OSBORNE (DAWN) VS. TOWN SQUARE BANK , ET AL.
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RENDERED: OCTOBER 3, 2008; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2007-CA-001555-MR
DAWN OSBORNE
v.
APPELLANT
APPEAL FROM JESSAMINE CIRCUIT COURT
HONORABLE C. HUNTER DAUGHERTY, JUDGE
ACTION NO. 07-CI-00211
TOWN SQUARE BANK; DAVID ALLEN
OSBORNE, EXECUTOR OF THE ESTATE
OF SHELLY M. OSBORNE; DAVID ALLEN
OSBORNE, INDIVIDUALLY; JACQUELINE
OSBORNE; CHERI O. WRIGHT (NOW
HARLOW); MICHAEL EARNEST HARLOW;
AND COMMONWEALTH OF KENTUCKY,
DEPARTMENT OF REVENUE
APPELLEES
AND
NO. 2007-CA-001909-MR
DAVID A. OSBORNE, EXECUTOR
OF THE ESTATE OF SHELLY
OSBORNE, DECEASED
APPELLANT
v.
APPEAL FROM JESSAMINE CIRCUIT COURT
HONORABLE C. HUNTER DAUGHERTY, JUDGE
ACTION NO. 07-CI-00211
TOWN SQUARE BANK, INC.; DAWN
OSBORNE; DAVID ALLEN OSBORNE,
INDIVIDUALLY; JACQUELINE OSBORNE;
MICHAEL EARNEST HARLOW;
COMMONWEALTH OF KENTUCKY,
REVENUE CABINET; AND DENNIS
KING
APPELLEES
AND
NO. 2007-CA-001926-MR
CHERI O. WRIGHT (NOW CHERI
HARLOW); MICHAEL EARNEST
HARLOW; DAVID ALLEN OSBORNE,
INDIVIDUALLY; AND JACQULINE
OSBORNE
v.
APPELLANTS
APPEAL FROM JESSAMINE CIRCUIT COURT
HONORABLE C. HUNTER DAUGHERTY, JUDGE
ACTION NO. 07-CI-00211
TOWN SQUARE BANK, INC; DAWN
OSBORNE; DAVID ALLEN OSBORNE,
AS EXECUTOR OF THE ESTATE OF
SHELLY OSBORNE; COMMONWEALTH
OF KENTUCKY, REVENUE CABINET;
AND DENNIS KING
OPINION
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APPELLEES
AFFIRMING AND REMANDING
** ** ** ** **
BEFORE: WINE AND VANMETER, JUDGES; LAMBERT,1 SENIOR JUDGE.
LAMBERT, SENIOR JUDGE: These consolidated appeals present issues arising
from a mortgage foreclosure action brought subsequent to the death of one of the
obligors. The primary issues presented are whether the decedent’s surviving
spouse effectively renounced his will pursuant to KRS 392.080, and whether three
subdivided lots created from the encumbered tract after the mortgage lien came
into existence were sold in the proper sequence. The surviving spouse, Dawn
Osborne, claims error in the trial court’s determination that her renunciation of the
decedent’s will was invalid. The decedent’s children, David A. Osborne and Cheri
O. Wright (Harlow), appeal in their individual capacities, and David A. Osborne
also appeals as executor of the decedent’s estate, from the trial court’s order
directing the sequence of the sale of the three lots. Other issues relating to the
judicial sale are also presented.
Appellant Dawn Osborne is the surviving spouse of Shelly M.
Osborne who died testate on August 30, 2006. About three years prior to Mr.
Osborne’s death, he and Dawn purchased a 45-acre parcel of land with a home
located thereon in Wilmore, Kentucky. The purchase price was $940,000 and title
was taken in the Osbornes’ names jointly, with remainder in fee simple to the
survivor. Of the purchase price, $60,000 was paid in cash and the balance of
1
Senior Judge Joseph E. Lambert sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
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$880,000 was financed by means of a promissory note to Town Square Bank
secured by a mortgage lien on the entirety of the real property.
Following the real estate purchase, the Osbornes subdivided the
property into three separate parcels known as lot 1F (20 acres), lot 1G (10 acres)
and lot 1H (15.72 acres). A plat depicting the subdivision was recorded in the
county court clerk’s office. While the mortgage instrument executed by Shelly M.
Osborne and Dawn Osborne described the original 45.72-acre tract, the mortgage
enforcement complaint filed herein by Town Square Bank acknowledged the
subdivision of the property. There is no issue as to whether the mortgage covers
the three subdivided lots. Lot 1F and lot 1H consist of unimproved acreage. Lot
1G is a 10-acre tract improved with a home and adjacent outbuildings.
On July 29, 2006, about one month before Shelly Osborne’s death,
Dawn Osborne conveyed her interest in lots 1F and 1H to her husband. A few
days later, at a time when he was seriously ill, Shelly M. Osborne executed a last
will and testament whereby he devised lots 1F and 1H to his daughter and son,
issue of an earlier marriage. Lot 1G, upon which was located the family residence,
was given to Dawn Osborne, but the will directed that the outstanding mortgage
debt be allocated only to lot 1G and that lots 1F and 1H go to the testator’s
daughter and son without encumbrance. A few weeks after Shelly Osborne’s death,
his will was probated, and pursuant to directions contained in the will, David A.
Osborne was appointed executor.
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After the executor was appointed, Dawn Osborne sought allowance of
her spousal exemption. Over the executor’s objection, the court ordered the
payment to be made. Dawn used these proceeds, in part, to pay the decedent’s
funeral expenses despite a provision to the contrary in his will whereby payment
was directed to be made by the estate. Thereafter, over the next few months, the
relationship between Dawn Osborne and the executor deteriorated to the extent that
in January 2007, Dawn sought his removal. She requested entry of an order
directing the executor to file an inventory and to immediately pay current the
mortgage debt owed to Town Square Bank. She also sought payment of a certain
specific bequest in the decedent’s will. She contends that this request was to
secure funds with which to pay toward the delinquent mortgage debt owed to
Town Square Bank.
Whether due to Dawn Osborne’s request or of his own accord, the
executor paid her the sum of $45,000 on January 25, 2007. A letter of transmittal
from the executor’s counsel to Dawn’s counsel makes it unmistakable that the
payment was “a partial distribution from the Estate pursuant to Article III C and D
of the Will of Shelly Osborne.” In addition, the check contained a memo in the
lower left-hand corner reflecting that it was pursuant to Article III C of the will. In
her deposition, Appellant acknowledged that she was aware of the motion filed on
her behalf seeking payment pursuant to the decedent’s will, that the check
indicated payment pursuant to the will; and that $32,000 of the $45,000 payment
had been used to pay the mortgage indebtedness with the rest being placed in a
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certificate of deposit in her name. She also acknowledged that her attorney had
advised her not to take the check.
I.
On February 6, 2007, Dawn Osborne filed a purported renunciation of
the last will and testament of Shelly M. Osborne pursuant to KRS2 392.080.
Whether she had a right to renounce the will at that time is a central issue before
the Court. The executor, David A. Osborne, contends that by her acceptance of the
$45,000 payment pursuant to the decedent’s will, she forfeited her right to
renounce the will.
Dawn Osborne claims exemption from the general rule that one who
accepts benefits from a decedent’s will may not thereafter renounce that will. Her
argument is that in an effort to stave off foreclosure upon her home, she accepted a
relatively modest sum provided for her in the decedent’s will and used it to pay the
mortgage because the executor refused to make the required mortgage payment.
The right of a surviving spouse to renounce a decedent’s will exists by
virtue of KRS 392.080. The statute contains language permitting the surviving
spouse to “release what is given to him or her by will, if any, and receive his or her
share under KRS 392.020 as if no will had been made.” From the language
“release what is given . . . by will,” courts have held that acceptance of benefits
under the will precludes subsequent renunciation.
2
Kentucky Revised Statutes.
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A lengthy survey of the law in this area is unnecessary for the
decision of the Supreme Court in Hannah v. Hannah, 824 S.W.2d 866 (Ky. 1992),
appears to be dispositive. In that case, a surviving spouse brought an action to
recover a $50,000 inter vivos gift her husband had made to his brother. She
claimed that the transfer was with the intent to deprive her of her dower interest in
the money. With respect to the decedent’s will, she was the sole beneficiary. She
did not renounce the will and fully accepted its benefits, but in addition she
claimed a dower interest in the $50,000 gift from her husband to his brother.
The question identified by the Hannah Court was whether one who
accepted what was given by will could also claim a right of dower. For its short
answer to the question presented, the Court said:
Within this scheme, the General Assembly has provided
the surviving spouse with a “dower” interest in the
decedent's estate which she can assert, if there is a will,
only by renouncing the will and releasing what is given
to her under the will.
Id. at 867. The Court explained that testators are broadly entitled to dispose of
their estates as they see fit even to the point of disinheriting close relatives. It
noted that only a surviving spouse is protected from total disinheritance, and the
means is the renunciation statute. Discussing the purpose of the dower statute as
secured by the renunciation statute, the Court said:
The purpose of the dower statute is to insure that a
surviving spouse will not be left disinherited and
destitute. The statute is to apply in only those limited
situations. It was not meant to utterly destroy the
testator's ability to give and devise his property as he
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desires so long as the spouse was provided for. If the
widow is not satisfied with the will provisions, she can
elect to seek her statutory remedy. But the plain language
of the statute makes clear that she cannot have both.
Id. at 868. The Court held that as Mrs. Hannah did not renounce the will, she lost
her right to claim a dower interest, and had no standing to assert her claim that a
fraudulent transfer was made to defeat that interest.
The Court summarized its view as follows:
In conclusion, if a surviving spouse brings a claim that a
fraudulent transfer was made with the intent to deprive
her of her dower interest, she must, within the allotted
time, renounce the will that makes provisions for her and
thereby invoke her statutory right to her dower interest.
Failing to do this, the widow takes as a devisee the
bequests made by the will and her right to dower ceases.
In this case, the widow has taken under the will and thus
is precluded by statute to take her dower interest in
addition thereto.
Id.
From the evidence of record, there appears to be no doubt that Dawn
Osborne was cognizant that the $45,000 she received was pursuant to the
decedent’s will. Despite her apparent fear of foreclosure and desire to prevent it,
she could not accept benefits under the will and thereafter effectively renounce the
will. Sanders v. Pierce, 979 S.W.2d 457 (Ky.App. 1998). Morguelan v.
Morguelan’s Executor, 307 Ky. 94, 209 S.W.2d 824 (1948).
For the foregoing reasons, we affirm the trial court’s summary
judgment of July 20, 2007, holding the purported renunciation of Shelly M.
Osborne’s will by his spouse, Dawn Osborne, to be invalid.
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II.
Upon our determination that the will of Shelly M. Osborne is
controlling, we must review the claim of David A. Osborne, individually, and as
executor of the decedent’s estate, and Cheri O. Wright (Harlow) that the trial
court’s judgment of August 1, 2007, relating to the order in which the lots were to
be sold was erroneous and the sale should be set aside.
Notwithstanding the July 20, 2007, trial court judgment effectively
upholding the will of Shelly M. Osborne, the trial court nevertheless ordered the
lots to be sold in an order that is claimed to be inconsistent with the provisions of
the will. The trial court directed that the unimproved lots 1F and 1H be sold first.
It then directed that in the event the proceeds of the sale were insufficient to satisfy
the judgment, interest and costs, the Master Commissioner should sell lot 1G and
then offer all properties as a whole to determine whether a greater sum could be
obtained when the lots were grouped. The executor and his sister claim that this
order of sale is contrary to the terms of Shelly M. Osborne’s will because the will
allocated the indebtedness on the property to lot 1G. The reasoning goes that lot
1G should have been sold first and that lots 1F and 1H should have been sold only
if lot 1G did not produce sufficient proceeds to pay the indebtedness.
The trial court appears to have ruled as it did with respect to the order
of sale on the view that the unimproved lots should be sold first. Inasmuch as
Town Square Bank had a mortgage lien on the entirety of the real property and the
subdivision into three lots was without its participation, the trial court’s
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determination does not constitute an abuse of discretion. Moreover, even if the
order of sale was inconsistent, it is difficult to discover any prejudice to the
executor and his sister in this regard. When the property was sold by the Master
Commissioner, the two unimproved lots brought an insufficient sum to pay the
indebtedness, and lot 1G alone likewise brought an insufficient sum. Thus, at a
minimum, it would have been necessary to sell lot 1G and at least one of the other
lots to pay the indebtedness. The executor and his sister have not contended that
one or the other of the unimproved lots should have been spared from judicial sale.
As such, we conclude that even if the trial court erred in its determination of the
order of sale of the lots, the error was entirely nonprejudicial to the interests of the
executor and his sister.
Finally in this regard, we must also consider the interest of the
purchaser, an appellee in this proceeding. At the judicial sale, Dennis K. King, for
himself and others, purchased all three lots paying $200,000 for lot 1F, $150,000
for lot 1H, and $445,000 for lot 1G. The judgment requiring the sale was
unsuperceded.
King contends that Sedley v. Louisville Trust Company, 419 S.W.2d
531 (Ky. 1967), and Rose v. Cox, 297 Ky. 458, 179 S.W.2d 871 (1944), preclude
an attack upon the sale because the error, if any, was in the summary judgment
(judgment and order of sale) dated August 1, 2007. Indeed, those cases hold that
where a judicial sale is pursuant to an unsuperceded judgment, the subsequent
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reversal of the judgment does not invalidate the sale. The prevailing rule as stated
in Sedley v. Louisville Trust is that:
[T]he purchaser of real estate at a sale made pursuant to
an unsuperseded judgment acquired title to the property,
irrespective of the fact that subsequent to the sale and
confirmation that judgment was appealed and reversed.
Id. at 532.
The executor and his sister argue that E’Town Shopping Center , Inc.
v. Lexington Finance Company, 436 S.W.2d 267 (Ky. 1969), distinguishes both
Sedley and Rose and describes a situation in which a judicial sale can be set aside.
However, E’Town Shoppping Center plainly says that the rule in Sedley v.
Louisville Trust Company applies when the error is in the judgment of sale as
distinguished from the proceedings held pursuant to it. The error in this case, if
there is one, was in the judgment and order of sale, not in the proceedings pursuant
to it. Thus, we conclude that Sedley and Rose are controlling and that relief is
unavailable.
Finally, we have considered the argument presented by the executor
and his sister criticizing the trial court’s amendment of the August 1, 2007,
summary judgment reducing the notice time that was required to be given by the
Master Commissioner. Though conceding that the circuit court could have
amended the judgment to require less notice, they contend that the court acted
beyond its jurisdiction by retroactively allowing less notice than was earlier
required. In our view, the trial court acted well within its discretion, and
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particularly as no prejudice has been identified. All parties were fully apprised of
the fact of the judicial sale. See Kentucky Trust Co. v. Kessel, 464 S.W.2d 275
(Ky. 1971). This case is a far cry from Miller v. Cisco, 279 Ky. 440, 130 S.W.2d
783 (1939), where there was an absence of posting of handbills at the courthouse
door or on the property as required by the judgment.
III.
As reflected in this opinion, this Court affirms the orders and judgment of the trial
court in their entirety. Despite that fact, further trial court action will be required
for the proper distribution of sale proceeds, the determination of claims for
reimbursement, orders confirming the sale, determination of inferior liens,
attorneys’ fees and other matters within the jurisdiction of the trial court.
Accordingly, we remand for such further orders and judgments as may be required.
ALL CONCUR.
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NO. 2007-CA-001555-MR
BRIEF FOR APPELLANT:
David Russell Marshall
Nicholasville, Kentucky
NO. 2007-CA-001909-MR &
NO. 2007-CA-001926-MR
JOINT BRIEFS FOR
APPELLANTS:
Glen S. Bagby
J. Robert Lyons, Jr.
Lexington, Kentucky
Catesby Woodford
Thomas C. Marks
Lexington, Kentucky
BRIEF FOR APPELLEES, DAVID A.
OSBORNE, EXECUTOR; DAVID
OSBORNE, INDIVIDUALLY;
JACQUELINE OSBORNE, CHERI
O. WRIGHT (NOW CHERI
HARLOW); AND MICHAEL
EARNEST HARLOW:
Glen S. Bagby
J. Robert Lyons, Jr.
Lexington, Kentucky
Catesby Woodford
Thomas C. Marks
Lexington, Kentucky
BRIEF FOR APPELLEE, TOWN
SQUARE BANK:
Mark T. Miller
Nicholasville, Kentucky
BRIEF FOR APPELLEE, DAWN
OSBORNE:
David Russell Marshall
Nicholasville, Kentucky
BRIEF FOR APPELLEE, DENNIS K.
KING:
Howard Downing
Nicholasville, Kentucky
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