RENDERED: SEPTEMBER 16, 2022; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals
NO. 2021-CA-1498-MR
FRANK CRAIG, III AND RUSSELL CRAIG APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE SUSAN SCHULTZ GIBSON, JUDGE ACTION NO. 19-CI-004051
DAVID JOSEPH CRAIG AND LISA CRAIG APPELLEES
OPINION AFFIRMING
** ** ** ** **
BEFORE: CALDWELL, CETRULO, AND COMBS, JUDGES.
COMBS, JUDGE: This appeal is taken from a dispute among three brothers as to
ownership of a parcel of real property following the death of their mother.
Brothers, Frank Craig III and Russell Craig, filed suit against their brother, David
Craig, and his wife, Lisa, alleging fraud on their part with respect to the property at
issue. The Jefferson Circuit Court entered summary judgment in favor of
David and Lisa. In appealing from that summary judgment, Frank and Russell
contend that the circuit court erred by concluding that their fraud action was barred
by the statute of limitations. After our review, we affirm.
Bobbie Brutscher was the wife of Paul Brutscher and the mother of
Frank, Russell, and David Craig. On August 14, 2013, Bobbie, a Louisville
resident, executed a deed to property that she had inherited on Dell Road in
Louisville to David and herself as joint tenants with right of survivorship. The
deed was duly recorded on August 21, 2013. On November 26, 2013, a deed of
correction was executed by Bobbie -- joined now by her spouse, Paul -- that again
conveyed the Dell Road property to Bobbie and David as joint tenants with right of
survivorship. This deed was recorded on February 12, 2014.
Paul died in March 2016. After Paul’s death, Bobbie left Louisville to
live with son Frank in Lockport, Illinois, where she decided to revise her estate
plan. On July 20, 2016, Bobbie created the Bobbie Sue Brutscher Living Trust.
Virginia Resendiz, an Illinois resident, was designated to act as trustee upon
Bobbie’s death. Pursuant to the terms of the revocable trust, all three of Bobbie’s
sons would participate equally in the division of the trust estate after certain gifts
were made to Resendiz. Bobbie executed a pour-over will on July 21, 2016.
-2- On July 22, 2016, Bobbie’s estate planning attorney corresponded by
e-mail with David. The attorney advised him that the living trust had been created
and that she had recommended to Bobbie that the Dell Road property be conveyed
to the trust. The attorney requested David to sign a deed (already executed by his
mother) conveying the Dell Road property to the trust. However, David did not
sign this deed.
Bobbie died in May 2017. Resendiz became trustee pursuant to the
terms of the trust and was appointed executrix of Bobbie’s estate in June 2017.
On July 2, 2019, Resendiz, in her capacity as trustee of the living trust
and executrix of Bobbie’s estate, filed an action for fraud against Frank, Russell,
David, and Lisa (David’s wife). The Estate and Trust alleged that David had
fraudulently acquired the Dell Road property by intentionally misleading Bobbie to
believe that deeding the property to both of them with right of survivorship “was
an efficient way to avoid probate, save expenses and taxes to her estate,” while
allegedly promising to give to Frank and Russell each a one-third interest in the
disputed property. The Estate and Trust claimed that David never meant to give
his brothers any interest in the property, intending instead, “to keep the real estate
as his own to the exclusion of his brothers[.]”
The Estate and Trust alleged that in conjunction with her living trust,
Bobbie prepared a deed with the expectation that David would execute it and
-3- restore the Dell Road property to her sole control. The Estate and Trust sought to
have the 2013 deed set aside. David and Lisa answered and denied the allegations.
They asserted that the action had been filed out of time. Additionally, they filed a
counterclaim for slander of title.
In November 2019, David and Lisa filed a motion for partial summary
judgment. By order entered on April 21, 2020, the Jefferson Circuit Court granted
their motion. The court reasoned that the disputed property was not and never had
been part of the trust or the estate and concluded that Resendiz as trustee of the
trust and executrix of Bobbie’s estate lacked standing to pursue the action.
Additionally, the court observed that the action had been filed outside the five-year
period of limitations. The claim was dismissed with prejudice. The order was
designated final and appealable, there being no just cause for delay. No appeal
was filed.
In October 2020, Frank and Russell, as Bobbie’s heirs, filed a
complaint against David and Lisa. They alleged that David never informed them
that the August 2013 deed existed and that David meant, in fact, to keep the
transaction secret. They alleged that David obtained the deed by fraud and
“intended to keep the real estate as his own to the exclusion of his brothers[.]”
David and Lisa answered and denied the allegations. They asserted
that this lawsuit had been filed out of time. Additionally, they filed a counterclaim
-4- alleging -- among other things -- a claim for wrongful use of civil proceedings.
David and Lisa filed a motion to consolidate the two actions; Frank and Russell
answered the counterclaim.
The separate actions were consolidated by order of the court entered
in May 2021. David and Lisa filed a motion for summary judgment arguing that
the action had been filed outside the period of limitations. Frank and Russell
opposed the motion, arguing, in part, that in view of the close and confidential
relationship that existed between David and his mother, Bobbie, the period of
limitations did not begin to run against them until the alleged fraud was discovered
by them all in 2016. They contended that “Bobbie wholeheartedly trusted [David]
when she took his advice as how to properly secure her assets.” But in 2016, “she
discovered his advice was not given for her best interest, but rather as part of a
fraudulent scheme to convey the interest in the property solely to him.”
Following a hearing, the circuit court concluded as a matter of law
that the fraud claim asserted by Frank and Russell accrued more than five years
before the action against David and Lisa was commenced in October 2020.
Consequently, it ordered that the fraud claim be dismissed. The order was
designated as final and appealable, there being no just cause for delay. This appeal
followed.
-5- On appeal, Frank and Russell argue that the circuit court erred by
failing to conclude as a matter of law that their cause of action accrued only after
David’s alleged fraud was discovered in 2016.
KRS1 413.120(11) provides a five-year period of limitations for
claims of fraud and mistake. However, KRS 413.130(3), a statute of repose, tolls
the limitations period until the fraud or mistake is discovered:
In an action for relief or damages for fraud or mistake, referred to in subsection (11) of KRS 413.120, the cause of action shall not be deemed to have accrued until the discovery of the fraud or mistake.
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RENDERED: SEPTEMBER 16, 2022; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals
NO. 2021-CA-1498-MR
FRANK CRAIG, III AND RUSSELL CRAIG APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE SUSAN SCHULTZ GIBSON, JUDGE ACTION NO. 19-CI-004051
DAVID JOSEPH CRAIG AND LISA CRAIG APPELLEES
OPINION AFFIRMING
** ** ** ** **
BEFORE: CALDWELL, CETRULO, AND COMBS, JUDGES.
COMBS, JUDGE: This appeal is taken from a dispute among three brothers as to
ownership of a parcel of real property following the death of their mother.
Brothers, Frank Craig III and Russell Craig, filed suit against their brother, David
Craig, and his wife, Lisa, alleging fraud on their part with respect to the property at
issue. The Jefferson Circuit Court entered summary judgment in favor of
David and Lisa. In appealing from that summary judgment, Frank and Russell
contend that the circuit court erred by concluding that their fraud action was barred
by the statute of limitations. After our review, we affirm.
Bobbie Brutscher was the wife of Paul Brutscher and the mother of
Frank, Russell, and David Craig. On August 14, 2013, Bobbie, a Louisville
resident, executed a deed to property that she had inherited on Dell Road in
Louisville to David and herself as joint tenants with right of survivorship. The
deed was duly recorded on August 21, 2013. On November 26, 2013, a deed of
correction was executed by Bobbie -- joined now by her spouse, Paul -- that again
conveyed the Dell Road property to Bobbie and David as joint tenants with right of
survivorship. This deed was recorded on February 12, 2014.
Paul died in March 2016. After Paul’s death, Bobbie left Louisville to
live with son Frank in Lockport, Illinois, where she decided to revise her estate
plan. On July 20, 2016, Bobbie created the Bobbie Sue Brutscher Living Trust.
Virginia Resendiz, an Illinois resident, was designated to act as trustee upon
Bobbie’s death. Pursuant to the terms of the revocable trust, all three of Bobbie’s
sons would participate equally in the division of the trust estate after certain gifts
were made to Resendiz. Bobbie executed a pour-over will on July 21, 2016.
-2- On July 22, 2016, Bobbie’s estate planning attorney corresponded by
e-mail with David. The attorney advised him that the living trust had been created
and that she had recommended to Bobbie that the Dell Road property be conveyed
to the trust. The attorney requested David to sign a deed (already executed by his
mother) conveying the Dell Road property to the trust. However, David did not
sign this deed.
Bobbie died in May 2017. Resendiz became trustee pursuant to the
terms of the trust and was appointed executrix of Bobbie’s estate in June 2017.
On July 2, 2019, Resendiz, in her capacity as trustee of the living trust
and executrix of Bobbie’s estate, filed an action for fraud against Frank, Russell,
David, and Lisa (David’s wife). The Estate and Trust alleged that David had
fraudulently acquired the Dell Road property by intentionally misleading Bobbie to
believe that deeding the property to both of them with right of survivorship “was
an efficient way to avoid probate, save expenses and taxes to her estate,” while
allegedly promising to give to Frank and Russell each a one-third interest in the
disputed property. The Estate and Trust claimed that David never meant to give
his brothers any interest in the property, intending instead, “to keep the real estate
as his own to the exclusion of his brothers[.]”
The Estate and Trust alleged that in conjunction with her living trust,
Bobbie prepared a deed with the expectation that David would execute it and
-3- restore the Dell Road property to her sole control. The Estate and Trust sought to
have the 2013 deed set aside. David and Lisa answered and denied the allegations.
They asserted that the action had been filed out of time. Additionally, they filed a
counterclaim for slander of title.
In November 2019, David and Lisa filed a motion for partial summary
judgment. By order entered on April 21, 2020, the Jefferson Circuit Court granted
their motion. The court reasoned that the disputed property was not and never had
been part of the trust or the estate and concluded that Resendiz as trustee of the
trust and executrix of Bobbie’s estate lacked standing to pursue the action.
Additionally, the court observed that the action had been filed outside the five-year
period of limitations. The claim was dismissed with prejudice. The order was
designated final and appealable, there being no just cause for delay. No appeal
was filed.
In October 2020, Frank and Russell, as Bobbie’s heirs, filed a
complaint against David and Lisa. They alleged that David never informed them
that the August 2013 deed existed and that David meant, in fact, to keep the
transaction secret. They alleged that David obtained the deed by fraud and
“intended to keep the real estate as his own to the exclusion of his brothers[.]”
David and Lisa answered and denied the allegations. They asserted
that this lawsuit had been filed out of time. Additionally, they filed a counterclaim
-4- alleging -- among other things -- a claim for wrongful use of civil proceedings.
David and Lisa filed a motion to consolidate the two actions; Frank and Russell
answered the counterclaim.
The separate actions were consolidated by order of the court entered
in May 2021. David and Lisa filed a motion for summary judgment arguing that
the action had been filed outside the period of limitations. Frank and Russell
opposed the motion, arguing, in part, that in view of the close and confidential
relationship that existed between David and his mother, Bobbie, the period of
limitations did not begin to run against them until the alleged fraud was discovered
by them all in 2016. They contended that “Bobbie wholeheartedly trusted [David]
when she took his advice as how to properly secure her assets.” But in 2016, “she
discovered his advice was not given for her best interest, but rather as part of a
fraudulent scheme to convey the interest in the property solely to him.”
Following a hearing, the circuit court concluded as a matter of law
that the fraud claim asserted by Frank and Russell accrued more than five years
before the action against David and Lisa was commenced in October 2020.
Consequently, it ordered that the fraud claim be dismissed. The order was
designated as final and appealable, there being no just cause for delay. This appeal
followed.
-5- On appeal, Frank and Russell argue that the circuit court erred by
failing to conclude as a matter of law that their cause of action accrued only after
David’s alleged fraud was discovered in 2016.
KRS1 413.120(11) provides a five-year period of limitations for
claims of fraud and mistake. However, KRS 413.130(3), a statute of repose, tolls
the limitations period until the fraud or mistake is discovered:
In an action for relief or damages for fraud or mistake, referred to in subsection (11) of KRS 413.120, the cause of action shall not be deemed to have accrued until the discovery of the fraud or mistake. However, the action shall be commenced within ten (10) years after the time of making the contract or the perpetration of the fraud.
The recording of a deed allegedly obtained by fraud constitutes
constructive notice to all the world. Loy v. Nelson, 201 Ky. 710, 258 S.W. 303
(1924). Consequently, a grantor is generally required to bring an action to set
aside a disputed deed within five years of the recording of the deed. However,
where a confidential relationship exists between the parties, the limitations period
is tolled until actual discovery of the fraud or mistake. Hernandez v. Daniel, 471
S.W.2d 25 (Ky. 1971). Under those circumstances, constructive notice, such as the
recordation of the deed, is not sufficient to trigger commencement of the statute of
1 Kentucky Revised Statutes.
-6- limitations. Id. at 26 (citing McMurray v. McMurray, 410 S.W.2d 139 (Ky. 1966)
and Lemaster v. Caudill, 328 S.W.2d 276 (Ky. 1959)).
Frank and Russell argue that the close and confidential relationship
between Bobbie and David meant that their mother “had no reason to check up into
what [David] was doing to ensure it actually met her intentions” and that it was not
until 2016 that she (as well as they) discovered that “David had fraudulently
persuaded Bobbie” to execute the disputed deed. They argue that the confidential
relationship between mother and son served to toll the limitations period until
Bobbie and they discovered David’s alleged fraud.
In essence, Frank and Russell would have the Court disregard our rule
that recording of the deed in 2013 (and the deed of correction in 2014) provided
them with constructive notice of an alleged fraud on the basis that their mother and
David shared a confidential relationship. However, Frank and Russell did not
participate in that confidential relationship nor did they benefit vicariously from
the tolling exception entailed in that relationship.
Any arguable action for alleged fraud that Frank and Russell might
have asserted against David accrued when the fraud became discoverable by them
upon the exercise of ordinary diligence. They were not relieved of a duty to
discover the recorded deeds reflecting a conveyance of property from the
Brutschers to David by virtue of the nature of the relationship that existed between
-7- their brother and their mother. David’s relationship with his mother had no
bearing on the tolling of the statute of limitations with respect to Frank and
Russell. Consequently, the circuit court did not err by concluding that the fraud
claim asserted by Frank and Russell was clearly filed out of time as a matter of
law.
We affirm the summary judgment and the order dismissing the action
of Frank and Russell against David and Lisa.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Thomas K. Stone Daniel M. Oyler Louisville, Kentucky Edward H. Bartenstein Louisville, Kentucky
-8-