Opinion ID: 3211465
Heading Depth: 1
Heading Rank: 5

Heading: The Trial Court Acted Erroneously.

Text: The errors in the trial court's orders are fundamental and easy to identify. First, ownership of land is being extinguished by judicial sale even though the legal title holders (The Trusts and their beneficiaries) have never been named as parties or served with process. Second, the trial court 2 Until his retirement at the end of 2014, Judge Stephen Bates presided over the Stamper divorce. Thereafter, Special Judge Linda Bramlage was appointed to preside. The May 28, 2015, order was entered by Judge Bramlage and it recites: The Court finds that the order from the December 17, 2014 hearing date was not prepared. That order is set out herein as directed by Judge Bates[.] What follows, with absolutely no factual findings or conclusions of law is an order directing the sale of nine parcels owned by the Trusts. 11 misconstrued constructive notice to be the same as constructive service. Third, the imposition of a constructive trust requires in personam, not in rem, jurisdiction. A. The trial court has no authority to transfer title to land by a judicial sale when neither the legal title holder of the land nor its beneficial owners were parties to the action and were never served with process. Despite the undisputed fact that the Stamper Revocable Trust and the Roger Stamper Three Daughters Revocable Trust, and their respective beneficiaries, were never made parties to the action and were never brought before the court through constructive or personal service of process, the trial court declared that it had pierced the veil of these entities, adjudicated property rights affecting the Trust beneficiaries, and ordered the judicial sale of nine tracts of land held by the Trusts. In Gripshover v. Gripshover, another case in which the use of a family trust was challenged as a fraud on a marital estate, we noted that Darlene did not join in her action . . . the trustee of the George Gripshover Family Trust, or the beneficiaries of the trust, all of whom would be necessary parties to an action seeking to avoid . . . the trust. 246 S.W.3d 460, 466 (Ky. 2008) (emphasis added.) Thus, a trustee is a necessary party to any suit or proceeding involving a disposition of trust property or funds[.] 76 Am. Jur. 2d Trusts § 611 (2016). [I]n actions and proceedings pertaining to trusts and trustees, interested parties who will be materially affected by the order or decree should be made parties. 76 Am. Jur. 2d Trusts § 609 (2016): See also In re Ashton, 266 S.W.3d 602, 604 (Tex. App. 2008) (For relief to be ordered 12 against a trust, its trustee must be properly before the trial court as a result of service, acceptance, or waiver of process, or an appearance.). Ordering the sale of land owned by the Trusts without naming the Trustee and the Beneficiaries as parties and without proper service upon either was clear error. B. The trial court erroneously confused constructive notice with constructive service. The trial court explicitly acknowledged that neither Roger Stamper nor the trucking companies named as respondents in the divorce case were ever served with process personally or constructively, in any capacity at all. Rather than service consistent with due process, the trial court based its authority over the property of Roger and the Trusts entirely upon what it called constructive notice to Roger — his subjective awareness of the pending claim that he had aided his son by fraudulently hiding assets of his son's marital estate. After expressly noting the Black's Law Dictionary definition of constructive notice (not constructive service), the trial court in its Order Addressing Constructive Trust of June 16, 2014, justified its authority over the property of Roger Stamper and his affiliated interests as follows: As constructive notice is adequate to proceed against property in rem, the Court finds that it has in rem jurisdiction over the property of Roger Stamper and his companies within the Commonwealth and the Court has quasi in rem jurisdiction over Roger Stamper and his companies as it relates to that property. (Emphasis added.) To support that startling conclusion, the trial court cited Minary v. Minary, 395 S.W.2d 588, 589 (Ky. 1965). Minary, however, says nothing at all 13 about constructive notice. Minary stands for the rather non-controversial principle that constructive service of the non-resident beneficiary gave the court sufficient jurisdiction of the person to subject the trust res to a claim made against the interest of the non-resident. Id. (emphasis added). By misconstruing constructive notice as the equivalent of constructive service, the trial court erroneously claimed the authority to assert in rem jurisdiction over the property of Roger Stamper, Stamper Trucking, and R. Stamper Trucking; and by some further indiscernible mechanism, over the property of the Trusts. Our precedent is clear that even actual notice, much less constructive notice, is a wholly inadequate substitute for proper service of process. Mere knowledge of the pendency of an action is not sufficient to give the court jurisdiction, and, in the absence of an appearance, there must be service of process.' Potter v. Breaks Interstate Park Commission, 701 S.W.2d 403, 406 (Ky. 1985) (quoting Rosenberg v. Bricken, 194 S.W.2d 60, 62 (1946)). Notably, Roger's only appearance was a special appearance on his own behalf objecting to service; the Trusts never made an appearance. Constructive service required for in rem jurisdiction is obtained only upon strict compliance with our warning order attorney rules, CR 4.05, 4.06, and 4.07. While strict compliance with [the warning order] rules is required . . . actual notice to the defendant is not necessary. Nolph v. Scott, 725 S.W.2d 860, 861 (Ky. 1987) (citing Potter v. Breaks Interstate Park Commission, 701 S.W.2d 403 (Ky. 1985)). 14 No attempt was made to obtain constructive service over any adverse party by warning order attorney. No attempt was made at all to serve the Trusts and beneficiaries whose property is to be sold. And despite the ease of obtaining personal service over Roger Stamper, a Louisiana resident, under Kentucky's long arm statute, KRS 454.210, there was no attempt to do so. Acting with the complete lack of in personam and in rem jurisdiction over the persons and property involved in the action is clear error. C. The trial court erroneously imposed a constructive trust without in personam jurisdiction over the putative trustee. Even if the trial court had properly concluded that constructive notice vested it with in rem jurisdiction over all of Roger Stamper's property, the imposition of a constructive trust was plainly erroneous because lain action to create a constructive trust proceeds in personam. 76 Am. Jur. 2d Trusts § 569 (1975). If a court has jurisdiction over the parties, then it is competent to entertain a suit to establish a trust, although the trust pertains to land in another state. Kaplon v. Chase, 690 S.W.2d 761, 763 (Ky. App. 1985) (citation omitted.) 3 The trial court erred when it imposed a constructive trust without in personam jurisdiction over the trustee. Personal service was necessary; constructive service-had it been obtained-would nonetheless have been insufficient, but here the trial court proceeded upon nothing more than constructive notice. 3 Although Kaplon appears to be the last word on the issue by a Kentucky court, its holding is universally supported by numerous decisions of the appellate courts of our sister states. 15 HI. Our clear precedent provides writ relief under these circumstances. The basic facts material to the writ issue are as follows: Mia Stamper has a judgment against Michael Stamper for $716,491.00 as her share of their marital estate, subject to the outcome of the direct appeal. From all appearances, Roger Stamper was complicit with Michael Stamper in fraudulently concealing or diverting marital assets to defeat Mia's interest in them. Consequently, the trial court allowed Mia to bring third party claims against Roger Stamper and two trucking companies, although none of the third parties were ever served with process, personally or constructively. To rectify the injustice it perceived, the trial court impressed a constructive trust for the benefit of Mia upon all of the property of these three, unserved parties. To liquidate the debt, the trial court ordered the sale of real property; but not the property owned by Michael Stamper, Roger Stamper, and Roger's trucking companies, or any party to the action. The trial court ordered the sale of property owned by Trusts that had not been made parties to the action or served with process. Fortunately, cases like this rarely arise and seldom require our intervention. That being so means there is little precedent to guide our review. However, we have clear precedent that provides clear authority for enjoining a judicial sale of real estate in this situation. Robinson v. Carlton, 96 S.W. 549, 551 (1906), provides that injunctive relief restraining the judicial sale of land is proper: where the real estate of the plaintiff is about to be sold in satisfaction of a judgment which as to him is void, or under execution for debt owing by a third party, to prevent irreparable injury to his title, or oppressive litigation growing out of a 16 multiplicity of suits in which he might be involved with purchasers, in the event such sale were permitted. The Robinson court affirmed that injunctive relief was available without a showing of the inadequacy of other remedies, such as money damages. Id. To the same effect is Bean v. Everett, 56 S.W. 403, 405 (Ky. 1900), which holds: [T]his is . . . an action by a third party to prevent property claimed by her from being sold to pay the debts of [the judgment debtor] . . . a court of equity, may interfere by injunction, in a case of this character, where the real estate of the plaintiff is about to be sold under executions, as the property of a third person (upon proof that such property is not subject to the judgment upon which the executions issued), to prevent irreparable injury to her title, and a multiplicity of suits, and oppressive litigation in which she might be involved with purchasers if such sales were permitted to be made. Like the third part[ies] referred to in Robinson and Bean, the Trusts are the legal owners of land that has been attached by the court and subjected to sale to satisfy the debts of a judgment debtor, Michael Stamper. Injunctive relief is available without the need to prove the inadequacies of any other avenue of relief.