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In Re Estate of Millhouse





APPEAL from the Circuit Court of Clark County; the Hon. RICHARD E. SCOTT, Judge, presiding.


Sylvia Ritter Millhouse died.

This rather mundane event — considering the transitory existence of this vale of tears — would not normally be of any momentous legal note.

However, immediately following her demise, it was discovered that about $1,800,000 was missing from the Marshall Loan Company, and Sylvia Ritter Millhouse was managing partner of that unincorporated financial institution.

Yet — her estate was insolvent. All that really existed was a house and lot on the credit side of the ledger, and over $1,700,000 in claims on the debit sheet. Her surviving husband-administrator was awarded homestead upon the sale of the realty to pay debts, and this posits the precise point on appeal: Can a surviving spouse claim homestead exemption from funds "defalcated" by the deceased spouse? Or is he barred by having unintentionally benefited from the fruits of the crime?

He can. He isn't. We affirm.

More specifically, the facts are these: At the time of her marriage to Jerome in 1953, Sylvia was the owner of the residence property involved in this proceeding. It had been given to her by her father in 1949 or 1950 and she was the title owner at the time of her death. They set up housekeeping there at the time of their marriage and inhabited it as their family residence until her death on December 12, 1973. Jerome Millhouse continued to live in the residence after his wife's death and it was his residence at the time of the hearing below. Sylvia was the manager of a loan company and drew a salary of $700 per month, while Jerome was a barber with an income from his business of about $5,000 per year. Jerome testified that his wife contributed substantially to their family expenses, that she bought most of the groceries, and that during the last five years of her life "all the extras and the pluses of life" that he enjoyed were because of the money that his wife supplied.

Also below, David Ritter Nash (decedent's son by a prior marriage) testified that in 1971 his mother had shown him a deed to the property in question and told him to record it if anything happened to her. They made "a sort of a verbal agreement" that he would not cause her husband (Jerome) to move out of the residence. He gave the deed back to her and she put it in the family lock box in the loan company office. After his mother's death, he recorded the deed to the property which conveyed title to him. (David's wife, Norma Jean Nash, corroborated the substance of his testimony.)

The 1972 Federal and State joint income tax returns of Jerome and Sylvia Millhouse were admitted into evidence, reflecting a $2,350 net profit from the barber shop operated by Jerome, and $13,961 net income from Sylvia's partnership in the Marshall Loan Company. Jerome Millhouse testified that as a barber he had earned about $5,000 annual income in the three to four years before Sylvia's death, and although he did not know exactly what her income was, he assumed Sylvia had a salary from the loan company. He did say that she contributed substantially to the family expenses, purchasing most of the groceries and household items.

An accountant by the name of Larry Woodard had been appointed receiver for the Marshall Loan Company and he testified that Sylvia Ritter Millhouse and her brother shared a one-half interest in the loan company which was operated as a partnership. In fact, Sylvia was the principal operating officer of the loan institution. Although Woodard did not audit the records of the loan company, he performed a "review" which disclosed a shortage of $1,800,000. The records reflected that there had not been any net income to the company for five years prior to Sylvia's death, that she had received a monthly salary of $700 (plus a share in the profits), and that the company had other salaried employees who had also been paid.

The trial judge found that the deed from Sylvia Ritter Millhouse to her son (David Ritter Nash) was void for lack of delivery, that Sylvia possessed a homestead exemption in her personal residence at the time of her death, and that her surviving spouse (Jerome Millhouse), who continued to reside there, had the benefit of that exemption, which in turn would attach to the proceeds of any sale of the real estate.

Now to the issue.

The creditors contend that Millhouse should not be entitled to the homestead exemption because he benefited from the fruits of his wife's crime, and argue that the record shows Sylvia embezzled or stole $1,800,000 from the loan company. (They do admit, however, that they have found no case on point to support their contention.)

We must necessarily underscore here the simple fact that Sylvia was never charged with any crime related to the insolvency of the loan company, nor was she ever convicted of any offense relative to the monetary deficiency, nor did the court make any finding that she had improperly obtained the money she used to support herself and her husband. Furthermore, there was no audit explanation of where the money actually went. From a proof standpoint, it is only supposition that she obtained the money — an inference drawn from highly questionable circumstances perhaps, but most assuredly not proof. Thus, the creditors' argument that she "defalcated" the money is, as Jerome Millhouse suggests, merely their conclusion. Also a fact that is of ...

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