Divorce Law Journal

Allison v. Allison, Marital/Nonmarital Propert And Debts, Attorney Fees

ALLISON V. ALLISON
DIVORCE: MARITAL/NONMARITAL CHARACTERIZATION OF PROPERTY AND DEBTS; ATTORNEY FEES
2006-CA-001967.
PUBLISHED: AFFIRMING IN PART AND VACATING IN PART AND REMANDING
PANEL: BUCKINGHAM, PRESIDING; THOMPSON AND HENRY CONCUR
COUNTY: FAYETTE
DATE RENDERED: 02/15/2008
Ex-Husband appealed from TC’s orders relating to marital/nonmarital nature of his family's business, the marital/nonmarital nature of a $66,714 debt allegedly owed by Ex-Wife to her mother, and the award of attorney and expert witness fees.

Ex-Husband and Ex-Wife were married on September 5, 1986. In the early 1970's, Ex-Husband's mother and father acquired all stock in an office-supply business. Ex-Husband owned all shares of stock in the business at the time of trial, which he claimed to be his nonmarital property. He claimed that prior to the marriage he entered into an agreement that gave him an 8% interest in the business in exchange for a promissory note from him for $32,000. Ex-Husband never paid the note, and TC found that his father had forgiven the debt. Ex-Husband contended that he owned this portion of the outstanding business shares as his nonmarital property because the forgiveness of the debt constituted a gift to him. Alternatively, he contended that this ownership interest is his nonmarital property because he acquired it before marriage.

As to the remaining shares of corporate stock, during the marriage, there was a stock redemption agreement between Ex-Husband's parents and the corporation whereby the parents sold their 84,800 shares of stock to the corporation for a sum that was paid to them over a ten-year period by corporate earnings. Ex-Husband claimed that these shares were also his parents' gift to him and that he never paid any money, from marital funds or otherwise, for the stock.

Ex-Husband ultimately argued to CA that he had at least an 8% nonmarital interest in the business due to the forgiveness of the payment for the stock by his father, citing KRS 403.190(2)(a) which expressly excludes property acquired by gift from the definition of “marital property” unless “there are significant activities of either spouse which contributed to the increase in value of said property and the income earned therefrom.” Alternatively, Ex-Husband stated that the 8% interest is nonmarital because it was acquired before marriage.

CA provided that if Ex-Husband acquired his ownership interest in exchange for the note, and that indebtedness was later forgiven, then the forgiveness of the indebtedness would be a gift to Ex-Husband and would constitute a nonmarital interest in the corporation. CA thus vacated TC’s determination that Ex-Husband did not have a nonmarital interest in the corporation and remanded the matter for TC to determine the extent of Ex-Husband's interest prior to the redemption agreement and whether such interest was marital or was proven by Ex-Husband to be nonmarital as a result of a gift or nonmarital as having been acquired before marriage.

CA further noted that if, on remand, TC determined that Ex-Husband's interest prior to the redemption was marital, then any increase in ownership interest because of the redemption agreement was also necessarily marital. If TC determined that Ex-Husband's interest prior to the redemption was nonmarital, then it must determine whether any increase in value was marital or nonmarital. CA noted that, in this regard, the case was one of first impression in Kentucky.

CA recognized that under the “source of funds” rule used by Kentucky courts to determine whether property is marital or nonmarital, property is considered to be acquired as it is paid for; thus, the shares of stock sold to the corporation in the stock redemption agreement were not “acquired”, within the meaning of KRS 403.190 and the determination of marital/nonmarital interest, until they were paid for. CA found that these shares were paid for during the marriage over a period of years by corporate earnings and therefore were “acquired” during the marriage and are presumed to be marital property. Ex-Husband attempted to avoid the presumption by arguing that he exchanged his 8% interest for a 100% interest when the stock redemption occurred. CA agreed with Ex-Husband that the value of his ownership interest did not increase at the time of the stock redemption because while the percentage of ownership interest increased, the value of the corporation decreased because of the debt liability created to pay Ex-Husband's parents for their shares. However, although Ex-Husband's ownership interest at the time of the redemption of his parents' shares increased, the value of Ex-Husband's shares did not. Rather, the value of Ex-Husband's shares increased during the marriage as the corporation gradually paid the debt to Ex-Husband's parents. CA provided that if Ex-Husband had a nonmarital interest in the corporation at the time of marriage, the value of that interest likely increased in time as the years passed and the corporation paid off the debt owed to Ex-Husband's parents. CA held that to the extent the increase was due to Ex-Husband's efforts as the primary operator of the business and Ex-Wife's efforts as homemaker, it was marital property. However, to the extent the increase in value was due to general economic conditions, the increase was not marital property.

Ex-Husband's second argument was that TC erred in finding that checks from Ex-Wife's mother written to Ex-Wife after she and Ex-Husband separated constituted a marital debt. After the parties separated, Ex-Wife was awarded $2,000 per month for temporary maintenance and $1,000 for child support. Thereafter, as power of attorney for her mother, Ex-Wife wrote checks totaling $66,714 on her mother's checking account. Some of the checks were written before the maintenance and child support awards to Ex-Wife, and some were written after the awards. Of this amount, $27,300 in checks apparently were written to Ex-Wife herself for cash. Ex-Wife claimed that all the checks were loans from her mother that were needed because she could not meet her living expenses despite her maintenance award of $3,000 per month. She claimed that much of the money went for home maintenance and repair and that the remainder went for living expenses for her and her daughter. Ex-Husband was not aware of the alleged loans, and he argued that the checks were likely to be gifts from Ex-Wife's mother and that Ex-Wife's testimony that the checks were loans and the notations of “loan” on some of the checks were insufficient to prove the existence of a loan. Ex-Wife testified as to the nature of the debts and had documentation in the form of checks from her mother that supported her testimony that there was actually a loan. TC accepted Ex-Wife's claim of indebtedness to her mother based on her testimony and copies of the checks and CA concluded that the evidence was sufficient to support the determination that the checks represented loans, not gifts. However, CA held that to the extent that Ex-Wife may have used loan proceeds for her personal expenses and expenses for her child after being awarded temporary maintenance and child support, those debts should be held to be Ex-Wife's personal debts. To do otherwise would be to increase Ex-Husband's temporary maintenance and child support obligations during that period of time.

Ex-Husband's third and final argument was that TC erred in ordering him to pay 25% of Ex-Wife's attorney fees and expert witness fees because there was not an imbalance in the financial resources of the parties. Ex-husband stated that the marital property was equalized but that the majority of his assigned marital property ($1.2 million) was the family business. Ex-Wife asserted that while Ex-Husband had a salary of over $100,000 per year, as well as potentially more due to retained corporate earnings not paid by the corporation, she was 55 years old at the time, had been out of the work force for 10 years, and had only a high school education, so although the marital property was divided equally, the financial resources of the parties were not balanced due to these additional facts. Ex-Husband also correctly stated that TC made no specific finding that there was an imbalance in the financial resources of the party, but that it appeared to base its award on Ex-Husband's obstructive tactics in failing to comply with discovery requests and orders of the court. Also, Ex-Husband argued that attorney fees may be awarded pursuant to KRS 403.220 only when there is an imbalance in the parties’ financial resources, even though attorney fees may be warranted otherwise under CR 37.01 due to obstruction tactics. CA found that it was not entirely clear whether TC based its award of attorney fees under KRS 403.220 on the financial resources of the parties as well as Ex-Husband's obstructive tactics. CA found that while TC did not specifically address the parties' financial resources prior to making the award, it did cite the statute, which requires the court to consider such resources. CA held that, in light of Ex-Husband's failure to seek a more specific finding from the court, and in light of the fact that a finding of disparity in the parties' financial resources due to the parties' respective incomes was supported by the evidence, TC did not abuse its discretion in awarding Ex-Wife 25% of her attorney fees and expert witness fees.
As digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates

Gripshover v. Gripshover (Ky) Nonmarital Property, Estate Planning, Child Support, Section 179 Expense, Imputed Income

Gripshover v. Gripshover, __ S.W.3d __ (Ky. 2008), 2005-SC-000729-DG and 2006-SC-000256-DG

Husband and his brother owned a farming operation, realty totaling over 600 acres, and a promissory note for more than a million dollars. They formed two limited partnerships: 1) a real estate partnership with their wives that would hold and manage the realty, and 2) a partnership to manage the farming operation. The brothers also assigned their partnership interests to two trusts. The wife signed documents allowing said transfers. The Supreme Court granted discretionary review to consider the validity of the partnership and trust into which the parties transferred a large portion of their estate less than a year prior to the filing of the petition for divorce, as well as to review the child support and maintenance awards.

Real estate partnership and trust: There was no evidence that either party was contemplating divorce at the time the estate plan was executed or that the husband’s intent was to impair the wife’s marital rights. Therefore, the wife had not been defrauded, as she knowingly and voluntarily consented to the estate plan. The COA erred in holding that the wife retained an interest in the realty and that it was subject to division as marital property. The wife’s argument that the estate plan should be set aside due to the husband retaining control over the realty and not truly giving it to the trust is without merit. SC noted that the wife did not join the necessary parties to challenge the validity of the partnership and trust. Moreover, SC held there was nothing wrong with the brothers retaining control of the realty for the purpose of use in the farming operation. The realty was not transferred to the trust, but instead the partner’s interest in the partnership. Thus, the realty was validly removed from the marital estate and was not subject to division.

Husband’s nonmarital interest in the promissory note: Wife argues that husband’s entire half of the note is marital, since the other siblings quit-claimed their interests to the three remaining siblings (one being the husband) in 1987 (parties married in 1988) for no consideration. Wife argued that because the siblings gave up their interests for no consideration, the property should be regarded as having no equity at that point, and that all equity in the property was acquired after the marriage. The court rejected this argument, especially since in 1989 a small portion of the land was sold for more than the outstanding indebtedness which adequately established that the property increased in value as a result of economic factors alone.

Child support and maintenance: The parties’ incomes were wrongly determined. TC erred in allowing the husband to calculate his income for child support purposes using 26 U.S.C. sec. 179 expense deductions. Section 179 provides an alternative to standard, straight line depreciation, which KRS 403.212(2)(c) mandates as the only allowable method. TC also erred in imputing the wife with $360 per week of income, a level of income well above what she achieved when she was younger and in much better health. TC did not adequately consider all of the statutory factors in KRS 403.212(2)(d). Therefore, SC held that both child support and maintenance must be reconsidered.
Digested by Sarah Jost Nielsen, Diana L. Skaggs + Associates

Jones v. Jones (Ky) Income On NonMarital Property, Increase In Value Of Nonmarital Property, Maintenance

Jones v. Jones, ___S.W.3d___ (Ky. App. 2008)

Ex-Husband appealed TC’s orders classifying his Tobacco Transition Payment Program (TTPP) payments and a portion of the increase in value of his life estate as marital and awarding maintenance and attorney’s fees to Ex-Wife in divorce proceeding.

Prior to the parties’ 18 year marriage, Ex-Husband inherited from his grandfather a life estate in a farm consisting of 215 acres. During the marriage, the parties resided in a residence located on the farm, and Ex-Husband conducted farming operations thereupon. The parties entered into a prenuptial agreement prior to marriage.

In its orders regarding division of property, TC treated future TTPP payments to be made to Ex-Husband as owner of the life estate as marital property in order to effectuate an equitable division of property. CA found that TC erred as a matter of law by classifying the TTPP payments as marital property in order to effectuate a fair distribution of property. The classification of property as marital or nonmarital is not discretionary. CA further found that TTPP owner payments should have been classified as Ex-Husband’s nonmarital property. The TTPP owner payments represent compensation from the government for the taking of the property interest in the tobacco grower’s tobacco quotas. As Ex-Husband inherited the tobacco quotas from his grandfather, they were nonmarital, and the compensation received for them is also nonmarital.

CA also found that future TTPP payments to be made to Ex-Husband as a grower of tobacco should also be classified as Ex-Husband’s nonmarital property. Finding that these TTPP payments supplant income traditionally received from the sale of tobacco, CA found these payments to be properly classified as income. As the income from the sale of tobacco would have been classified as Ex-Husband’s nonmarital property pursuant to the parties’ prenuptial agreement, the grower TTPP payments were also his nonmarital property.

TC found that the parties made substantial improvements to the farm with marital assets, thus the life estate in the farm had a marital component. TC found the actual cost of improvements to the farm totaled $67,000.00, that these improvements were paid for with marital assets, and then adjusted the $67,000 by Ex-Husband's “life estate valuation formula” and concluded the marital property interest was $44,648.00. CA noted that under KRS 403.190(2)(e), any increase in value of property acquired before marriage is nonmarital unless the increase in value is attributed to “the efforts of the parties during marriage.” CA found that TC clearly erred when it equated actual cost of improvements to the life estate in the farm with increase in value to the life estate in the farm. To properly calculate the increase in value attributed to marital improvements upon property acquired before marriage, CA provided that the court must subtract the fair market value of the property at the time of dissolution without marital improvements from the fair market value of the property at the time of dissolution with marital improvements. The difference between such fair market values yields the increase in value attributed to marital improvements upon the property. As to a life estate acquired before marriage, a party may be compensated for the increased value attributed to marital improvements thereon, not to exceed the value of the improvements. Furthermore, when determining the fair market value (FMV) of real property with improvements and without improvements, expert opinion is ordinarily necessary. To be qualified to express an opinion upon FMV of real property, a witness, including the owner thereof, must possess some basis for knowledge of market values. The mere ownership of property does not qualify a lay person to give an opinion upon market value. The actual cost of improvements may be considered as evidence bearing upon FMV but should not be the sole factor. CA noted that if the parties come to the end of their proof with grossly insufficient evidence on the value of the property involved, TC should either order this proof to be obtained, appoint his own experts to furnish this value, at the cost of the parties, or direct that the property be sold. CA directed TC, upon remand, to calculate the marital increase in value of the life estate in the farm by subtracting FMV of the farm at the time of dissolution without marital improvements from the FMV of the farm at the time of dissolution with marital improvements, then, adjust this amount by a life estate valuation formula, but in no event shall the compensation for the marital increase in value to a life estate exceed the value of the improvements thereon.

Ex-Husband also contends TC erred by awarding maintenance to Ex-Wife. As entitlement and amount of maintenance are dependent upon the marital and nonmarital property allocated to the party for a determination of whether the claimant has sufficient resources for her support, CA ruled that Ex-Wife’s maintenance award must also be vacated for reconsideration as part of the underlying property award was reversed on appeal.

Ex-Husband finally contends TC abused its discretion by awarding attorney’s fees to Ex-Wife. Based upon the apparent imbalance of financial resources between the parties, CA found no abuse of discretion in TC’s award to Ex-Wife of a portion of her attorney’s fees.

Affirmed in part, reversed in part, and remanded.
Digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates.

Heskett v. Heskett (Ky) Settlement Agreements, Marital/Nonmarital Property, Dissipation

Heskett v. Heskett, ___S.W.3d___(Ky. App. 2008)

Wife appealed TC’s decision arguing that the court failed to restore her non-marital property. CA reversed and remanded, on a separate issue. CA opined that the TC was correct the property was marital but the TC erred because it failed to consider the issue of dissipation.
Husband and Wife separated in 2002. They drafted a settlement agreement but never signed the agreement. They did, however, divided the property and then began a physical separation. After several months of separation the couple reconciled and bought a house. As a down payment on the house Wife withdrew over $60,000 from CD’s purchased with her share of the previous property division. Husband contributed $8,500 to the purchase of the house from his portion of the property division. Again, however, the couple separated and Wife filed for divorce.
At the conclusion of trial the TC ordered Wife to pay Husband an equal share of the equity in the martial residence. Wife appealed and argued that the settlement agreement from the previous separation should control the classification and distribution of property. Therefore, she argued the money she used as a down payment on the house was her non-marital money and should be restored to her. CA opined that the TC was correct in its determination that the money was marital. CA reasoned that while the parties drafted an agreement during the first separation they never signed the agreement. Therefore, the agreement was not valid under KRS 403.180. Furthermore, when the couple reconciled the previous agreement was voided and not revived by the second separation. However, the CA went on to say that the TC erred because it did not consider the issue of dissipation.
At trial, Wife presented extensive evidence tracing her share of the assets received as a result the first separation. Husband, however, introduce virtually no evidence tracing his share of the assets. In fact, the trial court noted that it was unclear what Husband had done with his share. However, the TC divided the couple’s assets equally. The CA opined that, in the instant case, an equal distribution was not a just distribution. Husband’s inability to account for the majority of his share of the assets received during the first separation constituted dissipation of the marital estate. Therefore, Wife was entitled to have the money she used as a down payment on the marital residence restored to her. Digested by Linda Dixon Bullock, Diana L. Skaggs + Associates

Hibdon v. Hibdon, Valuation (KY) Of Defined Benefit Pension Plan

Hibdon v. Hibdon, ___ S. W. 3d ___(Ky. App. 2007)

Husband appealed from order of the Bullitt County Circuit Court (TC), confirming Domestic Relations Commissioner’s (DRC's) report, dividing his pension plan with Ex-wife, contending that TC erred in its computation of the present value of the plan.

Husband and Ex-Wife were married for 27 years. Husband began earning his pension benefits shortly after the parties married. The primary disagreement between the parties concerned the present value of Husband’s defined benefits pension plan. However, at the hearing on this issue, only Ex-Wife offered evidence in regard to the calculation of the plan's value. Included in Ex-Wife's evidence was a pension valuation which utilized the monthly benefit amount Husband would receive if he continued to work until his normal retirement age, multiplied by 174 months (Husband’s post-retirement life expectancy), and then discounted to present value by 2.25% per local rule. DRC’s findings of fact and conclusions of law concluded that Husband’s pension plan had a value equal to that calculated by Wife, to be discounted for present value by 2.25%, and the entirety of that amount was marital property. DRC did not explain how he arrived at a 2.25% annual discount rate, nor does the rule allow for the Commissioner to explain the influence of the annual inflation rate or other essential data required to provide a competent analysis of the pension plan's present value.

After no exceptions were filed within ten days, TC adopted DRC’s report in its entirety. Husband then filed a motion pursuant to CR 59.05 to alter or amend TC’s order adopting DRC’s report, asserting that DRC accepted Ex-Wife’s erroneous evidence regarding the value of his pension plan. TC assigned matter to DRC for a recommendation as to whether TC’s order should be altered or amended. After hearing, DRC filed his report recommending that Husband’s CR 59.05 motion be denied because he had not offered any new evidence which was not readily available to him at the property division hearing. Before TC could act on the recommendation, Husband filed a motion for a hearing to contest DRC’s valuation of his pension plan. TC adopted DRC’s recommendation to deny the first CR 59.05 motion and denied Husband’s motion for hearing. This appeal followed.

Ex-Wife argues that Husband’s failures to offer evidence of the present value of the pension and to timely file exceptions to DRC’s report are fatal to his appeal. CA disagreed, finding that TC abdicated its discretion to DRC and erred by adopting a present day value of Husband’s pension plan which was not supported by competent evidence. Further, even if Husband insufficiently preserved the issue for review, a palpable error affecting the substantial rights of an individual resulting in manifest injustice is reviewable, even if insufficiently raised or preserved.
Although the evidence as to the value of the pension was limited and offered only by Ex-Wife, CA held that, as a matter of law, the value assigned to the pension plan was clearly erroneous and the error so serious that it must be considered palpable. TC miscalculated the present value of his pension plan by allowing Husband’s post-divorce earnings to be included in the calculation of the present value of the pension plan. Because Ex-Wife's share of the pension was limited to her interest in its accumulated value earned during the marriage, TC abused its discretion by allowing Ex-Wife to receive a share of the pension which included Husband’s post-divorce earnings. Reversed and remanded for a new hearing to determine the marital distribution of Husband’s pension as of the date of the parties’ divorce.

CA noted that Bullitt County’s local rule regarding establishment of present day value of a pension negates the requirement of expert testimony and is not based upon accepted accounting or economic principles, and that entry of a QDRO dividing the pension would be simpler and is a preferable method of division of pensions.

Digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates

Croft v. Croft, KY, Marital/Nonmarital property, Maintenance

Croft v. Croft, ___S.W.3d__(Ky. App. 2007)

Wife appealed an order dividing marital property, denying maintenance, and restoring non-marital property. First, Wife argued that the TC erred in finding that the marital residence was Husband’s non-marital property. CA agreed with Wife and reversed and remanded on this issue. Husband purchased the house and adjoining lot before the couple was married. However, the mortgage was paid off after the marriage, with marital funds. CA reasoned that the TC should have acknowledged this fact and apportioned some of the value of the property as marital. Also, the couple made several, post marriage, improvements to the house. Therefore, Wife claimed the increase in value should be considered marital property. Husband argued that the improvements were just regular maintenance and “were not substantial enough to warrant an increase in value.” CA opined that a TC needs only to determine that the increase in value was due to improvements and not just economic conditions in order for the property to qualify as marital property. Absent clear and convincing evidence that the increased value was due to economic conditions alone the property should be considered marital.
Next, Wife argued it was error for the TC to deny her claim for permanent maintenance. TC held that considering the length of the marriage ( the parties were married in 1997) and the division of property maintenance was not appropriate. CA held that the TC’s decision was not an abuse of discretion because it was supported by substantial evidence.
Finally, Wife argued that the TC erred because it did not divide the property proportionately. CA held that the TC did not err in its division of property. CA opined that husband had presented sufficient evidence that certain items in his possession were his non-marital property. Additionally, wife provided no evidence that any of that property was marital.
Digested by Linda Dixon Bullock, Diana L. Skaggs + Associates

Clark v. Clark, Maintenance, Marital And Nonmarital Property

Clark v. Clark, ___ S. W. 3d ___ (Ky. App. 2007)

DESIGNATED TO BE PUBLISHED: AFFIRMING IN PART; VACATING AND REMANDING IN PART
PANEL: ACREE PRESIDING; KELLER AND LAMBERT CONCURRING;
COUNTY: JEFFERSON
DATE RENDERED: 9/21/2007

Ex-Wife appealed from TC’s Order assigning value to a 2002 Ford Taurus, not valuing or dividing certain certificates of deposit (CD’s) and reducing her maintenance. Parties separated after eighteen years of marriage. At the time of their divorce, Ex-Wife was 70 years old and Ex-Husband was 78. Prior to their marriage, Ex-Husband owned a home, land and livestock. Ex-Husband sold his livestock shortly after the marriage and purchased CD’s with the proceeds. During their marriage, the parties lived on Ex-Husband's social security and pension benefits and, once Ex-Wife reached 62, her social security benefits.

While Ex-Wife's dissolution petition was pending, Ex-Husband was ordered to pay $300.00 per month pendente lite maintenance. After trial, TC found a Taurus to be marital property and awarded it to Ex-Wife with a value of $12,000.00. The CD’s were neither assigned nor awarded since Ex-Wife failed to present any evidence that they existed at the time of the parties' divorce. After dividing all marital property, TC reduced Ex-Wife's maintenance award to a monthly sum of $100.00. Ex-Wife filed this appeal. Subsequently, Ex-Wife filed a CR 60.02 Motion for TC to consider new evidence reflecting that Ex-Husband had cashed out CD’s prior to dissolution but after separation. TC denied this motion. CA indicated that any appeal of that Motion must be separate from this appeal.

Ex-Wife first argues the trial court abused its discretion when it assumed facts not in evidence about the value of the 2002 Ford Taurus, and further arguing that Ex-Husband had purchased the car as a gift for her and, thus, it was not marital property within the definition of Kentucky Revised Statute (KRS) 403.190(2). At trial, Ex-Husband disputed that the Taurus was purchased as a gift to Ex-Wife and, indeed, the car was titled in both parties' names. At trial, neither party testified as to the current value of the Taurus. TC found that Ex-Wife failed to meet her burden of proving that the car was her nonmarital property. The car was awarded to Ex-Wife and assigned the $12,000.00 value listed as its NADA book value in Ex-Husband's mandatory case disclosure. Ex-Wife contends it was incumbent upon Ex-Husband to introduce evidence of the car's value at trial, since he argued it was a marital asset, citing CR 43.01(1), which states, “The party holding the affirmative of an issue must produce the evidence to prove it.” Ex-Wife claimed Ex-Husband’s failure to introduce evidence of its value at trial deprived her of the opportunity to refute this figure. Thus, she argues the burden of refuting the Taurus' supposed value of $12,000.00 never fell to her. She asked CA to assign a value of zero dollars to the car or, in the alternative, to allow her to present evidence contradicting the value assigned by TC. CA disagreed with Ex-Wife’s contentions. CA noted that Ex-Wife had filed her own MCD but failed to assign any value to the Taurus because she contended it was her nonmarital property value as $12,000.00, was filed in the record on June 30, 2004. Ex-Wife had notice that Ex-Husband was characterizing the car as marital property and also of its asserted value. It appears that, instead of introducing her own evidence regarding the car's value, Ex-Wife relied on her ability to persuade TC of the car's nonmarital character. CA found no error in TC’s decision on this issue.

Ex-Wife next argues that TC’s division should have recognized and divided the CD’s between the parties. At trial, Ex-Wife introduced records showing existence of CD’s in 2001. She did not testify to the source of the funds, and offered no proof that the CD’s still existed. Ex-Husband testified that all of the funds used to purchase the CD’s came from the sale of his nonmarital livestock and that the CD’s were exhausted during the marriage.TC found that it was unable to award or assign an asset whose existence was unproven. Ex-Wife asked CA to consider evidence she presented in support of her CR 60.02 motion that Ex-Husband had cashed out the CD’s shortly after the parties separated. However, CA noted that it had issued a previous order that issues related to this Motion must be contained to a timely appeal of that Motion, and Ex-Wife failed to timely appeal that Motion. CA found no error in TC’s order on this issue.

Finally, Ex-Wife argued TC abused its discretion when it reduced her maintenance award, as it set her permanent maintenance so low that she would be dependent upon others for the means to meet her basic needs. At trial, Ex-Wife told TC that she was currently obliged to live with her daughter, and, as a result, TC subtracted her rent and telephone bills from her monthly living expenses. CA held that a TC’s failure to award a sum sufficient to allow a spouse to meet her needs without requiring that she depend on the generosity of family and friends was plainly an abuse of discretion. CA held that TC clearly erred, as its Order did not address the issue of Ex-Wife's current standard of living versus the lifestyle she shared with Ex-Husband during their marriage. TC’s order affirmed in part, vacated in part, and remanded with instructions to TC to review maintenance award.
As digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates.

Kleet v. Kleet, Marital and Nonmarital Property

Kleet v. Kleet

Husband appealed circuit court order awarding wife 80% of marital assets actually in the possession of the parties at the time of the divorce. Husband made four major claims. First, husband claimed the court erred in not awarding him his non-marital assets and holding that he had failed to meet his burden of proving those assets were non-marital. Husband produced some documentation with regards to the non-marital assets. The circuit court, however, found that he selectively produced documents and claimed not to be able to produce other documents. CA opined that this was not clearly erroneous and also upheld the circuit court’s finding that husband’s expert witness’ testimony was flawed. The expert did not attempt to do a traditional tracing. Instead, she used an approximate growth rate, the parties’ joint tax returns, depositions of each party, and interviews with husband to produce a forensic tracing. According to the CA, she testified that, “by taking the income during the marriage and subtracting out the estimated yearly living expenses during the years of marriage, a percentage of non-marital to marital assets could be determined.” She then used the calculated percentage to determine marital and non-marital interest in stock purchased during the marriage. CA found this tracing method unsatisfactory and held that if husband failed to receive all of his non-marital property it was because he failed to meet his burden of proof.
Second, husband claimed it was error to find that he had dissipated marital assets. Husband gave two million dollars to his sister, brother-in-law, and accountant. Husband claimed he had always given monetary gifts and this was not dissipation. CA, however, found that husband was aware that there was a real possibility divorce was eminent and that he never informed wife of the gifts. Additionally, husband did not report the gifts on his gift tax return until after discovery. There was substantial evidence that husband tried to hide the gifts from wife.
Third, husband claimed the family court erred in dividing the property. Husband claimed wife was unsupportive and did not contribute to the marital home. Husband also claimed error in the family court finding that he had an interest in a Florida condominium. CA opined that the family court was in the best position to judge the evidence as to both of these facts and would not find the lower courts holding to be clearly erroneous.
Finally, husband claimed the family court failed to credit him monies paid to wife during litigation. CA found that this too did not constitute error. CA opined that they might have divided the martial assets differently. Regardless, they did not find the trial court abused its discretion in dividing the assets.

Digested by Linda Dixon Bullock, Diana L. Skaggs + Associates

Briefs In Teacher's Retirement Case Before Kentucky Supreme Court

SCOKY Blog has posted the briefs here in the teacher's retirement case, Shown v. Shown, about which we posted here. Oral arguments are set June 14, 2007.

Classification of Marital and Non-marital Property, Debt and Maintenance

Smith v. Smith, __ S.W.3d __ (Ky. App. 2006), 2006 WL 140577 (Ky. App.) Motion for discretionary review pending.

Expected Inheritance: Divorce Relevancy

An Alaska case last month is causing quite a stir.
Krize v. Krize, Alaska Supreme Court, September 29, 2006
"Where the beneficiary remains on generally good terms with the donor, and particularly where the donor is a parent or other close family member, it is a rare case where the expected gift or inheritance will completely fail to yield any benefits at all. The better position, therefore is that the court may consider an expected gift or inheritance as one relevant factor in dividing the marital estate. Of course, the weight of a future gift or inheritance as a division factor should depend heavily upon the degree of likelihood that benefits will actually be received...
We therefore conclude that it is not inherently improper for a court to consider the possibility of inheritance in some cases. Because property divisions cannot be reopened, however, courts must be cautious in using this factor. On remand, the court should permit further discovery on this issue and on the extent to which Robert's interests have vested. Interests that have already vested may be considered as an asset of the beneficiary when the superior court divides the property."