Kentucky Case Law Review by Topic: June 2024

Grumblatt v. Grumblatt, Nos. 15-CI-502339, 2023-CA-1134-MR (Ky. App. 2024)

Civ. R. 59
Contempt
Marital Property: burden of proof, dissipation (financial misconduct), retirement benefits
Property Settlement Agreement: ambiguity
QDRO

Dated: June 7, 2024
Affirming
Not to be Published

As part of their contentious dissolution, Husband and Wife executed an agreed order under which: (a) they would enter a previously drafted QDRO awarding Wife half of Husband’s retirement account; and (b) Husband would reimburse Wife for half the value of withdrawals he unilaterally made, during the pendency of the case.

Husband was ordered to make the reimbursement payment to Wife within 60 days, but failed to do so. Wife filed a motion for contempt, and Husband responded, arguing that his reimbursement payment to Wife was not intended to be separate from the QDRO. Husband reasoned that the ‘gains and losses’ provisioning in the QDRO rendered separate payment unnecessary.

Get your favorite cider out. It's stone fence season.

Following a hearing with the trial court, Husband was found in contempt for failure to make separate reimbursement payment to Wife. The trial court found that the provisions of the agreed order were clear and unambiguous, and that Husband’s interpretations were “unreasonable and self-serving.” Husband was ordered to pay attorney fees and the reimbursement payment owed Wife.

Husband retained new counsel, and filed a motion to amend, alter or vacate the agreed order. The trial court denied Husband’s motion, and his appeal followed.

In his appeal, Husband argued the trial court erred when it held him in contempt without an evidentiary hearing, and that the provisions of the agreed order were ambiguous as to the separate handling of the award amounts. Husband further argued that the trial court’s order failed to find clear and convincing evidence of, or willfulness in his contempt.

The Court disagreed, noting that Husband’s failure to make the reimbursement payment to Wife established a prima facie case of his violating a court order, thereby shifting the burden of proof to Husband. Moreover, the Court found that the trial court correctly held Husband had waived his right to an evidentiary hearing:

The [trial] court found [Husband’s] interpretation of what he had to pay to be unreasonable. It might just as well have been described as specious. The reference to investment gains and losses in the account cannot logically mean including the withdrawals made by [Husband]. If that were the case, there would be no reason for Provision 3 at all. [Husband’s] delay-continuing and meritless explanation did not shift the burden back for the [trial] court to have to make any further specific findings. [Husband] decided to rely on a legal argument and having done so cannot now claim a violation of his rights because he lost that argument.

Bryant v. Bryant, Nos. 19-CI-502514, 2021-CA-1427-MR, 2021-CA-1494-MR (Ky. App. 2024)

KRS 403.090: maintenance
Marital Property: burden of proof, house, source of funds, tracing

Dated: June 14, 2024
Affirming in Part, Reversing in Part, and Remanding
Not to be Published

The trial court issued an order in 2021, resolving issues on which the parties had been unable to reach agreement, including: child support, uninsured medical expenses, private school tuition, Wife’s separate property claim, division of marital property, attorney fees, and alleged dissipation by Husband. Husband filed an unsuccessful motion to alter, vacate, or amend this order, and this appeal followed.

In his appeal, Husband asserted that the trial court erred when: (a) it found Wife met her tracing burden for her separate property claim; (b and c) it imputed income to him for child support and maintenance; (d) imputed a yearly income of $20,025.60 to Wife; (e) deviated from Kentucky Child Support Guidelines; and (f) awarded Wife all her attorney’s fees and costs.

In 2013, Wife cashed out a nonqualified retirement plan with marital and non-marital components, the bulk of which she deposited into the parties’ jointly held money market account. Wife produced evidence showing a $109,392.47 deposit into the account. This account was subsequently used to fund the downpayment on the parties’ vacation home. During the trial court’s hearing, Wife produced pre-marital W-2 forms which she subsequently conceded did not show contributions to her nonqualified plan, but showed contributions to her 401(k), instead. Wife argued that her testimony and provided bank records were sufficient proof of her separate interest in the parties’ vacation home. The trial court subsequently awarded Wife a portion of her alleged non-marital interest in the downpayment, $30,265.13, but also found that she failed to prove any non-marital interest in her 401(k) with the same employer.

In a subsequent Civ. R. 59.05 motion, Husband alleged that the trial court “plainly erred” since Wife’s W-2s denoted contributions to Wife’s 401(k), only, and not her nonqualified plan. The trial court then entered an order partially granting his motion by agreeing it had erred regarding the 401(k), and reduced Husband’s share by that same amount from Wife’s 401(k) plan. Husband then brought this appeal.

Citing Chenault, the Court agreed with Husband: the trial court erred when it (1) awarded Wife the same duplicative amount as separate property from her 401(k) and as interest in the vacation home; and (2) in finding that Wife had traced any non-marital interest into the vacation home at all. A party that claims a pre-marital interest has the burden to prove this claim “by clear and convincing evidence.” And while Chenault recognized that not all litigants have the records and acumen to fully trace their separate property claims, the parties in this case were both successful business professionals.

The [trial] court’s division of the account into marital and nonmarital property was based on nothing but speculation and conjecture, along with a sense of what it considered equitable. However, tracing requires some evidence, especially where, as here, we are dealing with educated businesspersons with several million dollars’ worth of assets. In the absence of evidence to demonstrate what amounts [Wife] contributed to the [nonqualified plan] account prior to the parties’ marriage, the [trial] court erred when it proportionally divided the account. Certainly, the [trial] court has the discretion to divide marital property in just proportions; however, we cannot agree, in a case like the present, that it can simply disregard the tracing rules to award a party a nonmarital interest based simply on its notion of what is fair.

The Court thus reversed the trial court’s award of a nonmarital interest in the vacation home to Wife, which it deemed fully marital in nature, and remanded the question back to the trial court to determine the parties’ respective shares of the vacation home as marital property.

Noting Husband’s voluntary decision to break his former employer’s nonfraternization policies, which led to his termination, the Court affirmed the trial court’s decision to impute his former income in its determination of child support and maintenance. Husband had obtained new employment with a significantly lower salary, and had been offered a position with his old employer, were he willing to relocate.

The court similarly affirmed Husband’s assignments of error concerning attorney fees, Wife’s imputed income, and child support awards. The parties had enjoyed a high standard of living, prior to the dissolution, and Wife’s years out of the workforce significantly impacted her earnings ability in the short term.

Smith v. Smith, Nos. 22-CI-00053, 2023-CA-0811-MR (Ky. App. 2024)

Marital Property: house, source of funds

Dated: June 21, 2024
Affirming in Part, Reversing in Part, and Remanding
Not to be Published

Prior to the parties’ 2022 dissolution, Husband received retirement accounts consequent to his mother’s death, which he used toward the purchase of the parties’ marital home. Both parties were listed on the deed.

As part of the dissolution proceedings, the trial court deemed the funds used to purchase the house as Husband’s non-marital property. However, the trial court then also found that the deed indicated a donative intent on the part of Husband, to gift the residence to Wife. The trial court thus classified the house as marital property (despite the finding it had been gifted to Wife), but awarded the entirety of the home to Wife. [Editor’s Note: there is some internal confusion in the trial court’s findings and conclusions with regard to the gifting and determinations of marital/nonmarital property, which is observed by the Court of Appeals.] Husband then brought this appeal.

In his appeal, Husband argued that the trial court erred in classifying the home as marital property. The Court agreed with Husband, citing well-established case law:

To classify property, Kentucky courts use the “source of funds” rule, which means “the character of the property, i.e., whether it is marital, nonmarital, or both, is determined by the source of the funds used to acquire the property.” Sexton v. Sexton, 125 S.W.3d 258, 265 (Ky. 2004)

The Court found that the record clearly showed that the house was purchased using only funds from Husband’s mother’s retirement account, and the house had not increased in value since its purchase (whereby any such increase might be deemed marital). The Court also found that Husband’s listing of Wife on the deed was not sufficient to establish donative intent on his part. The Court thus held the trial court erred in its marital property determination. In so holding, the Court found the house to be Husband’s sole nonmarital property.

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