Kentucky Case Law Review by Topic: March 1, 2024 through April 31, 2024

Burdette v. Burdette, Nos. 20-CI-00022, 2022-CA-0341-MR (Ky. App. 2024)

Civ. R. 59
KRS 403.190: marital misconduct
Marital Property: appreciation (passive), retirement benefits, tracing

Dated: March 1, 2024
Affirming
Not to be Published

During proceedings for the parties’ 2017 dissolution, Wife testified that Husband had behaved violently toward her during the marriage, and that she was thus entitled to a greater share of the marital property. The trial court rejected Wife’s argument, noting its obligation to divide parties’ marital property “without regard to marital misconduct.”

Following the entry of the trial court’s decree, Wife filed a Civ. R. 59 motion to amend, alter, or vacate the decree, and challenging the constitutionality of KRS 403.190(1). The trial court declined to address Wife’s constitutional challenge, due to it only being raised after judgment was entered.

Wife also objected to the trial court’s determination of her separate property claim related to her retirement. The trial court awarded Wife, as her separate interest in the retirement account, an amount which was calculated by subtracting the balance as of the date of marriage and the amount of her post-marital contributions from the overall account balance. Wife argued for a calculation/approach—similar to Brandenburg—that would consider the passive gains/losses on her pre-marital share during the term of the marriage. The trial court overruled, however, maintaining its calculation of her separate share in the retirement account. The trial court then awarded Wife 60% of the marital portion of the account, and Husband the remaining 40%. Wife’s appeal followed.

On appeal the Court declined to hear arguments for Wife’s constitutional challenge, finding that she had failed to raise the arguments at trial, and further failed to meet requirements set forth in KRS § 418.075.

Stay out of the QDRO relax in the shade of this commonwealth.

The Court further found that Wife had failed to meet her burden of proof as to her separate property claim, as the party alleging an increase in value was nonmarital. Citing Roper v. Roper and Cobane v. Cobane, the Court noted how prior Kentucky case law has consistently rejected similar arguments that relied on testimony alone, and failed to properly ‘trace’ alleged pre-marital retirement contributions.

[Wife] failed to rebut the presumption that all increases in value of her non-marital contributions is marital property.

We do note again that in making a division of the marital portion of [Wife’s] retirement account the [trial court] awarded her fifty percent more than [Husband] received. We hold this satisfied the [trial court’s] obligation under KRS 403.190(1) to distribute marital assets in just proportions.

Jabrazko v. Kleiman, Nos. 21-CI-01465, 2023-CA-0336-MR, 2023-CA-0353-MR (Ky. App. 2024)

Marital Property: abuse of discretion, burden of proof, separate property, tracing
Remand: tracing

Dated: March 22, 2024
Affirming in Part, Reversing in Part, and Remanding
To be Published

The parties were married in 2019 and began dissolution proceedings in 2021. They maintained substantial assets and incomes, with Wife earning $492,947 and Husband earning $187,767, annually. As part of their dissolution, the trial court ordered the division and equalization of various assets including equity in the marital home, retirement accounts, and a savings account established prior to the marriage by Wife, with a stipulated pre-marital balance of $300,379.

During the marriage, Wife made deposits of marital income and withdrawals for marital purposes from the savings account. Citing Chenault v. Chenault, the trial court determined that—because the balance of Wife’s account as of its valuation for division fell below its balance prior to the marriage—the entire balance was thus marital. The trial court wrote:

The result is harsh, but it is also crystal clear under Kentucky Law. The “last in-first out” theory for tracing co-mingled funds cannot be applied if the account balance fell below the pre-marriage balance. So here this account is marital as a matter of law, the [W]ife having failed to meet her burden of proof as to tracing.

Applying the same standard, the trial court denied Husband’s claim of a pre-marital interest in one of his accounts. The Court, however, found that this was a misapplication of the law, and remanded the matter back to the trial court to allow the parties to present evidence and tracing of their respective pre-marital interests.

[W]hen nonmarital funds have been comingled with marital funds—resulting in a balance lower at dissolution than prior to the marriage—tracing may permit a party claiming a nonmarital interest to obtain such, either in whole or in part. Here, it is undisputed that the marital funds deposited into Wife’s Savings Account consisted primarily of Wife’s salary from GE. These comingled funds were used for marital expenses. Wife presented extensive tracing materials to the [trial court]. We do not make a judgment on this evidence. However, it is clear that the [trial court] erroneously concluded that the Savings Account was automatically “converted” into marital funds and were therefore, “marital as a matter of law[.]”

Gilbert v. Gilbert, Nos. 18-CI-02993, 2022-CA-0012-MR, 2022-CA-0450-MR (Ky. App. 2024)

Marital Property: gift, house
Witness: credibility

Dated: April 5, 2024
Affirming
Not to be Published

During the parties’ marriage, Husband deeded the marital residence to Wife, despite his ownership before the marriage. During the final hearing for the divorce, the parties presented conflicting testimony concerning the ultimate intent behind this ownership transfer. Wife alleged Husband had gifted the property to her outright, whereas Husband testified he had only meant to shelter it from creditors due to the risks associated with his profession. The parties also presented arguments related to their child and visitation with Wife, which are not summarized here and are of limited concern for this blog.

The trial court ultimately agreed with Wife, finding that Husband had indeed gifted the house to Wife during the parties’ marriage. Husband appealed this designation, arguing for the restoration of the residence to his ownership. Noting its deferential standard of review, when determining the credibility of witnesses, the Court affirmed the trial court’s findings.

First the Court found Husband had improperly relied upon Digenis v. Young, No. 2014-CA-001086-MR, 2017 WL 3328119 (Ky. App. Aug. 4, 2017) (unpublished) in his appeal—by his citation to a footnote therein related to the RESTATEMENT (SECOND) OF TRUSTS referencing ‘asset protection’ as a basis for relief. The Court noted that the Digenis Court expressly rejected any such premise as directly at odds with Kentucky law, opining: “’[a] person who conveys property… to avoid the reach of creditors is generally at his grantee’s mercy as to whether he will ever get his property back.’”

The Court similarly found that Husband misinterpreted Justice v. Justice, 310 Ky. 34, 219 S.W.2d 964 (1949) in arguing that his case was distinct based on the lack of any ongoing suits against him. However, the Court pointed out that in Justice, there was likewise no ongoing lawsuits, but only the fear of such threat. Finding no merit for Husband’s appeal, the Court affirmed the trial court’s assignment of the residence to Wife.

Willett v. Willett, Nos. 14-CI-00054, 2023-CA-0490-MR (Ky. App. 2024)

Marital Property: division, retirement benefits (military)
Property Settlement Agreement: Ambiguity (cost-of-living adjustments)

Dated: April 12, 2024
Affirming
Not to be Published

Immediately prior to the parties’ marriage in 1988, Husband enlisted in the Army, and by the time of their divorce in 2014, he had accrued eligibility for a military pension. As part of the parties’ divorce, Wife was awarded a monthly dollar amount, representing half of the marital share of said pension (now in pay status) along with survivorship coverage for its continued payment should Husband predecease her.

In 2023, Wife filed a motion to recover a portion of cost-of-living adjustments (COLAs) paid to Husband subsequent to the parties’ divorce. In his motion opposing this, Husband argued that Wife should only receive the fixed amount awarded to her under the parties’ agreement. Ultimately the trial court agreed with Wife, and concluded that the agreement was ambiguous, thus permitting the trial court to review extrinsic evidence. Noting the clear intent to award Wife half of the marital portion of the pension benefit, the trial court ordered Husband to reimburse Wife $2,545 representing her share of COLA adjustments he had received. Husband’s appeal followed.

Noting that Husband failed to properly reserve his allegations of error, nor cite the record, the Court reviewed only for manifest injustice.

Manifest injustice requires a showing of the probability of a different result, or that the error in the proceeding was of such magnitude as to be shocking or jurisprudentially intolerable. Martin v. Commonwealth, 207 S.W.3d 1, 3-4 (Ky. 2006). We conclude that Husband failed to establish any error of such caliber.

Citing a similar case in Applewhite v. Applewhite, No. 2008-CA-001494-MR, 2009 WL 1884615 (Ky. App. Jul. 2, 2009) (unpublished) the trial court’s findings noted the expression of Wife’s award in the parties’ agreement in both percentage and dollar amounts, giving rise to ambiguity and one or more interpretations. The Court affirmed, finding that “COLA is typically treated as part of an earned benefit during the marriage, rather than as being earned only after entry of the decree.”

Editor’s Note: To learn more about retirement plan COLAs, their status under Kentucky domestic relations law, and interplay with property settlement, see this January of 2015 EZ QDRO LAW blog post and this June of 2015 article written by Eileen Zell published by the Lex Loci.

Michael v. Michael, Nos. 09-CI-03487, 2023-CA-0425-MR (Ky. App. 2024)

Property Settlement Agreement: Civ. R. 60.02 (ambiguity, unconscionable)

Dated: April 26, 2024
Affirming
Not to be Published

The parties in this case divorced in 2009, consequent to which Husband was to transfer his equity interests in the marital residence to Wife. Subsequently, in exchange, Wife was to pay Husband $20,000. Notwithstanding, for the next decade, Husband continued to reside in the home, and made monthly payments to Wife. As time wore on, Husband made improvements to the home, and Wife paid certain expenses including property taxes.

In 2019, Wife informed Husband she was ready to pay him his $20,000 in exchange for his ownership share in the property. Husband refused, Wife filed a motion to enforce the settlement agreement, and a hearing followed, but no order was entered. In 2023, Wife re-noticed her motion to enforce the agreement, Husband again filed a response motion, and the trial court ruled in Wife’s favor. Finding Husband had failed to meet his CR 60.02 burden to reopen the decree, the trial court ordered the transfer of his interest to Wife in exchange for payment of $20,000 to Husband. Husband appealed.

In affirming the trial court’s decision, the Court found under KRS § 403.180(5), the terms of parties’ agreements are “enforceable as contract terms,” and although Wife waited ten years to enforce said terms in this case, she was within the fifteen-year statute of limitations imposed by KRS § 413.090(2).

The Court further found that Husband failed to allege any articulable change in his circumstance that occurred since 2009 that would render enforcement of the agreement unconscionable. Instead, Husband merely argued that the agreement placed no affirmative duty of him to act. However, the Court observed that the agreement unambiguously bestowed a duty upon Husband to convey his interest (and without any regard to when Wife paid him the $20,000). The Court determined any equitable argument (including any extrinsic evidence taken in support thereof) raised as to the interpretation of this unambiguous clause in the agreement—just as with any other contract—would be inapplicable as a matter of law.

Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.