Commonwealth of Kentucky Court of Appeals

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1 RENDERED: FEBRUARY 6, 2015; 10:00 A.M. NOT TO BE PUBLISHED Commonwealth of Kentucky Court of Appeals NO CA MR KELLY NOBLE, JR. APPELLANT APPEAL FROM BREATHITT CIRCUIT COURT FAMILY COURT DIVISION v. HONORABLE JANIE MCKENZIE-WELLS, JUDGE ACTION NO. 10-CI ALMA NOBLE APPELLEE OPINION AFFIRMING IN PART, REVERSING IN PART, AND REMANDING ** ** ** ** ** BEFORE: CLAYTON, MAZE, AND TAYLOR, JUDGES. TAYLOR, JUDGE: Kelly Noble, Jr., brings this appeal from an October 11, 2013, findings of fact, conclusions of law and decree of dissolution of marriage in the Breathitt Circuit Court, Family Court Division, and a November 20, 2013, order

2 granting in part a motion to alter, amend or vacate. We affirm in part, reverse in part, and remand. Kelly and Alma Noble were married on August 30, During their almost thirty-eight year marriage, the parties accumulated significant real and personal property. The marriage was dissolved by decree of dissolution entered in the family court on October 11, The decree also resolved all of the parties marital and nonmarital property issues. Kelly subsequently filed a motion to alter, amend, or vacate the October 11, 2013, decree under Kentucky Rules of Civil Procedure (CR) 59. By order entered November 20, 2013, the family court granted Kelly s motion in part and amended the valuation of certain real and personal property. This appeal follows. Kelly contends that the family court erred by failing to restore his nonmarital interest in certain real property obtained during the parties marriage. More particularly, Kelly asserts that the family court failed to recognize his nonmarital interest in three properties: (1) the marital residence, (2) the French Terry Farm, and (3) the Harlan Timothy Noble Farm. We will address each property separately. Kentucky Revised Statutes (KRS) controls disposition of property in a dissolution of marriage proceeding and provides, in relevant part: -2-

3 (1) In a proceeding for dissolution of the marriage... the court shall assign each spouse's property to him. It also shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors including: (a) Contribution of each spouse to acquisition of the marital property, including contribution of a spouse as homemaker; (b) Value of the property set apart to each spouse; (c) Duration of the marriage; and (d) Economic circumstances of each spouse when the division of property is to become effective.... (2) For the purpose of this chapter, marital property means all property acquired by either spouse subsequent to the marriage except: (a) Property acquired by gift... during the marriage and the income derived therefrom unless there are significant activities of either spouse which contributed to the increase in value of said property and the income earned therefrom; (b) Property acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, bequest, devise, or descent;.... (e) The increase in value of property acquired before the marriage to the extent that such increase did not result from the efforts of the parties during marriage. (3) All property acquired by either spouse after the marriage and before a decree of legal separation is presumed to be marital property, regardless of whether title is held individually or by the spouses in some form of co-ownership such as joint tenancy, tenancy in common, tenancy by the entirety, and community -3-

4 property. The presumption of marital property is overcome by a showing that the property was acquired by a method listed in subsection (2) of this section. Pursuant to KRS , the family court must characterize each item of property as either marital or nonmarital, assign each party their nonmarital property, and divide the marital property in just proportions. Jones v. Jones, 245 S.W.3d 815 (Ky. App. 2008). And, there is a presumption that property acquired by either spouse during the marriage and before entry of a decree of dissolution is marital property. KRS The presumption of marital property may be overcome by showing the property was acquired by gift or acquired in exchange for property acquired by gift. KRS The party claiming a nonmarital interest in property acquired during the marriage bears the burden of proof upon that issue. Hunter v. Hunter, 127 S.W.3d 656 (Ky. App. 2003). There are several relevant factors to consider when evaluating whether property acquired during the marriage was a gift to only one spouse. Id. The relevant factors include the source of the money used to purchase the item, the intent of the donor, and the status of the marriage at the time of the transfer. Hunter, 127 S.W.3d at 660. The donor s intent is considered the paramount factor. Id. And, [w]hether property is considered a gift for purposes of divorce proceedings is a factual issue subject to the clearly erroneous standard of review. Id. at When property acquired during the marriage is obtained in exchange for property acquired by gift, there is a requirement that the party claiming a nonmarital interest must trace the property acquired by gift into property presently owned. 15 Louise E. Graham & James E. Keller, Kentucky Practice Domestic Relations Law 15:10 (3rd ed. 2008). -4-

5 First, Kelly asserts a nonmarital interest in the parties marital residence. The record discloses Kelly testified that the real property upon which the marital residence was built was a gift to him from his parents. In support of his claim, Kelly stated that the real property was located on his family s farm and was given to him by his parents. Alma, on the other hand, introduced the deed for the property into evidence. The deed reflected that the property was conveyed to both Kelly and Alma for the sum of $1.00 and in exchange for the love and affection... for their son [Kelly] and daughter-in-law [Alma]. 2 As the burden was upon Kelly to demonstrate a nonmarital interest in the property, we agree with the family court that Kelly did not introduce sufficient proof to overcome the presumption that the marital residence was marital property. Therefore, we do not believe the family court erred by determining that the marital residence was entirely marital property. Second, Kelly claims a nonmarital interest in the Harlan Timothy Noble Farm. The farm was conveyed to Kelly and Alma in January 2006 in exchange for $20,000. In support of Kelly s claim that he possessed a nonmarital interest in this farm, Kelly averred that he used a portion of the funds inherited from his father to pay the indebtedness owed on the Harlan Timothy Noble Farm. Kelly introduced an October 15, 2007, check from his father s estate in the approximate amount of $45,000. Kelly testified that he utilized approximately $20,000 from the inherited funds to pay the debt incurred to purchase the Harlan 2 This language is taken from the Deed of Conveyance dated September 29, 1978, and recorded in Deed Book 136, Page 735, in the Breathitt County Clerk s Office. -5-

6 Timothy Noble Farm. However, Kelly did not trace the inherited funds ($45,000) directly to the payment of $20,000 upon the indebtedness on the farm. As the burden was upon Kelly to demonstrate his nonmarital interest in the property, we again cannot conclude that the family court erred by holding that Kelly failed to prove a nonmarital interest in the Harlan Timothy Noble Farm. Third, Kelly maintains that he possessed a nonmarital interest in the French Terry Farm. The undisputed facts reveal that the French Terry Farm was conveyed for valuable consideration to Kelly and his father, Kelly Noble, Sr., as tenants in common by deed dated April 3, This conveyance occurred during the parties marriage. Thus, as a matter of law, the one-half undivided interest Kelly acquired in the Farm by deed dated April 3, 1993, constitutes marital property. By deed dated April 11, 2000, Kelly s father conveyed his one-half undivided interest in the Farm to Kelly for and in consideration of the sum of ONE DOLLAR ($1.00) and for the natural love and affection. Kelly testified that this conveyance was made to him during his father s final illness and was a gift. Kelly s Brief at 4. Based upon this unrefuted evidence, we think it was the clear intent of the donor (father) to gift his one-half undivided interest in the French Terry Farm to Kelly. Under KRS (2)(a), the gift of the one-half undivided interest in the French Terry Farm made by the father to Kelly clearly constitutes Kelly s nonmarital property and must be assigned to Kelly. See Jones, 245 S.W.3d 815. Consequently, we conclude the family court erred by failing to assign the gifted -6-

7 one-half undivided interest in the French Terry Farm to Kelly as his nonmarital property. As hereinbefore stated, the other one-half undivided interest acquired by Kelly for valuable consideration during the parties marriage was properly classified as marital property. Upon remand, the family court shall assign a onehalf undivided interest in the French Terry Farm to Kelly as nonmarital property and shall divide in just proportions the other one-half undivided marital interest in the farm. Kelly next asserts that the family court abused its discretion by granting Alma s motion for the family court judge to recuse and for appointment of a special judge. In her motion for recusal, Alma asserted that there appeared to exist some type of relationship between Kelly and the judge that was hindering the judge s ability to make unbiased decisions in this case. Relevant to this appeal, recusal of a judge is governed by KRS 26A.015(2), which provides, in relevant part: (2) Any justice or judge of the Court of Justice or master commissioner shall disqualify himself in any proceeding:.... (e) Where he has knowledge of any other circumstances in which his impartiality might reasonably be questioned. And, the standard for deciding whether to grant a motion for recusal is whether the facts alleged would place a reasonably prudent person in fear of not receiving a -7-

8 fair and impartial trial. Taylor v. Carter, 333 S.W.3d 437, 445 (Ky. App. 2010) (citation omitted). In the case sub judice, Alma made a motion for the family court judge to recuse himself. At the hearing upon her motion, Alma testified that a relationship existed between Kelly and the family court judge. Alma further asserted that the relationship between Kelly and the judge prevented the judge from making a fair decision in this case. These facts provide a sufficient basis for the family court judge s decision to recuse. Hence, we do not believe that the family court abused its discretion by granting Alma s motion for recusal. Kelly also contends that the family court abused its discretion in the division of marital property. Kelly alleges the family court failed to divide the property in just proportions. Kelly does not explain in detail how the family court abused its discretion, other than to reference the court s alleged failure to consider Kelly s economic circumstances and alluding to his bad health. Nonetheless, we have remanded to the circuit court for the assignment of a one-half undivided interest in French Terry Farm to Kelly as nonmarital property and for a division in just proportions of the other one-half undivided marital interest in the French Terry Farm. Being a substantial asset, this could directly affect the division of all marital property. Accordingly, since the circuit court erred by its classification of the French Terry Farm as wholly marital, we believe it is necessary for the circuit -8-

9 court to reconsider its overall division of all marital property on remand in light of this Opinion. 3 In sum, we reverse the family court s determination that the French Terry Farm was entirely marital property. We conclude that a one-half undivided interest in the French Terry Farm constitutes Kelly s nonmarital property and that the other one-half undivided interest in the French Terry Farm is marital property. Consequently, we remand for the circuit court to reconsider its division of marital property and to divide the marital property in just proportions. For the foregoing reasons, the order of the Breathitt Circuit Court, Family Court Division, is affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion. ALL CONCUR. BRIEF FOR APPELLANT: Melissa C. Howard Tammy E. Howard Jackson, Kentucky BRIEF FOR APPELLEE: Monica S. Lacy Stanton, Kentucky 3 It is well established that [a]ttempts to determine the percentage of marital property that should be allocated to each spouse under [Kentucky Revised Statutes (KRS)] KRS or the amount of maintenance to be awarded under KRS are subject to reversal if property has been incorrectly classified. 15 Louise E. Graham & James E. Keller, Kentucky Practice Domestic Relations Law 15:1 (3rd ed. 2008). -9-

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