RENDERED: JULY 17, 2009; 10:00 A.M. NOT TO BE PUBLISHED Commonwealth of Kentucky Court of Appeals NO. 2007-CA-002387-MR GERALD L. CLAXON APPELLANT APPEAL FROM GREENUP CIRCUIT COURT v. HONORABLE JEFFREY L. PRESTON, JUDGE ACTION NO. 07-CI-00453 JANET R. CLAXON APPELLEE OPINION AFFIRMING ** ** ** ** ** BEFORE: CAPERTON, THOMPSON, AND WINE, JUDGES. CAPERTON, JUDGE: Gerald L. Claxon appeals the October 1, 2007, Findings of Fact, Conclusions of Law, Decree of Dissolution of Marriage, and Judgment of the Greenup Family Circuit Court, whereby the court divided the property of Gerald and Janet R. Claxon following the parties dissolution of marriage. Specifically Gerald argues that the court s award to Janet of one-third of the value of the farm
was error and requires reversal. We disagree, and accordingly, affirm the order of the Greenup Family Circuit Court. The parties were married on April 11, 1998, and separated on June 15, 2007. Janet is retired from AK Steel. Janet s income consists of Social Security and her pension from AK Steel. Gerald is employed at ESM Machine Shop. Both parties owned residences prior to the marriage. The parties moved into Gerald s residence after marriage while Janet sold her residence for a profit of $42,000. Janet paid off the debt from her non-martial car and put $34,000 into the parties joint account. During the six years they resided at Gerald s residence the parties made improvements to the property which Janet claims amounted to $30,000. On December 8, 1998, the parties prepared a new deed for Gerald s property with Gerald and Janet as grantees. This deed was not recorded until July 14, 2004. Following the recording of the new deed, in September 2004, the parties purchased Gerald s father s house and the accompanying farm (hereinafter collectively the farm ) and sold Gerald s residence for $189,000. The value of the farm was $200,000. Gerald had previously inherited a one-third interest in the farm from his father and Gerald and Janet purchased the remaining two-thirds interest for $133,374.56 from Gerald s siblings. At the time of the dissolution of the marriage, 35 head of cattle valued at $500 each and farm machinery purchased during the marriage were also located on the farm. At the final hearing, the primary focus was on whether Janet was entitled to one-third of the value of the farm. Janet claimed that the money to -2-
purchase the farm came from the parties joint account while Gerald argued that the sale of his residence funded the purchase of the farm, leaving Janet no claim to it. After hearing testimony from the parties, the trial court awarded each party their respective retirement accounts, divided the martial debt, awarded Gerald the cattle and farm machinery, and awarded Janet a one-third interest in the farm. The major factor in awarding Janet a one-third interest in the farm was the fact that the deed to Gerald s residence listed both Gerald and Janet. The trial court reasoned that as there was no evidence as to the intent or reasoning for placing Janet s name on the deed, the transfer was either a gift to Janet or for value received from Janet. As to the latter, the trial court did find there was evidence that both parties had expended labor and money to improve Gerald s residence and such would support a finding that Janet was entitled to a one-third interest in the farm that was purchased after the sale of the jointly held residence and with the proceeds therefrom. It is from this award that Gerald appeals. The only issue on appeal presented by Gerald is whether the court erred in awarding Janet a one-third marital interest in the farm. Gerald argues that KRS 403.190 controls the disposition of property in proceedings for dissolution of marriage and that the court did not properly apply the statute as the two-thirds purchase price of the farm came from the sale of Gerald s residence. Gerald argues that Janet stipulated that the residence was non- -3-
marital and as such, it was not necessary for Gerald to trace the funds. 1 Gerald further contends that while Janet argues that she expended labor and money to improve the non-martial property, there is no evidence that this actually increased the value of the property. Accordingly, Gerald asserts that Janet is precluded from any interest in it. Janet counter-argues that Gerald does not offer citation to the record to support such assertations nor is there anything in the record, to contradict the court s findings. Further, Janet argues that the court did not abuse its discretion, as it was the duty of Gerald to prove that the farm was purchased with non-martial property. Janet argues it was Gerald s burden to establish that his residence had not lost its non-marital character as it was the residence of the parties for six years. 1 Gerald fails to cite to the record where this stipulation occurred as required by CR 76.12. Our review of the record does not show any stipulations by Janet. -4-
At the outset we note that KRS 403.190 2 controls the division of property upon dissolution of marriage. As stated in Hunter v. Hunter, 127 S.W.3d 656, 659-660 (Ky. App. 2003), the trial court's division of property involves a three-step process: (1) characterizing each item of property as marital or nonmarital; (2) assigning each party's nonmarital property to that party; and (3) 2 KRS 403.190 states: (1) In a proceeding for dissolution of the marriage or for legal separation, or in a proceeding for disposition of property following dissolution of the marriage by a court which lacked personal jurisdiction over the absent spouse or lacked jurisdiction to dispose of the property, 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, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children. (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, bequest, devise, or descent 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; (c) Property acquired by a spouse after a decree of legal separation; (d) Property excluded by valid agreement of the parties; and (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 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. (4) If the retirement benefits of one spouse are excepted from classification as marital property, or not considered as an economic circumstance during the division of marital property, then the retirement benefits of the other spouse shall also be excepted, or not considered, as the case may be. However, the level of exception provided to the spouse with the greater retirement benefit shall not exceed the level of exception provided to the other spouse. Retirement benefits, for the purposes of this subsection shall include retirement or disability allowances, accumulated contributions, or any other benefit of a retirement system or plan regulated by the Employees Retirement Income Security Act of 1974, or of a public retirement system administered by an agency of a state or local government, including deferred compensation plans created pursuant to KRS 18A.230 to 18A.275 or defined contribution or money purchase plans qualified under -5-
equitably dividing the marital property between the parties. (Internal citations omitted). The party claiming that the property acquired during the marriage is non-marital has the burden of proof and must establish this by clear and convincing evidence. Sexton v. Sexton, 125 S.W.3d 258, 266-267, n.31 (Ky. 2004). Clear and convincing proof does not necessarily mean uncontradicted proof. It is sufficient if there is proof of a probative and substantial nature carrying the weight of evidence sufficient to convince ordinarily prudent-minded people. Rowland v. Holt, 253 Ky. 718, 70 S.W.2d 5, 9 (1934). Our courts routinely apply the source of funds rule when the property before the court includes both marital and non-marital components. See Travis v. Travis, 59 S.W.3d 904, 909 (Ky. 2001). The source of funds rule simply means that 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 property. Travis at 909, n.10 (internal citations omitted). In the case sub judice, Gerald claims that the farm is completely nonmarital property. 3 As such, he had the duty to trace and prove its non-marital character. In the context of tracing nonmarital property, when the original property claimed to be nonmarital is no longer owned, the nonmarital claimant Section 401(a) of the Internal Revenue Code of 1954, as amended. 3 Sexton explains the reasoning for tracing as it arises from KRS 403.190(3)'s presumption that all property acquired after the marriage is marital property unless shown to come within one of KRS 403.190(2) s exceptions. Id. at 266. -6-
must trace the previously owned property into a presently owned specific asset. Sexton at 266. We review the trial court s findings under the clearly erroneous standard set forth in CR 52.01, which states, [f]indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses. In dividing marital property and debt equitably, a trial court has wide latitude and absent an abuse of discretion we shall not disturb the trial court s ruling. See Smith v. Smith, 235 S.W.3d 1 (Ky.App. 2006), and Neidlinger v. Neidlinger, 52 S.W.3d 513 (Ky. 2001). Abuse of discretion is that which is arbitrary or capricious, or at least an unreasonable and unfair decision. See Sexton v. Sexton, 125 S.W.3d 258, 272 (Ky. 2004). Gerald relies on Davis v. Davis, 775 S.W.2d 942 (Ky.App. 1989), to argue that it was not necessary that he trace the proceeds of the sale from the prior residence to the purchase of the farm because Janet acknowledged that the farm was in fact bought with funds from Gerald s non-martial property. 4 However, Gerald has failed to provide citation to the record to support such argument as required by CR 76.12. 4 Gerald has likewise failed to explain how KRS 403.190(3) is inoperable in the case sub judice. The statute states: 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 coownership such as joint tenancy, tenancy in common, tenancy by the entirety, and community 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. -7-
Gerald also provides different facts than those found by the trial court and does not provide citation to support his version of the facts. See CR 76.12. While we would be justified in not considering the portion of the brief where the requirements of CR 76.12 are deficient, or in striking the briefs, we shall confine ourselves to a review for manifest injustice. See Pierson v. Coffey, 706 S.W.2d 409 (Ky.App. 1985); Elwell v. Stone, 799 S.W.2d 46, 47-48 (Ky.App. 1990); and CR 76.12. Our review of the record does not reveal an acknowledgement or stipulation by Janet, that the farm was purchased with Gerald s non-marital funds nor is there anything in the record to indicate that an award of an interest in the farm to Janet would create a manifest injustice. As such, we find that the evidence presented to the trial court supported the judgment of the trial court in dividing the property. Accordingly, Gerald s argument fails. See McBrearty v. Kentucky Community and Technical College System, 262 S.W.3d 205, 213 n.12 (Ky.App. 2008); Horn v. Horn, 430 S.W.2d 342 (Ky. 1968). Gerald last argues that the trial court improperly awarded Janet a onethird interest in the farm as there was not any evidence that her efforts to improve Gerald s residence actually increased the value of that property, such that she would be entitled to an interest in the farm. Again, we disagree. The trial court was presented evidence that Gerald had either given an interest in his prior residence to Janet as a gift or had compensated her for her labor expended in increasing the value of the residential property, which was then sold to buy the -8-
farm. Gerald maintained the burden of proof of showing that the farm maintained its non-marital status. See Travis and Sexton, supra; see also Croft v. Croft, 240 S.W.3d 651 (Ky.App. 2007). We cannot say that the trial erred in its determination. After a through review of the record, the arguments presented by the parties, and the applicable law, we affirm the October 1, 2007, Findings of Fact, Conclusions of Law, Decree of Dissolution of Marriage, and Order of the Greenup Family Circuit Court. -9-
ALL CONCUR. BRIEF FOR APPELLANT: James W. Lyon, Jr. Greenup, Kentucky BRIEF FOR APPELLEE: Richard A. Hughes Ashland, Kentucky -10-