Case Name: Verlon McKAY v. Debra McKAY
Court: Arkansas Court of Appeals
Jurisdiction: Arkansas
Decision Date: 1999-05-12
Citations: 66 Ark. App. 268
Docket Number: CA 98-888
Parties: Verlon McKAY v. Debra McKAY
Judges: Robbins, C.J., Pittman and Crabtree, JJ., agree.
Reporter: Arkansas Appellate Reports
Volume: 66
Pages: 268–282

Head Matter:
Verlon McKAY v. Debra McKAY
CA 98-888
989 S.W.2d 560
Court of Appeals of Arkansas Divisions II and III
Opinion delivered May 12, 1999
Meredith Wineland, for appellant/cross-appellee.
Virginia (Ginger) Atkinson, for appellee/cross-appellant.

Opinion:
John F. Stroud, Jr., Judge.
Appellant, Verlon McKay, and appellee, Debra McKay, were divorced by the Saline County Chancery Court on March 12, 1998. Appellant contends on appeal that the chancellor erred in finding that appellee has an equal interest in a houseboat purchased during the marriage. Appellee argues in her cross-appeal that the chancellor erred in finding that all of the money in the parties' joint checking account and that most of the property purchased with the funds from this account are the separate property of appellant. Appellee also argues that the chancellor erred in modifying the divorce decree by setting aside her award of rehabilitative alimony and in failing to award her attorney's fees.
When the parties married in 1991, appellee had custody of two sons from a previous marriage and was employed as a courier by Federal Express. Appellant receives veterans' and social security disability income. When the parties married, his monthly income was increased over $100 because he had a wife and minor stepchildren. Appellant receives approximately $76,000 of tax-free income each year. Appellant deposited all of his disability income into a joint checking account to which appellee made no contribution. Appellant paid for the utilities and groceries out of this account. At trial, appellant testified that he wrote 90% of the checks on this account; he said that appellee wrote approximately 10% of the checks and that she only did so after first discussing it with him. At the time of the parties' marriage, appellant owned a house in Little Rock and land in Saline County. After their marriage, the parties built a house on the land in Saline County. In order to finance the construction, appellant used over $60,000 of his nonmarital savings and borrowed $30,000; the parties mortgaged the house in Little Rock as security for the loan. During the marriage, this debt was repaid in full from funds in the joint checking account. When the parties separated, appellant closed out the joint checking account and kept the balance of $12,800.
During the parties' marriage, appellant inherited approximately $35,800 from his mother. He deposited the proceeds of his inheritance into the joint checking account and used this money in the purchase of a $39,500 houseboat. Although the seller prepared the bill of sale in both parties' names, appellant registered the boat with the State of Arkansas only in his name. He testified that he had not intended to give appellee an interest in the houseboat and that he had not objected to appellee's name appearing on the bill of sale because she was his wife.
Appellee testified that, at appellant's request, she changed jobs with Federal Express. For awhile, she worked part-time and later went back to full-time employment as a customer-service representative. At the time of trial, she was making $27,200 per year. Appellee stated that she assisted appellant with two multilevel marketing businesses during the marriage. Appellee testified that she did write checks on the joint account for such things as groceries and gas credit cards and that she did so without first dis cussing it with appellant. She also said that, during the marriage, she kept her own checking account, on which appellant did not write checks, and that she paid for a new refrigerator, stove, dishwasher, washer, and dryer. Appellant, however, testified that he paid for the washer and dryer. At trial, he produced the checks written for these items.
In the divorce decree, the chancellor found that all of the money that was in the joint checking account was the separate property of appellant because it was derived from his disability benefits and was under his control. The chancellor also found that, with the exception of the houseboat, everything purchased with the proceeds of the joint checking account was appellant's separate property because it was purchased with his disability income. The chancellor found that, although appellant's inheritance was used to purchase the houseboat, it was marital property because the bill of sale placed title in both parties' names and that appellant made a gift of an interest in the boat to appellee. The chancellor found that appellee had purchased the stove, refrigerator, and dishwasher and found them to be her separate property. He also directed appellant to pay appellee $100 a week in rehabilitative alimony through the end of 1998. Upon motion by appellant, however, the chancellor set aside the award of alimony; he found that, because appellee's pleadings did not request alimony, he was without authority to make this award.
On appeal, appellant argues that the chancellor erred in finding that appellee has an interest in the houseboat because he used the proceeds of his inheritance to purchase it and because he did not intend to make a gift of an interest in it to appellee.
Under Arkansas law, property acquired by inheritance or in exchange for such property is not marital property subject to equal division upon divorce. Ark. Code Ann. § 9-12-315(b)(1) and (2) (Repl. 1998). However, a party can destroy the nonmarital status of such property by placing it in an account held jointly with a spouse. See Jackson v. Jackson, 298 Ark. 60, 765 S.W.2d 561 (1989). Once property, whether real or personal, is placed in the names of persons who are husband and wife without specifying the manner in which they take, there is a presumption that they own the property as tenants by the entirety, and clear and convincing evidence is required to overcome that presumption. Cole v. Cole, 53 Ark. App. 140, 920 S.W.2d 32 (1996).
A presumption also arises that the spouse placing the money in a joint account intended to make a gift of an interest in this money to the other spouse. Creson v. Creson, 53 Ark. App. 41, 917 S.W.2d 553 (1996). To support a finding that such property is separate property for purposes of property distribution upon divorce, the party seeking to rebut either presumption must present clear and convincing evidence that the property was separately owned. Id. In either event, the requirement of clear and convincing evidence means that the proponent seeking to rebut the presumption must do so by proof so clear, direct, weighty, and convincing that the fact-finder is able to come to a clear conviction, without hesitation, of the matter asserted. Id. Clear and convincing evidence is that degree of proof that will produce in the fact-finder a firm conviction respecting the allegation sought to be established. Id.; see also Cole v. Cole, supra. This court's test on review is not whether it is convinced that there was clear and convincing evidence to support the trial judge's finding but whether it can say that the finding is clearly erroneous. Bishop v. Bishop, 60 Ark. App. 164, 961 S.W.2d 770 (1998). A finding is clearly erroneous when the reviewing court, on the entire evidence, is left with the definite and firm conviction that a mistake has been committed. Adkinson v. Kilgore, 62 Ark. App. 247, 970 S.W.2d 327 (1998). A requirement that the evidence be clear and convincing does not mean that the evidence must be uncontradicted. O'Flarity v. O'Flarity, 42 Ark. App. 5, 852 S.W.2d. 150 (1993). Even when the burden of proof is by clear and convincing evidence, this court defers to the superior position of the chancellor to evaluate the evidence. Id.
Appellant testified that, after he had talked with the seller of the houseboat, the seller had prepared the bill of sale in both parties' names. He said he did not object because "she was my wife." Applying the proper standard of review, therefore, we cannot say that the chancellor's finding that appellant gave appellee an interest in the houseboat is clearly erroneous.
For her cross-appeal, appellee argues first that the chancellor erred in fading to award her an interest in all of the property that was purchased with money from the joint checking account, even though appellant's disability income funded this account. Appel-lee does not dispute that appellant's disability income itself is excepted from the definition of marital property. See Ark. Code Ann. § 9-12-315 (b)(6) (Repl. 1998). She also does not argue that his disability income lost its status as nonmarital property simply because it was used to acquire property. Instead, she contends that appellant's disability income lost its status as nonmarital property when he deposited it in the joint checking account and that she therefore has a one-half interest in everything purchased with the funds in that account. Appellee also argues that, contrary to the chancellor's finding, the joint checking account was not solely under appellant's control. She also stresses that appellant's monthly disability income was increased by approximately $100 a month because of his marriage to appellee and that he also drew a monthly allotment for her boys while they were under the age of eighteen. Appellant argues that, therefore, she did make an actual monetary contribution to the joint checking account.
Appellee also contends that, because she participated in giving a mortgage on appellant's house in Little Rock to secure the debt on the new house in Saline County, she should be awarded an interest in the new house. She states: "When nonmarital property is converted into security for a marital debt, as here, the protected status of that property which the owner might have had under the division of property statute is relinquished. Hale v. Hale, 307 Ark. 546, 822 S.W.2d 836 (1992)." In Hale, the supreme court held that it was permissible for nonmarital property to be subjected to payment of the parties' marital debts only because that property was specifically mortgaged to secure those debts. The supreme court limited the application of its holding therein to situations wherein the mortgaged nonmarital property is used to satisfy the debt to which it is actually pledged. The supreme court emphasized that the chancellor could not utilize this property to satisfy any other marital debts. In any event, in the case before us, the parties did not give a mortgage on the new house, but did so only on appellant's nonmarital house in Little Rock, on which appellee has made no claim. The Hale case is therefore not applicable to this situation.
Appellant testified that appellee only wrote checks on the joint checking account after first discussing it with him, that the parties understood the separate nature of their checking accounts, and that he had not intended to give appellee an interest in the funds in the joint checking account. The chancellor believed appellant's testimony and was satisfied that he had met his burden of rebutting the presumptions by clear and convincing evidence. We cannot say that his findings in this regard are clearly erroneous.
Appellee also argues that the chancellor erred in holding that he did not have authority to award alimony because appellee had failed to raise this issue in her pleadings. At the temporary hearing, appellee was awarded temporary monthly support in the amount of $100. At trial, she testified that her financial circumstances were basically the same as during the temporary hearing and stated that she needed continued assistance until her truck was paid for (approximately two years). She specifically requested that the chancellor award her alimony. In fact, counsel for appellant acknowledged at trial that appellee had requested alimony.
Rule 15(b) of the Arkansas Rules of Civil Procedure allows for the amendment of the pleadings to conform to the evidence introduced at trial:
When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended in its discretion. The court may grant a continuance to enable the objecting party to meet such evidence.
The rule is liberal in its allowance of amendments to conform pleadings to proof and even contemplates an amendment after judgment. Hope v. Hope, 333 Ark. 324, 969 S.W.2d 633 (1998). Even if no amendment is made, it does not affect the trial of issues not raised in the pleadings; permitting the introduction of proof on an issue not raised in the pleadings constitutes an implied consent to trial on that issue. Id.; see also Interstate Oil & Supply Co. v. Troutman Oil Co., 334 Ark. 1, 972 S.W.2d 941 (1998).
Clearly, the issue of alimony was tried, and the chancellor did have authority to make this award. Accordingly, we hold that the chancellor erred in setting aside the award of alimony. On de novo review of a chancery record, when we can plainly see where the equities lie, we may enter the order that the chancellor should have entered, or we may decline to do so if justice will be better served by a remand. Reaves v. Reaves, 63 Ark. App. 187, 975 S.W.2d 878 (1998). In our view, justice will be better served by a remand so that the chancellor can compute the amount of alimony due appellee and enter a judgment in her behalf for that amount.
Appellee also argues in her cross-appeal that the chancellor erred in failing to award her attorney's fees. However, appellee failed to obtain a ruling on her request for attorney's fees, and it is well settled that an issue must be raised and ruled on before this court will consider it on appeal. Vanderpool v. Fidelity & Casualty Ins. Co., 327 Ark. 407, 939 S.W.2d (1997); Britton v. Floyd, 293 Ark. 397, 738 S.W.2d 408 (1987). We therefore need not address this issue.
Affirmed on direct appeal; affirmed in part, and reversed and remanded in part on the cross-appeal.
Robbins, C.J., Pittman and Crabtree, JJ., agree.
Hart and Rogers, JJ., dissent.