Court Opinion

ID: 9449258
Source: CourtListenerOpinion
Date Created: 2023-08-04 14:09:03.633923+00
Date Added: 2024-06-11T17:35:56.404817
License: Public Domain

RENDERED: JULY 28, 2023; 10:00 A.M.
                        NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals
                             NO. 2022-CA-0894-MR

CHARLES E. HALL                                                     APPELLANT

                 APPEAL FROM LETCHER CIRCUIT COURT
v.               HONORABLE JAMES W. CRAFT, II, JUDGE
                        ACTION NO. 18-CI-00293

BRANDEE CAUDILL                                                       APPELLEE

                                   OPINION
                                  AFFIRMING

                                  ** ** ** ** **

BEFORE: THOMPSON, CHIEF JUDGE; EASTON AND KAREM, JUDGES.

THOMPSON, CHIEF JUDGE: Charles E. Hall appeals from a decree of

dissolution of marriage. The issues on appeal concern the division of marital

property and child support. We find no error and affirm.

                   FACTS AND PROCEDURAL HISTORY

            The parties in this case were married in 2001. They separated in

November of 2018, were divorced in April of 2019, and the judgment awarding

marital property was entered on May 9, 2022. Relevant to this Opinion is the fact
that, during the marriage, Brandee Caudill possessed an inheritance she received

from her grandfather’s estate. All parties agree that this inheritance is nonmarital.

The main issues in this case revolve around the trial court’s award to Appellee of

her nonmarital interest in marital property. This nonmarital interest stemmed from

her using money from her inheritance to purchase property during the marriage.

             The trial court found that Appellee had spent $27,500 from her

inheritance for the parties’ first marital residence. This amount consisted of a

down payment and closing costs for the property. The court also found that

Appellee spent $2,000 from her inheritance for closing costs when the parties

refinanced their mortgage on the marital residence. Later, the parties purchased a

second marital residence prior to the completed sale of the first marital residence.

The court found that Appellee had spent $50,000 from her inheritance as a down

payment and $2,000 from her inheritance for closing costs. In total, the court

found that Appellee had spent $81,500 from her inheritance and this amount had

not been reimbursed to her during the course of the marriage. The court also found

that Appellee had spent $20,000 from her inheritance on furniture to furnish the

two marital homes over the course of the marriage.

             Based on Appellee’s expenditure of nonmarital funds, the trial court

awarded her all the real property the parties owned and awarded her all of the

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furniture.1 The court held that this allowed her to recoup the amounts of

nonmarital funds she expended during the marriage.

              The trial court also found that Appellant was $18,000 in arrears for

child support. To remedy this arrearage, the trial court awarded to Appellee a

vehicle purchased during the marriage which was used by Appellant and titled in

Appellant’s name. The court valued the vehicle at $20,000.

                                        ANALYSIS

              On appeal, Appellant argues that the trial court erred in finding that

Appellee expended $81,500 of nonmarital funds for the real property purchased

during the marriage. Appellant also argues that the trial court erred in finding that

Appellee expended $20,000 of nonmarital funds to purchase furniture. Finally,

Appellant argues that the trial court erred in awarding Appellee the vehicle to

satisfy the child support arrearage.

              “The legal standards applicable to our review of the family court’s

judgment are that findings of fact are reviewed only to determine if they are clearly

erroneous.” Kleet v. Kleet, 264 S.W.3d 610, 613 (Ky. App. 2007) (citations

omitted). “Decisions of the family court concerning the division of marital

1
  Appellee was also required to be solely responsible for any outstanding mortgages and debts
related to the real property.

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property are within the discretion of that court, and we will not disturb those

decisions except for an abuse of that discretion.” Id. (citations omitted).

             [A] trial court’s division of the parties’ property requires
             a three-step process: (1) the trial court first characterizes
             each item of property as marital or nonmarital; (2) the
             trial court then assigns each party’s nonmarital property
             to that party; and (3) finally, the trial court equitably
             divides the marital property between the parties.

Travis v. Travis, 59 S.W.3d 904, 908-09 (Ky. 2001) (footnotes omitted).

                    Property acquired during 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[.]
             [Kentucky Revised Statutes (KRS)] 403.190(3). When
             property consists of both marital and nonmarital
             elements, the trial court must determine the parties’
             marital and nonmarital interests. Kentucky uses the
             “source of funds” rule to characterize property or to
             determine the parties’ nonmarital and marital interests.
             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.

Kleet, 264 S.W.3d at 614 (internal quotation marks and citations omitted).

                    KRS 403.190(2)(b) requires a court to assign each
             spouse all of his or her nonmarital property, including
             [p]roperty acquired in exchange for property acquired
             before the marriage[.] When nonmarital property is not
             in existence at the time of dissolution, the party claiming
             a nonmarital interest in a presently owned asset must
             “trace” the previously owned asset into an existing asset.
             Tracing is [t]he process of tracking property’s ownership
             or characteristics from the time of its origin to the
             present.

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                    The Kentucky Supreme Court has recognized that
             tracing to a mathematical certainty is not always possible,
             [and] [w]hile such precise requirements for nonmarital
             asset-tracing may be appropriate for skilled business
             persons who maintain comprehensive records of their
             financial affairs, such may not be appropriate for persons
             of lesser business skill or persons who are imprecise in
             their record-keeping abilities.

Id. (internal quotation marks and citations omitted). “A trial court’s ruling

regarding the classification of marital property is reviewed de novo as the

resolution of such issues is a matter of law.” Young v. Young, 314 S.W.3d 306,

308 (Ky. App. 2010).

             Appellant’s first argument on appeal is that the trial court erred in its

categorization of marital and nonmarital property. Specifically, Appellant argues

that the trial court did not correctly apply the “source of funds” rule. Appellant

argues that Appellee provided insufficient proof to show she used nonmarital funds

in purchasing the two pieces of real property. In addition, he argues that there was

no evidence regarding the amount of nonmarital funds used to purchase the two

properties. We disagree.

             In Smith v. Smith, 503 S.W.3d 178 (Ky. App. 2016), Amy Smith

testified that she used a $26,000 certificate of deposit for a down payment on a

marital home. The CD was a gift to her from her grandmother. That home was

later sold and the proceeds used to buy another home. Ms. Smith’s mother

corroborated Ms. Smith’s testimony. Mark Smith, Amy’s husband, testified that

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the CD was used for a down payment, but argued that since no documents were

provided proving the existence of the CD, her nonmarital claim should fail.

Another panel of this Court disagreed with Mr. Smith and held that the testimony

of Ms. Smith, Mr. Smith, and Ms. Smith’s mother was sufficient to show the

existence of the nonmarital asset and trace it to the current marital home. Id. at

183-84.

             This case is similar to Smith. Here, Appellee testified that she used

money from her inheritance for down payments on the two marital homes;

however, she also testified that she did not know how much she spent. Appellee’s

father also testified. He was a banker and the parties utilized him to keep track of

and manage their finances. He testified as to the amounts of down payments and

closing costs. Appellant also testified that Appellee used her inheritance for the

down payments and agreed with the amounts set forth by Appellee’s father. He

claims, however, that Appellee was reimbursed those amounts after the sale of the

first home was completed. We note that, although Appellant believed Appellee

was reimbursed the two down payments after the sale of the first marital home, he

did not know for sure if it happened and saw no evidence that it did indeed occur.

Appellant further testified that the closing costs were not paid from the inheritance,

but from joint, marital funds.

                                         -6-
             We believe there was substantial evidence to show that Appellee

expended $81,500 of nonmarital funds during the marriage. Appellant, Appellee,

and Appellee’s father all testified that Appellee spent these funds. This is

sufficient evidence according to Smith. In addition, while Appellant testified that

Appellee was reimbursed these funds and that the closing costs were provided

from joint funds, Appellee and her father testified to the contrary. Appellant’s

testimony is not sufficient to reverse the conclusion of the trial court

             Regardless of conflicting evidence, the weight of the
             evidence, or the fact that the reviewing court would have
             reached a contrary finding, “due regard shall be given to
             the opportunity of the trial court to judge the credibility
             of the witnesses” because judging the credibility of
             witnesses and weighing evidence are tasks within the
             exclusive province of the trial court. Thus, “[m]ere doubt
             as to the correctness of [a] finding [will] not justify [its]
             reversal,” and appellate courts should not disturb trial
             court findings that are supported by substantial evidence.

Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (footnotes and citations

omitted).

             This conclusion also holds true for the furniture issue. Appellee

testified that the parties had originally bought the furniture on credit, but because

the payments were high, she decided to pay off the debt by using money from her

inheritance. Appellee’s father testified that she used $20,000 from her inheritance

to pay off the furniture debt. Appellant testified that Appellee’s inheritance was

not used to purchase the furniture, but that they purchased it over time using joint

                                          -7-
funds and credit. We believe there was substantial evidence to support the trial

court’s decision to award Appellee the furniture as a nonmarital asset. While there

is conflicting evidence, the trial court was in the best position to judge the

credibility of the witnesses and weigh the evidence. Id.

             Appellant also argues that the trial court did not divide the property in

just proportions. KRS 403.190(1) states:

             In a proceeding for dissolution of the marriage or for
             legal separation, . . . 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.

             Appellant argues that the marital property was not divided in just

proportions because Appellee was awarded all real property, all household

furnishings, and a vehicle, but he only received a Honda side-by-side and a trailer

used to haul it. We believe there was no error. As stated previously, the trial court

                                          -8-
awarded all the real property and household furnishings to Appellee as nonmarital

property. We have concluded that this was appropriate. We should also note that

the trial court found that the parties equally split the funds in their bank accounts

and this finding was not appealed. Once the nonmarital assets are set aside, we

believe the remaining marital assets, the vehicle and the side-by-side and trailer,

were justly apportioned.

             Appellant’s final argument on appeal is that the trial court erred in

awarding Appellee the vehicle to satisfy a child support arrearage. We find no

error. Appellee testified that Appellant had made no child support payments even

though he was ordered to pay $500 a month. Appellant provided no testimony or

other evidence regarding child support payments. The trial court held that there

was a child support arrearage of $18,000 and ordered that Appellee be awarded a

marital vehicle to satisfy that debt. This was appropriate.

                                   CONCLUSION

             Based on the foregoing, we affirm the judgment on appeal.

             ALL CONCUR.

 BRIEF FOR APPELLANT:                       BRIEF FOR APPELLEE:

 Ryan D. Mosley                             Gene Smallwood, Jr.
 Hazard, Kentucky                           Whitesburg, Kentucky

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