SABRINA BLAKE v. CRAIG BLAKE
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RENDERED: October 11; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-000315-MR
SABRINA BLAKE
APPELLANT
APPEAL FROM BOONE CIRCUIT COURT
HONORABLE LINDA R. BRAMLAGE, JUDGE
ACTION NO. 00-CI-00071
v.
CRAIG BLAKE
APPELLEE
OPINION
AFFIRMING IN PART, VACATING IN PART, AND REMANDING
** ** ** ** **
BEFORE:
COMBS, DYCHE, and KNOPF, Judges.
COMBS, JUDGE:
Sabrina Blake appeals from a December 1, 2000,
decree and a January 16, 2001, order dissolving her marriage to
the appellee, Craig Blake.
Sabrina contends that the trial court
made several errors with respect to its characterization and
disposition of the parties’ property in awarding Craig interest
on the judgment and in denying her request for attorney’s fees.
We affirm in part, vacate in part, and remand.
The Blakes married in 1986 and separated in 2000.
At
the time of the divorce, both parties worked at Fidelity
Investments -- Craig as a retirement plan specialist and Sabrina
as a supervisor of customer service employees.
Both earned
approximately $44,000 per year.
Although the parties agreed upon
some of the issues regarding the division of the marital estate,
most matters were resolved by the trial court after a hearing.
The trial court entered its Findings of Fact, Conclusions of Law,
and Decree on December 1, 2000.
The judgment was altered in
several aspects by the trial court’s order of January 16, 2001,
granting Craig’s post-judgment motion.
Additional facts relevant
to the issues that Sabrina has raised in her appeal will be
related as needed.
Sabrina first alleges error in the trial court’s award
of 432 shares of Intel stock to Craig as his non-marital
property.
That stock, valued at $17,955 at the time of
dissolution, was the major asset in the Fidelity Ultra Account, a
jointly owned fund opened during the marriage.
The remaining
portion of the fund, valued at $4,280, was stipulated as marital
property and was divided equally between them.
Sabrina maintains
that the trial court erred in failing to treat the entire fund,
including the Intel stock, as marital property subject to
division.
As a reviewing court, we must defer to the trial
court’s underlying findings of fact.
CR1 52.01.
We will not
disturb the findings of a trial court in a dissolution matter
unless those findings are clearly erroneous or are clearly
contrary to the weight of the evidence.
Clark v. Clark, Ky.App.,
782 S.W.2d 56, 58 (1990); Reichle v. Reichle, Ky., 719 S.W.2d 442
(1986).
1
In order to reverse the decision of a circuit court in a
Kentucky Rules of Civil Procedure.
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dissolution of marriage action, it must be apparent either that
the lower court’s findings of fact were not supported by
substantial evidence or that the circuit court abused its
considerable discretion.
Perrine v. Christine, Ky., 833 S.W.2d
825 (1992).
In order to refute Sabrina’s contention that the shares
of Intel stock constituted marital property, Craig presented
evidence tracing his purchase of 54 shares of the stock in
December 1996 to his non-marital funds.
The following facts
relevant to this issue were never in dispute: the parties
purchased a house in Lexington in 1994, using $10,000 from
Craig’s mother as a down payment; when the parties sold the
residence in 1996, they received more than $10,000 at the
closing; the money obtained at closing was placed in a joint
checking account, the balance of which was never reduced below
$10,000 prior to Craig’s withdrawal of $8,000 to purchase the
stock; the 54 stocks increased in number and value solely because
of stock splits and not because of any further investment by the
parties — financial or otherwise.
The only factual dispute for the trial court’s
consideration was whether the gift of $10,000 from Craig’s mother
used to purchase the house was intended as a gift to Craig alone
(as he claimed) or whether — as Sabrina testified — it was
intended to be a gift to both parties.
Sabrina claimed that the
trial court erred in finding that the gift was to Craig and not
to both of them.
She argued that Craig’s mother did not come
forward and substantiate his claim that the gift was to him
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alone.
She also assigns as error the trial court’s allocation of
$10,000 of the $10,754 realized from the sale as attributable to
Craig’s down payment instead of to the improvements made to the
property during the two years in which they lived in the home.
She also argues that when non-marital funds are co-mingled in a
joint account, “the first amount taken from the account is the
marital funds.”
contention.
She cites no authority in support of this
Finally, she contends that Craig failed to overcome
the presumption that the increase in the value of the stock was
marital property.
After reviewing the record and the relevant arguments,
we have found no error.
Thus, we cannot disturb the trial
court’s findings and its characterization of the shares of Intel
stock.
KRS2 403.190(2) provides,
(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;
. . .
2
Kentucky Revised Statutes.
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(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.
In determining whether an item is a gift, the court
must consider four factors: (1) the source of the gift; (2) the
intent of the donor; (3) the status of the marital relationship
at the time of the transfer; and (4) whether there was any valid
agreement that the transferred property was to be excluded from
the marital property.
Clark v. Clark, Ky.App., 782 S.W.2d 56,
62, citing O’Neill v. O’Neill, Ky.App., 600 S.W.2d 493 (1980).
Donative intent is the primary consideration.
Id. at 63.
Sabrina argues that in applying these criteria to the
facts of this case, the court is compelled to conclude that the
gift of $10,000 was intended for both parties.
She points out
that although the $10,000 check was made out solely to Craig, his
mother intended that it be used to purchase a house for the both
of them; that the gift was used to benefit both of them at a time
when they “were happily married to each other”; that when the
house was sold, the money was deposited in a joint account; and
that there was no contrary agreement that the money should be
excluded from the marital estate.
In Ghali v. Ghali, Ky.App., 596 S.W.2d 31 (1980), this
Court held that a trial court’s determination concerning the gift
or non-gift status of an item must be upheld unless it is clearly
erroneous.
We agree that the issue presented a close call.
However, in Angel v. Angel, Ky.App., 562 S.W.2d 661, 665 (1978),
the court rejected the notion that title alone to real property
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is controlling.
Gifts from a spouse’s relative are deemed to be
non-marital unless it is demonstrated to the satisfaction of the
trial court that the other spouse was named as a grantee for
reasons other than the status of the marriage alone.
Id.
Thus,
we believe the evidence that Craig was the sole payee on the
$10,000 check, coupled with Craig’s testimony that the gift was
intended for him alone, is sufficient to support the trial
court’s finding that the $10,000 investment in the Lexington
property was his non-marital property.
Sabrina argues compellingly that by allowing Craig to
recover his entire non-marital investment upon the sale of the
real property, the trial court encumbered the marital estate for
the costs of improvements made during the marriage and other
costs — such as closing costs and realtor’s fees.
However, while
Sabrina testified as to numerous improvements made to the realty,
there was very little proof offered as to the cost of those
improvements.
No proof was presented to establish whether the
improvements caused the value of the property to increase.
Thus,
we have no basis to conclude that the court abused its
discretion.
Furthermore, we believe that Craig’s testimony and the
documents introduced pertaining to the sale of the house and the
purchase of the Intel stock satisfy the tracing requirements
outlined in Chenault v. Chenault, Ky., 799 S.W.2d 575 (1990).
It
was undisputed that the stocks increased in number and in value
solely due to changes in the stock market rather than due to any
joint efforts of the parties during the marriage.
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Thus, we find
no error of the court in awarding the increase in the value of
this non-marital asset to Craig.
See Travis v. Travis, Ky., 59
S.W.3d 904, 910 (2001), which reiterated the holding in Goderwis
v. Goderwis, Ky., 780 S.W.2d 39 (1989), that the increase in nonmarital property during the marriage “due to general economic
conditions” is not marital property.
Sabrina next argues that the court erred in its
division of the Fidelity IRA account.
of these funds was disputed.
She argues that the source
She stipulated in the trial court
that the IRA, which was held in Craig’s name, was commenced with
both joint marital and non-marital funds.
Of the $13,000
deposited in the fund, Craig established that he “rolled-over”
$5,216.32 from a pre-marital asset, which constituted
approximately 37.5% of the fund.
The trial court’s finding with
respect to the source of funds is not clearly erroneous.
Sabrina argues that the entire IRA should be considered
marital property.
We disagree with that contention; however, we
do believe that the court erred in its division of the increase
in the value of the fund (which had grown to $120,699 by the time
of dissolution).
The trial court allocated the increase in the
IRA during the marriage between the marital and nonmarital
interests according to the percentage that each interest
represented in the original $13,000 used to establish the IRA.
However, unlike the passive increase in value of the shares of
Intel stock discussed above, the evidence revealed that this IRA
was actively managed and was moved from one account to another by
one or both of the parties and that numerous transactions took
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place over the course of the marriage affecting the value of the
account.
In Travis v. Travis, supra, the Kentucky Supreme Court
discussed the evidence that must be provided and the
considerations that the court must make in determining how to
characterize the increase in an asset containing both marital and
non-marital components.
An item of property will often
consist of both nonmarital and marital
components, and when this occurs, a trial
court must determine the parties’ separate
nonmarital and marital shares or interests in
the property on the basis of the evidence
before the court. Kentucky courts have
typically applied the “source of funds” rule
to characterize property or to determine
parties’ nonmarital and marital interests in
such property.
When the property acquired during
the marriage includes an increase in the
value of an asset containing both marital and
nonmarital components, trial courts must
determine from the evidence “why the increase
in value occurred” because “where the value
of [non-marital] property increases after
marriage due to general economic conditions,
such increase is not marital property, but
the opposite is true when the increase in
value is a result of the joint efforts of the
parties.”
KRS 304.190(3), however, creates
a presumption that any such increase in value
is marital property, and, therefore, a party
asserting that he or she should receive
appreciation upon a nonmarital contribution
as his or her nonmarital property carries the
burden of proving the portion of the increase
in value attributable to the nonmarital
contribution. By virtue of the KRS
403.190(3) presumption, the failure to do so
will result in the increase being
characterized as marital property.
Id., at 59 S.W.3d 909-911.
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The IRA account was invested in various ways during the
marriage; the funds were not put into one account and then left
unattended by the parties.
Craig admits that he managed the
account throughout its existence and used his expertise in
investing these funds over the years.
However, his argument
overall tends to minimize the efforts made by the parties with
respect to the account, a result that would tend to attribute its
increased value to be the product of general economic conditions.
He contends that “the only true transactions total 16 and are
over the course of the parties[’] 14 year marriage.”
Contrary to
the formula of Travis, the trial court did not analyze from the
evidence why the IRA had increased in value but instead made a
pro-rata division of the increase based on the marital/nonmarital interests that had represented the original source of the
account.
We cannot find sufficient evidence in the record to
overcome the statutory presumption that the increase in the value
of this asset was attributable to anything other than the joint
efforts of the parties and that it was, therefore, marital in
character.
Even if the court had undertaken the evaluation
analysis outlined in Travis, there was no reliable evidence from
which it could ascertain — without speculating — what portion of
the increase was due to vagaries of the stock market or what
portion was attributable to the parties’ efforts and skill in
choosing the various investments.
Thus, on remand, the trial
court should award Craig his original contribution ($5,216.32) as
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his non-marital property and should treat the remainder of the
fund as marital property subject to division between the parties.
Next, Sabrina contends that the trial court erred with
respect to their vehicles.
First, she argues that the court
erred in accepting the values for the vehicles provided by Craig,
values which she alleges do not allow for a mileage adjustment.
She also alleges error in the court’s failure to award her the
sum of $3,000, the amount stipulated as her non-marital interest
in her vehicle.
We find no error in the court’s valuation of the two
automobiles.
Both parties submitted valuations based on
competing “blue books.”
There was no error in the trial court’s
adoption of the values submitted by Craig.
We agree with Sabrina, however, that the court erred in
failing to award her $3,000 of the value of her vehicle as her
non-marital property.
It was stipulated that Sabrina invested
$3,000 of her own funds to purchase the Camry, which was owned by
the parties at the time of the dissolution.
The fact that the
Camry decreased in value is not significant; regardless of whose
values the trial court used, the vehicle was worth more than
$3,000 at the time of dissolution.
Just as Craig received his
$10,000 non-marital interest in the proceeds of the sale of the
marital residence, so should Sabrina have been awarded her nonmarital interest in the vehicle without reduction for
depreciation.
Chenault, supra.
Thus, on remand, the trial court
is instructed to award Sabrina her non-marital interest and to
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re-calculate the marital/non-marital portion of the value of the
Camry.
Sabrina alleges error in the failure to require Craig
to pay her half of $3,925, the value of the automobile awarded to
Craig.
We agree with Sabrina that this appears to have been an
oversight.
In its original decree, the trial court determined
the value of both cars to be very nearly the same and awarded
each party his and her respective automobile.
In its amended
judgment, the court adjusted its finding concerning the marital
interest in Sabrina’s car and ordered that she pay half the
marital equity to Craig.
It did not otherwise alter its decree
with respect to the marital portion of Craig’s vehicle nor did it
make a corresponding order that he pay Sabrina one-half the
marital equity in his vehicle.
As Craig points out, the marital estate does not have
to be divided equally.
(1986).
See Wood v. Wood, Ky.App., 720 S.W.2d 934
While we find no abuse of discretion in the trial
court’s overall division of the marital property, we would
nonetheless direct the court to re-visit this portion of its
judgment to ascertain whether this valuation was an oversight and
to adjust the judgment accordingly or to determine whether it had
intended this particular unequal but equitable division and to
let it stand unaltered.
Sabrina has also questioned the award of interest on
the liquidated portions of the judgment.
error.
However, we find no
See KRS 360.040 and Cochran v. Cochran, Ky.App., 746
S.W.2d 568 (1988).
-11-
Sabrina argues that in calculating the parties’ equity
in the marital residence (of which she was ordered to pay Craig
half), the trial court erred in failing to deduct $1,400 owed for
the carpeting in the house.
While the court may have erred in
concluding that the carpet debt was not a marital debt, it was
not tantamount to a mortgage or lien which would affect the
parties’ equity in the home.
Craig is correct in stating that
the court has considerable discretion in the allocation of
marital debts.
Sabrina was allowed to remain in the marital home
during the separation.
Furthermore, she was given one year in
which to re-finance the house before paying Craig his share of
their equity.
For these reasons, we find no abuse of the trial
court’s discretion in requiring that Sabrina be charged with the
debt related to the carpeting.
See, O’Neill, supra.
Finally, Sabrina contends that the trial court erred in
failing to make an award for attorney’s fees and in refusing to
allow her to establish fault in determining her entitlement to
those fees.
She alleges that Craig was awarded more assets in
the decree of dissolution and that his marital misconduct was the
cause of her need for an attorney in the first instance.
This decision on appeal — particularly with respect to
the Fidelity IRA fund — will leave the parties on an even more
level financial footing.
nearly the same.
As we have noted, their incomes are
Under these circumstances and considering that
the allocation of attorney’s fees is entirely within the
discretion of the trial court, see Tucker v. Hill, Ky.,App., 763
S.W.2d 144, 145 (1988), we are unable to discover any inequity in
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the decision of the trial court to deny Sabrina’s request for her
attorney’s fees.
She has not cited any authority to substantiate
her argument that she should be able to present proof of fault in
the break-up of the marriage to establish entitlement to an
attorney’s fee.
Thus, we will not disturb the decision of the
trial court not to award Sabrina any amount for her attorney’s
fees.
The judgment of the Boone Circuit Court is affirmed in
part, vacated in part, and the matter is remanded for entry of a
new judgment consistent with this Opinion.
DYCHE, JUDGE, CONCURS.
KNOPF, JUDGE, CONCURS IN PART, DISSENTS IN PART, AND
FILES SEPARATE OPINION.
KNOPF, JUDGE, CONCURRING IN PART AND DISSENTING IN
PART:
While I agree with most of the majority opinion, I do not
agree with the portion of the opinion which reverses the trial
court for its failure to award Sabrina her full $3,000.00 nonmarital contribution to the purchase of the 1996 Camry.
general rule, vehicles depreciate in value.
As a
Just as an increase
in value of non-marital property may be considered marital or
non-marital depending upon the circumstances, I believe that the
vehicle’s depreciation is relevant to a determination of
Sabrina’s rights to recover her non-marital contribution.
By
allocating the depreciation proportionately to the marital and
non-marital interests, the trial court attempted to divide fairly
the respective interests in the Camry.
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In contrast, in restoring
to Sabrina her entire non-marital contribution without regard to
depreciation, the majority effectively deems all of the
depreciation to be marital.
This result does not accurately
reflect the parties’ respective interests in the Camry.
Brandenburg v. Brandenburg,3 sets out the guidelines
for apportionment between marital and non-marital property.4
The
interests should be apportioned in the same percentages as their
respective contributions to the total equity in the property.
The relationships between the non-marital contribution and the
total contribution, and between the marital contribution and the
total contribution, are reduced to percentages and then
multiplied by the equity in the property at the time of
distribution to establish the value of the non-marital and
marital properties.5
This formula is expressed as follows:
Non-marital contribution (NMC)
Total contribution (TC) x equity(e)= total non-marital property
and
Marital contribution (MC)
Total contribution (TC) x equity(e)= total marital property
Although the Brandenburg formula is typically used to
allocate the increase in value of property containing both
marital and non-marital interests, I find no authority which
would preclude the formula being used to allocate the
depreciation of such property.
The record in this case shows
that Sabrina purchased the Camry for approximately $21,000.00,
3
Ky. App., 617 S.W.2d 871 (1981).
4
See also Newman v. Newman, Ky., 597 S.W.2d 137 (1980).
5
Id. at 872.
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using a $3,000.00 down-payment in non-marital funds and financing
the balance.
At the time of the dissolution, the trial court
found that the Camry had depreciated to $9,725.00.
Sabrina used
$18,200.00 in marital funds to pay the loan, leaving a debt
balance of $2,800.00.
This leaves a total equity of $6,925.00.
Using the Brandenburg formula, the trial court calculated the
marital and non-marital interests as follows:
3,000.00 (NMC)
18,200.00 (TC)
x
6,925.00(e) = $1,148.48 (Sabrina’s nonmarital property)
x
6,925.00(e) = $5,783.52 (Total marital
property)
and
15,200.00 (MC)
18,200.00 (TC)
I find no error in the trial court’s use of this
calculation.
Accordingly, I would leave it undisturbed.
However, I agree with the majority that the trial court appears
to have overlooked its adjustment of Sabrina’s non-marital
interest in the Camry.
In its initial order, the trial court
valued Sabrina’s Camry (less her unreduced non-marital interest)
in the same amount as Craig’s 1994 Geo Prism: $3,925.00.
Accordingly, the court awarded each vehicle to its respective
owner without any offset in payment.
In its amended order, the
trial court adjusted its finding concerning the marital interest
in the Camry, and it ordered her to pay half of the marital
equity ($2,891.50) to Craig.
But in so doing, the trial court
failed to offset the value of the Prism against Sabrina’s
equalizing payment.
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As the majority correctly points out, the trial court’s
calculation does not evenly divide the marital interests in the
vehicles.
The total marital value of both vehicles is (3,925.00
+ 5,783.52 =) $9,708.52.
Half of this amount is $4,854.26.
To
properly equalize the division of the vehicles, the trial court
should have required Sabrina to pay Craig $929.26, not
$2,891.50.6
Although the trial court was not required to equally
divide these assets, the trial court’s initial decision suggests
that it intended an equal division, and the amended judgment does
not indicate otherwise.
Consequently, I agree with the majority
that this issue should be remanded, but only to clarify whether
it intended this unequal division of the vehicles.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE:
Bernard J. Blau
Cold Spring, Kentucky
D. Anthony Brinker
Covington, Kentucky
6
The trial court allocated the Prism to Craig, leaving him
with a deficit in the asset division of (4,854.26 - 3,925.00 =)
$929.26. Likewise, the trial court allocated the Camry to
Sabrina, leaving her with a surplus of (4,854.26 - 5,783.52) = $929.26.
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