ARTHUR MARTIN v. JULIA MARTIN
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RENDERED: NOVEMBER 8, 2002; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NOS.
ARTHUR MARTIN
2001-CA-001926-MR & 2001-CA-001946-MR
APPELLANT/CROSS-APPELLEE
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE JOHN R. ADAMS, JUDGE
ACTION NO. 96-CI-04228
v.
JULIA MARTIN
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
** ** ** ** **
BEFORE:
GUIDUGLI, HUDDLESTON, AND KNOPF, JUDGES.
KNOPF, JUDGE:
Arthur Martin appeals and Julia Martin cross-
appeals from a decree of the Fayette Circuit Court, entered July
19, 2001, dissolving their marriage, restoring their separate
properties, and equitably dividing their marital estate.
Arthur
complains that the trial court awarded him too small a nonmarital interest in the couple’s residence and awarded Julia too
large a non-marital interest in a second piece of realty.
Julia
contends that the court should not have awarded yet a third piece
of realty exclusively to Arthur, and that it should have included
in the marital estate two other properties that Arthur allegedly
dissipated.
Most of these contentions have little merit and need
be addressed only briefly.
We agree with Arthur, however, that
his non-marital interest in the parties’ residence was
miscalculated, although not in the manner or to the extent he
claims.
We are obliged, therefore, to reverse the trial court’s
judgment in that one particular and to remand for an appropriate
modification of the decree.
In all other respects, we affirm.
We shall not attempt to summarize this litigation’s
long history.
Suffice it to say that the couple married in July
1980 and separated near the end of 1996, Arthur petitioning for
divorce in December of that year.
children born of the marriage.
Apparently there were no
The marriage did generate,
however, a series of real estate investments.
Not only did the
couple invest in their personal residence, as many couples do,
but both parties also bought realty in the hope of generating
income.
Julia bought a duplex with her daughter from an earlier
marriage and rented at least a portion of it.
Arthur pursued
what he refers to as a hobby of buying, refurbishing, and selling
houses.
Untangling the result of these transactions and
assigning the various interests to the parties’ marital and
separate estates was the difficult task that fell to the trial
court.
Not surprisingly, perhaps, that task has not been easily
accomplished.
In October 1999, the trial court entered a decree
dissolving the Martins’ marriage and dividing their property.
Julia successfully moved to have the property division
reconsidered.
Following additional discovery and a new trial,
the court entered a second decree on July 19, 2001.
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It is from
that decree that both parties have appealed.
We shall look first
at the issues most readily resolved.
Julia contends that Arthur sometimes kept from her the
proceeds of his house trading.
In particular, she claims that he
sold houses in June 1984 and July 1993 and dissipated what he
received for them, i.e., he devoted the proceeds, which were
marital property, to non-marital purposes.
The trial court
erred, she contends, by refusing to include the sales prices of
these houses in the marital estate and deeming the proceeds to
have been received by Arthur as part of his share of that estate.
We disagree.
Ordinarily, of course, the marital estate comprises
whatever marital property the couple owns at the time of the
first separation or dissolution decree.1
Property disposed of
before that time is simply no longer a part of the estate and is
not subject to equitable division.
Julia is correct, however, in
her assertion that if one party to the marriage intentionally
misappropriates or disposes of marital assets for non-marital
purposes after separation or when separation is clearly
contemplated, but before entry of a decree, the trial court may
include those dissipated assets in the marital estate and charge
them to the share of the dissipating party.2
Here, however,
Arthur’s alleged dissipation took place long before the parties
separated.
1
Absent clear and convincing evidence that Arthur
KRS 403.190.
2
Bratcher v. Bratcher, Ky. App., 26 S.W.3d 797 (2000); Brosick v. Brosick, Ky. App.,
974 S.W.2d 498 (1998); Robinette v. Robinette, Ky. App., 736 S.W.2d 351 (1987).
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even then intended to separate, his use of those assets must be
deemed marital.3
Julia presented no such evidence of Arthur’s
intent to separate at the time of these sales.
The trial court
did not err, therefore, by refusing to include in the marital
estate assets that simply no longer existed.
Julia also contends that the trial court erred by
deeming a house that Arthur purchased during the separation his
non-marital property.
Again, we disagree.
In November 1997, as
the parties were establishing separate households, Arthur
purchased a house at 1135 Oakwood Drive in Lexington.
He
apparently borrowed the funds for the entire purchase price and
soon thereafter repaid those obligations by obtaining a new loan
secured by the house.
The trial court assigned both the house
and the debt to Arthur as his non-marital property.
Julia
correctly points out that all property, such as this house,
acquired by either spouse after marriage and before a decree of
separation or dissolution is presumed to be marital.4
The
presumption may be overcome, however, by a showing that the
property was acquired after legal separation.5
The trial court
ruled, correctly we believe, that the debt by means of which
Arthur obtained this house would be satisfied entirely with
Arthur’s post-separation funds and thus that the house was his
separate property.
3
Cf. Brosick v. Brosick, supra (husband’s use of marital funds to establish household with
paramour provided sufficient evidence of his intent to end marriage).
4
KRS 403.190(3).
5
KRS 403.190(2)(c).
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For his part, Arthur complains that the court erred by
deeming another piece of realty Julia’s and her daughter’s
property with no marital component.
The court ruled that Julia
and her daughter had acquired this property, a duplex at 384
Radcliffe Road in Lexington, in exchange for property Julia had
inherited from her former husband.
inheritance.
Arthur does not deny the
He contends, however, that Julia must have used
marital property rather than inherited property to purchase the
duplex because the sellers of the duplex signed the deed
transferring it to Julia about a month before Julia’s inherited
funds became available.
Julia testified, however, that the
sellers lived in another state and conducted the transaction
through an agent.
Although they executed the deed and sent it to
their agent before Julia had liquidated her inheritance, the
agent did not deliver the deed to Julia until the closing, which
took place immediately after the liquidation.
The trial court
did not clearly err by crediting Julia’s account of this
transaction and deeming the duplex hers and her daughter’s with
no marital component.6
We come then to Arthur’s claim that he is entitled to a
greater non-marital share of the couple’s residence than the
trial court assigned to him.
Applying the so called Brandenburg7
6
Apparently Julia and her daughter financed about $10,000.00 of the duplex’s purchase
price and repaid this obligation with rental income. Arthur contends that the rental income was
marital property and thus constituted a marital contribution to the acquisition of this asset.
Whatever the merit of this argument, Arthur raised it for the first time in his reply brief on
appeal. The issue was not properly preserved, and we decline to address it.
7
Brandenburg v. Brandenburg, Ky. App., 617 S.W.2d 871 (1981).
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formula to this property, a house and lot at 429 Dover Road in
Lexington, the court determined that Arthur separately
contributed 17% to its acquisition, that there had been an 83%
marital contribution, and that the equity at the time of
dissolution was $138,000.00.
Accordingly,8 the trial court
awarded $23,460.00 to Arthur as his non-marital interest and
divided the $114,540.00 marital interest evenly between the
parties.
Arthur takes issue with every aspect of this
calculation.
The trial court assigned too low a non-marital
interest, he contends, too high a marital interest, and
overvalued the equity at dissolution.
Arthur traced his non-marital interest in the Dover
Road residence from his 1979 pre-marital investment in an
unimproved lot on Blue Ridge Drive in Lexington.
Arthur
purchased the lot for $12,000.00 then borrowed $16,000.00 to
construct a home on it.
The parties married in July 1980.
They
moved into the home that fall and at about the same time
8
The Brandenburg formula assumes that the increase in value of an asset over time is nonmarital property in proportion to the non-marital share of the principal investment. In cases
where it was shown that the increase in value was due to the parties’ efforts and not to general
changes in the market, Brandenburg was held not to apply, and the increase in value was deemed
to be marital. Goderwis v. Goderwis, Ky., 780 S.W.2d 39 (1989). In Travis v. Travis, Ky., 59
S.W.3d 904 (2001), our Supreme Court reversed this assumption. It ruled that all such increases
in value should be presumed marital--i.e. that Brandenburg should not apply--unless the nonmarital claimant shows that the increase in value was not due to the parties’ efforts. Travis, in
other words, makes Brandenburg (or any similar proportionality formula) the exception rather
than the rule and places the burden of invoking the exception on the non-marital claimant.
Relying on Travis, which appeared after the trial court’s decision in this case, Julia argues in her
reply brief that the trial court assigned too great a non-marital interest by assuming, under the
Brandenburg rule, that the increase in value of the parties’ residences was due to non-party
factors. The presumption and burden-of-proof issues addressed in Travis were not raised in this
case, however, and thus Travis may not bear on our decision. We shall rely instead on the old
Brandenburg assumptions as the trial court, without objection from the parties, applied them.
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refinanced it by replacing the $16,000.00 mortgage with one for
$22,000.00.
In other words, the asset had a total purchase price
of $28,000.00, and after the refinancing there was a $6,000.00
non-marital contribution toward the purchase, the other half of
Arthur’s original investment having been withdrawn and devoted to
marital purposes.
The couple sold the Blue Ridge residence in 1985 for
$79,000.00.
By that time, marital mortgage payments had reduced
the purchase debt by another $942.00 to $21,058.00.
According to
Brandenburg, therefore, the ratio of non-marital contribution to
total contribution was $6,000.00/$6,942.00 or 86.4% and the
marital contribution was $942.00/$6,942.00 or 13.6%.
Thus, of
the $57,942.00 net proceeds from the sale,9 86.4%, or about
$50,062.00, would be deemed non-marital under Brandenburg and
13.6% or about $7,880.00 would be deemed marital.
$48,150.00 of the sale proceeds were used to purchase
the residence on Dover Road.
If we assume, as did the parties
and the trial court, that the non-marital and marital proportions
remained the same, then the initial non-marital contribution was
$41,602.00 (86.4% of $48,150.00), and the marital contribution
was $6,548.00.
Not long after they acquired the Dover Road home,
the Martins invested an additional $11,000.00 of marital funds to
improve it.
The total purchase price thus became $59,150.00.
Martin’s non-marital contribution was $41,602.00/$59,150.00 or
about 70.33%, and the marital contribution was
$17,548.00/$59,150.00 or about 29.67%.
9
$79,000.00 minus the $21,058.00 outstanding mortgage.
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Again the couple refinanced; they withdrew $43,000.00
of their investment to use for marital purposes and placed a
mortgage in that amount on the property.
At that point, they
were left with a total contribution toward the asset price of
$16,150.00.10
Again assuming that non-marital and marital
proportions remained the same, 70.33% of that amount--$11,358.00-was Martin’s non-marital contribution and the remainder-$4,792.00 --the marital contribution.
the mortgage with marital funds.
They eventually paid off
At the time of the decree,
therefore, there was a total contribution of $59,150.00:
Martin’s non-marital contribution of $11,358.00, or about 19.2%,
and a marital contribution of $47,792.00 or about 80.8%.
Based on an appraisal the parties stipulated to, the
trial court found the value of the Dover Road house at the time
of the decree to be $138,000.00.
Soon after the hearing and
before the trial court ruled, Martin sold the house for
$124,000.00.
The sale violated a standing order not to disturb
the marital estate.
Martin contends that the court erred by
using the appraisal rather than the actual sale price as the
house’s value.
Martin never moved, however, to supplement the
record with evidence of the sale.
In light of that failure, and
in light of Martin’s disregard for the court’s order preserving
the status quo, the trial court did not abuse its discretion by
relying on the appraisal.
Thus, Martin’s non-marital share of the Dover Road
property was 19.2% of $138,000.00 or $26,496.00.
10
$59,150.00 minus $43,000.00.
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The marital
share was the remaining $111,504.00, which the trial court
divided evenly.
Julia’s share of the Dover Road house,
therefore, should have been $55,752.00 rather than the
$57,270.00. the trial court awarded.
On remand the trial court
shall amend the decree accordingly.
In all other respects, for the reasons stated, we
affirm the July 19, 2001, decree of the Fayette Circuit Court.
ALL CONCUR.
BRIEFS FOR APPELLANT/CROSSAPPELLEE:
BRIEFS FOR APPELLEE/CROSSAPPELLANT:
Leslie Rosenbaum
Rosenbaum & Rosenbaum, P.S.C.
Lexington, Kentucky
J. Robert Lyons, Jr.
Woodward, Hobson & Fulton,
L.L.P.
Lexington, Kentucky
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