RUTH BENEDICT (NOW YATES) v. DELMAR LEE BENEDICT, JR.
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RENDERED:
October 11, 2002; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO. 2001-CA-002060-MR
RUTH BENEDICT (NOW YATES)
APPELLANT
APPEAL FROM BOYLE CIRCUIT COURT
HONORABLE DARREN W. PECKLER, JUDGE
CIVIL ACTION NO. 99-CI-00354
v.
DELMAR LEE BENEDICT, JR.
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
GUIDUGLI, HUDDLESTON and KNOPF, Judges.
HUDDLESTON, Judge:
Ruth Yates appeals from a Boyle Circuit Court
order overruling her objections1 to the findings of the court’s
domestic relations commissioner (DRC) concerning the division of
marital property in an action seeking dissolution of her marriage
to Delmar Benedict, upholding its previous order concluding that
Benedict is “entitled to one-half of the increase in the fair
1
In the instant case and commonly throughout this
jurisdiction, the term “exception” or some variation thereof is
used to describe the procedure by which a party obtains trial court
review of the report of a domestic relations commissioner (DRC)
pursuant to Ky. R. Civ. Proc. (CR) 53.06. In actuality, CR 53.06
does not contain the term “exception” but rather speaks of
“objections.” For the sake of consistency with the rule, we will
use the term “objection” throughout this opinion.
market value of the real properties that was obtained by the joint
efforts of the parties.”
Yates and Benedict were married on February 14, 1997.
Two days prior to their marriage, the parties entered into an
antenuptial agreement.2
In the agreement, Yates and Benedict
identified “certain items of valuable property owned on the date of
their marriage, which property shall be treated as the separate
property of the owner . . . .”
Specifically, Yates acknowledged
ownership of ten parcels of real estate, nine of which were located
in Boyle County, IRAs, mutual funds, trust accounts, Kentucky
Retirement accounts and personal belongings.
personal
belongings
and
“working
equipment”
Benedict listed
as
his
separate
property.
Pursuant to the agreement, “[p]roperty the title to which
is in the name of one of the parties shall be that party’s separate
property.”
Of
particular
relevance,
the
parties
included
a
provision that “[a]ny appreciation of, improvements to, or income
earned by separate property shall be separate property and belong
to the owner of the property which produced it.”
Further, the
parties expressed their intentions regarding the treatment of said
separate property in the event of a divorce: “[E]ach party agrees
that all separate property shall be deemed nonmarital property as
defined by [Kentucky Revised Statutes] KRS Chapter 403, and neither
party shall assert any claim to the other’s separate property.”
2
Antenuptial agreements are sometimes referred to as “prenuptial agreements” or “premarital agreements,” as in the Uniform
Premarital Agreement Act. See Black’s Law Dictionary, 92 and 1181
(6th ed. 1990).
-2-
On August 4, 1999, Yates filed a petition for dissolution
of
marriage
in
Boyle
Circuit
appearance in the action.
Court
and
Benedict
entered
his
Yates and Benedict reconciled for a
brief period, separating again on May 20, 2000.
Yates then sought
to amend her original petition and the matter came before the DRC
for a hearing on July 6, 2000.
In his report, the DRC concluded
that Yates should have exclusive occupancy of the marital residence
beginning on July 16, 2000, declined her request for attorney fees,
granted her leave to amend the petition, assessed costs against
Benedict and scheduled a final hearing on the matter for September
26, 2000.
When the hearing date arrived, the case was continued
until discovery could be completed “to be reset at the earliest
possible date.”
On October 18, 2000, the DRC conducted the
hearing, ultimately finding the antenuptial agreement valid but
determining that Benedict was entitled to “reimbursement” for his
contribution
question.3
to
the
improvements
made
to
the
properties
in
Benedict filed an objection to the report, arguing that
the DRC “erred in failing to find that all of the real property
purchased
by
the
parties
after
considered marital property.”
[their]
marriage
should
be
On October 27, 2000, the circuit
court entered its findings of fact, conclusions of law and decree
dissolving the Benedicts’ marriage, restoring Ruth’s maiden name
and reserving the issue of property division for a later hearing.
3
Apparently, the parties “would purchase rental property,
with [] Benedict providing labor and services” in order to prepare
the properties for tenants.
The properties were later sold or
rented for a profit.
These projects were Benedict’s full-time
employment but he did not receive a salary.
-3-
Yates filed objections to the DRC’s report and a motion
to strike Benedict’s objection, arguing that “the agreement is
valid and therefore precludes [Benedict’s] claim” and “that it is
not unconscionable to disallow [Benedict’s] alleged entitlement to
time and labor.”
In an order entered on November 14, 2000, the
court found the antenuptial agreement to be valid but also said
that “it would be unconscionable to deny [Benedict’s] claim for
work done to the property, reimbursement for time and labor,
subject to [Yates’s] setoff claims,” delaying any calculations
until a future hearing.
Ultimately, the court upheld the DRC’s
finding that the antenuptial agreement is “conscionable and valid.”
With respect to the DRC’s finding that Benedict is entitled to
reimbursement for time and labor expended on the properties, the
court modified the DRC’s report, specifying that Benedict is
entitled to one-half of the increased value of the real property
obtained by the joint efforts of the parties, leaving the issue of
whether Yates is entitled to any set-off to the discretion of the
DRC.
On January 16, 2001, the DRC conducted a hearing to
resolve the remaining issues in the action which resulted in both
parties being instructed to list the personal property in their
possession and “list real estate with change in value of property
during marriage and what work [Benedict] did if any;” three weeks
was allotted for discovery.
In response, Benedict submitted a
spreadsheet listing a total of seventeen properties (including the
ten owned by Yates at the time of the marriage), along with the
purchase date, purchase price, fair market value and marital change
-4-
in value of each property.
Also included was an itemization of
the work he allegedly performed on each property and the amount of
time spent completing each job.
Following the April 2001 hearing, Yates submitted a
detailed
memorandum
disputing
Benedict’s
contention
that
the
increase in the value of the properties resulted from the parties’
joint efforts, citing five reasons in support of her argument.
According to Yates, Benedict “mistakes improvements for repairs and
maintenance” in his exhibit and his calculations are therefore
erroneous.
Benedict also fails to “satisfy valuing improvements
for joint effort analysis.”
Further, his exhibit is “erroneous
because of mathematical error” related to the FMV of several of the
properties.
Yates questioned Benedict’s credibility “as to the
veracity of his claims of performed work on the properties.”
Finally, Yates argued that Benedict had “produced no evidence,
supported by the record, or to be presented at the hearing, to
support his claims.”
In an addendum to the memorandum, Yates
sought attorney fees, court costs and related expenses incurred in
enforcing the agreement pursuant to its terms as it had been deemed
valid.
On June 26, 2001, the DRC held a final hearing to
ascertain the value of “[Benedict’s] contribution to [Yates’s] real
estate.”
Having reviewed all of the available evidence, i.e, the
information contained in the pre-trial memoranda and exhibits, the
depositions of both parties and the testimony of witnesses, the DRC
arrived at a value for the improvements made to each property which
is
reflected
in
an
addendum
to
-5-
his
report.
In
the
DRC’s
estimation, the parties made a total of $113,400.00 in improvements
to the properties, one-half of which was awarded to Benedict, with
$2,500.00 in attorney fees and costs being awarded to Yates.
Yates then renewed her motion arguing that the parties’
antenuptial agreement precludes Benedict’s claims and objected to
the DRC’s findings, echoing her original assertions.
In an order
entered on July 13, 2001, the court adopted the findings of the DRC
in their entirety but also ordered Benedict to reimburse Yates for
the payment of liens on properties which totaled $12,500.00.
In
short,
of
the
$41,700.00
court
ordered
Yates
to
pay
Benedict
the
sum
($56,700.00 in improvements minus $12,500.00 in lien
payments plus $2,500.00 in attorney fees).
On appeal, Yates argues that the “trial court improperly
found the real property owned by [her] prior to marriage and
excluded by the antenuptial agreement to be marital property
divisible by the court” and further “erred in finding that any
appreciation in the properties owned by [her] prior to marriage
were marital.”
In the alternative, she contends that “there is no
evidence upon which the trial court could base its opinion as to
appreciation”
and,
finally,
that
the
trial
court
erred
in
confirming the DRC’s findings with “regard to marital equity.”
On the present facts, our standard of review is well
established.
“Since this case was tried before the court without
a jury, its factual findings ‘shall not be set aside unless clearly
erroneous, and due regard shall be given to the opportunity of the
-6-
trial court to judge the credibility of the witnesses.’”4
If a
factual finding is supported by substantial evidence, it is not
clearly erroneous.5 “Substantial evidence is evidence of substance
and relevant consequence sufficient to induce conviction in the
minds of reasonable people.
‘It is within the province of the
fact-finder to determine the credibility of witnesses and the
weight to be given the evidence.’”6
In Eiland v. Ferrell,7 the Supreme Court described the
respective roles of the circuit court and the DRC as follows:
A great many circuit courts in Kentucky make
use of domestic relations commissioners.
The rules
relating to such commissioners are found in CR 53.0353.06, inclusive. Of significance here is CR 53.06 which
relates to the report of the commissioner.
Subsection
(2) of CR 53.06 provides that within ten days after
notice of the filing of the report, any party may serve
written objections and have a hearing thereon before the
circuit court. With respect to the report, the court may
adopt, modify or reject it, in whole or in part, and may
receive
further
instructions.
evidence
or
may
recommit
it
with
In sum, the trial court has the broadest
4
Cole v. Gilvin, Ky. App., 59 S.W.3d 468, 472 (2001).
5
Id. at 472-473.
6
Id. at 473.
7
Ky., 937 S.W.2d 713, 716 (1997).
-7-
possible discretion with respect to the use it makes of
reports of [DRCs].8
A trial court is entitled to reevaluate the evidence and
reach a different conclusion than the DRC.
“While actions before
the court without intervention of a jury are governed by CR 52, et.
seq., it seems apparent that on matters referred to a commissioner
pursuant to CR 53.03, the specific provisions of the rules relating
to
commissioners
prevail.”9
Our
function
is
limited
to
ascertaining whether there is substantial evidence to support the
circuit
court’s
factual
findings
and
determining
whether
the
circuit court abused its discretion in finding that the antenuptial
agreement was conscionable or modifying it as was done in this
case.
In
conclusively
Edwardson
resolved
v.
any
Edwardson,10
question
as
the
to
Supreme
the
Court
validity
of
antenuptial agreements in general, observing that the statutory
scheme encourages parties involved in domestic litigation to enter
into separation agreements.
Permitting parties to enter into
antenuptial agreements is consistent with the reasoning behind that
policy.
“Indeed, KRS 403.190(2)(d) may be read to expressly
authorize antenuptial agreements in contemplation of divorce.”11
8
Id.
9
Id.
10
Ky., 798 S.W.2d 941, 945 (1990).
11
Id.
Historically, Kentucky courts recognized the
validity of prenuptial agreements only to the extent that they were
intended to take effect upon death.
Any provisions of an
(continued...)
-8-
However, the enforcement of such agreements is subject to
three
limitations
which
should
be
employed
by
a
court
in
determining whether to enforce a specific antenuptial agreement:
(1) was the agreement obtained through fraud, duress or mistake, or
through misrepresentation or non-disclosure of material facts; (2)
is the agreement unconscionable; and, (3) have the facts and
circumstances changed since the agreement was executed so as to
render
its
enforcement
unfair,
i.e.,
is
the
agreement
unconscionable at the time enforcement is sought?12
“Unconscionable” has the same meaning for both separation
and antenuptial agreements and is defined as “manifestly unfair or
inequitable.”13 Such a determination must be made on a case-by-case
basis.14
However, the trial court is vested with broad discretion
to modify or invalidate antenuptial agreements.15
The opponent of
an agreement bears the burden of proving it is invalid or should be
modified.16
“Upon a finding of unconscionability, the trial court
entertaining such an action may modify the parties’ agreement to
11
(...continued)
antenuptial agreement that contemplated divorce or separation were
against public policy and therefore void. Apparently, there was
some dispute regarding this issue below. We take this opportunity
to reiterate that Edwardson and its companion case, Gentry v.
Gentry, Ky., 798 S.W.2d 928 (1990), removed any doubt as to the
enforceability of antenuptial agreements.
12
Blue
v.
Blue,
(2001)(citation omitted).
Ky.
App.,
13
60
S.W.3d 585, 588
Shraberg v. Shraberg, Ky., 939 S.W.2d 330, 333 (1997);
id. at 589.
14
Id.
15
Shraberg, supra, n. 12, at 333.
16
Blue, supra, n. 11, at 589.
-9-
satisfy the necessary standard, but should otherwise give effect to
the agreement as nearly as possible provided the agreement was not
procured by fraud or duress.”17
Here, there is no allegation that the agreement was
procured through fraud, duress, mistake, misrepresentation or nondisclosure.
Accordingly,
the
question
becomes
whether
the
agreement is unconscionable, either from its inception or at the
time enforcement was sought.
Having heard the arguments of both
parties and considered the evidence of record, the court chose to
adopt (although not explicitly) the DRC’s determination that the
agreement is conscionable, a choice which was fully within its
broad discretion.
Since 1972, Kentucky’s version of the Uniform Marriage
and Divorce Act, KRS Chapter 403, has provided as a general rule
that property acquired by a husband and wife during the course of
their marriage is subject to equitable division between them in the
event of divorce.18
However, “[t]hroughout the law parties are
permitted to enter into agreements which modify the result which
would obtain if the matter was finally litigated”19 and, subject to
the aforementioned limitations, the right to enter into antenuptial
agreements
has
been
specifically
upheld.
By
virtue
of
the
antenuptial agreement executed here, Benedict and Yates agreed to
forego this equitable division.
Although the claims Benedict
relinquished by the terms of the agreement are substantial, “a bad
17
Edwardson, supra, n. 9, at 945-946.
18
Blue, supra, n. 11, at 588.
19
Edwardson, supra, n. 9, at 945.
-10-
bargain and unconscionability [are] not synonymous.”
The relevant
cases reveal that provisions of the type at issue are not uncommon.
In cases of this nature, “the trial court is in the best position
to evaluate the circumstances surrounding the agreement.”20
Given
the guidelines and the level of deference afforded to the circuit
court in this regard, we decline to alter its resolution of this
issue.
Equally within the court’s authority was the decision to
modify the agreement with respect to Benedict’s entitlement to onehalf of the value of the improvements to the properties upon
implicitly finding that a failure to do so would be inequitable
under the circumstances, i.e., that Benedict met his burden of
establishing that modification of the agreement was warranted
because it was unconscionable at the time enforcement was sought.
Because the court limited itself to the matter deemed “manifestly
unfair,” leaving the remainder of the agreement intact so as to
give
effect
to
the
parties’
intentions,
its
action
was
both
reasonable and proper.
When the value of property increases after marriage due
to general economic conditions, the increase does not constitute
marital property.21
But, the opposite is true when the increase
results from the joint efforts of the parties.22
Therefore, when
the property acquired during the marriage includes an increase in
20
Id.
21
Goderwis v. Goderwis, Ky., 780 S.W.2d 39, 40 (1989);
Travis v. Travis, Ky., 59 S.W.3d 904 (2001).
22
Id.
-11-
the value of an asset containing both marital and nonmarital
components, trial courts must determine from the evidence “why the
increase in value occurred.”
presumption
that
an
23
increase
However, KRS 304.190(3) creates a
in
value
is
marital
property.
Accordingly, a party asserting that he or she is entitled to
receive appreciation upon a nonmarital contribution as nonmarital
property must rebut that presumption; failure to do so results in
the increase being characterized as marital property.24
In the instant case, the court offered the following
analysis in support of its modification of the agreement:
On the issue of [Benedict’s] burden of proof
regarding his contribution to the non-marital properties’
marital-period improvement and increase in value, the
Court notes that in Kentucky tracing requirements are
satisfied by a party’s testimony and that documentation
of a claim is not required.
According to the record,
sworn testimony regarding the value of the properties was
obtained from [Benedict] and [Yates]. At the January 16,
2001, hearing before the [DRC], [Yates] herself presented
extensive testimonial evidence regarding the increase in
value of every relevant piece of real property, or the
lack thereof, as well as the extent of [Benedict’s]
contributions to the increase in value of the non-marital
property.
Furthermore, [Benedict] provided on-stand
testimony from two witnesses regarding the extent of
23
Id.
24
Travis, supra, n. 21, at 910-911.
-12-
[Benedict’s] labor on and improvements to the properties
in question.
As
substantive
discussed
proof
documentation,
[Benedict’s]
above,
other
and
than
canceled
statements
as
to
[Yates]
her
own
drafts
the
offered
no
testimony,
to
value
improvements to the real property at issue.
counter
of
the
The record
clearly shows that when the [DRC] rendered his findings,
he found that valuation increases attributable to joint
efforts at improvement could be reasonably adduced and
apportioned following a comparison of [Benedict’s] and
[Yates’s] sworn statements. [Yates] is entirely correct
that under Kentucky law a mere increase in value of a
non-marital asset does not constitute marital property.
To
reiterate:
if
[Yates]
believed
that
[Benedict’s]
calculated valuation of the properties was solely based
upon economic factors or factors unrelated to actions
undertaken by [Benedict], [Yates] had ample notice and
opportunity to present substantive evidence.
* * *
The record of the above-styled case clearly
shows
that
depositional,
in-court
testimony
and
information provided in the pre-trial memoranda submitted
by the parties contains detailed information concerning
the date of purchase of each piece of realty, the value
of [his] labor, the contributions of [Yates], and marital
equity, each of which contributes to a description of the
-13-
proportion of the real property appreciation attributable
to the joint efforts of the parties.
For example, the
1996 purchase price of the property at 510 North Third
Street in Danville, Kentucky was $42,000.[00].
The
estimated 2001 fair market value of the property is
$64,000.[00]. As is apparent from the record of the June
hearing, the [DRC] took these figures into account along
with evidence submitted by both parties to arrive at a
joint-contribution-to-increase
in-value
sum
of
$10,000.[00].
This Court remains satisfied that the [DRC’s]
recommendations were reasonable and that the Order issued
on the basis of those recommendations was within the
purview of the discretion of this Court.25
In
summary,
upon
considering
the
arguments
of
both
parties, thoroughly reviewing the DRC’s report and the basis for
its findings and applying the governing legal principles, the court
found that Yates failed to satisfy her burden of establishing that
the increase in the value of the properties was attributable to
general economic conditions rather than the joint efforts of the
parties.
As substantial evidence exists to support the court’s
determination as to why the properties increased in value as well
as the specific amounts of appreciation, its findings cannot be
disturbed.
Having found that Yates did not rebut the presumption
that the increases in value are nonmarital property, the court
25
Citations omitted.
-14-
reached the necessary conclusion that the increases must be treated
as marital property and divided in an equitable manner.
As
revealed by the evidence of record, the court employed an entirely
proper and typical method of division — 50/50, fairly compensating
both parties for their respective contributions.
Contrary to
Yates’s assertion, this measure did not constitute an abuse of
discretion — quite the opposite.
As the circuit court has neither committed clear error
nor abused its discretion, its order is affirmed.
GUIDUGLI, Judge, CONCURS.
KNOPF, Judge, CONCURS WITH SEPARATE OPINION.
KNOPF, Judge, CONCURRING:
I concur with the majority
opinion, but write separately to emphasize an additional point. As
the majority correctly holds, the controlling issue in this case is
whether the prenuptial agreement was unconscionable at the time
enforcement was sought.
The appropriate test of the substantive
fairness of a prenuptial agreement requires a finding that the
circumstances of the parties at the time the marriage is dissolved
are not so beyond the contemplation of the parties at the time the
contract was entered into as to cause its enforcement to work an
injustice.
The emphasis of this inquiry relates to the reasonable
expectations of the parties as contemplated by the agreement.26
If non-marital property appreciates through the
joint efforts of the parties, the increase in value is deemed to be
26
Blue v. Blue, Ky. App. 60 S.W.3d 585, 590 (2001).
-15-
marital.27
The “joint efforts of the parties” may be broadly
construed to include the contribution of one spouse as a primary
operator of the business and the other spouse as primarily a
homemaker.28 Furthermore, income produced from non-marital property
is also marital.29
However, when Benedict signed the prenuptial
agreement, he specifically waived any right to appreciation of,
improvements to, or income earned by Yates’s separate property. In
other words, he disclaimed any interest to which he would otherwise
have been entitled.
Nevertheless, the trial court specifically found
that
Benedict
personally
contributed
labor
improvements to Yates’s separate property.
and
services
for
The trial court’s
factual finding regarding the value of his labor and services was
supported by substantial evidence.
Bendict’s contributions went
substantially beyond what the parties contemplated at the time the
agreement was signed.
supports
the
conclusion
Accordingly, the trial court’s finding
that
enforcement
of
the
prenuptial
agreement with respect to these contributions would unjustly enrich
Yates and would work an injustice to Benedict.
Consequently, the
trial court properly upheld the agreement while also allowing
Benedict reimbursement for his direct contribution to improvements
made to the properties in question.
27
Goderwis v. Goderwis, Ky., 780 S.W.2d 39, 40 (1989).
28
Id.
29
Sousley v. Sousley, Ky., 614 S.W.2d 942, 944 (1981).
-16-
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Robert R. Baker
RANKIN & BAKER
Stanford, Kentucky
William R. Erwin
HELTON, ERWIN & ASSOCIATES
Danville, Kentucky
-17-
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