CONWAY (KENNETH) VS. CONWAY (KATHLEEN)Annotate this Case
RENDERED: OCTOBER 3, 2008; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
APPEAL AND CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE O. REED RHORER, JUDGE
ACTION NO. 05-CI-01407
AFFIRMING IN PART,
AND VACATING AND REMANDING IN PART
** ** ** ** **
BEFORE: THOMPSON AND VANMETER, JUDGES; HENRY,1 SENIOR
Senior Judge Michael L. Henry sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
VANMETER, JUDGE: Kenneth Conway appeals, and Kathleen Conway crossappeals, from a judgment entered by the Franklin Circuit Court, Family Division,
in a marital dissolution proceeding. For the reasons stated hereafter, we affirm in
part, and vacate and remand in part for further proceedings.
The parties married in 1971, divorced in 1989, and reconciled a few
months later. They remarried in September 1990, and separated in September
2005. The court dissolved the marriage in February 2006, reserving all property
issues for future resolution.
During a lengthy hearing in June 2006, both parties testified and
produced evidence regarding the pending property issues, including evidence that
they maintained separate bank accounts except for a joint checking account used
for some joint expenses. Kenneth asserted that he alone bore the cost of all marital
expenses, and that Kathleen used her income only for her own needs. Kathleen
testified to the contrary, stating that she used her income for marital expenses such
as groceries and home improvements. Substantial evidence was adduced regarding
various investments and Kenneth’s transfers of funds to his sister, but the parties
disagreed regarding the source, disposition, or justification for many of the
investments or transfers. While the parties agreed that Kenneth paid Kathleen
$25,000 for her interest in the marital residence at the time of the first divorce,
Kenneth denied Kathleen’s claim that she repaid the amount to him after they
remarried. In February 2007, the court entered findings, conclusions and a
judgment which it subsequently clarified. However, the court denied Kenneth’s
motion to alter, amend or vacate the judgment. This appeal and cross-appeal
First, Kenneth contends that the trial court erred by failing to restore
the marital residence and certain personal property to him as nonmarital property.
At the time of dissolution, the trial court is required to assign each
spouse’s nonmarital property to him or her. KRS 403.190(1). Nonmarital assets
which have been commingled with marital property or traded for other property
may be traced into a presently owned specific asset in order to restore nonmarital
funds to either spouse. See, e.g., Sexton v. Sexton, 125 S.W.3d 258 (Ky. 2004);
Chenault v. Chenault, 799 S.W.2d 575 (Ky. 1990).
Here, the circumstances regarding the marital residence differ from
the typical tracing situation. The parties agree that when they divorced in 1989,
Kenneth paid Kathleen $25,000 for all her rights and interests in the marital
residence. Kenneth, however, denies Kathleen’s assertion that after they
reconciled, she repaid the $25,000 to him in order to regain her interest in the
property. The parties attempted to prove their respective positions but neither was
able to provide direct documentary proof of whether repayment occurred.
Kathleen provided evidence that her bank did not retain records as far back as the
date of the alleged transfer of funds to Kenneth, but she pointed to a deposit of
$21,994.18 into the joint checking account, shortly after the 1990 marriage, as an
indication of her repayment to Kenneth. Kenneth denied her claim, asserting that
both parties contributed to the deposit, and that the funds were used to purchase a
vehicle for Kathleen. However, Kenneth provided no records which clearly traced
the source of the funds.
Both parties testified about their financial transactions during the
second marriage, and they introduced evidence of several deeds to the marital
residence. The first deed showed that at the time of the first divorce in 1989,
Kathleen conveyed all of her interests in the residence to Kenneth. In December
1992, while facing heart surgery, Kenneth conveyed all of his interests in the
residence to Kathleen in consideration of the payment of one dollar. In January
1998, the parties executed a straw man deed reconveying the property to both,
desire to hold said real property, share and share alike,
for and during their joint lives and, upon the death of
either husband or wife, then the remainder to the survivor
thereof in fee simple[.]
The deed included the parties’ certification that the transfer constituted a gift.
In other words, regardless of typical tracing requirements and
regardless of whether Kathleen reimbursed Kenneth $25,000, the deeds establish
that Kenneth deliberately conveyed his entire marital and nonmarital interest in the
residence to Kathleen in December 1992, and then regained a marital interest in the
property only in 1998, when the parties executed the straw man deed reconveying
the property to both. Kenneth’s assertion that the trial court should have assigned
the property to him as nonmarital property must be considered in light of the
Kentucky Supreme Court’s recent summary of the case law relevant to the
construction of deeds, including that
“[i]n determining the intention of the parties, courts look
at the whole deed, along with the circumstances
surrounding its execution, and courts may also consider
the acts of the parties following the conveyance.” Arthur
v. Martin, 705 S.W.2d 940, 942 (Ky.App. 1986). . . . A
deed “is ambiguous when its language is reasonably
susceptible of different constructions.” Blevins v.
Riedling, 289 Ky. 335, 158 S.W.2d 646, 648 (1942).
Of course, “[t]he construction of a deed is a matter
of law, and [absent an ambiguity,] the intention of the
parties is to be gathered from the four corners of the
instrument.” Phelps v. Sledd, 479 S.W.2d 894, 896 (Ky.
1972). Thus, the “court may not substitute what [a]
grantor may have intended to say for what was said.” Id.
Hoskins Heirs v. Boggs, 242 S.W.3d 320, 328 (Ky. 2007).
Hence, regardless of the circumstances underlying the parties’
decisions to convey the property, the lack of ambiguity in the wording of the 1992
and 1998 deeds required the trial court to construe the deeds according to their
terms, rather than according to either party’s underlying intent or the source of
funds applied to the property’s purchase. According to the deeds’ specific and
unambiguous terms, all of Kenneth’s interest in the property was conveyed to
Kathleen in December 1992, and in 1998 he regained only a joint tenancy interest
in the property. Further, the court noted that both parties behaved consistently with
a joint ownership of the property. Given the substantial evidence to show that the
residence constituted marital property at the time of the 2006 dissolution, the trial
court did not err by equally dividing its value between the parties in light of the
provisions set out in KRS 403.190.
Moreover, we are not persuaded by Kenneth’s assertion that the trial
court erred by failing to restore to him as nonmarital property the household
furnishings and other personal property which he received as nonmarital property
in the first divorce. The record shows that the parties’ 1989 property settlement
agreement awarded Kenneth “[a]ll property not specifically designated” as having
been awarded to Kathleen. However, the record neither identifies what items had
not been restored to Kenneth’s possession even though previously awarded to him,
nor specifically addresses whether any of the items in question still existed.
Absent such evidence, we cannot say that the trial court erred in its assignment of
nonmarital personal property.
Further, we are not persuaded by Kenneth’s assertion that the trial
court erred by failing to assign to him, as nonmarital property, “three I.R.A.’s in
the form of certificates of deposit totaling $17,922.94 that were earned prior to
marriage from his employment at National Distillers[.]” The videotape of the June
2006 hearing shows that Kenneth testified that only one of the three IRA’s was
established with funds rolled over from a nonmarital National Distillers retirement
account. Moreover, he could not recall which of the three IRA accounts allegedly
was established with funds from such a nonmarital account, and he provided no
documentation to demonstrate that the accounts had nonmarital origins. Given our
review of the evidence and our obligation to accept the trial court’s findings unless
clearly erroneous, we cannot say that the trial court clearly erred by finding that
“[n]either party presented sufficient proof that any of the funds maintained in their
accounts was non-marital money.” See CR2 52.01; Ghali v. Ghali, 596 S.W.2d 31
Next, Kenneth contends that the trial court abused its discretion when
dividing marital property. We disagree.
KRS 403.190(1) requires a trial court to divide 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
(b) Value of the property set aside 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.
The parties both testified regarding the nature, value and source of various items of
marital property. They kept separate bank accounts, but at times they both used a
joint account for household or living expenses. Although Kenneth alleged that
Kathleen retained all of her earnings for her own use throughout the sixteen-year
marriage, Kathleen testified that she contributed toward joint expenses including
groceries and home improvements. She also testified regarding her marital role in
performing chores and maintaining the residence.
Kentucky Rules of Civil Procedure.
We are not persuaded by Kenneth’s assertion that the trial court failed
to consider the factors set out in KRS 403.190(1) when dividing the marital
property. The court’s judgment specifically acknowledged the marriage’s
“relatively long duration,” as well as the fact that each party “contributed both
domestically and financially to the accumulation of the marital estate.” The court
further reviewed the conflicting evidence and found that Kenneth had concealed
some marital funds and transferred others to his sister, all with the intent of
depriving Kathleen of her marital interest in such funds. Moreover, there is no
merit to Kenneth’s argument that the parties’ use of separate checking accounts
should be treated as evidence of a postnuptial waiver of spousal property rights, as
the record contains no evidence that both parties ever agreed to waive such rights
in marital property. We conclude that the court did not clearly err in dividing
Next, Kenneth contends that the trial court erred by awarding
Kathleen duplicate credit for a single asset. More specifically, he refers to Section
II(F)(4) of the judgment, wherein the court stated that Kenneth
has three CD’s at Farmer’s Bank totaling $25,000.00.
([Kenneth’s] Exhibit 11) This money was derived from
the $25,000.00 cash [Kenneth] transferred to his sister,
Judy Wilson, during the marriage to hold for his benefit
with the expectation that it would be concealed from
[Kathleen] and returned to him after the divorce was
He also refers to Section II(G), wherein the court stated:
1. [Kenneth] testified that in 2005 he transferred to his
sister, Judy Wilson, $25,000.00 in cash to hold for
2. The $25,000.00 in cash was returned to [Kenneth]
by his sister within one week after the divorce was
final in February of 2006. The money was placed in
three CDs at Farmer’s Bank by [Kenneth].
([Kenneth’s] Exhibit 11)
The court found that Kathleen was entitled to one-half of the assets described in
Kenneth asserts, and Kathleen agrees, that the three CD’s described in
Section II(F)(4) are the same three CD’s described in Section II(G). Although
Kenneth therefore argues that the award to Kathleen of one-half of the CD’s
described in Section II(G) should be stricken as duplicative of the Section II(F)(4)
award, Kathleen asserts that the court correctly found that Kenneth made two
separate transfers of approximately $25,000 each to his sister, and that she is
entitled to one-half of each transfer. She argues that while one of the $25,000
transfers was used to purchase the three CD’s described in Section II(F)(4), the
other $25,000 transfer was in fact returned to Kenneth and, as he testified below,
was held by him in travelers checks and cash. Further, on cross-appeal Kathleen
urges this court both to correct the duplicate award, and to award her one-half of
the amount addressed above in Section II(G).
After reviewing the record, we agree with the parties that the trial
court erred when making its findings of fact and awarding Kathleen duplicate
credit for the three CD’s described in Section II(F)(4) and Section II(G). Clearly,
the funds described in Section II(G) were not invested in the same three CD’s as
the money described in Section II(F)(4). The second sentence of Section II(G)(2)
therefore is vacated, and this matter is remanded for new findings and conclusions
relating to the division of the $25,000 in assets described in Section II(G)(1).
Next, Kenneth contends that the trial court erred by finding that he
dissipated marital assets. We disagree.
A trial court may find that a party has dissipated marital assets if
marital property has been used “(1) during a period when there is a separation or
dissolution impending; and (2) where there is a clear showing of intent to deprive
one’s spouse of her proportionate share of the marital property.” See Brosick v.
Brosick, 974 S.W.2d 498, 500 (Ky.App. 1998) (citing Robinette v. Robinette, 736
S.W.2d 351, 354 (Ky.App. 1987)). Once the spouse alleging dissipation presents
evidence of such, the burden shifts to the other spouse to show that the assets were
not expended for nonmarital purposes. Brosick, 974 S.W.2d at 502.
Here, after the parties adduced substantial conflicting evidence, the
trial court found that two separate groups of assets had been dissipated. First, in
Section II(G), as set out above, the court found that dissipation occurred when
$25,000 was transferred to Kenneth’s sister in 2005, “to hold for his benefit,” and
then was returned to him within one week after the parties’ dissolution became
final. As noted above, on remand the trial court must make new findings regarding
the use and disposition of those funds so as to avoid the duplication of awarded
assets. Nevertheless, we cannot say that the trial court clearly erred by finding that
marital assets were dissipated by the transfer and apparent attempt to conceal
marital funds. See CR 52.01.
The trial court also found that Kenneth dissipated the assets described
in Section II(H) of the judgment when he transferred $9,500 to his sister on each of
three occasions between 1991 and 1993. Kenneth asserted that he transferred
money to his sister as a gift during a time when he was in medical crisis and
contemplating the possibility of death. However, although the transfers occurred
long before the parties’ final separation, the parties briefly separated on other
occasions, and Kenneth also testified that the transactions occurred after he and
Kathleen fought. Further, the evidence indicated that Kenneth’s sister purchased
CD’s which named him as the beneficiary, that Kathleen was unaware of the
transfers, and that Kenneth knew Kathleen would not agree to the transfer of such
large gifts to his sister. Again, we cannot say that the trial court clearly erred by
finding that the assets were wrongfully dissipated by Kenneth in an attempt to
“deprive [Kathleen] of her marital share of the $28,500.00[,]” and by awarding half
of that amount to Kathleen. See Brosick, 974 S.W.2d at 500-01; Robinette, 736
S.W.2d at 354.
Finally, Kenneth asserts that the trial court abused its discretion by
awarding Kathleen costs and attorney’s fees. He also contends that when he filed a
motion to alter, amend or vacate the judgment, the court wrongfully retaliated
against him by modifying the judgment “to increase [his] share of [Kathleen’s]
costs and attorneys fees from one-fourth to one-half, a proposition that wasn’t even
before the court.” We disagree.
KRS 403.220 permits the trial court in a dissolution proceeding to
consider both parties’ financial resources, and to order one party to pay “a
reasonable amount” to the other for costs and attorney’s fees. It is well established
that an award of attorney’s fees and the allocation of courts costs falls entirely
within the trial court’s discretion. Wilhoit v. Wilhoit, 521 S.W.2d 512, 514 (Ky.
Here, the trial court’s judgment included the following:
1. At the trial of this case, [Kathleen] presented proof
that she had incurred approximately $4,000.00 in
costs, expenses and attorney’s fees up to the date of
the final hearing. The attorney’s fees did not include
any trial preparation, trial or post-trial work.
2. The Court finds that some of the attorney’s fees were
incurred by [Kathleen] as a result of [Kenneth’s]
failure to answer Interrogatories and Requests for
Production of Documents.
3. The Court finds that [Kenneth] shall pay to [Kathleen]
one-fourth of her costs, expenses and attorney’s fees
incurred by her in this case. [Kathleen’s] counsel
shall file an Affidavit with the Court providing proof
of the amount incurred by [Kathleen] in this case.
[Kenneth] shall have ten days to dispute any item
included in the Affidavit and thirty days thereafter to
make payment for one-half of the amount presented.
The court directed Kenneth to reimburse Kathleen
for one-fourth of her costs, expenses, and attorney’s fees
incurred to the date of the entry of this Order. Counsel
for [Kathleen] shall file an Affidavit with the Court, and
[Kenneth] shall have ten days to dispute any item
contained therein. [Kenneth] shall have thirty days
thereafter to make payments for one-half of the amount
directly to [Kathleen].
The court subsequently clarified the judgment to correct the obvious discrepancies
by directing Kenneth to pay Kathleen “for one-half of her costs, expenses, and
attorney fees incurred herein[,]” but it denied Kenneth’s motion to alter, amend or
vacate the judgment.
Our review of the record, including the videotape of the hearings,
supports the trial court’s statement that “some of the attorney’s fees were incurred
by [Kathleen] as a result of [Kenneth’s] failure to answer Interrogatories and
Requests for Production of Documents.” Further, the record shows that Kathleen’s
attorney spent substantial time addressing issues relating to assets which the court
found were marital assets dissipated by Kenneth. Under these circumstances, we
cannot say the trial court abused its discretion when awarding costs and attorney’s
fees to Kathleen. Moreover, given the judgment’s obvious error in directing
Kenneth to pay one-fourth of Kathleen’s costs, expenses and attorney’s fees, while
providing thirty days to pay one-half of the amount presented by counsel, we are
not persuaded by Kenneth’s argument that the amended order constituted evidence
The court’s judgment is affirmed in part, and vacated and remanded in
part for further proceedings relating to the division of the assets described in
Section II(G)(1), as discussed above.
HENRY, SENIOR JUDGE, CONCURS.
THOMPSON, JUDGE, CONCURS IN RESULT ONLY.
BRIEFS FOR APPELLANT/
BRIEF FOR APPELLEE/CROSSAPPELLANT:
Steven G. Bolton
Michael L. Hawkins