FEHR (RALPH EDWARD) VS. FEHR (MAREN MITCHELL)Annotate this Case
RENDERED: OCTOBER 3, 2008; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
RALPH EDWARD FEHR
APPEAL AND CROSS-APPEAL FROM OLDHAM CIRCUIT COURT
HONORABLE TIMOTHY E. FEELEY, JUDGE
ACTION NO. 04-CI-00389
MAREN MITCHELL FEHR
OPINION AFFIRMING IN PART AND
REVERSING AND REMANDING IN PART
** ** ** ** **
BEFORE: MOORE AND THOMPSON, JUDGES; HENRY,1 SENIOR JUDGE.
THOMPSON, JUDGE: This is an appeal and cross-appeal filed from the findings
of fact and conclusions of law entered in a dissolution of marriage action. Ralph
Edward Fehr appeals the decision of the Oldham Family Court awarding Maren
Mitchell Fehr a villa and a one-half marital interest in a mini-storage warehouse
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 KRS 21.580.
located in St. Maarten of the Netherlands Antilles. He alleges that as a result of the
court’s award, he was denied his nonmarital interest in those properties. Maren
contends that the family court lacked subject matter jurisdiction over the property
located in the Netherlands Antilles, or alternatively, that the law of that country
should apply to the division of the property. She further challenges the admission
of appraisals performed by an unlicensed real estate agent. We initially address the
issue of jurisdiction because, if lacking, the issues raised by Ralph are moot.
The parties were married on August 7, 2000, in St. Maarten. At the
time of the marriage, both were Kentucky residents and Ralph continued to reside
in this state throughout the marriage. During the marriage, Maren primarily
resided in St. Maarten but did not change her United States citizenship.
In June 2004, Ralph filed a petition for dissolution in Oldham County,
Kentucky, wherein he alleged that he had been a resident of Kentucky for at least
180 days preceding the filing of the petition. In her response, Maren admitted that
Ralph resided in Kentucky for 180 days prior to the filing of the petition and
further, that he had resided in Oldham County continuously for at least seven
years. She also admitted as alleged in the petition that she had been a resident of
Kentucky for “several years.” Documents filed in the record, including her 2005
tax returns and insurance documents, demonstrate that her domicile was within the
United States. The record further reveals that the first objection Maren made to the
jurisdiction of the Oldham Family Court was two years after the filing of the
Maren does not dispute that Ralph’s domicile was Kentucky for 180
days prior to the filing of the petition for dissolution of marriage. By her own
admissions, she was likewise domiciled in this state. Although she resided in St.
Maarten for much of the marriage, at the time Ralph filed his petition, there was
absolutely no evidence that it was her intent to establish permanent residency in
that country and abandon her Kentucky domicile. St. John v. St. John, 291 Ky.
363, 163 S.W.2d 820, 822 (1942). The family court had subject matter jurisdiction
and personal jurisdiction over the parties to grant the dissolution. KRS 403.140;
Jeffrey v. Jeffrey, 153 S.W.3d 849 (Ky.App. 2004). Thus, the issue is whether the
court’s jurisdiction extended to the property located in St. Maarten.
Jurisdiction is an essential prerequisite to any judicial action. It is the
“ubiquitous procedural threshold through which all cases . . . must pass prior to
having their substance examined.” Nordike v. Nordike, 231 S.W.3d 733, 737 (Ky.
2007). Maren’s objection to the assertion of the court’s jurisdiction is premised on
its lack of power to decide the parties’ interest in the St. Maarten property and,
therefore, is a question of subject matter jurisdiction. Contrasted to a claim that
personal jurisdiction is lacking, subject matter jurisdiction cannot be waived or
otherwise conferred by the parties. It either exists or it is absent. Id.
It is well established law that Kentucky courts are without jurisdiction
to settle title or possessory rights to land outside the Commonwealth. See Kaplon
v. Chase, 690 S.W.2d 761 (Ky.App. 1985). However, it is equally accepted that a
court may, through an in personam decree, affect title to land in another state. The
distinction between an action to adjudicate title to land and that to determine the
parties’ interests in land was recognized long ago in our jurisprudence and has
been subsequently reaffirmed. See McQuerry v. Gilleland, 89 Ky. 434, 12 S.W.
1037 (1890); Kaplon, 690 S.W.2d at 763. Although a Kentucky court does not
have jurisdiction to quiet title or to secure possession of foreign land, in personam
jurisdiction is sufficient to decide the interests of the parties in that same land. See
Kaplon, 690 S.W.2d at 763.
In the context of a marital dissolution action, the law expressed in
McQuerry and its progeny has been applied and further explained. In Becker v.
Becker, 576 S.W.2d 255 (Ky.App. 1979), the Court addressed the jurisdiction of a
Kentucky court to decide the parties’ marital interests in property located in
another state. The circuit court found that a residence in Florida was marital
property and awarded a sixty percent interest to the husband and forty percent to
the wife. On appeal, when addressing the challenge to the circuit court’s
jurisdiction over the Florida property, the court indulged in an analysis of the
United States Supreme Court’s decision in Fall v. Eastin, 215 U.S. 1, 30 S.Ct. 3,
54 L.Ed. 65 (1909), and wrote the following summation of the law:
As regards the question of the power of a court to compel
a party before it to convey real property located in
another state, we believe that the United States Supreme
Court firmly established such authority in Fall v. Eastin,
215 U.S. 1, 30 S.Ct. 3, 54 L.Ed 65 (1909). There, the
Court held that while it was clear that the disposition of
real estate was to be governed by the law of the state
where the land was situated, and that no decree or
conveyance of property except by the party vested with
title was effective beyond the jurisdiction of that court, a
court of equity with in personam jurisdiction could, in
the proper case, by virtue of its power over the person of
a party, “‘compel him to act in relation to property not
within its jurisdiction.’” 30 S.Ct. at 7. The Court further
explained that such a “‘decree does not operate directly
on the property nor affect the title, but is made effectual
through the coercion of the defendant; as, for instance, by
directing a deed to be executed or cancelled by or on
behalf of the party.’” Id. The Court pointed out that this
authority stemmed from a limited but well-defined
exception to the territorial limitation imposed on the
courts of one state over the property of another state.
This exception was defined thusly:
A court of equity, having authority to act upon the
person, may indirectly act upon real estate in
another state, through the instrumentality of this
authority over the person. Whatever it may do
through the party, it may do to give effect to its
decree respecting property, whether it goes to the
entire disposition of it or only to affect it with liens
or burdens. 30 S.Ct. 6.
The Court also stated that while a decree pursuant to such
power was not legal title, nor did it transfer legal title,
obedience to it could be compelled by contempt,
attachment, or sequestration.
Id. at 257. Based on Fall, the Court held that by virtue of the circuit court’s
personal jurisdiction over the parties, it had the authority and power to indirectly
affect the property by compelling the conveyance of the interest.
Thus, a court with in personam jurisdiction and subject matter
jurisdiction over a dissolution action may declare the parties’ interests in foreign
land. However, consistent with the limitations on the court’s jurisdiction, an action
to enforce a foreign decree so as to transfer title in accordance with the decree
generally requires a separate action in the jurisdiction in which it is located. See In
re Marriage of Kowalewski, 163 Wash.2d 542, 182 P.3d 959 (2008).
Although Becker involved a foreign state rather than a foreign
country, its holding is nevertheless applicable to the present case. The family
court’s decree does not purport to transfer title to the St. Maarten properties but
only declares the parties’ interests in those properties. The enforcement of that
decree and what effect the St. Maarten courts give to the decree is not for this court
Maren contends that even if the court had jurisdiction to decide the
parties’ respective marital interests in the property, the family court was required to
apply the law of the Netherlands Antilles, which according to an affidavit filed by
an attorney in that country, provides for a division in accordance with community
property law. We have previously determined that the parties’ domicile remained
in Kentucky throughout the marriage. Absent an agreement to the contrary, in
dissolution of marriage proceedings the law of the marital domicile applies. See
Rowley v. Lampe, 331 S.W.2d 887 (Ky. 1960).
There was no prenuptial agreement and no other indication that the
parties intended to be governed by Netherlands Antilles’ law in the event of
dissolution of the marriage. Ralph did file a lien on the St. Maarten villa pending
resolution of the dissolution action. However, his action was taken to protect his
interest in the property and cannot be deemed a waiver of the application of
Kentucky law for the purpose of the dissolution of marriage action. It was merely
an overt act to preclude Maren from selling the property. We find no error in the
family court’s application of Kentucky law.
We address Maren’s final allegation of error which pertains to the
family court’s reliance on the testimony of Leroy De Weever when determining
the value of the St. Maarten properties. De Weever is a resident of St. Maarten but
is not a licensed appraiser. However, he testified that it is not customary in that
country for appraisers to be licensed and explained his experience as a real estate
broker and knowledge in regard to property in St. Maarten. He valued the villa at
$705,000 and the value of the M & R Storage Warehouse business at $585,000.
Maren contends that De Weever’s testimony was inadmissible because he was not
licensed in accordance with Kentucky law.
The General Assembly’s decision to regulate real estate appraisers
through KRS Chapter 324A does not supersede our Rules of Civil Procedure. It
remains within the discretion of the trial court to determine whether an expert
witness is qualified based on the witnesses’ knowledge, skill, experience, training,
and education. KRE 702 and 703. Although a license required by statute is
relevant in the court’s determination, a lack of a real estate appraiser’s license or
certification does not by itself render the testimony inadmissible. The family court
acted well within its discretion when it ruled De Weever’s testimony admissible.
Monin v. Monin, 156 S.W.3d 309 (Ky.App. 2004).
We conclude that Kentucky has jurisdiction to resolve the property
dispute, that Kentucky law is applicable, and that the admission of De Weever’s
testimony was within the family court’s discretion. We now turn to the errors
alleged by Ralph.
THE CLASSIFICATION OF MARITAL
AND NONMARITAL PROPERTY
Each party entered the marriage with premarital property. It is the use
of the proceeds from the sale of the parties’ properties and premarital assets to
purchase the M & R Mini-Storage Warehouse and the St. Maarten villa that is the
center of controversy.
We preface our discussion with the applicable standard of review and
applicable law. The family court’s findings of fact will not be disturbed unless
they are not supported by substantial evidence. Cochran v. Cochran, 746 S.W.2d
568 (Ky.App. 1988). Findings of fact include the designation of and assignment of
value to marital and nonmarital property. Issues raised concerning strictly
questions of law are reviewed on a de novo basis. Hunter v. Hunter, 127 S.W.3d
656, 659 (Ky.App. 2003).
We conclude that the family court’s findings of fact are not clearly
erroneous and accept those findings as conclusive. However, because the family
court did not apply the formula set forth in KRS 403.190 when dividing the
parties’ marital and nonmarital interests in the St. Maarten villa, we conclude that
it erred as a matter of law.
The parties claim both marital and nonmarital interests in both
properties located in St. Maarten. Pursuant to the statutory guidelines for the
division of property in a marriage dissolution action set forth in KRS 403.190, the
family court was required to apply the definitions of marital and nonmarital
property set forth in subsection 2 of that statute that provides:
For the purpose of this chapter, “marital property” means
all property acquired by either spouse subsequent to the
(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;
(c) Property acquired by a spouse after a decree of legal
(d) Property excluded by valid agreement of the parties;
(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.
KRS 403.190 (2). The method used to divide property consistent with the statute
was extensively reviewed and explained in Sexton v. Sexton, 125 S.W.3d 258 (Ky.
The inquiry begins with 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.” Id. at 264-265. The
court further observed that often property will have been accumulated with both
marital and nonmarital contributions which renders its division subject to specific
rules of common law and, in the initial classification of the parties’ interests, the
invocation of the trial court’s discretion.
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. Neither title nor the form
in which property is held determines the parties' interests
in the property; rather, Kentucky courts have typically
applied the ‘source of funds' rule to characterize property
or to determine parties' nonmarital and marital interests
in such property. 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 the property. (Internal
citations and footnotes omitted).
When property consists of both marital and nonmarital contributions
and has increased in value during the marriage, the application of the principles
enunciated in Sexton have historically proven challenging. A basis for any inquiry
into the status of such property is the reason for the increase. If the value of the
nonmarital property after the marriage is attributable solely to economic
conditions, the increase is not characterized as marital property. However, if the
increase is the result of the joint efforts of the parties it is considered marital
property subject to division in equitable proportions. Travis v. Travis, 59 S.W.3d
904 (Ky. 2001).
The seminal case in the proper division of an increase in marital and
nonmarital property is Brandenburg v. Brandenburg, 617 S.W.2d 871 (Ky.App.
1981). In its effort to restore the nonmarital contribution and the corresponding
increase in value during the marriage, the court promulgated what is commonly
referred to as the Brandenburg formula. Id. at 872. The court in Brandenburg
recognized that monetary contributions are not the only resources that contribute to
a marital contribution. Although not equated with a monetary contribution, the
parties’ efforts expended during the marriage to the increase in value of the
property are a consideration in the percentage of marital property awarded. Id.
The application of the Brandenburg formula proved problematic in
Goderwis v. Goderwis, 780 S.W.2d 39 (Ky.App. 1989). In that case, prior to the
marriage the husband was the sole owner of an auto repair business and, during the
marriage, operated it as the sole source of income of the parties. The business
increased significantly in value during the marriage. Recognizing that the primary
source of the parties’ income during the marriage was the auto repair business, the
court rejected strict adherence to the Brandenburg formula. Applied in the context
of business property versus a residence, the court recognized a distinction:
There has been a certain amount of confusion on the
question of how to treat business property which is the
primary occupation of one spouse during marriage but
which was acquired prior to marriage when it increases in
value during the marriage.
This is not a Brandenburg case. The problem with
applying Brandenburg to this fact pattern is the
difference in the nature of the nonmarital property.
Brandenburg involved three pieces of rental property
owned by the husband before the marriage which
increased in value during the marriage. This case
involves the business of the husband to which he devoted
all his time during the marriage. The fact that it was
started before marriage, does not render the entire growth
of the business over the course of the parties' 18-year
marriage, nonmarital. Here, the auto repair business was
the principal source of the marital funds. Accordingly
the wife could contribute to the marital assets in her role
as a homemaker.
Id. at 40. What is gleaned from Brandenburg and Goderwis is that there is a
distinction between nonmarital property operated as business during the marriage
with the joint efforts of the parties and residential property, which consistent with
its nature, increases in value as a result of economic circumstances.
With these statutory and common law principles as our guide, we now
turn to the unique facts of this case.
ACQUISITION OF THE M & R
The parties are equal shareholders in M & R Mini-Storage
Enterprises, N.V., incorporated pursuant to the laws of the Netherlands Antilles.
The corporation was formed prior to the marriage and, in 1999, acquired the M &
R Mini-Storage Warehouse for $145,000, financed with a $110,000 loan. Ralph
testified that he transferred $66,500 payable to cash to be applied to the purchase
and rebuilding of the mini-storage and that he made a $15,250 earnest deposit. He
presented checks for further payments made from nonmarital funds toward
improvement of the property representing a total investment of $110,692.54.
Maren testified that she invested $60,000 in the purchase of the property from
funds received from the sale of two prior businesses she owned on St. Maarten and
has managed the property since the purchase. According to the testimony of De
Weever, the warehouse business is presently valued at $585,000.
The family court found that the warehouse was a joint business
venture, declared it to be marital property, and equally divided the parties’
interests. Ralph reasons that since his investment in the warehouse business was
derived from nonmarital funds, he is entitled to a percentage share equal to his
investment as his non-martial property. We conclude that the trial court’s decision
was based on the evidence presented and affirm.
This case presents yet another anomaly in the law of the division of
property in the context of dissolution of marriage. It is undisputed that prior to the
marriage, the parties interacted as business partners entering into ventures with the
intent of profit. The family court found that the formation of M & R Mini-Storage
Warehouse Inc. and the acquisition of the warehouse property were likewise
pursuant to that goal.
Ralph and Maren formed a closely held corporation and entered into
that business relationship as business partners, not spouses. From the evidence, it
is reasonable to conclude that while Ralph contributed more than Maren
financially, she contributed a corresponding amount in her effort as manager of the
business both before and during the marriage. Pursuant to Goderwis, we hold that
the family court acted within its discretion when it found that her nonmarital
contribution as manager of the property was equal to the monetary contribution of
non-martial funds contributed by Ralph. Under the circumstances, we find no
abuse of the family court’s discretion when it awarded each party a one-half
interest in the M & R warehouse business.
THE ST. MAARTEN VILLA
As the family court recognized, the parties’ interests in the St.
Maarten villa cannot be treated the same as the warehouse business. It was used as
a residence to which both parties made substantial nonmarital contributions and its
value significantly increased during the marriage. The property was purchased in
December 2000, for $342,000 and, at the time of the dissolution of marriage, had
increased in value to $705,000.
The villa was titled in the name of C-Island Limited, organized under
the laws of the country of Anguilla and of which Maren is the sole director. The
family court found that Maren sold her pre-martial home in Kentucky for $101,000
and, from the proceeds, contributed to the purchase of the villa. The court found
that Ralph contributed nonmarital funds to the purchase of the villa in the amount
of $217, 000. Maren did not dispute his contribution.
Despite the evidence that both parties contributed nonmarital funds
toward the purchase of the villa, the family court awarded the entirety of the
property to Maren. In its order entered addressing the parties’ motion to alter,
amend or vacate its findings of fact, conclusions of law and final decree of
dissolution, the court expressed its reasoning and stated as follows:
For clarification, this Court did not find that Mr.
Fehr’s nonmarital contribution to the villa property was a
gift. However, in consideration of significant other
factors including: 1) Mr. Fehr’s age and Maren’s age; 2)
the contribution of each party to the home, including that
Maren contributed all the proceeds from the sale of her
nonmarital private residence; 3) the speculative nature of
the appraisal figure; 4) the difficulties enforcing a
Kentucky judgment as it relates to the St. Maarten
property; 5) the fact that Maren had rightfully or wrongly
titled the home in a corporation solely owned by her,
without input from Ralph; 6) that Maren has lived in the
home consistently since its purchase; 7) that Maren has
limited outside resources; 8) and that the Court, in
balancing the equities, ordered no maintenance paid from
Ralph to Maren, nor required Ralph to provide any health
insurance care for Maren; this Court made an equitable
decision to leave the villa as the sole property of Maren
Although the family court’s decision was clearly thoughtfully reasoned, it is
nevertheless flawed because it is inconsistent with KRS 403.190 and the three-step
process required to be applied.
As was emphasized by the Court in Sexton, the first step in the threestep process is the characterization of the particular property as marital or
nonmarital. The parties are then awarded their nonmarital interests without
deference to other considerations. The court has no discretion to divide nonmarital
property but only to restore the property to the contributing party. In this case, the
family court ignored the dictates of KRS 403.190 when it awarded the villa to
Germane to our discussion are two findings made by the family court
that are directly contrary to its final result. First, it found that Ralph had
contributed approximately $217,000 of non-martial funds to the purchase of the
villa and that Maren’s nonmarital contribution exceeded $110,000. Second, the
family court found that Ralph’s nonmarital contribution was not a gift to Maren.
When a nonmarital contribution is undisputed, the party claiming that
property as nonmarital is relieved of any obligation to prove otherwise. Davis v.
Davis, 775 S.W.2d 942 (Ky.App. 1989). The only contention offered by Maren to
refute the evidence Ralph offered was that his contribution to the villa was a gift to
her and, consequently, should not be restored to him. We review this issue as a
factual finding subject to the substantial evidence rule. Ghali v. Ghali, 596 S.W.2d
31, 32 (Ky.App. 1980).
The determination of whether Ralph’s contribution to the villa was a
gift includes a consideration of the following: (1) the source of the money; (2) the
intent of the donor at the time as to intended use of the property; (3) the status of
the marriage relationship at the time of the transfer; and (4) whether there was a
valid agreement that the transferred property was to be excluded from the marital
property. O'Neill v. O'Neill, 600 S.W.2d 493, 495 (Ky.App. 1980).
We conclude that the family court’s explicit finding that Ralph’s
contribution was not a gift to Maren is supported by substantial evidence in the
record. Ralph used his non-martial funds to purchase the residence in St. Maarten
as an investment and presumably as a residence while on the island. The fact that
Maren titled the property in the name of C-Island has no bearing on the issue.
Most telling is Ralph’s testimony that he did not intend his contribution as a gift.
Based on the evidence, the family court’s finding that Ralph’s nonmarital
contribution was not a gift to Maren is affirmed.
Because the family court found that Ralph and Maren made
nonmarital contributions to the purchase of the villa, the court was required to
award each their respective nonmarital interests in the property. Indeed, it is our
deference to the family court’s findings of fact that requires the parties be awarded
their respective nonmarital interests. On remand, the Court is directed to apply the
formula set forth in Brandenburg to the division of the St Maarten villa. Only after
it has restored each party their nonmarital interest are the factors delineated in KRS
403.200 and an award of maintenance, if any, appropriate. The court is not
permitted to usurp the dictates of the General Assembly mandated by KRS 403.190
in lieu of a maintenance award.
We recognize that the family court’s award in this case was
presumably based on its supposition that its decree would encounter difficulty in
its enforcement in St. Maarten and the avoidance of a maintenance issue.
However, the same factors when awarding maintenance are simply not present in
the restoration of nonmarital property.
Based on the foregoing, the case is reversed and remanded for an
award of nonmarital property to each party in the St. Maarten villa. After the
restoration of the nonmarital interests, the court shall determine the equitable
division of the marital interest in the villa. The trial court is advised that at oral
argument each party agreed to a reasonable sale of the villa to determine its value.
BRIEFS FOR APPELLANT/CROSSAPPELLEE:
Rocco J. Celebrezze
Jennifer S. Begley
BRIEF AND ORAL ARGUMENT
Vincent J. Eiden
ORAL ARGUMENT FOR
Jennifer S. Begley