REARDEN (JAMES MARK) VS. REARDEN (KIMBERLY JOYCE)
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RENDERED: OCTOBER 9, 2009; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2006-CA-002362-MR1
JAMES MARK REARDEN
v.
APPELLANT
APPEAL FROM JEFFERSON FAMILY COURT
HONORABLE JOSEPH W. O'REILLY, JUDGE
ACTION NO. 05-CI-504276
KIMBERLY JOYCE REARDEN
APPELLEE
OPINION
AFFIRMING IN PART,
REVERSING IN PART, AND REMANDING
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BEFORE: LAMBERT AND NICKELL, JUDGES; HENRY,2 SENIOR JUDGE.
NICKELL, JUDGE: James Rearden (James) appeals from a judgment of the
Jefferson Family Court classifying various items as marital property, including his
1
This is one of two cases considered simultaneously by this Court. This appeal pertains
primarily to the classification of property following dissolution of the parties’ marriage. The
second case, Crowder v. Rearden, No. 2007-CA-002604-MR, pertains to the court having found
Kimberly to be in contempt of its orders.
2
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
(KRS) 21.580.
military pension. He also appeals the trial court’s denial of his request for
attorneys’ fees in the wake of the court holding his former wife, Kimberly
Rearden, now Kimberly Johnson Crowder (Kimberly), in contempt for willfully
disregarding court orders pertaining to the sale of the marital home. After
reviewing the record and the law, we affirm in part, reverse in part and remand for
further proceedings consistent with this opinion.
I. Factual Background
On May 1, 2005, while stationed in California, James, a career Navy
man, wrote a $3,000.00 check from his personal money market account and made
a down payment on a home in Louisville, Kentucky. On May 13, 2005, the realtor
transferred the $3,000.00 deposit from James’s account and applied it to the
purchase of the home. On May 20, 2005, James married Kimberly, a surgical
nurse, in California.
In June 2005, James officially closed on the marital home with a
purchase price of $299,000.00. During this time, James also used a personal credit
card to purchase a treadmill, a bed frame and mattress, and a dining room table and
chairs for the marital home. James paid a total of $3,855.94 for these items from a
combination of his personal money market account, to which Kimberly did not
have access, and from a joint bank account, which she could access.
Two months after the wedding, James retired from the Navy with a
total of 270 months of service credit, and began receiving $2,165.00 in monthly
military retirement benefits. In November 2005, just six months after the wedding,
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he filed for dissolution of the marriage. No children were born during the shortlived union. The primary task of the trial court in the dissolution action was
classifying assets as marital or non-marital property.
Since Kimberly was married to James during just two months of his
more than twenty-year Navy enlistment, the court found she was entitled to a
fraction of his retirement benefits, calculated without dispute to be $8.08 per
month for the remainder of James’s life. However, rather than requiring James to
make the small monthly payments, the court ordered him to pay Kimberly a lump
sum of $3,000.00, finding that amount “to be a reasonable calculation of
[Kimberly’s] total expected interest from [James’s] retirement.” The trial court did
not explain how it arrived at the $3,000.00 figure. At $8.08 per month, James, who
was born in October 1964, would have to live another 30.9 years to justify the
lump sum payment of $3,000.00 to Kimberly.
During the dissolution hearing, the court drew these conclusions:
James’s $3,000.00 deposit toward the purchase of the marital home, which came
from his personal money market account prior to the marriage, was marital
property; the personal property he purchased with his personal credit card after the
marriage was marital property; Kimberly was entitled to an immediate $3,000.00
lump sum payment from James as the trial court’s estimate of the future value of
her share of James’s retirement benefits ($8.08 per month for approximately thirty
years); Kimberly was in contempt of court due to her willful disregard of court
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orders pertaining to the sale of the marital home; and James was not entitled to an
award of attorneys’ fees. This appeal followed.
II. Analysis
James raises five issues in this appeal, four of which concern the trial
court’s designation of contested property as marital property. The fifth issue is
whether the court abused its discretion in denying his request for attorneys’ fees.
A. Standard of Review
In determining whether an item has been properly designated as either
marital or non-marital property, we first consider the trial court’s factual findings,
to which we give deference because the trial court was in the best position to judge
the credibility of the witnesses and the weight of the evidence. Smith v. Smith, 235
S.W.3d 1, 6 (Ky. App. 2006). Once we have determined the trial court did not
commit clear error in reaching its findings of fact, we review de novo the trial
court’s ultimate legal classification of whether the property was marital or nonmarital. A finding of fact is clearly erroneous if it is unsupported by substantial
evidence which is defined as proof sufficient to induce conviction in the mind of a
reasonable person. B.C. v. B.T., 182 S.W.3d 213, 219 (Ky. App. 2005).
B. Down payment on future marital home
The first question we address is whether a pre-wedding down payment
of $3,000.00, made by James from his personal money market account on a home
that was to become the marital residence, was properly classified by the trial court
as marital property. Without explanation, the court stated only that “[p]etitioner
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did not sustain his burden related to his non-marital claim of contributing
$3,000.00 to the down payment of the home.” James argues the deposit should
have been classified as non-marital property because it was made prior to the
marriage and the money used to pay the deposit came from his individual bank
account. Kimberly claims the trial court correctly found the entire $3,000.00
deposit to be marital property because James insufficiently traced a $526.87 refund
from that deposit, received during the marriage, to his personal money market
account.
During a dissolution proceeding, a trial court must first “assign each
spouse’s property to him” and then divide the marital property in just proportions.
KRS 403.190(1). Property acquired during the marriage is presumed to be marital
property. Id. To rebut this presumption, KRS 402.190(3) specifies the party
claiming the asset acquired during the marriage is non-marital must show the
property satisfies an exception described in KRS 403.190(2)(a)-(e), such as
“[p]roperty acquired in exchange for property acquired before the marriage or in
exchange for property acquired by gift, bequest, devise, or descent[.]” KRS
402.190(2)(b). See also Sexton v. Sexton, 125 S.W.3d 258, 266 (Ky. 2004).
To deem property as marital or non-marital, Kentucky courts use the
“source of funds” rule meaning property is characterized based upon the source of
funds used to acquire the asset. Travis v. Travis, 59 S.W.3d 904, 909 (Ky. 2001).
If the non-marital property does not exist at the time of dissolution, the spouse
claiming the property is non-marital must adequately “trace” the previously owned
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asset into a currently owned asset. Id. To satisfy the tracing requirement, the party
must prove when the property was acquired and transferred, the asset into which it
was transferred, and its value at those times. Chenault v. Chenault, 799 S.W.2d
575, 578 (Ky. 1990).
James provided clear proof that he transferred $3,000.00 from his
personal money market account to the realtor, prior to the marriage, to make a
down payment on the marital home. James gave the deposit to the realtor on May
1, 2005, twenty days prior to the marriage. The realtor transferred the funds from
James’s account to the real estate agency on May 13, 2005, seven days before the
wedding. In our analysis, it matters not that the closing on the home occurred after
the wedding because the down payment was an identifiable portion of the home’s
purchase price and it was made prior to the wedding. Therefore, James clearly
established the down payment used to acquire the marital home came from his
personal non-marital account prior to the marriage.
However, as Kimberly notes, James did not trace back to his private
non-marital bank account a refund of $526.87 received from the down payment
during the marriage as the result of calculations within the loan closing documents.
James claimed he opened a joint bank account for himself and Kimberly with the
refund, but offered no proof of this alleged use and did not distinguish the refund
from marital funds deposited into the joint bank account during the marriage.
As a result, we hold the trial court abused its discretion in classifying
the entire $3,000.00 deposit as marital property. Instead, only the $526.87 refund
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should be classified as marital property, and the remaining $2,473.13 constitutes
James’s non-marital property. We therefore reverse and remand for further
proceedings consistent with this opinion on this issue.
C. Personalty purchased during marriage with James’s personal credit card
The second issue we address is whether the trial court erred in
classifying three items of personalty,3 purchased with James’s personal credit card
during the marriage, as marital property. James argues the items should be
classified as non-marital property because (1) Kimberly admitted during the
dissolution hearing that the items were bought with money from James’s personal
money market account, and (2) two transfers from James’ personal account – one
to his credit card account and the other to the parties’ joint bank account - show the
property was purchased with non-marital funds. We disagree and affirm the trial
court’s classification of these items as marital property because James did not
sufficiently prove the property was purchased with his non-marital funds and
Kimberly did not testify James used non-marital funds to purchase the treadmill,
dining room suite and bed/mattress.
James admitted buying the three items during the marriage but
claimed they were nonetheless non-marital because he paid for them by using his
personal credit card. Since the items were presumed to be marital assets because
they were purchased during the marriage, to have them classified as non-marital
3
A dining room table and chairs valued at $1,890.00; a bed frame and mattress valued at
$1,000.00; and a Nordic Track treadmill valued at $965.94.
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property, James had to overcome the presumption that the items were bought with
funds from the couple’s joint bank account as opposed to his personal account. To
satisfy this burden, he cited two wire transfers from his private account to his credit
card account and the couple’s joint account around the time he purchased the
property and claimed under oath that these transfers were used to pay for the
property purchased with his personal credit card. According to the record, some
credit card transactions were paid using funds from the couples’ joint account.
Thus, the trial court found the wire transfers were insufficient to sustain his burden
and we agree.
Relying on Davis v. Davis, 775 S.W.2d 942, 945 (Ky. App. 1989),
James argues tracing of the funds used to purchase the items was unnecessary
because Kimberly did not challenge his testimony that he used non-marital funds
to purchase the items. We deem Davis to be factually distinct and therefore not
controlling. In Davis, the non-moving spouse testified two parcels of land were
purchased almost entirely with non-marital property. As a result, a panel of this
Court held the non-moving spouse’s admission relieved the moving spouse’s
“burden to technically trace the proceeds from one account to another.” Id.
However, that is not what happened here. James asserted non-marital funds were
ultimately used to pay for the three items and Kimberly did not question his
testimony on cross-examination or contradict him during her own trial testimony.
In light of the record, which shows joint bank funds were used to pay for the items,
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we are unwilling to say the trial court abused its discretion in characterizing these
three pieces of personalty as marital property.
One correction is necessary, however. In its findings of fact, the trial
court listed the value of the treadmill as $320.00. The record, however, shows the
invoice price for the machine was $965.94. Because the parties had agreed to use
the invoice price as the value of these items, on remand, the court is directed to
correct the value of the treadmill to reflect a figure of $965.94 and to correct any
other calculations based upon this figure. Otherwise, this aspect of the court’s
opinion is affirmed.
D. James’s military retirement benefits
The third issue we address is whether Kimberly is entitled to a share
of James’s military retirement benefits. Our Supreme Court has held military
retirement pay is marital property and therefore divisible upon dissolution. Jones
v. Jones, 680 S.W.2d 921 (Ky. 1984). Since the marriage lasted only two months
of his military enlistment, James asserted Kimberly was not entitled to any portion
of his vested military pension because he read 10 U.S.C. §1408(d)(2) as allowing
payments to a spouse only if the marriage lasted ten years during which James
earned ten years’ of military service. We dispelled this theory in Carranza v.
Carranza, 765 S.W.2d 32, 33-34 (Ky. App. 1989), when we held §1408(d)(2) does
not require a ten-year marriage as a threshold to dividing a military pension. We
went on to specify the reference to a ten-year marriage “only affects the right of the
nonmilitary spouse to require the military to issue a separate check directly to
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[him/her] to enforce a court-ordered property division.” Id. Thus, Kimberly may
have been James’s bride for only two months of his enlistment, but she is
nonetheless entitled to a share of his military retirement benefits as a result of the
marriage, brief though it may have been. Therefore, we affirm the trial court’s
conclusion that Kimberly was entitled to a portion of James’s pension.
E. Trial court’s lump sum payment in lieu of monthly payments
James’s fourth claim is that the trial court erred in transforming
Kimberly’s monthly award of $8.08 from his military retirement benefits for the
remainder of his life to a present-day lump sum payment of $3,000.00. Trial courts
have wide discretion in dividing marital property. Davis v. Davis, 777 S.W.2d
230, 233 (Ky. 1989). Converting monthly payments into a lump sum payment is
permitted under Overstreet v. Overstreet, 144 S.W.3d 834, 839 (Ky. App. 2003).
While the trial court did not abuse its discretion in converting
Kimberly’s monthly interest to a lump sum payment, we must reverse and remand
for an explanation of how the court determined $3,000.00 would be a fair
calculation of her future interest. As James noted in his brief, there was no
testimony about his life expectancy, no assessment of the current value of
retirement benefits, and no consideration of actuarial tables. Without some
evidence in the record, we cannot determine whether the court’s math was accurate
and we cannot agree with its conclusion that $3,000.00 was a “reasonable
calculation of [Kimberly’s] total expected interest from [James’s] retirement.”
Therefore, we must hold the trial court abused its discretion and reverse and
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remand for recalculation of the value of Kimberly’s interest with an explanation of
the formula used to reach that figure.
F. Denial of attorneys’ fees
The fifth and final issue is whether the trial court erred in denying
James’s request for attorneys’ fees after finding Kimberly to be in contempt of
court on more than one occasion. We will reverse only upon a showing of an
abuse of discretion. Smith v. City of Loyall, 702 S.W.2d 838, 839 (Ky. App. 1986).
When awarding attorney’s fees, KRS 403.220 requires the trial court
to consider the financial resources of both parties. If their resources are
substantially equal, each spouse will be required to pay his or her own attorneys’
fees; if their resources are grossly disproportionate, the court may award attorneys’
fees to the party with fewer resources. Beckner v. Beckner, 903 S.W.2d 528, 530
(Ky. App. 1995). In the case sub judice, James filed numerous motions asking that
Kimberly be ordered to show cause for her noncompliance with various court
orders. Kimberly was twice found to be in contempt for willful disregard of court
orders, first in the findings of fact and conclusions of law entered by the trial court
at the end of the trial on October 18, 2006, and second on June 21, 2007, following
a hearing in a separate contempt action.
James argues the court should have awarded him attorney’s fees
because Kimberly’s repeated willful disregard of court orders caused him, through
his attorney, to file numerous motions to compel her to act. As a result, he
incurred attorneys’ fees and believes Kimberly should be made to pay those fees
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since they are wholly a result of her recalcitrance. However, KRS 403.220 does
not authorize a trial court to consider fault or willful disobedience, or anything
beyond the financial positions of the parties. Furthermore, White v. Sullivan, 667
S.W.2d 385, 389 (Ky. App. 1983) (citing Holsclaw v. Stephens, 507 S.W.2d 462
(Ky. 1974); Nick’s Auto Sales v. Radcliff Auto Sales, 591 S.W.2d 709 (Ky. App.
1979)), recognized that “Kentucky Courts have been consistently reluctant to
uphold awards of attorneys’ fees [in civil contempt proceedings] except in those
particular instances when such fees are authorized by statute or a contract
expressly providing therefor.” James has not cited us to contract language or a
statute specifically authorizing an award of attorneys’ fees in this context.
Additionally, we note that in the companion appeal dealing
specifically with the finding of contempt, James was awarded attorneys’ fees in the
amount of $1,200.00. Since the same mulish conduct on Kimberly’s part spawned
both findings of contempt, it appears James may be attempting to “double dip” and
receive attorneys’ fees for both the contempt action and the dissolution action.
From the record, it appears James has greater financial strength than Kimberly.
Therefore, using KRS 403.220 as our guide, the court did not abuse its discretion
in denying James’s request for attorneys’ fees.
Conclusion
For the foregoing reasons we affirm the circuit court’s decision in
part, but reverse and remand that portion of the opinion that erroneously found
James’s pre-marital $3,000.00 down payment on the marital residence to be marital
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property. Second, the trial court erred in finding the present-day value of
Kimberly’s share of James’s military retirement benefits was $3,000.00 because it
failed to provide any evidence supporting such a finding. We affirm the trial
court’s decision regarding the three other issues presented to this Court.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Patricia Tierney Kidd
Louisville, Kentucky
C. Thomas Hectus
Louisville, Kentucky
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