Opinion
NO. 2017-CA-002038-MR
05-31-2019
BROWN JOHNSON SHARP APPELLANT v. PEGGY O'NEIL SHARP APPELLEE
BRIEFS FOR APPELLANT: Edward L. Cooley Lexington, Kentucky BRIEF FOR APPELLEE: Elizabeth S. Hughes Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE TRACI H. BRISLIN, JUDGE
ACTION NO. 12-CI-04655 OPINION
AFFIRMING
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BEFORE: LAMBERT, MAZE, AND TAYLOR, JUDGES. LAMBERT, JUDGE: Brown Johnson Sharp (hereinafter "Brown"), appeals the September 27, 2017, decree of dissolution of the Fayette Circuit Court, Family Division. For the reasons set forth below, we affirm.
The parties were married in 1982 and separated when Peggy O'Neil Sharp (hereinafter "Peggy") vacated the marital residence in 2012. Peggy filed a petition for dissolution of marriage on October 12, 2012, and the family court held a final hearing on August 28, 2017. During the pendency of the divorce action, Brown filed for bankruptcy, which led to the sale of the farm Brown purchased in 1952, prior to the marriage. Remaining proceeds from the sale of the farm in the amount of $477,070.43 are currently held by the bankruptcy court to be distributed in accordance with the family court's findings.
During the marriage, Brown's income came from farming and operating a tobacco warehouse. In addition to homemaker responsibilities, Peggy also worked outside of the home during the marriage. Both parties testified that Brown was responsible for the family's finances, including making mortgage and utility payments. Additionally, both testified that wages earned by Peggy were deposited into her personal savings account and used at her discretion.
The parties took four mortgages against Brown's farm during the marriage. First, a mortgage in the amount of $125,000.00 was taken against the farm in 1989 and was satisfied and released in 1997. Second, a mortgage in the amount of $263,226.00 was taken against the farm in 1991 and was satisfied and released in 2003. Third, a mortgage in the amount of $416,506.00 was taken against the farm in 1992 and was satisfied and released in 1999. Fourth, a mortgage in the amount of $275,000.00 was taken against the farm in 1997. This mortgage was satisfied and released in 2004 when Brown sold the right to develop the farm ("PDR rights") to the Fayette County Rural Land Management Board for $521,199.80. Of the proceeds from the sale of the PDR rights to the farm, $212,801.36 was used to satisfy the 1997 mortgage. Documentation and testimony indicate that, prior to that payoff and during the marriage, $62,198.64 was paid toward the 1997 mortgage. Neither party disputes that a total of $866,930.64 was paid toward the four mortgages during the marriage and prior to the PDR sale. However, Brown argues that the funds from the mortgages were used to make the payments on them, while Peggy argues that marital funds were used to make these payments. The family court found that, because the amount that had been mortgaged and repaid with marital funds during the marriage exceeded the total remaining proceeds from the sale of the farm, the proceeds were marital and ordered them to be divided equally.
The parties agree that the proceeds from the sale of the PDR rights to the farm are Brown's nonmarital property. --------
The parties purchased a home on Queensway Drive in Lexington, Kentucky in 1990. Also in 1990, Peggy sold her home on Henry Clay Boulevard for $73,500.00. Peggy purchased the Henry Clay Boulevard home prior to the marriage and, at the time of the purchase, took a mortgage against the home in the amount of $39,000.00. Therefore, the family court found that there were $34,500.00 in proceeds from the sale. The parties disagreed about how these proceeds were used. Brown contended that Peggy kept the proceeds for her personal use. Peggy claimed that the proceeds went toward the purchase of the Queensway Drive house. At the final hearing, Peggy introduced a request for admission in which Brown admitted that the proceeds from the sale of the Henry Clay Boulevard home were used to purchase the Queensway Drive home. Brown testified that the admission was a mistake. The family court relied upon the admission in determining that Peggy had a 23% nonmarital interest in the Queensway Drive home based upon the use of the $34,500.00 in proceeds toward the purchase.
The Queensway Drive home was purchased for $150,000.00. At the time of the purchase in 1990, a $60,000.00 mortgage was taken against the home. Brown claims that instead of using the proceeds from the sale of Peggy's Henry Clay Boulevard home, he used the $125,000.00 mortgage taken against the farm in 1989 to cover the remainder of the cost of the home. Furthermore, he argued that the payments for the 1989 and 1990 mortgages were made out of funds from the mortgages on the farm, not from wages or income, which makes the Queensway Drive home nonmarital in nature. Brown introduced no evidence to support this claim. Peggy argued that the Queensway Drive home was marital in nature because, other than the proceeds from the sale of the Henry Clay Boulevard home, marital funds were used to make payments on the mortgage on the home. The family court found that, other than Peggy's 23% nonmarital interest in the home, the Queensway Drive home was marital and ordered it sold and for the proceeds to be divided evenly after Peggy received the first 23% of the proceeds.
Finally, the parties purchased a whole life insurance policy, which was cashed by Brown for $61,314.37 during the marriage. Brown did not share these funds with Peggy. Brown argues that, though the policy was purchased during the marriage, the monthly payments were made out of funds from a mortgage taken against the farm. However, he did not identify a specific mortgage. He claims that because a mortgage on the farm was the source of funds used to purchase the policy, it was his nonmarital property and Peggy was entitled to none of the funds. Brown offered no evidence other than his own testimony to support this contention. Peggy argued that because the policy was purchased during the marriage and the monthly payments were made from marital funds, she was entitled to share in the funds Brown received. The family court found that, because Brown offered no proof that funds from one of the mortgages on the farm were used to purchase the policy, it was marital property subject to division. The court ordered Peggy to receive the first $61,314.37 from the proceeds held by the bankruptcy court. In an order entered following Brown's motion to alter, amend, or vacate the decree, the family court clarified that Peggy was to receive $30,500.00 from Brown's half of the bankruptcy proceeds as her share of the insurance proceeds. On all other grounds, the family court denied Brown's motion. This appeal followed.
Under Kentucky Rules of Civil Procedure (CR) 52.01, the family court "is required to make specific findings of fact and state separately its conclusions of law relied upon to render the court's judgment." Barber v. Bradley, 505 S.W.3d 749, 754 (Ky. 2016). The family court's "[f]indings of fact[] shall not be set aside unless clearly erroneous[.]" CR 52.01.
Regardless of conflicting evidence, the weight of the evidence, or the fact that the reviewing court would have reached a contrary finding, "due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses" because judging the credibility of witnesses and weighing evidence are tasks within the exclusive province of the trial court. Thus . . . appellate courts should not disturb trial court findings that are supported by substantial evidence.Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (footnotes omitted).
Although this Court is deferential to the family court's findings of fact, legal conclusions are reviewed de novo. Barber, 505 S.W.3d at 754 (citing Sawyers v. Better, 384 S.W.3d 107, 110 (Ky. 2012)). "On appellate review of a [family] court's ruling regarding the classification of marital property, we review de novo because the [family] court's classification of property as marital or non- marital is based on its application of [Kentucky Revised Statutes (KRS)] 403.190; thus, it is a question of law." Heskett v. Heskett, 245 S.W.3d 222, 226 (Ky. App. 2008) (citing Holman v. Holman, 84 S.W.3d 903, 905 (Ky. 2002)). "Once classified, the division of marital property is within the sound discretion of the trial court. We review a trial court's determinations of value and division of marital assets for abuse of discretion." Cobane v. Cobane, 544 S.W.3d 672, 676 (Ky. 2018) (citations and internal quotation marks omitted).
Under KRS 403.190, a [family] court utilizes a three-step process to divide the parties' property: (1) the [family] court first characterizes each item of property as marital or nonmarital; (2) the [family] court then assigns each party's nonmarital property to that party; and (3) finally, the [family] court equitably divides the marital property between the parties.Sexton v. Sexton, 125 S.W.3d 258, 264-65 (Ky. 2004) (footnote and internal quotation marks omitted).
First, we address the four mortgages taken against Brown's farm during the marriage. Property acquired by a party prior to marriage is the party's nonmarital asset. KRS 403.190. The parties agree that the farm was Brown's nonmarital property. However, the parties disagree about the nature of the proceeds from the sale of the farm because of the four mortgages taken against the farm and repaid during the marriage. The parties testified that a total of $866,930.64 was paid toward the mortgages during the marriage and prior to the PDR sale.
Brown argues that no marital funds were used to make payments on any of the mortgages. Instead, he claims that all payments were made from the mortgaged funds themselves. He argues that he mortgaged more funds than necessary for this purpose. He also claims that the 1991 and 1992 mortgages were used in his tobacco warehouse business. However, Brown provided no documentary proof that payments were made from the loan proceeds or for what purpose the 1991 and 1992 mortgages were used.
Peggy argues that, because the total mortgaged funds repaid with marital funds during the marriage exceed the amount of proceeds from the sale of the farm that are being held by the bankruptcy court, those proceeds were correctly determined to be marital property. Peggy introduced documentation of the amount of each mortgage, the date it was taken against the farm, and the date it was satisfied and released. The family court found that Brown did not provide sufficient proof that his nonmarital funds were used to repay the mortgages in their entirety and therefore found the remaining proceeds from the sale of the farm were marital and ordered them to be divided equally.
In Cobane, 544 S.W.3d at 681, this Court observed:
The concept of "tracing" is not expressly created by statute, but it is strongly implied by the presumptions
created in KRS 403.190. . . . Essentially, the tracing requirement simply means that "[w]hen the original property claimed to be nonmarital is no longer owned, the nonmarital claimant must trace the previously owned property into a presently owned specific asset."(Footnote and citation omitted.) Brown presented no evidence other than his own testimony regarding the manner in which the mortgages against the farm were repaid. The family court was within its discretion in finding that Brown's testimony alone, without additional documentary proof, was insufficient to meet his burden. McVicker v. McVicker, 461 S.W.3d 404, 419 (Ky. App. 2015).
Next, we will address Peggy's nonmarital interest in the Queensway Drive home. There is a presumption that all property acquired during a marriage is characterized as marital. KRS 403.190(3). "A party claiming a specific item of property is nonmarital can rebut the 'marital property presumption' through clear and convincing evidence." Barber, 505 S.W.3d at 755 (quoting Sexton, 125 S.W.3d at 266 n.23). The family court found that Peggy rebutted the presumption and established a 23% nonmarital interest in the home because funds from the sale of her premarital home on Henry Clay Boulevard were used to purchase the Queensway Drive home. In reaching this decision, the court relied upon Brown's admission that the Henry Clay Boulevard home proceeds were used for the purchase in response to Peggy's requests for admissions. At the hearing, Brown claimed that the admission was a mistake.
"A proper request for admissions is often an effective tool in pretrial practice and procedure." Buridi v. Leasing Group Pool II, LLC, 447 S.W.3d 157, 174 (quoting Harris v. Stewart, 981 S.W.2d 122, 124 (Ky. App. 1998)). Matters admitted upon requests for admission are "conclusively established unless the court on motion permits withdrawal or amendment of the admission." CR 36.02. Furthermore, whether to allow an admission to be withdrawn "rests in the trial court's sound discretion." Buridi, 447 S.W.3d at 178. Here, no motion was made to withdraw Brown's admission. Brown only attempted to explain it away during the hearing. Without a motion to withdraw the admission, the admission was "conclusively established" and the family court properly relied upon it in reaching its determination that Peggy was entitled to a 23% nonmarital interest in the Queensway Drive home.
Third, Brown argues that the Queensway Drive home was entirely his nonmarital property. He reasons that he used funds from mortgages taken on the farm to purchase the home in 1990. Specifically, he testified that he used the $125,000.00 mortgage taken on the farm in 1989 toward the purchase. He reasoned that the mortgage was taken approximately one year prior to the purchase of the Queensway Drive home because he secured a one-year option to purchase from the previous owner of the home. However, he provided no proof, other than his testimony, to support these claims. Furthermore, he argues that the $60,000.00 mortgage taken against the Queensway Drive home at the time of the purchase, was repaid using funds from mortgages on the farm. However, he again offered no additional proof in support of this assertion. The family court was not persuaded by Brown's testimony and found that the home was marital, less the 23% nonmarital share to the Peggy. The court then ordered the home sold and the proceeds divided accordingly.
Here, Brown did not sustain his burden of proving his claimed nonmarital interest in the Queensway Drive property through clear and convincing evidence. Brown was required to show that his nonmarital assets were used in a traceable manner during the marriage. Cobane, 544 S.W.3d at 681. The family court was in the best position to evaluate the evidence and testimony presented at trial, and it was unconvinced by Brown's testimony regarding the use of mortgages on the farm to purchase the Queensway Drive home. On this basis, we must affirm the family court's determination that, other than Peggy's 23% nonmarital interest, the Queensway Drive home was marital property. Furthermore, as the family court has broad discretion in dividing marital property, we find no grounds for disturbing the family court's order to sell the Queensway Drive home and divide the marital portion of the proceeds equally.
Finally, the parties purchased a whole life insurance policy during the marriage, which was cashed out by Brown during the marriage for $61,314.37. Brown follows his prior argument in claiming that the funds from the policy are entirely his nonmarital property because the policy was bought with and premiums were paid from funds from a mortgage on the farm. However, he again did not provide any documentation to support this assertion. Peggy argues that these funds are marital property because the policy was purchased during the marriage and there is a presumption that marital funds were used to pay the premiums. The family court followed this reasoning in finding that the policy was marital and granting Peggy approximately half of the proceeds, or $30,500.00, to be paid out of the proceeds held by the bankruptcy court.
Our analysis of this issue is similar to that of the Queensway Drive property. Because the life insurance policy was purchased during the marriage, it is presumed to be marital property. KRS 403.190(3). The family court was not compelled by Brown's assertion that the policy was purchased with proceeds from one of the mortgages on the farm without some documentary proof. Review of the record shows that this was not an abuse of discretion. Therefore, we affirm the family court's determination that the funds derived from the life insurance policy were marital in nature and, therefore, subject to equitable division.
For the foregoing reasons, we affirm the decree of the Fayette Circuit Court, Family Division.
ALL CONCUR. BRIEFS FOR APPELLANT: Edward L. Cooley
Lexington, Kentucky BRIEF FOR APPELLEE: Elizabeth S. Hughes
Lexington, Kentucky