Opinion
NO. 2018-CA-000964-MR
01-24-2020
ROBERT KYLE SMITH APPELLANT v. CAROL LEE SMITH APPELLEE
BRIEF FOR APPELLANT: Jennifer Sacharnoski Nelson Princeton, Kentucky BRIEF FOR APPELLEE: Bard K. Brian Paducah, Kentucky
NOT TO BE PUBLISHED APPEAL FROM MCCRACKEN FAMILY COURT
HONORABLE DEANNA WISE HENSCHEL, JUDGE
ACTION NO. 16-CI-00743 OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; DIXON AND GOODWINE, JUDGES. CLAYTON, CHIEF JUDGE: Robert Kyle Smith ("Kyle") appeals from the McCracken Family Court's order classifying certain real property as marital. Upon review of the record and applicable law, we affirm.
BACKGROUND
Kyle and Carol Smith married on September 9, 1999 and separated on April 27, 2016. During the parties' marriage, Kyle filed a mechanic's lien (the "Lien") on April 2, 2003, against a property owned by Kyle's parents and located on Jimtown Road in Mayfield, Kentucky ("the Jimtown Property"). Kyle testified at the trial court's hearing on the matter that the Lien resulted from Kyle's work, and/or Kyle's business's work, towards the construction of a house and the rehabilitation of a shop building located on the Jimtown Property. Kyle further testified that he was attempting to protect his interests by filing the Lien because his parents were divorcing.
Particularly, the Lien stated that Kyle was "asserting a Mechanic's and Materialman's Lien against the property of Robert L. Smith [Kyle's father] and Patricia Smith [Kyle's mother], having a mailing address of 564 Jimtown Road, Mayfield, Kentucky 42066 . . . [.]" Further, the Lien stated as follows:
Kyle Smith, individually and as a representative of Smith Specialty Group Inc., furnished labor and materials for the construction of a residence upon a property of the Smith's, which labor and materials totals the sum of $178,000.00. In addition, Kyle Smith and Smith Specialty Group, Inc. furnished labor and materials in the construction of a shop building located on the premises and belonging to Robert L. Smith. The said labor and materials furnished by Kyle Smith and Smith Specialty Group are in the amount of $34,500.00. The last day that labor was furnished or materials were provided to or on behalf of the premises was February 7, 2003.
In satisfaction of the Lien, Kyle's father deeded the Jimtown Property to Kyle on November 28, 2003, seven months after the filing of the Lien and over four years into the parties' marriage. The Jimtown Property Deed of Conveyance (the "Deed") named Kyle's father, "Robert L. Smith, single" as the "Grantor" and "Kyle Smith, married" as the "Grantee." The consideration listed in the Deed was one dollar and "the satisfaction of [the Lien], receipt of which is hereby acknowledged."
Eleven years later, on September 11, 2014, Kyle sold the Jimtown Property and received $145,000.00 in proceeds from the sale. In turn, the proceeds from the sale of the Jimtown Property were used towards the purchase of the marital residence located at 360 Watson Road, Paducah, Kentucky (the "Watson Property").
Divorce litigation began in 2016, at which time Kyle made a claim that he and/or his business had performed work on the Jimtown Property prior to the parties' marriage-beginning sometime in 1995 or 1996-and that such alleged pre-marital work somehow converted a portion of the Jimtown Property to Kyle's nonmarital property. Therefore, according to Kyle, the portion of the proceeds from the sale of the Jimtown Property that went towards the purchase of the Watson Property converted a portion of the Watson Property into Kyle's nonmarital property.
During the trial court's hearing, the primary evidence Kyle offered regarding his potential nonmarital interest in the Jimtown Property was his own testimony that he had always expected that he would inherit the property from his parents upon their "demise." Kyle also introduced a property valuation assessment from Graves County listing the property value prior to the marriage as $91,000.00.
After conducting the hearing, the trial court entered a written order finding, in part, that Kyle had failed to meet his burden of proof regarding his claim of a nonmarital interest in the Watson Property and finding the Watson Property to be a completely marital asset subject to equitable division. This appeal followed.
ISSUES
On appeal, Kyle argues that the family court erred by (1) failing to classify Kyle's interest in the Jimtown Property as nonmarital, (2) failing to find that Kyle had properly traced the proceeds from the sale of the Jimtown Property to the Watson Property, and (3) finding that the Lien had any impact on Kyle's purported nonmarital interest.
ANALYSIS
a. Standard of Review
On appeal, we review the trial court's findings of fact only to determine if they are clearly erroneous. Kentucky Rule of Civil Procedure ("CR") 52.01. "A factual finding is not clearly erroneous if it is supported by substantial evidence." Hunter v. Hunter, 127 S.W.3d 656, 659 (Ky. App. 2003) (citations omitted). Moreover, "[s]ubstantial evidence is evidence, when taken alone or in light of all the evidence, which has sufficient probative value to induce conviction in the mind of a reasonable person." Id. (citations omitted). Further:
A family court operating as finder of fact has extremely broad discretion with respect to testimony presented, and may choose to believe or disbelieve any part of it. A family court is entitled to make its own decisions regarding the demeanor and truthfulness of witnesses, and a reviewing court is not permitted to substitute its judgment for that of the family court, unless its findings are clearly erroneous.Bailey v. Bailey, 231 S.W.3d 793, 796 (Ky. App. 2007).
Additionally, "[q]uestions of whether property . . . is marital or nonmarital are left to the sound discretion of the trial court . . . and will be reviewed for abuse of discretion, namely, 'whether the decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles.'" Rice v. Rice, 336 S.W.3d 66, 68 (Ky. 2011) (citations omitted).
b. Was A Portion of the Jimtown Property Nonmarital?
As discussed by the Kentucky Supreme Court in Travis v. Travis, when disposing of property in a dissolution of marriage action, the trial court is required by Kentucky Revised Statutes ("KRS") 403.190 to follow "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.Travis v. Travis, 59 S.W.3d 904, 908-09 (Ky. 2001) (citations and footnotes omitted).
KRS 403.190(3) creates a presumption that property acquired during the marriage by either spouse and before a decree of legal separation is marital property. KRS 403.190(2) states that this presumption can be overcome by the person claiming the property is nonmarital if he or she can prove that the property falls into one of the following categories:
(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;The presumption that all property acquired during the marriage is marital property must be rebutted by clear and convincing evidence. Brosick v. Brosick, 974 S.W.2d 498, 502 (Ky. App. 1998) (citations omitted). Again, under KRS 403.190, the burden to prove by clear and convincing evidence the existence of nonmarital property is squarely on the party claiming the nonmarital portion.
(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 separation;
(d) Property excluded by valid agreement of the parties; and
(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.
Kyle asserts that the Jimtown Property was a nonmarital asset and that he should be able to claim the original nonmarital investment from the proceeds of Jimtown Road into the purchase of Watson Road. However, Kyle does not specifically explain which exception under KRS 403.190(2) to the marital property presumption is applicable in this case. The evidence of record shows that, until November 28, 2003, well into the parties' marriage, Kyle's father owned the Jimtown Property. The Deed unambiguously shows that the Jimtown Property belonged to Kyle's father until November 28, 2003, at which time Kyle's father deeded the property to "Kyle Smith, married." Kyle has provided no evidence of any ownership interest he may have had in the Jimtown Property prior to November 28, 2003.
Moreover, while Kyle offered some testimony that he had always expected that he would inherit the Jimtown Property from his parents, the trial court, "operating as finder of fact," had "extremely broad discretion with respect to testimony presented" and could either "believe or disbelieve any part of [such testimony]." Bailey, 231 S.W.3d at 796. The trial court clearly believed that Kyle's acquisition of the Jimtown Property was the result of an arm's-length transaction, with the consideration being the valid release of the Lien, and it was entitled to believe or disbelieve any testimony by Kyle to the contrary.
Moreover, Kyle has provided no evidence that the Deed evidenced a gift or advance on his inheritance. Kentucky courts have stated that "[a] 'gift' in a common, ordinary, popular sense is a voluntary and gratuitous giving of something by one without compensation to another who takes it without valuable consideration." Browning v. Browning, 551 S.W.2d 823, 825 (Ky. App. 1977) (quoting Bowman's Adm'rs v. Bowman's Ex'r and Adm'r, 301 Ky. 694, 192 S.W.2d 955, 956 (1946)). Here, according to Kyle's own testimony the conveyance of the Jimtown Property was compensation for the work performed by Kyle on the Jimtown Property, and the stated consideration for the Deed was to satisfy and release the Lien - valid and valuable consideration. Consequently, based on the language of the Deed, as well as Kyle's own testimony, substantial evidence existed to support the trial court's determination that no portion of the Watson Property was nonmarital, and the trial court's ruling was not "arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Rice, 336 S.W.3d at 68.
Finally, Kyle argues that the Lien did not destroy his nonmarital claim in the Jimtown Property. However, we do not read the trial court's order as finding that the Lien destroyed any potential nonmarital claims that Kyle may have had, but rather that the Deed indicated that Kyle obtained the Jimtown Property in an arm's-length transaction through the valid consideration of the release of the Lien. As previously discussed, we agree with the trial court regarding this issue and therefore decline to address any further arguments by Kyle regarding same.
CONCLUSION
Based on the foregoing, we affirm the McCracken Family Court's order.
ALL CONCUR. BRIEF FOR APPELLANT: Jennifer Sacharnoski Nelson
Princeton, Kentucky BRIEF FOR APPELLEE: Bard K. Brian
Paducah, Kentucky