Opinion
NO. 2016-CA-001072-ME NO. 2017-CA-000162-ME
04-27-2018
ALICE UPCHURCH APPELLANT/CROSS-APPELLEE v. WILLARD UPCHURCH APPELLEE/CROSS-APPELLANT
BRIEF FOR APPELLANT: Russell D. Alred Harlan, Kentucky BRIEF FOR APPELLEE: William M. Garmon Monticello, Kentucky
NOT TO BE PUBLISHED APPEAL AND CROSS-APPEAL FROM WAYNE FAMILY COURT
HONORABLE WAYNE THOMAS LIVELY, JUDGE
ACTION NO. 13-CI-00007 OPINION
AFFIRMING
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BEFORE: DIXON, JOHNSON AND TAYLOR, JUDGES. DIXON, JUDGE: Appellant/Cross-Appellee, Alice Upchurch, appeals from a judgment of the Wayne Family Court finding that real estate transferred to an irrevocable family trust was no longer a marital asset subject to division in the parties' divorce action. Appellee/Cross-Appellant, Willard Upchurch, appeals from the family court's classification of a pick-up truck and tractor as marital property. Finding no error, we affirm the family court.
The parties herein were married in 1974 and produced four sons during the 39-year marriage. On April 27, 2006, Willard established an irrevocable trust called the "Upchurch Family Trust." The Trust language provided, "WHEREAS, the Grantor intends to establish an irrevocable trust under the terms hereinafter set forth, relinquishing all power to alter, amend or revoke the Trust." Willard was designated as grantor and trustee for the remainder of his lifetime, with Jonathan Upchurch (son) and Justin Upchurch (son) as successor trustees. All four of the parties' sons were beneficiaries under the trust. Alice was not named as a trustee and did not sign the trust. On the same day the Trust was executed, Willard and Alice executed a deed conveying four tracts of land, consisting of a 400-acre farm, to the Trust for "estate planning purposes and for no other consideration." Both the Trust and deed were prepared by the parties' attorney at that time.
Almost seven years later, on January 11, 2013, Willard filed a petition for dissolution of marriage in the Wayne Family Court. On October 29, 2013, the family court entered findings of fact, conclusions of law, and bifurcated decree of dissolution of marriage, reserving issues pertaining to child custody and the division of marital property.
Following nearly a year of discovery and briefing, the family court held a hearing on October 1, 2014, on the issues pertaining to the validity of the Trust and whether the property held therein was marital or nonmarital. During the hearing, Alice testified that she was unaware of the contents of the Trust and that she believed Willard had created the instrument as a means to defraud her of the largest asset of their marital estate. Although Alice made bald assertions that Willard moved out of the marital residence soon after the Trust was executed, her testimony was quite conflicting and not supported by any other evidence. Willard also testified during the hearing that the purpose of the Trust was to benefit the parties' sons. He further explained that that the parties agreed he would be the sole beneficiary of the Trust during his lifetime because Alice was receiving income from other rental properties. Willard stated that, contrary to Alice's claim she had never reviewed the Trust provisions, she had actually read the Trust language to him as he is unable to read and write. Finally, Jonathan testified by affidavit that he was privy to conversations between his parents regarding the terms of the Trust and that at the time of its execution his parents were happily married.
On November 21, 2014, the family court entered a judgment finding that Willard and Alice had freely and voluntarily executed the deed conveying property to the Trust as part of their estate planning. Further, the family court noted that the parties were married at the time, were not contemplating divorce, and had used one attorney who fully explained the purpose of the Trust. Finally, affidavits established that the sons had executed the trust in the presence of Alice and Willard, and that all parties were fully aware of the purpose and directives of the Trust. As such, the family court concluded,
[T]he four (4) tracts of land in question were originally marital property. This property was by a "valid agreement of the parties" transferred to an irrevocable trust for valid family estate purposes and said land is no longer a marital asset to be divided in this divorce action. KRS 403.190(2)(d); Gripshover v. Gripshover, KY 246 S.W.3d 460 (2008); Ensor v. Ensor, KY App., 431 S.W.3d 462 (2013).
The family court conducted a final hearing on July 31, 2015, and thereafter entered findings of fact and conclusions of law resolving all remaining issues. Therein, the family court included within the martial property to be sold by the Master Commissioner a 2007 Chevrolet pickup truck and a Kubota tractor, both of which were in Willard's possession. Willard then filed a motion to alter, amend or vacate, arguing that at the time of the parties' divorce, both the truck and the tractor were owned by Jonathan, and that Willard did not obtain title to the truck until after the divorce decree was entered. By order entered December 19, 2016, the family court denied Willard's motion, finding that he had failed to introduce any evidence that either vehicle did not belong to him. Both parties thereafter appealed to this Court.
On appeal, Alice argues that the trial court erred by failing to find that the real estate in the Trust was marital property subject to division. She maintains that the property in the Trust constituted the bulk of the marital estate and that Willard dissipated the estate in an effort to deprive her of her rightful share in that asset upon dissolution. Thus, Alice contends that the deed transferring the property to the Trust should be deemed invalid because the transfer was a fraudulent attempt to divest her of marital property. Moreover, Alice believes that the Trust should also be declared invalid since she did not sign it and was not aware of its provisions benefiting Willard. We disagree.
In a dissolution action, the standard of review of a trial court's legal findings is de novo. Hunter v. Hunter, 127 S.W.3d 656, 659 (Ky. App. 2003); Carroll v. Meredith, 59 S.W.3d 484, 489 (Ky. App. 2001). An appellate court may set aside a lower court's factual findings only if those findings are clearly erroneous, i.e., whether or not they are supported by substantial evidence.
"[S]ubstantial evidence" is "[e]vidence that a reasonable mind would accept as adequate to support a conclusion" and evidence that, when "taken alone or in the light of all the evidence, ... has sufficient probative value to induce conviction in the minds of reasonable men." 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, "[m]ere doubt as to the correctness of [a] finding [will] not justify [its] reversal," and 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). See also CR 52.01; Reichle v. Reichle, 719 S.W.2d 442, 444 (Ky. 1986).
Under KRS 403.190, trial courts engage in a three-step process in dividing the marital estate: "(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." Sexton v. Sexton, 125 S.W.3d 258, 264-65 (Ky. 2004); see also Gripshover v. Gripshover, 246 S.W.3d 460, 465 (Ky. 2008). As set forth in KRS 403.190(2), "marital property" means all property acquired by either spouse subsequent to the marriage except:
(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 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.
Generally, a spouse does not have an equitable interest in real property transferred to an irrevocable trust for the purposes of distribution of property in a divorce absent a showing of fraud or dissipation. Indeed, KRS 403.190(2)(d) specifically excludes from the marital estate "[p]roperty excluded by valid agreement of the parties." Nevertheless, in dissolution actions where issues arise concerning potentially nefarious property transfers, Kentucky courts have followed the clear and unambiguous rule that fraudulent or dissipative transfers of marital property may be avoided or otherwise counteracted so as to vindicate a spouse's interest in support or in an equitable division of the marital estate. Ensor v. Ensor, 431 S.W.3d 462, 471(Ky. App. 2013) (citing Gripshover, 246 S.W.3d at 466). Usually, however, a finding of fraud or dissipation requires evidence of (1) the spending of funds for a non-marital purpose, (2) with the intent to deprive one's spouse of his or her share of marital funds, (3) during a period when the parties are separated or a dissolution is impending. Robinette v. Robinette, 736 S.W.2d 351, 354 (Ky. App. 1987).
In Gripshover, our Supreme Court addressed whether the parties' transfer of five parcels of realty to a limited partnership and their assignment of their partnership interests to an irrevocable trust had extinguished, for property division purposes during divorce proceedings, the wife's equitable interest in the realty. The Gripshover Court essentially adopted the factors set forth in Robinette in concluding there was no evidence that either party was contemplating divorce at the time the estate plan was executed six months earlier, nor was there any evidence that the husband sought to impair the wife's marital rights. "On the contrary, the trial court expressly found that Darlene had not been defrauded of her rights but had joined in the estate plan knowingly and voluntarily. As the Court of Appeals observed, substantial evidence supports that finding[.]" Id. at 466.
We are of the opinion that Alice has failed to establish even one-much less all-of the factors set forth in Gripshover. The use of marital assets to provide for the future needs of children is generally considered to be a marital purpose. In this case, there was nothing objectionable or underhanded about the transfer of the property to the Trust that was undertaken pursuant to estate planning in the early 2000's, years before the parties separated and ultimately divorced. Further, at no point prior to Willard filing the dissolution petition in 2013 did Alice take any action to overturn the Trust as being improperly created. Other than her unsupported assertions that she was unaware of the Trust provisions, the testimony and affidavits established that the parties' attorney had fully explained to both Willard and Alice the purpose and directives of the trust.
We agree with the family court herein that the irrevocable transfer of the property in question to the Trust removed it from the marital estate. The family court expressly found there was no fraudulent intent in the formation and funding of the Trust and that it was created for a valid estate planning purpose. The parties engaged in estate planning in excess of six years prior to their separation and ultimate divorce. Both voluntarily executed the deed which conveyed to the Trust their interest in the real estate. Accordingly, the family court properly excluded the Trust assets from the marital estate.
In his cross-appeal, Willard claims that the family court erred in ruling that a 2007 Chevrolet truck and a Kubota tractor were part of the marital estate. Willard contends that his testimony at the hearing established that the truck belonged to his son Jonathan until after entry of the bifurcated degree of dissolution of marriage. Willard further testified that Jonathan was the sole owner of the tractor and only kept it on Willard's property due to storage constraints. In finding that both items were marital assets, the family court noted,
[T]he Petitioner never introduced any written proof (by bill of sale or certificate of title) that the 2007 Chevrolet Truck and/or the farm tractor belonged to anyone other than the Petitioner, Willard Upchurch or that they belonged to anyone else.
The fact that the two items of personal property were in the Petitioner's possession at his residence and the testimony of the Respondent that they were marital property created a presumption of ownership by the Petitioner. The simple oral statements that the tractor was not his and that he didn't own the truck during the marriage did not overcome that presumption
As previously noted, property acquired during the marriage is presumed to be marital unless proved otherwise by clear and convincing evidence. KRS 403.190(3); Barber v. Bradley, 505 S.W.3d 749, 755 (Ky. 2016). A party claiming a specific item of property is nonmarital can rebut the marital property presumption through clear and convincing evidence. Sexton, 125 S.W.3d at 266. "Clear and convincing proof does not necessarily mean uncontradicted proof. It is sufficient if there is a proof of a probative and substantial nature carrying the weight of evidence sufficient to convince ordinarily prudent-minded people." Rowland v. Holt, 253 Ky. 718, 70 S.W.2d 5, 9 (1934).
We must agree with Alice that transfers of vehicle titles and farm equipment are well-documented. Willard was given several opportunities to overcome the presumption that the truck and tractor were marital property but failed to do so. Certainly, the trial court was not required to accept his bare assertions that he had no ownership interest in the tractor and only acquired such in the truck after the divorce decree was entered. As such, we agree with the family court that Willard failed to prove by clear and convincing evidence that the vehicles were non-marital property. Accordingly, they were properly included in the marital assets to be sold.
For the reasons set forth herein, the judgments of the Wayne Family Court are affirmed.
ALL CONCUR. BRIEF FOR APPELLANT: Russell D. Alred
Harlan, Kentucky BRIEF FOR APPELLEE: William M. Garmon
Monticello, Kentucky