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SHARON KAY WHEELER APPELLANT v. GEORGE KARL WHEELER APPELLEE
NOT TO BE PUBLISHED
OPINIONVACATING AND REMANDING
In this divorce action, Sharon Kay Wheeler appeals the Lawrence Circuit Court's order dividing the parties' property. Upon review, we vacate and remand for additional findings.
George and Sharon were married on June 7, 1997. Prior to their marriage, George founded and began operating Crew Construction in 1995 with his business partner Randall Mosley. George's primary source of income was from the operation of Crew Construction. Sharon did not work outside the home but instead was a homemaker.
In July of 1997, Crew Construction filed articles of incorporation. George and Mosley each received one-half of the shares in Crew Construction. In 2003 (during the parties' marriage), George became sole owner of Crew Construction when he bought Mosley's one-half interest in the company.
George filed for divorce in January of 2010. A divorce decree, findings of fact and conclusions of law and judgment were entered in October of 2011. The court thereafter granted Sharon's motion to alter, amend or vacate and amended its findings of fact and conclusions of law. The only issue on appeal involves the court's characterization of Crew Construction as George's nonmarital property in the amended order. The background of how this issue presents itself is rather curious and must necessarily be explored.
A good starting point is the fact both George and Sharon filed property disclosure statements with each designating Crew Construction as marital property. George submitted a valuation of Crew Construction which represented the fair market value as of December 31, 2010, as $135,000. Sharon stipulated to this valuation.
The parties also stipulated that Sharon “had no involvement in the operation, financing, or management of [George's] business Crew Construction, which was begun prior to the parties [sic] marriage.” At the final hearing in this matter, the parties discussed stipulations as to a number of other property items. However, neither party mentioned a stipulation as to whether Crew Construction was nonmarital, marital or part nonmarital and part marital. Nonetheless, when the family court stated numerous times that the only issues that remained to be resolved at the hearing regarded Sharon's request for maintenance and payment of health insurance premiums, neither party objected or stated otherwise. Although it seemed evident that the hearing was based on only these two issues, both George and Sharon presented testimony regarding whether Sharon's contribution as a homemaker contributed in any way to Crew Construction. Nevertheless, even after Sharon's counsel asserted that Sharon still claimed an interest in the marital estate due to her contributions as a homemaker, the family court attempted to clarify its understanding of the issues to be determined at the hearing by stating that Sharon was “not wanting a part of Crew Construction. She's just wanting maintenance.” Sharon's counsel did not state otherwise, nor make a direct request for a marital division of Crew Construction.
The family court entered an order, which was drafted by George's counsel, dissolving the parties' marriage, awarding Sharon maintenance, and requiring George to pay Sharon's health insurance premiums. In other words, the order reflected the two issues the court stated were at issue throughout the hearing. The order also recited some of the parties' stipulations.
Sharon timely filed a motion to alter, amend or vacate. The central theme in this motion was the family court's failure to designate property as either marital or nonmarital. George's response was that the motion was well taken. Double Specifically George responded that:
Respondent's motion is well taken in so far as it does accurately state that there had been agreements between the parties which were not memorialized in that Findings of Fact [sic] Conclusions of Law and Judgment prepared by Petitioner's counsel. There are also certain of the property that further in the dispensing with [sic]. A proposed order of altering Court orders entered October 3 is attached hereto.[ Double ]
Apparently recognizing that the parties agreed its earlier order needed to be amended, the family court granted Sharon's motion. Relevant to this appeal, the family court found that:
[George's] business, Crew Construction, has a current value of $135,000. The appraisal was presented by [George] and stipulated to by [Sharon]. The company was operated prior to the marriage, incorporated during the marriage and one-half ownership thereof was purchased from Randall Mosley during the marriage. There was undisputed testimony by [George] that the company did not have an overall increase in value during the marriage. Therefore, the Court does not find from the evidence presented that there is any marital value to divide. The corporation, Crew Construction, Inc. is awarded to [George].
Sharon appeals the family court's designation of Crew Construction as having no increase in value during the parties' marriage and its implied designation of it as a nonmarital property, having awarded it in its entirety to George.
We review a trial court's ruling on a motion made pursuant to Kentucky Rules of Civil Procedure (CR) 59.05 for an abuse of discretion. See Bowling v. Kentucky Dept. of Corrections, 301 S.W.3d 478, 483 (Ky.2009). As a general rule, a trial court has unlimited power to amend or alter its own judgments. Gullion v. Gullion, 163 S.W.3d 888 (Ky.2005). Pursuant to Gullion,
[t]here are four basic grounds upon which a Rule 59(e) motion may be granted. First, the movant may demonstrate that the motion is necessary to correct manifest errors of law or fact upon which the judgment is based. Second, the motion may be granted so that the moving party may present newly discovered or previously unavailable evidence. Third, the motion will be granted if necessary to prevent manifest injustice. Serious misconduct of counsel may justify relief under this theory. Fourth, a Rule 59(e) motion may be justified by an intervening change in controlling law.
Id. at 889.
Certainly the parties and the family court agreed that Sharon's motion was well taken and should have been granted. We agree. However, it is the amended findings that Sharon raises issues concerning. Given the facts of this case and the procedural posture, we agree that the family court erred.
Regarding determinations as to the marital or nonmarital nature of property,
[u]nder KRS [Kentucky Revised Statutes] 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. An item of property will often consist of both nonmarital and marital components, and when this occurs, a [family] court must determine the parties' separate nonmarital and marital shares or interest in the property on the basis of the evidence before the court.
Sexton v. Sexton, 125 S.W.3d 258, 265 (Ky.2004) (internal quotations and footnote omitted).
George owned only one-half of Crew Construction prior to his marriage to Sharon. Subsequent to the marriage, George acquired an additional one-half interest when he bought out Randall Mosley. Because this interest was acquired during the marriage, as a general rule it is presumed to be marital property. KRS 403.190(2); Terwilliger v. Terwilliger, 64 S.W.3d 816, 820 (Ky.2002). Therefore, it was necessary for George to produce evidence tracing the acquisition of Mosley's one-half interest back to nonmarital assets. Terwilliger, 64 S.W.3d at 820. On remand, a finding on this issue needs to be made.
The family court's finding that Crew Construction experienced no “overall increase in value during the marriage” was not supported by the evidence of record. George testified that the value of Crew Construction had not increased due in any part to Sharon's contribution. He however did not testify or present any evidence that Crew Construction had not increased in value during the parties' marriage. Thus, there simply was no evidence of record to support the family court's finding in this regard.
That aside, the family court made no finding regarding any increase in the value of Crew Construction during the marriage or Sharon's contribution to any increase in value. Although the parties stipulated that Sharon had no involvement with the business, it is nevertheless necessary for the family court to make findings regarding her contributions as a homemaker. See KRS 403.190(2)(e) (any increase in value of the premarital portion of the company during the marriage would be nonmarital property unless the increase in value resulted from the efforts of the parties during marriage); Goderwis v. Goderwis, 78 S.W.2d 39, 40 (Ky.1989) (“An increase in the value of nonmarital property during marriage which is the result of a joint effort of the parties establishes the increase in value of the nonmarital property as marital property. The efforts of the parties may include the contribution of one spouse as a primary operator of the business and the other spouse as primarily a homemaker.”)
For the aforementioned, we vacate the family court's January 18, 2012 order and remand for proceedings consistent with this opinion.
Response sent, thank you
Docket No: NO. 2012–CA–000200–MR
Decided: June 28, 2013
Court: Court of Appeals of Kentucky.
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