Transmutation of Nonmarital Property and Division of Personal Property by Lot – Ky Supreme Court Published Opinion

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Husband appealed to the Court of Appeals arguing the trial court erred by finding the equity in the parties’ residence was marital property and ordering the division of household goods and furnishings by lot. The Court of Appeals affirmed the trial court. The Supreme Court granted discretionary review.

They first turn to the issue of the characterization of the equity in the marital home. Husband argues that because a $246,000 gift from his parents was used to partially fund the construction of the marital home, he has a nonmarital claim in the home that should have been recognized by the trial court. The Supreme Court employs the factors laid out in O’Neill and modified in Sexton to make a determination that the $246,000 gift was indeed Husband’s nonmarital property creating nonmarital interest in the home. O’Neill v. O’Neill, 600 S.W.2d 493 (Ky. App. 1980); Sexton v. Sexton, 125 S.W.3d 258 (Ky. 2004). Addressing the concept of  transmutation through gifting, the Supreme Court goes on to again review the O’Neill/Sexton factors and concludes Husband’s nonmarital claim to the marital home was gifted to the marital estate citing among other factors Husband’s multiple promises to Wife regarding co-ownership, the joint title and the status of the marriage at the time of the gift. Thus, the Supreme Court finds no error in the trial court’s treatment of the marital home as marital property.

The Supreme Court then turns to Husband’s argument that the trial court erred in failing to award undisputed nonmarital items to the appropriate party, make findings and conclusions relating to the disputed nonmarital items, and appropriately divide the marital property. The Supreme Court agrees holding the trial court failed to properly assign the undisputed nonmarital household goods and furnishings; the trial court also failed to rule on the disputed items. Moreover it was an abuse of discretion for the trial court to order the parties to divide the marital property by lot, as it violated KRS 403.190 by failing to take into account the value of the personal property. Thus, the Supreme Court remands the case for the trial court to divide the property in compliance with KRS 403.190.

Justice Noble and Justice Venters dissent arguing Husband had a nonmarital interest in the marital residence because there was no clear and convincing evidence that the house was gifted to the Wife, and had the residence been gifted to the Wife it would have belonged to her in its entirety.

Justice Wright joins Justice Noble’s opinion in most respects, but endorses a two-step analysis.

 Digested by Elizabeth M. Howell

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