Chenault v. Chenault

• Citation: 799 S.W.2d 575
• Decision Date: 18 October 1990
• Docket Number: No. 89-SC-185-DG,89-SC-185-DG
• Parties: Ruby E. CHENAULT, Appellant, v. William C. CHENAULT, Appellee.
• Court: United States State Supreme Court (Kentucky)

Page 575

799 S.W.2d 575

Ruby E. CHENAULT, Appellant, v. William C. CHENAULT, Appellee.

No. 89-SC-185-DG.

Supreme Court of Kentucky.

Oct. 18, 1990.

As Amended Nov. 8, 1990.

William F. Woodward, Joseph L. Lenihan, Woodward, Hobson & Fulton, Louisville, for appellant.

Joseph V. Mobley, Louisville, for appellee.

LAMBERT, Justice.

This Court granted discretionary review of the decision of the Court of Appeals which imposed stringent requirements upon appellant, Ruby E. Chenault, who sought to "trace" the proceeds of nonmarital property at the time the marriage was dissolved. In effect, the Court of Appeals held that at the time of dissolution, a party undertaking to prove the nonmarital character of property must do so by documentary evidence and with near mathematical precision. We believe such a requirement is beyond the mandate of KRS 403.190 and contrary to sound public policy. Hence, we reverse.

Ruby and William married in 1971. At the time of their marriage both were in their early 50's and William was the father of a seven-year-old daughter who lived with him. During the 15-year duration of their marriage, Ruby discharged the normal duties of homemaker and mother and after William's daughter went to college, worked in a low-wage position at the Speed Art Museum in Louisville. During the marriage, William worked as a construction worker and after his retirement from that position, worked as a security guard at the Speed Museum.

On this appeal, the principal and decisive issue is whether the Court of Appeals, affirming the trial court, erred in holding that Ruby failed to present sufficient evidence that certain liquid assets should have been assigned to her as nonmarital property. Ruby contends that she brought to the marriage at least $21,000 in cash, a home valued at $14,000, and 27 shares of stock in Standard Oil of California. At trial, she presented convincing evidence that she owned her home prior to the marriage and that the home was sold and the proceeds realized during the marriage. Likewise, she presented convincing evidence that at a minimum she had $10,000 in cash one year prior to the marriage and that a Treasury Note for $10,000 came due and was reinvested during the marriage. Finally, Ruby testified that she inherited 27 shares of stock in Standard Oil of California and that by virtue of stock dividends and stock splits, this number of shares grew significantly before and during the marriage. Despite the sale of some of this stock during the marriage, a fact which William admits, Ruby continued to own 50 such shares at the time of trial. Regardless of the foregoing evidence, the Court of Appeals affirmed the trial court's determination that Ruby had failed to establish the nonmarital character of these assets. The Court of Appeals said:

"The testimony below established that at the time of her husband's death, the appellant was bequeathed a house worth approximately $14,000 and other cash and securities worth over $21,000. Additionally, she inherited 27 shares of stock in Standard Oil Company. Nevertheless, there was a total inability on the part of her counsel to trace the course of either the cash or the stock subsequent to 1966. Although the appellant testified that she purchased CD's with the money and continued to roll them over during the duration of the marriage, she was unable to document such testimony, either as to dates of purchase or specific amounts involved....

"Similarly, although the appellant testified that she inherited 27 shares of standard oil company at the time of her husband's death, there were no stock certificates or other records introduced by her counsel to substantiate the claim that she continued to hold them from 1966 to 1971 and from 1971 until 1986. On the contrary, the only exhibits introduced on this issue were those introduced by the appellee, showing stock certificates issued to the appellant in the Standard Oil Company of California beginning in September of 1979 and continuing to August 19, 1980. Such evidence, together with the appellant's own testimony that she had during the marriage sold a portion of her stock at different times, supports the trial court's finding that such property must be considered marital. And although the house she inherited from her first husband was not sold until 1974--some three years after the parties were married--the trial court correctly determined that there was no tracing of either the down payment or the subsequent mortgage payments paid to her by her daughter and son-in-law."

In its findings of fact, the accuracy of which is not disputed by either party, the trial court found that in addition to the 50 shares of Standard Oil of California stock, Ruby was then in possession of cash and securities valued at $91,329. Nevertheless by virtue of her inability to trace any of these assets to the satisfaction of the trial court, it was determined that all of such assets were marital property.

In KRS 403.190(2)(b), marital property is defined, in part, as "all property acquired by either spouse subsequent to the marriage except: ... (b) Property acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, bequest, devise or descent." Subsection (3) of KRS 403.190 creates a presumption that all property acquired during the marriage is marital property, but permits this presumption to be overcome by proof that the property was acquired as in subsection (2) of the statute. Numerous decisions of this Court and the Court of Appeals have construed this statutory provision and from these decisions there has emerged the concept of "tracing" although this term is nowhere found in the statute. Among the more significant decisions on this point are Turley v. Turley, Ky.App., 562 S.W.2d 665 (1978), Brunson v. Brunson, Ky.App., 569 S.W.2d 173 (1978), Allen v. Allen, Ky.App., 584 S.W.2d 599 (1979), Daniels v. Daniels, Ky.App., 726 S.W.2d 705 (1987), and Sharp v. Sharp, Ky., 516 S.W.2d 875 (1975).

Even a cursory review of the foregoing decisions reveals a requirement of considerable precision in the process of tracing if the property claimed to be nonmarital is to be so found. For instance, in Turley, the Court said:

"Mr. Turley failed to show that any property owned by the parties at the time of the separation was acquired by use of his inheritance or from the proceeds from the sale of the automobile and furniture owned by him prior to the marriage. Because he did not trace the inheritance or the proceeds, if any, from the disposition of the automobile and furniture, it was error for the trial court to award him the value of such items." Id. at 668.

Likewise in Brunson, the Court said:

"The trial court recognized that Mrs. Brunson brought property into the marriage. However, because she failed to trace any of that money or property into any specific assets which were owned by the parties at the time of the separation, the trial court concluded that it had no power to assign any property to Mrs. Brunson as nonmarital property. The record supports the trial court's conclusion that Mrs. Brunson failed to trace the assets which she brought into the marriage into assets owned at the time of the separation." Id. at 176.

In Daniels, the Court determined that nonmarital property was sufficiently traced and affirmed the trial court's assignment to the owner. The Court said:

"The trial court properly determined that Harvey had traced money which he had inherited to its use in the purchase of stock and, except for one trade involving the sale of one stock and the purchase of another in 1981, Harvey had kept intact the securities which he had bought from his cash inheritances." Id. at 706.

While such precise requirements for nonmarital asset-tracing may be appropriate for skilled business persons who maintain comprehensive records of their financial affairs, such may not be appropriate for persons of lesser business skills or persons who are imprecise in their record-keeping abilities. This problem is compounded in a marital union where one spouse is the recorder of financial detail and the other is essentially indifferent to such matters. Moreover, such a requirement may promote marital disharmony by placing a premium on the careful maintenance of separate estates.

In Allen v. Allen, supra, the Court of Appeals retreated somewhat from its earlier decisions and held that "the requirement of tracing should be fulfilled, at least as far as money is concerned, when it is shown that nonmarital funds were deposited and commingled with marital funds and that the balance of the account was never reduced below the amount of the nonmarital funds deposited." Id. at 600. The view expressed in Allen is consistent with the concurring opinion of Vance, J., in Turley v. Turley, supra. In that concurring opinion, it was persuasively argued that all nonmarital property should be restored upon dissolution of the marriage providing the parties have, throughout the marriage, maintained at least as much in assets as the combined value of their nonmarital property. By logical inference, if this view were adopted, any decrease during the marriage in the parties' total nonmarital asset value would be charged pro rata against their percentage share of total nonmarital property to be assigned.

As appealing as the foregoing view may be, particularly when the simplicity of its application and its inherent equity is considered, we believe the concept of tracing is too firmly established in the law to be abandoned at this time.

Accordingly, we shall adhere to the general requirement that nonmarital assets be traced into assets...