Gillett v. McKinney
| Decision Date | 04 April 2019 |
| Docket Number | Case No. 115,742 |
| Citation | 440 P.3d 69 |
| Parties | Sarah Jane GILLETT and Anne Elizabeth Richmond, Petitioners/Appellants, v. Deborah B. MCKINNEY, Respondent/Appellee. |
| Court | United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma |
James A. Kirk, Amber M. Brock, KIRK & CHANEY PLLC, Oklahoma City, Oklahoma, for Petitioner/Appellant
Charles O. Schem, HESTER SCHEM HESTER & DEASON, Oklahoma City, Oklahoma, for Respondent/Appellee
¶1 Kenneth N. McKinney,1 appeals the district court's order in this divorce action denying his request for credit for all of the 2014 and 2015 federal income tax credits and overpayments. Based on our review of the record, the district court's order in favor of Deborah B. McKinney is not against the clear weight of evidence and is affirmed.
¶2 The parties were married in 1998. They separated on October 3, 2015, and the petition for divorce was filed on October 20, 2015. The parties resolved the majority of their issues through mediation. They did not resolve who was to receive credit for the excess taxes paid in conjunction with their 2014 income tax returns or the excess in estimated taxes paid for their 2015 income tax liability. The district court held a hearing to resolve those issues. The district court found that husband's deposit of his separate funds into the parties' joint accounts "took away the separate identity and character" of those funds. The court also found that any of husband's separate funds used to pay the parties' income taxes had been commingled with their marital funds. According to the district court, wife's use of one-half of those funds was "fair and equitable." Based on these findings, the district court denied husband's request to credit him with all of the tax credits and overpayments. Husband appeals the district court's disposition of the 2014 and 2015 tax issues.
¶3 In an action for divorce, the division of property "is one of equitable cognizance and in reviewing a case of equitable cognizance, the judgment of the trial court will not be disturbed unless the trial court abused its discretion or unless the court's finding was clearly against the weight of the evidence." Hough v. Hough , 2004 OK 45, ¶ 12, 92 P.3d 695 (citing Merritt v. Merritt , 2003 OK 68, ¶ 7, 73 P.3d 878 ). "A trial court's valuation of a marital estate will not be disturbed unless it is against the clear weight of evidence, and our cases demonstrate considerable deference to a trial court's valuation of marital assets in a divorce." Childers v. Childers , 2016 OK 95, ¶ 12, 382 P.3d 1020.
¶4 Husband raises two issues in this appeal. First, he argues that the district court erred in not awarding him $115,994 in tax refunds and overpayments as his separate property. Second, he contends that the district court erred when it did not order wife to reimburse him for $9,625 in additional taxes he had to pay because wife filed a separate, rather than a joint income tax return for 2015.
¶5 The parties filed joint individual income tax returns for the 2014 tax year and received a partial refund for the taxes paid in conjunction with that return. In addition, during 2015 and prior to the filing of the petition for divorce, the parties made estimated tax payments for the 2015 tax year. The estimated tax payments exceeded the amount of income tax eventually owed for 2015.
¶6 At the hearing on this matter, husband called an expert witness who testified that he could trace the source of the 2014 and 2015 tax payments to deposits made to the parties' joint account. According to the expert, deposits made to cover those payments came from withdrawals from husband's IRA. Wife used one-half of the 2014 refund and one-half of the 2015 overpayments, in the total amount of $115,994, to pay her 2015 income tax liability. It is not disputed that the funds and assets in husband's IRA are his separate property. Nor is it disputed that, from time to time, husband would withdraw funds from his IRA and deposit those funds into the parties' joint accounts. Some of these deposits approximately coincide with the 2014 and 2015 tax payments at issue in this case. The question is whether the funds withdrawn from husband's IRA remained his separate property once they were deposited in the parties' joint accounts, even if the tax payments can be "traced" to some of the deposits.
¶7 Husband urges us to follow the approach taken in the Uniform Marital Property Act of 1983. See Unif. Marital Prop. Act §§ 1 - 26, 9A U.L.A. 110-158 (Master Ed.1998). Section 14(a) of that Act provides that "mixing marital property with property having any other classification reclassifies the other property to marital property unless the component of the mixed property which is not marital property can be traced." Id. at 141. Oklahoma has not adopted the Uniform Marital Property Act. And, despite husband's argument to the contrary, we do not find that provision consistent with Oklahoma law. The deposit of separate property into a joint account may not automatically convert the separate property into marital property. Cf. , Smith v. Villareal , 2012 OK 114, ¶ 9, 298 P.3d 533 (). However, separate property given to a spouse is no longer separate property even though it might be traced. Chastain v. Posey , 1983 OK 46, 665 P.2d 1179 (). Therefore, we decline to accept husband's invitation to follow the Uniform Marital Property Act of 1983, particularly when the Oklahoma Legislature has not chosen to adopt the Act during the last thirty-five years. Consequently, husband's separate ownership of the excess tax payments depends on existing Oklahoma precedent.
¶8 At the conclusion of this divorce proceeding, the district court was required to "enter its decree confirming in each spouse the [separate] property owned by him or her before marriage and the undisposed-of property acquired after marriage by him or her in his or her own right." 42 O.S. Supp. 2012 § 121(B). As relevant to this case, separate property means: "property owned by a spouse prior to the marriage, which retained its separate status during the marriage because it was maintained as separate property ...." In re Estate of Hardaway , 1994 OK 30, ¶ 9, 872 P.2d 395. Husband's expert testified that he was able to "trace" the tax payments to the husband's separate funds because the comparatively large tax payments generally coincided with comparatively large deposits into the joint accounts made a few days before or a few days after withdrawals from husband's IRA.
¶9 Although the expert's tracing evidence has some record support, it is not conclusive. The most notable example concerns the estimated taxes paid for the third quarter of 2015. On September 15, 2015, checks totaling $73,684 were written to the IRS and the Oklahoma Tax Commission from the parties' joint checking account. On September 22, 2015, $20,000 was withdrawn from husband's IRA and deposited in the parties' joint checking account. However, on September 14 and 15, $60,000 was withdrawn from the parties' joint savings account and deposited into the parties' joint checking account. Apparently, those two deposits were necessary to cover the $73,684 in tax payments.
¶10 It is not disputed that the savings account was a joint account, but husband's expert argued that this $60,000 also should be attributed to husband because funds in the joint savings account could be traced to a deposit made a year earlier from husband's separate funds. On August 15, 2014, $250,000 was withdrawn from husband's IRA and deposited in the parties' joint checking account. On August 21, 2014, $200,000 was transferred from the joint checking account to the joint savings account, which had a balance of $648.80 before the deposit. The expert provided no evidence about the balance in the checking account prior to the $250,000 deposit, the purpose for which the deposit was made or the use of the $50,000 that was not transferred to the joint savings account.
¶11 If the $60,000 in the joint savings account were not husband's separate funds, then $53,684 of the September 2015 tax payments were made from marital property. The district court was not required to accept the expert's testimony on this issue. The district court could give that testimony the value it thought the testimony should receive. Childers v. Childers , 2016 OK 95, ¶ 18, 382 P.3d 1020. And, for the following reasons discussed, we are not persuaded that funds from husband's separate property, "traced" to deposits in the parties' joint accounts, remained husband's separate property.2
¶12 It does appear from the expert's testimony and exhibits that deposits into the parties' joint checking account from husband's IRA on June 16, 2015, exceeded, by $61, the checks written on June 14, 2015, to cover their second quarter estimated tax payments. On the other hand, deposits from husband's IRA did not cover $15,600 of the $282,600 paid on April 14, 2015, in conjunction with the parties' requested extension to file their 2014 tax returns.
¶13 Also problematic with the expert's approach is the number of comparatively large withdrawals from husband's IRA deposited in the parties' joint accounts at times when no tax payments were made. In 2014, husband made five withdrawals from his IRA, $38,000 in April, $50,000 in May, $22,000 in June, $80,000 in July and the $250,000 withdrawal in August previously discussed. Likewise, in 2015 husband withdrew $60,000 in March, $267,000 in April, $91,500 in June, $15,000 in July and $20,000 in September from his IRA. The expert attributes only the April, June and September withdrawals to tax payments. The April...
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