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Hayes v. Hayes9/9/2005
AFFIRMING IN PART, AND REVERSING AND REMANDING IN PART
BEFORE: BUCKINGHAM, SCHRODER, AND VANMETER, JUDGES.
This is an appeal from a judgment entered by the Bell Circuit Court in a marital dissolution proceeding. Appellant Paula Hayes raises numerous issues on appeal relating to the division and the alleged dissipation of property, and relating to the court's failure to award maintenance or attorney's fees. For the reasons stated hereafter we affirm in part, and reverse and remand in part.
Paula and appellee William Hayes married in 1986, separated for six weeks in the summer of 2002, separated again in August 2003, and divorced in December 2003. No children were born of the marriage. Before and during the marriage, Paula was employed as a paralegal and bookkeeper in William's solo law practice, and she also worked as a professional photographer. After restoring the non-marital property to the parties the court divided the marital property, assigned liability for an alleged tax debt, and denied Paula's requests for maintenance and attorney's fees. This appeal followed.
First, Paula contends that the trial court erred by finding that William's "attorney account" constituted non-marital property which was not subject to division. We agree.
KRS 403.190 requires the trial court in a marital dissolution action to assign to each spouse all non-marital property, including " roperty acquired in exchange for property acquired before the marriage[.]" It has long been the rule that non-marital funds which have been commingled with marital funds may be traced by showing that the balance of the commingled account "was never reduced below the amount of the non-marital funds." Although William correctly notes that in Chenault v. Chenault the Kentucky Supreme Court "relax some of the draconian requirements heretofore laid down," that relaxation of requirements pertains only to the expansion of what types of evidence may meet tracing requirements, as the court continues to adhere to "the general requirement that non-marital assets be traced into assets owned at the time of dissolution." The party seeking to overcome the presumption of marital property "bears the burden of proving that he or she acquired the property pursuant to an exception listed in KRS 403.190(1)."
Here, it is undisputed that when the parties married, William had $22,000 in an "attorney account" which evidently was used for office expenses. Although Paula admitted in her preliminary verified disclosure statement that the account normally contained $20,000 - $30,000, she produced bank statements to show that the balance dropped as low as $538.98 in November 1987 and $15,140.71 in January 1998. William does not dispute those figures on appeal, but he asserts that the account's funds need not be traced because that account was always kept separate from, rather than commingled with, the parties' joint bank accounts, and because Paula's admission that the account normally had a balance of $20,000 - $30,000 provided clear and convincing evidence that he was entitled to be restored to $22,000 from that account.
We are not persuaded by William's assertions. Regardless of whether the account contained at least $22,000 at the time of dissolution, the fact that the account's balance dropped substantially below that figure at least twice during the marriage clearly indicates that the non-marital funds were spent during the marriage. In the absence of any evidence to show that the replacement funds in the account were acquired as non-marital funds pursuant to one of the exceptions set out in KRS 403.190(2), it must be presumed that the expended non-marital funds were replaced
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