Neidlinger v. Neidlinger

KELLER, Justice,

concurring.

I agree with the majority that the trial court did not abuse its discretion in its rulings concerning attorney’s fees and debt assignment, and I therefore concur in the result reached by the majority. I cannot agree, however, with that portion of the majority opinion which holds that no pre *524 sumptions exist regarding debts incurred during a marriage and which overrules Daniels v. Daniels 1 and Underwood v. Underwood. 2 I write separately concerning Part III (Assignment of Debt) because I believe existing Court of Appeals precedent correctly holds that KRS 403.190(3) creates a rebuttable presumption that debts incurred individually or jointly during the course of a marriage, but prior to a valid separation agreement, are marital debts which “were incurred for the benefit of both parties to the marriage.” 3

KRS 403.190(3) creates a presumption that property acquired by the parties during a marriage is marital property:

All property acquired by either spouse after the marriage and before a decree of legal separation is presumed to be marital property, regardless of whether title is held individually or by the spouses in some form of co-ownership such as joint tenancy, tenancy in common, tenancy by the entirety, and community property. The presumption of marital property is overcome by a showing that the property was acquired by a method listed in subsection (2) of this section. 4

In Daniels v. Daniels, the Court of Appeals held that KRS 403.190(3) implicitly created a parallel presumption for debts incurred during the marriage:

KRS 403.190(3) establishes as being presumed to be marital that property acquired after the marriage but before the decree is entered but also provides that the presumption is rebuttable. Similarly, debts so accrued are presumed to be marital debts unless the presumption is rebutted, 5

This holding is consistent with the rule in other jurisdictions where “[djebts are for the most part characterized as marital or separate by the same principles that govern assets....” 6 Today’s majority, howev *525 er, holds that KRS 403.190(3) implies no such presumption regarding marital debts and resurrects Bodie v. Bodie: 7

We cannot accept the argument that KRS 403.190 creates a presumption that all debts acquired during the marriage are marital debts. The appellant is the only logical party who can produce evidence as to the marital nature of the debts....

There is no Kentucky law precisely on point as to a presumption of marital indebtedness. Although it can be argued that a converse presumption could be implied from KRS 403.190(3), the judicial reasoning used in Herron v. Her-ron, Ky., 573 S.W.2d 342 (1978), precludes that result. In Herron, supra, the Kentucky Supreme Court disapproved gratuitous presumptions in regard to marital property. Herron, supra is obviously distinguishable on its facts, but we believe the reasoning is applicable to this situation. The statute itself does not create a presumption as to marital debts and we do not believe one can be judicially implied. All debts incurred during marriage are not necessarily marital debts. Consideration should be given to the nature of the debts based upon the receipt of benefits and the extent of participation. Inman v. Inman, Ky.App., 578 S.W.2d 266 (1979). 8

The bases for today’s majority’s conclusion mirror those articulated in Bodie v. Bodie: (1) the desire to avoid “gratuitous presumptions”; (2) concerns that a presumption regarding marital debts is not grounded in fact because not all debts incurred during the marriage are actually marital debts; and (3) the assumption that such a presumption regarding marital debts would unfairly allocate the burden of proof. I find none of these concerns persuasive, and I believe that KRS 403.190(3) creates a presumption that debts incurred during the marriage are marital debts. Common sense, logic, and the assumptions regarding the economic nature of a marital partnership upon which Kentucky’s property distribution rules are premised 9 support the Daniels conclusion. The majority’s contrary conclusion — that the presumption covers assets (property acquired) but not liabilities (debts incurred) — risks anomalous marital *526 balance sheets and frustrates efficient litigation in domestic cases.

In Henvn v. He?Ton, 10 this Court did not condemn all presumptions, but merely found no authority to support a presumption regarding the manner in which a trial court should divide marital property. 11 The Henvn Court expressed its concerns about a presumption urged by the Court of Appeals which would have required trial courts to divide marital property equally rather than “in just proportions” as dictated by KRS 403.190(1):

As we see the problem, if the presumption adopted by the Court of Appeals in this case is allowed to stand, the inevitable result would be a proliferation of presumptions in other fact situations, and the standards adopted by the General Assembly in KRS 403.190 would become meaningless. 12

While the Herron Court correctly identified the proposed presumption concerning how trial courts should divide marital property as “gratuitous” and without statutory support, KRS 403.190 contains an explicit presumption regarding the characterization of property as marital or non-marital. The presumption regarding marital debts which the Daniels panel found implicit in KRS 403.190(3) complements rather than contradicts the explicit presumption regarding marital property, risks none of the slippery slope concerns raised in HeiTon, and flatly defies the “gratuitous” label.

In my opinion, the majority’s latter two concerns are greatly outweighed by the need for consistency in property characterization at dissolution. The KRS 403.190(3) marital debt presumption, like its counterpart, the marital property presumption, is obviously not conclusive in every factual situation — in fact, the statute explicitly states that the presumption can be overcome by evidence to the contrary. 13 Thus, if the evidence demonstrates that a debt was incurred to benefit only one spouse, it should be characterized as a nonmarital debt. 14 The presumption merely generalizes from the majority of situations and expedites the process by absolving parties of the responsibility and expense of proving the nature of each and every debt incurred during a marriage. Presumptions exist for one reason — “to perform relative *527 ly simple functions m the litigation process” 15 — and the KRS 403.190(3) marital debt presumption facilitates proof requirements. The majority’s concerns about how the presumption allocates the burden of proof ignore the extensive pretrial discovery available in domestic actions. Litigants in dissolution cases consistently trace funds and proceeds in a variety of contexts, and I believe the majority’s contention that the presumption will prevent a spouse from proving a debt nonmarital is groundless. In my opinion, the majority’s decision overruling Daniels and removing the KRS 403.190(3) marital debt presumption will actually increase delay and expense in domestic actions.

While I would affirm the trial court’s judgment because I find its rulings as to marital and nonmarital debts supported by substantial evidence, I strongly disagree with the majority’s repudiation of the KRS 403.190(3) presumption concerning marital debts. The Court of Appeals “got it right” in Daniels and Underwood, and today’s majority errs when it breathes life into Bodie —a decision which the Court of Appeals has not followed for over a decade.

LAMBERT, C.J. and STUMBO, J. join this concurring opinion.

. Ky.App., 726 S.W.2d 705 (1986).

. Ky.App., 836 S.W.2d 439 (1992).

. Gipson v. Gipson, Ky.App., 702 S.W.2d 54, 55 (1985) (defining the “litmus test” for characterization of debts as marital or nonmari-tal).

. KRS 403.190(3).

. Daniels v. Daniels, supra note 1 at 706. See also Underwood v. Underwood, supra note 2 at 445 ("Debts accrued ... before entry of a divorce decree are rebuttably presumed to be marital debts.” Id.).

. Principles of the Law of Family Dissolution: Analysis and Recommendations § 4.03, Comment b at 90 (American Law Institute, Proposed Final Draft, Part I, 1997). See also In re Marriage ofPahlow, 39 S.W.3d 87, 92 (Mo. App.2001):

"It is presumed that all property acquired by either spouse subsequent to the separation of the parties but prior to the dissolution decree is marital property....” "The party questioning the presumption of marital property has the burden of rebutting the presumption[.]”

... "the phrase 'marital debts’ encompasses all debts incurred during the marriage, either jointly or separately,” and "the fact that a spouse does not control or participate in the decision to make a particular debt does not preclude allocation of that debt to the non-participating spouse.” ... [W]e cannot say the trial court erred in not accepting Husband’s contention that these were not marital transactions. The funds borrowed were borrowed ... while they were still married and are presumed marital.... Accordingly, we find that Husband did not prove ... that the proceeds from the Ring loan — and the stock that was subsequently purchased by the loan proceeds— was not marital in nature.

Id.; Mo.Rev.Stat. § 452.330(3) (2001) (presumption as to marital property identical to KRS 403.190(3)); Simplotv. Simplot, 96 Idaho 239 , 526 P.2d 844, 851 (1974) ("A rebutta-ble presumption has been established [by court precedent] that all property acquired during the marriage is community property. There is nothing in the record to indicate that the Idaho Bank & Trust debt' was not in *525 curred for the benefit of the community it is therefore presumed to be a community debt.” Id. (emphasis added and footnote omitted)); Hardy v. Hardy, 311 S.C. 433 , 429 S.E.2d 811, 813-14 (Ct.App.1993).

. Ky.App., 590 S.W.2d 895 (1979).

. Id. at 896 . See also O’Neill v. O’Neill, Ky. App., 600 S.W.2d 493, 496 (1980) ("[W]hile there is a presumption in KRS 403.190 that all property acquired during marriage is marital, there is no similar presumption as to debts.” Id.).

*. See Louise E. Graham & James E. Keller, 15 Kentucky Practice (Domestic Relations Law) § 15.3 at 504 (West 1997):

The broad policies underlying [Kentucky’s prior] restoration statute were not, however, always compatible with those of

KRS 403.190. The restoration statute’s purpose was to place the parties in the position that they would have enjoyed had the marriage never occurred and was intimately connected to the problem of fault in breaking up the marriage. Functionally, it relied heavily on the availability of permanent alimony. The current statute, on the other hand, recognizes only the ground of irretrievable breakdown and treats marriage as a partnership. It permits consideration of both monetary and nonmonetary contributions to the acquisition of marital property. The puipose of the current statute is to increase the amount of marital property available for division between the parties by ignoring record title and presummg that all property acquired during the marriage is marital unless it falls within a few narrow statutory exceptions.

Id. (emphasis added and footnotes omitted).

. Ky., 573 S.W.2d 342 (1978).

. See Id. at 344:

Thus the courts have a legislative mandate to divide marital property in accordance with the standards set out in the statute [KRS 403.190(l)(a)-(d) ]. It is significant to us that the statutes do not mention “presumptions"; and in the absence of this, we are of the opinion the legislative mandate is binding upon us and that presumptions in the division of marital property should not be indulged in at all.

Id. (emphasis added).

. Id.

. See Robert G. Lawson, The Kentucky Evidence Law Handbook § 10.05 at 549 (Michie 1993):

There are far too many statutory presumptions in Kentucky to try to list all those that might qualify for exemption under the Rule [KRE 301]. One illustration of what a statute might look like is KRS 403.190, which creates a presumption that all property acquired by a spouse during marriage is marital property and then provides that the presumption can be "overcome by a showing that the property was acquired by [gift, bequest, devise, or descent.]” ... In [this] statute[ ] there is a clear indication of legislative intent to shift to the party against whom the presumption operates a full burden of proof — the burden of going forward with evidence and the risk of nonpersuasion.

Id. (emphasis added); Underwood v. Underwood, supra note 2 at 441, n. 1.

. See Gipson v. Gipson, supra note 3 at 55.

. Lawson, supra note 13 at § 10.00 at 538.