## Facts

- Margaret Callaway (wife) and Danny Callaway (husband) were married and, during the marriage, received significant property from Margaret’s mother.
- Margaret’s mother gave the couple a residential lot, and the spouses built their marital home on that lot.
- Margaret’s mother also gave the couple a racing car.
- Both spouses used the racing car for recreation during the marriage, and both participated in its upkeep.
- Margaret filed for divorce and was granted a dissolution.
- The trial court entered a property-settlement order dividing and classifying property.
- As part of that order, the trial court classified the residential lot and the racing car as nonmarital property and excluded them from the marital estate.
- Both Margaret and Danny appealed various aspects of the property-settlement order to the Kentucky Court of Appeals.

## Issues

1. Whether the trial court erred in classifying the residential lot given by Margaret’s mother as nonmarital property rather than marital property subject to division.
2. Whether the trial court erred in classifying the racing car given by Margaret’s mother as nonmarital property rather than marital property subject to division.

## Decision

- The Kentucky Court of Appeals affirmed the trial court’s property-settlement order in most respects, finding no clear error on the other challenged rulings.
- The court held that the trial court erred in excluding the residential lot from the marital estate as nonmarital property.
- The court held that the trial court erred in excluding the racing car from the marital estate as nonmarital property.
- The court reversed the trial court’s classification of the lot and the racing car and remanded for further proceedings consistent with treating those assets as marital property.

## Legal Principles

- Under Kentucky dissolution law, property acquired after marriage is presumed marital unless it falls within a statutory exception (including a gift to one spouse).
- A transfer from a spouse’s parent is not automatically nonmarital; the classification turns on whether the donor intended to give the property to one spouse individually or to both spouses as a couple.
- A gift intended for both spouses is marital property subject to equitable division, even if the gift came from only one spouse’s family.
- Evidence that both spouses used and maintained gifted property as part of the marital life supports treatment of the property as a marital asset rather than as a separate, nonmarital asset.
- Appellate review of a trial court’s property classification in a dissolution action is deferential, but a misclassification of marital versus nonmarital property warrants reversal and remand for a corrected division.

## Conclusion

The Court of Appeals left most of the dissolution property-settlement order intact, but reversed the trial court’s determination that the residential lot and racing car were nonmarital; because Margaret’s mother gave those items to the couple and they were treated as shared property during the marriage, they were marital assets that had to be included in the marital estate for equitable distribution on remand.


Callaway v. Callaway, 832 S.W.2d 890 (1992)