APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, SEVENTEENTH DIVISION. NO. 60-DR-13-2226. HONORABLE MACKIE M. PIERCE, JUDGE.
Wallace, Martin, Duke and Russell, PLLC, by: Valerie L. Goudie, for appellant.
Dover Dixon Horne PLLC, by: Gary B. Rogers and Bridget H. Norton, for appellee.
KENNETH S. HIXSON, Judge. GLADWIN, C.J., and VIRDEN, J., agree.
KENNETH S. HIXSON, Judge.
At issue in this appeal is whether certain life insurance proceeds constituted
marital property subject to division in a divorce case. Appellant Shelby Hargrove contends that the trial court erred in finding that the death-benefit proceeds were marital property and awarding a portion to his ex-wife, appellee Robbie Hargrove. After de novo review, we hold that the trial court clearly erred in failing to adhere to statutory mandate, and thus we reverse.
We begin with our standard of review. We review domestic-relations decisions de novo on the record. Scott v. Scott, 86 Ark.App. 120, 161 S.W.3d 307 (2004). Although review is de novo, we will not reverse a finding of fact by the trial judge unless it is clearly erroneous. Id. A trial court's determination of whether certain property is marital property is a fact question that will not be reversed unless it is clearly erroneous. Id. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a distinct and firm conviction that a mistake has been committed. Id. As to issues of law, however, we give no deference to the trial court and rather review issues of law and statutory construction de novo. Farrell v. Farrell, 365 Ark. 465, 231 S.W.3d 619 (2006).
In a divorce action, statutory law requires that all marital property be evenly distributed to each party, unless the trial court finds such a division to be inequitable, in which event the trial court may make a division that the trial court deems equitable. Ark. Code Ann. § 9-12-315(a)(1) (Repl. 2009). Arkansas Code Annotated section 9-12-315(b) specifically provides, however, that " marital property" does not include " property acquired prior to marriage or by gift or by reason of the death of another, including, but not limited to, life insurance proceeds." Id. at (b)(1). The trial court, however, created an exception to this statutory exemption by considering the proceeds equivalent to retirement benefits or active appreciation of a non-marital asset. This defies the plain statutory language and constitutes clear error.
What follows is an examination of the undisputed facts in greater detail. Appellant, Shelby Hargrove, had a son from a previous marriage. In 1995, appellant purchased a life insurance policy on his son, appellant being the named beneficiary of the policy. In 1997, appellant and appellee married. From the date of marriage through May 2013, when the parties separated and divorce proceedings were initiated, the premiums on the life insurance policy were paid with marital funds. The final three months of premiums (June, July, and August 2013) were paid with non-marital funds, specifically deemed gifts to appellant from appellant's first wife and adult daughter. Appellant continued to be the beneficiary of the life insurance policy. Appellant's son passed away in August 2013, while the divorce was still pending.
Although the insurance policy was never made part of the record, commentary and stipulations before the trial court reveal that this was a flexible premium adjustable life insurance policy through Conseco with an estimated death benefit of $100,000. Although the policy accrued some cash value, that cash value was never realized because the life insurance was to pay solely a death benefit to the beneficiary of the policy, the appellant. The parties litigated whether the death benefit proceeds were marital property and subject to division, and if so, to what extent.
Appellee's attorney argued that the policy was " brought out of" the statutory exemption by virtue of marital funds paying many years of premiums. Appellee's attorney characterized this as " commingling." Appellant's attorney contended that the life insurance proceeds were appellant's separate non-marital property by virtue of a plain reading of the ...