NOT TO BE PUBLISHED

OPINION

KELLER, JUDGE.

The sole question presented in this appeal is whether the Ballard Circuit Court erred in determining that Barney Leon McNeill (Barney) had a nonmarital interest in the parties' residence, which consisted of a mobile home and two acres of real property in Wickliffe, Kentucky (the Wickliffe Property). This property was acquired during Barney's marriage to Gloria Paula McNeill (Gloria). After considering the record and the parties' briefs, we reverse and remand.

FACTS

Barney and Gloria were married on May 12, 1992, and on November 12, 2009, Barney filed for divorce. Thereafter, the circuit court entered a judgment dissolving the marriage but reserving all questions regarding division of marital property and assets, division of marital debts, restoration of nonmarital property, maintenance, and attorneys' fees. On August 17, 2010, a final hearing was held to resolve all remaining contested issues concerning these matters. The hearing ultimately focused on the parties' dispute as to how to divide the proceeds from a sale of the Wickliffe Property. Specifically, Gloria challenged Barney's claim that he had a nonmarital interest in this property, even though it was purchased during the parties' marriage.

It is undisputed that, in the fall of 1992, Barney's parents conveyed to the couple, via deed, a house and approximately 37 acres in Boaz, Kentucky (the Boaz Property). The deed for this property listed both Barney and Gloria as the Grantees and provided that it was given solely "[f]or and in consideration of the LOVE AND AFFECTION WHICH THE GRANTORS HAVE FOR THEIR SON AND DAUGHTER-IN-LAW, THE GRANTEES HEREIN[.]" (Emphasis in original). No other consideration is referenced in the deed, and the last page reiterated that "the property herein conveyed is transferred by gift and without consideration[.]" Additionally, the deed reflected that the fair market value of the Boaz Property was estimated to be $89,000.

At the hearing, Barney testified that the Boaz Property was a gift to him from his parents, but that he gave his parents $10,000 afterwards because he felt that he owed them something. According to Barney, the $10,000 he gave to his parents was from the proceeds he received from the sale of property he owned prior to his marriage to Gloria. Barney further testified that the Boaz Property was intended to be gifted solely to him and that the only reason Gloria was named in the deed was because of her marriage to him. However, Barney later acknowledged that he did not know why Gloria's name was on the deed.

In July 2002, the parties borrowed $70,000.00 and took out a mortgage on the Boaz Property. According to Barney, the parties used $55,000.00 of this loan to purchase the Wickliffe Property. Barney testified that, without the loan, the parties did not have enough money to purchase the property. In December 2002, the parties sold the Boaz Property for $95,000.00. A month later, the loan was paid off in full and the mortgage was released. Although no written documentation was produced reflecting this,1 Barney testified that the loan was satisfied from the proceeds of the sale of the Boaz Property. Barney claimed that, because the loan used to purchase the Wickliffe Property was satisfied with the proceeds from the sale of the Boaz Property, the Wickliffe Property could be directly traced to a nonmarital asset.

Gloria testified that she believed that the Boaz Property and the Wickliffe Property were completely marital in nature. She testified that the Boaz Property was not a gift; that she and Barney were both listed on the deed; and that the parties gave Barney's father $10,000 for the property. According to Gloria, when they acquired the Boaz Property in 1992, the house on the property was not in good shape and was only worth the $10,000 the parties paid for it. Gloria testified that the parties spent several thousand dollars remodeling the house, which included the addition of two rooms, a new kitchen, and new carpet and flooring throughout the house.

When asked on cross-examination whether there was any other reason, besides her being married to Barney, that Barney's parents would have put her name in the deed to the Boaz Property, Gloria stated she did not know. When asked again, Gloria stated that she could not say there was any other reason besides being married to Barney. Gloria further testified that the $55,000 used to purchase the Wickliffe Property came from the parties' joint bank account. Gloria further testified that she did not know where the money came from to pay off the $70,000 mortgage on the Boaz Property. Gloria testified that she only knew that Barney wrote a check and that she assumed that it had come from the parties' joint bank account.

On August 31, 2010, the circuit court entered a supplemental decree and order finding that the Wickliffe Property was the nonmarital property of Barney. However, the court found that there was $6,000 in marital equity in the residence that should be split equally between the parties.2 In support of the supplemental decree and order, the court orally found that the Boaz Property was a gift to Barney and that Barney's parents had named Gloria in the deed to the property only due to her marriage to Barney. The court further found that the proceeds from the sale of the Boaz Property were used to pay off the loan taken out to purchase the Wickliffe Property. Because of this, the Wickliffe Property could be directly traced to the Boaz Property gifted by Barney's parents. Therefore, Barney retained a nonmarital interest in the Wickliffe Property even though it was purchased during the parties' marriage. This appeal followed.

STANDARD OF REVIEW

On appeal, Gloria contends that the circuit court's decision was erroneous because Barney failed to adequately establish that the Wickliffe Property was nonmarital in nature. Our standard of review in such matters is governed primarily by Kentucky Rules of Civil Procedure (CR) 52.01, which provides that "[i]n all actions tried upon the facts without a jury or with an advisory jury, the court shall find the facts specifically and state separately its conclusions of law thereon and render an appropriate judgment[.]" See also Hunter v. Hunter, 127 S.W.3d 656, 659 (Ky. App. 2003). On appellate review, "[f]indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." CR 52.01. A finding of fact is not clearly erroneous if it is supported by substantial evidence. Hunter, 127 S.W.3d at 659. "Substantial evidence is evidence, when taken alone or in light of all the evidence, which has sufficient probative value to induce conviction in the mind of a reasonable person." Id. In contrast, we review all legal issues de novo. Id.

ANALYSIS

On appeal, Gloria contends the trial court erred in concluding that the Wickliffe Property was nonmarital property. We agree.

"The disposition of parties' property in a dissolution-of-marriage action is governed by Kentucky Revised Statute (KRS) 403.190[.]" Sexton v. Sexton, 125 S.W.3d 258, 264 (Ky. 2004). A presumption exists that all property acquired by either spouse after the marriage and before a decree of legal separation is marital. KRS 403.190(3). However, this presumption can be overcome by a showing that the property was acquired via one of the methods set forth in KRS 403.190(2), including "[p]roperty acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, bequest, devise, or descent[.]" KRS 403.190(2)(b). The party claiming that property acquired after the marriage is his or her nonmarital property bears the burden of proof on that issue. Hunter, 127 S.W.3d at 660.

"An item of property will often consist of both nonmarital and marital components, and when this occurs, a trial court must determine the parties' separate nonmarital and marital shares or interests in the property on the basis of the evidence before the court." Travis v. Travis, 59 S.W.3d 904, 909 (Ky. 2001). Such a determination generally requires application of the "source of funds rule," which "simply means that the character of the property, i.e., whether it is marital, nonmarital, or both, is determined by the source of the funds used to acquire property." Id. at 909 n.10. A spouse must adequately trace his or her nonmarital interest, or the property is presumed marital. Sexton v. Sexton, 125 S.W.3d 258, 271 (Ky. 2004).

Tracing is defined as "`[t]he process of tracking property's ownership or characteristics from the time of its origin to the present.'" Sexton, 125 S.W.3d at 266 (quoting BLACK'S LAW DICTIONARY 1499 (7th ed. 1999)). When nonmarital property is not in existence at the time of dissolution or is no longer owned, the party claiming a nonmarital interest must "trace" the previously-owned nonmarital asset into a presently-owned specific asset. Id.; Kleet v. Kleet, 264 S.W.3d 610, 614 (Ky. App. 2007).

Barney argues that, although the Wickliffe Property was purchased while the parties were married, it is nonetheless nonmarital because it can be directly "traced" to the Boaz Property gifted to him by his parents. Specifically, Barney contends that the sale of the Boaz Property was used to pay off a loan taken out to purchase the Wickliffe Property. To the contrary, Gloria contends that the Boaz Property was not given to Barney as a gift but was instead purchased from his parents for $10,000.00. Gloria contends that, even if the Boaz Property was a gift, it was a gift to both of them, because both parties were named in the deed.

As set forth in Hunter, 127 S.W.3d at 660:

(Citations omitted).

"[T]he donor's intent is the primary factor in determining whether a transfer of property is a gift, and . . . is also the primary factor in determining whether a gift is made jointly to spouses or individually to one spouse." Sexton, 125 S.W.3d at 268-69. "In determining the intent of the donor, a court should look at all the circumstances such as statements of the donor, statements of the spouses, the tax treatment of the gift, whether the gift was jointly titled, the relationship of the parties, and the intended use of the property." Hunter, 127 S.W.3d at 662. "The determination of whether a gift was jointly or individually made is a factual issue, and therefore, subject to the CR 52.01's clearly erroneous standard of review." Id. at 269.

In this case, the deed to the Boaz Property unambiguously provided that the property was transferred "[f]or and in consideration of the LOVE AND AFFECTION WHICH THE GRANTORS HAVE FOR THEIR SON AND DAUGHTER-IN-LAW, THE GRANTEES HEREIN" and subsequently reiterated that "the property herein conveyed is transferred by gift and without consideration[.]" (Emphasis in original). Kentucky jurisprudence recognizes that the common meaning, usage, and understanding of the phrase "in consideration of the love and affection," when that phrase is paired with nothing else and used in the context of a deed, unambiguously imparts a gift. See Sword v. Fields, 192 Ky. 629, 234 S.W. 202 (1921). Therefore, we conclude that the Boaz Property was a gift.

The question that remains is whether the trial court erred in concluding that the Boaz Property was a gift to only Barney. We believe that it did.

In Hunter, the husband's parents conveyed their interest in real property by deed to their son and daughter-in-law, reserving a life estate. "The deed stated that the property was being conveyed `for and in consideration of the sum of One dollar ($1.00), cash in hand paid, and in further consideration of the love and affection the parties of the first part have for their son, the male grantee herein.'" 127 S.W.3d at 658. The parents testified that they intended to give the real property only to their son, and included their daughter-in-law on the deed solely because of her marriage to their son. The daughter-in-law also acknowledged that she was only included in the deed because of her marriage to the son. This Court concluded that, based on the parent's testimony, the daughter-in-law's testimony, and the fact that the deed stated that the consideration for conveyance was the love and affection the parents had for their son, there was substantial evidence to overcome the marital property presumption. Id. at 662.

Unlike in Hunter, Barney's parents did not testify as to their intent.3 Further, unlike in Hunter, the deed in this case stated that the consideration for the conveyance was the love and affection of Barney's parents for both Barney and Gloria. We note that Barney testified that his parents intended to give the Boaz Property only to him, and that they would not have put Gloria's name in the deed had she not been married to him.4 We further note that Gloria did not seem to disagree with Barney's assertion that she would not have been included in the deed but for her marriage to Barney. However, we do not believe that Barney's self-serving testimony as to his parents' intent was sufficient to overcome the unambiguous language in the deed and the marital property presumption.

Therefore, we conclude that there was not substantial evidence to support the trial court's conclusion that the Boaz Property was nonmarital property. Because the Wickliffe Property could not be traced to a nonmarital asset, we conclude that the trial court erred in determining that the Wickliffe Property was nonmarital. Accordingly, the trial court's finding to that effect is reversed, and on remand the trial court must enter a new finding that the Wickliffe Property is marital.

CONCLUSION

For the foregoing reasons, we vacate the order of the Ballard Circuit Court and remand for further proceedings consistent with this opinion.

NICKELL, JUDGE, DISSENTS AND FILES SEPARATE OPINION.

NICKELL, JUDGE, DISSENTING.

Respectfully, I dissent.

I do not agree with the majority's holding that the trial court erred in finding the Boaz Property was a parental gift only to Barney. CR 52.01 states a trial court's findings of fact "shall not be set aside unless clearly erroneous, and due regard shall be given to the ability of the trial court to judge the credibility of the witnesses." Findings of fact are not clearly erroneous if supported by substantial evidence. Owens-Corning Fiberglass Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky. 1998). Substantial evidence is evidence that "has sufficient probative value to induce conviction in the mind of a reasonable person." Hunter, 127 S.W.3d at 659.

Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (internal quotation marks and citations omitted). I believe the trial court's conclusion was supported by substantial evidence and that the majority's reversal improperly substitutes its judgment for that of the fact finder. Id.

In the present case, Barney's testimony as to his parents' intent regarding the conveyance of the Boaz Property, though contradicted by other evidence and witnesses, represented substantial evidence of sufficient probative value to reasonably induce the trial court to find that Barney's parents intended the Boaz Property as a gift only to their son. Though contrary evidence was presented, based on its review of the totality of the evidence and exercising its prerogative to weigh the evidence and the credibility of the witnesses, Hunter, 127 S.W.3d at 662, the trial court found that Barney's parents had intended the Boaz Property as a gift to their son and that the proceeds from the sale of that property had been used to pay off the Wickliffe Property loan. Based on this factual finding, the trial court correctly concluded that the Wickliffe Property could be directly traced to the Boaz Property, and that Barney retained a non-marital interest in the Wickliffe Property. I would affirm.