Everything Must Go: Assessing the Authority of Kentucky Family Courts to Order the Sale of Marital Property

Everything Must Go: Assessing the Authority of Kentucky Family Courts to Order the Sale of Marital Property

By: Jonathan D. Thiel

Like any good, born-and-raised Kentuckian, I am interested in all things bourbon including its production, distribution, and, ultimately, consumption. Naturally, as a family law attorney and bourbon lover, when I read that a premium Kentucky bourbon distillery, Old Carter Whiskey Company, was being put up for public auction as part of a court-mediated divorce settlement, I found myself applying Kentucky’s divorce and property division laws to the same set of facts leading up to the distillery being put up for auction. While the Carter divorce originated in California and the terms of the sale were reached by mediated agreement of the parties, the possibility of a judicially mandated sale of marital property in a Kentucky divorce is one that family law attorneys should address with clients when settlement negotiations stall.      

First, as mentioned above, the Carter divorce case that led to the auction and sale of Old Carter Whiskey Company comes out of a California court, where the co-owners and founders, Mark and Sherri Carter, reached a mediated settlement to pause the production of Old Carter products during 2024 and place the distillery, licenses, inventory and real estate up for public auction. The auction closed on December 10, 2024 with the winner of the auction being publicly announced on December 12, 2024. The auction took place through a Louisville, KY auction firm under a sealed bidding process per the terms of the settlement agreement.

               The first place our analysis starts is the Kentucky Revised Statutes Chapter 403 “Dissolution of Marriage-Child Custody.” Specifically, KRS 403.190 governs the disposition of property in a divorce or legal separation in Kentucky. KRS 403.190 ( 1 ) states:

In a proceeding for dissolution of the marriage or for legal separation, or in a proceeding for disposition of property following dissolution of the marriage by a court which lacked personal jurisdiction over the absent spouse or lacked jurisdiction to dispose of the property, the court shall assign each spouse’s property to him. It also shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors including:

(a) Contribution of each spouse to acquisition of the marital property, including contribution of a spouse as homemaker;

(b) Value of the property set apart to each spouse;

(c) Duration of the marriage; and

(d) Economic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children.

The relevant language for this discussion here is that the trial court, specifically the family court, “shall divide the marital property…in just proportions considering all relevant factors.” This language provides the family court with significant discretion in dividing the parties’ marital property, which has been illustrated and upheld in several cases decided by the Kentucky Court of Appeals, discussed below.

Of additional note are the factors enumerated in KRS 403.190 ( 1 )(a-d), specifically subsection (b) as to the value of the property awarded to each spouse. Returning to the example of the Old Carter Whiskey Company, Mark Carter purchased the company back at auction for $18,650,750 with several investment partners helping to fund the purchase. Under Kentucky law and provided that the distillery was an entirely marital asset, these net proceeds of this sale would either be distributed equally to both Mark and Sherri Carter, or in the alternative, held in escrow until the remaining property division was completed as a sort of nest egg for the trial court to equalize the parties’ marital property division at the conclusion of the proceedings.

               In Culver v. Culver, the Kentucky Court of Appeals addressed a trial court’s division of marital property pursuant to KRS 403.190 ( 3 ) and whether the trial court properly classified certain assets within the marital estate. 572S.W.2d 617, 619 (Ky. App. 1978). The trial court had previously ordered that if the parties could not agree upon the division of the marital property, then the marital property would be sold at public auction by the master commissioner. Id. The Court of Appeals ultimately reversed the decision of the trial court and remanded the case with special instructions to re-determine the division of the parties’ marital and non-marital property, but the court took no issue with the implementation of a sale by the master commissioner. Id.at 623.

               More recently in James v. James, the court considered whether the trial court had properly distributed funds received from the court ordered sale of marital property by the master commissioner. 636 S.W.3d 549 (Ky. App. 2021). The Court of Appeals again had no issue with the use of the master commissioner to sell marital property and distribute the proceeds accordingly, further supporting the authority of the trial court to authorize such a sale to begin with.

               Finally, the case that is perhaps most informative in answering the question posed is not a divorce case at all. Rather, in Faulkner v. Terrell, the Court of Appeals held that the sale of jointly held property has historically been held to be within the jurisdiction of the circuit court. 287S.W.2d 409 (Ky. 1956). This case is important to note because in Kentucky the family courts are a division of the circuit court system, albeit one that is devoted exclusively to handling domestic issues, therefore it would follow that the family courts would have the same authority to order the sale of jointly held property as a traditional circuit court.

When considering the question through this lens, the answer becomes rather clear, which is to say that Kentucky family courts do in fact have the authority to mandate the sale of jointly held property in order to equitably divide the marital estate. Family courts are vested with broad discretion to achieve the goal of equitable division of the marital estate, which would include ordering that the particular be placed up for public auction through the master commissioner or, conceivably, the use of a private auction firm as was the case with Old Carter Whiskey.

Knowing that a Kentucky family court has the authority to order this sort of sale may prove to be a motivating factor for parties that are unable to agree on marital property. The specter of a judicially mandated sale or public auction may loom large over parties who cannot agree on a valuation or the distribution of marital property during the course of divorce proceedings, which, when presented with this information regarding the presiding court’s authority to do so, may encourage all parties to return to the negotiating table to find a more preferable solution.

If you have questions about property division in divorce cases or need legal guidance, contact Jonathan D. Thiel in the Strauss Troy Domestic Relations Department at 513.621.2120 or jdthiel@strausstroy.com.