Kentucky Case Law Review by Topic: July 31, 2020 through September 30, 2020

“What’s a miniature gotta do to get some Ale-8 around here?”

Byrd v. Byrd, No. 2019-CA-000540-MR (Ky. App. 2020)

Civ. R. 76.12
Marital Property: equalization, equitable distribution, retirement benefits, valuation
QDRO: valuation date

Dated: August 14, 2020
Not to Be Published
Affirming

H argued that the trial court should not have equally divided his 401K since W chose not to work during the marriage. Additionally, H argued that the trial court used the wrong valuation date for the QDRO to divide his 401K. The trial court set the valuation date as 2 years after the filing of the petition for dissolution, and not the date of the divorce decree. However, the Court -after reminding H that “equitable is not always equal,” and that the trial court has wide discretion in dividing marital property- ruled that the arguments could not be addressed on appeal because they were not presented to the trial court in H’s motion to alter, amend or vacate. Indeed, “a party may not raise an issue for the first time on appeal.” Sunrise Children’s Services, Inc. v. Kentucky Unemployment Insurance Commission, 515 S.W.3d 186, 192 (Ky. App. 2016) (citation omitted).

The Court ruled that the trial court’s valuation of the marital home, relying on the Property Valuation Administration value, was not clearly erroneous, since H presented no evidence (no expert testimony, no appraisal) at the hearing regarding the value of the property. The Court rejected H’s argument that his testimony was more credible than W’s testimony regarding an equalization payment that the trial court required him to make to W for the sale of 13 hogs. There was no abuse of discretion or clearly erroneous conclusion “because judging the credibility of witnesses . . . is a task[] within the exclusive province of the trial court.” Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (citation omitted).

A final note on this case: Although H’s brief failed to comply with Civ. R. 76.12, as it did not contain any references to the record, supporting statements narrated in the summary, nor a statement of the preservation of the issues H raised in his appeal, the Court proceeded with review, but cautioned that it might not be so lenient upon a subsequent violation.

Orbank v. Orbank, Nos. 2018-CA-001268-MR & 2018-CA-001293-MR (Ky. App. 2020)

Marital Property: equalization, tracing

Dated: August 21, 2020
Not to Be Published
Affirming

H and W disagreed on the trial court’s award of $119,000 in proceeds from the sale of the marital home. H argued that he should have been awarded all the proceeds as his non-marital property, not just $90,000. W argued that H did not adequately trace his previous nonmarital property and it all became marital property, which should have been divided equally between them. The Court found the trial court’s ruling accepting H’s tracing evidence was not clearly erroneous, therefore assigning this property as nonmarital was correct. However, the Court stated that the trial court acted appropriately in awarding W a portion of the proceeds to equalize the property division.

The Court noted that W testified she was forced to continue working into her seventies because she could not afford to retire and there was very little marital property left to divide. Additionally, W argued that an equalizing payment made to her for personal property should have been awarded out of H’s nonmarital award. The Court found, however, that the trial court acted within its discretion in determining that W would receive an equalization payment out of marital funds because the personal property being equalized was marital property.

Mayo v. Mayo, No. 2019-CA-000158-MR (Ky. App. 2020)

Marital Property: appreciation (home), dissipation

Dated: August 21, 2020
Not to Be Published
Affirming

H contended the trial court erred by finding W had not dissipated $8,000 in marital funds by sending $5,000 to her family and loaning $3,000 to her friends. The Court found that substantial evidence supported the trial court’s finding that W did not dissipate marital funds; that H offered no proof, let alone proof sufficient to meet his burden by a preponderance of the evidence, that W defrauded him or acted with intent to deprive him of his share of marital property.

H argued that because no evidence was offered to explain the increase in value of the marital residence, except for general economic conditions, the increase in value should be considered nonmarital property under KRS 403.190(2)(e), which provides “[t]he increase in value of property acquired before the marriage to the extent that such increase did not result from the efforts of the parties during marriage” is nonmarital property. The Court ruled that the trial court did not err in determining the increase in value of the parties’ marital home was marital property. The Court discussed that the trial court was required to infer an increase in value based on W’s testimony that she made improvements to the yard and patio, but that she did not know how much those improvements increased the value of the home. It should be noted that there was no proof from H to the contrary. Additionally, the trial court’s finding was further supported by the fact that marital funds were used to pay the mortgage.

Cornatzer v. Cornatzer, No. 2019-CA-000608-MR (Ky. App. 2020)

Marital Property: retirement benefits
Property Settlement Agreement: ambiguity

Dated: August 21, 2020
Not to Be Published
Affirming

H argued that the trial court improperly interpreted a paragraph regarding pensions and retirement accounts in the property settlement agreement incorporated into the divorce decree. H maintained that the plain meaning of the language provided that upon W’s retirement, H’s obligation to pay W her share of his retirement proceeds terminated, and that his marital share of W’s retirement should then be credited against the sums he previously paid to W.

The paragraph stated in part, “[W]hen [W] retires [H] will be entitled to his marital share and it shall be credited against sums paid to the [W].” H noted that the term “paid” is past tense and must necessarily refer to payments previously made to W; he argued it cannot refer to future payments to W, as the language “to be paid” is not found in the paragraph. Further, H argued the rule of contra proferentem, i.e., that ambiguities in a contract are construed against its drafter, requiring his interpretation over W’s interpretation. See McMullin v. McMullin, 338 S.W.3d 315 (Ky. App. 2011). Alternatively, H argued there was no meeting of the minds sufficient to form a contract, and that the interpretation asserted by W was unconscionable.

The Court found that the trial court correctly interpreted the agreement as requiring ongoing payments to W representing a portion of H’s retirement income, subject to a credit for H’s entitlement to a portion of W’s retirement income. The Court noted that the paragraph in question disposed of marital assets in a manner substantially like the scheme set out in KRS Chapter 403, does not contain a termination date, and was not ambiguous or unconscionable.

Hays v. Hays, No. 2018-CA-001718-MR (Ky. App. 2020)

Maintenance: retirement benefits
Marital Property: division, retirement benefits (military) (survivorship)
Property Settlement Agreement: unconscionable

Dated: August 28, 2020
Not to Be Published
Affirming in Part, Reversing in Part, and Remanding

W argued the trial court abused its discretion in its division of H’s military retirement pay and by declining to award her maintenance.

First, W complained that the trial court erred by refusing to enforce the parties’ settlement agreement. The Court agreed with the trial court that the settlement agreement was unconscionable because the parties had not reached a meeting of the minds as to essential terms. See Cinelli v. Ward, 997 S.W.2d 474, 477 (Ky. App. 1998) (Holding “an agreement is unenforceable for indefiniteness if the resolution of material terms is left open to future negotiations unless a standard is provided from which a court can supplant the open terms should the negotiations fail”). The Court noted that the testimony of both parties at the final hearing indicated that they had not reached an agreement on what portions of H’s military retirement were subject to division, nor on the allocation of the monthly premium for the Survivor Benefit Plan (SBP) election. The lack of agreement on these provisions rendered the entire agreement unenforceable because Kentucky follows the traditional “all or nothing” approach. Id. at 478. An agreement is either enforceable as a binding contract or it is unenforceable as something less. Id.

Next, W argued that the trial court abused its discretion in its division of H’s military retirement and the rest of the marital property. W contended that the trial court failed to properly divide H’s military retirement as a marital asset, instead the trial court treated it as only temporary maintenance. W argued that the trial court should have divided H’s gross retired pay, rather than his disposable retired pay, which is gross retired pay less authorized deductions. The Court determined that the trial court’s division of H’s disposable retired pay was not erroneous. The Court restated from Copas v. Copas, 359 S.W.3d 471 (Ky. App. 2012): “disability payments are deducted from the retiree’s gross military retired pay, resulting in the retiree’s ‘disposable retired . . . pay.’” Id. at 478 (citing Snodgrass v. Snodgrass, 297 S.W.3d 878, 882 n.6 (Ky. App. 2009)). See also 10 U.S.C. § 1408(a)(4). The Court in Copas further stated “[b]ecause the retiree’s disposable retired pay is lower when he or she receives disability payments, the retiree’s former spouse’s portion of the retiree’s retired pay is also reduced.” Id. While the Court recognized the potential inequity of this situation, it concluded that the applicable federal law requires that a state court only provide for the division of disposable retired pay, not gross retired pay. Id. at 478-79.

Further, the Court found no abuse of discretion in the trial court’s assignment of the SBP election premium to W. 10 U.S.C. § 1452(a)(1)(A)(iv)(I) provides that the retired pay of a participant in the SBP shall be reduced by 6 ½%, representing the premium for the election. While the trial court had the discretion to allocate this reduction between the parties, the Court could not find that it was compelled to do so under the circumstances.

The Court examined the trial court’s decision to terminate W’s receipt of H’s military retirement pay when she reaches the age of 62 and concluded that the trial court treated her receipt of benefits as a form of maintenance, rather than a distinct marital asset in its own right. It is well-established that it is the pension, not the benefits, which is the marital asset subject to division by the court. Brosick v. Brosick, 974 S.W.2d 498, 503 (Ky. App. 1998). The same holds true for vested military retirement benefits. The Court determined that the trial court’s findings were not sufficient to determine whether the trial court mischaracterized the asset. For purposes of remand, the Court dictated that the marital portion of H’s military retirement be treated as a marital asset subject to division by the court. The Court ruled that the trial court set forth its division of H’s retirement, including any reasons to reduce W’s share of the asset through an early termination of benefits.

Lastly, W argued that the trial court abused its discretion by declining to award her maintenance. Given her age and disability, W argued that the award of marital assets was insufficient to meet her reasonable needs. W had agreed to give up her interest in the real property in exchange for a greater share of H’s military retirement. Since the division of H’s military retirement was the primary matter in dispute, the Court ruled that the family court re-evaluate W’s entitlement to maintenance once it determined the appropriate division of that asset.

Naramore v. Naramore, Nos. 2019-CA-00939-MR & 2019-CA-000992-MR (Ky. App. 2020)

Maintenance: retirement benefits

Date: September 11, 2020
To be Published
Vacating and Remanding

The Court vacated the trial court’s decree with respect to the amount and duration of maintenance and remanded for entry of a new maintenance award.

As a division of marital property rights, W was awarded half of the marital value of H’s retirement accounts, consisting of two 401(k)s and a separate pension account. H testified it was his understanding that after a court order W would be able to get a lump sum for her portion of the pension and 401(k); however, he was not sure whether penalties would be assessed against W if she withdrew the funds before retirement age. H argued that although W was not able to work, he believed she could meet her needs by withdrawing money or taking a lump sum payment from the 401(k)s and pension accounts awarded to her in the dissolution. However, since W was in her fifties, the Court reasoned that she could easily live several more decades and would need those funds for her own retirement, so the funds in those retirement accounts could not be considered a readily available source of income from which W could meet her present day, pre-retirement age needs.

Even though the trial court determined W had reasonable expenses of $3,500, it only awarded her $1,500 per month in maintenance. The Court discussed that W only had the property awarded to her in the dissolution to cover the monthly shortfall of $2,050 and that if she did not take early withdrawals of the 401(k)s and pension, she would exhaust all the cash funds awarded to her in a little over a year. Meanwhile H will continue living the same lifestyle the couple previously enjoyed.

The Court noted that the trial court failed to offer any explanation regarding the disparity between W’s reasonable expenses and the maintenance payment, and its failure to consider whether H had the ability to pay the maintenance payment, considering the “enormous” disparity between H and W’s monthly incomes. Based on this disparity and W’s inability to provide for herself, the Court agreed that W should have been awarded more maintenance, and that leaving W with a shortfall of over $2,000 a month was unconscionable and a clear abuse of discretion. See Powell v. Powell, 107 S.W.3d 224 (Ky. 2003).

The Court instructed that on remand, the trial court should reassess the amount of maintenance awarded to W to even out the disparity and provide W with enough resources to allow her a lifestyle similar to the one she enjoyed during the parties’ marriage. The Court also vacated the maintenance award with respect to duration and remanded for entry of a new award. The trial court had ordered that the maintenance was to cease when W “[reached] the age to receive Social Security.” Since there was no evidence submitted regarding when this would occur or how much W would be eligible to receive, the Court ruled that this decision was arbitrary. See Russell v. Russell, 878 S.W.2d 24, 27 (Ky. App. 1994).

When the evidence regarding entitlement to and amount of future benefits is speculative, it is better practice to enter an open-ended award that can be reduced or eliminated pursuant to KRS 403.250. See Calloway v. Calloway, 832 S.W.2d 894 (Ky. App. 1992).

Day v. Day, No. 2019-CA-000972-MR (Ky. App. 2020)

Civ. R. 52.01
Civ. R. 76.12
Marital Property: retirement benefits

Dated: September 18, 2020
Not to be Published
Vacating and Remanding

Editor’s Note: This case provides an excellent primer on Civ. R. 52.01 and Civ. R. 76.12.

The Court vacated the trial court’s order allocating the parties’ marital property because the order lacked written findings of fact, and remanded for further proceedings.

The parties had only been married for 2 years, had no children, and only had as much marital property as might be expected of a short-duration marriage. The trial court held W solely responsible for various debts and held H responsible for only half of a $2,000 debt. The trial court divided W’s 401K plan by determining that it totaled exactly $30,000, and that exactly $10,000 of that amount was marital property she was obligated to share equally with H. The trial court identified personal property (“tools . . . personal paper . . . collectibles, furniture and appliances”) with a value of $7,500 and without determining whether this personal property was marital or non-marital, all of it was awarded to H.

After the trial court issued the order, W retained an attorney who filed a motion to alter, amend, or vacate it. The trial court denied the motion and this appeal followed. H failed to file an appellee brief. The Court noted that W’s brief failed to comply with Civ. R. 76.12(4)(c)(v), with no supportive references to the record and citations of authority pertinent to each issue of law. Nor did W say how she preserved an argument that the trial court’s allocations and awards were erroneous or an abuse of discretion. That is, the Court could not tell if she presented any evidence to support her claims of error or abuse. Complying with the requirements of Civ. R. 76.12 would have solved that failing. The Court wrote: “sadly, failing to follow CR 76.12 has become nearly endemic among Kentucky appellate advocates.” Clark v. Workman, _ S.W.3d _, No. 2019-CA000805-ME, 2020 WL 3582597, at *1 (Ky. App. Jun. 26, 2020) (finality on August 11, 2020).

H also failed to comply with Civ. R. 76.12 “in the most dramatic way – by failing to file any brief at all.” As with a noncompliant appellant’s brief, the rule provides a variety of sanctions when the appellee fails to file a brief at all. The Court continued:

Of course, this Commonwealth has embraced a “doctrine of substantial compliance in the area of appellate practice[.]” Ky. Farm Bur. Mut. Ins. Co. v. Conley, 456 S.W.3d 814, 818 (Ky. 2015). Unlike a strict compliance rule, there are as many versions of substantial compliance as there are judges to measure it. By nearly any measure, both parties to this appeal have failed to substantially comply.

The Court further found that the trial court had “fallen short, too,” writing:

“The provisions of CR 52.01 require the trial court to engage in a good faith effort at fact-finding and to include those facts in a written order.” Murry v. Murry, 418 S.W.3d 432, 435 (Ky. App. 2014). In Anderson v. Johnson, the Kentucky Supreme Court explained:

To review the judge’s decision on appeal, it is important to know what facts the judge relied on in order to determine whether he has made a mistake of fact, or to even determine if he is right at law, but for the wrong facts. If a judge must choose between facts, it is clearly relevant which facts supported his opinion, 350 S.W.3d 453, 455 (Ky. 2011).

In this case, the family court… failed to make any factual findings to support its allocation. Furthermore, the implicit fact-finding of the dollar amounts of debt and assets is highly suspect because they, conveniently, are round, even-dollar sums, such as $8,000, $7,000, $30,000, $10,000, and even $3,400. Only the most extraordinary coincidences, verging on miracles, could explain such numbers.

Because of the alleged failure of the trial court to comply with its obligation under Civ. R. 52.01, the Court found that it “[could not] even conduct a review for manifest injustice,” adding “and that is all [W] is entitled to here.” Thus, the Court vacated the trial court’s order and remanded to allow the trial court’s compliance under the rule, and gave this warning to the parties:

This Court expects that, in any subsequent appeal, the parties’ briefs will be proof of their commitment to future compliance with CR 76.12.

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