Kentucky Case Law Review by Topic: October 1, 2020 through November 30, 2020

Scott v. Scott, No. 2019-CA-0909-MR (Ky. App. 2020)

Civ. R. 60.02: mistake, timely
Marital Property: retirement benefits (railroad)

Dated: October 2, 2020
Not to Be Published
Affirming

As you read this, my OH blog entry is telling the KY one it didn’t know they were doing gifts this year.

The Court affirmed the May 6, 2019 order of the trial court denying W’s motion seeking relief from the March 14, 1990 divorce decree.

H was employed through the entirety of the marriage by CSX Railroad and earned Railroad Retirement Benefits; both the DRC’s report and the decree completely omitted any reference to H’s retirement benefits. H retired in January 2017, and W retired in July 2018. W applied for Social Security benefits and was told for the first time that she was eligible for Railroad Retirement Benefits, Tier II. (Two months after her retirement, she began receiving Tier I benefits, despite that the decree’s silence.)

Editor’s Note: This is federal statutory right for eligible spouses, and a right which preempts state domestic relations law.

Believing she was entitled to benefits under Tier II, in April 2019, citing no law, W filed a “Motion to Award Railroad Tier [II] Benefits” which the trial court interpreted it as a “motion to reopen the judgment” – i.e., to reopen the decree of dissolution “entered March 14, 1990 . . . .” “In substance, the motion sought relief from the twenty-nine-year-old decree.”

The trial court heard W’s motion on April 10, 2019, but asked each party to brief the issue. The trial court was concerned it lacked jurisdiction to hear such a motion. In her brief, or memorandum, W told the trial court her “motion is akin to a motion under CR 60.02(f), filed as a motion to reopen the Decree for extraordinary reasons affecting the ends of justice” and, in support, she cited O’Neal v. O’Neal, 122 S.W.3d 588 (Ky. App. 2002). After briefing, the trial court denied the motion based on its analysis of O’Neal. This appeal followed, and the Court agreed with the trial court that O’Neal more than adequately addresses this issue.

As in the instant case, the ex-wife in O’Neal sought “to reopen the divorce decree as it related to the property division and to award her a share of [her ex-husband’s] pension and characterized her motion as having been brought pursuant to CR 60.02(f).” 122 S.W.3d at 589. In O’Neal, when the ex-wife filed her motion, only 12 years had passed. The parties in the instant case were divorced 29 years before W filed her motion. Unlike the ex-wife in O’Neal who received none of her husband’s pension, W was granted Tier I Railroad Retirement Benefits. The ex-wife in O’Neal even pursued a subsequent, independent action pursuant to CR 60.03, which W had not done. Despite the more favorable fact pattern, the trial court would not grant the ex-wife in O’Neal relief under CR 60.02(f) or in her independent action under CR 60.03.

The bottom line in O’Neal is that the only reason the ex-wife could give for failing to address the pension issue at the time of the decree was mistake. O’Neal, 122 S.W.3d at 590. Under CR 60.02(a), relief from a judgment based on mistake must be brought within one (1) year and this motion was way out of time. Id. (“relief on the ground of mistake . . . was time barred”).

The Court could only conclude that CR 60.02(a): “mistake, inadvertence, surprise or excusable neglect,” is the section applicable here.

[W] acknowledges never knowing the government classifies Tier II benefits as marital property until she applied for Social Security benefits… To take her case from under the umbrella of CR 60.02(a), [W] first acknowledges her attorney at the time told her nothing about [H’s] pension benefits. She then claims the CR 60.02(f) “reason of an extraordinary nature justifying relief” in her case is that she “later learned that at the time [the attorney who represented her] was struggling with severe and ongoing personal problems from which he later died.” But this only helps explain why this mistake occurred; it is not an independent, extraordinary reason beyond mistake that would qualify her for relief under CR 60.02(f). Even if it did, whether the motion was “made within a reasonable time” under that subsection is discretionary with the lower court. Foley v. Commonwealth, 425 S.W.3d 880, 884 (Ky. 2014) (“two decades passed between . . . trial and . . . CR 60.02 motion, we are constrained to conclude that the trial court did not abuse its discretion in concluding that the present motion was not brought within a ‘reasonable time’”).

The Court agreed with and affirmed the trial court’s ultimate ruling that it had no jurisdiction to modify a previously entered judgment. Whether the motion was properly characterized as one brought pursuant to CR 60.02(a) more than a year after the decree, or one brought pursuant to CR 60.02(f) as not brought within a reasonable time, the trial court lacked particular-case jurisdiction to consider the untimely CR 60.02 motion. “’[A]lthough a court may have jurisdiction over a particular class of cases, it may not have jurisdiction over a particular case at issue, because of a failure by the party seeking relief to comply with a prerequisite established by statute or rule.” The Court ruled that the timely filing of a CR 60.02 motion was a prerequisite to the relief sought and W failed to comply with that prerequisite.

Qasem v. Qasem, Nos. 2018-CA-0427-ME & 2018-CA-0776-ME (Ky. App. 2020)

Marital Property: discovery (sanctions)

Dated: October 9, 2020
Not to be published
Affirming

This appeal recognized there was a long history of discovery non-compliance by H and a trial court order granting sanctions against H.

As sanction for H’s non-compliance, the trial court held that certain facts alleged by W “shall be designated as facts for purposes of future proceedings.” The designated facts included, among other things, the value of various parcels of real property owned by the parties, the value of the marital residence, income produced by the parties’ various businesses, H’s yearly income, and the value of certain personal property. The order also precluded H from presenting evidence to dispute the designated facts. The Court discussed that “[w]hen a party does not obey a court’s order to produce discovery, CR 37.02(2) provides that the court may accept designated facts as established for the party obtaining the order, prohibit the disobedient party from supporting or opposing designated claims or defenses, and strike pleadings of the disobedient party. CR 37.02(2); see also R.T. Vanderbilt Co., Inc. v. Franklin, 290 S.W.3d 654, 661 (Ky. App. 2009).”

In determining whether the sanction is appropriate, the court may consider the following factors: (1) whether the noncompliance was willful or in bad faith; (2) whether the other party was prejudiced by the noncompliance; (3) whether the disobedient party was warned that failing to cooperate could lead to dismissal; (4) whether less drastic sanctions were imposed or considered; and (5) whether the sanctions imposed bear a reasonable relationship to the seriousness of the noncompliance. Id. at 662.

The Court applied the above Franklin factors, and after reviewing the record, concluded that the trial court did not abuse its discretion by imposing Civ. R. 37 sanctions upon H.

Additionally, H asserted that he was entitled to an evidentiary hearing on the Civ. R. 37 sanctions, which he argued resulted in the trial court’s findings not being supported by substantial evidence in the record. H further argued that the failure to conduct an evidentiary hearing violated his due process rights. The Court found no requirement that a court conduct a full-blown evidentiary hearing to award sanctions against a party. “The issues raised under Civ. R. 37 look to discovery or procedural problems in the case rather than issues of proof that address the merits of the case. For purposes of appellate review, at minimum, the court below must articulate on the record the court’s resolution of the discovery dispute and any discretionary issues associated therewith. Greathouse v. Am. Nat’l Bank & Trust Co., 796 S.W.2d 868, 870 (Ky. App. 1990).”

The Court’s review of the record reflected that the trial court addressed the discovery problem in open court on at least three occasions, if not more. Additionally, the trial court articulated almost 17 pages of findings to support discovery sanctions. The record clearly reflected that H “willfully failed to cooperate in the discovery process which warrants more severe sanctions under CR 37. See Nowicke v. Cent. Bank & Trust Co., 551 S.W.2d 809, 810 (Ky. App. 1977).” The Court found no such abuse of discretion nor a violation of H’s due process protections, “given his willful disregard of discovery rules in this case. See Nowicke, 551 S.W.2d 809.” The Court emphasized that “the civil rules set out a pattern of conduct for the litigants and their proper application is left to sound discretion of a trial judge, which this Court must respect. Naive v. Jones, 353 S.W.2d 365, 367 (Ky. 1961).”

Gonzalez v. Dooley, No. 2019-CA-1014-MR (Ky. App. 2020)

Marital Property: debts, tax refund

Dated: October 16, 2020
To Be Published
Affirming in Part, Reversing in Part, and Remanding

W argued the trial court abused its discretion by treating the tax return as a marital asset, because it no longer existed at the time of trial. W claimed to have used the money for marital obligations, i.e., rent, electricity, water, car repairs, and caring for the minor child.

In April 2016, the parties filed a joint 2015 federal tax return with the IRS. Both parties testified that W received the refund, in the amount of $6,625, after the parties had separated but before their divorce trial. It was further uncontested that W kept the entirety of the refund. The trial court classified the refund as marital property and ordered W to reimburse H approximately half, or $3,300.

The Court ruled that whether the funds had been exhausted prior to the time of trial was irrelevant. What was important was that it was based on their 2015 incomes and filed with the IRS prior to their separation which made it “marital property, which must be divided equitably between the parties. Smith v. Smith, 235 S.W.3d 1, 5 (Ky. App. 2006).” “If the family court had found [W] spent the refund on marital obligations, [H] would not be entitled to half. However, [W] did not present any evidence, other than her own testimony, to establish it was spent on marital obligations. To the contrary, [W] presented conflicting testimony about its use. At one point, [W] testified she used the refund to pay her rent and bills after [H] left. However, at another time, she testified she used part of it to purchase a business named ‘Shorty G’s.’” The Court affirmed the award of $3,300 to H.

During the marriage, the parties incurred a debt of $2,500 from a cash advance taken out on H’s US Bank credit card. The money was given to W’s brother as a loan to buy an engagement ring. H testified he made all the payments toward this debt since the parties separated and, at the time of trial, a balance of $427.93 remained on the card. W did not contest these facts, however, W testified that her brother repaid the debt prior to the separation. The trial court found the US Bank credit card debt to be a marital debt and ordered W to reimburse H $1,250. The Court agreed that the division of marital debt was “within the discretion of the family court and the reviewing court [should] not disturb its ruling absent an abuse of discretion. Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001), overruled on other grounds by Smith v. McGill, 556 S.W.3d 552 (Ky. 2018).”

Additionally, the Court acknowledged that debts incurred during the marriage are not presumed marital. Id.

In considering whether a debt is marital, courts look at factors such as receipt of benefits, extent of participation, whether the debt was incurred to purchase marital property, whether the debt was necessary to provide for the maintenance and support of the family, and economic circumstances related to the parties’ ability to assume indebtedness. Id.

W asserted that this was not a marital debt because the cash advance of $2,500 was not taken out for marital purposes. “Unlike Neidlinger, and the typical cases in which this issue arises, [H] did not incur this debt behind [W’s] back. To the contrary, the parties accrued this debt to benefit [W’s] immediate family member. [W] had knowledge prior to the cash advance and does not dispute her agreement to loan her brother the money. Therefore, she actively participated in incurring the debt. Additionally, because the loan was for [W’s] brother, there was no non-marital benefit to [H].” The Court concluded there was no error by the trial court in the equitable division of a marital debt.

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