Kentucky Case Law Review by Topic: August 1, 2021 through September 30, 2021

“Sure you can use my property for your fall family photo shoot,” the farmer told me. “The horses won’t bother you at all.”

Mahl v. Mahl, No. 2019-CA-0874-MR (Ky. App. 2021)

Maintenance
Property Settlement Agreement: unconscionable

Dated: August 6, 2021
Not to be Published
Reversing and Remanding

At the time of their 2007 divorce, both parties were receiving disability benefits, with Husband’s (substantial) benefit set to expire upon his turning 65 in 2017. The trial court equally divided marital property, awarding Wife $764,117 from Husband’s IRA, $59,368 from a separate investment account, and $6,000 in monthly maintenance payments to terminate upon Husband’s reaching the age of 65.

Both parties appealed, with the Court affirming the trial court’s decision in 2009. During the pendency of the appeal, however, it was revealed that the parties had been victims of a Ponzi scheme in which a substantial amount of money was lost, including the funds in the two investment accounts from which Wife was to receive her marital property awards.

In 2016, Wife filed a motion to modify maintenance, citing Husband’s return to work, her own losses in the Ponzi scheme, and non-receipt of the marital property awards from Husband’s investment accounts. The trial court agreed, seemingly blaming Husband in part for the 2009 losses, and rejected his argument that Wife’s motion was barred by laches. Determining that the 2007 decree was an enforceable judgment, the trial court ordered Husband pay $8,688 in monthly maintenance until Wife’s “remarriage, cohabitation or death, or until she collects… the $764,117.00 and $59,368.00 payments, whichever comes first.” Husband appealed.

In reversing and remanding the trial court’s decision, the Court noted Wife’s undisputed receipt, over the ten-year span originally set forth in the decree, of $720,000 in maintenance payments, in addition to more than a million dollars in marital property not lost to the Ponzi scheme. The Court further noted the mutuality in the parties’ unfortunate investment decision, and Husband’s own losses therefrom, as well as Wife’s other financial decisions subsequent to the divorce.

Regardless of whether [Husband] is able or willing to work to earn money now or in the future, these disability payments –which were the source of his income for payment the original maintenance award– have stopped. It is manifestly unfair under these facts to essentially require him to keep working well past traditional retirement age in order to pay maintenance to [Wife].

The Court thus found that the trial court abused its discretion in modifying the maintenance award, and suggested that -if the decree is an enforceable judgment- Wife may seek its enforcement on remand to the trial court or by separate action subject to time limitations.

Russelburg v. Russelburg, No. 2020-CA-1287-MR (Ky. App. 2021)

Attorney Fees: enforcement of property settlement agreement
Civ. R. 60.02: mistake, timely
Marital Property: retirement benefits (kdc, kppa, military)
Property Settlement Agreement

Dated: August 6, 2021
Not to be Published
Reversing and Remanding

As part of the parties’ 2015 property settlement agreement, Husband was awarded his own military pension as his non-marital separate property, and half of Wife’s Kentucky State pension and deferred compensation account, both of which were deemed ‘marital property’ in the agreement’s provisioning.

In 2016, Husband filed a motion to enforce the agreement, citing Wife’s refusal to cooperate with the division of her retirement accounts as called for under the parties’ agreement. At a subsequent hearing, Wife unsuccessfully argued that the parties’ agreement did not apply to the entirety of her two retirement benefits, with the trial court affirming the terms of the parties’ agreement, and finding that said terms unambiguously assigned half of the benefits to Husband as of the date of decree.

Wife did not appeal the trial court’s order, but filed a Civ R. 60.02 motion for relief from the court’s decree arguing a mistake in the terms of the parties’ agreement, alleging new, not previously knowable evidence, and that the inclusion of alleged non-marital benefits in Husband’s assignment stemmed from a mutual mistake of the parties (and requesting relief under Civ. R. 60.01).

Wife’s 2017 motion was denied both as untimely (for relief under Civ. R. 60.02(a) or (b)), and because Civ. R. 60.01 did not apply to mistakes by parties or their counsel. Wife appealed, and also filed a motion for relief under Civ. R. 60.02(f) “which provides that the trial court may grant relief from a judgment ‘for any other reason of an extraordinary nature[.]’” The Court affirmed the trial court’s overruling of Wife on all motions.

Husband subsequently filed a motion for attorney fees related to Wife’s motions and appeal, referencing language in the parties’ agreement under which a party in breach thereof “shall be obligated to pay the reasonable and necessary costs, including reasonable attorney’s fees, incurred by the non-breaching party to enforce or protect his or her rights hereunder.”

The trial court denied Husband’s motion, and his appeal followed. The Court reversed and remanded the trial court’s decision, finding that Husband was entitled “by contract” to receive such fees, stating:

[Wife] plainly failed and refused to divide equally the amount of her retirement benefits with [Husband]. She was aware of the obligation to do so. Her deposition testimony confirms that she was also aware that she would be held responsible for attorney’s fees incurred by [Husband] both to enforce and protect his rights under the terms of the agreement.

Thielmeier v. Thielmeier, No. 2020-CA-0707-MR (Ky. App. 2021)

Attorney Fees
KRS 403.190
Marital Property: abuse of discretion, de facto date (termination of marriage), equitable division, retirement benefits, standard of review, valuation
Witness: expert

Dated: September 10, 2021
Not to be Published
Affirming

Editor’s Note: This matter was since ruled on by the Supreme Court of Kentucky. Click here to read our blog’s summary of the Court’s opinion.

Husband and Wife married in 1985, and Husband thereafter co-founded an anesthesiology practice, his interest in which (and value thereof) was a matter of consideration for the trial court and in Wife’s appeal. As additional physicians joined the practice over time, ownership was further split among them so that Husband owned 26% of the practice at the time of the parties’ separation. By the time of the decree, however, another physician had retired, increasing said ownership to 35.14%. Under the practice’s organizing agreement, partner physicians were entitled to a buyout of their interest at the time of separation from employment/ownership equaling 93% of net collectible accounts receivable.

Throughout the course of trial court proceedings, three different valuations of Husband’s ownership were presented to the trial court. The practice’s business manager provided testimony that Husband’s outgoing co-founder had received $209,721 for his interest in the business, which was the same percentage (26%) as Husband’s at that time. The trial court also appointed an independent accounting firm to conduct its own analysis, which valued Husband’s 26% interest at $133,120. Finally, Wife’s expert, an attorney and CPA, testified as to his own method and valuation of the interest equaling $1,350,456.

The trial court ultimately held that the methods of its appointed expert were the most persuasive, but relied on the amount paid to the outgoing partner in valuing Wife’s marital property interest in the business. The increase in ownership share, which occurred after the parties’ separation, but prior to the date of decree, was awarded solely to Husband.

Similarly, the trial court awarded Wife 50% of the value of Husband’s employer-sponsored retirement account, valued as of the date of separation of the parties (awarding Husband 100% of accruals thereafter), rather than as of the date of decree.

The trial court also declined to award Wife additional maintenance.

Finally, the trial court declined to award Wife additional attorney fees, citing significant amounts already paid by Husband to Wife’s attorney and to experts, and Wife’s own marital property award.

In its consideration of Wife’s appeal (on the valuation of Husband’s business interest and retirement account, her maintenance award, and the trial court’s refusal to award her additional attorney fees), the Court applied a standard of review based on whether the trial court’s findings were ‘clearly erroneous’ (based on KRS 403.190). The Court found no such abuse of discretion in any of the trial court’s findings.

We believe the [trial] court was not clearly erroneous in valuing [Husband’s] 26% share in [the practice] at $209,721. The trial court heard testimony from three experts and [Husband] regarding the value of [the practice]. The trial court found the court-appointed expert’s testimony was the most reliable; however, the [trial] court chose to value [the practice] pursuant to [Husband’s] testimony that the business should be valued based on the partnership agreement. This choice increased the value of [Husband’s ownership in the practice] by over $76,000 and increased [Wife’s] share of the business by over $38,000.

The Court similarly found no abuse of discretion in the award of Husband’s retirement account valued as of the parties’ separation, rather than the date of decree (as sought by Wife). Citing Husband’s departure from the marital home, the Court could not find the trial court’s award of contributions from such date to Husband alone, unreasonable.

The Court affirmed the trial court’s non-award of additional attorney fees and maintenance sought by Wife, again citing its standard of review and findings that none of the trial court’s rulings had been clearly erroneous.

In an attached dissenting opinion, one of the members of the Court agreed with the Court’s application of the clearly erroneous standard of review, but found some abuses of discretion on the part of the trial court. Noting the needs of the parties’ minor child, the dissenting opinion argued that the trial court had abused its discretion in firstly awarding Husband 100% of the increases in value of his ownership share in the practice and his retirement account, and secondly in declining to outline its reasoning for doing so, following appropriate requesting motions by Wife.

Editor’s Note: For more on de facto termination dates, and how marital property may be affected, check out the case law summary for Phelps v. Phelps, and Shaida v. Shaida here.

Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.