Kentucky Case Law Review by Topic: December 1, 2022 through February 28, 2023

Few outside of historians know that Kentucky’s famous state motto actually originated in a request for a dance. These origins can still be seen in the state seal and flag today.

Felix v. Rivera, Nos. 18-CI-00238, 2020-CA-000872-MR (Ky. App. 2022)

Marital Property: abuse of discretion, division, retirement benefits (military)
Property Settlement Agreement

Dated: December 22, 2022
Reversing and Remanding
Not to be Published

As part of the parties’ 2008 divorce, Wife was awarded a portion of Husband’s military retirement and child support for the parties’ minor children. This support amount was lowered by the originating New Mexico court in 2015, following one child’s emancipation, and Wife relocated to Kentucky.

At Husband’s retirement from active duty in 2018, the parties had not completed the documents necessary for Wife to begin receiving her share of the retirement. Simultaneous to this, Husband’s income dropped. In July and August 2018, Wife filed motions seeking enforcement of both Husband’s child support obligations and the amounts assigned to her from Husband’s military retirement. Husband, who at that time lived in Puerto Rico, filed motions in opposition and requested a telephonic hearing. The trial court denied Husband’s motions, and following a 2019 hearing found him in contempt for failure to pay child support, and awarded Wife $910.09/month in retroactive payments from Husband’s military retirement.

The [trial] court made its computation by simply multiplying $2,735.43 (the sum listed as “gross pay” on the retiree account statement provided by [Husband]) by 33.3%.

Husband subsequently retained counsel, and while his child support obligation was lowered in consideration of his diminished pay, and his contempt finding purged, the trial court’s calculation of his retirement payment obligation remained. Husband’s appeal followed.

Addressing Husband’s third assignment first, the Court agreed, finding that the trial court had abused its discretion when it denied Husband’s motion to appear telephonically.

The Court next agreed that the trial court miscalculated Wife’s share of Husband’s military retirement (to be repaid her by Husband, retroactively), and misapplied the below assignment terms from the parties’ original agreement:

The former spouse [Wife] is awarded a percentage of the member’s disposable military retired pay, to be computed by multiplying 50% times a fraction, the numerator of which is 160 months of marriage during the member’s creditable military service – 240 months…

Should [Husband] serve beyond 240 months Defense Finance and Accounting Systems (DFAS), will adjust this percentage downward accordingly…

At the time of his retirement, Husband had indeed served more than 240 months, necessitating the reduction spelled out above (but not applied in the trial court’s calculation).

Noting Husband’s rights to increases in his benefit due to post-marital service, and the fact that neither party had submitted a revised calculation for Wife’s share of the benefits, the Court reversed and remanded the matter back to the trial court to await the final calculation of such share from DFAS, and award Wife a lump sum based on the same.

Finally, the Court again agreed with Husband, who argued that the initial calculation of his child support arrearage failed to account for his decrease in pay following his retirement. The Court found that, had the trial court allowed Husband to participate in its hearing telephonically, the parties’ agreement to reduce his child support at retirement would have become known, and the trial court abused its discretion in failing to do so.

Parties have the power to orally modify child support, and courts have the power to recognize such agreements when proven with certainty, they are fair and equitable, and if they would have been reasonably granted had modification been sought.

Thielmeier v. Thielmeier, No. 2021-SC-0532-DG (Ky. 2022)

Attorney Fees
KRS 403.190
Marital Property: abuse of discretion, appreciation, final hearing, goodwill, retirement benefits, valuation, valuation date
QDRO
Witness: expert, credibility

Dated: December 15, 2022
Affirming in Part, Reversing in Part, and Remanding

Editor’s Note: To read our previous post, covering this case when it was with the Court of Appeals, click here.

Following the parties’ dissolution, Wife appealed, arguing that the trial court abused its discretion in its apportionment of Husband’s 401(k) and medical practice ownership, her maintenance award, and in its decision not to award her additional attorney fees. The Court of Appeals affirmed the trial court’s order, and Wife’s appeal to the Supreme Court of Kentucky followed.

In this appeal, Wife again argued that the trial court erred in its division of Husband’s 401(k), its valuation of his ownership in the medical practice, its calculation of her maintenance award, and its decision not to award her additional attorney fees.

Finding that the trial court failed to “engage with KRS 403.190” in its decision to utilize the parties’ 2017 separation date (at which time Husband had moved out of the marital residence), rather than the 2019 date of decree, the Court reversed and remanded. The Court ordered that the trial court shall utilize the later date of decree, and show how its ruling conforms to KRS 403.190(1)(a)-(d) when it does so. The Court’s findings stemmed in part from Wife’s ongoing care for the medical needs of the parties’ youngest child, by which the Court found she continued to contribute to Husband’s ability to earn and add to his 401(k), even after he left the marital residence.

Wife next argued that the trial court erred in its valuation of Husband’s medical practice (a) when it adopted the ‘buyout’ value under his employment agreement; and (b) when it utilized a date prior to the date of decree. After the parties separated, but prior to the date of decree, one of Husband’s medical practice partners retired, triggering a buyout of his ownership interest by the other owners. In deciding how to value the practice, the trial court heard testimony from three different witnesses, including an expert appointed by the trial court, an expert hired by Wife, and the medical practice’s business manager. These three witnesses presented significantly different values for the medical practice, which were calculated via different methods, and the trial court ultimately selected the middle amount. This amount was calculated pursuant to the employment agreement, based on the amounts recently paid to the retiring co-owner.

Wife argued that the trial court improperly excluded goodwill in its chosen valuation of the practice, but the Court disagreed. Referring to the trial court-appointed expert’s testimony, the Court noted that -under the ‘capitalization of income approach’ - the practice had a negative value and therefore had no goodwill. Wife’s own expert had only found goodwill after making ‘add backs’ the trial court’s expert deemed inappropriate, including ERISA plan expenses. Thus, the Court wrote, such exclusion of goodwill “was not clearly contrary to the weight of the evidence.”

Wife also argued that the trial court erred in its use of the ‘buyout’ value for Husband’s medical practice, rather than her expert’s. Noting the above-mentioned issues with Wife’s expert’s valuation, as well as incongruities in some of the expert’s other testimony, the Court again disagreed, and affirmed the trial court’s use of the ‘buyout’ value of Husband’s business.

The Court disagreed, however, with the trial court’s use of a date prior to the date of decree. In utilizing the ‘buyout’ value for Husband’s medical practice, the trial court calculated his interest therein as though he retired simultaneously with the retired partner upon whose buyout the valuation was based. Husband’s interest by the date of decree, however, increased by his receipt of a share of said retiree’s ownership interest, from 26% to 35.14%.

[T]he [trial] court provided absolutely no reasoning as to why it awarded [Husband] 100% of the [increase in] ownership interest. It simply stated “[e]ven though [Husband] currently owns a greater share of ACE, the [trial court] finds that the additional shares acquired in 2018 should be awarded to him solely.” Similar to the division of the ACE 401(k), the [trial] court was required to address why its chosen division was just under the factors enumerated in KRS 403.190(1)(a)-(d), and its failure to do so was error.

Once again citing Wife’s continued contributions for their son’s medical care, the Court remanded to the trial court to utilize the date of decree in its valuation of Husband’s ownership interest in the medical practice.

Wife then argued that the trial court erred when it denied her an award of additional attorney and expert fees. In its denial, the trial court noted amounts already paid by Husband, but failed -the Court writes- to consider all funds prior to the date of decree as marital. The Court thus remanded and ordered payment to Wife for attorney and expert fees.

Because Wife’s maintenance award will need to be revisited following the remand of other matters subject to her appeal, the Court declined to address it in its ruling.

Werner v. Crowe, Nos. 17-CI-00039, 2020-CA-1507-MR (Ky. App. 2023)

Civ. R. 60.02: fraud
Marital Property: disclosure
Property Settlement Agreement: regret, unconscionable

Dated: January 6, 2023
Affirming
Not to be Published

The parties in this case began dissolution proceedings in 2017, and filed their property settlement agreement in 2018, along with other filings including a waiver of verified disclosure statements. A decree followed, incorporating the parties’ agreement, which the trial court found “not unconscionable.”

In 2019, Wife filed a Civ. R. 60.02 motion, seeking to have the decree set aside or modified to include division of two accounts that had not been identified in the parties’ agreement or decree, but were divided by a later trial court order. The trial court denied Wife’s motion, and she appealed, arguing the trial court should have set aside the decree for failure to determine the conscionability of the parties’ agreement, and conduct on the part of the Husband amounting to fraud. Wife further argued the trial court lacked post-decree jurisdiction to effect property division of the two accounts at issue.

Concerning relief under Civ. R. 60.02, the Court disagreed. Noting that Wife’s appeal failed to “connect what she alleges were procedural errors with any specific ground identified in [Civ. R. 60.02],” the Court turned to Wife’s argument that the trial court failed in its determination of the conscionability of the parties’ agreement. Wife, the Court writes, could have raised any alleged omissions in a direct appeal, and “it is well-established that [Civ. R. 60.02] relief is only available for issues that could not be raised in direct appeal.”

Indeed, [Wife] devotes much of her brief to the premise that the [trial] court’s assessment of “conscionability” was indicative of “clear error,” which is not a ground for relief under [Civ. R. 60.02], but rather a standard that would have applied to direct appellate review of the [trial] court’s decree. See CR 52.01.

Noting that the trial court reasonably relied on the materials provided by the parties, the Court also dismisses Wife’s argument concerning the failure of the parties to exchange verified disclosures, which Wife -the Court notes- expressly waived.

The Court similarly dismissed Wife’s suspicions of fraud on the part of Husband as grounds for her Civ. R. 60.02 motion, noting that said suspicions were just that, and sharing the trial court’s concerns about a subsequent discovery motion of Wife’s.

At a February 17, 2020 hearing, the [trial] court questioned [Wife’s] counsel about [Wife’s] “motion to permit discovery while [a] 60.02 motion is pending.” It asked whether the goal of her motion was, paradoxically, to reopen the underlying proceedings for the purpose of allowing [Wife] to conduct open-ended discovery that might lead to evidence of fraud which, in turn, might justify reopening the underlying proceedings based upon fraud.”

Wife, the Court writes, could have engaged in discovery, litigated the conscionability of the parties’ agreement, otherwise exercised diligence prior to entry of the decree, or raised her issues in a direct appeal.

Finally, the Court rejected Wife’s argument that the trial court lacked jurisdiction to assign to Husband the two accounts that were not identified in the decree. While the accounts had not been included in the parties’ agreement, Wife herself had agreed at a hearing that said accounts were included in the overall equalization of the parties’ assets (though the accounts were not identified in the trial court’s order following the hearing).

Reynolds v. Reynolds, Nos. 09-CI-00930, 2021-CA-1239-MR (Ky. App. 2023)

Civ. R. 52.02 & 52.09
Civ. R. 60.02
Marital Property: survivorship

Dated: January 20, 2023
Affirming
Not to be Published

Following the parties’ 2010 dissolution, an order was entered assigning Wife a marital share of Husband’s Civil Service Retirement System (CSRS) pension, as well as a Former Spouse Survivor Annuity (FSSA) entitling Wife to a survivor benefit should Husband predecease her “in the same amount to which [she] would have been entitled if the divorce had not occurred.” Husband subsequently filed a motion to amend the order to exclude accruals after the parties’ divorce, but the matter was never ruled on or brought up again by the parties.

In 2021, Husband retired and began receiving a reduced pension per the order awarding Wife her interest and survivor benefit, and filed a new motion seeking to amend the order. Following a hearing, the trial court denied Husband’s motion, finding it lacked jurisdiction to amend the order 11 years later, and was not convinced Wife’s allegedly inflated FSSA award had been in error. Husband appealed.

Agreeing that the trial court lacked jurisdiction due to the time elapsed, but noting via footnote “that no argument has been made regarding the trial court vacating the allegedly incorrect order pursuant to [Civ. R. 60.02],” the Court affirmed and declined to provide analysis on the merits or intentionality of Wife’s FSSA assignment.

Cummings v. Cummings, Nos. 20-CI-00732, 2022-CA-0387-MR (Ky. App. 2023)

Marital Property: burden of proof, equitable distribution, goodwill

Dated: February 17, 2023
Affirming in Part, Reversing in Part, and Remanding
Not to be Published

Following a period of separations, Wife filed for dissolution in 2020, and the trial court entered a decree in 2022. Husband’s subsequent motion to correct a clerical error was granted, but his motion to alter, amend, or vacate the order was denied. Husband’s appeal followed.

At the heart of the appeal was Wife’s extensive, valuable jewelry collection, parts of which she failed to turn over, and removed without Husband’s knowledge. While the trial court acknowledged that much of the jewelry was unaccounted for, it did not find Wife had a burden to prove what had happened to the collection. The Court disagreed, and noted Husband had produced “extensive documentary evidence” of their purchases during the marriage, and Wife’s own admission of removing most of the jewelry prior to trial. The Court thus remanded the matter to the trial court to order that Wife produce the jewelry collection for identification as part of the overall division of marital property.

Husband next argued that the trial court erred in its division of his business-related accounts, noting the business’ substantial value at the time of the marriage, and disputing Wife’s contributions thereto. While the Court acknowledged “that there was evidence that would have supported a different division of the marital assets,” it declined to find that the trial court was clearly erroneous in its division of the accounts.

Husband finally argued that the trial court erred in the division of proceeds from the sale of his veterinary practice, and alleged that Wife played a role in the disappearance of records that would have helped to substantiate his pre-marital claims in the business’ value. The Court disagreed, noting that much of the business’ sale price had been attributed to goodwill which was marital in nature.

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