Kentucky Case Law Review by Topic: March 1, 2023 through April 30, 2023

“Oh, you can draw your name with a sparkler? Watch this.”

Bruenger v. Miller, Nos. 19-CI-004039, 2022-CA-0701-MR (Ky. App. 2023)

Attorney Fees
Civ. R. 60.02
Marital Property: life insurance

Dated: March 10, 2023
Affirming
Not to be Published

Under the terms of the parties’ 2011 divorce, Husband was required to name Wife as the beneficiary of his Federal Employees’ Group Life Insurance (FEGLI) policy through his government employment. Said policy was required to equal at least two years of his annual income. Similarly, a Court Order Acceptable for Processing (COAP) was entered which assigned Wife a portion of Husband’s federal employee pension, and established a Former Spouse Survivor Annuity for said pension, should Husband predecease her.

Following Husband’s death in 2017, the parties’ daughter was notified that she would be the recipient of his approximately $172,000 life insurance policy. While the COAP concerning Husband’s pension had been received and processed by the Office of Personnel Management following the divorce, the decree provisioning concerning Wife’s FEGLI designation was never filed with Husband’s employing agency, and thus the life insurance proceeds would be payable to the parties’ daughter.

Wife subsequently brought a claim against Husband’s estate, and the parties’ daughter filed an action in federal court for a declaration of her right to the proceeds, which was subsequently dismissed for lack of subject matter jurisdiction. In 2019, Wife filed a trial court action for declaratory judgment on the proceeds, wherein the trial court concluded in December 2020 that there was “no remedy” available to Wife due to controlling federal law. Upon the motion of Wife in March 2021, the trial court designated its 2020 order as final and appealable, despite the daughter’s arguments that it no longer held jurisdiction to modify the earlier order. On appeal, the Court sided with the daughter’s arguments, finding that Wife’s 2021 appeal was untimely: “[t]he trial court’s subsequent ‘finality’ order… did not and could not re-start the clock on [Wife’s] time to appeal.”

In December 2021, Wife filed a motion to vacate the trial court’s 2020 order under Civ. R. 60.02, “and thereafter re-issue it,” to allow her to timely appeal. The trial court granted Wife’s motion in June 2022, and her second appeal followed.

We have no motion to dismiss before us. Nevertheless, we hold that the motion practice undertaken in the circuit court following our first dismissal was aimed directly and solely at avoiding the law of the case irrefutably established by our decision and that it constitutes a scandalous attempt to undermine our jurisdiction. Therefore, we dismiss on our own accord.

Deeming Wife’s appeal frivolous and “an egregious affront to our authority,” the Court dismissed the matter and awarded costs and attorney’s fees to the daughter.

Hayden v. Hayden, Nos.21-CI-00015, 2022-CA-0174-MR (Ky. App. 2023)

Cohabitation
KRS 403.190
Marital Property: de facto date (termination of marriage), equitable distribution, separate property

Dated: April 14, 2023
Affirming in Part, Reversing in Part, Vacating in Part, and Remanding
Not to be Published

Editor’s Note: This case is the first ‘post-Thielmeier.’ I had previously noted the discord that existed at the appellate level surrounding the use of de facto dates (representing the end of the term of marriage) to assign and divide marital assets. The harmony I was able to find among these earlier cases (inadvertently) predicted Thielmeier’s ultimate holding (click here for review under Phelps and Shaida). Thielmeier set forth clear rules to follow going forward, but as the dust settles, expect to see more cases like Hayden in the short term. For our post on Thielmeier, click here.

During the parties’ marriage, both served in the armed forces, with Husband retiring in 2009 while Wife remained stationed abroad. Upon her return to the U.S. in 2012, the parties continued living apart but frequently visited one another, last having marital relations in early 2013. Husband began new employment later on that year, and started contributing to an employer-sponsored 401(k) thereafter. Wife moved to Oklahoma in 2017, and the parties continued to sporadically visit each other until December 2020. Wife filed a petition for dissolution in 2021.

In a January 2022 hearing that followed, the parties disputed the date at which they separated, with Husband arguing occurrence in 2010 or alternatively 2012, and Wife 2020.Specifically, the parties disputed what portion (if any) of Husband’s 401(k) would be considered marital or his separate property. The trial court subsequently found that the parties separated in 2013, and awarded the entire 401(k) (with a current balance of $39,279.42) to Husband.

In her appeal, Wife argued that the trial court erred in finding that the parties separated in 2013, and erred in awarding the 401(k) to Husband. To bolster her argument, Wife pointed out that the parties continued to represent themselves as married through 2020, filed joint tax returns until 2019, and commingled their finances until 2021. Noting the trial court’s discretion with respect to witness testimony, the Court disagreed, with the caveat: “[h]owever, the date of physical separation has no bearing whatsoever on the classification of property in an action for dissolution.”

Regardless of the parties’ separation date, the Court found that all property acquired prior to legal separation is presumed marital under 403.190(3) unless it falls under any of the exceptions set forth in KRS 403.190(2). Husband failed to prove which if any of these exceptions applied to his 401(k), and Court thus reversed the trial court’s designation of the 401(k) as Husband’s non-marital property.

Finally, due to the trial court’s failure to property adhere to KRS 403.190(1), it “did not make it to the third step” in determining what portion of Husband’s 401(k) should be assigned to Wife. This question was remanded back to the trial court for a determination on the division of Husband’s 401(k), and assignment of a portion thereof to Wife.

Editor’s Note: Thank you Tim Theissen, Esq., of Strauss Troy, for sharing this case with me the day it came out!

Mahl v. Mahl, Nos. 05-CI-500770, 2019-CA-0874, 2021-SC-0481-DG, 2021-SC-0487-DG (Ky. 2023)

Attorney Fees
Indispensable Parties
Maintenance: retirement benefits
Marital Property: abuse of discretion, equitable distribution
Witness: expert

Dated: April 27, 2023
Reversing and Reinstating
To be Published

Editor’s note: Click here to read our summary of the appeals court opinion that preceded this one from the Supreme Court of Kentucky.

Following an extremely lucrative career with an ophthalmology practice he founded, Husband became disabled in 1999, while Wife (who had also worked at the practice) remained unemployed due to an injury. As part of their 2007 dissolution, Wife was given a monthly maintenance award of $6,000 terminating at Husband’s reaching 65, roughly $800,000 from two retirement accounts, and other marital property. Both parties appealed, during the pendency of which (in 2009) they suffered enormous losses to a Ponzi scheme, including the retirement funds awarded to Wife.

Wife filed a motion to modify maintenance in 2016, citing the loss and non-receipt of her retirement funds award, Husband’s return to work, and other losses she suffered from the same Ponzi scheme. In 2019, the trial court assigned a monthly maintenance award to Wife of $8,688, through the earlier of her remarriage, cohabitation, or death, or the repayment of her original $800,000 award. Noting what appeared to be large withdrawals by Husband in 2005 (in violation of the then in-effect status quo order), the trial court ordered Husband to pay attorney fees to Wife’s counsel, and that statutory interest be applied to her 2007 award. In Husband’s subsequent appeal, the appeals court found that the trial court abused its discretion in extending Wife’s maintenance award (past Husband’s age 65) and increasing its amount. Noting Wife’s receipt of $720,000 in previous maintenance payments, the appeals court found that the loss of Wife’s awarded retirement account funds did not constitute a change in circumstances meriting modification of the previous maintenance award. Both parties filed motions to the Supreme Court of Kentucky for discretionary review.

The Court ultimately reversed the appeals court, finding that the appeals court erred when it (1) reversed the trial court’s maintenance award modification, and (2) found that Husband’s failure to name Wife’s attorney was fatal to the portion of his appeal related to attorney’s fees.

As of the trial court’s 2019 hearings on Wife’s motion to modify maintenance, the Court noted, the parties’ respective financial circumstances had substantially changed: Wife remained unable to work and was selling off stocks to provide for her roughly $4,663.94 monthly expenses. Husband, on the other hand, had resumed working and had -the trial court believed- approximately $16,928 in monthly expenses. In his testimony, Husband alleged he made $200 per month from two businesses he now helped run, which the trial court deemed “fictitious at best.” During the proceedings, the trial court utilized an expert witness who -based on review of Husband’s tax returns and disclosures- found inconsistencies between his reported and actual assets, and posited that Husband may have an unreported “cash hoard.”

The Court found that the appeals court, in substituting its own judgment for that of the trial court’s, ignored the trial court’s undoubted greater familiarity with both the matter and the parties themselves, and the deference owed to its findings when supported by substantial evidence.

The [trial] court was undoubtedly in the best position to listen to the testimony, review hundreds of pages of evidence, and assess the credibility of the witnesses who testified. “The fact that a reviewing judge might have decided the issue differently had he/she occupied the trial bench is not a sufficient basis for concluding that the trial court abused its discretion.” Perrine v. Christine, 833 S.W.2d 825, 827 (Ky. 1992).

Citing 2023 changes to the Rules of Appellate Procedure, and Wife’s attorney being on the distribution list and thus notified of Husband’s appeal, the Court found that the appeals court also erred when it deemed Husband’s failure to name Wife’s attorney fatal to his appeal related to the attorney’s fees award. Finding thus, the Court took up the attorney’s fees question, and whether their award to Wife’s attorney constituted an abuse of discretion by the trial court.

During the trial court proceedings, Wife was first represented by an attorney who ostensibly agreed to assist her pro bono, and was subsequently represented by another attorney affiliated with the same office, after Wife and the first attorney began to have a relationship. While Wife requested fees for both attorneys, the trial court only awarded half of her second attorney’s fees (based on the first having been counseled to remove himself from work on the case). Further, the trial court found that much of the costs of litigation to date had been due to Husband’s own non-compliance. For this reason, the Court upheld the trial court’s award of attorney’s fees.

Additional Reading:

Thinking about how changes under the SECURE act might affect the long term investment of defined contribution plans into annuities? What do you mean “of course not?” Well, if you change your mind, here’s an article on just that subject.

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.