Kentucky Case Law Review by Topic: April 8, 2019 through March 15, 2020

Kenison v. Kenison, No. 2017-CA-000739-MR (Ky. App. 2019)

Marital Property: debts, retirement benefits

Dated: April 12, 2019
Not to be Published
Affirming

H appealed trial court order requiring him to reimburse W for her payment of one-half of a margin loan debt associated with a retirement (stock) account. H claimed that the lower court erred in assigning him the debt associated with the account, based on its assessment that the parties’ agreement was unambiguous. Alternatively, H argued that, if the agreement was ambiguous, the trial court erred by applying the doctrine of contra proferentem (ambiguities are construed against the drafter of a contract). On the other hand, W contended that the appeal should be dismissed under the doctrine of res judicata, arguing that there was no ambiguity in the separation agreement and that the terms of the contract clearly indicated H was to assume the margin loan debt associated with the account. The Court reviewed the assignment of the margin loan debt to H in the context of the similar fact pattern of Money v. Money, 297 S.W.3d 69 (Ky. App. 2009) (holding margin loan debt is not just part of the overall value of an account, rather, it is separate indebtedness).

Thompson, K., Judge, Concurring in Part, Dissenting in Part: Judge Thompson dissented from the portion of the opinion assigning the margin debt in the retirement account to H. The Judge disagreed that that a de novo reading of the parties’ separation agreement required that H pay the margin debt associated with his retirement account. Instead, Judge Thompson opined that the separation agreement should have been interpreted to equally divide the value of the retirement account. The dissent further argued that the majority opinion misread Money v. Money, 297 S.W.3d 69 (Ky. App. 2009), and conflated the accounts discussed there with the single account at issue on appeal; therefore, the dissent argued Money is distinguishable and should not control.

Who’s going to tell her that’s not a twenty?

Etscorn v. Etscorn, No. 2017-CA-001637-MR (Ky. App. 2019)

Marital Property: dissipation, final hearing, findings of fact
Witness: expert

Dated: April 11, 2019
Not to be Published
Affirming

W raised several allegations of error in seeking reversal. First, she contended the trial court set arbitrary and unreasonable limitations on the time permitted for the final hearing, depriving her of an adequate opportunity to present her case and resulting in a constitutionally defective trial which violated her due process rights. W asserted the extreme time limitations forced her to present almost her entire case by deposition and to truncate her expert proof while H was able to put on his entire case with live witnesses. Here, the Court found no error because it did not find the prescribed time limits to be arbitrary or an abuse of discretion. See Hicks v. Commonwealth, 805 S.W.2d 144 (Ky. App. 1990). At the time of the final hearing, this matter had been pending over five years with comprehensive discovery, and one prior appeal had been prosecuted to completion. Further, the limitations on time had been known to the parties for nearly two years, so there was certainly adequate opportunity to tailor their respective cases to fit within the allotted time frame.

Next, W asserted the trial court failed to make necessary findings of fact and conclusions of law. W argued the findings the trial court did make were against the manifest weight of the evidence, and the trial court’s legal conclusions did not properly take controlling precedents into consideration. The Court summarily dismissed W’s argument that the trial court of failed to make necessary findings of fact and conclusions of law as required by Civ. R. 52, since she did not indicate what findings the trial court failed to make. The Court scolded that it would not search the record nor the law to construct W’s argument for her, nor would it undergo a fishing expedition to find support for underdeveloped arguments.

Further, W argued the trial court’s findings of fact and conclusions of law were “utterly deficient,” thereby adversely impacting resolution of her claim of dissipation of the marital estate, the maintenance award, and her request for attorneys’ fees. W asserted the trial court failed to undertake an independent analysis pursuant to Gripshover v. Gripshover, 246 S.W.3d 460 (Ky. 2008), to determine whether H perpetrated a fraud on the marital estate, and that it compounded the error when it relied on Etscorn I to find the issue had previously been decided. The Court found, however, that there must be a clear showing the expenditures were made with the intent to deprive the other spouse of their share of the marital property. Robinette v. Robinette, 736 S.W.2d 351, 354 (Ky. App. 1987); see also Heskett v. Heskett, 245 S.W.3d 222, 227 (Ky. App. 2008).

The trial court here concluded H did not defraud W, and did not force or coerce her into signing any documents, and divorce was not contemplated when the transactions related to the business succession and estate plan were completed. It found the parties continued with their high standard of living, reaped large financial gains following completion of the transfers, and continued to increase the size of the marital estate. The trial court was presented with mountains of documentary evidence (the record on appeal contains more than 6,000 pages) throughout the course of the proceedings relative to the purported nefarious motives of various asset transfers, yet it found no fraudulent intent or plan to impair W’s interest in the marital estate. Therefore, since it had previously ruled on these issues on several occasions and no new, credible evidence to the contrary had been produced, the trial court concluded analysis of the facts under Gripshover was unnecessary. The Court confirmed that W failed to present credible evidence to support her assertions of fraud and dissipation so no analysis under Gripshover was required.

Finally, W claimed the trial court’s findings were against the manifest weight of the evidence. Although unclear from her brief, it appears W believed the trial court made only perfunctory findings and abdicated its factfinding and decision-making responsibilities. The Court disagreed, concluding there was no authority supportive of her position, nor did it find her argument was pled with any sort of specificity. Instead, the Court reviewed the record and concluded the trial court’s findings of fact were supported by substantial evidence.

Martin v. Martin, No. 2017-CA-001944-MR (Ky. App. 2019)

QDRO: ambiguity, conformity to decree, loan

Dated: April 12, 2019
Not to be Published
Affirming

W appealed post-dissolution decree of lower court denying her motion to amend QDRO regarding H’s 401(K), arguing that the QDRO did not conform with the settlement agreement incorporated into the parties’ divorce decree. The lower court had conducted a hearing; in the order denying the motion to amend the QDRO, the lower court determined the relevant portions of the agreement were ambiguous regarding the value of H’s 401(k), and construed the ambiguity against W because she drafted the agreement. “A contractual provision is ambiguous if the provision is susceptible to multiple or inconsistent interpretations.” McMullin v. McMullin, 338 S.W.3d 315, 320 (Ky. App. 2011) (citations omitted). If an agreement contains an ambiguity, the Court shall “gather, if possible, the intention of the parties from the contract as a whole. In determining the intention of the parties, [the Court] will consider the subject matter of the contract, the situation of the parties and the conditions under which the contract was written[.]” Id. (citations and internal quotation marks omitted). Unambiguous contracts are “strictly enforced as written.” Id. (citation omitted).

Here, the Court agreed the agreement was silent as to the intended meaning of the word “value,” and there were two reasonable interpretations of the meaning. “A contract is ambiguous if a reasonable person would find it susceptible to different or inconsistent interpretations.” Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. App. 2002). Because the agreement contained an ambiguity, the Court looked to “the body of the contract and the surrounding circumstances” to determine the parties’ intent. McMullin, 338 S.W.3d at 320. The Court confirmed that the surrounding circumstances supported the trial court’s interpretation of the agreement.

Additionally, the Court upheld the trial court’s interpretation because the rule of contra proferentem: ambiguities are “construed against the drafter of a contract when the contract is susceptible of two meanings.” Id. at 322. W drafted the agreement, so the ambiguity should be construed against her. H accepted the contract drafted by W, and the QDRO entered by the trial court comported with H’s interpretation of the agreement. Thus, the Court found the trial court’s interpretation was correct; H’s 401K must be reduced by the amount of the loan before the asset is divided.

The Court found no abuse of discretion by the trial court in denying W’s motion to amend the QDRO. The trial court’s denial of W’s motion was based on its interpretation of the contract, which it concluded was correct and based on substantial evidence. See Young v. Young, 314 S.W.3d 306, 310 (Ky. App. 2010).

Rodgers v. Rodgers, No. 2018-CA-000326-MR (Ky. App. 2019)

Marital Property: abuse of discretion, debts, dissipation, equitable distribution, findings of fact, status quo order

Dated: April 12, 2019
Not to be Published
Vacating and Remanding

H contended that the trial court made numerous errors in its findings of fact and that it abused its discretion by failing to distribute the marital property in just proportions. First, H argued that the trial court clearly erred by finding that he had violated the status quo order. H asserted he opened his individual bank account with funds taken from the parties’ joint accounts several days before he filed the petition for dissolution and his motion for a status quo order. The Court found that the trial court clearly erred in its finding, since H technically had moved the money prior to entry of the status quo order, but that it was harmless error.

The Court agreed that the trial court had made some computational errors regarding duplication of assets. The Court, after review of the record, including the provisions of W’s disclosure statement and the professional appraisals provided to the trial court, found the trial court’s findings of fact with respect to these assets was clearly erroneous. Because the trial court had as its proper goal an equitable distribution of the marital estate rather than an equal division, the Court reversed the judgment and remanded for further proceedings to permit the trial court to correct these computational errors.

H further argued that the trial court erred by failing to include certain debts in its calculation of the value of assets that W had already received from the marital estate. The Court’s review of the exhibit submitted by H and relied upon by the trial court was supportive of H’s contention, so this issue was remanded to the trial court.

Finally, the Court found no error or abuse of discretion by the trial court by failing to conclude that W dissipated a portion of the marital estate and by failing to award H a greater proportion of the marital property. The trial court concluded that W would bear the costs associated with some property damages she caused before the entry of the decree and examined several checks drawn by W on the parties’ joint account, but determined that there was no evidence from which it could conclude that they were written in order to dissipate the marital estate.

Schupanitz v. Schupanitz, No. 2017-CA-001970-MR (Ky. App. 2019)

Marital Property: burden of proof, dissipation, equitable distribution, findings of fact, retirement benefits
Tax Liability

Dated: May 3, 2019
Not to be Published
Affirming

W appealed the findings of fact, conclusions of law and decree of the lower court. W argued that the trial court abused its discretion: (1) by determining that H did not intentionally dissipate marital assets; (2) through its inequitable division of marital debt and property; and (3) by its denial of maintenance.

W made a preliminary argument that the trial court incorrectly interpreted the burden of proof required by Brosick v Brosick, 974 S.W.2d 498 (Ky. App. 1998), by ruling she bore the initial burden of proving whether H dissipated marital assets. “Once the dissipation is shown, placing the burden of going forward with the evidence on the spouse charged with the dissipation is reasonable because that spouse is in a better position to account for these assets.” Id. Before the burden could be shifted to H, W had to demonstrate dissipation occurred by proof of two things: (1) that H used marital funds “during a period when there is a separation or dissolution impending[,]” Robinette v. Robinette, 736 S.W.2d 351, 354 (Ky. App. 1987); and (2) H’s “clear . . . intent to deprive [her] of . . . her proportionate share of the marital property.” Id.

The Court agreed with the trial court that W failed to prove H spent the withdrawn funds during their separation or in contemplation of a divorce. H admitted to withdrawing funds, but claimed he utilized the funds to pay down marital bills. The Court concurred that W failed to provide evidence consistent with a clear intent on H’s part to deprive her of her proportionate share of the marital property, and affirmed the trial court’s ruling on dissipation.

W further argued that the trial court erred by assigning her any of the tax liability because she is an innocent spouse; W filed for innocent spouse protection under 26 U.S.C. § 6015 (the Court notes there is no evidence in the record that the IRS granted Robin’s innocent spouse claim). However, W could not establish that the undeclared income from retirement funds withdrawals was not spent on family expenses. Nor could she establish the money H saved by not paying taxes on the undeclared income was not spent on family expenses. The trial court found H used the money to support the parties’ unsustainable lifestyle. The Court indicated that there was nothing in the record to indicate that the tax liability was a non-marital debt, and that it would not reverse a trial court’s determination when it is based upon substantial evidence.

Noffsinger v. Noffsinger, No. 2016-CA-001162-MR

Marital Property: abuse of discretion, debts, equitable distribution

Dated: May 17, 2019
Not to be Published
Affirming in Part, Vacating in Part and Remanding

The Court, after review, affirmed, vacated in part and remanded to the trial court to enter findings regarding H’s non-marital interest in the marital residence. W took issue with the trial court’s determinations involving H’s non-marital interest in the marital residence, imputation of income to her and its effect on child support and maintenance, denial of maintenance, and the custody and timesharing arrangement of the parties’ child.

The parties had agreed that H would retain and reside in the marital residence, but the trial court was asked to decide the value of the residence as well as H’s non-marital interest, if any, in the property. The trial court awarded H 62% of the total equity of the marital residence, which W argued was in error. H acknowledged that the trial court erred on this specific determination, and that H was only entitled to 62% (as his non-marital interest) in the down payment made on the marital residence of $16,790.67, which amounted to a non-marital interest of $10,410.22. Accordingly, the trial court’s findings specifically relating to H’s non-marital interest in the marital residence were vacated and the issue was remanded for the trial court to enter findings consistent with the above.

W next argued that the trial court erred when it credited H for the principal reduction on an additional residence during the pendency of the action based solely on the fact he made the payments. W contended the payments were made with marital funds and because the trial court’s intent was to equalize the division of the property, and thus, H should not get credit for the entire amount paid. However, and as recognized by the Court, under Kentucky law, there is no such presumption that marital debts must be divided equally or in the same proportions as the marital property. Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001). The trial court found that W had made no showing of contribution to the marital debt on the home, despite remaining in the residence during the relevant time. Further, the trial court noted that W had been ordered to make payments on other marital debts, which she did not do. Such a determination was within the discretion of the trial court, and W failed to convince this Court that an abuse of that discretion occurred.

Patten v. Patten, No. 2017-CA-000784-MR (Ky. App. 2019)

Civ. R. 60.02: fraud
KRS 413.090(1): statute of limitations
Property Settlement Agreement: enforcement, disclosure, retirement benefits

Dated: May 17, 2019
Not to be Published
Reversing and Remanding

Editor’s Note: the remand came back up on appeal, subsequent to this post, and you can read the case in full here.

W appealed lower court order denying her motions to enforce the parties’ settlement agreement and to set aside that agreement pursuant to Civ. R. 60.02(d) for fraud affecting the proceedings. W petitioned for dissolution of the marriage in a particularly acrimonious and contentious divorce. Both parties were attorneys; W claimed that H was hiding assets and concealing income (W asserted that H had created multiple entities with multiple addresses) and much effort was spent by W’s counsel to uncover all marital and non-marital assets subject to division.

W’s attorney had requested certain financial documents from H. A few months later, H submitted, under oath, his preliminary verified disclosure statement (PVDS) where H disclosed various bank and retirement accounts. Later, H, at W’s request, executed thirty broad authorizations for the release of tax and financial records. When W noticed H’s deposition, along with a subpoena duces tecum, she specifically requested copies of all banking records. H testified at his deposition that he had disclosed all his retirement accounts and that he lost some of the parties’ tax returns, and the electronic data was corrupted.

The parties executed a comprehensive property settlement agreement which addressed and resolved all outstanding issues, including child support, health insurance and the division of personal property, real property, retirement accounts, marital debt, and all other assets. The agreement awarded H his retirement accounts, all trust interests, and all savings bonds in his name or the name of a trust. Of critical note: to alleviate W’s fears that H was concealing assets, the parties included language in the agreement (at paragraph 18) that there had been full disclosure and that if either party failed to disclose any assets of any nature, said asset shall be deemed joint property of the parties subject to division by the trial court.

W later filed motions to enforce the disclosure paragraph of the agreement, along with a motion to set aside the decree of dissolution and re-open the agreement to restore certain assets to W pursuant to Civ. R. 60.02(d) for fraud affecting the proceedings. W asserted that H produced documents in an Oklahoma probate action that contradicted his sworn testimony during the divorce proceedings. The trial court denied W’s Civ. R. 60.02(d) motion as not filed “within a reasonable time,” without addressing any underlying factual discrepancies. The trial court reasoned that W’s inability to understand the agreement “[wa]s fictitious” and the idea that she or her competent counsel were defrauded “a stretch” and also stated that W had every right and opportunity to discover the full extent of H’s financial accounts during the divorce, and if she mistakenly missed an opportunity, she only had herself to blame. W filed a Civ. R. 59.05 motion to alter, amend, or vacate the trial court’s order arguing that the trial court only considered her Civ. R. 60.02(d) motion, but wholly failed to address her motion to enforce paragraph 18 of the agreement. W appealed the trial court’s order denying her motion.

The Court distinguished between a motion to enforce and a motion to modify or set aside a settlement agreement incorporated into a decree. The Court rejected H’s argument that, pursuant to Davis v. Davis, 489 S.W.3d 225 (Ky. 2016), because the agreement was incorporated into the decree, W was precluded from seeking contractual relief. H had asserted W’s sole route for relief is to proceed to set aside or re-open the decree by way of Civ. R. 60.02, and the circuit court properly denied that motion as untimely.

The issue in Davis was whether a party could file a separate contract action to enforce a valid settlement agreement that was not incorporated or referenced in the final decree of dissolution. The Kentucky Supreme Court held that a party could file an independent contract action in such limited circumstance. 489 S.W.3d at 228, 229. The Supreme Court carefully clarified, however, that its holding in Davis did not apply when, as in this case, the agreement is properly incorporated or referenced in the decree. Id. In such circumstance, the decree controls. Id.

The Court observed that here, W brought two motions: the first to enforce paragraph 18 of the agreement, and the second to reopen the decree and set aside the agreement pursuant to Civ. R. 60.02(d). The Court specified that though initially combined in one document, these were two different motions asking for two different types of relief under separate and distinct criteria. The trial court addressed the latter, but not the former. The Court agreed with W that the trial court erred when it denied her motion to enforce the agreement, without adequately considering her alternative motion. The trial court’s order spoke only as to the timeliness of W’s Civ. R. 60.02 motion and her alleged failure to prove the possibility of fraud. Unlike W’s motion for Civ. R. 60.02(d) relief, her motion to enforce paragraph 18 of the agreement did not require her to prove fraud (paragraph 18 only required that one party establish that the other failed to disclose an asset). Further, unlike Civ. R. 60.02(d), paragraph 18 contained no limitations period; therefore, it was not limited by time except for that contained in statute. See KRS 413.090(1) (“An action upon a judgment or decree of any court of this state . . . , the period to be computed from the date of the last execution thereon[,]” shall be commenced within fifteen (15) years after the cause of action accrued). The Court reversed and remanded to the trial court for additional proceedings to: (1) find whether an asset not disclosed at the time the parties executed the agreement existed; and (2) equitably divide any such asset between the parties, taking into consideration the agreement and in accordance with KRS 403.190.

W also argued the trial court abused its discretion when it denied her motion for relief under Civ. R. 60.02(d) as both untimely and factually insufficient. The Court agreed that to the extent her motion did, in fact, assert grounds set out in Civ. R. 60.02(d). However (as explained below), if her claim was actually based on falsified evidence as contemplated by Civ. R. 60.02(c), her motion was not timely. The Court specifically questioned the trial court’s timeliness analysis, and found its substantive analysis lacking and, therefore, suspect. Civ. R. 60.02 is a unique rule designed to be utilized only in remarkable situations to grant exceptional relief “under the most unusual and compelling circumstances.” Age v. Age, 340 S.W.3d 88, 94 (Ky. App. 2011). A motion for relief under Civ. R. 60.02(a), (b), or (c) must be made within one year of the judgment and failure to do so is a bar to relief. The remaining subsections, Civ. R. 60.02(d), (e), and (f) are not subject to the one-year limitations period. Instead, the statute simply requires that a motion invoking them be filed “within a reasonable time.”

Kentucky’s version of Civ. R. 60.02 differs from its federal counterpart, Fed. R. Civ. P. 60(b) (limiting to one year all motions for relief from a final judgment based on any brand of fraud); the Kentucky version of the rule applies the one-year limitation only to perjury and falsified evidence. The Court was unable to determine if W was basing her allegation of fraud on perjury or falsified evidence, or some other form of fraud. To the extent W was claiming H lied under oath, or that he submitted falsified evidence by way of a deceitful PVDS or other documents, this amounted to perjury or falsified evidence, and the one-year limitation for motions would have applied. If W’s claim fell solely under Civ. R. 60.02(c), it was not timely filed because W filed her motion four years after entry of the decree. However, W also claimed H committed fraud when he entered into the agreement with knowingly undervalued assets and that H intentionally concealed assets. The Court opined this was more likely an assertion under Civ. R. 60.02(d), not Civ. R. 60.02(c), and the reasonable time limitation would be applicable.

Nevertheless, the trial court found W’s Civ. R. 60.02 motion untimely under the “reasonable time” standard as brought, and as W indicated, pursuant to Civ. R. 60.02(d). The trial court measured the reasonableness of this time starting from the judgment date until W filed her motion four years later in December 2015, even though it was undisputed W did not discover a disc referencing an omitted account of H’s until September 2015 and she filed the motion four months later. It was also undisputed that W discovered the other alleged hidden accounts by January 2014, yet she waited almost two years from then to file her Civ. R. 60.02 motion. In that regard, the Court agreed it was possible her motion with respect to these assets was not filed within a reasonable time. Accordingly, the Court concluded this issue must be remanded to the trial court for additional fact finding and consideration of these factors.

The Court also disagreed with the trial court’s determination that W established nothing more than a mere possibility of fraud. Ultimately, whether W established fraud is a factual issue which must be decided by the trial court. Accordingly, the Court reversed and remanded the trial court’s denial of W’s Civ. R. 60.02(d) motion to determine whether it properly falls under Civ. R. 60.02(c), perjury or falsified evidence, or Civ. R. 60.02(d), fraud affecting the proceedings. The trial court was instructed to then determine, based on its finding, whether the motion was timely filed. If W cleared those hurdles, the trial court must then determine whether she adequately established fraud affecting the proceedings to justify re-opening the decree and modifying or setting aside the agreement. The Court did pause to clarify that the trial court may not need to address W’s Civ. R. 60.02 motion at all if adequate relief is granted regarding her motion to enforce paragraph 18 of the agreement, but left that fully and squarely to the trial court’s sound discretion.

Vernatter v. Vernatter, No. 2018-CA-001401-ME (Ky. App. 2019)

Marital Property: findings of fact, retirement benefits, unjust enrichment

Dated: May 17, 2019
Not to be Published
Affirming in Part, Reversing in Part and Remanding

W appealed the trial court findings of fact and conclusions of law. The parties had been married for twelve years and had two children. It was an acrimonious divorce, which had been bifurcated by the trial court. W contended the trial court failed to justly divide the marital and non-marital property, stating she “received no property, marital or non-marital in the Judgment.” However, examination of the record showed she received items in her possession and one-half of H’s retirement plan, with a QDRO entered. In short, W brought nothing to the attention of the Court that would justify reversal and failed to assert any argument that would support her contention that the division was unjust.

Peck v. Peck, No. 2017-CA-001374-MR (Ky. App. 2019)

Maintenance: retirement benefits

Dated: June 29, 2019
Not to be Published
Affirming

W presented evidence at the hearing, and the trial court found that she did not have sufficient property to support herself and was permanently disabled, rendering her unable to work to provide for her reasonable needs. Based on those two findings, and in accordance with KRS 503.200(1), the court deemed maintenance was appropriate in this case. The trial court’s next step was to determine the amount and duration of maintenance, in consideration of the totality of the evidence presented, after consideration of the statutory factors listed above. At the hearing, the trial court heard detailed testimony regarding H’s employment and his financial status, each of the parties’ monthly expenses, and their standard of living, along with investment and management strategies for the assets awarded to W in the agreed property division.

W asserted the court should not have considered W’s share of the retirement assets from the property division in setting maintenance because she should not have to deplete those assets to support herself. The Court discussed that it was proper for the trial court to consider all of W’s financial resources available when calculating her maintenance award, and determined there was no reason to exclude some of her assets simply because they are classified as retirement investments.

Editor’s Note: I reviewed and blogged about a recent Kentucky Court of Appeals decision, Brown v. Brown, wherein the Court considered this same issue CLICK HERE. The Brown Court relied upon the same 2003 Kentucky Supreme Court as the Peck Court (Powell v. Powell), and did not require the payee spouse in that case to deplete her retirement to reduce the amount of spousal maintenance required for her needs.

Day v. Day. No. 2018-CA-001153-ME (Ky. App. 2019)

Marital Property: debts

Dated: June 28, 2019
Not to be Published
Affirming in Part, Reversing in Part and Remanding in Appeal
Affirming in Cross-Appeal

The Court found substantial evidence to support the trial court’s conclusion that H’s pre-marital debt was used for marital purposes in its division of the equity of the marital property. The Court affirmed the trial court’s judgment and decree with respect to its division of marital property and debt. W had appealed the calculation of the marital interest in a residence in North Carolina that the parties had agreed would be sold and the proceeds equally divided after payment of the marital debt. The parties also agreed that the property was encumbered by a marital mortgage. H testified that prior to the marriage, he had taken out a loan and used the proceeds to improve the property and that the remaining balance on the loan was approximately $14,000; however, H was not able to provide any documentation regarding these improvements or when they were done.

Nevertheless, the trial court accepted H’s testimony and found that the debt was marital and directed that the balance of the loan should be deducted from the sale proceeds prior to the division of the remaining equity. W argued that, since H incurred the debt prior to the marriage, it could not be considered as a marital debt. However, there is no statutory presumption regarding characterization of debt as marital or non-marital. 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). Rather, debts should be characterized based upon principals of equity, including receipt of benefits, the extent of participation by each party, and whether the debt was necessary to provide for the maintenance and support of the family. Id.

Although debts incurred during the marriage and prior to separation are more likely to meet this equitable test, the Court found no basis for a presumption that a debt incurred prior to the marriage is non-marital as a matter of law. Here, the trial court accepted H’s testimony that he used the proceeds of the loan to refurbish the North Carolina residence. The trial court was not obligated to accept his testimony in the absence of documentation, but likewise, the Court could not find that the trial court clearly erred by doing so. The Court concluded that the trial court did not err by deducting the outstanding balance of that loan from the sale proceeds to be divided, because H used those loan proceeds to improve marital property.

Naylor v. Naylor, No. 2017-CA-001529-MR (Ky. App. 2019)

Civ. R. 60.02
Marital Property: equalization, valuation
Property Settlement Agreement: mutual mistake

Dated: July 12, 2019
Not to be Published
Affirming

H appealed findings of fact, conclusions of law and order entered by trial court denying H’s Civ. R. 60.02 motion, seeking to set aside a mediated settlement agreement incorporated into the divorce decree. The agreement did not assign a value or target sales price to the marital residence or to an apartment complex and contained an equalization payment (requiring H to pay any shortfall within 60 days after giving W the sales proceeds and H’s agreement to secure any shortfall with a life insurance policy until paid in full). The apartment complex sold for $90k less than the appraised value and H filed the Civ. R. 60.02 motion fearing that the marital residence would sell for less than its appraised value of $900k. The trial court deferred disposition of H’s motion until the residence sold two years later for $655k. The trial court found that the actual sales prices of the properties was not newly discovered evidence warranting Civ. R. 60.02 relief. H had argued that the Agreement was based on the mutual mistake: that the value of the apartment complex was $1,850,000 and the value of the marital home was $900k.

The Court discussed that to be a mutual mistake sufficient to set aside a contractual agreement, the mistake must be one as to a material fact affecting the agreement. Abney v. Nationwide Mut. Ins. Co., 215 S.W.3d 699, 704 (Ky. 2006). Here, H and W assigned value to the properties based on their opinion and opinions are not facts. Additionally, the parties knew that the values assigned to the properties might not have been accurate and they obviously contemplated that there could be shortfall between the funds owed to W by H and the funds realized from the real property sales because they included the equalization provision.

Considering the terms of the equalization provision (and an email sent by H to W) regarding the matter, the Court called it disingenuous for H to argue that he did not know the properties might sell for less than the parties believed they were worth. The Court further found that the parties’ decision to sell the properties for less than what they believed the properties to be worth was not newly discovered evidence and was a decision made after the mediated settlement agreement was executed. The Court affirmed the trial court’s decision that relief under Civ. R. 60.02(b) was not available.

Sharp v. Sharp, No. 2018-CA-000779 (Ky. App. 2019)

Marital Property: debts, equitable distribution, valuation

Dated: July 26, 2019
Not to be Published
Affirming in Part, Reversing in Part and Remanding

The trial court found H had dissipated marital assets in awarding $9,250.00 of a joint savings account to the W. The court simply noted in its opinion that the asset had existed, was no longer in existence, and awarded W’s interest. It appeared that the trial court identified the monies in the account as marital property, valued them, and made an equitable division of the assets, a method consistent with Kentucky case law. Thus, the Court did not find this division to be an abuse of discretion. The Court disagreed with H’s arguments that the order was irreconcilably inconsistent.

H also claimed that the trial court committed reversible error in its division of marital property and debts. H argued that W was awarded “81% more of the marital assets” than he was. To support this assertion, H pointed to the award of two Lexus vehicles to W, as well as “$20,000” in household furnishings. KRS 403.190(1) provides that marital property is to be divided in just proportions. An “equitable” division of the parties’ marital property in “just proportions” is not necessarily an equal division. Cobane v. Cobane, 544 S.W.3d 672, 684 (Ky. App. 2018); Stipp v. St. Charles, 291 S.W.3d 720, 726 (Ky. App. 2009); Lawson v. Lawson, 228 S.W.3d 18, 21 (Ky. App. 2007); Russell v. Russell, 878 S.W.2d 24, 25 (Ky. App. 1994).

The Court did not find an abuse of discretion by the trial court; the award of marital property needed only be “equitable” and in “just proportions.” This does not mean that the division must be equal. To the extent any alleged inequality existed, it mostly stemmed from the values placed on the vehicles, $20,325 combined, and the household furnishings, $20,000, awarded to W. However, these items are tangible, depreciating, personal property that have no monetary value unless W decided to sell them, in which case she would lose the use of the property and absorb the loss of depreciation in the process. Further, the trial court was not required to believe the estimation placed on the value of the household furnishings of the H.

Lastly, the Court observed that it cannot be said that the trial court abused its discretion in its allocation of the parties’ debts. Unlike marital property, “[t]here is no statutory authority for assigning debts in an action for dissolution of marriage.” Neidlinger v. Neidlinger, 52 S.W.3d 513, 522 (Ky. 2001), overruled on other grounds by Smith v. McGill, 556 S.W.3d 552 (Ky. 2018). Unlike marital property, there is no presumption, statutory or otherwise, that a debt arising during the marriage is marital or non-marital. Allison v. Allison, 246 S.W.3d 898, 907 (Ky. App. 2008); Bodie v. Bodie, 590 S.W.2d 895, 896 (Ky. App. 1979). The Court opined that, in order to determine whether a debt is marital or non-marital, a court must evaluate factors such as receipt of benefits, extent of participation, whether the debt was incurred to purchase assets designated as marital property, and whether the debt was necessary to provide for the maintenance and support of the family. Allison, 246 S.W.3d at 907-08 (citing Neidlinger, 52 S.W.3d at 523).

Here, the trial court’s order reflects that it considered the aforementioned factors in determining how to divide the parties’ debt. It was clear that the debt associated with the credit cards was incurred to the benefit of both parties getting the “receipt of the benefits” of the debt, given the court’s finding that they had utilized said line of credit to fund a vacation. Because the Court held that H was deprived of his right to be heard, it reversed trial court’s judgment insofar as it related to childcare arrearages and remanded for a hearing upon same.

Lykins v. Lykins, No. 2017-CA-000778-MR (Ky. App. 2019)

Marital Property: dissipation, retirement benefits, tax liability

Dated: August 2, 2019
Not to be Published
Affirming

Editor’s Note: to read Eileen’s previous post on this case, from its first appeal, click here.

The Court affirmed the trial court’s order finding W dissipated $65k in marital assets prior to the dissolution of her marriage. This matter was previously before the Court in Lykins v. Lykins, No. 2014-CA-000524-MR (Ky. App. 2015). In that appeal, H argued he had established a prima facie claim that W dissipated assets but that the trial court failed to rule on the issue. The Court agreed and found the circuit court erred by failing to rule on the dissipation question before dividing the marital assets. The case was remanded to trial court, holding that H’s prima facie showing of dissipation shifted the burden to W to present evidence, if she could, how the assets were used for a marital purpose and therefore not dissipated. The remand specifically gave “instructions to make a specific finding on the issue of dissipation and assignment of tax liabilities” associated with the withdrawal of IRA and pension funds, the assets allegedly dissipated. On remand, the trial court made the specific findings and W appealed.

As an aside, the Court noted W’s failure to follow the rule governing appellate briefs, Civ. R. 76.12, and failure to cite the certified record in violation of Civ. R. 76.12(4)(c)(iv) and (v), making the review “challenging.” The Court stated that deviations from rules justify review of the issues raised in the brief for manifest injustice only. Elwell v. Stone, 799 S.W.2d 46, 47 (Ky. App. 1990); Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky. App. 2010). The Court did not adjust the standard of review in this case because it found W’s argument without merit; W failed to recognize that the Court previously held that H made a prima facie showing of dissipation, and that the burden was upon her to present evidence to contradict that showing. Given the opportunity to overcome H’s prima facie case for dissipation, W offered nothing more than her denial and contended the trial court assigned fault to her in violation of the intent of KRS 403.190. However, the Court asserted that not only is abuse of discretion not the standard of review here, there was nothing to which the Court had been directed that even hinted that the trial court’s decision was based on fault-finding. Finding that a spouse dissipated assets is a question of proof and mathematical calculation, no matter how the dissipated assets were spent. The Court agreed with the trial court that in this case, W failed to satisfy her burden to account for the assets and demonstrate that she did not direct them to her own use.

White v. Gary, No. 2018-CA-001089-MR (Ky. App. 2019)

Marital Property: abuse of discretion, burden of proof, equitable distribution, separate property
Witness: expert

Dated: August 9, 2019
Not to be Published
Affirming

H argued the trial court abused its discretion in awarding W an equal distribution of the marital property. Pertinent to this appeal, the trial court found that four parcels of real property were purchased during the marriage and constituted marital property.

The trial court considered the evidence presented by the parties and found W failed to present credible evidence regarding the value of the marital property; however, it found that H presented credible evidence regarding the value of the real property through an expert witness’ appraisal of the four properties. The trial court weighed the factors of KRS 403.190(1) and concluded that all four parcels should be sold, and the proceeds divided equally between the parties.

The Court noted that H failed to include a statement of preservation pursuant to Civ. R. 76.12(4)(c)(v) and did not request review for palpable error pursuant to Civ. R. 61.02 which hindered the Court’s ability to review his arguments. The Court ignored the deficiency because H’s brief failed on the merits.

On appeal, H argued the trial court abused its discretion in equally dividing the value of the four parcels of real property between the parties. There was no dispute that all four of the parcels were purchased during the parties’ marriage, and that they constitute marital property pursuant to KRS 403.190(2). See Stallings v. Stallings, 606 S.W.2d 163 (Ky. 1980). The Court stated that H advanced nothing of substance in support of his contention. Here, the trial court was presented with substantial evidence that equal division of the proceeds from the sale of the four properties was equitable under the circumstances based on the factors of KRS 403.190(1).

Kelly v. Kelly, No. 2018-CA-001282-MR (Ky. App. 2019)

Civ. R. 60.02
KRS 403.250(1)
Marital Property: disclosure, retirement benefits
Property Settlement Agreement

Dated: August 9, 2019
Not to be Published
Affirming

The Court found no abuse of discretion in the trial court’s decision to reopen the decree dissolving the parties’ marriage and awarding one-half of W’s retirement pension to H. In 2005, the parties entered into a property settlement agreement, and a decree of dissolution incorporating the terms of that agreement was entered on the same date. In late 2017, after becoming aware that W had retired and was receiving retirement pension benefits from the Kentucky Retirement System, H filed a motion to reopen the decree seeking an equitable share of that pension on the grounds the pension plan was not addressed in the parties’ agreement. The trial court entered detailed findings of fact and conclusions of law supporting its decision to award H a share of W’s pension based on Civ. R. 60.02(f) principles.

W filed an appeal challenging the authority of the trial court to reopen the 2005 decree. Specifically, W argued that H did not cite Civ. R. 60.02 in his motion. However, the Court found H reopened the decree pursuant to KRS 403.250(1) (stating “[t]he provisions as to property disposition may not be revoked or modified, unless the court finds the existence of conditions that justify the reopening of a judgment under the laws of this state”). In Fry v. Kersey, 833 S.W.2d 392 (Ky. App. 1992), the Court interpreted this language to mean that “[t]he law of this state relating to the reopening of decrees is found in Civ. R. 60.02. Under the residual clause of that rule, a judgment may be set aside for ‘reason[s] of an extraordinary nature justifying relief.’” Id. at 394. Fry directed a circuit court to analyze the motion under the principles of Civ. R. 60.02 and that is how the trial court proceeded here.

Further, the Court found no merit in W’s contention that it was not clear how the trial court concluded that the decree should be reopened. The Court stated it was convinced that W’s arguments concerning fraud were a “red herring,” and further wrote that it was clear from a reading of the trial court’s opinion that its decision was based upon Civ. R. 60.02(f). The criteria for the proper application of subsection (f) were thoroughly examined and explained by the Court in Snodgrass v. Snodgrass, 297 S.W.3d 878, 884 (Ky. App. 2009) (explaining a successful movant must present to the court a “reason of an extraordinary nature justifying relief.” Civ. R. 60.02(f).

“What constitutes a reason of extraordinary nature is left to judicial construction.” Commonwealth v. Spaulding, 991 S.W.2d 651, 655 (Ky. 1999). Judicial construction must incorporate consideration of three specific factors. The first is that relief under subsection (f) of Civ. R. 60.02 will not be available unless “none of that rule's [other] specific provisions applies.” Alliant Hospitals, Inc. v. Benham, 105 S.W.3d 473, 478 (Ky. App. 2003), citing Spaulding at 655 (“CR 60.02(f) is a catch-all provision that encompasses those grounds, which would justify relief pursuant to writ of coram nobis, that are not otherwise set forth in the rule.”). After determining that CR 60.02(a)-(e) do not apply, courts must consider two more factors: “(1) whether the moving party had a fair opportunity to present his claim at the trial on the merits, and (2) whether the granting of CR 60.02(f) relief would be inequitable to other parties.” Bethlehem, supra; Fortney v. Mahan, 302 S.W.2d 842 (Ky. 1957)).

Applying these factors to this case, the Court determined that the trial court did not abuse its discretion in reopening the decree under Civ. R. 60.02(f). Relying upon Fortney v. Mahan, the trial court directed its analysis to whether H had a fair opportunity to present his claim concerning W’s pension and whether granting him relief would be inequitable to W. The trial court specifically found that W was aware of her pension and failed to disclose it pursuant to the agreement and that H was unaware of the existence of W’s pension. Therefore, the trial court found H did not have a fair opportunity to present this issue in the original litigation and that it was not inequitable for H to share in W’s pension, as she had benefited from her equal share in H’s pension for many years. Finally, the trial court found that because W failed to disclose her pension and H was not aware of it, it had not been awarded to either party under the agreement.

Editor’s Note: Appellee’s Attorney in this case shared this on her own blog, and added some thoughts. Click here to read.

Baker v. Baker, No. 2018-CA-001023-MR (Ky. App. 2019)

QDRO: disclosure, equitable distribution, unjust enrichment

Dated: August 23, 2019
Affirming
To be Published

The Court affirmed that W was equitably entitled to payment of back benefits from H’s railroad retirement payments. Although W did not file proper paperwork to gain access to retirement payments until two years after H retired, W had fulfilled her duty by filing the QDRO and asking when H planned to retire; H did not inform her of his retirement.

At the time of divorce, the parties’ entered into a settlement agreement, which was incorporated into the decree of dissolution of marriage. The settlement agreement provided for W to receive half of H’s Railroad Retirement Plan benefits accrued from the date of the parties’ marriage until the entry of the decree of dissolution of marriage. Additionally, the parties “agree[d] that in the event any document, legal instrument, or other writing [was] necessary to effect the terms and provisions of [the settlement] agreement, each party [would] produce, execute, and/or sign such document in order to effect the intent and purpose of [the settlement] agreement.”

W filed a motion for the trial court to enter a QDRO twenty years later, stating H had started drawing his retirement in the last year. The trial court found the plan benefits to be marital property and entered a QDRO allowing W to begin receiving her portion. W then filed a motion for a judgment for two years of benefits from H under the Plan. H did not tell W when he retired, even though she had inquired, and the Plan Administrator could only divide the Plan as of the date of the QDRO.

W began taking steps to receive the benefits she was due under the Plan as soon as she learned of H’s retirement. The Court held that both parties had a duty to produce or sign any documents needed to effect the terms of the settlement agreement, and W fulfilled her duty by filing the QDRO and asking H about his retirement plans. But H failed to fulfill his duty, informing W of his retirement, which caused W to lose two years of benefits she should have received. The Court applied the doctrine of unjust enrichment, holding that H would be unjustly enriched if allowed to retain two years of his benefits, a portion of which should have been paid to W.

Editor’s Note: EZ QDRO Law would like to give a QDRO-shout-out to Terri Mohan for making sure this case didn’t slip past our QDRO eyes.

McPhee v. McPhee, No. 2018-CA-000774-MR (Ky. App. 2019)

Marital Property: burden of proof, debts, findings of fact, retirement benefits, separate property, tracing

Dated: October 4, 2019
Not to be Published
Affirming in Part, Reversing in Part and Remanding

The Court found that the trial court’s determination that W’s share of an account containing proceeds from the sale of non-marital property compensated her for her share of the marital contribution was equitable and based on substantial evidence in the record.

W further contended that H had not adequately traced an annuity he claimed was purchased with non-marital proceeds; the only evidence that the annuity was purchased with the non-marital proceeds was H’s own testimony. The Court remanded the issue to the trial court to make further findings based on the inconsistency, although “testimony alone may be sufficient to satisfy the tracing requirement[,]” Maclean v. Middleton, 419 S.W.3d 755, 767 (Ky. App. 2014). The Court ruled that if indeed H’s 401K retirement account was the source of the funds in the annuity account, the trial court must further determine the marital portion of the non-marital properties.

Finally, W contended the trial court failed to make findings mandated by Civ. R. 52.01 regarding whether the debts were marital or non-marital. W contended that H was largely responsible for incurring the debt through profligacy and poor decisions and the evidence showed W did not know of or approve the debt; however, W offered no evidence, documentary or testimonial, to show the nature of her credit card expenses. The Court’s review of the findings of fact indicated the trial court adequately characterized the debts. In light of the evidence before it, the Court found that the trial court did not abuse its discretion in characterizing the credit card debt as marital.

Tager v. Tager, No. 2018-CA-001661-MR (Ky. App. 2019)

QDRO: equitable estoppel, valuation date

Dated: October 25, 2019
To be Published
Affirming

The trial court issued a limited divorce decree and adopted the Domestic Relations Commissioner’s (DRC’s) report finding H qualified for military retirement benefits, which the parties stipulated were partially marital, but the order did not provide for division of H’s retirement plan.

Eleven years later, the trial court found the retirement benefits to be subject to division, upon W’s motion, and referred the matter to the DRC for drafting of a QDRO, which provided a valuation date for when the QDRO was completed. W moved the trial court to alter, amend or vacate, arguing that the valuation date should be the date of dissolution. H argued W was estopped from claiming the earlier valuation date because she delayed eleven years before seeking division of the retirement benefits. The trial court entered an amended QDRO, providing a valuation date as of the date of dissolution. H appealed and argued W should be estopped due to her long delay in seeking a formal order.

The Court held that W was not estopped and that the trial court did not err by directing the retirement be valued as of the date of decree of dissolution. The Court listed the elements of equitable estoppel as “(1) [c]onduct, including acts, language and silence, amounting to a representation or concealment of material facts; (2) the estopped party is aware of these facts; (3) these facts are unknown to the other party; (4) the estopped party must act with the intention or expectation his conduct will be acted upon; and (5) the other party in fact relied on this conduct to his detriment[,]” citing Hinshaw v. Hinshaw, 237 S.W.3d 170 (Ky. 2007).

The Court then reasoned that H had not meet the elements, because he had not argued (1) that he relied on W’s silence to conclude she was no longer making a claim to the retirement benefits; (2) that he was unfairly prejudiced by the delay, such as making withdrawals from the benefits in reliance on the lack of an order of division; or (3) that W would obtain a greater benefit than she would be entitled if the court had entered the QDRO earlier.

Roper v. Roper, 2018-CA-000979-ME (Ky. App. 2019)

Maintenance: retirement benefits
Marital Property: separate property, tracing, vesting

Dated: November 8, 2019
Modified: January 17, 2020
To be Published
Affirming in Part, Reversing in Part, Vacating in Part and Remanding

The Court found no error in the trial court’s conclusion that the H’s Toyota Relocation Incentive Payment (RIP) was marital property. H contended that the trial court erred in the division of property, specifically that the trial court misclassified his Toyota RIP as marital property, and refused to allow him to testify as to interest earned on the non-marital portion of his retirement account.

H argued that the trial court erred in failing to classify the RIP as his future income, which he contended would have required the trial court to classify it as non-marital property. In concluding that the RIP was marital property, the trial court found that H had received it before the decree of dissolution was entered. However, while H acknowledged that he had already received all funds at issue under the RIP, he contended that he was not yet fully entitled to those funds, as an event may occur which would require him to pay a portion of those funds back to Toyota.

“In the case of an employee benefit, the operative factor in determining whether benefits are marital or non-marital property is not whether vesting has occurred.” Cobane v. Cobane, 544 S.W.3d 672, 677 (Ky. App. 2018) (citing McGinnis v. McGinnis, 920 S.W.2d 68, 70 (Ky. App. 1995)). “Rather, the test is whether the spouse’s right to participate in the plan was earned during the marriage.” Id. (emphasis added) (citing McGinnis, 920 S.W.2d at 70). Benefits that are only a “mere expectancy” should be classified as non-marital. Id. (emphasis added) (citing McGinnis, 920 S.W.2d at 70). Benefits that are only a “mere expectancy” should be classified as nonmarital. Id. However, “if the employee’s right to future participation in the plan accrued during the marriage, then it is a marital asset even though the employee’s right to receive those benefits does not arise until after the marriage.” Id. (citing McGinnis, 920 S.W.2d at 71).

In this case, the Court wrote that the evidence clearly indicated that H earned the right during the marriage to receive the RIP because of H’s willingness to relocate to Texas. Further, H made both the decision to relocate, actually relocated, and received the funds under the RIP during the parties’ marriage so the benefits are more than a “mere expectancy.” In contrast, there was but a slim possibility that a triggering event would occur, requiring H to pay back a portion of those funds.

H also contended that the trial court erred in not allowing him to testify about interest earned on the non-marital portion of his retirement account. H introduced a statement showing his balance prior to the marriage and there was testimony that H had merged his pension and 401(k) accounts into one account. It was acknowledged by both parties that the $3,101.50 in H’s retirement account at the time of their marriage was H’s non-marital property. H had statements for these accounts; however, he acknowledged that he was missing statements covering approximately six years.

On W’s objection, the trial court ruled that H could not testify as to tracing the interest attributable to the non-marital portion of his retirement funds. The Court observed that, when a particular item of property consists of both marital and non-marital components, a trial court is required to “determine the parties’ separate non-marital and marital shares or interests in the property on the basis of the evidence before the court.” Sexton v. Sexton, 125 S.W.3d 258, 265 (Ky. 2004) (quoting Travis v. Travis, 59 S.W.3d 904, 909 (Ky. 2001)). “The court must apply the ‘source of funds’ rule in order to characterize the property or the parties’ interests in it as marital or non-marital.” McVicker v. McVicker, 461 S.W.3d 404, 417 (Ky. App. 2015) (citing Sexton, 125 S.W.3d at 265). Further, the party claiming that a portion of the disputed property is non-marital must provide clear and convincing evidence demonstrating that contention. See Smith v. Smith, 450 S.W.3d 729, 733 (Ky. App. 2014) (citing Brosick v. Brosick, 974 S.W.2d 498, 502 (Ky. App. 1998)). In this instance, H had not met his burden, and was missing six years’ worth of statements from his retirement account. The Court ruled that there was no error on the trial court’s part in refusing to allow him to testify on the issue because he could not meet this burden.

Lastly, H contended that the trial court erred in ordering him to pay any maintenance to W. The Court vacated and remanded the issue back to the trial court, noting that the trial court failed to consider income W received from her IRA and the total sum of marital property awarded to W.

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