Grasch v. Grasch . A digest of this published opinion from the Ky Court of Appeals today will follow in a couple of weeks. We are swamped!
Grasch v. Grasch . A digest of this published opinion from the Ky Court of Appeals today will follow in a couple of weeks. We are swamped!
Wife obtained a common law judgment for attorney fees against Husband and his company in divorce action. Subsequently, Husband formed a new company. Wife obtained an order of garnishment for the new company’s bank account. Husband filed a motion to quash, which was denied by the family court. The family court found that the new company was Husband’s “alter ego.” Husband appealed arguing the garnishment was void ab initio because it was ordered before Wife had any final judgment against the new company. The Court of Appeals affirmed the family court’s order holding that the family court acted properly under KRS 425.501 in finding the new company was “a judgment debtor in its capacity as an ‘alter ego’” of Husband.
Digested by Elizabeth M. Howell.
A Domestic Violence Order had been entered against Husband, after which Wife filed a post-divorce motion requesting a parenting coordinator. Extensive litigation followed, including several motions for contempt and requests for attorney fees. Despite the fact that no active custody motion was before the court, Husband pursued numerous discovery requests, many of which were focused on obtaining financial information from Wife’s boyfriend and later husband (herein “boyfriend”). Husband requested attorney fees for Wife’s and boyfriend’s failure to comply with discovery in the amount of $24,847.91. The trial court ordered Wife to pay $8,000 towards Husband’s attorney fees. Wife appealed and Husband cross-appealed.
The Court of Appeals held that the circumstances of this case do not justify any award of attorney fees. The American Rule, upheld in Rumpel v. Rumpel, requires parties’ to pay their own fees and costs. Rumpel v. Rumpel, 428 S.W.3d 354, 360 (Ky. 2014). There are two narrowly construed exceptions to the American Rule pertinent herein.
KRS 403.220 allows for an award of attorney fees based on disparity in income between the parties. In this case, the trial court did not make any finding that there was a disparity in income. Additionally, the trial court failed to consider other relevant factors including Husband’s obtrusive tactics and conduct.
CR 37.01 allows courts to require a party who fails to respond to discovery to pay for the other party’s reasonable expenses incurred in obtaining discovery, but makes an exception for when the parties’ refusal is “substantially justified” or when “other circumstances make an award of expenses unjust.” In this case, Husband was not entitled to attorney fees to compel discovery because he should not have been permitted to conduct the discovery in the first place. The Court of Appeals cites the ruling in Combs v. Daugherty, which prevents a party post-decree from engaging in discovery when no motion is pending. Combs v. Daugherty,170 S.W.3d 424, 426 (Ky. App. 2005). There was no pending motion when Husband made his discovery requests. Thus, the Court of Appeals concludes the sole purpose of the requests was to harass Wife and boyfriend.
Finally, the Court of Appeals notes that the trial court could not order Wife to pay attorney fees for boyfriend’s noncompliance with discovery. Thus, the Court of Appeals reversed the $8,000 award of attorney fees rendering Husband’s cross-appeal moot.
Digested by Elizabeth M. Howell.
The Kentucky Court of Appeals addressed three appeals stemming from the same Boone Family Court post-dissolution case:
The first appeal filed by Father challenges the court’s subject-matter jurisdiction, custody modification, and child support modification. Father first argues the Kentucky court lacked subject-matter jurisdiction because the Petition was filed in Kentucky before the Montana court determined Kentucky was the more convenient forum. Prior to the current appeal, Father filed a writ of prohibition and the Court of Appeals held Kentucky had subject-matter jurisdiction. As the “law of the case” doctrine provides that a decision of an appellate court applies to any subsequent trial or appeal, even if erroneous, Father’s argument is without merit. The Court of Appeals holds the trial court had subject-matter jurisdiction.
Father goes on to argue the trial court abused its discretion in modifying custody. He first cites Mother’s failure to file two affidavits pursuant to the requirements set forth in KRS 403.350. The Court of Appeals applies the Supreme Court’s ruling in Masters v. Masters holding, “a trial court had authority to rule on a motion for custody modification despite the party’s noncompliance with an affidavit.” Masters v. Masters, 415 S.W.3d 621, 624 (Ky. 2013).
Father further argues that the trial court abused its discretion by disregarding the custodial evaluation. The Court of Appeals affirms the trial court holding it did not abuse its discretion citing its consideration of all the evidence and finding the custodial evaluation less credible than other evidence presented.
Father also argues the trial court abused its discretion in modifying child support. The Court of Appeals disagrees holding the trial court’s decision was not clearly erroneous in that the trial court’s decision was supported by substantial evidence.
The second appeal filed by the children’s GAL questions the trial court’s authority to overrule the GAL’s objection to testimony from the children’s psychotherapist. KRE 507 governs patient-psychotherapist privilege and grants exceptions to the privilege only when the mental condition of the patient is at issue. In this case, the testimony was not directly related to the mental health of the children. Traditionally, no exception would apply. However, Kentucky has never held children have an independent right to assert patient-psychotherapist privilege in custody proceedings.
The Court of Appeals holds that a GAL when appointed may either invoke or waive the patient-psychotherapist privilege on behalf of the child stating:
“To allow a parent to waive a privilege held by the child in a custody
dispute, over the objections of that child, is not only bad policy, but defeats the
purpose of the existence of the privilege. The impropriety of a rule allowing such
waiver would be further complicated here by the fact that the parent waiving the
privilege was furthering interests which are neutral, if not actually adverse, to those
of the children.”
The Court of Appeals reverses the trial court to the extent the testimony from the children’s psychotherapist was admitted.
Notably, the court states this case is distinguishable from Bond v. Bond where the mental health of the children was at issue, but does not clarify when the children’s mental health is of enough significance to rise to the level of one of the exceptions to the privilege found in KRE 507(c). Bond v. Bond, 887 S.W.2d 558 (Ky. App. 1994). The court simply states, “the psychotherapist-patient privilege protects confidential communications from disclosure no matter how relevant they may be to a disputed issue.”
The final appeal addresses issues of contempt. Father argues that the trial court abused its discretion by denying his request for make-up parenting time as a sanction for Mother’s contempt. The Court of Appeals holds the trial court did not abuse its discretion because Father’s motion did not include any language to indicate his request was sought as a sanction, contained multiple motions, and was moot.
Next Father argues the court abused its discretion by denying his motion to modify child support when one of his children turned eighteen. Father’s motion did not include a child support worksheet, income information, or insurance documentation as required by KRS 403.212(6)(a) and FCRPP 9(4). While Father is entitled to a review of child support, the Court of Appeals holds the trial court correctly determined the motion at issue was defective.
Finally, Father argues the trial court abused its discretion by staying Mother’s payment of his attorney fees as a sanction during the appeal. The Court of Appeals holds the prevention of inconsistent rulings is a legitimate reason to stay the enforcement of the sanction and such order was within the trial court’s discretion.
Digested by Elizabeth M. Howell
Wife argued that the Trial Court erred by failing to include Husband’s income from a second business in its child support calculation. Husband ran a second business and gifted all his proceeds to his father. The Appellate Court held that the Trial Court erred by excluding the income from its child support calculation. Income from a small business, even if given away, is still income pursuant to KRS 403.212(2)(c). The Trial Court should have calculated the gross receipts of the business and subtracted the necessary expenses to determine the gross income to include in its child support calculation.
Wife also argued that the Trial Court erred when calculating the amount of income she was capable of earning. The Appellate Court affirmed the Trial Court, finding the Trial Court took appropriate factors into consideration when imputing income, including work history, prior income, and Wife’s new job. Next Wife argued that the Trial Court erred by denying her maintenance and attorney fees. The Appellate Court again affirmed the Trial Court finding there was no abuse of discretion.
Digested by Elizabeth M. Howell
After significant ongoing litigation over custody, the Trial Court ordered that custody be transferred to Father and that Mother have supervised visitation. The Court of Appeals reversed because of the arbitrary time limitation at trial. Upon discretionary review the Ky Supreme Court reversed the Court of Appeals and reinstated the trial court’s judgment.
As the Trial Court judge was familiar with the case, set the time limit sufficiently in advance of trial, and had significant experience with modification hearings, six hours was a reasonable time limitation within the discretion of the Judge.
Mother requested the minor children testify as part of the modification hearing. The Trial Court declined to interview the children in chambers or allow them to testify. Mother argued on appeal the Trial Court did not have the authority to exclude the children’s testimony, when the children were called by a party to be a witness in a custody proceeding. The Court of Appeals, citing Coleman agreed. Coleman v. Coleman, 323 S.W.3d 770 (Ky. App. 2010). The Kentucky Supreme Court reversed the Court of Appeals and Coleman holding that the decision to interview a child or permit a child to testify in custody proceedings is within the discretion of the trial court. KRS 403.290(1) which grants a judge discretion in interviewing a child would be defeated if a party could obligate a child to testify. Additionally, the Trial court had the benefit of a GAL, two psychologists, and there is strong policy against placing a child between parents. The Trial Court’s decision was within its discretion.
Although the Mother and children resided in Indiana, Kentucky was the undisputed home state when custody was initially determined. Father remained in Kentucky and exercised visitation in Kentucky. The Trial Court properly considered KRS 403.834 in determining Kentucky retained jurisdiction. Furthermore, Mother’s timing in requesting a change in jurisdiction was suspect.
Best Interest Standard, Attorney Fees, and Psychological Evaluation
The Supreme Court affirmed the Trial Court on all remaining issues finding no errors. The Trial Court properly applied the best interest standard by considering the KRS 402.340 and 403.270 factors, as well as an expert’s recommendation. The Trial Court declined to award mother attorney fees, as Mother’s actions necessitated the proceedings and there is nothing mandatory in an award of fees under KRS 403.220. Finally, the Trial Court properly denied Mother’s motion for Father to undergo a psychological evaluation as Father’s mental health was never in controversy.
Digested by Elizabeth M. Howell
The parties’ Settlement Agreement included a provision for the sale of the marital residence. When husband rejected an offer for the purchase of such residence and asserted he intended to buy the home, the trial court ordered wife to sign a quitclaim deed over to husband. For her equity in the home the Trial Court awarded wife the value of half of the offer for purchase of the home less hypothetical closing costs. Wife appealed the Trial Court’s calculation of equity in the home, as well as other matters.
Wife first challenged the Trial Court’s jurisdiction to amend the parties dissolution decree without making the required CR 60.02 findings. The Appellate Court held this argument was waived because it was not brought up prior to the appellate action. The Appellate Court reiterated the Supreme Court’s holding in Commonwealth v. Steadman that while subject-matter jurisdiction cannot be waived, case specific jurisdiction, jurisdiction over a particular case where the court has jurisdiction of the general matter, can be waived.
The Appellate Court next addressed husband’s claim that wife’s argument is estopped by deed. Although wife executed a quitclaim deed and accepted payment from husband, the Appellate Court held wife did not waive her right to appeal. The court looked to the general support for preservation of the right to appeal and wife’s action, which was in compliance with the trial court’s order. Additionally, the Appellate Court held that the acceptance of payment did not waive the right of appeal. AlthoughComplete Auto Transit holds that a party who accepts payment on a judgment is estopped from pursuing an appeal to reverse that judgment, the Appellate Court held Complete Auto Transit does not apply to “acceptance of monetary payments in dissolution proceedings where there is no disagreement or dispute concerning whether the accepting party was entitled to at least the amount accepted and the only issue on appeal concerns whether the accepting party is entitled to additional money.”
The Appellate court concluded that it was an abuse of discretion for the trial court to use hypothetical closing costs to reduce the amount of equity wife received when husband was keeping the house and had no immediate plans to sell. Including closing costs in equity calculations is only appropriate when “(1) the receiving spouse plans or intends an imminent sale of the property without delay; and (2) credible and reliable evidence supports the estimated costs of sale.”
The Trial Court awarded wife attorney fees because husband willfully and deliberately violated the parties’ settlement agreement. The Appellate Court remanded to Trial Court because the Trial Court did not make a finding about financial circumstances which is required in awarding attorney fees. The Appellate Court upheld the Trial Court’s decision not to impose CR11 sanctions, as wife’s motion was well grounded in law.
The Appellate Court first addresses maintenance, holding that income should not be imputed to a spouse when her underemployment is not voluntary. In this case, the child’s medical needs prevented the mother from working.
The Appellate Court did find error with the Family Court’s conflation of child support and maintenance. The Appellate Court held maintenance is for the reasonable needs of a spouse. Expenses for children do not come within a spouse’s reasonable needs, as the children’s expenses are already included in the court’s child support calculation. Including children’s expenses in maintenance is inappropriate as it would ultimately require the obligor to pay all of the children’s expenses.
The Appellate Court also held that the nine year duration of maintenance was not adequately supported by the lower court’s findings when the marriage was 20 years long, the wife was only 48 years old, the wife had a bachelor’s degree, and expert witnesses found the wife to be employable. The Appellate Court remanded the maintenance decision for recalculating the amount and for additional findings supporting the duration.
The Appellate Court then dealt with a slew of other issues, upholding all lower court decisions. They found no error with the court’s consideration of gross vs. net income in setting maintenance, the consideration of gross income in setting child support, and the court’s use of a stock valuation from an expert witness. They held that the lower court had broad authority in assigning attorney fees and did not make an error assigning a portion of wife’s attorney’s fees to husband where the husband was high earning, the wife was unable to seek full time employment, and the court awarded only half the total amount of wife’s attorney’s fees.
The Appellate Court also upheld the lower court’s consideration of future and past earnings in calculating income; and upheld the decision to assign all the residential expenses to the wife, when the obligations were considered in calculating her expenses to determine maintenance. Finally, the Appellate Court affirmed the lower court’s refusal to modify maintenance, as the husband showed no change of circumstances to justify a modification.
The Supreme Court reaffirms the American Rule against shifting fees, recognizing CR 37.03 and KRS 403.220 as exceptions to the rule. In this case, $50,000 of attorney fees were awarded to the Wife under CR 37.03 and KRS 403.220. The Supreme Court held that the Trial Court misapplied CR 37.03 by imposing discovery sanctions on Husband for denial of a request for admission. The Trial Court should have considered Husband’s grounds for denial. As in this case, when a party reasonably believes he might prevail on a matter, or has a legitimate reason for denial of a request for admission, the denial is justified and sanctions are improper. CR 37.03 is to be narrowly construed. Husband should not have been sanctioned under CR 37.03.
Unlike 37.03 which provides for narrow sanctions, KRS 403.220 provides for attorney fees when there is financial disparity between parties to a divorce. The Trial Court has broad discretion in awarding attorney fees under KRS 403.220. The rule is not punitive, but Kentucky case law holds Trial Courts can appropriately consider the litigation conduct of the parties. Allowing Trial Courts this discretion prevents an “unreasonable or an unfair burden on the party with fewer financial resources.” In this case, the Supreme Court notes facts which may support an award of attorney fees under KRS 403.200. The Supreme Court remands the matter to the Trial Court to determine the amount of Wife’s attorney fees Husband should pay under KRS 403.200.
Finally, The Supreme Court looks to Husband’s argument that wife improperly applied CR 59.05. The Wife challenged the business-valuation amount after trial and entry of the initial judgment. CR 59.05 is not available to Wife because she could have raised the business-valuation issues during the trial. Wife’s use of CR 59.05 and the Trial Court’s subsequent modification of the property settlement award are improper. The Supreme Court agrees with the Husband that Wife should have raised any business-valuation issues pre-judgment, as she has the information available to her at that time.
Middleton v. Middleton Interesting 50 page opinion and dissent addressing characterization of distributions from family trust, nonmarital tracing and standard of proof, division of marital personalty, assignment of debt, attorney fees and costs.
D.L.B. v. Cabinet for Health and Family Services, et al Conversion of involuntary termination of parental rights action into a voluntary termination action and concurrent dismissal of father from proceedings was abuse of discretion.
Murry v. Murry Denial of attorney fees in grandparent visitation modification affirmed as there is no fee shifting provision in KRS Chapter 405. Findings that prior visitation order had not been working and presents more problems than it resolves falls short of the requirement that necessary facts be found specifically so case was remanded to trial court to make further factual findings.
Posted by Diana L. Skaggs in Attorney Fees, Case Law - Kentucky, Child Abuse and Neglect, Child Support, Civil Procedure and Local Rules, Debt Division, Grandparent Visitation, Maintenance , Marital Property, Nonmarital Property, Termination of Parental Rights | Permalink | Comments (0) | TrackBack (0)
Nesselhauf v. Haden, et al, Where appellants’ claim for attorney fees was in ad damnum clause and no statement of why he or she is legally entitled to the request was made, no separate claim for relief was before the court. Once court entered custody directed verdict and more than 10 days passed with no motion to alter or amend, the court lost jurisdiction. Award of attorney fees made months following the final judgment was reversed.
Buddy Lee Bailey v. Linda Beth Bailey, No. 2012-CA-000508-MR
Husband filed for dissolution of the parties’ thirty year marriage in 2004. During his employment, Husband actively participated in his employer’s retirement pension plan. Subsequent to the parties’ separation, Husband was injured and filed for short term disability. The order entered by the Court after mediation included a provision that Husband was to provide to Wife information concerning the retirement account, including the policy, and all information regarding Husband’s disability. Wife was not provided with this information. The trial court entered a limited decree of dissolution in December 2004. In August 2006, the Court entered a judgment against Wife for the value of Husband’s personal property not returned to him. Husband filed a motion in June 2008 to satisfy the judgment. Since the pension issue had not been resolved, the Court also granted Wife’s request that the parties exchange all documents relating to retirement or disability accounts.
In June 2011, the Court entered an order holding that Husband’s retirement pension was not subject to division as marital property because Husband’s retirement pension was converted into a disability pension. Wife filed a motion to alter, amend or vacate the order because she was never provided with the retirement policy documents. Husband was deposed, and Wife received the documents. In January 2012, the Court granted Wife’s motion to alter, amend or vacate the judgment, holding that Wife was entitled to entry of a Qualified Domestic Relations Order allocating one half of the pension benefits accrued from the date of marriage to the date of the entry of the limited decree of dissolution. The court found that Husband’s disability pension would be converted to an ordinary retirement pension when Husband reached the age of 62. Wife was also ordered to satisfy the August 2006 judgment against her, plus statutory interest. Husband filed a motion to alter, amend or vacate the Court’s January 2012 order. The Court denied Husband’s motion after a hearing, and Husband appealed.
When the Court ruled on the divisibility of the retirement plan, the relevant plan documents had not been made available to Wife or the Court. Because a full and candid disclosure of the parties’ assets is necessary for an equitable division of property, the Court did not abuse its discretion in granting Wife’s motion. Once obtained, the policy clearly stated that when Husband turned 62 his disability pension would end, and he would become eligible for a normal retirement pension. The Court of Appeals distinguished this case factually from the Kentucky Supreme Court’s decision in Holman v. Holman, 84 S.W.3d 903 (Ky. 2002), which held that disability benefits which replace future income should not be classified as marital property. Husband’s disability benefits would be reclassified on a date certain, which was different from the facts presented in Holman. The ordinary pension benefits that were accumulated during the marriage that would be reclassified as normal pension funds when Husband turned 62 were marital property. Any other conclusion would be inequitable because it could allow a spouse to prevent the other spouse from his or her share of retirement benefits through an election of disability coverage.
On the attorney’s fees issue, Husband argued that the Court failed to rule on the motion. Wife argued that the Court’s silence on the matter was a denial of attorney’s fees. The Court of Appeals agreed with Wife, stating that attorney’s fees are entirely within the discretion of the trial court, and the Court in this case clearly considered the financial resources of both parties throughout the lengthy proceedings. Nothing in the record could demonstrate that the Court abused its discretion in failing to award attorney’s fees.
Digested by: McKenzie Cantrell, Attorney, of counsel, Diana L. Skaggs + Associates
Published: Opinion Affirming
Father appeals order of Kenton Circuit Court requiring him to pay, as part of his child support, amounts for respite care and work-related childcare, as well as part of Mother’s attorney fees and court costs.
The parties were married in 1994 and divorced in 2007. They have two children, one of whom requires extra care because of autism. At the time of the divorce, Father lived in Cincinnati and Mother lived in Ft. Mitchell, Kentucky. In January, 2011, Father took a job in Abu Dhabi, United Arab Emirates earning approximately $32,000 a month. Mother also went to work earning $46,000 a year.
Mother filed a motion in March, 2011 because Father was unable to exercise parenting time after his move to Abu Dhabi. She asked that Father be required to pay for a sitter to give her time off from caring for the children. She also requested that he share work-related childcare costs and her attorney fees. Even after Father’s subsequent move to Texas, he was unable to exercise parenting time on a regular basis.
The trial court ordered Father to pay 100% of any childcare costs incurred when he did not exercise his parenting time, which was designated as respite care. Father was also ordered to pay work-related childcare expenses and to pay $3500.00 of Mother’s attorney fees. After Father’s motion to alter, amend, or vacate was denied, this appeal followed.
Father first argued that respite care is not authorized under Kentucky law. The Court of Appeals disagreed, finding that the award of respite care was similar to work-related childcare, and was not an increase in Father’s general child support obligation. This expense was specifically and adequately justified by the trial court.
Father further argued that the trial court erred when it awarded Mother work-related childcare expenses. He claimed that even if she incurred the expenses, they were only temporary. Again, the Court of Appeals disagreed, holding that Mother had only to prove that there had been a change of circumstances requiring the payment of work-related childcare expenses. Father had to pay his share of those expenses, whether or not they were temporary.
The Court of Appeals found no abuse of discretion in the award of $3500 in attorney fees. Father earned $450,000 in Abu Dhabi and about $250,000 after his move to Texas. Mother only earned $46,000 per year. Because of the disparity in the parties’ incomes, the award of attorney fees was not an abuse of discretion.
Published: Opinion Reversing and Remanding
The parties divorced in 1990, ending a 24-year marriage. Their agreement provided the wife $3000.00 per month in maintenance which was subject to modification if she became more employable as a result of education she received from husband’s financial assistance. In October, 2008 husband filed a motion to modify maintenance after wife received a bachelor’s degree in social work from the University of Kentucky. In June, 2009, wife filed a motion for attorney fees, expert fees, and costs incurred to defend the motion for modification.
On June 22, 2009, family court heard testimony on both motions, and on June 30, 2009 entered an order finding insufficient grounds for modification of maintenance. The order did not mention wife’s motion for fees and costs. On July 1, 2009, wife’s attorney emailed the judge’s clerk regarding the fees and on August 13, 2009 the judge’s secretary informed husband’s attorney that wife was going to file an affidavit concerning fees and that husband would have one week to respond, after which there would be a hearing.
At the hearing on September 4, 2009 husband objected on the grounds that family court no longer had jurisdiction over wife’s motion. On September 16, 2009 the trial court granted wife’s motion and awarded $19,161.80 in attorney fees and held that husband’s objection was without merit.
Husband appealed to Court of Appeals, which held family court lacked jurisdiction to grant wife’s motion and reversed award of attorney fees. Wife then appealed from Court of Appeals’ decision and discretionary review was granted.
Husband contended that trial court’s granting of fees to wife was an amendment to its decision denying his motion to modify maintenance. Since wife’s motion was not granted within 10 days following denial of husband’s motion, he asserted that CR 52.02 divested family court of jurisdiction. The Supreme Court disagreed, however, finding that CR 52.02 applied only to the amendment of judgments. The ten day time limit would apply only if the order denying husband’s motion to modify was a final judgment.
The finality of a judgment depends upon whether a case involves a single claim or multiple claims. If the case involves a single claim, all rights of all parties must be adjudicated in order to be final. CR 54.01. Multiple claims involve the application of CR 54.02(1) which states a final judgment may be granted on less than all claims only if it is determined there is no just cause for delay. Absent such determination, the decision is interlocutory and subject to revision at any time before entry of judgment adjudicating all claims.
The Supreme Court found that wife’s motion for attorney fees was a separate motion by a party opposed to the initial action, and more akin to a counterclaim. Different facts supported each motion in that husband relied on wife’s attainment of a bachelor’s degree and the basis for wife’s claim was the financial disparity of the parties.
Holding that the motions of each party constituted separate claims for the purposes of CR 54.02, the Supreme Court reversed the opinion of the Court of Appeals and remanded to that court for consideration of the merits of husband’s appeal of the trial court’s order awarding attorney fees to wife.
No. 2010-CA-000229-MR, No. 2010-CA-000272-MR, No. 2010-CA-000849-MR
Published: Opinion Affirming
Timothy Brosnan appeals and Margaret Brosnan cross-appeals from judgment of Jefferson Family Court dividing marital property and debts and awarding maintenance to Margaret. Margaret also appeals from Jefferson Family Court order denying her motion for attorney fees incurred on appe
Timothy alleges that a social worker was erroneously permitted to offer expert opinion, and that the amount and duration of maintenance awarded to Margaret was an abuse of discretion. Margaret argues the trial court awarded insufficient maintenance, improperly divided parties’ bank accounts, improperly divided credit card debt, failed to require Timothy to keep her on his life insurance policy, and erred when it denied her request to withhold dissolving marriage until January 1, 2010 to permit filing of joint tax returns and denied her request to require Timothy to pay her one half the 2008 tax refund prior to sale of marital residence. She also argues that family court erred when it failed to advance her attorney’s fees on appeal and cross-appeal.
The trial court divided the marital property and ordered Timothy to pay Margaret her share from his half of the proceeds from the sale of the marital residence. The trial court found that Timothy dissipated funds from a joint savings account and ordered him to pay the parties’ entire credit card debt. On the issue of maintenance, the trial court permitted, over Timothy’s objection, the testimony of a social worker who diagnosed Margaret with PTSD and incapable of employment because of a variety of symptoms. Margaret was awarded maintenance for fifteen years and $3000 in attorney’s fees.
Both parties filed motions to alter or amend, both of which were denied. Timothy appealed and Margaret cross-appealed. Margaret also filed a motion in family court for an advance of attorney’s fees for the appeal, which the family court denied.
The Court of Appeals held that family court abused its discretion when it permitted the social worker to opine that Margaret has PTSD. Since the social worker lacks training and education to diagnose psychological disorders, her testimony was inadmissible. The Court concluded, however, that since the trial court did not rely on the social worker’s testimony and based its findings on the factors in KRS 403.200, the error was harmless, not requiring reversal. Margaret’s claims that the maintenance award is inadequate was denied, the Court finding no abuse of discretion. The Court found no abuse of discretion in any of the other issues presented on the appeal or cross-appeal.
On the issue of Margaret’s attorney’s fees on appeal, the Court of Appeals held that family court retains jurisdiction over this matter after an appeal is filed. Prospective fees may be awarded and the trial court retains jurisdiction to alter its award and order reimbursement of any unjustified amounts. Therefore, Margaret shall be permitted to file a motion for attorney’s fees as a result of this appeal.
2009-CA-001867-ME AND NO. 2010-CA-000049
Issues: Published: Affirming
DE FACTO CUSTODIAN AND TOLLING STATUTE:
KRS 403.270(1)(a) provides that, in calculating the minimum period of time during which a person must be the sole primary caregiver and financial supporter of a child in order to qualify for de facto custodian status, the requisite period of time shall not include any period of time after a legal proceeding has been commenced by a parent. CA held in this case that this “tolling period” does not require the parent to file a new and separate lawsuit; and that, in this case, numerous pleadings were independently sufficient to trigger the tolling provision, including Father’s pro se motion for custody, Mother’s Petition for Dissolution of Marriage demanding custody, Father’s response to the petition demanding custody, and Father’s response to Grandparents’ Intervening Petition. Thus, Grandparents were not primary caregivers for the statutory period and they could not have standing as de facto custodians.
ATTORNEY’S FEES AWARD:
FC did not err in ordering Grandparents to pay $2,500 of Father’s $36,000 attorney’s fees; FC was not required to find that Grandparents employed delay tactics; FC need only consider the financial resources of the parties and Grandparents had maintained throughout the action that Father was unable to financially support Child while they were capable of doing so.
No. 2009-SC-000442-DG on review of COA No. 2008-CA-001059-MR
The questions presented in this case include 1) whether a trial court could enforce through its contempt powers, an obligation to pay a creditor on a marital debt after the obligor received a post-decree bankruptcy discharge and his former wife failed to institute an adversary proceeding in bankruptcy court; 2) whether a motion for modification of child support was properly denied when child support established in divorce decree was based upon parent’s imputed income as a result of a finding of voluntary underemployment; and 3) an award of attorney fees.
The parties’ divorce decree provided for joint custody of their minor child with husband required to pay child support calculated from his recent history of earnings as a federal prison guard. Husband testified that the parties agreed he should quit his job at the prison because the wife was also employed there as a guard. The wife denied making such an agreement.
The decree also assigned to husband liability for a National City loan on a Dodge Durango which had been repossessed by the time of the decree.
A little more than a year after the decree, husband filed a motion to reduce child support claiming changed circumstances, including health problems, inability to locate correctional work and filing for bankruptcy. Wife countered with motion for attorney fees and to hold husband in contempt for failure to pay the debt on the repossessed Durango. Wife acknowledged she received notice of the bankruptcy and that she did nothing to challenge discharge of the debts. Husband admitted that under the decree, he was responsible for the Durango debt.
The trial court found husband to be in contempt for failure to pay the debt on the Durango, denied his motion to modify child support, and ordered him to pay $500 of wife’s attorney’s fees.
The Court of Appeals affirmed on all issues, as did the Supreme Court.
With respect to child support modification, the court found that the standard for modification was not met because his affidavit did not definitively establish a material and continuing change of circumstances post-decree. The court explained that KRS 403.212(2)(d) specifically states that a parent may be voluntarily unemployed or underemployed without finding that the parent intended to avoid or reduce the child support obligation. In order to prevail, husband needed to show a material, substantial, and continuing change of circumstances existing post-decree which made him less capable of attaining his former income level than existed at the time of the decree. The trial court did not find the requisite showing, the Court of Appeals agreed, and the Supreme Court affirmed.
The trial court held husband in contempt for his failure to pay the loan on the Durango. The bankruptcy statute was amended in 2005 to provide that a Chapter 7 discharge does not discharge a debtor from an obligation incurred in the course of a divorce or separation. In addition, since state court has concurrent jurisdiction to determine the dischargeability of a debt, Kentucky state courts have jurisdiction to determine whether the husband’s obligation on the Durango was discharged in his bankruptcy.
Following BAPCPA amendments to the bankruptcy statutes, a non-support divorce debt is excepted from discharge and there is no requirement that a spouse or child participate in the bankruptcy for the debt to be excepted from discharge. Husband’s payments on the loan were part of the division of marital property and debts, even though in this case there was no hold harmless provision.
Finally, the trial court is not required to make findings on financial resources when awarding attorney’s fees. The statute requires only that the trial court must simply consider the parties’ finances before awarded fees.
Age v. Age, No. 2009-CA-001982-MR
Reid (formerly Age) v. Age, et al, No. 2009-CA-002173-MR
Reid filed a petition for dissolution of a 33-year marriage in November, 2006. After entry of the decree in June, 2008 the parties filed a settlement agreement which had been executed in April, 2008.
More than a year after the decree was entered, Age filed a motion to set aside the decree based on Reid’s statements in obtaining a theological annulment by the Roman Catholic Church. That motion was denied. In August, 2009, Age filed a CR 60.02 motion to set aside the judgment on the grounds of mistake, fraud, and new evidence. On September 3, 2009 the TC entered an order denying the post-judgment motion and also denied Age’s subsequent motion to reconsider.
Reid’s cross-appealed on the issues of maintenance and attorney fees. Reid never earned more than $7,000 annually, while Age earned $188,000 in 2008. She contended that after consideration of the relevant statutory criteria, the court’s award of maintenance was inadequate. She further maintained that the court should have made findings before ordering her to pay additional fees to her attorney and also when the TC denied reimbursement by Age to Reid of these attorney fees, which she claimed was an abuse of discretion.
By agreed order, temporary maintenance was set at $750.00 per month. Under the terms of their settlement agreement, Reid waived maintenance but negotiated for one-half of Age’s pension payment which she expected would be approximately $2,300 per month. In an addendum to the April, 2008 agreement, Age agreed to pay Reid $2,300 per month until she began to receive pension payments from Abbot Laboratories pension administrator. The court ordered the parties to enter into a QDRO to facilitate Reid’s receipt of pension benefits.
At a hearing in January, 2009 it was discovered that Reid’s pension benefits would only be $953.74 per month. This gave rise to continued dispute about the issue of spousal support.
On October 22, 2009, TC entered an order finding the settlement agreement unconscionable because of the waiver of spousal support and the pension benefit insufficient to meet the minimum needs. TC awarded maintenance until Age’s retirement when Reid will be entitled to one-half Age’s pension.
Reid’s former counsel filed an attorney’s lien for unpaid fees and TC ordered Reid to pay the fees in installments. TC denied Reid reimbursement of any fees from Age based upon her assertion that his post-judgment motion was frivolous and vexatious.
Regarding the validity of the divorce decree, the CA found no evidence to suggest the parties were not lawfully married. The Catholic Church’s determination under ecclesiastical law does not alter the legal effort of a civil marriage. None of the reasons to invalidate a marriage as set out in KRS 403.120 applied in this case.
CA held that Age’s CR 60.02 motion was not timely filed, there was no evidence of civil fraud and the Constitution prohibits an interface between church and state law.
Reid claimed the TC abused its discretion when it set maintenance at $2,300 per month to be reduced when Reid’s pension benefits commenced. The CA found that the TC made relevant findings and used the factors enumerated in the statute to determine the maintenance award.
The CA reviewed Reid’s appeal of the issue of reimbursement of attorney fees despite procedural infirmities regarding the notice of appeal. Holding that a TC’s decision regarding KRS 403.220 may only be overturned if an abuse of discretion occurred, the CA found no indication the TC’s ruling was arbitrary, unreasonable, unfair, or unsupported by sound legal principles. To Reid’s contention that the TC failed to make adequate findings, the CA disagreed and found that the trial judge exhaustively covered the division of assets and did not omit any findings essential to its judgment.
Mitchell v. Mitchell, 2009-CA-001856-MR
Appellant appealed from Circuit Court Order awarding Appellee attorney fees, expert fees, and costs incurred as a result of his motion to modify maintenance. The CA agreed with argument that TC lacked jurisdiction to enter the Order and reversed.
Parties were divorced in 1990 after 24-year marriage. In the divorce agreement, Appellant agreed to pay $3,000 a month in maintenance until Appellee remarried or one of the parties died. The agreement provided that if Appellee became more employable due to education she received with appellant’s financial assistance, this could be grounds for modification. Appellee earned a bachelor’s degree in 1995. In October, 2008, Appellant filed a motion to modify maintenance.
June 9, 2009, Appellee filed a motion for attorney fees and costs related to her defense of the motion to modify maintenance. On June 22, 2009, TC heard testimony on both motions.
On June 30, 2009, TC entered order finding that Appellant failed to establish sufficient grounds to support modification and denied the motion, and indicated the ruling was final and appealable. No appeal was taken. Appellee’s motion for fees was not addressed.
On July 1, 2009, Appellee’s attorney emailed the judge’s law clerk inquiring how to proceed with respect to the motion for fees, and on July 8, 2009 the clerk responded “I am on this, give me a day or two.”
On August 13, 2009, the judge’s secretary informed Appellant about the ex parte communication between Appellee’s attorney and the law clerk. Appellant’s counsel was advised that Appellee’s counsel had been instructed to file an attorney fee affidavit. Appellant’s attorney would then have a week to file a response, after which the judge would hear arguments on the motion for fees on September 4, 2009.
Appellant filed an objection to the TC’s consideration of the motion for fees, arguing that the court lacked jurisdiction to award fees and costs at this juncture and that such an award was unwarranted. On September 4, 2009 the TC heard arguments from counsel, and on September 16, 2009 awarded Appellee $19,161.80 in attorney fees. The TC found Appellant’s objection on “technical jurisdictional grounds” to be without merit and stated “… the June 9 motion was not ruled on until this date.” Thereafter, Appellant filed this appeal.
Appellant argued on appeal that the TC lacked jurisdiction to rule on Appellee’s motion for fees and costs, that Appellant was prejudiced by the TC staff’s ex parte communication with Appellee’s counsel, and that the award of fees and costs was unwarranted.
CA agreed with Appellant that the TC’s order denying his motion to modify was final and therefore the TC had lost jurisdiction to enter the subsequent order awarding fees because Appellee failed to timely request additional findings and modification of the Order pursuant to CR 52.02. The CA concluded the Order was inherently final because the case addressed a single claim which was the motion to modify maintenance. Appellee’s motion for fees did not constitute a separate claim.
Because the Order was final, there was a ten-day window during which the TC could modify or Appellee could move for modification of the ruling to include findings and a ruling on her motion for attorney fees. Appellee did not file a proper post-judgment motion. The ex parte communication between Appellee’s counsel and the judge’s law clerk was insufficient to toll the time for amendment. Therefore, entry of the order awarding Appellee attorney fees constitutes reversible error.
Appellant’s remaining two arguments were not addressed because the decision on the jurisdictional argument is determinative of the case as a whole.
Husband appealed the trial court’s division of marital property, award of temporary maintenance, award of attorney fees, and denial of relief to quash garnishment writs and judgment lien.
Marital residence: Court awarded husband the residence, but awarded all the equity in the residence to the wife as her non-marital property. Husband argued that the court should have apportioned the equity as set out in
Timeshare: The court ordered that the timeshare be sold. Wife was to receive $1,522.88 of the proceeds as her non-marital property. The remaining proceeds were to be divided equally. Husband argues that the court erred in not taking into consideration the debt associated with the timeshare, which the court assigned to husband. COA found that debt is part of the current mortgage on the marital residence. The court deducted the full amount of both mortgages from the value of the residence to determine the equity in the property. As a result, the court properly considered the debt.
Temporary maintenance: Court ordered husband to pay wife temporary maintenance of $2500 per month. The order included a provision for health insurance and car insurance. Husband argued that the award was excessive and that wife intentionally remained unemployed. COA found the trial court had imputed wife with income in calculating temporary maintenance and found no basis to disturb the trial court’s judgment.
Attorney fees: Trial court awarded wife $10,000 in attorney fees. Husband argued that wife not entitled to any fees due to the amount of assets wife received in the judgment. COA found no abuse of discretion. Wife only awarded half of the fees she asked for, husband retains a higher earning capacity, and husband received the residence and most of the income producing property.
Writs of garnishment and judgment lien: After the trial court ruled on the parties CR 59.05 motions, wife filed non-wage garnishment against three of husband’s accounts and a judgment lien against his real property. Husband moved to quash the writs and lien as premature, but trial court denied the motion. COA found that the garnishment writs and judgment lien were not filed prematurely. The court’s judgment stays in effect until modified, although enforcement is stayed under CR.62.01. When compliance dates have passed by the time the court denies a CR 59.05 motion, the trial court should allow a reasonable amount of time for the obligor to comply with the original order. Here, a reasonable amount of time was given.
Wife’s garnishment of tax-deferred accounts resulted in 10% penalties for early withdrawal, plus taxes and fees. COA found that the garnishment writs subjected husband to penalties that far outweighed his failure to comply with the court’s orders. The penalties and taxes imposed on husband changed the overall allocation of marital assets. COA remanded this issue to the trial court for a determination of the amount of penalties and taxes incurred and an allocation of this amount between the parties.
Rearden v. Rearden, __ S.W.3d __ (
The parties divorced after approximately 6 months of marriage. No children were born during the marriage. Thus, the primary issues at trial and on appeal concerned the classification of assets as marital or non-marital property:
Down payment on marital residence: The trial court classified the husband’s pre-wedding down payment of $3000.00 from his personal money market account on the marital residence as marital. Following the Source of Funds Rule, the COA found that the down payment was an identifiable portion of the purchase price and it was made by the husband prior to the wedding. However, the husband could not trace the $526.87 refund received from the down payment during the marriage as a result of calculations in the closing documents. COA held that $526.87 refund was marital property and that the remaining $2473.13 was husband’s non-marital property.
The treadmill, dining room suite, and bed/mattress: The trial court classified these items as marital property since the husband could not sufficiently prove they were purchased with his non-marital funds. COA agreed. Husband purchased the items with his personal credit card, but paid some of the credit card transactions using funds from the parties’ joint account. The fact that the wife did not challenge husband’s testimony that he used non-marital funds to buy the items does not equate to an admission by the wife. Husband still had to meet his burden of proof.
Husband’s military retirement benefits: The trial court found that since the parties were married for 2 months of husband’s 270 months of service credit, wife was entitled to $8.08 per month for the remainder of husband’s life. Instead of requiring the husband to make such a small monthly payment to the wife, the court ordered husband to pay the wife a lump sum of $3000. The court did not give an explanation of how it arrived at the lump sum amount. COA agreed that the wife would be entitled to $8.08 per month for the rest of the husband’s life and that the trial court had discretion to convert the payments to a lump sum. COA reversed and remanded for an explanation of how the court arrived at $3000.00 as a fair calculation of the wife’s future interest.
The final issue on appeal concerned whether the trial court erred in not awarding the husband attorney fees after finding the wife to be in contempt of court more than once. COA affirmed, finding that the trial court is not authorized to consider any other factors beyond the financial positions of the parties when awarding attorney fees. COA also noted that the husband was awarded attorney fees in the companion appeal, specifically addressing the finding of contempt.
I have followed with interest the mounting clamor for fixed fees in divorce cases. I loved North Carolina attorney Lee Rosen’s quote in an ABA Journal e•report, “If someone at Lockheed can put a price on a jet, a lawyer can put a price on a case – the variables they deal with are so much more complicated than those we deal with… We should be expert enough in our areas of law so that we can do it.” After many years I cannot predict with much accuracy. How do you know after one interview whether the client or spouse has good records or any records tracing that nonmarital interest? You have never met the spouse and probably don't know who is representing him/her so it is virtually impossible to gauge whether the case will proceed with open and forthright discovery and a cooperative sense of collegiality or whether you will be in court often and taking many depositions. How to know whether this is the case that will have a child related issue after every exchange of the children? What we can do, however, is spread the risk. Under fixed fees some cases will be financial losers and others will be profitable.
Rosen’s website has a fee calculator so prospective clients who answer a few questions can find the range for legal fees they would pay his firm. Once the few simple questions are answered “yes” or “no,” a range of fees can be found for cases that settle without filing a lawsuit and a separate range can then be accessed for litigation fees. The actual fee, of course, is set in a meeting with the client because the web based calculator cannot cover all scenarios. The ranges were developed after Rosen lawyers analyzed five years of their cases. At first blush they appear to be a very reasonable approach.
One could quibble that the lowest fees published on the website are too high; most of us handle many cases for less than $6,000. This has the probably intended effect of discouraging calls from those who cannot afford his firm's services. For clients with a fixed fee retainer, however, $6,000 may be on spot as the hourly rate mitigates huge numbers of phone calls and emails. On the other hand, the fee calculator does not take into account complicating issues such as relocation, hidden assets, multiple businesses, legal questions of first impression, and personality disorders. Perhaps before settling on a definitive fee in the interview, the lawyer takes such matters into account.
All in all, it’s a good step in the right direction. We are in the process of analyzing our historical fees and considering whether to offer clients a fixed fee option. We could do it today and use Rosen's numbers and methodology if I could satisfy myself that those fees are fair. I would prefer to have my own basis for the numbers. Some clients would end up paying more with a fixed fee as opposed to an hourly rate and some would save money, but for those who justifiably want a sum certain, the time has come.
UPDATE: A comment from William Wilson, Indiana Family Law:
The worry about getting the fixed fee "right" stems from our brains looking at everything in terms of hours having value. If we can break that habit, then fixed fees aren't so worrisome.
An analogy (albeit a poor one) is a car: for the most part, auto makers can produce a $15,000 car in the same amount of time that they can produce a $50,000 car, yet they do not charge us based upon the number of hours that went into making the car. They charge us based upon the value of what they sell and we want to buy.
For clients, it's easier for them to say "yeah, it's worth $2,500 for me to get this divorce" than to say "I'm willing to have you put X hours into the case." The other side of the coin is the lawyer saying "the work I did was worth $2,500" or "the work I did was probably worth more than $2,500."
We all have cases where we put more time in than we thought we would, but many of those cases also end up with unpaid client bills. The end result is the same--our expectation of being paid a fair amount was not met.
But, on the flip side, there are those cases where we can quote a $2,500 fee and get it done quickly. We shouldn't feel bad about "making more" than we would have under an hourly rate--for the client, the end result is the same.
In a nutshell, hourly billing has many flaws. Some things we do as lawyers can be done very quickly, but are worth more than the time it takes to do them. It's easier for clients to understand the value of achieving a goal--like obtaining the divorce--than to understand how much time goes into doing discovery and the resulting fees based on an hourly rate.
I hope that makes sense--I haven't had my morning OJ yet.
Don't be afraid of flat fees. I've been making that move, and clients seem very comfortable with the concept. I figure I will quote the fee a little higher, and in the end, if I feel the fee was a bit high, I can always reduce it--and you can imagine how much clients will appreciate that.
ALLISON V. ALLISON
DIVORCE: MARITAL/NONMARITAL CHARACTERIZATION OF PROPERTY AND DEBTS; ATTORNEY FEES
PUBLISHED: AFFIRMING IN PART AND VACATING IN PART AND REMANDING
PANEL: BUCKINGHAM, PRESIDING; THOMPSON AND HENRY CONCUR
DATE RENDERED: 02/15/2008
Ex-Husband appealed from TC’s orders relating to marital/nonmarital nature of his family's business, the marital/nonmarital nature of a $66,714 debt allegedly owed by Ex-Wife to her mother, and the award of attorney and expert witness fees.
Ex-Husband and Ex-Wife were married on September 5, 1986. In the early 1970's, Ex-Husband's mother and father acquired all stock in an office-supply business. Ex-Husband owned all shares of stock in the business at the time of trial, which he claimed to be his nonmarital property. He claimed that prior to the marriage he entered into an agreement that gave him an 8% interest in the business in exchange for a promissory note from him for $32,000. Ex-Husband never paid the note, and TC found that his father had forgiven the debt. Ex-Husband contended that he owned this portion of the outstanding business shares as his nonmarital property because the forgiveness of the debt constituted a gift to him. Alternatively, he contended that this ownership interest is his nonmarital property because he acquired it before marriage.
As to the remaining shares of corporate stock, during the marriage, there was a stock redemption agreement between Ex-Husband's parents and the corporation whereby the parents sold their 84,800 shares of stock to the corporation for a sum that was paid to them over a ten-year period by corporate earnings. Ex-Husband claimed that these shares were also his parents' gift to him and that he never paid any money, from marital funds or otherwise, for the stock.
Ex-Husband ultimately argued to CA that he had at least an 8% nonmarital interest in the business due to the forgiveness of the payment for the stock by his father, citing KRS 403.190(2)(a) which expressly excludes property acquired by gift from the definition of “marital property” unless “there are significant activities of either spouse which contributed to the increase in value of said property and the income earned therefrom.” Alternatively, Ex-Husband stated that the 8% interest is nonmarital because it was acquired before marriage.
CA provided that if Ex-Husband acquired his ownership interest in exchange for the note, and that indebtedness was later forgiven, then the forgiveness of the indebtedness would be a gift to Ex-Husband and would constitute a nonmarital interest in the corporation. CA thus vacated TC’s determination that Ex-Husband did not have a nonmarital interest in the corporation and remanded the matter for TC to determine the extent of Ex-Husband's interest prior to the redemption agreement and whether such interest was marital or was proven by Ex-Husband to be nonmarital as a result of a gift or nonmarital as having been acquired before marriage.
CA further noted that if, on remand, TC determined that Ex-Husband's interest prior to the redemption was marital, then any increase in ownership interest because of the redemption agreement was also necessarily marital. If TC determined that Ex-Husband's interest prior to the redemption was nonmarital, then it must determine whether any increase in value was marital or nonmarital. CA noted that, in this regard, the case was one of first impression in Kentucky.
CA recognized that under the “source of funds” rule used by Kentucky courts to determine whether property is marital or nonmarital, property is considered to be acquired as it is paid for; thus, the shares of stock sold to the corporation in the stock redemption agreement were not “acquired”, within the meaning of KRS 403.190 and the determination of marital/nonmarital interest, until they were paid for. CA found that these shares were paid for during the marriage over a period of years by corporate earnings and therefore were “acquired” during the marriage and are presumed to be marital property. Ex-Husband attempted to avoid the presumption by arguing that he exchanged his 8% interest for a 100% interest when the stock redemption occurred. CA agreed with Ex-Husband that the value of his ownership interest did not increase at the time of the stock redemption because while the percentage of ownership interest increased, the value of the corporation decreased because of the debt liability created to pay Ex-Husband's parents for their shares. However, although Ex-Husband's ownership interest at the time of the redemption of his parents' shares increased, the value of Ex-Husband's shares did not. Rather, the value of Ex-Husband's shares increased during the marriage as the corporation gradually paid the debt to Ex-Husband's parents. CA provided that if Ex-Husband had a nonmarital interest in the corporation at the time of marriage, the value of that interest likely increased in time as the years passed and the corporation paid off the debt owed to Ex-Husband's parents. CA held that to the extent the increase was due to Ex-Husband's efforts as the primary operator of the business and Ex-Wife's efforts as homemaker, it was marital property. However, to the extent the increase in value was due to general economic conditions, the increase was not marital property.
Ex-Husband's second argument was that TC erred in finding that checks from Ex-Wife's mother written to Ex-Wife after she and Ex-Husband separated constituted a marital debt. After the parties separated, Ex-Wife was awarded $2,000 per month for temporary maintenance and $1,000 for child support. Thereafter, as power of attorney for her mother, Ex-Wife wrote checks totaling $66,714 on her mother's checking account. Some of the checks were written before the maintenance and child support awards to Ex-Wife, and some were written after the awards. Of this amount, $27,300 in checks apparently were written to Ex-Wife herself for cash. Ex-Wife claimed that all the checks were loans from her mother that were needed because she could not meet her living expenses despite her maintenance award of $3,000 per month. She claimed that much of the money went for home maintenance and repair and that the remainder went for living expenses for her and her daughter. Ex-Husband was not aware of the alleged loans, and he argued that the checks were likely to be gifts from Ex-Wife's mother and that Ex-Wife's testimony that the checks were loans and the notations of “loan” on some of the checks were insufficient to prove the existence of a loan. Ex-Wife testified as to the nature of the debts and had documentation in the form of checks from her mother that supported her testimony that there was actually a loan. TC accepted Ex-Wife's claim of indebtedness to her mother based on her testimony and copies of the checks and CA concluded that the evidence was sufficient to support the determination that the checks represented loans, not gifts. However, CA held that to the extent that Ex-Wife may have used loan proceeds for her personal expenses and expenses for her child after being awarded temporary maintenance and child support, those debts should be held to be Ex-Wife's personal debts. To do otherwise would be to increase Ex-Husband's temporary maintenance and child support obligations during that period of time.
Ex-Husband's third and final argument was that TC erred in ordering him to pay 25% of Ex-Wife's attorney fees and expert witness fees because there was not an imbalance in the financial resources of the parties. Ex-husband stated that the marital property was equalized but that the majority of his assigned marital property ($1.2 million) was the family business. Ex-Wife asserted that while Ex-Husband had a salary of over $100,000 per year, as well as potentially more due to retained corporate earnings not paid by the corporation, she was 55 years old at the time, had been out of the work force for 10 years, and had only a high school education, so although the marital property was divided equally, the financial resources of the parties were not balanced due to these additional facts. Ex-Husband also correctly stated that TC made no specific finding that there was an imbalance in the financial resources of the party, but that it appeared to base its award on Ex-Husband's obstructive tactics in failing to comply with discovery requests and orders of the court. Also, Ex-Husband argued that attorney fees may be awarded pursuant to KRS 403.220 only when there is an imbalance in the parties’ financial resources, even though attorney fees may be warranted otherwise under CR 37.01 due to obstruction tactics. CA found that it was not entirely clear whether TC based its award of attorney fees under KRS 403.220 on the financial resources of the parties as well as Ex-Husband's obstructive tactics. CA found that while TC did not specifically address the parties' financial resources prior to making the award, it did cite the statute, which requires the court to consider such resources. CA held that, in light of Ex-Husband's failure to seek a more specific finding from the court, and in light of the fact that a finding of disparity in the parties' financial resources due to the parties' respective incomes was supported by the evidence, TC did not abuse its discretion in awarding Ex-Wife 25% of her attorney fees and expert witness fees.
As digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates
Jones v. Jones, ___S.W.3d___ (Ky. App. 2008)
Ex-Husband appealed TC’s orders classifying his Tobacco Transition Payment Program (TTPP) payments and a portion of the increase in value of his life estate as marital and awarding maintenance and attorney’s fees to Ex-Wife in divorce proceeding.
Prior to the parties’ 18 year marriage, Ex-Husband inherited from his grandfather a life estate in a farm consisting of 215 acres. During the marriage, the parties resided in a residence located on the farm, and Ex-Husband conducted farming operations thereupon. The parties entered into a prenuptial agreement prior to marriage.
In its orders regarding division of property, TC treated future TTPP payments to be made to Ex-Husband as owner of the life estate as marital property in order to effectuate an equitable division of property. CA found that TC erred as a matter of law by classifying the TTPP payments as marital property in order to effectuate a fair distribution of property. The classification of property as marital or nonmarital is not discretionary. CA further found that TTPP owner payments should have been classified as Ex-Husband’s nonmarital property. The TTPP owner payments represent compensation from the government for the taking of the property interest in the tobacco grower’s tobacco quotas. As Ex-Husband inherited the tobacco quotas from his grandfather, they were nonmarital, and the compensation received for them is also nonmarital.
CA also found that future TTPP payments to be made to Ex-Husband as a grower of tobacco should also be classified as Ex-Husband’s nonmarital property. Finding that these TTPP payments supplant income traditionally received from the sale of tobacco, CA found these payments to be properly classified as income. As the income from the sale of tobacco would have been classified as Ex-Husband’s nonmarital property pursuant to the parties’ prenuptial agreement, the grower TTPP payments were also his nonmarital property.
TC found that the parties made substantial improvements to the farm with marital assets, thus the life estate in the farm had a marital component. TC found the actual cost of improvements to the farm totaled $67,000.00, that these improvements were paid for with marital assets, and then adjusted the $67,000 by Ex-Husband's “life estate valuation formula” and concluded the marital property interest was $44,648.00. CA noted that under KRS 403.190(2)(e), any increase in value of property acquired before marriage is nonmarital unless the increase in value is attributed to “the efforts of the parties during marriage.” CA found that TC clearly erred when it equated actual cost of improvements to the life estate in the farm with increase in value to the life estate in the farm. To properly calculate the increase in value attributed to marital improvements upon property acquired before marriage, CA provided that the court must subtract the fair market value of the property at the time of dissolution without marital improvements from the fair market value of the property at the time of dissolution with marital improvements. The difference between such fair market values yields the increase in value attributed to marital improvements upon the property. As to a life estate acquired before marriage, a party may be compensated for the increased value attributed to marital improvements thereon, not to exceed the value of the improvements. Furthermore, when determining the fair market value (FMV) of real property with improvements and without improvements, expert opinion is ordinarily necessary. To be qualified to express an opinion upon FMV of real property, a witness, including the owner thereof, must possess some basis for knowledge of market values. The mere ownership of property does not qualify a lay person to give an opinion upon market value. The actual cost of improvements may be considered as evidence bearing upon FMV but should not be the sole factor. CA noted that if the parties come to the end of their proof with grossly insufficient evidence on the value of the property involved, TC should either order this proof to be obtained, appoint his own experts to furnish this value, at the cost of the parties, or direct that the property be sold. CA directed TC, upon remand, to calculate the marital increase in value of the life estate in the farm by subtracting FMV of the farm at the time of dissolution without marital improvements from the FMV of the farm at the time of dissolution with marital improvements, then, adjust this amount by a life estate valuation formula, but in no event shall the compensation for the marital increase in value to a life estate exceed the value of the improvements thereon.
Ex-Husband also contends TC erred by awarding maintenance to Ex-Wife. As entitlement and amount of maintenance are dependent upon the marital and nonmarital property allocated to the party for a determination of whether the claimant has sufficient resources for her support, CA ruled that Ex-Wife’s maintenance award must also be vacated for reconsideration as part of the underlying property award was reversed on appeal.
Ex-Husband finally contends TC abused its discretion by awarding attorney’s fees to Ex-Wife. Based upon the apparent imbalance of financial resources between the parties, CA found no abuse of discretion in TC’s award to Ex-Wife of a portion of her attorney’s fees.
Kentucky Bar Association v. Glidewell, ___S.W.3d___(Ky. 2007)
Two bar complaints were filed against Attorney. The first complaint arose because, in the course of a divorce action, Attorney failed to respond to motions, attend hearings, or communicate with her client. She failed to respond to a motion requesting that her client pay arrearages on and then keep his mortgage payments current. She also failed to attend the hearing and the court entered an order granting the motion. When her client failed to abide by the order her client’s wife filed a motion for contempt. Attorney did not respond to this motion, inform her client about the motion, or attend the hearing. As he had no knowledge of the hearing, her client also failed to attend the hearing. The court found him in contempt and issued an arrest warrant. Subsequently, the client hired new counsel and attempted to have the unused portion of his retainer refunded. However, counsel did not return his phone calls. Attorney responded to the bar complaint but did not file an Answer to the Charge when it was issued. The Board of Governors by a unanimous vote found her guilty of lack of diligence, failure to keep client informed, failure to adequately explain matter to client, improper termination, and failure to respond to an inquiry from a disciplinary authority. Attorney was suspended from the practice of law for a period of forty-five days and was ordered to pay restitution and cost.
The second complaint against the Attorney also arose out of a divorce action. At the conclusion of this divorce action the client still owed Attorney money. Therefore, she filed a Notice of Attorney’s Lien on her client’s marital residence. However, she failed to do a title search and discover that title to the home had been conveyed to her client’s parents. She had never represented his parents and they owed her no money. Client’s parents informed Attorney that they now owned the home and Attorney filed a lien release. However, she did not properly identify the property and the lien was not removed. Attorney was informed of the mistake but took no action until after the bar complaint was filed. Attorney responded to the bar complaint but did not file an Answer to the Charge when it was issued. On this Charge the Commission found her not guilty, by unanimous vote, of using means that have no substantial purpose other than to embarrass, delay, or burden a third person, and committing a criminal act.
Digested by Linda Dixon Bullock, Diana L. Skaggs + Associates
UPDATE: We were late getting this digest posted. The Kentucky Supreme Court, however, denied discretionary review and ordered that the Court of Appeals decision not be published.
Lane v. Caudill-Lane, 2007 WL 2459269
Dad appealed TC order awarding sole custody to Mom and requiring Dad’s visits to be supervised. Additionally, Dad appealed TC’s order awarding Mom attorney’s fees.
CA upheld the award of custody and attorney’s fees but overturned the supervised visitation.
CA opined, on the issue of custody, that there was sufficient evidence presented for the trial court to award sole custody. CA went on to state that an award of joint custody presumes that the parties can rise above their petty issues and do what is in the best interest of the child. A TC should not assume that because parties are antagonistic during a divorce that they will not be able to rise above it in the future. However, in the instant case, the CA reasoned that it did not appear from the record that the parties possessed the necessary emotional maturity to ensure joint custody would be in the child’s best interest.
Regarding the issue of visitation, CA held that there was not substantial evidence to warrant limiting Dad’s visitation and TC used the wrong standard in making its decision. The appropriate standard for restricting visitation is whether the visitation would “seriously endanger the child”. There was testimony presented that, among other things, Dad had called a phone sex line, that he had visited pornography websites, and that he had watched pornographic movies. However, none of this occurred in the presence of the child. There was no evidence presented that such activity would harm the child. CA stated that there may be situations in which this type of behavior would endanger a child but there was no evidence presented that Dad’s behavior would “seriously endanger the child”.
On the issue of attorney’s fees, CA held that the decision to award attorney’s fees is completely in the discretion of the TC. The only requirement is that the court consider the financial resources of the parties.
Digested by Linda Dixon Bullock, Diana L. Skaggs + Associates
Adoptions Changes Sought, Panel Wants Safeguards For Removing Kids From Parents is the title of a Lexington Herald-Leader article by Valarie Honeycutt Spears. Some quotes:
A task force studying the improper removal of children from their parents in Kentucky is for the second time asking the General Assembly to pass a reform bill.
State Rep. Darryl Owens, D-Louisville, is introducing legislation designed to put more safeguards into the process of removals by state social workers, into cases involving the termination of parental rights and into state adoptions from foster care in Kentucky.
If enacted, the bill would further protect the due process rights of parents, slightly increase accountability for the Kentucky Cabinet for Health and Family Services staff and provide increases in the fee scale for court-appointed attorneys for children and their parents.
The Cabinet's Blue Ribbon Panel on Adoption presented similar, though weaker, legislation, during the 2007 General Assembly, but it failed to become law. The task force had been led by former Secretary Mark D. Birdwhistell.The story continues,
In Kentucky, there was no definitive word yesterday on whether there will be additional legislation filed in the 2008 General Assembly to open child protection courts, an issue that was a main focus of the Blue Ribbon panel.
Cabinet Undersecretary Tom Emberton Jr. told members of the Interim Joint Committee on Health and Welfare yesterday that regional meetings were being held across the state at the direction of Chief Justice Joseph E. Lambert to determine whether a bill should be filed.
Last week, Lambert stopped short of saying that legislation would be filed in the upcoming legislative session. But he said, "I support the concept of allowing greater public access to juvenile court proceedings."
One new provision in the legislation presented yesterday gives Kentucky's chief justice the ability to establish rules to manage juvenile and child protection cases. The legislation also calls for parents -- and children if they are old enough -- to meet with their court-appointed attorney before they go to court for the first time. That does not happen now.
And the bill says that as of July 1, 2010, attorneys would have to prove that they had received specialized training before they could be placed on a new list that would allow them to be appointed by the court to represent children and parents.
Under the proposed legislation, fees for court-appointed attorneys would be increased from $500 to as much as $1,500, but they would have to justify those fees to the state.Thanks to Kentucky Law Review for catching this story.
Miller v. McGinty, ___S.W.3d___(Ky. App. 2007)
Ex-husband appealed order of TC requiring him, pursuant to KRS 403.220 and CR 37, to pay $8,500 of attorney fees to Ex-wife, claiming that TC failed to consider the financial resources of both parties as required by KRS 403.320 and that CR 37 and the holding of Lampton v. Lampton, 721 S.W.2d 736, 739 (Ky. App. 1986) were inapplicable to the facts of his case.
When Ex-Wife initially filed her Petition for Dissolution, she was unaware of Ex-Husband’s address. She therefore attempted service through a Warning Order attorney. Darren resided in Utah, was a member of the Air National Guard, and unknown to Ex-Wife, was stationed in Iraq at the time she filed for divorce. The Warning Order Attorney filed his report and, subsequently, a default hearing was held, resulting in TC’s issuance of findings of fact, conclusions of law, and decree of divorce. Ex-Husband then filed a Motion to Alter, Amend or Vacate this Order on the basis that Ex-Husband had not been properly served. TC granted the motion, Ex-Wife served Ex-Husband through Secretary of State, and new trial was held. TC divided property and debts and ordered Husband to pay $8,500 of Ex-Wife’s attorney fees.
Ex-Husband first contended that TC failed to consider the financial resources of the parties before awarding attorney's fees to Ex-Wife. CA noted that although a trial court is not required to make specific findings on the parties' financial resources, TC must consider the financial resources of the parties before ordering an award of attorney’s fees. Further, KRS 403.220 requires a showing of an imbalance in the financial resources of the respective parties. In this case, TC expressly stated that no evidence was submitted concerning the parties' financial resources, requiring the court to make assumptions from evidence submitted regarding the financial circumstances at the time of the marriage as to the status of their financial resources at the time of trial, though the parties had been separated for over 3 years and divorced for 2 years. CA held that the financial situations of the parties during their marriage were too remote in time for the court to make such a finding based on this evidence, and TC abused its discretion in making award of attorney fees without first considering the parties' financial resources at the time that the court entered its order. CA vacated attorney fee award under KRS 403.220 and remanded issue to TC.
Ex-Husband next asserted that TC erred by basing the attorney fee award on the case law of Lampton and CR 37, as they are inapplicable to a party's failure to voluntarily submit to personal jurisdiction. CR 37, which is titled "Failure to Make Discovery; Sanctions," permits a court to award attorney's fees as a sanction against a party who fails to conduct discovery or abide by discovery rules. In Lampton, CA implied that an award of attorney's fees under CR 37 is appropriate if the award is motivated by the party's obstruction of and refusal to cooperate with discovery. In this case, TC provided that an award of attorney's fees under CR 37 was appropriate due to Ex-Husband’s irresponsibility with regard to the parties' financial matters. CA held that this reasoning had no connection to discovery proceedings in the case. Furthermore, Ex-Husband’s failure to submit to TC’s jurisdiction despite his knowledge of the case also held no connection to CR 37 nor merited an award of attorney fees under any rule or statute, as there is no requirement in Kentucky that a defendant submit to the court’s jurisdiction once he gains knowledge of the action. CA reversed any portion of the attorney fee award based on CR 37.
Ex-Husband also alleged that if TC had the authority to award attorney's fees in this case, the reasonableness of the fees awarded was improperly analyzed by TC. CA held this claim to be moot as it had vacated the award.
Digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates.
This case is now final; SW3d cite will be supplied when available. This is Hinshaw # 2, not to be confused with Hinshaw #!, in which a motion for discretionary review is pending.
Hinshaw v. Hinshaw, __ S.W.3d __ (Ky. App. 2006), 2006 WL 3334040 (Ky. App.)