Opinion
NO. 2014-CA-000828-MR
06-19-2015
TIFFANY HENDRICK APPELLANT v. JAMES BRENT HENDRICK APPELLEE
BRIEFS FOR APPELLANT: Frank Stainback Owensboro, Kentucky David A. Lanphear Bowling Green, Kentucky BRIEF FOR APPELLEE: Steven D. Downey Bowling Green, Kentucky
NOT TO BE PUBLISHED APPEAL FROM WARREN CIRCUIT COURT
HONORABLE JUDITH BARTHOLOMEW, JUDGE
ACTION NO. 11-CI-01443
OPINION
AFFIRMING
BEFORE: CLAYTON, J. LAMBERT AND STUMBO, JUDGES. STUMBO, JUDGE: Tiffany Hendrick appeals from Findings of Fact, Conclusions of Law, and Decree of Dissolution of Marriage of the Warren Circuit Court, and from an Order denying her Motion to Alter, Amend or Vacate and Motion for a New Trial. She contends that she was entitled to a new trial because the presiding Judge died subsequent to trial but prior to rendering Findings of Fact, Conclusions of Law and Judgment. She also raises several issues relating to the division of property, award of maintenance and attorneys' fees. For the reasons stated below, we find no error and AFFIRM the Decree and Orders on appeal.
Tiffany Hendrick ("Ms. Hendrick") and James B. Hendrick ("Mr. Hendrick") were married on October 1, 1994, in Jefferson County, Kentucky. The marriage produced two children, who were born in 1996 and 1999. During the marriage, the parties lived in Bowling Green, Warren County, Kentucky. Mr. Hendrick is a part-owner of a family business called Farmers Fertilizer, Inc. At the time of dissolution, the Warren Circuit Court imputed to him an income of $200,000. Ms. Hendrick was not employed outside the home at the time of dissolution, but based on her employment history the court imputed to her an ability to earn $30,000 per year.
The parties separated on July 1, 2009, and have lived separately since that time. On August 11, 2011, Mr. Hendrick filed a Verified Petition for Dissolution of Marriage in Warren Circuit Court (Family Court). A bench trial on the Petition was conducted on five occasions from May, 2013, through August, 2013.
After trial was concluded, but prior to the rendition of Findings of Fact, Conclusions of Law and Decree of Dissolution of Marriage, presiding Judge Margaret Huddleston died in January, 2014. Thereafter, the matter was transferred to Judge Judith Bartholomew, who rendered Findings of Fact, Conclusions of Law and Decree of Dissolution on March 5, 2014, disposing of all claims and issues. Judge Steve Alan Wilson subsequently denied Ms. Hendrick's post-judgment motions by Order rendered on April 23, 2014. This appeal followed.
Ms. Hendrick now argues that Judge Wilson committed reversible error in failing to sustain her Motion to Vacate and Motion for a New Trial. The focus of her argument on this issue centers on the death of Judge Huddleston after trial but before judgment, and the subsequent substitution of Judge Bartholomew. Ms. Hendrick contends that there were no intervening proceedings prior to the substitution of Judge Bartholomew, no notice to the parties that a substitute judge was appointed, no Order was entered appointing a new judge, and no opportunity for the parties to object. Ms. Hendrick directs our attention to Kentucky Rules of Civil Procedure (CR) 63, which addresses the death, sickness or other disability of a trial judge during the pendency of proceedings, and argues that pursuant to CR 63 a new trial is required under the facts before us. Ms. Hendrick maintains that Judge Bartholomew was not vested with the discretion to decide the matter based on the record, and as a consequence this Court should reverse the Decree and remand the matter for a new trial.
CR 63 states,
If by reason of death, sickness, or other disability, a judge before whom an action has been tried is unable to perform the duties to be performed by the court under these rules after a verdict is returned or finding of fact and conclusions of law are filed, then any successor or special judge sitting in or assigned to the court in which the action was tried may perform those duties; but if such other judge is satisfied that he cannot perform those
duties because he did not preside at the trial or for any other reason, he may in his discretion grant a new trial.
Though perhaps inartfully drafted, CR 63 unequivocally provides that a successor judge may perform the duties of his or her predecessor, and "may in his discretion grant a new trial" for any reason. For our purposes, the controlling language is "may" and "in his discretion." Neither CR 63, nor the very limited case law which it spawned, employ mandatory language requiring a new trial upon the death, sickness or disability of a trial judge before whom an action has been tried. In the sole published Opinion citing CR 63, namely Hamlin Const. Co., Inc. v. Wilson, 688 S.W.2d 341 (Ky. App.1985), a panel of this Court sustained the Boyle Circuit Court's decision to render Findings of Fact and Conclusions of Law from the record and in lieu of a new trial after the death of the presiding judge. Though the facts of Hamlin vary somewhat from those before us, the panel concluded that the successor judge did not abuse his discretion by moving the matter to fruition based solely on the trial record rather than ordering a new trial. In so doing, the panel of this Court noted the discretionary rather than mandatory language of CR 63, and found no basis for concluding that the successor judge had abused that discretion.
In the matter at bar, CR 63 vested with Judge Bartholomew the discretion to move the matter forward to completion either with or without a new trial. The dispositive question for our consideration is whether the record demonstrates that she abused that discretion by bringing the action to finality based on the trial record and without the benefit of a new trial. We must answer this question in the negative. Judge Bartholomew was availed of the complete video trial record, which spanned five hearings over four months in 2013. In addition to the testimony of the parties, a plethora of lay and expert witnesses also testified, and voluminous documentary evidence was tendered. After examining the full record, Judge Bartholomew rendered a comprehensive nineteen-page Decree disposing of all issues presented at trial. Given Judge Bartholomew's access to the complete trial record, we see no substantive benefit to a new trial. Even were we to see such a benefit, the controlling question is whether Judge Bartholomew abused her discretion by moving forward without a new trial. In light of CR 63 and Hamlin, and based on the record we have before us, we find no abuse of discretion and affirm Judge Wilson's denial of Ms. Hendrick's Motion to Vacate and Motion for a New Trial.
Ms. Hendrick next argues that the trial court erred when it determined that a marital debt of $400,000 existed payable to Mr. Hendrick's father, Jimmy Hendrick (hereinafter "Jimmy"). In 1999 or 2000, the parties moved to a residence on Windmere Drive in Bowling Green, Kentucky. The purchase of the parcel and construction of the improvements were financed with substantial debt. In February, 2004, Jimmy gave the parties a check in the amount of $400,229.69 to pay off the mortgage. He would later testify that he did so because he did not want the parties to worry about making a monthly mortgage payment.
Ms. Hendrick contends that this check was a gift to the parties with no obligation of repayment. However, after the parties separated in 2009, Mr. Hendrick produced a promissory note dated February 18, 2004, in the amount of $400,000 payable to Jimmy. The note was signed by Mr. Hendrick, but not Ms. Hendrick. At trial, Mr. Hendrick sought to characterize the debt as a marital debt to be split equally by the parties. Conversely, Ms. Hendrick argued that Mr. Hendrick should be solely responsible for the debt. Ms. Hendrick characterizes the note as suspicious because it did not surface until after the parties separated.
Judge Bartholomew determined that the note was a marital debt for the benefit of both parties. She noted that the parties lived at the marital residence for several years and raised their children there. Judge Bartholomew ordered that Mr. Hendrick should pay the entire $400,000 to Jimmy, after which Mr. Hendrick would produce proof of payment and Ms. Hendrick would then pay $200,000 to Mr. Hendrick.
Unlike the presumptions regarding marital property, there is no presumption that debt acquired during the marriage is marital or that debt must be divided equally between the parties. Rice v. Rice, 336 S.W.3d 66, 68 (Ky. 2011). Rather, principles of equity guide the family court's allocation of marital debt. Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001). In Neidlinger, the Kentucky Supreme Court set out four factors in assigning debt. They are: 1) the receipt of benefits and the extent of the participation of the parties in creating the debt; 2) whether the debt was incurred to purchase marital property; 3) whether the debt was necessary to provide for the maintenance and support of the family; and 4) the economic circumstances of the parties bearing on their respective abilities to assume indebtedness. Id. at 523.
The standard of review with respect to debt allocation is abuse of discretion, i.e., whether the decision is arbitrary, unreasonable, unfair, or unsupported by sound legal principles. Rice, supra. In the matter at bar, documentary and testimonial proof was tendered that Jimmy loaned $400,000 to Mr. Hendrick to pay off the parties' mortgage on the marital residence. Because there is substantial evidence to support Judge Bartholomew's characterization of this debt as marital, as it comports with Neidlinger, and as it is not otherwise arbitrary, unreasonable, unfair or unsupported by sound legal principles, we find no error on this issue.
Ms. Hendrick's next contention is that the court acted erroneously in finding that certain non-voting shares in Farmers Fertilizer, Inc. were not subject to division as marital property. In 1995, Jimmy utilized the services of a Louisville attorney to create a "Crummey Trust" called "Brent's Trust." At trial, a question arose regarding the transfer of shares in Farmers Fertilizer from Jimmy to the Brent Trust. Through what the court characterized as "a series of mishaps," Jimmy endorsed the certificates to Mr. Hendrick personally rather than to the trust. Testimony was adduced that Jimmy intended to transfer the shares to the trust. At a hearing, a Bowling Green attorney, Beth McKinney, was found to be a qualified expert in the area of estate planning and trust. She testified that despite the issue of the endorsement to Mr. Hendrick, the trust was still valid and remains valid to the present time. She further stated that the donor's endorsement of stock to an individual rather than a trust is a common mistake, but not fatal to effectuating the gift to the intended recipient.
Ms. Hendrick argued below, as she now contends, that Jimmy's endorsement of the stock to Mr. Hendrick rather than the trust must result in characterizing the stock as marital - and therefore divisible - property. In considering this issue, Judge Bartholomew found the testimony of Jimmy, Mr. Hendrick and attorney McKinney to be credible and persuasive. Judge Bartholomew then characterized the shares as property of the trust rather than divisible marital assets.
The question for our consideration is whether this characterization is erroneous as Ms. Hendrick now argues. In order to make that determination, we must examine whether the lower court's findings are clearly erroneous and therefore manifestly against the weight of the evidence. Frances v. Frances, 266 S.W.3d 754, 756 (Ky. 2008). In so doing, we conclude that Judge Bartholomew's characterization of the Farmers Fertilizer shares as nonmarital is supported by the evidence. It is uncontroverted that Jimmy established a Crummey Trust to benefit Mr. Hendrick, and his testimony, along with that of Mr. Hendrick and attorney McKinney, constitutes an ample basis for supporting the conclusion reached. We find no error.
Ms. Hendrick next argues that the court erred in excluding the expert testimony of David York, CPA. Ms. Hendrick sought to introduce York's testimony as to the valuation of Farmers Fertilizer. At trial, Judge Huddleston excluded the report and testimony of York upon concluding that they were based on insufficient facts and data, and because York could not produce evidence sufficient to persuade the court that his opinions were the product of a reliable valuation method. The substance of Ms. Hendrick's claim on this issue is that Judge Bartholomew improperly failed to recognize that York followed the same "Guideline Company Method" for valuating Farmers Fertilizer as employed by Mr. Hendrick's expert, and that as such, it was erroneous for her to exclude York's testimony.
In excluding York's testimony, the court determined that York employed a valuation method he referred to as "goodwill to revenue." It also found that York could not produce or identify publications to support this valuation method or show that it is recognized in the valuation industry.
"The decision to qualify a witness as an expert rests in the sound discretion of the trial court." Kemper v. Gordon, 272 S.W.3d 146, 154 (Ky. 2008). Additionally, a "trial court has wide latitude in deciding how to test an expert's reliability and in deciding whether or when special briefing or other proceedings, i.e., at a Daubert hearing, is needed to investigate reliability." Dixon v. Commonwealth, 149 S.W.3d 426, 430 (Ky. 2004) (citing Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 1176, 143 L.Ed.2d 238 (1999)). "[F]ormal Daubert hearings are not always required." Id.
In the matter at bar, Judge Huddleston exercised her sound discretion in excluding York's expert testimony, and we find no basis for concluding that she abused that discretion. She determined that York's valuation methodology, and the data upon which he relied, rendered his testimony unreliable. As there is some rational basis in the record upon which this conclusion was drawn, and as the conclusion was made in the exercise of her sound discretion, we find no error.
Ms. Hendrick also contends that the trial court erred in characterizing a one-half interest in the Mortar Branch Farm as Mr. Hendrick's nonmarital property upon finding that it was gifted to Mr. Hendrick. This was the sole parcel of property disputed at trial. Mortar Branch Farm was purchased by Jimmy and Mr. Hendrick in 1996, which was two years after the Hendricks were married. Jimmy testified that though both names were on the deed, along with those of their spouses, he was the only one who paid for the farm. Sometime thereafter, Jimmy, his wife Paula, and the Hendricks re-conveyed the parcel to Jimmy and Mr. Hendrick alone with joint survivorship. Jimmy testified that the conveyance was an estate planning tool.
Ms. Hendrick maintains that Mr. Hendrick failed to overcome the presumption that all property acquired during the marriage is considered marital property. Kentucky Revised Statutes (KRS) 403.190. She argues that there was no testimony and no evidence tending to prove that Jimmy transferred an interest in the Mortar Branch Farm to Mr. Hendrick. As such, she contends that the farm is presumed to be marital property because it was acquired during the marriage, and that it must be so divided.
We do not agree with Ms. Hendrick's assertion that there is no evidence of record to support the conclusion that the one-half interest in the Mortar Branch Farm was gifted to Mr. Hendrick. The circuit court relied on Jimmy's testimony in conjunction with the deeds to conclude that the evidence was sufficient to overcome the presumption that the farm is marital property. The donor's intent is the primary factor the court considers in determining whether the property was intended as a gift to both spouses or only one of the parties. O'Neill v. O'Neill, 600 S.W.2d 493, 495 (Ky. App. 1980). Jimmy, the donor, unequivocally stated his intent, and testified that the transfer of the one-half interest was an estate planning maneuver in favor of Mr. Hendrick alone. The evidence demonstrates that Jimmy paid for the parcel, that he transferred a one-half interest in the parcel to Mr. Hendrick, and that the transfer was a gift solely to Mr. Hendrick. We find no error.
Ms. Hendrick's penultimate argument is that the award of maintenance was insufficient. She contends that Judge Bartholomew abused her discretion in awarding maintenance in the amount of $3,000 per month for five years, which Ms. Hendrick characterizes as an insufficient amount for an insufficient term. She notes that Mr. Hendrick has a significant income, and that she has not worked outside the home for many years. Ms. Hendrick also directs our attention to the nineteen-year duration of the marriage, and the standard of living which the parties enjoyed during the marriage. The focus of her argument on this issue is that the award, coupled with the child support award (which is not at issue), totals $5,500 per month, and that amount is $1,250 per month less than her reasonable monthly expenses.
In examining this issue, the circuit court applied the facts in the record to the maintenance provisions set out in KRS 403.200. KRS 403.200 provides that,
(1) In a proceeding for dissolution of marriage or legal separation, or a proceeding for maintenance following dissolution of a marriage by a court which lacked personal jurisdiction over the absent spouse, the court may grant a maintenance order for either spouse only if it finds that the spouse seeking maintenance:
(a) Lacks sufficient property, including marital property apportioned to him, to provide for his reasonable needs; and
(b) Is unable to support himself through appropriate employment or is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the home.
(2) The maintenance order shall be in such amounts and for such periods of time as the court deems just, and after considering all relevant factors including:
The court examined each of the statutory factors, including the duration of the marriage, the income and earning capacities of the respective parties, and the lifestyle of the parties which she characterized as lavish. The court also considered the testimony of Dr. Stephen Schnake, who was a vocational expert who evaluated Ms. Hendrick for the purpose of determining her job prospects. He noted that though Ms. Hendrick had been out of the work force for some time, she had a college degree, that her age placed her in a "prime competitive zone," and that she should be able to earn $30,000 per year. After considering the KRS 403.200 factors, the court determined that the maintenance award noted above was proper while Ms. Hendrick transitioned into the work force.(a) The financial resources of the party seeking maintenance, including marital property apportioned to him, and his ability to meet his needs independently, including the extent to which a provision for support of a child living with the party includes a sum for that party as custodian;
(b) The time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment;
(c) The standard of living established during the marriage;
(d) The duration of the marriage;
(e) The age, and the physical and emotional condition of the spouse seeking maintenance; and
(f) The ability of the spouse from whom maintenance is sought to meet his needs while meeting those of the spouse seeking maintenance.
On appeal, an award of maintenance is reviewed for abuse of discretion. Perrine v. Christine, 833 S.W.2d 825, 826 (Ky. 1992). We find no such abuse. Judge Bartholomew carefully examined the record in light of KRS 403.200, and specifically considered each element. When taking into account the entire record, including Dr. Schnake's evaluation and all other relevant factors, we cannot conclude that the award constitutes an abuse of discretion. We find no error on this issue.
Ms. Hendrick's final argument is that the circuit court erred in failing to award her attorney fees. Mr. Hendrick counters that he paid $11,000 of her attorney fees prior to trial, in addition to being obligated to pay one-half of a $31,552.03 lien on the marital residence imposed by Ms. Hendrick's former trial attorney Mitchell Charney. However, even if it were true that Mr. Hendrick has not paid any of her attorney fees, such an award falls within the sound discretion of the trial court. Sexton v. Sexton, 125 S.W.3d 258, 272 (Ky. 2004). Though Mr. Hendrick earns a substantial income, Ms. Hendrick is employable, and she received a just proportion of all marital assets, plus maintenance and child support. We cannot conclude that Judge Bartholomew's decision not to award attorney fees to Ms. Hendrick constitutes an abuse of discretion. We find no error.
For the foregoing reasons, we AFFIRM the Findings of Fact, Conclusions of Law, and Decree of Dissolution of Marriage of the Warren Circuit Court, and the Order denying her Motion to Alter, Amend or Vacate and Motion for a New Trial.
ALL CONCUR. BRIEFS FOR APPELLANT: Frank Stainback
Owensboro, Kentucky
David A. Lanphear
Bowling Green, Kentucky
BRIEF FOR APPELLEE: Steven D. Downey
Bowling Green, Kentucky
Crummey v. Commissioner of Internal Revenue, 397 F.2d 82 (9th Cir. 1968).