Opinion
NO. 2012-CA-002213-MR NO. 2013-CA-000266-MR
10-03-2014
AMY KELLEY APPELLANT v. MATTHEW KELLEY APPELLEE
BRIEF FOR APPELLANT: Brenna L. Penrose Covington, Kentucky BRIEF FOR APPELLEE: D. Keith Johnson Newport, Kentucky
NOT TO BE PUBLISHED APPEALS FROM KENTON CIRCUIT COURT
HONORABLE CHRISTOPHER J. MEHLING, JUDGE
ACTION NO. 09-CI-03755
OPINION
DISMISSING APPEAL NO. 2012-CA-002213-MR AND AFFIRMING IN PART, REVERSING IN PART, AND REMANDING APPEAL NO. 2013-CA-000266-MR
BEFORE: CAPERTON, CLAYTON, AND NICKELL, JUDGES. CLAYTON, JUDGE: These two appeals, which are based on the same record, have been consolidated. First, Amy Kelley appeals the Kenton Family Court's November 26, 2012 order that denied her September 21, 2012 motion to alter, amend, or vacate the September 11, 2012 findings of fact, conclusions of law, and decree. However, because Amy's Kentucky Rules of Civil Procedure (CR) 59.05 motion was made when the September 11th order was interlocutory, the family court did not have jurisdiction to address the motion. Similarly, this Court lacks jurisdiction to consider it on appeal, and therefore, we dismiss this appeal.
Second, Amy appeals the Kenton Family Court's January 10, 2013 order that denied her November 19, 2012 motion to alter, amend, or vacate the family court's September 11, 2012 and November 9, 2012 orders. Additionally, she appeals the family court's denial of her motion for its recusal. For the following reasons, we affirm in part, reverse in part, and remand.
FACTUAL AND PROCEDURAL BACKGROUND
Amy and Matthew Kelley (hereinafter "Matt") were married on May 1, 1992, in Kenton County. During the marriage the parties had four children, one of whom was emancipated at the time of the dissolution action. On December 15, 2009, Matt filed a petition for dissolution.
After several years of preliminary proceedings, the family court held trial over several days and entered findings of fact, conclusions of law, and a decree on September 11, 2012. However, because the family court reserved the issue of custody, it decided to not designate these orders as "final and appealable." The orders addressed, among other issues, child support, maintenance, debt, retirement accounts, and attorney fees. After the family court made the September 11th order, Amy, on September 21, 2012, filed a motion to alter, amend, or vacate it.
The family court then held another hearing primarily on the custody issue. Following the hearing, on November 9, 2012, the trial court issued supplemental findings of fact and conclusions of law, plus a supplemental decree. The supplemental orders designated that both its rulings and the prior September 11th rulings were now "final and appealable." In general, the supplemental findings and conclusions addressed custody and parenting time.
Next, on November 26, 2012, the family court addressed the September 21, 2012 motion to alter, amend, or vacate its September 11, 2012 orders and denied the motion. However, this order did not address Amy's November 19, 2012 motion to alter, amend, or vacate the September 11, 2012 and November 9, 2012 orders of the family court. Since the motion to alter, amend, or vacate was made when the September 11, 2012 order was interlocutory, the family court did not have jurisdiction to consider this motion nor do we now have jurisdiction.
Besides the motion to alter, amend, or vacate proffered by Amy on November 19, 2012, she also filed a motion for proceeding in lieu of a new trial and a motion for a new trial. Continuing with the rash of filings, on December 4, 2012, Amy filed a motion for the family court to reconsider its order of November 26, 2012, and a renewed the motion to alter, amend, or vacate. In addition, Amy filed other motions including a motion on December 3, 2012, which requested the recusal of the family court judge. After a hearing on December 11, 2012, the family court judge entered an order on January 10, 2013, and summarily dismissed the November 19, 2012 motion to alter, amend, or vacate and the December 3, 2012 motion to recuse.
Subsequently, on December 26, 2012, Amy filed a notice of appeal from the November 26, 2012 order, which denied the September 21, 2012 motion to alter, amend, or vacate. This appeal is titled No. 2012-CA-002213-MR. And on February 7, 2013, Amy filed a notice of appeal from the January 10, 2013 order, which denied the motion for recusal and the November 19, 2012 motion to alter, amend, or vacate the findings of the September 11, 2012 and November 9, 2012 orders. This appeal is titled No. 2013-CA-000266-MR.
We begin our analysis by addressing the efficacy of the first appeal.
2012-CA-002213-MR
Our Court is required to raise a jurisdictional issue on its own motion if the underlying order lacks finality. Huff v. Wood-Mosaic Corp., 454 S.W.2d 705, 706 (Ky. 1970). This appeal arises from the family court's November 26, 2012 denial of Amy's September 21, 2012 CR 59.04 motion to alter, amend, or vacate the family court's first ruling, which was entered on September 11, 2012. But a review of the September 11th orders indicates that the family court specifically denoted that these orders were not "final and appealable."
Pursuant to CR 59.05, "[a] motion to alter or amend a judgment, or to vacate a judgment and enter a new one, shall be served not later than 10 days after entry of the final judgment." Clearly, in the case at bar, when the motion was filed, there was no final order, and therefore, the motion was invalid. Federal courts have stated that "Rule 59(e) [from which CR 59.05 is derived] is ... applicable only to a final judgment." Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1469 (4th Cir. 1991).
Here, the family court erred when it addressed the September 21st motion to alter, amend, or vacate because the motion was based on an interlocutory order, and consequently, the family court did not have jurisdiction to address it. Hence, we too, have no jurisdiction to address the motion or the family court's decision and dismiss this appeal.
STANDARD OF REVIEW
In the remaining appeal, No. 2013-CA-000266-MR, Amy appeals both the family court's denial of a motion to alter, amend, or vacate and also its denial of the motion of recusal. In the appeal, she references the September 11, 2012 and November 9, 2012 orders. Her February 7, 2013 notice states:
. . . appeals to the Kentucky Court of Appeals the Order Overruling Respondent's Motion for Recusal and Respondent's Motion to Alter, Amend, or vacate, entered by this court on January 10, 2013, incorporating by reference the Court's ruling from September 11, 2012 and the supplemental decree entered November 19, 2012.
It is well-established that a trial court's findings of fact are reviewed for clear error, while its conclusions of law are reviewed de novo. Commonwealth v. Coffey, 247 S.W.3d 908, 910 (Ky. 2008). Explicitly, under CR 52.01, in an action tried without a jury, "[f]indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." And a factual finding is not clearly erroneous if it is supported by substantial evidence. Owens-Corning Fiberglas Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky. 1998). Substantial evidence is evidence, when taken alone or in light of all the evidence, which has sufficient probative value to induce conviction in the mind of a reasonable person. Sherfey v. Sherfey, 74 S.W.3d 777, 782 (Ky. App. 2002). An appellate court, however, reviews legal issues de novo. Carroll v. Meredith, 59 S.W.3d 484, 489 (Ky. App. 2001).
Further, a denial of a motion to alter, amend or vacate is subject to the abuse of discretion standard. See William C. Eriksen, P.S.C. v. Kentucky Farm Bureau Mutual Ins. Co., 336 S.W.3d 909, 911 (Ky. App. 2010). Thus, it must be determined whether the trial court's decision was "arbitrary, unreasonable, unfair or unsupported by sound legal principles." Miller v. Eldridge, 146 S.W.3d 909, 914 (Ky. 2004) (quoting Goodyear Tire & Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000)). Absent a "flagrant miscarriage of justice," the trial court will be affirmed. Gross v. Commonwealth, 648 S.W.2d 853, 858 (Ky. 1983).
ANALYSIS
Amy maintains that the family court committed the following errors in rendering its decisions:
1. The child support findings were arbitrary, unreasonable, unfair, or unsupported by sound legal principles.
2. The maintenance findings were arbitrary, unreasonable, unfair, and unsupported by sound legal principles.
3. The division of the parties' debt was against the weight of the evidence.
4. The allocation of the parties' assets, including the escrow account, was arbitrary, unreasonable, unfair, or unsupported by sound legal principles.
5. The trial court erred in its determination that the husband did not knowingly and voluntarily destroy marital assets.
6. The trial court erred in its failure to address wife's request for health care coverage.
7. The trial court erred in not awarding wife husband's retirement account and stocks.
8. The trial court erred in its determination of reasonable attorney fees.
9. The trial court erred in not recusing itself.
10. The trial court erred in not granting appellant a new trial for various reasons, including but not limited to the finding that the appellant is an innocent spouse pursuant to a ruling by the Internal Revenue Service.
Matt responds to her numerous allegations with a two-and-a-half page brief that, in essence, states that the family court's findings of fact and conclusions of law were based on substantial evidence; and, the decision was within the court's discretion. He concludes that the decisions should be affirmed.
We will address the appropriately appealed and preserved issues sequentially and develop additional facts as necessary.
1. The child support findings were arbitrary, unreasonable, unfair, or unsupported by sound legal principles.
The establishment, modification, and enforcement of child support obligations, within statutory constraints, are left to the sound discretion of the trial court. Van Meter v. Smith, 14 S.W.3d 569 (Ky. App. 2000). This discretion, however, must be fair, reasonable, and supported by sound legal principles. Downing v. Downing, 45 S.W.3d 449 (Ky. App. 2001).
In alleging that the family court abused its discretion when determining child support, Amy makes numerous objections to the child support amount set by the family court. The first objection is to the amount established by the family court as Matt's annual income. Integral to this objection, is Amy's contention that the family court erred when it reduced Matt's salary by $34,285.72, the amount of his employer's loan forgiveness benefit. Amy maintains that the family court incorrectly determined her annual income when it held that not only was she voluntarily underemployed but also imputed annual income to her of $35,000.00.
Matt is employed as a recruiter for Ameriprise Financial. In 2008, when he started working for Ameriprise, he was a national vice president. At that time, Ameriprise provided him stock and an interest-free loan of $200,000.00. Matt's job position with Ameriprise changed over the years. When the hearings were held, Matt was employed as a division vice president with a base salary of $100,000.00. In addition, he received bonuses and/or commissions.
The family court described the determination of Matt's compensation as complex and detailed. To establish his annual compensation, the family court used his last 2011 paycheck stub and his most recent May 2012 paycheck stub. The family court noted that Matt received substantial bonuses and commissions in 2011, which amounted to $137,097.91. Further, in 2011 Matt sold Ameriprise stock and received $78,655.31. His gross pay for 2011 was $293,553.00.
Before considering the family court's computation regarding Matt's gross income for child support purposes, we address its handling of his Ameriprise's loan forgiveness benefit. In reaching Matt's annual income figure, the family court observed that a portion of the income on his pay stub represents forgiveness for the $200,000.00 loan and is not income actually received. In fact, the loan is being paid off over a number of years by a structured loan repayment schedule. Ameriprise is "forgiving" the loan, but for income tax purposes, the annual loan forgiveness amount is considered income.
The family court labeled this amount as "phantom" income since the money was previously received and spent, plus Matt is not receiving any compensation, that is, dollars for it. For these reasons, the family court excluded the loan forgiveness amount from Matt's gross income for purposes of child support. The amount for the loan repayment shown on his 2011 paycheck stub is $34,285.72.
Next, the family court, using figures for the husband's income through May 13, 2012, determined Matt's eventual 2012 income. In doing so, it ascertained that the 2012 compensation would be less than 2011. First, based on Matt's testimony, the family court explained that Matt's position with the company had changed over the years and characterized the change as "moving down in position through no fault of his own." Second, the family court explicitly identified that Matt's 2012 income was $68,945.84 less than his income in May 2011. Because Ameriprise frontloads its employees' annual income, the family court concluded that this reduction would prevail over the year and declared that reducing the expected annual income based on the May 2012 income was appropriate. The family court then concluded that his annual income for 2012 was $188,722.16.
Continuing with its analysis, the family court opined that no completely accurate way existed to assess the amount of Matt's 2012 bonuses and commissions. But based on his lower job position with Ameriprise, the family court believed that his 2012 income would be less than 2011. Accordingly, it attributed $12,000.00 in commissions for the remainder of 2012.
The family court then added the amount of its estimated commission to Matt's base salary of $188,722.16 and set, for purposes of child support, his 2012 annual income at $200,722.16.
The family court's determination that Matt's earning capacity for 2012 was $200,722.16 translates into $16,726.85 per month. In addition, the family court ordered Matt to provide health insurance for the three children. Matt's monthly child support obligation was set at $1,000.00 per month. The family court then setoff the amount by $161.83, the monthly cost of the children's health insurance. Consequently, the family court held that Matt's child support obligation was $838.17 per month.
Next, we review the family court's holding regarding Amy's income. At the time of the hearings, Amy was employed part time as a personal trainer at a fitness center, where she earned $3,158.00 in 2011. The family court, based on Kentucky Revised Statutes (KRS) 403.212(2)(d), ascertained that Amy was underemployed. It highlighted that she received a bachelor's degree in communications from college about twenty years ago. Additionally, the family court discounted Amy's contention that because she suffered from post traumatic stress disorder (PTSD) during the marriage, she was unable to work full time. Rather, the family court observed that she made little or no effort to find full-time employment for herself and worked minimal hours per week as a fitness instructor. From these factors, the family court concluded that even though Amy did not work during the marriage, she had a college degree and was capable of earning $35,000.00 per year. It used this amount in computing the parties' respective child support obligations.
Having laid out the factual basis of the family court's decision regarding child support, we now turn to Amy's allegations that the family court abused its discretion in rendering the child support decision. We begin with her objection to its decision to exclude $34,285.72, the amount of loan forgiveness received by Matt, when the family court determined his gross income for purposes of child support.
We begin with a review of the child support statutes. Specifically, KRS 403.212(2)(b) defines gross income in pertinent part as follows:
"Gross income" includes income from any source, except as excluded in this subsection, and includes but is not limited to income from salaries, wages, retirement and pension funds, commissions, bonuses, dividends, severance pay, pensions, interest, trust income, annuities, capital gains, Social Security benefits, workers' compensation benefits, unemployment insurance benefits, disability insurance benefits, SupplementalObviously, the statute does not specifically address whether loan forgiveness is income, and further, no Kentucky case has addressed this question.
Security Income (SSI), gifts, prizes, and alimony or maintenance received.
As reasoned by the family court, Matt and Amy received and spent this money during the marriage. Additionally, the loan forgiveness amount was not actual income but was merely listed for purposes of income tax. In Snow v. Snow, 24 S.W.3d 668, 672 (Ky. App. 2000), our Court stated that "the statute recognizes taxation and child support serve different purposes" and cautions against the wholesale adoption of taxable income listed on a tax document as income for child support purposes under KRS 403.212(2)(c). Although this section of the statute refers in particular to the determination of child support when parties are self-employed, its wisdom is instructive in cases where an employed party receives an in-kind benefit. Hence, based on the reasoning in the statute for self-employed individuals, we concur with the family court's exclusion of the loan-forgiveness benefit from Matt's gross income for purposes of establishing his income for child support.
Secondly, we address Amy's contention that the family court's decision about Matt's income was "arbitrary, unreasonable, unfair, or unsupported by sound legal principles," because it attributed an insufficient amount of income to Matt based on his job history and performance. We disagree. Regarding the amount of Matt's gross income, the family court, in great detail, explained its reasons for setting Matt's 2012 income at $200,722.16. Since Matt's income was changeable and inchoate, the family court, using the evidence provided, made a reasoned estimation of gross income for 2012, and as such, we discern no abuse of discretion. Hence, the family court did not err when it set Matt's 2012 income.
Next, we address the family court's conclusion that Amy was voluntarily underemployed under KRS 403.212(2)(d). "[W]hether a child support obligor is voluntarily underemployed is a factual question for the trial court to resolve." Gossett v. Gossett, 32 S.W.3d 109, 111 (Ky. App. 2000). In her appeal, Amy argues that the family court, in so ruling, did not consider Amy's "employment potential and probable earnings level based on . . . recent work history, occupational qualifications, and prevailing job opportunities and earnings levels in the community." KRS 403.212(2)(d). Nor did it consider the PTSD diagnosis and its impact on her ability to seek full-time employment.
In terms of her psychological issues, the family court heard testimony and decided that the conditions were not sufficiently debilitating to prevent her from holding full-time employment. That decision rests with the discretion of the fact-finder, and the family court did not abuse its discretion in so deciding.
Nonetheless, our assessment indicates that while the family court did not abuse its discretion in finding that Amy was voluntarily underemployed, it did err when it imputed $35,000.00 per year to Amy. When the family court imputed $35,000.00 in annual income to Amy, it did not address the requisite statutory factors - "recent work history, occupational qualifications, and prevailing job opportunities and earnings levels in the community." KRS 403.212(2)(d).
As noted in Hempel, without adequate factual findings by the family court, we cannot conduct a meaningful review of its decision. Hempel v. Hempel, 380 S.W.3d 549, 553 (Ky. App. 2012). The mere fact that Amy has a college degree is insufficient to support her ability to earn $35,000.00 per year, particularly in light of her work history and training. Hence, this decision was "arbitrary, unreasonable, unfair or unsupported by sound legal principles," and therefore, we reverse and remand it. Miller, 146 S.W.3d at 914.
Upon remand, given the significant gap in Amy's work history and her lack of any additional or recent vocational or professional training, the family court may consider her earning potential on either full-time occupation at the fitness center ($14,500 per year) or minimum wage. Moreover, since upon remand, the family court must recalculate the parties' child support obligation, it should use the most up-to-date and conclusive evidence for both Amy and Matt to establish the appropriate amount of child support.
To recap, the family court did not abuse its discretion by excluding from Matt's gross income the loan forgiveness benefit when it ascertained his 2012 income or in its determination of his annual 2012 gross income. However, the family court did abuse its discretion in imputing $35,000.00 as Amy's annual income and should recalculate the parties' child support using the most up-to-date information about the parties' income.
Besides challenging the family court's handling of child support on these issues, Amy also maintains that the family court abused its discretion when it deviated from the child support guidelines. Her assertion of error includes that the family court erred when it established the child support amount by improperly calculating and crediting Matt with the health care costs; by failing to use its own income findings regarding the parties in calculating the child support amount; by failing to utilize a child support worksheet when it established child support; and finally, by not documenting its reason for deviating from the child support guidelines.
We begin our review by discussing the statutory scheme for deviating from the child support guidelines. In the case at hand, the parties' combined income is outside the child support guidelines. If a parties' income is outside the guidelines, logically it is necessary to deviate from the guidelines. The manner for such a deviation is found in KRS 403.211(2), which states:
At the time of initial establishment of a child support order, whether temporary or permanent, or in any proceeding to modify a support order, the child support guidelines in KRS 403.212 shall serve as a rebuttable presumption for the establishment or modification of the amount of child support. Courts may deviate from the guidelines where their application would be unjust orAs a result, even though the family court had to deviate from the guidelines, it must still provide a written or specific finding on the record giving the reason for the deviation. That was not done here.
inappropriate. Any deviation shall be accompanied by a written finding or specific finding on the record by the court, specifying the reason for the deviation.
A recent Kentucky Supreme Court decision, Bell v. Bell, 423 S.W.3d 219 (Ky. 2014), discussed the proper approach when deviating from the child support guidelines. Recognizing that trial courts have wide discretion in setting child support, the Court noted that this discretion is still limited by statutory constraints, and consequently, the discretion must be exercised at the proper point in the child support calculation. And as the Court observed in Bell, a trial court may deviate from the guidelines "where their application would be unjust or inappropriate." Bell, 423 S.W.3d at 225. But prior to making a deviation from the child support guidelines, the family court must make the requisite finding on the record based on certain statutorily provided criteria before it may "allow for an appropriate adjustment of the guideline award[.]" KRS 403.211(3).
In sum, although a family court is permitted to deviate from the guidelines when, pursuant to KRS 403.211(3)(e), the "[c]ombined monthly adjusted parental gross income [is] in excess of the Kentucky child support guidelines[,]" it must still state a reason for the deviation. Here, the family court did not do so, and hence, did not follow the prescribed statutory mandate.
Accordingly, we remand this issue back to the family court to provide findings for its deviation from the child support guidelines. Further, we caution the family court that merely stating that the parties' combined income is outside the guidelines is insufficient. Our perusal of the child support guidelines indicates that under KRS 403.212(7), the highest monthly income factor for which the guidelines provide a dollar amount is $15,000.00. In such a situation, the guidelines provide that the recommended monthly child support for a family with three children is $2,305.00. Here, the family court, with an even higher monthly income, has only ordered Matt to pay $838.17 per month in child support. To so justify, the family court must provide its reasons.
In doing so, the family court must keep in mind that the purpose of the child support statutes and guidelines is to secure the support needed by children commensurate with the ability of parents to meet those needs. As instructed in Gossett, "[b]oth our statutory scheme and our case law demand that whenever possible the children of a marriage should be supported in such a way as to maintain the standard of living they would have enjoyed had the marriage not been dissolved." Gossett, 32 S.W.3d at 112 (citations omitted).
Thus, the family court here must show that the result reached is equitable while recognizing that the focus is on the children's needs and the parents' ability to provide the support.
Regarding Amy's assertions of error with regard to the family court's calculation of the health care insurance and credit to Matt for providing the insurance; its failure to use the income findings in calculating the child support amount; and, its failure to use a child support worksheet, we deem that these issues will be ameliorated by the family court's recalculation of the parties' child support obligation. As already noted, the amount of income imputed to Amy was an abuse of discretion by the family court, and the lack of a finding for its deviation from the child support guidelines was a failure to follow statutory requisites. Therefore, the family court must reexamine and recalculate the parties' child support obligations, and in doing so, use the appropriate income figures for the parents.
The method for allocating health insurance between parents is explained in the child support statutes. Under KRS 403.211, courts must require health care insurance coverage for children regardless of which parent has physical custody if insurance coverage is reasonable and available, which is the situation herein. Furthermore, the order must include a judicial directive designating which parent shall have financial responsibility for providing health care coverage for the children. According to KRS 403.211(7)(a), the court may order either or both parents to be responsible for these costs, but the statute apparently expects that one parent will have financial responsibility and the other will owe reimbursement. The impact on child support is described in the statute.
If private health care insurance coverage is reasonable in cost and accessible to either parent at the time the request for coverage is made, the court shall order the parent to obtain or maintain coverage, and the court shall allocate between the parents, in proportion to their combined monthly adjusted parental gross income, the cost of health care insurance coverage for the child, in addition to the support ordered under the child support guidelines.Id. Hence, upon reconfiguration of the child support obligation, the family court shall follow the above statutory prescription.
Lastly, notwithstanding a local rule that requires a child support worksheet when a family court deviates from the guidelines, we find no other statutory or legal requirement mandating that a court must use a child support worksheet. In essence, when a court determines the child support obligation, it performs the actions required by the worksheet. Any error in failing to follow the local rules is harmless. CR 61.01.
Amy's last claim of error related to child support is her contention that the family court improperly handled the child support arrearages. The family court's decree and findings are devoid of any mention of child support arrearages. Yet, a trial court has no authority to forgive child support arrearage. Price v. Price, 912 S.W.2d 44, 46 (Ky. 1995) (citing Mauk v. Mauk, 873 S.W.2d 213, 216 (Ky. App. 1994)). And as stated in Lichtenstein v. Barbanel, 322 S.W.3d 27, 34 (Ky. 2010),
Once the court determined that the order was enforceable, i.e., a valid child support order, and that theAdditionally, in this case, the Kentucky Supreme Court determined that "once 'the validity of an order setting child support is established, the non-custodial parent bears the burden of proving that he satisfied the obligation and owes no arrearage.'" Id. at 32. Accordingly, the family court must deal with any pending orders of child support, including any arrearage pending at the Kenton County Child Support Enforcement Office, to ascertain whether an outstanding judgment of child support exists. Matt would then have an opportunity to respond if he believes that no arrearage exists. Upon remand, the family court must consider any evidence of a child support arrearage proffered by Amy or the child support enforcement office.
issue was pending, i.e., properly before the court, it was incumbent upon the court to calculate the arrearage (render judgment on the arrearage that Roberta owed) and allow the "off-set" of that amount against Steven's arrears before entry of any "child support" Income Withholding Order. The failure to do so was error.
2. The maintenance findings were arbitrary, unreasonable, unfair, and unsupported by sound legal principles.
Amy argues that the family court's decision regarding maintenance was an abuse of discretion. She initially maintains that because the family court erred in determining both parties' incomes, reversible error was committed regarding maintenance. Gripshover v. Gripshover, 246 S.W.3d 460, 470 (Ky. 2008). Second, Amy argues that the family court did not perform the requisite analysis under KRS 403.200, incorrectly awarded the husband a credit for unpaid maintenance, failed to consider the exhibits prepared by the parties relative to maintenance, and finally, incorrectly attributed fault to the wife.
Maintenance is decided at the discretion of the trial court. Our review of the trial court's decision is limited to a determination that the findings of fact are clearly erroneous or an abuse of discretion. Perrine v. Christine, 833 S.W.2d 825 (Ky. 1992).
The applicable statute governing maintenance is KRS 403.200. It reads in part:
(1) . . . 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 . . .
(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:
(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.
Additionally, it is important to keep in mind that the rationale behind an award of maintenance is to enable unemployed or underemployed spouses to acquire the skills necessary to support themselves in the current workforce so that they do not rely upon maintenance indefinitely. Gripshover, 246 S.W.3d at 469.
Here, the family court ordered $2,500.00 in rehabilitative maintenance for 84 months. Because Matt had been paying maintenance during the pendency of the action, the family court calculated the total amount paid as of September 11, 2012, which was $52,400. The family court divided the amount by $2,500.00 and held that, pursuant to this calculation, in essence Matt had already paid 21 months of maintenance.
In addition, the family court reduced the duration of maintenance based on Amy's behavior from 84 to 72 months, and thus, awarded six years of maintenance. The family court also observed that the maintenance award was reviewable at any time and could be terminated under the factors outlined in KRS 403.250.
First, we address the family court's finding that because Amy was having inappropriate relationships and contact with different men toward the end of the marriage, she was at fault, and hence, reduced the duration of the award of maintenance by one year. In doing so, the family court relied on Chapman v. Chapman, 498 S.W.2d 134 (Ky. 1973), wherein it is held that although fault is not to be considered in determining whether a spouse is entitled to maintenance, it is allowable in relation to the determination of the amount of maintenance.
Therefore, trial courts are permitted to consider fault when determining the amount of maintenance. Here, the family court did not abuse its discretion by finding fault on the part of Amy and reducing the maintenance. Amy proffers that no evidence was provided to the family court indicating that she had a sexual relationship with someone else during the marriage. However, the family court is the fact-finder in the case at bar, and as such, determines the credibility of the presented evidence. Given the conflicting evidence and its role as fact-finder, the family court did not abuse its discretion in finding fault on the part of Amy.
Regarding Amy's allegations that the family court did not perform the requisite analysis under KRS 403.200, incorrectly awarded the husband a credit for unpaid maintenance, and failed to consider the exhibits prepared by the parties relative to maintenance, we are not persuaded by these accusations. The family court analyzed the statutory factors in KRS 403.200 when it noted that both parties prepared monthly budgets; that they were married 18.5 years; that they had four children; and, that a huge disparity in income existed. Then, based on these factors, the family court found that the wife should receive maintenance. Clearly, the family court considered the factors and evidence in making its decision. Moreover, it had discretion to deal with the maintenance award over the course of the litigation.
Now, we address Amy's argument that the family court's error in determining her income had an impact on the award of maintenance, which amounted to reversible error. The family court set the amount of maintenance based on its imputation of $35,000.00 in annual income to Amy. We previously held that this finding was an abuse of discretion. Certainly, it is well-settled that we will not disturb a family court's award of maintenance unless the court "abused its discretion or based its decision on findings of fact that are clearly erroneous." Powell v. Powell, 107 S.W.3d 222, 224 (Ky. 2003).
Notwithstanding Powell, we note that KRS 403.200 mandates that the establishment of maintenance based on whether a party "(a) [l]acks sufficient property, including marital property apportioned to him, to provide for his reasonable needs; and (b) [i]s unable to support himself through appropriate employment." Based on this factor, we determine that the family court must reconsider its award of maintenance using the amount of annual income it decides on remand that is appropriate. Accordingly, we reverse the maintenance decision only in terms of the income ascribed to Amy and remand for the purpose of resetting the amount of maintenance with this information.
3. The division of the parties' debt was against the weight of the evidence.
Amy suggests that the family court erred in the division of debt. She specifically highlights the student loans and the short sale of the house. Further, she argues that because the family court divided the debt pursuant to the parties' percentages of income and that calculation was flawed, the division is also faulty, and thus, in error.
A trial court is guided by KRS 403.190 in dividing marital property including debts and is required to effectuate the division in "just proportions." Moreover, debts are generally "assigned on the basis of such factors as receipt of benefits and extent of participation[.]" Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001). There is no presumption that debts must be divided equally or in the same proportion as the marital property. Smith v. Smith, 235 S.W.3d 1, 15 (Ky. App. 2006).
We review issues pertaining to the assignment of debts incurred during the marriage under an abuse of discretion standard. Neidlinger, 52 S.W.3d at 523. First, we address the issue of Amy's student loans. Before doing so, we point out that both Matt and Amy were required by the family court to be individually responsible for their student loan debt. Amy opines that since some of her student loans were acquired during the marriage, they should be considered marital, and Matt should bear partial responsibility for this amount.
There is, however, no "statutory presumption as to whether debts incurred during the marriage are marital or nonmarital in nature." Id. at 522. In Amy's situation, the student loans were taken out for her educational benefit. And case law in Kentucky has taken the approach that student loans should be assigned to the party who benefitted from the educational attainment. This reasoning is explicated in Van Bussum v. Van Bussum, 728 S.W.2d 538, 539 (Ky. App. 1987):
The majority of the loans in question are directly tied to Ritchie's acquisition of his medical license. Inman v. Inman, Ky., 648 S.W.2d 847 (1982), plainly states that a professional degree cannot be considered marital property. Thus, we are persuaded that the debt attendant to the acquisition of a nonmarital asset must be borne by the party who will reap the benefit from it.Here, Amy is the one who would benefit from the college degree. Accordingly, the family court did not abuse its discretion in assigning Amy her student debt.
Next, we consider Amy's claim that the family court erred in its assignment to each party the debt for the "short sale" of the house in accordance with the respective percentages of their incomes. Amy's contention that because she was without any knowledge of the house sale, she should not have to pay for any of the shortfall is not particularly pertinent. The assignment of the debt is related to the receipt of benefits and extent of participation. Both parties lived in the house together and benefitted from this arrangement. Hence, the family court did not err in its assignment of this debt.
Lastly, we consider the fact that the family court ordered that the parties pay the marital debt according to their respective income percentages. Without elucidating anywhere in its order the method for which it determined that Matt had 79% and Amy had 21% of the income, the family court used this percentage to divide the responsibility for the marital debt. However, since we have held that the income ascribed to Amy was in error and that maintenance must be reconsidered, too, we remand the assignment of debt to the family court for a recalculation of the parties' respective income percentages. The resulting percentages may then be used to apportion the marital debt.
4. The allocation of the parties' assets, including the escrow account, was arbitrary, unreasonable, unfair, or unsupported by sound legal principles.
According to Amy, the family court's findings did not address the fact that Matt's escrow account had only $7,054.38 in it and should have had significantly more. Further, Amy proposes that the family court erred when it ordered that this remaining money be used to pay the fees for the guardian ad Litem (hereinafter "GAL") and to reduce the parties' tax liabilities. She claimed that the escrow account was for obligations that Matt was ordered to pay from his own assets rather than marital assets.
However, Amy never made any request for additional findings regarding the escrow account. If Amy believed that the family court did not address the escrow account in its rulings, it was incumbent for her, under CR 52.04, to make a motion for additional findings. Failure to move for additional findings constitutes a waiver of error. Cherry v. Cherry, 634 S.W.2d 423, 425 (Ky. 1982).
Moreover, the family court, as previously noted, has discretion in dividing marital property including debts, and pursuant to KRS 403.190 must effectuate such a division in "just proportions." In the case at bar, we conclude that the family court's decision as to the escrow account was not an abuse of discretion.
5. The trial court erred in its determination that the husband did not knowingly and voluntarily destroy marital assets.
Amy argues that Matt dissipated $295,429.41 in marital assets including the amount in the escrow account. Then, without further explanation concerning Matt's dissipation of assets, she refers to a number of exhibits proffered by her during the litigation. As noted in Bratcher v. Bratcher, 26 S.W.3d 797, 800 (Ky. App. 2000), the spouse claiming asset dissipation has the burden to go forward and show evidence that marital assets within the control of the other spouse are missing. Accordingly, Amy is required to do more than insinuate that Matt dissipated marital assets.
Again, we observe that if Amy believed that the family court did not adequately address the issue of whether Matt dissipated marital assets, it was incumbent on her to make a motion under CR 52.04 for additional findings on that matter, and as noted above, failure to move for additional findings constitutes a waiver of error. Cherry v. Cherry, 634 S.W.2d at 425.
Finally, a perusal of Amy's brief provides no citation to the record where she preserved this issue, and since Amy did not make the proper request for findings concerning the dissipation of assets following the family court's orders, the issue is not properly preserved for our review. CR 52.04; Vinson v. Sorrell, 136 S.W.3d 465, 471 (Ky. 2004). Accordingly, we are unable to address it.
6. The trial court erred in its failure to address wife's request for health care coverage.
Amy maintains that the family court committed a grievous error because it did not respond to her request for Matt to provide health care coverage for her through his employer's plan, as, she argues, is required under the federal law. The law alluded to by Amy is the Consolidated Omnibus Budget Reconciliation Act, which is commonly referred to as COBRA. In fact, Amy, if eligible, may apply under this Act for continued health care coverage through Matt's employer without court intervention regardless of who paid for the health insurance.
Nonetheless, no Kentucky statute or case law supports her position that Matt must provide health care coverage for her, and thus, the family court committed no error by not so ordering. Instead, the family court addressed her needs and ordered that Matt pay maintenance. From this income or her own income, Amy may pay for health care coverage.
7. The trial court erred in not awarding wife husband's retirement account and stocks.
Amy proposes that, because during a hearing Matt testified that she should receive all of his retirement account and the remaining stock options, the family court erred by not doing so. Rather, the family court divided the retirement account and stock options equally between Amy and Matt. Given that the family court has discretion under KRS 403.190 to divide the marital assets in "just proportions," we believe that the family court's decision to divide these assets equally between the parties was not in error or an abuse of discretion.
8. The trial court erred in its determination of reasonable attorney fees.
With respect to the attorney fees, the family court determined that $40,000.00 was a reasonable amount for Amy's attorney fees. Further, the family court found that, based upon its determination of the percentages of income, Matt was to pay 79% of Amy's attorney fees. In response, Amy maintains that because of Matt's contemptuous behavior, the family court should have set a higher amount for her reasonable attorney fees. In addition, she asserts that the family court did not consider the disparity in the parties' incomes when it made this award.
A family court has broad discretion in awarding attorney fees in a dissolution proceeding. Jones v. Jones, 245 S.W.3d 815, 821 (Ky. App. 2008) (citations omitted). After taking into account the financial resources of both parties, the court may award attorney fees when an "imbalance of such resources exists." Id. (citing KRS 403.220; Gentry v. Gentry, 798 S.W.2d 928 (Ky. 1990); Glidewell v. Glidewell, 859 S.W.2d 675 (Ky. App. 1993)).
Here, the family court did decide that an imbalance of resources existed and required Matt to pay Amy's reasonable attorney fees. The record supports such a finding. In making this decision, the family court compelled Matt to pay almost 80% of the $40,000.00 fee.
We are not convinced by Amy's argument that the family court erred in not setting her attorney fees at a higher amount because of Matt's contemptuous behavior during the proceedings. Our review of the record shows that both parties engaged in behaviors which were in contravention of court orders. And, in one specific instance, Matt was ordered because of such behavior to surrender certain stock options to Amy and pay the tax consequences for them. Consequently, our review reveals that the family court, as fact-finder, did not abuse its discretion by setting Amy's reasonable attorney fees at $40,000.00.
Nor did it abuse its discretion by requiring Matt to pay this fee based on the parties' percentages of income. Nevertheless, as we have previously noted, the family court, on remand, must ascertain a more accurate finding regarding Amy's income and recalibrate the parties' percentages of income to determine Matt's income percentage obligation for Amy's attorney fees.
9. The trial court erred in not recusing itself.
In her appeal, Amy observes that both Matt and she on separate occasions requested that the family court judge recuse. Notably, Matt has not appealed the family court's denial of his motion to recuse. Hence, we will only review the issue as it pertains to Amy. She alleges that the family court judge engaged in ex parte communication with the GAL attorneys, and also, she believes, was punishing her for her alcoholism and other acts. Thus, Amy requests that the case be remanded and a new judge assigned.
A party seeking to disqualify a judge in this Commonwealth may do so by filing a motion with the presiding judge pursuant to KRS 26A.015 or by filing an affidavit with the clerk of the court pursuant to KRS 26A.020. Under KRS 26A.020(1), "[i]f either party files with the circuit clerk his affidavit that the judge will not afford him a fair and impartial trial, . . . the circuit clerk shall at once certify the facts to the Chief Justice who shall immediately review the facts and determine whether to designate a regular or retired justice or judge of the Court of Justice as special judge." In these cases, the matter is submitted to the Chief Justice of the Supreme Court for consideration. Nichols v. Commonwealth, 839 S.W.2d 263 (Ky. 1992).
However, in the case at hand, Amy only filed a recusal motion pursuant to KRS 26A.015. Therefore, the decision as to recusal rested with the presiding judge. Pursuant to KRS 26A.015(2), a judge shall recuse if he or she has a "personal bias or prejudice concerning a party..." or "has knowledge of any other circumstances in which his impartiality might reasonably be questioned." Bissell v. Baumgardner, 236 S.W.3d 24, 28 (Ky. App. 2007)(quoting KRS 26A.015(2)(a) and (e)).
To establish that a judge must recuse, the burden of proof for the party seeking recusal "is an onerous one." Id. at 29 (quoting Stopher v. Commonwealth, 57 S.W.3d 787, 794 (Ky. 2001)). To satisfy this burden, Amy must establish that the facts are "of a character calculated seriously to impair the judge's impartiality and sway his judgment." Id. Further, a "mere belief" that the trial judge will not conduct himself or the trial in a "fair and impartial" way is not sufficient grounds for recusal. Id.
A review of this case and its record makes abundantly clear that the case was contentious, bitter, plus emotionally and substantively complicated. Further, the case was made even more difficult by the actions of the parties during its resolution. Amy's affidavit supporting the motion for recusal contains innuendo and personal feelings rather than facts that show bias or unfairness on the part of the judge. When seeking a judge's recusal, such an affidavit must contain facts that prove the judge could not be impartial and that his or her judgment was swayed. Foster v. Commonwealth, 348 S.W.2d 759, 760 (Ky. 1961).
Moreover, the timing of this motion to recuse is troubling. It was made after the family court had entered its final orders. A party must make a motion to recuse as soon as unfairness becomes apparent. Johnson v. Commonwealth, 231 S.W.3d 800 (Ky. App. 2007). Such a motion cannot be made because a party does not like the trial court's decisions. Amy has not met her burden to establish that the family court judge should have recused himself, and accordingly, no error was committed when the judge denied her recusal motion.
10. The trial court erred in not granting appellant a new trial for various reasons, including but not limited to the finding that the appellant is an innocent spouse.
Amy's final assignment of error to the family court involves its denial of her motion for a new trial based on the determination by the Internal Revenue Service (hereinafter "IRS") that she was eligible for innocent spouse treatment for the 2008 tax year.
Since Amy does not indicate the dates of these motions in her brief, it is necessary for us to look at the record. The record shows that Amy first moved for a new trial on October 26, 2012. In that motion, she cites to CR 50.01(g), CR 59.01(g), and CR 60.02(b). The motion for a directed verdict under CR 50.01 is clearly improper since this action was tried before a court without a jury. Brown v. Shelton, 156 S.W.3d 319, 320 (Ky. App. 2004)(citations omitted). With regards to the motions under CR 59.01 and 60.02, since the family court had not yet entered final orders in this case, these motions were invalid since no final order existed. (The family court entered its orders on November 9, 2012).
Later, on November 19, 2012, Amy makes another motion for a new trial under CR 50.01(g) and CR 60.02(b) based on newly discovered evidence, that is, the letter from the IRS. While Amy references CR 59.01(g) in the motion, she, in fact, moves for this relief under CR 50.01 and CR 60.02. Neither rule is valid at this time. First, as explained, CR 50.01 is only used in cases with a jury. Such is not the case here. Second, CR 60.02 states in pertinent part:
On motion a court may, upon such terms as are just, relieve a party or his legal representative from its final judgment, order, or proceeding upon the following grounds . . . (b) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59.02.
Amy made her motion on November 19, 2012, which was 10 days after the order was entered. Since CR 59.02 allows that a motion for a new trial shall not be served later than 10 days from the entry of judgment, Amy still had time under CR 59.02 to move for a new trial and was not permitted to use CR 60.02(b) yet. Consequently, Amy never made a proper motion for a new trial. Moreover, in her notice of appeal, Amy does not indicate that she is appealing the denial of the motion for a new trial, and hence, the issue is also not preserved.
Nonetheless, given that the family court must recalculate the parties' percentages of the income to ascertain their responsibility for the debt, the issue of debt is open for the family court's consideration upon remand. Again, the family court must use the most up-to-date and pertinent information in the assignment of debt. If Amy's innocent spouse status for the tax year 2008 impacts the debt assignment, the family court is to address it.
CONCLUSION
Based on the foregoing reasons, appeal No. 2013-CA-000266-MR, which addresses the September 11, 2012 findings of fact, conclusions of law, and decree and the November 9, 2012 supplemental findings of fact, supplemental conclusions of law, and supplemental decree of dissolution is affirmed in part, reversed in part, and remanded for further proceedings consistent with this Opinion.
The appeal titled No. 2012-CA-002213-MR is hereby dismissed for the reasons previously discussed in this opinion.
ALL CONCUR. BRIEF FOR APPELLANT: Brenna L. Penrose
Covington, Kentucky
BRIEF FOR APPELLEE: D. Keith Johnson
Newport, Kentucky