Opinion
NO. 2015-CA-001391-MR
03-03-2017
TRACEY SMITH (formerly WEINBERG) APPELLANT v. JED WILLIAM WEINBERG APPELLEE
BRIEF FOR APPELLANT: Noah R. Friend Pikeville, Kentucky Bill Slone Pikeville, Kentucky Kimberly Compton Louisa, Kentucky BRIEF FOR APPELLEE: Donald L. Smith, Jr. Pikeville, Kentucky Michael de Bourbon Pikeville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM KNOTT CIRCUIT COURT
HONORABLE JANIE McKENZIE-WELLS, SPECIAL JUDGE
ACTION NO. 13-CI-00418 OPINION
AFFIRMING
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BEFORE: JONES, D. LAMBERT AND MAZE, JUDGES. LAMBERT, D., JUDGE: This is an appeal from the Knott Circuit Court's August 10, 2015 judgment dividing the marital estate of Jed Weinberg and Tracey Smith (formerly Weinberg) and ordering Jed to pay child support. In dividing the marital estate, the court classified certain shares of bank stock as marital property. The court also fixed Jed's child support obligation after finding he was not voluntarily underemployed. Tracey disagreed with these determinations and challenged the court's property division and child support award. After careful review, we affirm.
I. BACKGROUND
Jed and Tracey married in 1995 and divorced nearly 20 years later. They have two minor children. During the dissolution proceedings, Jed and Tracey were able to resolve a number of factual disputes through mediation. For instance, they divvied up several articles of personal property among themselves and stipulated to that division. They also agreed to share custody of their children.
Despite this apparent cooperation, the parties could not find common ground when it came time to divide their shares of stock in Community Exchange Bancshares, Inc., the holding company for the Bank of Hindman (the Bank). They also could not agree on the issue of child support. Consequently, the court held a hearing on these disputes.
At the hearing, both parties offered evidence of their involvement with the Bank. Tracey is a Bank employee and apart from an extended period in 2008, has worked at the Bank since 1987. She started as a teller and rose to her current position as Vice-President. She is also a member of the Bank's board of directors, a position she has held since 1999. As a board member, she chairs the Past-Due Loan Committee and the Human Resources Committee. Notably, members of Tracey's family have been involved in the Bank's operations since its founding in 1903. During the marriage, Tracey inherited 219 shares of Bank stock.
Jed also acquired Bank stock (65 shares) during the marriage. He, too, serves as a board member. He also served as the Bank's interim President from November 2013 to April 2014. He was not employed by the Bank for a majority of his career, however, as he was involved in the oil and natural gas industry. Jed had historically earned more money through his career than he did at the time of the divorce.
In 2009, Community Exchange Bancshares, Inc. purchased the Bank's previous holding company. Jed and his father organized the investor's proposal. Following this transaction, Tracey converted her 219 shares of Bank stock into 219 shares of stock in Community Exchange Bancshares, Inc. She sold 35 of these shares in 2012, leaving her with 184 shares at the time of divorce. The parties agreed that when Tracey inherited the shares, they were worth $673,844. The parties also agreed, based on the fact Tracey was able to sell the 35 shares in 2012 for $12,500 per share, that the remaining 184 shares had an appreciated total value of $2,300,000. According to the court, the value of the shares nearly tripled between Christmas Eve 2008 and the time of divorce.
After considering the evidence presented at the hearing, including testimony from the Bank's President and CEO, Byron Jacobs, regarding Tracey's role within the Bank, the court found the efforts of the parties contributed to the appreciated value of the 184 shares. In making this finding, the court did not consider the testimony of Timothy Finn, an expert witness Tracey had retained to opine as to the cause of the increased share value. The court instead excluded Finn because Tracey had failed to timely supplement certain discovery responses regarding Finn's qualifications prior to the hearing. All the same, the court ultimately concluded the appreciated value was marital property subject to equitable division.
Once it had divided the marital estate, the court turned to the issue of child support. The court examined the evidence, including expert testimony from accountant Calvin D. Cranfill relating to Jed's business interests and historically higher earnings, and determined Jed was not voluntarily underemployed. The court then set a child support award in line with Jed's current income. Tracey followed with this appeal.
II. STANDARD OF REVIEW
"The question of whether an item is marital or nonmarital is reviewed under a two-tiered scrutiny in which the factual findings made by the court are reviewed under the clearly erroneous standard and the ultimate legal conclusion denominating the item as marital or nonmarital is reviewed de novo." Smith v. Smith, 235 S.W.3d 1, 6 (Ky. App. 2006). Kentucky courts have broad discretion in setting child support, but this discretion is limited to decisions that are not "arbitrary, unreasonable, unfair, or unsupported by sound legal principles." McKinney v. McKinney, 257 S.W.3d 130, 133 (Ky. App. 2008). In setting child support, the trial court "may impute income to a party whom it finds to be voluntarily unemployed or underemployed." Hempel v. Hempel, 380 S.W.3d 549, 552 (Ky. App. 2012). And, although the trial court may look to the totality of the circumstances in making this finding, it is nonetheless a factual finding reviewed for clear error. Maclean v. Middleton, 419 S.W.3d 755, 775 (Ky. App. 2014).
III. DISCUSSION
On appeal, Tracey's position essentially boils down to two main issues. The first is whether the court properly classified the appreciated value of the shares as marital property. The second is whether the court properly set child support after finding Jed was not voluntarily underemployed. With respect to the first issue, Tracey argues that market forces accounted for the elevated share value following the 2009 takeover and that her expert should have been admitted to testify as to this fact. She also argues that at least some portion of the 35 shares she sold in 2012 remained nonmarital. With respect to the second issue, Tracey contends that Jed's support obligation should reflect his historically higher income levels. For the following reasons, we disagree.
1. The court properly assigned the parties' marital property
When dividing the parties' property in a dissolution of marriage proceeding, KRS 403.190 requires the trial court to engage in a three-step process. First, it must characterize each item or interest as either marital or nonmarital property. Second, it must assign each party his or her nonmarital property. And third, it must divide the marital property in just proportions between the parties. Travis v. Travis, 59 S.W.3d 904, 909 (Ky. 2001).
Kentucky Revised Statutes. --------
Incorporated into the first step is a presumption that all property acquired during the marriage is marital. KRS 403.190(3). Thus, the party seeking to have a particular asset characterized as nonmarital must prove why that characterization is appropriate. Sexton v. Sexton, 125 S.W.3d 258, 266 (Ky. 2004). This is simple enough when the nonmarital claimant inherited a particular item or interest during the marriage: inherited property remains nonmarital property. See KRS 403.190(2)(a); see also Angel v. Angel, 562 S.W.2d 661, 663 (Ky. App. 1978). However, the matter is complicated when the inherited property increases in value during the marriage. In such a situation, the increased value of the property (as opposed to the property itself) can transmute into marital property depending on "why the increase in value occurred." Travis, 59 S.W.3d 904, 910 (Ky. 2001) (internal quotations omitted). If general economic conditions led to the increase in value, the increase remains nonmarital property. Id. But, if the "significant activities of either spouse" caused the increase, then the increased value becomes marital property subject to equitable division. See KRS 403.190(2)(a) (emphasis added); see also Goderwis v. Goderwis, 780 S.W.2d 39, 40 (Ky. 1989) (increase in value of nonmarital business divided as marital property where husband primarily operated the business and wife contributed as a homemaker).
Here, the court ultimately concluded that Tracey failed to prove her Bank stock had increased in value "due to general economic conditions, rather than the marital efforts of the parties." To support its conclusion, the court considered Tracey's hearing testimony in which she admitted that her work efforts had "somewhat" contributed to the increased share value. The court also detailed Tracey's and Jed's job responsibilities in the wake of the 2009 buyout, which Jed "was deeply involved in orchestrating." The court found that after the buyout, Jed "became formally involved with the Bank's operations" by serving as a Bank board member. The court then noted that Tracey's responsibilities at the Bank expanded post-buyout. According to the court, Tracey not only began overseeing the Bank's marketing and human resources departments, but also gained "a great deal of responsibility" regarding the Bank's lending and customer retention practices. The court also accepted Byron Jacobs' testimony that lending and customer retention "[were] significant factors in the value of a bank."
Based on these findings, we agree with the decision to divide the increased share value as marital property. The court correctly found that Jed and Tracey both contributed to the increased value of the Bank stock notwithstanding Tracey's argument that her expert witness should have been allowed to testify. Whether certain evidence is admitted or excluded is left to the trial court's broad discretion, Clephas v. Garlock, Inc., 168 S.W.3d 389, 393 (Ky. App. 2004), and here the court excluded Finn after observing that Tracey had not complied with an agreed order to "have all discovery completed" 14 days before the hearing. The court specifically ruled that Tracey failed to update her discovery responses with Finn's information, and Tracey admitted this failure on appeal. Therefore, the court made a reasonable decision.
As for the 2012 sale of 35 Bank shares, we cannot accept Tracey's position that she was entitled to receive an additional portion of the $437,500 in proceeds as nonmarital property. Although Tracey established that she bought a $250,000 certificate of deposit and a 2008 Lexus with the proceeds, the court determined that she was unable to account for the disposition of the entire $437,500. This was an accurate finding, as Tracey only produced evidence accounting for the certificate of deposit and the car, and did not address what happened to the remaining portion of the $437,500. Moreover, since Tracey received both the certificate of deposit and the Lexus in the court's final division, along with an equitable division of the entire marital estate, there was no reversible error with respect to the 2012 sale.
2. The child support award was proper
Regarding the child support award, we similarly cannot say the court abused its discretion. The court considered Jed's historically higher income, but specifically found that he was not voluntarily underemployed. In making this finding, the court relied on Jed's testimony as to the prevailing employment opportunities available to him. "[J]udging the credibility of witnesses . . . [is] within the exclusive province of the trial court. Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003). Accordingly, both the finding and the child support award were appropriate. The judgment of the Knott Circuit Court is hereby affirmed.
ALL CONCUR. BRIEF FOR APPELLANT: Noah R. Friend
Pikeville, Kentucky Bill Slone
Pikeville, Kentucky Kimberly Compton
Louisa, Kentucky BRIEF FOR APPELLEE: Donald L. Smith, Jr.
Pikeville, Kentucky Michael de Bourbon
Pikeville, Kentucky