Opinion
NO. 2018-CA-000702-ME
04-05-2019
KRISY HOWARD CARTY APPELLANT v. JASON ORAL CARTY APPELLEE
BRIEFS FOR APPELLANT: Leah Hawkins Mt. Sterling, Kentucky BRIEF FOR APPELLEE: Stephen E. Neal Mt. Sterling, Kentucky
NOT TO BE PUBLISHED APPEAL FROM ROWAN CIRCUIT COURT
HONORABLE WILLIAM EVANS LANE, JUDGE
ACTION NO. 14-CI-00296 OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
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BEFORE: TAYLOR, K. THOMPSON AND L. THOMPSON, JUDGES. THOMPSON, L., JUDGE: Krisy Carty appeals from an order of the Rowan Circuit Court which increased Jason Carty's parental timesharing with their children, calculated child support Appellant was to pay Appellee, and modified two provisions of a divorce contract. Appellant argues that the court should have awarded Appellee standard visitation, erred in its calculation of child support, and should not have modified the divorce contract entered into by the parties. We believe that the court did not err as to the increased timesharing but did err as to the other issues; therefore, we affirm in part, reverse in part, and remand for additional proceedings.
The parties were married in 2001 and have three minor children. Appellant is a dentist in Mt. Sterling, Kentucky and Appellee is employed by J.M. Smuckers in Lexington, Kentucky. Appellant filed a petition for dissolution of marriage on November 18, 2014. On December 11, 2014, the parties entered into a divorce contract which divided marital assets and debts. The contract also indicated that the parties would have joint custody of the children, that Appellant would be the primary residential parent, that Appellant would claim all three children as dependents for tax purposes, and that Appellee would exercise his timesharing in accordance with the Rowan Circuit Court's standard timesharing schedule. The contract also provided that Appellee would pay Appellant $500 a month in child support, would provide health and dental insurance for the children, and would pay the medical bills not covered by insurance. Finally, the contract reserved all issues regarding ownership of a business called Sweet Smiles, LLC, doing business as Yogurt Mountain.
On May 15, 2015, the parties executed a document called "Addendum to Divorce Contract." This agreement indicated that they wished to stop the operation of Yogurt Mountain. Appellant was to continue operating the business until it was wound up and that they would make all efforts to sell the business as a going concern. If they were unable to sell the business as a going concern by September of 2016, they agreed to liquidate the assets of the business and pay down any debt of the company. Finally, the agreement stated that the parties would be equally responsible for any remaining debt owed by the business.
The trial court entered a decree of dissolution of marriage on June 1, 2015. The decree stated that it was incorporating the divorce contract and addendum, that the court had considered both agreements, and that the court found the agreements were not unconscionable.
On September 2, 2016, Appellant filed a motion seeking postdissolution relief. She moved for the court to, among other things, order Appellee to pay his one-half of the Yogurt Mountain debt. Appellee responded to the motion and filed a counter-motion which requested, among other things, additional timesharing, child support, the ability to claim the children as dependents on his taxes, and for Appellant to be solely responsible for the Yogurt Mountain debt.
The court held an evidentiary hearing on December 7, 2017, during which Appellant and Appellee testified. Numerous financial documents were entered into the record regarding the finances of Yogurt Mountain, Appellant, Appellee, Appellant's dental practice called Mt. Sterling Smiles, LLC, and Appellant's other business called Carty Properties, LLC.
Mt. Sterling Smiles and Carty Properties were businesses that began during the marriage, but which Appellant received pursuant to the divorce contract.
The trial court entered its findings of fact, conclusions of law, and orders on April 11, 2017. The trial court awarded Appellee increased timesharing. Appellee's timesharing would be on a two-week rotating basis. He would get Monday night and Tuesday night on week one, Wednesday night and Thursday night on the following week, alternating weekends and weeks during the summer, and would following the court's standard visitation schedule for holidays and breaks. The court also awarded Appellee $1,626.24 per month in child support based on Appellant's yearly income of $238,150. In addition, the court ordered Appellant to pay 70% of non-covered medical expenses. The court also allowed Appellee to claim one child as a dependent for tax purposes each year and claim another child on alternating years. Finally, the court ordered that Appellant was solely responsible for the Yogurt Mountain debt.
The court ruled on multiple issues, but we will only discuss those which are pertinent to this appeal.
Appellant then filed a motion to alter, amend, or vacate the court's order. Appellant claimed that the trial court miscalculated her income for child support and medical expenses purposes. She argued that the court doubled her income and that her income was closer to $100,000 per year. She also requested that the court reconsider its decision and order Appellee be responsible for half of the Yogurt Mountain debt and that Appellee not be given increased timesharing. The court denied the motion and this appeal followed.
Appellant's first argument on appeal is that the trial court should have awarded Appellee standard timesharing and that the court did not consider the best interests of the child when modifying timesharing. Kentucky Revised Statute (KRS) 403.320(3) allows for the modification of timesharing or visitation if it is in the child's best interests. We believe the trial court did not err in granting Appellee more timesharing and that the court considered the best interests of the children.
Kentucky Rule of Civil Procedure (CR) 52.01 directs that "[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." A judgment "supported by substantial evidence" is not "clearly erroneous." Owens-Corning Fiberglas Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky. 1998). Substantial evidence is defined as "evidence of substance and relevant consequence, having the fitness to induce conviction in the minds of reasonable men." Kentucky State Racing Commission v. Fuller, 481 S.W.2d 298, 308 (Ky. 1972) (quoting O'Nan v. Ecklar Moore Express, Inc., 399 S.W.2d 466 (Ky. 1960)). Furthermore, "[e]very case will present its own unique facts, and the . . . modification of visitation/timesharing must be decided in the sound discretion of the trial court." Pennington v. Marcum, 266 S.W.3d 759, 769 (Ky. 2008).
When modifying timesharing in this case, the trial court stated that it considered all the relevant factors contained in KRS 403.270, KRS 403.320, and KRS 403.340. KRS 403.270(2) lists factors a court should consider when determining the best interests of a child. Those factors are:
(a) The wishes of the child's parent or parents, and any de facto custodian, as to his custody;
(b) The wishes of the child as to his custodian;
(c) The interaction and interrelationship of the child with his parent or parents, his siblings, and any other person who may significantly affect the child's best interests;
(d) The child's adjustment to his home, school, and community;
(e) The mental and physical health of all individuals involved;
(f) Information, records, and evidence of domestic violence as defined in KRS 403.720;
(g) The extent to which the child has been cared for, nurtured, and supported by any de facto custodian;
(h) The intent of the parent or parents in placing the child with a de facto custodian; and
(i) The circumstances under which the child was placed or allowed to remain in the custody of a de facto custodian, including whether the parent now seeking
custody was previously prevented from doing so as a result of domestic violence as defined in KRS 403.720 and whether the child was placed with a de facto custodian to allow the parent now seeking custody to seek employment, work, or attend school.KRS 403.270(2).
This statute has been amended and a new version became effective in July 14, 2018. We will utilize the version that was in effect at the time the case was before the trial court.
The court did not discuss each of the above factors individually; however, some were mentioned by the court. The court's findings indicated that Appellee wanted increased timesharing, but Appellant wanted Appellee to have standard timesharing. The court also found that even though Appellant was seeking to maintain the status quo, she had allowed increased timesharing in the past. The court also mentioned Appellant's concern that Appellee had anger issues but discounted this claim because she had not previously sought to curtail Appellee's timesharing. The court also found that the children were well integrated into Appellee's household. The court also held that the children should continue to attend the school in Appellant's school district. The trial court considered the best interests of the children when making its decision and we believe that the testimony given at the hearing supports the trial court's judgment. The court did not abuse its discretion in awarding Appellee additional timesharing.
Appellant's next argument on appeal is that the trial court erred in calculating her income and this erroneous calculation skewed the amounts Appellant was ordered to pay for child support and non-covered medical expenses. The trial court found that Appellant's yearly income was $238,150. The court came to this amount by adding $118,065 from Appellant's 2014 W-2 and $120,085 from Mt. Sterling Smiles' officer compensation information found on the company's 2014 tax return. Appellant argues that these amounts are duplicative. In other words, the W-2 shows the amount she was ultimately paid as officer compensation from Mt. Sterling Smiles.
We agree with Appellant that the trial court erroneously doubled her income. We come to this conclusion after reviewing Appellant's W-2, Appellant's applicable tax returns, Mt. Sterling Smiles' tax return, and Appellant's testimony at the hearing where she testified she earned about $10,000 per month. In addition, Appellant filed an affidavit from her accountant with her motion to alter, amend, or vacate which stated that the court erroneously doubled her income and that the officer compensation from Mt. Sterling Smiles was the same income listed on her W-2. Based on this evidence, the court's finding was clearly erroneous, and Appellant's income must be recalculated. Additionally, because Appellant's income was incorrect, the court's holding regarding child support and non-covered medical expenses is also erroneous and will need to be reviewed by the trial court.
Appellant's next arguments are in regard to the court's modification of the divorce contract. When the trial court entered the divorce decree, the court incorporated the agreements into the decree and found that the terms were not unconscionable. "A separation agreement which was originally determined not to be unconscionable may later be modified if due to a change in circumstances the agreement has become unconscionable. However, the party challenging the agreement as unconscionable has the burden of proof." Bailey v. Bailey, 231 S.W.3d 793, 796 (Ky. App. 2007) (citations omitted). "The term 'unconscionable' is defined as 'manifestly unfair or inequitable.' To determine whether the circumstances have changed, we compare the parties' current circumstances to those at the time the court's separation decree was entered." Block v. Block, 252 S.W.3d 156, 160 (Ky. App. 2007) (citations omitted). "A mere discrepancy in the amounts received by each party under a settlement agreement is not enough to render the agreement unconscionable." Money v. Money, 297 S.W.3d 69, 73 (Ky. App. 2009) (citation omitted). Additionally, the divorce contract could be set aside "on the basis of fraud, undue influence, or overreaching." Peterson v. Peterson, 583 S.W.2d 707, 712 (Ky. App. 1979).
The family court is in the best position to weigh the evidence and determine if a separation agreement is unconscionable or if it resulted from duress, undue influence, or overreaching. Regarding such determinations, we defer to the family court's broad
discretion, and are prohibited from disturbing its decision absent an abuse of its discretion.Mays v. Mays, 541 S.W.3d 516, 524 (Ky. App. 2018) (citations omitted).
Appellant argues that the trial court erred in allowing Appellee to claim some of the children as dependents for tax purposes because the divorce contract allowed her to claim all three children. She claims that allowing her to claim the three children on her taxes is not unconscionable. We agree.
The trial court held that because it was increasing Appellee's timesharing, it would be unconscionable and unfair to allow Appellant to continue to claim all three as dependents on her taxes. We believe allowing Appellant to keep claiming all three children on her taxes is not unconscionable. Appellee agreed to this arrangement and the trial court originally found it not unconscionable. While there may be changed circumstances in that Appellee is being awarded additional timesharing, the tax issue is not manifestly unfair. Unconscionable does not mean a "bad bargain[,]" Peterson, 583 S.W.2d at 712, and that is at most what this is.
Appellant also argues that the court erred in ordering her to pay the entire Yogurt Mountain debt even though the addendum states that both parties would be equally responsible for any debt owed by the business. We agree.
As previously discussed, the trial court originally found this agreement not unconscionable; therefore, there must be a change in circumstances that now makes it unconscionable. In ordering Appellant to pay the entire Yogurt Mountain debt, the trial court found that Appellant did not disclose the financial condition of Yogurt Mountain to Appellee before he entered into the addendum, that she did not disclose the intertwined business relationship between Yogurt Mountain, Carty Properties, and Mt. Sterling Smiles, and that Appellee did not have counsel when he entered into the agreement. The court ultimately held that it would be unconscionable to require Appellee to pay half of the remaining debt "considering the financial circumstance of the parties, the previous division of property and debt between the parties, the financial resources available to the parties and the intertwined relationships between Sweet Smiles, LLC, doing business as Yogurt Mountain, and the Petitioner herself and the Petitioner's two other businesses[.]"
The intertwined business relationship was that Carty Properties owned the building in which Yogurt Mountain was located and Yogurt Mountain was paying rent to Carty Properties. Additionally, Mt. Sterling Smiles made loans to Yogurt Mountain in order to help keep it afloat.
These findings do not show a change in circumstances from the time the divorce decree was entered into until now. The trial court only discusses issues that were present at the time the agreement was entered into and no testimony was presented showing a change in circumstances. In addition, other than Appellee not being represented by independent counsel, the court's findings are not supported by the evidence in the record. Appellee walked away from Yogurt Mountain and never requested access to financial records; however, he testified that he knew Yogurt Mountain was not doing well financially and Appellant informed him on multiple occasions that she needed help. There was also no testimony that Appellee was aware or unaware of the interconnectedness of Yogurt Mountain, Carty Properties, and Mt. Sterling Smiles. This line of questioning was never raised at the hearing or anywhere in the record.
In addition, although not specifically stated, it appears the court's discussion of the interconnectedness of the three businesses might have been indicating some fraudulent activity on Appellant's part. Fraud would allow the court to set aside the addendum, but as just stated, there was no evidence to support those findings.
Appellee's only argument in asking to be released from his obligation to pay half of the Yogurt Mountain debt was that he could not afford to do so. The questions presented to him at the hearing revolved around the finances of the parties and the previous property distribution. There was no evidence presented regarding a change in circumstances that would now make the addendum unconscionable. Furthermore, while the court did not use the term fraud, its discussion of the interconnectedness of the three businesses suggested that it was implying some fraudulent activity on Appellant's part; however, the court's finding that Appellee was unaware of this has no support in the record and was clearly erroneous.
Based on the foregoing, we affirm as to the increased timesharing issue and reverse and remand as to all other issues.
According to the record, after the appeal in this case was filed, Appellant sold her dental practice and the building in which it and Yogurt Mountain were located. Many of the issues being remanded involve the parties' finances; therefore, the trial court may need to hold another hearing or allow additional evidence to be submitted. --------
TAYLOR, JUDGE, CONCURS IN PART AND DISSENTS IN PART.
THOMPSON, K., JUDGE, CONCURS IN RESULT ONLY.
TAYLOR, JUDGE, CONCURRING IN PART AND DISSENTING IN PART: Respectfully, I concur with the majority's ruling on the child dependent tax issue and the Yogurt Mountain debt issue. However, I must respectfully dissent on the award of additional timesharing to appellee, as I believe the trial court made insufficient findings as concerns the best interests of the parties' children on this issue as required by KRS 403.270. See Keifer v. Keifer, 354 S.W.3d 123 (Ky. 2011). I would reverse on this issue and also direct the circuit court to reinstate timesharing as originally agreed to by the parties. BRIEFS FOR APPELLANT: Leah Hawkins
Mt. Sterling, Kentucky BRIEF FOR APPELLEE: Stephen E. Neal
Mt. Sterling, Kentucky