Opinion
NO. 2015-CA-001340-MR NO. 2015-CA-001414-MR
03-03-2017
GREGORY COBHAM APPELLANT/CROSS-APPELLEE v. PAMELA COBHAM APPELLEE/CROSS-APPELLANT
BRIEF FOR APPELLANT/CROSS- APPELLEE: Edward E. Dove Lexington, Kentucky BRIEF FOR APPELLEE/CROSS- APPELLANT: Ethyle Noel Georgetown, Kentucky
NOT TO BE PUBLISHED APPEAL AND CROSS-APPEAL FROM SCOTT CIRCUIT COURT FAMILY COURT THIRD DIVISION
HONORABLE LISA HART MORGAN, JUDGE
ACTION NO. 07-CI-00096 OPINION
AFFIRMING
** ** ** ** **
BEFORE: KRAMER, CHIEF JUDGE; ACREE AND CLAYTON, JUDGES. KRAMER, CHIEF JUDGE: Gregory Cobham appeals, and Pamela Cobham cross appeals, from the August 10, 2015 final judgment of the Scott Family Court in which the court resolved the issue of spousal maintenance in the parties' dissolution action. On appeal, Gregory claims the family court erred by awarding Pamela interest for years of non-payment of maintenance, and because of this error, he argues he is entitled to collect his overpayment to Pamela.
Pamela has filed a cross-appeal from the final judgment claiming the family court erred by: (1) relying on the satisfaction of maintenance evidence prior to considering the motion to modify maintenance; (2) by failing to consider evidence of Gregory's deception, fraud, and perjury; and (3) by erroneously calculating the cost to Pamela of Greg's failure to pay the court ordered maintenance.
We affirm on both the direct and cross-appeal.
I. FACTUAL AND PROCEDURAL BACKGROUND
This litigation has spanned almost ten years and is now on its second journey through the appellate process. The last time this case was before this Court was when the family court denied Gregory's motion to modify maintenance, found him in contempt, and ordered him to pay attorney fees in an order entered September 30, 2010. Cobham v. Cobham, Nos. 2010-CA-002163, 2010-CA-002106, 2012 WL 1886506 (Ky. App. May 25, 2012).
The facts leading up to the previous appeal were succinctly stated in this Court's opinion as follows:
Gregory filed a petition for divorce from Pamela . . . in 2007. In February 2008, Gregory and Pamela engaged in mediation in order to reach a settlement agreement. Their agreement was incorporated into the divorce decree, which was entered on February 28, 2008. It provided that Gregory would pay maintenance to Pamela for a total of twelve years. For the first three years, he was to pay her $1150 per month; he was to have an
obligation of $950 per month for the remaining nine years.Id. at *1.
In February 2009, Gregory filed a motion to modify the maintenance award, arguing that it had become unconscionable due to changed circumstances. On April 8, 2009, the court denied his motion. In June 2009, he made his last payment of the full amount. On October 20, 2009, Pamela filed a motion for the court to hold Gregory in contempt for failure to pay the maintenance. For the next several months, Gregory paid $100 to Pamela. On February 24, 2010, Pamela filed a motion for a judgment for arrearages. A hearing on the contempt motion and the motion for arrearages was held on September 10, 2010. The trial court found that Gregory owed Pamela arrearages and was in contempt of court. Because of the contempt finding, the court ordered Gregory to pay Pamela's attorney fees in an order entered on September 30, 2010.
After review, we vacated and remanded the order to the family court with instructions to modify the maintenance. Specifically, this Court found that Gregory's "reduction in . . . income constituted changed circumstances that are substantial enough to make the terms of the settlement agreement unconscionable." Id. at *2. The reduction in income was primarily due to the loss of overtime hours and bonuses for Gregory at Toyota Manufacturing stemming from the recession in 2008.
On remand, the family court received evidence and heard arguments of counsel. The court found that Gregory was entitled to a reduction in maintenance, but only for a portion of the period he was required to pay $1150 a month. By order entered November 6, 2013, the family court reduced Gregory's maintenance from $1150 per month to $862.50 per month, retroactive to February 2009. The court left the $950 per month maintenance, starting in March 2011, for the remaining nine years as originally contemplated. The court then calculated his past maintenance arrearage as follows:
On February 9, 2009, Gregory filed his first motion to modify maintenance, which was subsequently denied.
A. From February 2009 through March 2011, (25 months), Gregory owed Pamela $862.50 for a total of $21,562.50.The court then ordered Gregory to pay Pamela his past due obligation of $45,162.50 within the next sixty days and further ordered him to pay the monthly maintenance of $950, as originally agreed, from November 2013 through March 2020.
B. From March 2011 through October 2013, (3 months), [sic] Gregory owed Pamela, pursuant to the Settlement Agreement, $950.00 per month for a total of $950.00 per month for a total of $29,450.00.
C. The combined totals equal $51,012.50. Gregory is given credit for his payments of $100.00 a month from November 2009 through October 2013, (47 months), for a total of $4,700.00. Additionally, Gregory is entitled to credit for overpayment from February 2009 through May 2009, when he stopped paying maintenance all together. He was paying $1,150.00 per month when his obligation should be $862.50 per month, equaling an overpayment of $287.50 per month, multiplied by four months, for a total overpayment of $1,150.00.
D. Giving Gregory credit for the payments of $4,700.00 and $1,150.00 brings his total obligation to $45,162.50.
March 2011 through October 2013 is a total of 31 months. $950.00 multiplied by 31 comes to the total listed by the family court of $29,450.00.
On January 16, 2014, after not receiving a payment of any kind, Pamela moved the family court to hold Gregory in contempt for failing to comply with November 6, 2013 order. On January 29, 2014, the family court ordered Gregory "to show cause why he should not be held in contempt of court for failing to comply with the order." This led to a March 12, 2014 order that garnished Gregory's wages to satisfy past due and present maintenance. Pamela began receiving $1,950 per month: $950 for current maintenance; and $1,000 toward the arrearage. The order also mandated a Qualified Domestic Relations Order (QDRO) be submitted within twenty days of August 20, 2014, in the amount of $45,162.50 to satisfy the arrearage judgment.
Gregory, through counsel, initiated negotiations to settle all past due and future maintenance with one lump sum payoff. Evidenced by an email dated August 28, 2014, the parties agreed that the amount to settle all maintenance claims as of that date, past and future, would be $108,000. This amount would relieve him from any further monthly payments and garnishment.
Pamela received the $102,000 lump sum via the QDRO sometime in early January 2015. Gregory filed a motion to terminate his wage garnishment on January 7, 2015, reasoning that the prior maintenance order was satisfied in full, via the QDRO payment. Pamela acknowledged that she received this pay off amount. However, she initially disputed that it fully satisfied the terms of the prior maintenance order and contemporaneously moved to modify the terms of the maintenance order on January 20, 2015. She based her motion upon the change of circumstances in her financial position that resulted from the nearly six years that had passed since Gregory stopped paying maintenance as ordered in the original decree and the debt she was forced to incur as a result.
Testimony at the April 24, 2015 hearing established that $102,000 was paid, instead of 108,000, because Pamela received $1,800 via wage garnishment for four months (totaling $7,200) prior to receiving the QDRO payment. Accordingly, as of January the amount owed for past and future maintenance would have been $100,800.
A hearing was held on April 24, 2015, to determine whether the maintenance obligation had been satisfied by the lump sum payment and whether the family court should modify the maintenance pursuant to KRS 403.250. At the outset of the hearing, and despite having previously disputed that the balance of the maintenance obligation had been satisfied, Pamela stipulated that Gregory had satisfied his maintenance obligation to her through the lump sum payment from the QDRO. However, she stipulated to this with the "caveat" that the family court would hear evidence to show that a modification of the prior maintenance order was warranted. Pamela sought to have the $950 per month maintenance order as previously ordered extended indefinitely and enforced through a wage garnishment order.
Kentucky Revised Statutes.
In support of her motion to modify, Pamela presented evidence of the financial difficulties she suffered as a result of Gregory's failing to pay her the court ordered maintenance for approximately six years. These difficulties include a substantial amount of credit card debt, the depletion of her Individual Retirement Account (IRA), and a loan from her mother. Pamela further testified that once she received the $102,000 from the QDRO payout, she paid off approximately $22,000 in credit card debt and re-funded her IRA with the remaining balance of approximately $80,000. Once she reinvested the money into her IRA, she was still left with approximately $38,000 of credit card debt, with monthly payments she is unable to afford. In order to "make her whole" from Gregory's failure to pay his maintenance as ordered over the years, Pamela argued that the lump sum payoff should be treated as "reimbursement of sorts" for her having to liquidate assets and incur debt to cover her expenses over the years. In Pamela's view, the monthly maintenance payments should continue for life because the $102,000 lump sum was simply a "reimbursement" for her losses.
The family court considered all of the evidence and thoroughly discussed Pamela's financial position, and Gregory's impact on it, in its August 10, 2015 Amended Findings of Fact and Conclusions of Law. The relevant portion of the findings provided as follows:
While the Court is not unsympathetic to Pamela's trials and tribulations over the last several years with regard to this litigation and her financial hardships, basic legal principles of accord and satisfaction must be applied. As evidenced by an email between counsel for both parties, Pamela provided the payoff amount for Greg to satisfy the entire balance of his maintenance obligation and agreed to the entry of a QDRO that would satisfy the award. At no time prior to the entry of the QDRO had she sought to modify the maintenance obligation or seek tortious damage for the financial losses she claims she suffered as a result of the unpaid maintenance. It defies reason to believe that Gregory would have agreed to this early payoff if he did not believe it to be in full and final settlement of his maintenance obligation to Pamela, or knowing that she would attempt to continue the maintenance after receiving payment. In fact, Pamela's attempt to continue maintenance after making this deal borders on bad faith. To unilaterally characterize an amount that was indisputably arrived at as the contract (in this case order) amount as some sort of damages award is simply without merit, especially in light of the stipulation made at the hearing that the award has been satisfied . . . .
Therefore, the Court finds that Gregory's maintenance obligations as ordered on November 6, 2013, was terminated by accord and satisfaction once Pamela received the lump sum payment from Gregory's retirement account. As a matter of law the Court cannot revive a terminated and satisfied maintenance award after full payment has been received and the obligation no longer exists. Wherefore, her motion to modify the prior order once it had been satisfied is denied.
However, Gregory's long-standing violation of the Court orders did result in financial consequences that would not have occurred had the maintenance been paid as originally ordered or even as later modified. The Court finds that sanctions are appropriate for some part of those expenses that Pamela incurred. However, not all of the debt or need to liquidate her retirement could be a result of Gregory's non-payment. By the Court's calculations,
Gregory failed to pay her approximately $55,000 over about six years. However, Pamela's testimony regarding her current financial situation added up to approximately $150,000 in either debt or liquidated assets. Even if Gregory would have paid the maintenance, by these figures she would still be in a financial situation worse than when she left the marriage. This Court cannot find that all of this loss was caused by not having the maintenance payments.
Based on the evidence presented at trial, the Court finds and concludes that Pamela should be awarded the following damages for the non-payment of maintenance:
a. $4,500 for reimbursement of her attorney fees . . . .
b. $6,860 for interest incurred on her credit card debt, applying a 14% interest rate (noted on her statements presented) of $49,000 worth of credit card debt incurred according to her testimony and statements presented.
c. $4,500 for one-half of the tax consequences incurred as a result of liquidating her IRA. This represents one-half of the total tax Pamela presented in Court, which has been divided due to the lack of evidence supporting the fact that Gregory's failure to make the maintenance payments caused by the entirety of her losses. Pamela's credit card debt or [sic] debts to her mother alone were as much as Gregory would ever been required to pay, and thus he cannot be held responsible for her incurring triple the amount of debt or financial loss than what he was ever required to pay. . . .
Gregory would owe Pamela $15,680 for his breach of the prior court orders and the consequential losses Pamela suffered as a result. However the Court further finds that Gregory paid $8,400 in overpayment to Pamela as a
result of the wage assignment being in effect following the lump sum payment. In addition, Gregory incurred expert fees to bring an accountant to court to testify whether the lump sum payoff actually satisfied the maintenance obligation . . . [t]hese expenses were obviously unnecessary given the concessions made. Wherefore, the Court awards Gregory $500 toward the incursion of this fee.
(Internal citations omitted).
The debt to her mother was $11,250 and the credit card debt was approximately $49,000. After review, and considering Gregory failed to pay her approximately $55,000, it is clear the family court intended to say "credit card debt and debts to her mother alone were as much as Gregory would ever been required to pay. . . ."
After giving Gregory the credit for his overpayment and accountant fee, the family court calculated the amount owed to Pamela to be $6,960, which was made payable in ten monthly installments of $696. This appeal and cross-appeal followed.
II. STANDARD OF REVIEW
Matters relating to maintenance, including modification, are questions delegated to the sound and broad discretion of the family court. Block v. Block, 252 S.W.3d 156, 159 (Ky. App. 2007). While each modification case is reviewed separately and on its on facts, "[w]e cannot substitute our judgment for the family courts if there is substantial evidence supporting that court's decision." Id. at 159-160 (citing Bickel v. Bickel, 95 S.W.3d 925, 928 (Ky. App. 2002)). "Further, we may not set aside the family court's factual findings unless they are clearly erroneous." Id. (citing Wheeler v. Wheeler, 154 S.W.3d 291, 296 & n. 16 (Ky. App. 2004)); CR 52.01. With those standards in mind we now turn to the parties' respective arguments.
Kentucky Rules of Civil Procedure.
III. ANALYSIS
Gregory's first assignment of error is that the family court erred by "ordering [him] to pay interest on the maintenance payments not paid in full." However, a review of the family court's findings reveals that the court did not order him to pay "interest" on the unpaid maintenance payments. Rather, the court found that sanctions requiring Gregory to pay a portion of the debt Pamela incurred as a result of his breach were appropriate. In other words, the court was exercising its broad contempt powers. "A trial court has inherent power to punish individuals for contempt, and nearly unfettered discretion in issuing contempt citations. [The appellate court] will reverse a finding of contempt only if the trial court abused its discretion." Crowder v. Rearden, 296 S.W.3d 445, 450 (Ky. App. 2009).
Although the family court's final order did not expressly state Gregory was in contempt, it did state that sanctions were appropriate "for Gregory's long-standing violation of the Court orders," which resulted in "financial consequences that would not have occurred had the maintenance been paid as originally ordered or even as later modified." Contempt, which can be either civil or criminal, is the "willful disobedience toward, or open disrespect for, the rules or orders of a court." Commonwealth v. Burge, 947 S.W.2d 805, 808 (Ky. 1996). "Civil contempt, the focus of this appeal, is 'the failure . . . to do something under order of court, generally for the benefit of a party litigant. Thus, courts have inherent power to impose a sanction for a civil contempt[.]'" Crowder, 296 S.W.2d at 450 (quoting Burge, 947 S.W.2d at 808). The sanction may serve to compensate a party for losses caused by the contempt and the court has broad discretion to fashion compensatory remedies. Commonwealth, Cabinet for Health and Family Serv. v. Ivy, 353 S.W.3d 324, 332 (Ky. 2011) (citing United States v. United Mine Workers of America, 330 U.S. 258, 67 S. Ct. 1531, 16 L. Ed. 622 (1947)). However, the remedies must be based on evidence of actual loss. Id.
Gregory willfully disobeyed multiple court orders to pay spousal maintenance over the course of this litigation, even after the monthly payments were modified. It follows that the sanctions imposed on Gregory were a proper exercise of the family court's contempt power. In its final order, the family court stated the sanctions were ordered to compensate Pamela for the debts incurred from Gregory's failure to pay maintenance. Furthermore, the court based the amount of the sanction from actual losses Pamela incurred. Namely, the interest incurred on her credit card debt and one-half of the tax consequences incurred as a result of liquidating her IRA. Therefore, we conclude the family court did not abuse its discretion when it ordered Gregory to pay sanctions for his failure to comply with the maintenance orders.
Gregory's remaining argument is that he is entitled to collect his overpayment to Pamela. The overpayment Gregory is referring to is the $8,400 he paid to Pamela, via wage garnishment, after the lump sum payment. To be sure, the family court did credit Gregory for that amount. However, Gregory argues he should receive the entire overpayment back because the sanctions imposed on him were improper and without legal authority. As discussed, the family court was well within its powers to impose such a sanction. Therefore, Gregory's second argument is lacks merit.
Turning to Pamela's cross-appeal, she first argues that during the April 24, 2015 hearing the family court "committed reversible error by relying on the satisfaction of maintenance evidence prior to considering the motion to modify maintenance." In her view, the family court would not have deemed the lump sum payment an accord and satisfaction of the original maintenance obligation if it had heard the modification evidence first. However, a family court can control its docket in whatever way it deems prudent so long as due process is afforded to the parties. See Smith v. Commonwealth, 22 S.W.2d 418, 419 (Ky. 1929). Here, Pamela was given ample time to present her modification of maintenance evidence. Taking this evidence into consideration, the family court still deemed an accord and satisfaction occurred and the maintenance was satisfied when she accepted the $102,000. Although, if the family court abused its discretion in determining the lump sum payment was an accord and satisfaction, Pamela could be entitled to a modification because the court agreed she provided enough evidence supporting a substantial change in circumstances regarding her financial position.
In the Commonwealth, maintenance obligations can be the subject of a settlement or compromise. See Henderson v. Henderson, 350 S.W.2d 477, 479 (Ky. 1961) (citing Wilson v. Wilson, 112 S.W.2d 980, 980-81, 271 Ky. 631 (1937)). When there is a good faith dispute about the existence of a debt or about the amount that is owed, the common law authorizes the debtor and the creditor to negotiate a contract of accord to settle the outstanding claim. White/Reach Brannon RD., LLC v. Rite Aid of Kentucky, Inc., 488 S.W.3d 631, 637 (Ky. App. 2016); RESTATEMENT (SECOND) OF CONTRACTS § 281 (1981). The accord and satisfaction doctrine in the Commonwealth specifically provides that a claim may be discharged "'[i]f a person against whom a claim is asserted proves that: (a) [t]hat person in good faith tendered an instrument to the claimant as full satisfaction of the claim; (b) [t]he amount of the claim was unliquidated or subject to a bona fide dispute; and (c) [t]he claimant obtained payment of the instrument[.]'" Estes v. Mckinney 354 S.W.3d 144, 147 (Ky. App. 2011) (quoting KRS 355.3-311(1)). Whether a debt or a claim is discharged based upon accord and satisfaction is normally a question of fact and, therefore, we shall not set aside the family court's findings unless clearly erroneous. Id. (citing Liggons v. House & Associates Ins., 3 S.W.3d 363, 365 (Ky. App. 1999)); CR 52.01.
In the case sub judice, Pamela had a claim to collect past due maintenance from Gregory. Gregory's attorney sent an email to Pamela's attorney to determine an amount of money that would extinguish any past and future maintenance obligations. This meeting of the minds resulted in a figure of $108,000, which would discharge all spousal maintenance, including past arrearages and future payments. The amount was certainly subject to a bona fide dispute. At the time the $102,000 was accepted it was Gregory's position that he only owed her $100,800; whereas Pamela is presently still arguing that she is entitled to maintenance for life, despite the fact she gave Gregory the $108,000 figure in the first place. Lastly, it is undisputed that Pamela received $102,000 from the QDRO in January 2015. As the family court stated in its findings of fact, "[i]t defies reason to believe that Gregory would have agreed to this early payoff if he did not believe it to be in full and final settlement of his maintenance obligation to Pamela." In fact, at the hearing, Pamela admitted that she knew the $102,000 was intended to be a full and final settlement of the maintenance obligation. Accordingly, the family court was not clearly erroneous when it determined that the maintenance obligation as ordered on November 6, 2013, was terminated by accord and satisfaction once the lump sum payment was accepted.
Pamela's next argument is that the family court abused its discretion by failing to consider evidence of deception, fraud, and perjury by Gregory. The alleged perjury was, as she argues, in front of this Court in the previous appeal. Specifically, Pamela argued, only a few weeks after he filed his notice of appeal in 2010, Gregory made an approximately $37,000 cash payment for a house and sold an unimproved lot for over $100,000 dollars. She asserts that if Gregory had not deceived the family court and the Court of Appeals regarding his assets from 2010 through 2012, this Court would have decided the case differently and denied Gregory's motion to modify.
Whether Pamela effectively preserved this argument is a dubious proposition. She is alleging perjury and falsified evidence. Perjury and falsified evidence are only a basis for setting aside a judgment within one year of its entry. CR 60.02. Here, according to Pamela, Gregory perjured himself at the September 10, 2010 hearing. However, the first time she alleges perjury and deception, so far as we are able to tell from a review of the record, was in her pre-trial memorandum on October, 22, 2013. In any case, the family court allowed Pamela to introduce this evidence at the April 24, 2015 hearing. The family court considered it and did not find this evidence compelling. Bearing in mind the standard of review to set aside a family court's findings of fact, we cannot say the family court committed clear error when it did not find the evidence of Gregory's alleged perjury convincing.
Pamela's last assignment of error is that the family court miscalculated the cost to Pamela of Gregory's failure to timely pay maintenance. As such, Pamela argues the family court's findings of fact are clearly erroneous. The family court calculated that Gregory had failed to pay Pamela $55,000 over the years. Based on Pamela's testimony, the family court also calculated that her current financial situation added up to approximately $150,000 in either debt or unliquidated assets. This figure was reached by adding: (1) $80,000 in the liquidated IRA; (2) $49,000 in credit card debt; (3) $11,250 in a loan from Pamela's mother; and (4) $9,000 in tax penalties as a result of the premature liquidation of her IRA. The family court concluded that not all of this loss was caused by Gregory's failure to pay maintenance and levied sanctions against Gregory for an amount deemed the most equitable.
The sum of these four figures is $149,250. --------
Pamela argues that we should look to the position she was in at the time of the original separation agreement and place her in a similar position. In her view the $102,000 only refunded her IRA and paid a portion of her debt, so the maintenance payments should continue for life. But, she failed to show that Gregory was the sole cause of the debt. In her testimony, she stated she incurred several extraordinary expenses including medical bills stemming from an auto accident, a new car from the same accident, and problems with her drainage system at her new house. However, expenses of this nature were contemplated by the separation agreement and were not Gregory's responsibility to pay.
Pamela does correctly point out that the family court's calculation failed to give her any credit for loss of interest caused by liquidating her IRA. However, the family court is given broad discretion to fashion compensatory contempt remedies and the compensation must be based on evidence of actual loss. Ivy, 353 S.W.3d at 332 (citing United Mine Workers of America, 330 U.S. 258, 67 S. Ct. 677, 91 L. Ed. 884). Pamela tried to introduce evidence, compiled by an expert, of her loss of interest in her IRA. But, this evidence was contained in a supplement to the record on May 19, 2015. This was nearly a month after the hearing and the close of evidence. The family court subsequently struck this evidence from the record. Therefore, the compensatory remedy the court fashioned, as a result of Gregory's disregard of the maintenance orders, was based on the evidence of actual loss that was actually presented at the hearing. Therefore, the family court did not abuse its discretion in calculating the sanction, and its the findings of fact were not clearly erroneous.
IV. CONCLUSION
In light of the foregoing the decision of the Scott County Family Court is affirmed.
ALL CONCUR. BRIEF FOR APPELLANT/CROSS-
APPELLEE: Edward E. Dove
Lexington, Kentucky BRIEF FOR APPELLEE/CROSS-
APPELLANT: Ethyle Noel
Georgetown, Kentucky