Opinion
NO. 2018-CA-000924-ME
03-15-2019
ROBERT JOSEPH HENLEY, III APPELLANT v. JESSICA LEFEVRE (FORMERLY FRENCH) APPELLEE
BRIEFS FOR APPELLANT: Adam B. Shadburne Louisville, Kentucky BRIEF FOR APPELLEE: Robert Louis Fleck Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE DEBORAH DEWEESE, JUDGE
ACTION NO. 12-CI-501366 OPINION
AFFIRMING
The original order being appealed as distributed to the parties erroneously listed the case number as 16-CI-500140. The case number on the order was subsequently corrected in the certified record to reflect the current action.
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BEFORE: DIXON, LAMBERT, AND L. THOMPSON, JUDGES. DIXON, JUDGE: Robert Henley appeals from the Jefferson Circuit Court, Family Division's, May 21, 2018, order denying his motion for modification of child support. Finding no error, we affirm.
The trial court ordered Henley to pay $375 monthly child support effective December 20, 2016. Less than four months later, on April 6, 2017, Henley, through the Assistant Jefferson County Attorney, moved the court to modify his child support obligation—his request was based upon incomplete information as noted on the proposed child support obligation calculation worksheet. The trial court remanded Henley's motion for additional discovery. On June 16, 2017, Henley, pro se, again moved the trial court to modify his child support obligation. This motion prompted Jessica Lefevre to move the court to order Henley to produce proof of his income, which it did in an order setting the matter for hearing for September 2017. Both parties filed "compliance"; however, as noted by the trial court in its order remanding, "some discovery issues had arisen, which, . . . made any meaningful hearing at this point not feasible." On January 2, 2018, Henley, through counsel, renewed his motion for modification of child support. The matter was set for hearing which occurred on March 23, 2018.
Both parties were present, represented by counsel, and testified at the hearing. The parties agreed Lefevre's income, child care costs, and health insurance premiums were not in question. Although there were other motions presented at the hearing, the only issues on the motion for modification of child support—and the only issues now before us on appeal—pertain to Henley's income.
Henley testified he had not received a W-2 or regular wages since before the parties' daughter was born. He further attested that while he previously renovated and "flipped" houses with his father, he had not done any such renovations since 2015, and the last house he worked on sold in 2016. On cross-examination, Henley claimed he took the proceeds from the sale of the final house he "flipped" and invested them into his TDAmeritrade account, which he used to short-sale stocks until after the 2016 presidential election, at which time his stocks took significant losses and became worthless. Thereafter, Henley withdrew nearly all of his remaining trading income, leaving only a nominal balance in the TDAmeritrade account, and invested those funds into the startup of Cooking@Mille's ("C@M").
Henley produced tax returns for 2015—which reported taxable income of $9,811—and 2016—which reported taxable income of $0—but had not yet filed his 2017 taxes. Henley submitted and discussed his Schedule K-1's reporting his distributions from Southern Indiana Batting Cages ("SIBC") from 2015-2017 and C@M from 2017. Because Schedule K-1's had not yet been generated for 2018, Henley testified regarding his monthly actual and projected distributions.
Henley further testified that while he did not consider himself as such, he listed himself as a "professional gambler" on his income tax returns in order to offset his winnings from gambling by his losses. He explained W2G statements supplied by Caesar's Entertainment and how to read them to find his net winnings from gambling. Henley attested that he believed he had not yet won any money from gambling in 2018. On cross-examination, however, Lefevre produced an email from Henley's counsel dated March 12, 2018, advising that Henley "has winnings of less than $1500 for 2018" from gambling.
Lefevre attempted to explore other sources of Henley's income, including sale of prescription medicine, but the trial court overruled that line of questioning due to its lack of relevance. Both parties filed post-trial memoranda.
The trial court ultimately denied Henley's motion finding Henley's monthly adjusted gross income to be $2,738.89 based on earnings of $2,000 imputed from C@M, $238.89 from SIBC, and $500 from gambling, which would only reduce his child support obligation from $375 to $364.14, an insufficient decrease to meet the rebuttable presumption of KRS 403.213. This appeal followed.
Kentucky Revised Statutes.
As an initial matter, in contravention of CR 76.12(4)(c)(v), which requires ample references to the trial court record supporting each argument, Henley's initial brief contains only two such references in his argument section and these are both to the order being appealed. Henley's reply brief contains only three references to the order being appealed and three references to the video transcript from a hearing which was inadvertently not included in the certified record on appeal. This simply does not constitute ample citation to the record.
Kentucky Rules of Civil Procedure.
Henley points this out in his reply brief and contemporaneously filed motion to strike Lefevre's brief. Copies of the hearing and Henley's designation of evidence listing the hearing as the first item of evidence were attached to his motion. Our order denying the motion to strike entered contemporaneously with this opinion holds: because this appeal has been designated as an expedited appeal and a copy of the hearing has been provided to our Court with no objection or other response from Lefevre, we have elected to proceed using the tendered copy of the hearing to avoid further needless delay of rendition of our opinion.
Failing to comply with the civil rules is an unnecessary risk the appellate advocate should not chance. Compliance with CR 76.12 is mandatory. See Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky. App. 2010). Although noncompliance with CR 76.12 is not automatically fatal, we would be well within our discretion to strike Henley's briefs or dismiss the appeal for his failure to comply. Elwell v. Stone, 799 S.W.2d 46, 48 (Ky. App. 1990). While we have chosen not to impose such a harsh sanction, we caution counsel such latitude may not be extended in the future.
Ironically, Henley moved our Court to strike Lefevre's brief for her alleged failure to provide ample citation to the record, factual misstatements, citation to testimony inadvertently not included in the certified record, and other improprieties. Paradoxically, Lefevre's brief contains ten more citations to the record than Henley's initial brief and four more than both of Henley's briefs combined. The motion to strike was passed to this merits panel for resolution. We deny the motion to strike in a separate order entered this date.
In the instant case, we are called to review the trial court's denial of modification of child support.
We review the establishment, modification, and enforcement of child support obligations for abuse of discretion. Plattner v. Plattner, 228 S.W.3d 577, 579 (Ky. App. 2007). The test for abuse of discretion is whether the trial court's decision was "arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Downing v. Downing, 45 S.W.3d 449, 454 (Ky. App. 2001) (citing Goodyear Tire and Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000)). "[And] generally, as long as the trial court gives due consideration to the parties' financial circumstances and the child's needs, and either conforms to the statutory prescriptions or adequately justifies deviating therefrom, this Court will not disturb its rulings." Van Meter v. Smith, 14 S.W.3d 569, 572 (Ky. App. 2000) (citing Bradley v. Bradley, 473 S.W.2d 117 (Ky. 1971)).McCarty v. Faried, 499 S.W.3d 266, 271 (Ky. 2016). Similarly, the standard of an appellate court's review of a trial court's findings of fact is also well-settled.
The trial court heard the evidence and saw the witnesses. It is in a better position than the appellate court to evaluate the situation. Gates v. Gates, [412 S.W.2d 223 (Ky. 1967)]; McCormick v. Lewis, [328 S.W.2d 415, (Ky. 1959)]. The court below made findings of fact which may be set aside only if clearly erroneous. Hall v. Hall, [386 S.W.2d 448 (Ky. 1964)]; CR 52.01, 7
Kentucky Practice, Clay 103. We do not find that they are. They are not "manifestly against the weight of evidence." Ingram v. Ingram, [385 S.W.2d 69 (Ky. 1964)]; Craddock v. Kaiser, 280 Ky. 577, 133 S.W.2d 916 [(Ky. 1939)]. A reversal may not be predicated on mere doubt as to the correctness of the decision. Buckner v. Buckner, 295 Ky. 410, 174 S.W.2d 695 [(Ky. 1943)]. When the evidence is conflicting, as here, we cannot and will not substitute our decision for the judgment of the chancellor. Gates v. Gates, supra; Renfro v. Renfro, [291 S.W.2d 46. (Ky. 1956)].Wells v. Wells, 412 S.W.2d 568, 571 (Ky. 1967) (emphasis added).
For the purposes of the standard of review, in reviewing family court cases, we acknowledge that a family court judge has extremely broad discretion in ascertaining the reliability of the evidence presented. Moreover, a reviewing Court is not permitted to substitute its judgment for that of the family court unless its findings are clearly erroneous. Sherfey v. Sherfey, 74 S.W.3d 777, 782 (Ky. App. 2002).Jones v. Hammond, 329 S.W.3d 331, 334-35 (Ky. App. 2010) (emphasis added).
And, the dispositive question that we must answer, therefore, is whether the trial court's findings of fact are clearly erroneous, i.e., whether or not those findings are supported by substantial evidence. "[S]ubstantial evidence" is "[e]vidence that a reasonable mind would accept as adequate to support a conclusion" and evidence that, when "taken alone or in the light of all the evidence, . . . has sufficient probative value to induce conviction in the minds of reasonable men." Regardless of conflicting evidence, the weight of the evidence, or the fact that the reviewing court would have reached a contrary finding, "due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses" because judging the credibility of witnesses and weighing evidence are tasks within the exclusive province of the
trial court. Thus, "[m]ere doubt as to the correctness of [a] finding [will] not justify [its] reversal," and appellate courts should not disturb trial court findings that are supported by substantial evidence.Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (internal footnotes omitted). On careful review, we hold that the trial court did not abuse its discretion and its findings are supported by substantial evidence. Therefore, we must affirm.
Henley's argument consists of only tenuous theories with little or no application of the facts to any legal precedence. We will not search the record to construct Henley's argument for him, nor will we go on a fishing expedition to find support for his underdeveloped arguments. "Even when briefs have been filed, a reviewing court will generally confine itself to errors pointed out in the briefs and will not search the record for errors." Milby v. Mears, 580 S.W.2d 724, 727 (Ky. App. 1979). Nevertheless, for the reasons discussed below, we discern no error in the trial court's finding that Henley earned a monthly income including $2,000 imputed from his partial ownership in C@M and $500 from gambling.
Henley does not challenge the trial court's finding of $238.89 monthly income from his partial ownership interest distributions from SIBC.
We first choose to examine the evidence supporting the trial court's findings. The trial court relied on both parties' testimony and exhibits—including an exhibit stating Henley had earned "less than $1500" from gambling in the last three months and evidence demonstrating Henley's distributions from C@M had increased from $485.71 monthly in 2017 to $1,400 monthly in 2018—to ascertain the level of income to assign to Henley for the purposes of determining his child support obligation. Although Henley did not have or produce paychecks, pay stubs, or any other traditional form of earnings statements—which is neither a requirement or in this case an option given Henley's sources of income—the parties' testimony and exhibits were sufficient to support the trial court's finding of imputed income to Henley.
Henley suggests that the trial court's findings were inconsistent with his testimony and exhibits, namely his testimony that he did not believe he had made any money from gambling in 2018. However, Henley ignores the fact that it is solely within the trial court's province to determine the credibility of witnesses. The trial court, as the finder of fact, has the responsibility to judge the credibility of all testimony, and may choose to believe or disbelieve any part of the evidence presented to it. Caudill v. Maloney's Discount Stores, 560 S.W.2d 15, 16 (Ky. 1977). Therefore, and contrary to Henley's argument, the trial court's finding that it "is aware that [Henley] has been less than candid in the past with respect to his employment situation and, as [Lefevre] suggests . . . may have failed to report benefits which might otherwise constitute income" certainly allows it to impute income in a reasonable fashion. Such findings were well within the trial court's discretion and, as such, shall not be disturbed.
Clearly undaunted by the fact the trial court's order was supported by substantial evidence, Henley argues that the trial court abused its discretion by denying his motion based on "speculative" future imputed income from his ownership stake in C@M and from gambling earnings. KRS 403.212(2)(a) defines income as "actual gross income of the parent if employed to full capacity or potential income if unemployed or underemployed." KRS 403.212(2)(d) provides:
child support shall be calculated based on a determination of potential income. . . . Potential income shall be determined based upon employment potential and probable earnings level based on the obligor's or obligee's recent work history, occupational qualifications, and prevailing job opportunities and earnings levels in the community. A court may find a parent to be voluntarily unemployed or underemployed without finding that the parent intended to avoid or reduce the child support obligation.The Supreme Court of Kentucky has held that actual earnings alone are not determinative in modification of child support based on imputed income due to findings of voluntary underemployment. Howard v. Howard, 336 S.W.3d 433, 440 (Ky. 2011). Howard instructed trial courts to "recognize that the child's reasonable needs do not necessarily change when a parent switches to less lucrative employment and the parent's financial responsibility is not abrogated simply because the parent voluntarily switches to, or stays with, less lucrative employment." Id. at 438. Howard also discussed the case Henley now relies upon concerning utilization of actual current income when considering modification of child support.
The Court of Appeals, in Keplinger [v. Keplinger, 839 S.W.2d 566 (Ky. App. 1992)], stated that generally one's potential future income should be presumed to "be on a par with the worker's most recent experience." But we note that Keplinger concerned the appropriateness of an initial child support obligation in a divorce decree, rather than a motion for modification of an existing child support obligation. So we cannot agree with Shane that the trial court should have modified his child support obligation based solely on his actual earnings since the divorce. More accurately stated, we believe the relevant question was whether there had been a material change in circumstances to justify discontinuing the imputation of his former income.Howard, 336 S.W.3d at 440-41 (internal footnotes omitted).
The fact that his actual earnings since the divorce had been lower than his pre-decree earnings as a prison guard, standing alone, did not entitle Shane to modification. To prevail, Shane needed to show that a material, substantial, and continuing change of circumstances existing post-decree made him less capable of attaining his former income level than existed at the time of the decree. The trial court did not find that Shane made the requisite showing. And we discern no abuse of discretion. So we affirm the Court of Appeals on this issue.
We further note that Keplinger, 839 S.W.2d 566, while bearing some factual and legal similarities to the case at hand is significantly distinguishable. First, Keplinger held the trial court erred in imputing unearned income to Joy Keplinger when she quit her job to return to school, based on a prior version of KRS 403.212(2)(d) which has since been amended so there is clearly no requirement for a finding of bad faith to find a parent voluntarily underemployed. Howard, 336 S.W.3d at 439. Second, Keplinger held the trial court should have set child support at a level commensurate with the former spouses' most recent earnings, absent any evidence to indicate that former husband was likely to revert to his teenage earning capacity. The trial court in the instant case only considered Henley's earnings from 2015—just before its prior award—to the present and extrapolated reasonably projected potential income based on the data presented. --------
In the instant case, the trial court set Henley's monthly child support obligation at $375 per month on December 20, 2016. Not only did Henley fail to show that his overall earnings and/or income from C@M and gambling had decreased to meet the rebuttable presumption of a 15% change under KRS 403.213, but the evidence presented shows that his overall income as well as his income from C@M and gambling increased since the order.
C@M was founded June 1, 2017; thus, it is clear Henley had no income from C@M in 2016. In 2017, Henley received an average of $485.71 in monthly distributions from C@M. From January 1, 2018, through the date of the hearing, he received an average of $1,400 in monthly distributions. The trial court found,
[b]usiness is apparently looking up, and there is little reason to believe it will not continue to expand as it becomes further established in the community. Therefore, the Court will impute income to [Henley] from [C@M] of approximately $2,000 per month, or $600 more per month than is presently reflected in the distributions. This likely accounts for the continued expansion of the business[.]Henley argues this decision "is arbitrary, unreasonable and unfair as it is not supported by any evidence in the record," offering little more than a bald and unsupported statement that this "speculation has proved to be factually incorrect." His assertion is simply not borne out by the record before us. C@M appears to be doing well, growing, and thriving by Henley's own testimony and exhibits demonstrating increased distributions. Henley's monthly income from the business has nearly tripled from 2017 to 2018. Moreover,
[e]vidence regarding current or reasonably-projected income and also of recent years' past income likewise may assist the court in determining whether an increase in income is "continuing." . . . Indeed, if the court finds that "earnings are reduced as a matter of choice and not for reasonable cause, the court may attribute income to a parent up to his or her earning capacity." . . . Certainly, evidence of prior years' earnings is relevant to determining "earning capacity." Pearson v. Pearson, 190 Ariz. 231, 946 P.2d 1291, 1296 (1997) (citations omitted).Snow v. Snow, 24 S.W.3d 668, 673 (Ky. App. 2000). Likewise, imputation of additional potential income above actual earnings is appropriate in some cases, as another panel of our court recently held:
the trial court concluded that Matthew was voluntarily underemployed and, as a result, imputed to him a potential gross monthly income of $6,968.00, which represented the amount he earned at Amazon, despite the fact that his actual gross monthly income was $5,833.00. We believe this was the correct finding. KRS 403.212(d) allows a trial court to demine [sic] "potential income" in calculating child support . . . .Duffy v. Duffy, 540 S.W.3d 821, 830 (Ky. App. 2018). If Henley took issue with the court's lack of explanation in its findings of fact supporting its imputation of income, then Henley should have filed a motion for amendment pursuant to CR 52.02 or even a motion pursuant to CR 59.05 to alter, amend, or vacate the trial court's findings of fact, conclusions of law, and order denying his motion for modification of child support to preserve this claim.
It is well-established that a final judgment shall not be set aside because of the failure of the trial court to make a finding of fact on an issue essential to the judgment unless the failure is brought to the attention of the trial court by a written motion pursuant to CR 52.02. CR 52.04. In the absence of such a motion, this Court must presume that the evidence presented at trial supports the trial court's conclusions. Cherry v. Cherry, 634 S.W.2d 423, 425 (Ky.1982).McKinney v. McKinney, 257 S.W.3d 130, 134 (Ky. App. 2008). Therefore, we cannot say that it was unreasonable for the trial court to impute additional income based on the trend of increased distributions to Henley from C@M.
Concerning Henley's income from gambling, we again look to the Supreme Court of Kentucky for guidance. In Schoenbachler v. Minyard, 110 S.W.3d 776 (Ky. 2003),
the trial court determined Appellee's gross income by inferring that she had additional income from gifts, her gambling, and ticket scalping from the court's conclusion that "her lifestyle and property reflected an income greater than her W-2's and tax returns indicated." Certainly, these types of undocumented income, while not susceptible to documentation, are nevertheless income which, if proven, a trial court should consider when determining a party's gross income. As the Court of Appeals observed, however, the problem here is
that the Appellant failed to prove sufficiently that Appellee actually received the undocumented income that the trial court imputed to her. Although KRS 403.212(2)(f) imposes a mandatory obligation on the parties to report and verify their income and earnings with documentation, if a party fails to comply with this obligation, the burden remains on the opposing party to prove such income and earnings. The trial court candidly stated that proof of this additional income was "limited and speculative." We agree with the trial court's characterization, but would add the word "insufficient."Schoenbachler, 110 S.W.3d at 784-85. By contrast, in the instant case, evidence and documentation were presented regarding Henley's gambling earnings. According to Henley's interpretation of his W2G statements, he had a net loss of $26,367 in 2016 and a net gain of $3,691 in 2017. Per his counsel's email, which was made an exhibit at the hearing, Henley had made less than $1,500 for the first three months of 2018. When used to impute $500 a month in gambling income this figure amounts to $6,000 annually, which reasonably demonstrates an increase from the prior two years. Once again, the trial court's finding was supported by substantial evidence, was not unreasonable, and should be affirmed.
Furthermore, Henley conveniently avoids discussion of his total current income in comparison to that at the time of the prior child support order.
Taxable income commonly serves as the starting point for determining "gross income" for child support purposes, and because taxable income frequently provides a good measure of the income left to a business after the deduction of ordinary and necessary expenses, deviation from it should not be undertaken lightly.
Nevertheless, as the statute recognizes, taxation and child support serve different purposes. Trial courts establishing child support thus have the discretion and the duty to scrutinize taxable income and to deviate from it whenever it seems to have been manipulated for the sake of avoiding or minimizing a child support obligation or when deviating from it is clearly in the best interest of the child.Snow, 24 S.W.3d at 672 (internal citations omitted). Henley's 2015 tax return reported taxable income of $9,811, and his 2016 tax return reported taxable income of $0. Henley had not yet filed his 2017 taxes but produced Schedule K-1's for C@M—reporting an ordinary business loss of $3,440 with distributions of $3,400—and SIBC—reporting ordinary business income of $3,352 with distributions of $2,600—as well as his W2G statement showing net winnings of $3,691. In the absence of Schedule K-1's or a W2G statement for 2018, Henley testified regarding his 2018 distributions and gambling income. The evidence presented did not demonstrate a decrease in Henley's income from 2016 to 2018, but rather an increase.
Again, we emphasize that modification of child support requires the party seeking the change, in this case Henley, to show "a material change in circumstances that is substantial and continuing." KRS 403.213(1). Under KRS 403.213, proof of deviation of 15% or more "in the amount of support due per month shall be rebuttably presumed to be a material change in circumstances." KRS 403.213(2). Conversely, any change of less than 15% is "rebuttably presumed not to be a material change in circumstances." Id. As previously discussed, Henley failed to meet his burden; thus, the trial court did not err by denying modification.
For the foregoing reasons, the judgment of the Jefferson Circuit Court, Family Division, is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANT: Adam B. Shadburne
Louisville, Kentucky BRIEF FOR APPELLEE: Robert Louis Fleck
Louisville, Kentucky