Opinion
NO. 2016-CA-000215-MR
04-27-2018
AMY PRICHARD (NOW MURNAHAN) APPELLANT v. ROBERT JOE PRICHARD APPELLEE
BRIEFS FOR APPELLANT: Phillip Bruce Leslie Greenup, Kentucky BRIEF FOR APPELLEE: W. Jeffrey Scott Grayson, Kentucky
NOT TO BE PUBLISHED APPEAL FROM BOYD CIRCUIT COURT
HONORABLE DAVID D. FLATT, SPECIAL JUDGE
ACTION NO. 13-CI-00740 OPINION
VACATING AND REMANDING
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BEFORE: J. LAMBERT, NICKELL, AND TAYLOR, JUDGES. TAYLOR, JUDGE: Amy Prichard, now Murnahan, brings this appeal from Findings of Fact, Conclusions of Law, Order and Judgment entered in the Boyd Circuit Court on January 19, 2016, dividing the parties' marital property, setting child support, and awarding attorney's fees. We vacate and remand.
Amy and Robert Joe Prichard were married on August 31, 2002, and subsequently had three children together. When the couple married, Robert operated a lawn care business. Robert initially operated the lawn care business from business premises located at 1305 Boy Scout Road in Ashland, Kentucky. The marital residence was also at this address until 2005. Over the course of the parties' marriage, Prichard Lawn Care grew into a successful business providing lawn maintenance, landscaping, tree removal and snow removal. While Robert operated Prichard Lawn Care, Amy was employed full-time as a teacher and provided the primary care for the parties' three children.
Robert Joe Prichard operated the lawn care business before the marriage, known as Prichard Lawn Care. In 2003, Robert formed an S-Corporation to conduct the business, known as Prichard Lawn Care Services, Inc.
In 2005, Robert and Amy moved from 1305 Boy Scout Road to a home at 1427 Fairhill Drive. The home at 1427 Fairhill Drive served as the parties' martial residence while Prichard Lawn Care continued to utilize 1305 Boy Scout Road as its base of operations. In 2008, Prichard Lawn Care purchased 1306 Boy Scout Road and expanded its operations. In addition to lawn care services, Prichard Lawn Care also routinely purchased real property at master commissioner sales for the purpose of reselling same for profit.
At the time of the final hearing, Prichard Lawn Care Services, Inc. owned property located at 2409 Central Parkway and 2704 Straight Creek Road.
In late 2012, Prichard Lawn Care purchased 1748 Green Springer Road for $850,000. The almost 300-acre property included a home of approximately 7,000 square feet. Amy testified that Robert purchased the Green Springer Road property through Prichard Lawn Care without her knowledge. Then, in June of 2013, Prichard Lawn Care transferred the Green Springer Road property to Robert and Amy for nominal consideration. Robert, Amy, and their three children moved into the new marital residence at 1748 Green Springer Road in June 2013. Shortly thereafter, Amy and the children moved back into the residence located at 1427 Fairhill Drive, and Robert remained at 1748 Green Springer Road.
On August 23, 2013, Amy filed a petition for a decree of dissolution of marriage in the Boyd Circuit Court. Subsequently, on March 27, 2014, a limited decree of dissolution of marriage was entered dissolving the marriage and reserving all other issues for future resolution by the court. Eventually, Robert and Amy entered into a settlement agreement that provided they would share joint custody of their three children, Amy would serve as primary residential parent, and Robert would have timesharing. A final evidentiary hearing was conducted on December 17, 2014, upon the outstanding issues of property distribution, child support, and maintenance.
Amy Prichard (now Murnahan) simultaneously filed a motion seeking temporary maintenance and child support. Following an answer and response by Robert, a hearing was conducted before the Boyd Circuit Court Domestic Relations Commissioner. Thereafter, both of the Boyd Circuit Court judges recused, and a special judge was appointed. The special judge also conducted an evidentiary hearing on temporary matters, and an order was entered on February 20, 2014, awarding temporary maintenance and child support.
On January 19, 2016, Findings of Fact, Conclusions of Law, Order and Judgment (2016 Judgment) were entered in the Boyd Circuit Court. In the 2016 Judgment, the circuit court divided the parties' property. The court awarded Amy the residence at 1427 Fairhill Drive and the personalty located therein, her minivan, a timeshare, and an equalization payment of $120,000. Robert was awarded the business Prichard Lawn Care, and all other real property owned by the parties (1748 Green Springer Road, 1305 Boy Scout Road, 1306 Boy Scout Road, 3704 West Straight Creek, 2409 Central Parkway, and the Laurel Ridge Road property). This appeal follows.
The January 19, 2016, Findings of Fact, Conclusions of Law, Order and Judgment (2016 Judgment) incorporated by reference the parties' settlement agreement that had previously resolved issues of child custody and timesharing.
In its 2016 Judgment, the circuit court awarded Amy an equalization payment of $120,000 then inexplicably stated "$60,000.00 of that being payable now and $75,000.00 of that being payable by July 1, 2016." These two sums equal $135,000 rather than $120,000. Thus, it is unclear whether the circuit court intended to award Amy an equalization payment of $120,000 or $135,000.
As Robert owned 1305 Boy Scout Road prior to the marriage it was assigned to Robert as his nonmarital property.
We begin our analysis by noting that an evidentiary hearing was conducted by the circuit court without a jury. Accordingly, our review of the court's findings proceeds pursuant to Kentucky Rules of Civil Procedure (CR) 52.01:
Findings 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. The findings of a commissioner, to the
extent that the court adopts them, shall be considered as the findings of the court.CR 52.01. A finding of fact is not clearly erroneous if supported by substantial evidence. Moore v. Asente, 110 S.W.3d 336 (Ky. 2003). Questions of law are reviewed de novo and legal conclusions thereon made by the circuit court will not be disturbed absent an abuse of discretion. Sherfey v. Sherfey, 74 S.W.3d 777 (Ky. App. 2002) overruled on other grounds by Benet v. Com., 253 S.W.3d 528 (Ky. 2008); Carroll v. Meredith, 59 S.W.3d 484 (Ky. 2001). Additionally, as may be applicable, to the extent the circuit court's ruling looks to the interpretation of a statute, this is also a question of law for which our review is de novo. William C. Eriksen, PSC v. Farm Bureau Mutual Ins. Co., 336 S.W.3d 909 (Ky. App. 2010).
Amy's primary argument on appeal is that the circuit court erred by not dividing the parties' marital property in just proportions as required by Kentucky Revised Statutes (KRS) 403.190. KRS 403.190 governs the division of marital property in a dissolution proceeding and provides, in relevant part:
(1) In a proceeding for dissolution of the marriage . . . the court shall assign each spouse's property to him. It also shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors including:
(a) Contribution of each spouse to acquisition of the marital property, including contribution of a spouse as homemaker;
(b) Value of the property set apart to each spouse;
(c) Duration of the marriage; and
(d) Economic circumstances of each spouse when the division of property is to become effective. . . .
Pursuant to KRS 403.190, to properly allocate and divide property owned by parties in a dissolution of marriage proceeding, the circuit court must engage in a three-step process. Jones v. Jones, 245 S.W.3d 815 (Ky. App. 2008); Hunter v. Hunter, 127 S.W.3d 656 (Ky. App. 2003); Travis v. Travis, 59 S.W.3d 904 (Ky. 2001). First, the circuit court shall classify each property as either marital or nonmarital. Id. Second, the circuit court shall assign each party any nonmarital property. Id. Third, the circuit court shall divide the marital property in just proportions. Id. And, it is important to note that "[a]ll property must be valued in order for a fair and reasonable division of it to be made." 5 Robert W. Keats and Robert W. Riley, Kentucky Practice - Domestic Relations § 48:8 (2017).
Based on our review of the record, we believe the circuit court failed to engage in the three-step process as set forth in Jones, 245 S.W.3d 815. As for the first step - classifying each property as marital or nonmarital - the circuit court failed to do so, with one exception. See KRS 403.190 and Jones, 245 S.W.3d 815. The most substantial and only income producing asset, Prichard Lawn Care, was not classified by the circuit court as either marital or nonmartial property; notwithstanding that it grew substantially during the marriage. The parties and Prichard Lawn Care also owned several parcels of real property. The circuit court did find the 1305 Boy Scout Road property to be nonmarital and awarded it to Robert. We find no error in this assignment. However, the circuit court failed to classify the remaining real property, including the business, as either marital or nonmarital. Therefore, we conclude that the circuit court erred as a matter of law by failing to classify the parties' property as marital or nonmarital as required by KRS 403.190 and Jones, 245 S.W.3d 815.
We recognize that in a dissolution of marriage proceeding some property owned by the parties may have both marital and nonmarital interests. If a party is claiming a nonmarital interest in marital property, the burden is upon the party so claiming.
As to the second step - assigning any nonmarital property - as noted, the circuit court only assigned the real property located at 1305 Boy Scout Road to Robert as his nonmarital property. See Jones, 245 S.W.3d 815. The circuit court then awarded all the remaining real property to Robert, with the exception of 1427 Fairhill Drive (Amy and the children's residence) without identifying such remaining real property as marital or nonmarital.
1305 Boy Scout Road was Robert's property prior to the parties' marriage. The property was appraised by Robert's expert as having a value of $216,000. Amy's expert appraised the value to be $197,500.
Relevant to the third step - dividing marital property in just proportions - we believe the circuit court again failed to comply with the statute. See Jones, 245 S.W.3d 815. The evidence presented demonstrated that Prichard Lawn Care was a successful business. In fact, the evidence established that in each of the years between 2010 and 2013, Prichard Lawn Care had yearly gross income of approximately $1,5000,000. Amy also presented expert testimony that Prichard Lawn Care, as a business, had a value of $1,430,394. On the other hand, Robert did not present any expert testimony regarding the value of the business. The circuit court failed to make any finding regarding the value of Prichard Lawn Care, which would be critical in making a division of the marital property in just proportions. Relevant to the parties' other parcels of real property, both Amy and Robert presented expert testimony upon the value of each parcel. Despite being provided the expert testimony of both parties, with the exception of 1427 Fairhill Drive, the circuit court failed to make a finding as to the value of each parcel.
In its 2016 Judgment, the circuit court awarded Amy: (1) the residence located at 1427 Fairhill Drive which the court valued at $316,000; (2) the personalty located at 1427 Fairhill Drive for which no value was assigned; (3) the 2007 Honda Odyssey for which no value was assigned; (4) a timeshare valued at $16,000; and (5) an equalization payment of $120,000, although the court inexplicably provided for Robert to make two payments totaling $135,000. The only debt assigned to Amy was credit card debt in her name. Robert, on the other hand, was awarded: (1) the residence located at 1748 Green Springer, which his expert valued at $687,000 and Amy's valued at $750,000; (2) property located at 1306 Boy Scout Road, which Robert's expert valued at $500,000 and Amy's valued at $834,000; (3) property located at 3704 West Straight Creek, which Robert's expert valued at $103,500 and Amy's valued at $95,000; (4) property located at 2409 Central Parkway, which Robert's expert valued at 80,000 and Amy's valued at $87,000; and (5) approximately 10 acres on Laurel Ridge Road. The circuit court also assigned Robert the mortgage on 1748 Green Springer in the amount of $645,000 and a note guaranteed by Prichard Lawn Care in the amount of $588,871. As to Prichard Lawn Care, the circuit court specifically found that it had been Robert's "business for his entire life . . . [and was] needed for [Robert] to continue to generate income." January 19, 2016, Findings of Fact, Conclusions of Law, and Judgment at 9. In summary, the circuit court awarded Robert the lawn care business, the personalty associated with the business and all of the parties' real property except 1427 Fairhill Avenue.
The ten acres on Laurel Ridge Road is directly adjacent to the residence at 1427 Fairhill Drive. Amy's expert valued 1427 Fairhill Drive and the adjacent ten acres on Laurel Bridge Road separately and assigned a value to the house of $170,000. Her expert then valued the adjacent ten acres at $30,000. Robert's expert valued the residence at 1427 Fairhill Drive and the ten acres on Laurel Ridge Road together for a total value of $316,000. The circuit court separated the two properties; it awarded Amy 1427 Fairhill Drive and awarded Robert the ten acres on Laurel Ridge Road. However, without explanation, the circuit court valued 1427 Fairhill Drive at $316,000, despite awarding the adjacent ten acres to Robert.
Based upon this analysis, this Court is unable to determine whether the circuit court divided the parties' marital property in just proportions. Moreover, the circuit court's attempt to divide the marital property in just proportions was legally frustrated by its failure to assign a value to the lawn care business and each of the various parcels of real property. The court's failure to comply with KRS 403.190 is an error of law. This has also frustrated this Court's ability to conduct a competent appellate review. Under Kentucky law, it is incumbent upon the circuit court to classify each item of property as either marital or nonmarital, assign each party any nonmarital property, determine a value for said property, and then divide the marital property in just proportions. See Jones, 245 S.W.3d 815. Accordingly, we vacate the circuit court's assignment and division of the parties' property and remand for the circuit court to classify each property as marital or nonmarital property, then assign each party any nonmarital property, and divide the parties' property in just proportions in accordance with the statute, which includes determining a value for the parties' marital property.
Amy also contends the circuit erred in the amount of attorney's fees and costs awarded to her. Amy asserts the circuit court abused its discretion by ordering Robert to pay only $13,000 of her attorney's fees and costs. For the following reasons, we agree.
An award of attorney's fees and other costs associated with a marital dissolution proceeding is governed by KRS 403.220, which provides:
The court from time to time after considering the financial resources of both parties may order a party to pay a reasonable amount for the cost to the other party of maintaining or defending any proceeding under this chapter and for attorney's fees, including sums for legal services rendered and costs incurred prior to the commencement of the proceeding or after entry of judgment. . . .Pursuant to KRS 403.220, a circuit court may order one party to pay a reasonable amount toward the attorney's fees and costs of the other party where there is a disparity in the parties' financial resources. Bootes v. Bootes,470 S.W.3d 351 (Ky. App. 2015). In determining whether there is a disparity in the parties' financial resources, the circuit court must consider both the marital and nonmarital property of the parties and any income produced therefrom. Russell v. Russell, 605 S.W.2d 33 (Ky. App. 1980). If a disparity in the parties' financial resources exists, the decision to award attorney's fees to a party and the amount of such an award is within the sound discretion of the circuit court. Bootes, 470 S.W.3d 351. An abuse of discretion occurs when the "decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Sexton v. Sexton, 125 S.W.3d 258, 272 (Ky. 2004).
Evidence was presented below regarding the income of both Amy and Robert, and the income produced from the property awarded to Robert. The disparity in the parties' respective incomes is significant. Based upon their most recent tax return from 2013, Amy had gross income of $41,260, while Robert had gross income of $203,872. However, the circuit court failed to state or compute the parties' joint income, other than to state it was above the child support guidelines set out in KRS 403.212. Likewise, Robert was awarded the parties' only income producing asset while Amy was awarded none. In awarding Amy only $13,000 in attorney's fees, the circuit court further indicated Amy could utilize the $12,000 in her savings account toward her attorney's fees. There was evidence presented that Amy had incurred some $70,000 in attorney's fees and costs. Without valuing the marital property assigned to each party, including income producing property, the circuit court could not make an adequate determination of the disparity in the parties' financial resources as required by KRS 403.220. Given we have vacated the circuit court's division of marital property, we, likewise, vacate the award of attorney's fees as it will be necessary for the circuit court to revisit the issue of attorney's fees on remand, upon dividing the marital property in accordance with applicable law. See Russell, 605 S.W.2d 33.
The evidence presented also demonstrated that Robert withdrew some $500,000 from Prichard Lawn Care in 2013.
Amy testified that $12,000 in her savings account did not represent actual savings; rather, $8,000 came from a loan from her parents, and the remainder came from a very recent payment of child support and temporary maintenance.
Amy also contends the circuit court erred in its award of only $1,700 per month in child support. Amy specifically contends the parties' combined monthly adjusted gross income greatly exceeds the amount provided for in the guidelines and, thus, deviation from the guidelines was necessary.
KRS 403.212 sets forth the child support guidelines for courts in Kentucky. The child support guidelines "serve as a rebuttable presumption for the establishment" of child support. Ciampa v. Ciampa, 415 S.W.3d 97, 99 (Ky. 2013). A circuit court may deviate from the guidelines but must make a specific finding that application of the guidelines would be unjust or inappropriate. Id. If the parties' combined adjusted gross income exceeds the uppermost level of the guidelines, the circuit court may use its discretion to set child support outside the guidelines. KRS 403.212(5). So long as any deviation from the child support guidelines is "adequately justified in writing, this Court will not disturb the trial court's ruling . . . ." Ciampa, 415 S.W.3d at 99 (citation omitted). An abuse of discretion occurs when the "decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Sexton, 125 S.W.3d at 272.
In the case sub judice, the evidence demonstrated that the parties' combined adjusted gross monthly income was above the uppermost level provided for in the child support guidelines, although the circuit court made no finding as to what this amount was. Based upon their most recent tax returns, Amy and Robert's combined adjusted gross monthly income was at least $20,428 per month or $245,132 per year. The uppermost combined income level provided for in the guidelines is $180,000 per year or $15,000 per month. And, at the uppermost level of income of $15,000 per month, the child support guidelines provide child support for three children at $2,305 per month. The circuit court inexplicably and without written findings set child support for Richard at $1,700 per month, which is well below what he would have been obligated to pay had the parties joint income been $180,000, at the top level of the guidelines. Thus, $1,700 per month appears to be patently low considering the parties' combined adjusted gross monthly income is considerably higher than the uppermost level under the guidelines. While KRS 403.212(5) grants the circuit court discretion to determine child support outside the guidelines, under the facts of this case we can find no rationale or legal basis how the court made this determination from the record below. Under these unique circumstances, we believe the circuit court abused its discretion in awarding child support of $1,700 per month and vacate same. Upon remand, the circuit court shall reconsider the award of child support based upon the combined income of the parties as determined by the court and shall further state the rationale or legal basis for the award of child support for the parties' children.
Temporary child support in this case had been previously set by agreement of the parties at $2,750 per month. --------
For the foregoing reasons, the Findings of Fact, Conclusions of Law, Order and Judgment entered in the Boyd Circuit Court is vacated and remanded for proceedings consistent with this opinion.
ALL CONCUR. BRIEFS FOR APPELLANT: Phillip Bruce Leslie
Greenup, Kentucky BRIEF FOR APPELLEE: W. Jeffrey Scott
Grayson, Kentucky