ROBERT J. YELTON, SR. v. NANCY A. YELTON
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RENDERED: July 31, 1998; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NOS. 96-CA-001919-MR AND 96-CA-002024-MR
ROBERT J. YELTON, SR.
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM PENDLETON CIRCUIT COURT
HONORABLE ROBERT I. GALLENSTEIN, SPECIAL JUDGE
ACTION NO. 94-CI-000145
NANCY A. YELTON
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING
* * * * * * * * *
BEFORE: GUIDUGLI, JOHNSON and SCHRODER, Judges.
JOHNSON, JUDGE: Robert J. Yelton, Sr. (Bob) appeals and Nancy A.
Yelton (Nancy) cross-appeals from the findings of fact,
conclusions of law and final judgment entered by the Pendleton
Circuit Court on March 13, 1996, that resolved all issues
concerning the parties' marital and non-marital property.
affirm.
We
Bob and Nancy were married on June 4, 1988, and
separated on July 27, 1994.
Bob filed a petition for the
dissolution of the parties' marriage on October 25, 1994.
The
parties agreed to dismiss the dissolution action on November 3,
1994; however, Bob reopened the matter two months later in
January 1995.
Bob filed a motion to bifurcate the issues of
dissolution and division of property.
for temporary maintenance.
Nancy objected and moved
The motion to bifurcate was denied.
On April 5, 1995, the trial court ordered the parties
to serve pre-trial memorandum on each other regarding the issues
of property division and maintenance and outlining their
respective positions.
Following the service of pretrial
memoranda, the parties and their attorneys were ordered to meet
for the purpose of preparing and filing a joint trial memorandum.
On May 5, 1995, Bob was ordered to pay Nancy $1,200 per
month in temporary maintenance and the matter was set for a final
hearing on all contested issues on September 6, 1995.
Nancy's
motion to amend the order to allow for retroactive payment of
maintenance was denied.
On August 18, 1995, Nancy moved that the
case be removed from the court's trial docket and sought leave to
depose Bob's expert witnesses.
The motion was granted.
However,
the trial court allowed Bob to proceed on the issue of the
dissolution of marriage.
A decree of dissolution was entered on
September 16, 1995, which reserved all other issues for later
adjudication.
It was further ordered that the marital estate
would be determined as of September 6, 1995, the original hearing
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date.
At the time of the final hearing in January 1996, Bob
was sixty (60) years old and had worked as an insurance agent in
Pendleton County under a contract with State Farm Insurance
Companies (State Farm) since 1974.
Nancy was forty-six (46)
years old, and although she had a license to practice law in
Kentucky, she had not been employed since December 1991.
As she
anticipated, Nancy became employed in February 1996 for the
Office of the Attorney General in Frankfort, and waived any claim
to permanent maintenance.
In the final judgment, the trial court assigned assets
valued at $138,764.58 to Bob as his non-marital property,
including $80,210 in pension benefits with State Farm.
assigned non-marital property valued at $9,827.84.
Nancy was
Nancy was
assigned debts of $11,950.68; Robert was ordered to be
responsible for debts of $4,664.22.
at $469,404.22, was divided equally.
The marital estate, valued
Further facts will be
supplied as necessary for an understanding of the issues raised
in this appeal and cross-appeal.
In his appeal, Bob argues that the trial court erred in
its treatment of his termination pay to which he is entitled
pursuant to his contract with State Farm.
The trial court found
the termination pay to be in the nature of a pension and
determined the increase in value of the termination pay during
the marriage to be $144,635, a figure supported by the testimony
of Nancy's expert, William B. Donlin (Donlin).
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Bob argues that the termination pay, which he will
receive when his relationship with State Farm is terminated by
either party for any reason, is too speculative to be considered
a divisible asset for the following reasons:
(1) the payments
are subject to future contract changes and the solvency of State
Farm; (2) the amount depends on how well Bob does the last twelve
months before he retires and how well his successor maintains the
policies in effect for an additional twelve months after his
retirement; and (3) the amount of the payments depends upon how
long Bob lives both before and after his retirement.
He contends
that this Court should follow the holding in Lawyer v. Lawyer,
702 S.W.2d 790 (Ark. 1986)
We disagree.
The question of whether termination benefits are
marital or non-marital property has been answered differently
among the states.
See Lawyer, supra (five-year termination
payments "next to impossible" to place present value on); In re
the Marriage of Skaden, 139 Cal.Rptr. 615, 566 P.2d 249 (1977)
(termination benefits same kind of property interest as
retirement pension); Mallett v. Mallett, 323 S.C. 141, 473 S.E.2d
804 (1996) (purpose of termination benefits is to replace
commissions husband will earn after divorce action and therefore,
non-marital); and In re the Marriage of Wade, 923 S.W.2d 735
(Tex.Ct.App.1996) (anticipated termination payments are based on
"cumulative commissions" and are earned "in much the same manner
as retirement benefits").
Although we may use foreign authority
as a guideline in our decision-making, we are not bound to follow
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these holdings.
Paducah Area Public Library v. Terry, Ky., 655
S.W.2d 19, 24 (1983).
However, we believe the holding in In re
the Marriage of Wade, supra, to be helpful in addressing Bob's
arguments concerning the speculative nature of the benefits:
The right to the termination payments
came into existence upon [the husband's]
execution of the agency agreement on
March 1, 1977, which was during the
parties' marriage. The majority of the
benefits reflected in the termination
payments were earned by work he
performed for State Farm throughout the
entire marriage. Furthermore, the fact
that the amount of the actual payments
will be based on commissions received
during a twelve-month period sometime
after the dissolution of the marriage
does not mean that the payments are
separate property because . . . the
commissions are cumulative over an
agent's entire career.
Id. at 737 (footnote omitted).
There was similar conflict among the states on the
issue of whether a noncontributory retirement/pension plan was
marital or non-marital property.
See Foster v. Foster, Ky. App.,
589 S.W.2d 224 (1979), and the cases cited therein.
In
determining the noncontributory plan in that case to be marital,
this Court held as follows:
We feel that the direction of the
Kentucky courts has been set by Beggs v.
Beggs, Ky., 479 S.W.2d 598 (1972).
Although that case concerned a
contributory fund, in contrast to the
noncontributory fund in the instant
case, the vested rights, not the
contribution of the teacher, were
determinative. Even though this pension
plan was noncontributory, it was a part
of the consideration earned by the
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husband during marriage. In addition,
and most importantly, it was vested so
that the husband was entitled to receive
monthly payments upon termination for
any cause, with only the amount to be
fixed.
Id. at 224 (emphases added).
Bob's right to termination pay from
State Farm is both vested and matured.
It is this essential
aspect of the termination pay that mandates its inclusion as
property in the marital estate.
S.W.2d 231, 232-233 (1987).
Duncan v. Duncan, Ky. App., 724
For this reason, we believe the
trial court properly included the increase in the value of the
termination payments attributable to Bob's efforts during the
marriage as part of the marital estate.
Bob attempts to persuade this Court that since the
number of policies in effect at the time of the dissolution were
"practically the same" as when the parties married, the entire
termination pay should be considered as his non-marital property.
He argues that any increase in the value of the termination pay
is not due to the joint efforts of the parties during the
marriage.
This argument is absurd as the evidence showed that in
any given year, Bob's policies turned over at the rate of 20%.
If Bob had not expended any "efforts" during the marriage, the
number of policies would have been near, if not at, zero, at the
time of dissolution.
Bob also argues that the trial court erred in relying
on Donlin's value of the termination pay.
We find no error in
this regard as Donlin's valuation was clearly based on the value
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of the termination pay provided by State Farm for the years at
issue.
Finally in this regard, Bob contends that the trial
court erred in requiring immediate payment to Nancy for her share
of this item of property.
Clearly, whenever possible, it is
preferable to make a clean division of property so the parties
are "spared further entanglement."
at 233.
See Duncan v. Duncan, supra,
The trial court has considerable discretion in this
regard and considering the extent of marital and non-marital
property Bob has available, we are unable to discern any abuse of
the trial court's discretion in this regard.
In addition to the arguments concerning the termination
pay, Bob has raised three other allegations of error.
First, Bob
contends that the trial court erred in including in the marital
estate the sum of $6,280.87, which represents earnings during the
marriage in the form of interest on funds deposited in an
Individual Retirement Account (IRA).
The IRA had a value of
$4,470.61 at the time of the marriage.
to Bob as his non-marital property.
This was the sum assigned
He insists that the increase
in value is not due to the efforts of either party and under the
holding in Daniels v. Daniels, Ky. App., 726 S.W.2d 705 (1986)
(increase in value of stock purchased with non-marital property
was non-marital), should have been treated by the trial court as
his non-marital property.
This is not a novel argument.
In Mercer v. Mercer,
Ky., 836 S.W.2d 897 (1992), the case relied upon by the trial
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court, our Supreme Court clearly recognized that "[i]nterest
income paid to someone for the use of their money is not the
equivalent of an appreciation in value of a capital asset."
at 899.
Id.
Further, the Court held that "accumulated interest
earned from nonmarital funds deposited in a savings account is
income and is to be treated as marital property and should be
appropriately divided between the parties."
Id. at 900.
also Sousley v. Sousley, Ky., 614 S.W.2d 942 (1981).
See
We perceive
no significant difference between a savings account and the IRA
at issue in this case--both are interest bearing assets-warranting a result different than that required by Mercer.
Next, Bob argues that the trial court erred in
requiring him to pay Nancy cash for her half of a growth stock
fund which had a marital balance of $30,261.26.
Bob contends
that the sale of the stock fund has tax consequences which will
diminish the percentage of the funds he will realize.
Again, as
discussed in the context of the termination pay, we find no abuse
of the trial court's discretion in this regard.
The judgment
does not require Bob to sell the asset, and nothing prevents him
from paying Nancy's share from other personal funds.
Finally, Bob insists the trial court erred in making an
equal division of the marital property.
Both parties requested
an award of more than half the marital estate:
Bob argued he
should get more than 66% as he made the greater financial
contribution; Nancy argued she was entitled to a greater share as
she had a significantly lower earning capacity, a significantly
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smaller amount of non-marital property and because of her
intangible contributions to the marriage.
In making an equal
division, the trial court set out the factors set forth in
Kentucky Revised Statutes (KRS) 403.190(1) and made the following
findings:
9. [Bob] contributed to the
marriage by virtue of the fact that he
was employed full-time throughout the
marriage as an insurance agent earning
income from $80,000.00 per year in the
year of the marriage, to $150,000.00 per
year in more recent years.
10. [Nancy] was employed as an
attorney on a full-time basis for the
first four years of the marriage.
Throughout the marriage, she was also
active in numerous community, political
and charitable organizations.
11. The parties went through
extensive efforts with fertility
specialists and in-vitro fertilizations
in an attempt to have children. None of
those efforts were [sic] successful.
12. The marriage lasted for seven
(7) years, during which time [Nancy]
left the job market with [Bob's] prior
knowledge and consent to pursue
community and charitable activities and
other interests of a purely personal
nature.
13. This Court has accepted
substantially as true the summaries of
fact from the parties contained in their
respective trial briefs relating to the
contribution of each spouse. The Court
heard the testimony of [Bob] and his
witnesses on this issue.
14. [Bob's] nonmarital estate is
significantly greater than [Nancy's]
nonmarital estate.
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15. [Bob's] earning capacity of
approximately $140,000.00 per year is
significantly greater than [Nancy's]
earning capacity of approximately
$40,000.00 per year.
16. It is clear that during this
marriage both parties contributed
significantly to the marital goals and
objectives, and it would seem unfair and
unjust to award a greater percentage of
the marital property to either party.
On the basis of the facts of this case
outlined above, the Court finds tha[t]
an equal division of marital property is
just.
We have recited at length the trial court's findings
and conclusions in this regard to dispel the notion that the
trial court did not consider those factors set forth in KRS
403.190(1).
It is abundantly clear that the trial court was
aware of, and complied with, the statute's mandate.
The trial
court obviously considered the parties' respective contributions
and needs.
Nevertheless, Bob insists that the trial court did
not give sufficient consideration to his greater financial
contribution to the acquisition of the property and that it gave
too much consideration to Nancy's contribution as a homemaker,
particularly because Nancy did not bear any children.
Further,
Bob argues that the trial court erred in taking into
consideration Nancy's community activities as homemaker services,
as he contends the statute contemplates such services to include
only "cooking, cleaning and working around the house."
We find Bob's arguments in this regard to be without
any merit.
It is settled that the trial court's findings will
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not be disturbed unless clearly erroneous.
Ky. App., 564 S.W.2d 221, 222-223 (1978).
Johnson v. Johnson,
The trial court has
"wide discretion" in the division of marital property.
Davis, Ky., 777 S.W.2d 230, 233 (1989).
Davis v.
While there is no
presumption of equal division, see Herron v. Herron, 573 S.W.2d
342, 344 (1978), such a division will be upheld absent a showing
of an abuse of discretion.
Not only are we convinced that the findings articulated
by the trial court are supported by the evidence of record, but
we believe that it did not err as a matter of law in considering
the range of Nancy's involvement in the community in dividing the
marital estate.
Bob's limited interpretation of KRS 403.190
would require the trial court to penalize any spouse who
volunteers his or her time to benefit the community and would
preclude recognition of the types of intangible efforts (such as
Nancy's performance as a "State Farm Wife") expended by a nonemployed spouse.
However, even if Bob were correct, the fact that Nancy
was primarily responsible for running the household, albeit with
the help of a housekeeper one day every other week, and the fact
that her post-decree financial situation is significantly weaker
than Bob's, are sufficient facts to persuade this Court that the
trial court did not abuse its discretion in dividing the property
equally.
Further, Bob's own manager testified that Nancy's
involvement and visibility in the community were important to
Bob's business.
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The major contention in Nancy's cross-appeal concerns
the trial court's failure to include in the marital estate any
sum representing the increase in the value of Bob's business.
Bob has been a sole proprietor selling insurance for State Farm
for over twenty years.
As the trial court found, Bob is a
"captive" agent, and pursuant to his contract with State Farm
cannot sell insurance other than that written by State Farm.
State Farm owns Bob's customer list, policies, forms, manuals,
and computer equipment.
Bob cannot sell his contract with State
Farm or appoint his replacement.
Both parties offered the testimony of experts on the
issue of the value of the business and its increase during the
marriage.
Nancy's expert, Donlin, using a discounted cash flow
or discounted earnings method, testified that the value of the
business increased by $165,700 during the marriage.
Bob's
expert, Alan Motta, using the same method of valuation, testified
that the value of the business had actually decreased from 1988,
when the parties married, to 1995.
The trial court did include in the marital estate the
increase in value of the real estate where the business is
located but declined to treat the business as a marital asset as
follows:
While most of the goodwill created by
[Bob's] business is owned by State Farm
because of its interest in the policies
and customer lists, [Bob] also enjoys
certain elements of goodwill. [Bob]
enjoys the goodwill that his own name
has associated with it, as well as the
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goodwill created by the location where
his business has operated for many
years. The restrictions on transfer of
the agency do not preclude the existence
of goodwill owned by [Bob]. However,
this Court does find that the goodwill
attached to [Bob's] agency is so
indistinguishably intertwined with the
goodwill of State Farm that it would
prevent the agency from being treated as
a marital asset and valued as such.
The trial court also found that because Bob could not sell or
transfer his contract with State that it had no "ascertainable
value."
There is no question that the increase in value of a
nonmarital business is marital property subject to division upon
dissolution.
Goderwis v. Goderwis, Ky., 780 S.W.2d 39, 40
(1989); Marcum v. Marcum, Ky., 779 S.W.2d 209, 210 (1989); Heller
v. Heller, Ky. App., 672 S.W.2d 945, 947 (1984).
However, that
value, or lack thereof, ascribed to marital property by the trial
court will not be disturbed unless it is shown to be clearly
erroneous.
Goderwis, supra, at 41.
The trial court was not
required to accept the testimony of Nancy's expert.
Drake, Ky., 721 S.W.2d 728, 729-730 (1986).
Drake v.
The trial court's
finding that the agency had not increased in value or that the
value was not ascertainable is supported by the evidence.
The
trial court specifically stated that it accepted the testimony of
Bob and others that his earnings increased primarily because
State Farm's premiums increased.
Nancy faults the trial court for failing to find that
the goodwill component of the value of the business increased
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during the marriage.
The concept of goodwill recognizes that
there is a pecuniary value in the expectation that clients or
customers will return to the business because of its reputation.
Clark v. Clark, Ky. App., 782 S.W.2d 56, 59 (1990).
Clark also
makes clear that the "marketability" of the goodwill is not a
dispositive factor in its inclusion in the value of a business
upon dissolution.
Id. at 60.
However, unlike the situation in
Clark, Bob does not have any business that he can transfer.
Further, there was no specific value attributed to goodwill.
In
any event, there was expert testimony that if Bob were to
terminate his relationship with State Farm and sell other
insurance, his credibility with his custormers would be severely
affected.
Thus, the trial court's findings are not clearly
erroneous.
Next, Nancy argues that the trial court erred in
awarding her a total of $4,800 in temporary maintenance during
the thirteen-months this action was pending, a period when she
was unemployed and in which Bob was earning $12,500 a month.1
Nancy emphasizes that not only was she unemployed, but the vast
majority of marital assets were under Bob's control.
The question of maintenance, particularly temporary
maintenance, is one peculiarly within the discretion of the trial
court.
Calloway v. Calloway, Ky. App., 832 S.W.2d 890, 894
1
Actually, Nancy was awarded $1,200 for nine months for a total
of $10,800, but Bob was given credit in the final judgment for
five months of maintenance based on Nancy's motion to continue
the final hearing, a motion granted over Bob's objection.
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(1992).
While this Court may have made a different award, we
cannot find that the trial court abused its discretion in this
regard.
The evidence indicates that Nancy was doing volunteer
work in a political campaign in the hopes of getting a permanent
job, a goal which she achieved.
Also, Nancy was advanced from
the division of the property the sum of $20,000 during the
pendency of the action.
Under these circumstances, we find no
reason to disturb the trial court's ruling in this regard.
The penultimate issue raised in Nancy's cross-appeal is
whether the trial court erred in failing to award her prejudgment
interest on her share of the marital property from the date the
marital estate was fixed, September 6, 1995, until the date of
the final decree, March 22, 1996.
Nancy's reliance on KRS
360.040 in misplaced as that statute by its express terms
pertains only to judgments.
The trial court's order of September
6, 1995, merely dissolved the marriage and established that date
as the cut-off for valuing the marital estate.
The determination
of the value of the estate and Nancy's share was not made until
the final judgment in March 1996.
We know of no authority that
would require the trial court to award Nancy interest prior to
the final judgment.
Finally, Nancy argues the trial court erred in failing
to award her attorney's fees.
As with many of the other issues
raised in this appeal and cross-appeal, the decision whether or
not to award such fees is left to the sound discretion of the
trial court.
Giacalone v. Giacalone, Ky., 876 S.W.2d 616, 620-15-
621 (1994).
It is apparent from the record that Nancy has
sufficient funds available with which to pay her attorney.
Accordingly, the judgment of the Pendleton Circuit
Court is affirmed.
ALL CONCUR.
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BRIEFS AND ORAL ARGUMENT FOR
APPELLANT/CROSS-APPELLEE:
BRIEFS AND ORAL ARGUMENT FOR
APPELLEE/CROSS-APPELLANT:
Hon. Jerry M. Miniard
Florence, KY
Hon. Timothy B. Theissen
Covington, KY
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