STEVEN J. LICHTENSTEIN V. ROBERTA JILL LICHTENSTEIN
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RENDERED:
August 28, 1998; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
96-CA-2422-MR
STEVEN J. LICHTENSTEIN
V.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE ERNEST A. JASMIN, JUDGE
ACTION NO. 90-CI-9025
ROBERTA JILL LICHTENSTEIN
(NOW BARBANEL)
AND
APPELLEE
NO. 97-CA-0031-MR
STEVEN J. LICHTENSTEIN
V.
APPELLANT
APPEAL FROM JEFFERSON FAMILY COURT
HONORABLE JERRY J. BOWLES, JUDGE
ACTION NO. 96-FC-7465
ROBERTA JILL LICHTENSTEIN
(NOW BARBANEL)
APPELLEE
OPINION
AFFIRMING IN 96-CA-2422-MR
REVERSING AND REMANDING IN 97-CA-0031-MR
** ** ** ** **
BEFORE:
GUDGEL, CHIEF JUDGE; GARDNER and KNOPF, JUDGES.
GARDNER, JUDGE.
Appellant, Steven Lichtenstein (Steven), has
filed two appeals from opinions and orders of the Jefferson Circuit
Court and Family Courts in this case dissolving his marriage to
Roberta Jill Lichtenstein (Roberta).
After reviewing the numerous
issues raised by Steven and the record below, this Court affirms
regarding the issues filed in the first appeal but reverses the
family court’s opinion and order upholding an order of garnishment
and execution in the second appeal.
Steven and Roberta married in 1978 and separated in
November 1990.
The couple had two children, one born in September
1980 and one born in February 1984.
Steven graduated from medical
school during the marriage, completed a fellowship in pediatric
ophthalmology
Louisville.
in
1988
and
is
engaged
in
private
practice
in
Roberta graduated from law school during the marriage
and has practiced law with several firms.
The circuit court bifurcated the trials in this case and
considered the custody issue in June 1992.
The court ordered
Steven to pay $1,949 per month child support effective October 1,
1991. The court ordered Steven to pay $1,000 per month maintenance
effective April 1, 1992, $1,500 per month maintenance effective May
1992, and $3,000 per month maintenance effective June 1992.
The
court also ordered Steven to pay all uninsured medical expenses
commencing May 31, 1992, and ordered him to maintain medical
insurance for the children effective the same date.
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Steven has
filed several motions for relief regarding child support and
maintenance, and those motions were passed for later consideration.
The divorce proceedings were very contested with both parties
filing numerous motions and changing attorneys several times.
The
relations
financial
commissioner
issues
(the
scheduled for May 24, 1994.
were
assigned
commissioner),
to
and
a
a
domestic
hearing
was
Steven left in early May 1994 for a
medical relief trip to Romania.
Apparently, his legal counsel had
advised him against it, but he chose to go anyway.
On May 10,
1994, Steven’s counsel at that time filed a motion seeking that his
law firm be allowed to withdraw as counsel.1
granted the motion on May 16, 1994.
The circuit court
Steven returned around May 20,
1994.
A hearing was held before the commissioner on May 24,
19942 and continued until the next day.
In November 1994, the
commissioner filed her report and recommendations.
In part, the
commissioner found that Steven’s true earnings were a minimum of
$150,000 annually and that he had deliberately run up his business
expenses in order to make it appear that his personal income was
greatly reduced. The commissioner recommended Steven be granted no
1
Counsel maintained that not only had Steven gone on the
trip, but he also took his office manager with him. Counsel
stated that they had planned to depose both the manager and
Steven’s certified public accountant (CPA) in his absence.
2
Steven maintains in his brief that he orally moved for a
continuance on that date, but that this motion was not recorded.
The commissioner later testified before the circuit court that
Steven made no such motion and in fact wanted to get the
proceedings over with.
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reduction in child support and that he continue to pay $1,949 per
month child support until December 30, 1994, at which time it would
increase to $2,300 per month.
The commissioner also recommended
that Steven’s obligation to pay maintenance during the pendency of
this action be terminated during any period in which Roberta had
employment.
She
recommended
that
maintenance
be
suspended,
conditioned upon Steven satisfying the obligations to Roberta set
forth in the order regarding property division, attorney fees and
costs, current and future child support and past due maintenance
arrearage.
The commissioner valued Steven’s medical practice at
$144,000.
The commissioner found an arrearage of $57,765.21 in
child support, maintenance, and medical insurance and granted a
common law judgment against Steven for that amount.
Steven filed exceptions to the commissioner’s report and
recommendations. He primarily argued that he was prejudiced by his
counsel’s decision to withdraw shortly before the commissioner’s
hearing and by the commissioner’s alleged decision not to allow a
continuance.
He also moved the circuit court for a new trial or to
offer additional evidence.
The circuit court held a hearing to
consider the various issues and in an opinion and order in June
1996, overruled both parties’ exceptions to the commissioner’s
report.
The
court
affirmed
the
commissioner’s
report
and
recommendations and incorporated them into its order.
The court
specifically
regarding
upheld
the
commissioner’s
maintenance and child support.
conclusions
The court denied Steven’s motion
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for a new trial.
Steven’s first appeal is from this opinion and
order of the circuit court.
On
November
7,
1996,
Louisville
Children’s
Eye
Specialists, P.S.C. (Eye Specialists),a corporation wholly owned by
Steven, was administratively dissolved by the Kentucky Secretary of
State’s Office for failure to file an annual report.
On December
6, 1996, Roberta caused an order of garnishment to be issued
against Steven, doing business as Eye Specialists, based upon the
judgment she obtained against Steven in the divorce case.
Eye
Specialists’ checking account at Great Financial Bank was garnished
in the amount of $23,058.86, and the execution against Steven was
used to attach furniture and equipment owned by Eye Specialists.
On December 10, 1996, Eye Specialists applied to the Kentucky
Secretary of State for reinstatement.
The application was granted
and Eye Specialists was issued a certificate of existence dated
December
13,
1996,
which
reflected
an
incorporation
date
of
December 28, 1990.
Steven and Eye Specialists filed a joint motion to quash
garnishment wherein both entities sought a determination that the
garnishment and execution were improper and should be quashed. The
Jefferson
Family
Court
in
an
opinion
and
order
upheld
the
garnishment.3 It concluded that while Eye Specialists was revived,
the property garnished by Roberta was legally transferred during
3
Following the circuit court’s opinion and order in June
1996, the family court program began operating and this case was
transferred from circuit court to family court.
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the
period
dissolved.
that
the
corporation
had
been
administratively
Steven’s second appeal is from this opinion and order.
Steven first argues to this Court that the commissioner
and the circuit court erred by denying his motion for a new trial
or for leave to present additional proof.
record
circuit
below,
specifically
court
at
a
the
hearing
evidence
to
After reviewing the
presented
consider
before
exceptions
to
the
the
commissioner’s report, this Court has uncovered no error or abuse
of discretion by the court below.
Generally, a trial court has broad discretion in granting
or refusing a continuance of a trial, and unless that discretion
has been abused, an appellate court will not disturb the trial
court’s ruling. Hall v. Commonwealth, Department of Highways, Ky.,
511 S.W.2d 204, 205 (1974); Walker v. Farmer, Ky., 428 S.W.2d 26,
28 (1968); Lewis v. Liming, Ky. App., 573 S.W.2d 365, 368 (1978).
An appellate court may reverse a trial court’s decision not to
grant a new trial only if the trial court’s decision was clearly
erroneous. Humana of Kentucky, Inc. v. McKee, Ky. App., 834 S.W.2d
711, 725 (1992).
In the instant case, this Court has found no abuse of
discretion
continuance
or
or
clear
error
by
the
new
trial
issues.
trial
court
regarding
the
Witnesses
including
the
commissioner who conducted the hearing as well as Roberta’s former
counsel testified that Steven never asked for a continuance and in
fact requested that they proceed, because he wanted to conclude the
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matter.4
The record also reflects that Steven represented himself
at the commissioner’s hearing following his counsel’s withdrawal
and continued to represent himself for several months following the
hearing.
The record reveals that Steven undertook several actions
against his counsel’s advice, thus leading counsel to withdraw
before the hearing.
Thus, there was evidence presented that his
actions before the commissioner were inconsistent with the relief
he sought from the circuit court.
We have found nothing in the
record which would have rendered the trial court’s decision not to
grant a continuance or new trial clearly erroneous.
Steven next contends that the circuit court erred by
requiring him to pay $2,300 per month child support.
He maintains
that this amount is excessive and that the spirit of the child
support guidelines do not support such an amount.
We decline to
disturb the circuit court’s ruling. Kentucky Revised Statute (KRS)
403.211(2) states, “[t]he child support guidelines in KRS 403.212
shall serve as a rebuttable presumption for the establishment or
modification of the amount of child support.
Courts may deviate
from the guidelines where their application would be unjust or
inappropriate.”
One of the criteria provided for in the statute
which would allow adjustment of the guideline award is combined
4
Apparently, there is nothing in the record to support
Steven’s argument that he wanted a continuance. Steven says he
made his request before the tape recorder was turned on.
Roberta’s former counsel who appeared at the hearing stated that
he remembered some discussion regarding Steven wanting to
proceed, but he could not find the discussion on the taped record
of the commissioner’s hearing.
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parental income in excess of the Kentucky child support guidelines.
KRS 403.211(3).
“The court may use its judicial discretion in
determining child support in circumstances where combined adjusted
parental gross income exceeds the uppermost levels of the guideline
table.”
KRS 403.212(5).
S.W.2d 463 (1992).
See Redmon v. Redmon, Ky. App., 823
The guidelines are not designed to cover all
possible scenarios, and the legislature has not taken away the
trial court’s broad discretion in ensuring that the needs of the
children will continue to be met.
Id., at 465.
In the case at bar, Steven’s and Roberta’s monthly income
exceeded the highest income provided for in the statutory table.
We have found no abuse of discretion by the trial court in setting
the support based upon Steven’s income.
Further, Steven has
provided no authority to support his position.
Steven also argues that the circuit court erred by
reserving the issue of maintenance.
Steven’s argument is directly
refuted by James v. James, Ky. App., 618 S.W.2d 187 (1981).
The
same argument was made in that case, and this Court disagreed,
finding
that
maintenance.
KRS
403.200
Id., at 188.
does
permit
a
court
to
reserve
The statute allows the trial court to
provide for probable changes in either party’s ability to be selfsupporting.
Id.
The statute expressly places decisions regarding
the amount and duration of maintenance within the discretion of the
trial court.
Id.
In the case at hand, the court ordered that Steven’s
obligation to pay maintenance to Roberta would be suspended,
-8-
effective
with
the
date
of
her
finding
employment
and
would
continue to be suspended until further order of the court.
The
court noted that the suspension of the maintenance was conditional
upon Steven satisfying the obligations to Roberta. The court ruled
that if Steven failed to satisfy those obligations set forth within
three years or fell more than two months behind in child support,
Roberta would be able to renew a maintenance request.
We have
reviewed the court’s ruling and have found it reasonable and not an
abuse of discretion.
Next, Steven argues that the circuit court erred in
awarding Roberta a common law judgment for $57,765.21, representing
pendente lite maintenance, child support and medical insurance
arrearages.
This
argument
clearly
lacks
merit.
The
record
reflects that this amount was the result of payments for either
maintenance, child support or medical insurance that Steven failed
to make.
Many of these rulings setting the payments to be made had
been contested earlier by Steven. Steven was responsible for those
payments and cannot later have amounts changed that already had
been
adjudicated.
The
authority
he
cites
is
clearly
distinguishable.
We next consider Steven’s argument that the trial court
erred in the method of valuing his medical practice.
He maintains
that the trial court failed to adequately value goodwill by not
using the capitalization of earnings method.
He also states that
the trial court failed to consider the substantial debts of the
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practice.
This Court has uncovered no clear error by the trial
court on this issue and declines to disturb its finding.
Goodwill should be considered in valuing a closely held
corporation in a dissolution action. Drake v. Drake, Ky. App., 809
S.W.2d 710, 713 (1991).
A trial court’s valuation in a divorce
action will not be disturbed on appeal unless it is clearly
contrary to the weight of the evidence. Underwood v Underwood, Ky.
App., 836 S.W.2d 439, 444 (1992).
This is especially true where
the court’s figure falls within the range of competent testimony.
Id.
The commissioner heard testimony from James A. Gravitt,
C.P.A., who valued Steven’s practice at between $144,000 and
$156,000. Gravitt reviewed financial statements and records of the
business,
reviewed
raw
Steven’s accountant.
data
and
reviewed
the
depositions
of
The trial court valued the practice at
$144,000, the low end of the expert’s valuation. Thus, the court’s
valuation was within the range of competent testimony.
Steven
bears the burden of showing evidence that refutes the expert’s
testimony, and he has failed to do so in the instant case.
Steven argues as well that the trial court erred in
dividing assets and liabilities.
He argues that the division was
unjust and that Roberta provided no proof that itemized debts were
nonmarital and thus, the trial court erred in allocating all of the
debts to him.
KRS 403.190(1) states that in a proceeding for
dissolution of marriage, the court shall assign each spouse’s
property to him or her.
-10-
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 a 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. .
. .”
Id.
Property acquired by either spouse after the marriage and
before a decree of legal separation is presumed to be marital
property.
KRS 403.190(3).
This Court in Bodie v. Bodie, Ky. App.,
590 S.W.2d 895 (1979), rejected the argument that KRS 403.190
creates a presumption that all debts acquired during the marriage
are marital debts.
The statute does not create a presumption as to
marital debts, and one cannot be judicially implied.
Id., at 896.
“Consideration should be given to the nature of the debts based
upon the receipt of benefits and the extent of participation.” Id.
In the instant case, we again have found no abuse of
discretion by the trial court regarding this issue.
Evidence was
presented that Steven incurred many debts himself, thus leading to
his problems.
There was also evidence of dissipation by Steven.
Some of the items listed in Steven’s brief such as arrearages and
attorney fees are not debts and are problems of his own making.
We
decline to disturb the trial court’s findings. We affirm the trial
court on all issues in Steven’s first appeal.
We now turn to Steven’s second appeal.
He argues that
the family court’s opinion and order conflicts with the provisions
of
the
Kentucky
Business
Corporation’s
-11-
Act
and
decisions
of
Kentucky’s highest court, and is therefore reversible error.
He
contends that the family court relied on inapplicable law and
ignored the applicable law that a corporation continues to exist
for purposes of “winding up” its affairs even after it has been
administratively
dissolved.
After
examining
the
applicable
statutes and case law regarding this issue, we have concluded that
the family court erred.
KRS 271B.14-200 provides, “[t]he secretary of state may
commence a proceeding under KRS 271B.14-210 to administratively
dissolve a corporation if: (1) The corporation does not file its
annual report to the secretary of state within sixty (60) days
after it is due. . . .”
“A corporation administratively dissolved
continues its corporate existence but may not carry on any business
except that necessary to wind up and liquidate its business and
affairs under KRS 271.B:14-050 and notify claimants under KRS
271B.14-060 and 271B.14-070." KRS 271B.14-210(3).
KRS 271B.14-505
states,
(1) A dissolved corporation shall continue its
corporate existence but may not carry on any
business except that appropriate to wind up
and liquidate its business and affairs,
including: (a) Collecting its assets; (b)
Disposing of its properties that will not be
distributed in kind to its shareholders, (c)
Discharging
or
making
provision
for
discharging its liabilities; (d) Distributing
its remaining property among its shareholders
according to their interests; and (e) Doing
every other act necessary to wind up and
liquidate its business and affairs.
(2)
Dissolution of a corporation shall not: (a)
Transfer title to the corporation’s property.
. .[.]
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Further,
KRS
271B.14-220
provides
that
a
corporation
administratively dissolved may apply to the secretary of state
within two years after the effective date of dissolution.
If the
secretary of state determines that the application contains the
required information, he or she shall cancel the certificate of
dissolution and prepare a certificate of reinstatement with the
effective date of reinstatement.
KRS 271B.14-220(2).
“When the
reinstatement is effective, it shall relate back to and take effect
as of the effective date of the administrative dissolution and the
corporation
shall
resume
carrying
on
its
business
administrative dissolution had never occurred.”
as
if
the
KRS 271B.14-
220(3).
The Kentucky statute does not set any specified time in
which the officers and directors of a corporation must close up its
affairs, nor does it provide for a specific manner of winding up
the business.
523 (1943).
Greene v. Stevenson, 295 Ky. 832, 175 S.W.2d 519,
If the stockholders do not wind up the corporation as
expeditiously as possible, it may be that the stockholders have a
cause of action if injury can be shown by reason of the delay.
The
purpose
of
the
statute
allowing
extension
of
time
Id.
to
a
dissolved corporation to wind up its business is to provide for the
administration of corporate property by the corporation itself
during the period, and to permit the title to its property to
remain in the corporation itself until it winds up its affairs.
Id., at 523-524.
The effect of such statutes is to abrogate the
common law rules relative to the reversion of corporate real
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estate, escheat of its personal property, and extinguishment of the
debts owed by it.
Id., at 524.
See also Stearns Coal & Lumber Co.
v. Douglas, 299 Ky. 314, 185 S.W.2d 385 (1944).
Generally, dissolution of a corporation does not take
away or destroy its property.
19 C.J.S. § 864 at 509 (1990).
After dissolution, the property and the assets of the corporation
are preserved for the benefit of those entitled to share in them
either as creditors or stockholders.
Id.
Statutes continuing the
existence of a corporation after its dissolution generally provide
that it shall be continued as a corporate body for a limited time
for the purpose of settling its affairs including the power to
dispose of and convey its property.
Id.; § 862 at 516-17.
Generally, during this period, the dissolved corporation enjoys
most of the powers with which a corporation is vested including
disposing and conveying its property.
Id., at 518.
Courts in several other jurisdictions have considered
issues surrounding a corporation’s power during the “wind up”
period and have reached similar conclusions. See Penasquitos, Inc.
v. Superior Court, 812 P.2d 154 (Cal. 1991) (holding that the
corporation exists indefinitely for the purpose of winding up and
settling affairs of the corporation such as administering surviving
assets and liabilities); Elk River Mill and Lumber Co. v. GeorgiaPacific Corp., 330 P.2d 404 (Cal. Ct. App. 1958) (holding that
pursuant to the general rule for a three year wind up period, the
corporation’s rights that it had of whatever nature are preserved
in full vigor during this period); Addy v. Short, 89 A.2d 136 (Del.
-14-
Supr. 1952) (ruling that during the three year wind up period, the
corporation’s title and possession to property are unimpaired; its
property rights remain in full vigor during the period); City of
Klamath Falls v. Bell, 490 P.2d 515 (Or. Ct. App. 1971) (noting
that the Oregon statute providing for five years for a corporation
to
wind
up
its
affairs
includes
the
purpose
of
conveying,
transferring and releasing real or personal property); Krebs v.
Morgantown Bridge & Improvement Co., 87 S.E.2d 609 (W.Va. 1955)
(noting that the state statute allows for a dissolved corporation
to wind up affairs and that its property shall be subject to
payment of corporate obligations).
See also Matter of National
Medical Properties, Inc., 1980 W.L. 6373 (Del. Ch. 1980); Mackay &
Knobel Enterprises, Inc. v. Teton Van Gas, Inc., 460 P.2d 828 (Utah
1969).
In the case at bar, the family court failed to consider
Kentucky’s
statutory
provision
which
extends
the
life
of
a
corporation which has been administratively dissolved for purposes
of winding up its affairs.
The case upon which it relied, Psychic
Research and Development Institute of Maryland, Inc. v. Gutbrodt,
415 A2d 611 (Md. Ct. App. 1980), did not address the issue as well.
In fact, Maryland’s law appears distinguishable as the case states
that under that state’s law, once a proclamation dissolving the
corporation is issued, the forfeiture puts an end to corporate
existence.
It is true that a revived corporation would take title
only to those assets which were not disposed of during the period
of corporate demise, see Id.; however, in the instant case, Eye
-15-
Specialists had not ceased to exist and was in a wind up phase.
received reinstatement within one month of dissolution.
It
Under
Kentucky law as set out above and based upon the law of other
states, the property of Eye Specialists did not automatically
revert to its shareholder, because it existed for the corporation
to meet its obligations in winding up its affairs.
The family
court erred as a matter of law in upholding the garnishment of the
corporation’s assets.
Some of the cases relied upon by Roberta
pre-date the later cases setting out the current rule.
Thus, we
must reverse the family court’s order upholding the garnishment as
it was based upon an erroneous legal premise.5
This Court remands
for proceedings consistent with this opinion.
For
the
foregoing
reasons,
this
Court
affirms
the
Jefferson Circuit Court regarding issues in the first appeal but
reverses the family court regarding the garnishment issue in the
second appeal and remands for proceedings consistent with this
opinion.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEFS FOR APPELLEE:
Stephen M. George
Louisville, Kentucky
Kristin Dawson Henderson
Louisville, Kentucky
Michael V. Brodarick
Louisville, Kentucky
Robert L. Martin
Louisville, Kentucky
5
Roberta could have possibly proceeded on a piercing the
corporate veil theory if she could prove that Eye Specialists was
Steven’s alter ego; see Culver v. Culver, Ky. App., 572 S.W.2d
617 (1978), however she did not proceed under that theory.
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