THOMAS E. TERWILLIGER v. JUDITH H. TERWILLIGER
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RENDERED: OCTOBER 22, 1999; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO. 1998-CA-000032-MR
AND
CROSS-APPEAL NO. 1998-CA-000212-MR
THOMAS E. TERWILLIGER
APPELLANT/CROSS-APPELLEE
APPEALS FROM JEFFERSON CIRCUIT COURT
HONORABLE JAMES GREEN, JUDGE
CIVIL ACTION NO. 93-FD-02892
v.
JUDITH H. TERWILLIGER
APPELLEE/CROSS-APPELLANT
OPINION AND ORDER
REVERSING APPEAL NO. 1998-CA-000032-MR
AND
DISMISSING CROSS-APPEAL NO. 1998-CA-000212-MR
** ** ** ** **
BEFORE:
GUDGEL, Chief Judge; HUDDLESTON and KNOPF, Judges.
HUDDLESTON, Judge.
Thomas Terwilliger appeals from a Jefferson
Family Court order that modified a marital settlement agreement,
which
had
Marriage.
been
incorporated
Thomas
argues
into
that
a
Decree
of
Dissolution
the
family
court
was
of
without
jurisdiction to modify the settlement agreement and abused its
discretion in modifying the division of property agreed to by the
parties.
Judith Terwilliger cross-appeals on grounds that the
family court abused its discretion in the valuation of Thomas’
alleged business damage settlement.
In October 1993, Thomas filed a petition for dissolution
of marriage.
Without the aid of counsel, Thomas and Judith
negotiated a marital settlement agreement that provided for the
custody and visitation of their two minor children, support,
maintenance and division of their marital property and debt.
As
part of the division of marital property, Thomas agreed to transfer
ten shares of stock, the equivalent of ten percent ownership, in
each of five privately owned corporations to Judith.
Thomas, who
prepared a list of assets and liabilities of both parties, valued
the stock in all five corporations at $111,000.00.
Shortly after
the settlement agreement was signed, Thomas began to negotiate the
sale of one of the five corporations listed in the settlement
agreement, Health Services, Inc., d/b/a Trans-American Cable and
Mid-American Cable, Inc. The negotiations, however, did not result
in a sale.
On January 6, 1994, the family court dissolved the
marriage and entered a Decree of Dissolution which incorporated the
settlement agreement by reference.
In February 1994, Thomas agreed to sell Mid-American
Cable, Inc. to ICG Access Services, Inc. for $1,600,000.00.
In
December 1994, Judith filed a motion to reopen the Decree of
Dissolution
and
modify
the
settlement
agreement
pursuant
to
Kentucky Rule of Civil Procedure (CR) 60.02 and Kentucky Revised
Statute (KRS) 403.250. Specifically, Judith alleged that the stock
transfer she had agreed to in the settlement agreement was procured
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through fraud, misrepresentation, lack of full disclosure and
overreaching on behalf of Thomas.
On March 18, 1996, Jefferson
Family Court granted Judith’s motion to reopen the Decree of
Dissolution.
On December 8, 1997, after holding a hearing, the
family court modified the division of property and awarded Judith
$384,166.50 (equaling one-half of the profits realized from the
sale of Mid-American Cable, Inc., less monies she previously
received from the sale), a couch valued at $800.00 in exchange for
the return of Thomas’s tools, and a one-half interest in a Fantasy
speedboat valued at $5,000.00.
This appeal and cross-appeal
followed.
On appeal, Thomas argues that Judge James M. Green, a
district court judge serving as a "special circuit judge" in the
Jefferson Family Court project, was without jurisdiction to modify
a Decree of Dissolution entered by a circuit court judge.
While
Thomas acknowledges that the Kentucky Supreme Court, in Kuprion v.
Fitzgerald, Ky., 888 S.W.2d 679 (1994), upheld the Chief Justice’s
authority to assign a district judge to the Jefferson Family Court
project to serve as a special circuit judge and decide cases that
were normally within the exclusive jurisdiction of the circuit
court, he argues that due to the temporal nature of the Chief
Justice’s
authority,
constitutional.
the
We disagree.
appointment’s
are
no
longer
After reviewing Kuprion, supra, we
find that the analysis provided therein is still applicable.
Next, Thomas argues that the family court erred in
modifying the Decree of Dissolution. The provisions of a Decree of
Dissolution relating to the disposition of property "may not be
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revoked or modified, unless the court finds the existence of
conditions that justify the reopening of a judgment under the laws
of this state."
KRS 403.250(1).
The law of this state relating to
the reopening of a judgment is found in CR 60.02.
In Judith’s
brief to this Court, she maintains that her motion, filed pursuant
to CR 60.02(d), was based on fraud, mistake, overreaching and/or
unconscionability.
A court may relieve a party from its final judgment on
grounds that there was "fraud affecting the proceedings, other than
perjury or falsified evidence."
CR 60.02(d).
The type of "fraud
affecting the proceedings" necessary to justify reopening under CR
60.02(d) generally relates to extrinsic fraud. Rasnick v. Rasnick,
Ky. App., 982 S.W.2d 218, 219 (1998) (citing 7 Kurt A. Philipps,
Jr.,
Kentucky
Practice,
CR
60.02,
cmt.
6
(5th
ed.
1995)).
Extrinsic fraud covers "fraudulent conduct outside of the trial
which is practiced upon the court, or upon the defeated party, in
such a manner that he is prevented from appearing or presenting
fully and fairly his side of the case."
Id.
In the case sub judice, the family court reopened the
Decree of Dissolution upon finding that: (1) Thomas convinced
Judith to proceed without the aid of counsel in order to save
money; (2) Thomas prepared the settlement agreement; and (3) Thomas
convinced Judith that the corporations were near bankruptcy and she
needed to sign the settlement agreement to prevent the possibility
of losing her home to creditors.
While Thomas’s behavior, as
evidenced by the findings stated above, is extremely disturbing, it
-4-
does not rise to the level of "fraud affecting the proceedings"
within the meaning of CR 60.02(d).
Judith moved the family court to reopen the Decree of
Dissolution because Thomas fraudulently led her to believe that the
corporations were near bankruptcy, which resulted in her agreement
to accept a ten percent transfer of ownership rather than a more
proportional share.
This is the same argument which was rejected
in Rasnick, supra.
In that case, the circuit court divided the
Rasnick’s marital property according to a property settlement
agreement executed by the parties.
Several months later, Suzanne
Rasnick moved the court, pursuant to CR 60.02, for relief from the
property settlement claiming that she was fraudulently led to
believe that the parties’ net worth was far less than it actually
was and, as a result, gave up a disproportional amount of property
accumulated during the marriage.
The circuit court’s denial of
Suzanne Rasnick’s motion, insofar as it related to the property
dispositions, was affirmed because the "nondisclosure of assets in
a dissolution action does not constitute ‘fraud affecting the
proceedings’ as the term is used in CR 60.02(d)."
Rasnick, 982
S.W.2d at 221.
The same reasoning can be applied to the case sub judice.
Judith has failed to demonstrate how Thomas’ failure to disclose
the
true
value
proceedings."
of
the
corporations
CR. 60.02(d).
is
fraud
"affecting
the
In addition, the value of the
corporations could have been obtained through formal discovery had
Judith elected not to sign the settlement agreement.
McMurry, Ky. App., 957 S.W.2d 731 (1997).
-5-
McMurry v.
As
decree,
an
Judith
alternative
contends
ground
that
the
to
reopen
the
settlement
dissolution
agreement
was
unconscionable. She argues that according to Shraberg v. Shraberg,
Ky., 939 S.W.2d 330, 330 (1997), the trial court was in the best
position to determine whether the agreement was unconscionable and
this court should grant broad deference to such determination.
In
a post-dissolution motion, before a trial court may consider the
unconscionableness of an agreement, one of the grounds listed in CR
60.02 must be found and the decree reopened.
satisfy
her
burden
under
CR
60.02
Judith’s failure to
prohibits
the
court
from
reopening the decree and determining whether it was unconscionable.
For the reasons stated above, we find that the family
court erred in granting Judith’s CR 60.02 motion and by modifying
the division of property provisions in the marital settlement
agreement
incorporated
into
the
January
6,
1994,
Decree
of
Dissolution and, accordingly, its December 8, 1997, order is
reversed.
Judith’s cross-appeal is directly related to the manner
in which the family court distributed the funds from the sale of
the corporation.
Because the cross-appeal involves an issue which
arose after the circuit court incorrectly reopened the Decree of
Dissolution, it is hereby ordered dismissed.
KNOPF, Judge, CONCURS.
-6-
GUDGEL, Chief Judge, DISSENTS.
ENTERED:
October 22, 1999
/s/ Joseph R. Huddleston
Judge, Court of Appeals
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Michael L. Allen
Louisville, Kentucky
Jeffrey D. Stamper
Louisville, Kentucky
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