DEBRA JANE BALL v. DAVID CRAIG BALL
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NOVEMBER 4, 2005; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-001620-MR
DEBRA JANE BALL
APPELLANT
APPEAL FROM OHIO CIRCUIT COURT
HONORABLE RONNIE C. DORTCH, JUDGE
ACTION NO. 02-CI-00429
v.
DAVID CRAIG BALL
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BARBER, BUCKINGHAM, AND JOHNSON, JUDGES.
BARBER, JUDGE:
This appeal stems from a dissolution of marriage
proceeding originating in Ohio County, Kentucky.
were married on November 10, 2000.
The parties
At the time of the marriage,
Appellee, David Craig Ball (David), owned a one-third share of
Paxton & Ball, Inc., an S corporation.
After separating
November 23, 2002, Appellant, Debra Jane Ball (Debra) filed for
a dissolution of marriage from David on December 6, 2002.
An
interlocutory decree was entered on August 8, 2003, dissolving
the parties’ marriage while reserving all other issues for
determination at a later date.
The remaining issues were
presented to Hon. William L. Wiesman, Domestic Relations
Commissioner, (Commissioner) at a hearing on August 25 and 26,
2003.
During the hearing, testimony was received from two
certified public accountants (C.P.A.), Robert Kuphal, on behalf
of Debra; as well as David Anderson, long-time accountant for
Paxton & Ball, 1 on behalf of David, regarding the change in the
value of David’s interest in Paxton & Ball during the parties’
marriage.
Subsequently, the Commissioner filed his report with
the clerk on October 10, 2003.
Debra filed exceptions to the
report in its entirety on October 20, 2003.
Debra’s exceptions
were supplemented by a memorandum in support of exceptions to
the Commissioner’s recommended order, filed April 27, 2004.
David filed his response to Debra’s memorandum on May 17, 2004.
Judge Ronnie C. Dortch did not hold a hearing on Debra’s
exceptions and overruled them based upon the record on July 14,
2004.
The Court found that the Commissioner’s report was based
upon credible evidence and supported by applicable law.
Debra
now appeals the Commissioner’s finding related to the change in
value of David’s interest in Paxton & Ball during the parties’
marriage.
1
Mr. Anderson testified that his C.P.A. firm had served Paxton & Ball for 25
years. He also testified that he had personally prepared the financial
documents for Paxton & Ball for the past 10 years with the exception of part
of one year.
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There is also a second issue appealed by Debra.
On
November 10, 2003, Debra filed a motion requesting the trial
court to refer the matter back to the Commissioner for
additional proof in light of newly discovered evidence.
Debra
gave no indication as to the identity of the evidence in her
motion.
As a result, David responded requesting disclosures
regarding the evidence’s nature.
On December 23, 2003, Judge
Dortch entered an order allowing Debra to submit evidence to the
court in support of her motion.
On January 9, 2004, Debra filed
a motion containing more explanation as to the nature of the
evidence as well as attaching copies of financial documents and
a video transcript of a video deposition.
The newly discovered
evidence related to the deposition of Russell Snodgrass, a onethird interest holder of Paxton & Ball.
Mr. Snodgrass provided
financial documents which reflected an increase in his
investment equity from December 18, 2001, through March 31,
2003.
Debra argued in her motion that the same increase would
be applicable to David because he, like Mr. Snodgrass, owned a
one-third interest in the company.
David filed a response to
Debra’s motion on February 2, 2004.
Debra filed a reply on
February 3, 2004.
Judge Dortch denied Debra’s motion to refer
the matter back to the Commissioner on March 5, 2004, based upon
the record.
Debra then filed a motion to reconsider the order
overruling her on March 9, 2004, and David filed a response
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thereto on March 15, 2004.
Without a hearing, Judge Dortch
issued an order denying Debra’s motion to reconsider on April 5,
2004.
Debra now argues it was error for the trial court to
refuse to refer the matter back to the Commissioner for
additional proof based upon newly discovered evidence.
We will
first examine Debra’s argument that the Commissioner erred in
his valuation of David’s interest in Paxton & Ball during the
parties’ marriage in the findings of fact of the Commissioner’s
report.
Kentucky Rule of Civil Procedure 52.01 states in
pertinent part for actions tried without a jury, “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.”
As a result, when the
trial court adopts the recommendations of the Commissioner,
those recommendations fall under the same standard of review as
applied to a trial court’s findings.
See Greater Cincinnati
Marine Service, Inc. v. City of Ludlow, 602 S.W.2d 427, 429,
(Ky. 1980) and Wells v. Sanor, 151 S.W.3d 819, 822 (Ky.App.
2004).
First we determine the appropriate standard of review.
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Our court cannot disturb the findings of a trial court
in a case involving dissolution of marriage unless those
findings are clearly erroneous.
Cochran v. Cochran, 746 S.W.2d
568, 569-570, (Ky.App. 1988), (citing Johnson v. Johnson, 564
S.W.2d 221 (Ky.App. 1978)), see also Rife v. Fleming, 339 S.W.2d
650, 652, (Ky. 1960).
Findings of fact are not clearly
erroneous if supported by substantial evidence.
Black Motor
Company v. Greene, 385 S.W.2d 954 (Ky.App. 1964), (citing
Massachusetts Bonding & Insurance Co. v. Huffman, 340 S.W.2d 447
(Ky. 1960)).
Substantial evidence has been conclusively defined
by Kentucky courts as that which, when taken alone or in light
of all the evidence, has sufficient probative value to induce
conviction in the mind of a reasonable person.
Secretary, Labor
Cabinet v. Boston Gear, Inc., a Div. of IMO Industries, Inc., 25
S.W.3d 130, 134, (Ky. 2000).
A trial court’s ruling as to valuations in a
dissolution action will not be disturbed on appeal unless
clearly contrary to the evidence submitted.
Gomez v. Gomez, 168
S.W.3d 51, 55 (Ky.App. 2005), (citing Clark v. Clark, 782 S.W.2d
56, 58 (Ky.App. 1990)).
This is the rule even in cases where
evidence exists upon which the value could have been much higher
or lower.
Purdom v. Purdom, 498 S.W.2d 131, 133 (Ky. 1973).
The trial court is required to render a judgment of a business’
value which reflects reality, but is not required to use a
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particular methodology to reach that conclusion.
Gomez supra
168 S.W.3d at 55, (citing Clark supra, 782 S.W.2d at 60).
The
task of the appellate court is to determine whether the trial
court’s approach fairly estimated the value of the business and
the individual’s interest.
Id. (citing Clark supra, 782 S.W.2d
at 59).
There is no dispute between the parties that David’s
ownership interest itself is non-marital property in that he
owned same prior to the parties’ marriage.
What is at issue is
the increase in value of David’s interest in Paxton & Ball
during the parties’ marriage.
Kentucky Revised Statute
403.190(2)(e) states “marital property” means all property
acquired by either spouse subsequent to the marriage except the
increase in value of property acquired before the marriage to
the extent that such increase did not result from the effort of
the parties during the marriage.
In other words, an increase in
value of non-marital property may be marital or non-marital
depending on why the increase in value occurred.
Goderwis v.
Goderwis, 780 S.W.2d 39, 40 (Ky. 1989), (citing Stallings v.
Stallings, 606 S.W.2d 163 (Ky. 1980)).
An increase in value of
non-marital property during marriage which is the result of a
joint effort of the parties establishes the increase in value of
the non-marital property as marital property.
Id.
The efforts
of the parties may include the contribution of one spouse as a
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primary operator of the business and the other spouse as
primarily a homemaker.
Id.
According to the record, David
worked at Paxton & Ball while Debra maintained the marital home.
Therefore, we believe the marital property exception in KRS
403.190(2)(e) is not applicable to the facts presented to us in
this appeal and any increase in value in David’s share in Paxton
& Ball during the parties’ marriage would be marital property
and subject to division by the trial court.
We now turn to the Commissioner’s report.
The
Commissioner stated the following in his report about the change
in value of David’s interest in Paxton & Ball:
The primary asset involved is one-third
interest in the corporation, Paxton and
Ball, Inc. Shortly before the marriage, the
current shareholders of Paxton and Ball
purchased their interest from Mr. Tichenor
for a negotiated sum of Seven Million Three
Hundred Forty-Nine Thousand Dollars
($7,349,000.00) which constitute 85% of the
ownership. Two CPA’s testified as to the
value of the business at the date of
marriage and the value of the business at
the beginning of the year 2003. The
Petitioner’s CPA, Robert Kuphal, testified
that the business was currently losing
money. He further stated that the asset
approach of valuing the business had a
negative effect from the date of marriage
until June of 2003. He did not use market
income approach over present values, but
applied a formula based upon debt reduction
and concluded that the business was
currently worth considerably more than the
total value of Eight Million Six Hundred
Forty-Six Thousand ($8,646,000.00) at the
date of the marriage. Mr. Kuphal testified
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that in the year 2000, the business lost
Three Hundred Ninety-Three Thousand Two
Hundred Eight Dollars ($393,208.00) and that
in the year 2002, the business continued to
lose. Its 2001 loss amounted to One Hundred
Seventy-Eight Thousand, Three Hundred
Eighty-Five Dollars ($178,385.00).
The Respondent’s CPA, David Alexander,
testified that he had done work on Paxton
and Ball for many years. This, of course,
included years that other persons were
primary owners of Paxton and Ball. His
testimony on the value of Paxton and Ball in
November of 2000 and its value in November,
2002, had declined. During the period of
the marriage, his testimony was that
retained earnings had decreased Three
Hundred Eighty-One Thousand, Eight Hundred
Twenty-Five Dollars ($381,825.00).
Based upon the tax returns and the
testimony of CPA’s, the Court finds that the
value of the business has decreased
considerably during the time of the
marriage. Inasmuch as Kentucky does not
provide for splitting the losses that occur
during the marriage of a business and the
fact that the Respondent is a minority
owner, the Commissioner concludes that there
is no property to be divided in the Paxton
and Ball asset. 2
The Commissioner found the testimony on this matter by
Mr. Anderson to be more reliable than that provided by Mr.
Kuphal.
The Commissioner had the opportunity to judge the
credibility of each witnesses in relation to this issue and this
court shall give his findings due regard.
CR 52.01 In
circumstances of conflicting testimony, a reviewing court may
2
Commissioner’s Report, p.2-3.
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not and will not disturb the findings of the Commissioner so
long as it is supported by substantial evidence.
Bentley v.
Bentley, 500 S.W.2d 411, 412, (Ky.App. 1973), (citing Sharp v.
Sharp, 491 S.W.2d 639 (Ky. 1973) and Adams v. Adams, 412 S.W.2d
857 (Ky. 1967)), see also Ori v. Steele, 399 S.W.2d 727, 728,
(Ky.App. 1966).
Following a review of the record and trial video, we
believe the Commissioner’s finding in relation to the change in
value of David’s interest in Paxton & Ball during the marriage
is supported by substantial evidence.
Each C.P.A. provided the
Commissioner with substantial explanation as to the basis of
their respective valuations.
The Commissioner could have relied
on Mr. Kuphal’s testimony and reached a different result.
The
fact that the Commissioner chose not to does not provide
evidence of error warranting a reversal on appeal.
Because the
Commissioner’s finding related to the change in value of David’s
Paxton & Ball interest during the parties’ marriage was
supported by substantial evidence, the findings fail to satisfy
the clearly erroneous standard and must be affirmed.
We next turn to Debra’s second basis of her appeal,
the trial court’s denial of her request to have the matter
referred back to the Commissioner.
As stated above, Debra filed a motion asking the court
to refer her case back to the Commissioner for taking of
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additional proof in light of newly discovered evidence.
This
evidence consisted of deposition testimony 3 from Russell
Snodgrass, a one-third owner of Paxton & Ball, as well as
financial documents prepared for the benefit of the creditors of
Paxton & Ball as well as Mr. Snodgrass.
As stated earlier, the
trial court ultimately denied Debra’s request to refer the
matter back to the Commissioner for additional proof.
Typically, a motion such as that filed by Debra is
filed after a final judgment has been rendered by the trial
court.
Unfortunately, Debra failed to cite which Kentucky Rule
of Civil Procedure she was relying on in her motion to refer her
matter back to the Commissioner, but the motion reads as though
she is relying upon Kentucky Rule of Civil Procedure 59.01.
Ky.
R. Civ. P. (CR) 59.01(g) states “A new trial may be granted to
all or any of the parties on all or part of the issues for any
of the following causes: . . . (g) Newly discovered evidence,
material for the party applying, which he could not, with
reasonable diligence, have discovered and produced at trial.”
In the instant case, Debra’s motion to refer the matter back to
the Commissioner for additional proof based upon newly
discovered evidence is unusual in that it was filed after the
Commissioner’s report was filed but before the trial court’s
final order adopting or rejecting said report was entered.
3
The deposition of Mr. Snodgrass was taken on December 16, 2003.
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We
believe Debra’s motion was akin to a Ky. R. Civ. P. (CR) 59.01
motion and will treat it as such.
Under Ky. R. Civ. P. (CR) 59.01(g), newly discovered
evidence may be grounds for a new trial only if the moving party
shows that she could not, with reasonable diligence, have
discovered and produced the evidence at trial.
Glidewell v.
Glidewell, 859 S.W.2d 675, 677 (Ky.App. 1993), (citing Walker v.
Farmer, 428 S.W.2d 26 (Ky. 1968)).
In order for the trial court
to grant a new trial on the ground of newly discovered evidence
that evidence must be so strong and persuasive that a different
result would “necessarily follow.”
Massey v. McKinley, 690
S.W.2d 131, 135 (Ky.App. 1985), (citing Thomas v. Surf Pools,
Inc., 602 S.W.2d 437, (Ky.App. 1980)).
The trial court is
granted broad discretion in ruling on a Ky. R. Civ. P. (CR)
59.01 motion based on newly discovered evidence.
Glidewell
supra, 859 S.W.2d at 677, (citing Gibbs v. Commonwealth, 723
S.W.2d 871 (Ky.App. 1986), overruled on other grounds by
Commonwealth v. Christie, 98 S.W.3d 485 (Ky. 2002)).
Upon a review of the motions and the documents filed
relating thereto as well as the Snodgrass deposition video
transcript, we affirm the trial court for three reasons.
First,
Debra did not state with specificity why this “newly discovered”
evidence was not available to her prior to the hearing in August
2003 other than to say that she had specifically requested the
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documents produced by Mr. Snodgrass prior to the final hearing
and she was advised the documents were not available.
However,
Mr. Snodgrass stated several times during his deposition that
Mr. Kuphal received every financial document he requested from
Paxton & Ball.
Second, Debra does not state that Russell
Snodgrass was unavailable as a witness at the time of the
hearing in August 2003.
In fact, Mr. Snodgrass stated during
his deposition that he was available as a witness, waiting in
the hallway outside the hearing room during a part of the August
2003 hearing.
Third, we do not feel that the additional
evidence received from the Snodgrass deposition was of a type
likely to change the result of the original hearing, because Mr.
Snodgrass repeatedly stated the reason the financial documents
he provided at the deposition were prepared was for the benefit
of creditors of Paxton & Ball as well as his own.
Based on the
foregoing, we believe the trial court’s denial of Debra’s motion
to reconsider its denial of her motion to refer her matter back
to the Commissioner for additional proof was proper and we
affirm.
For the reasons set forth above, the finding of fact
by the Commissioner related to the valuation of the change in
value of David’s interest in Paxton & Ball during the parties’
marriage is supported by substantial evidence and is not clearly
erroneous.
We also believe the trial court’s April 5, 2004
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order denying Debra’s motion to reconsider its denial of her
motion to refer her matter back to the Commissioner for
additional proof was proper.
Therefore, we affirm the Ohio
Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Leigh A. Jackson
Hartford, Kentucky
Mike McKown
Hartford, Kentucky
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