JOHN EDWARD HALLORAN v. KAREN JANE HALLORAN
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RENDERED: May 24, 2002; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2000-CA-001755-MR (DIRECT APPEAL)
AND
NO. 2000-CA-001857-MR (CROSS-APPEAL)
JOHN EDWARD HALLORAN
v.
APPELLANT/CROSS-APPELLEE
APPEALS FROM BOONE CIRCUIT COURT
HONORABLE LINDA R. BRAMLAGE, JUDGE
ACTION NO. 99-CI-01026
KAREN JANE HALLORAN
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BARBER, McANULTY, AND SCHRODER, JUDGES.
McANULTY, JUDGE:
John Edward Halloran appeals from a judgment of
the Boone Circuit Court with respect to division of the parties’
marital property.
Karen Jane Halloran cross-appeals challenging
the trial court’s finding that John did not dissipate marital
assets and its failure to award her maintenance.
We affirm.
The parties were married in 1966 and had three sons,
none of whom are minors.
In September 1999, John filed a
petition for dissolution of marriage.
At that time he was 53
years old and employed as the President and Chief Executive
Officer of International Knife & Saw, Inc. (IKS).
years old and a housewife.
Karen was 52
During the marriage, the couple
accumulated approximately $4-5 million in assets including houses
in Kentucky and South Carolina, retirement assets, life
insurance, investment accounts, IKS stock, and miscellaneous
personal property.
Shortly after filing the petition, John resigned his
position at IKS and started to establish a new company named The
Knife Source (TKS), which manufactured industrial cutting knives
used in the lumber industry.
It was anticipated that the
parties’ three sons would be employed by and eventually become
minority owners of TKS.
John contributed $475,000 as start-up
capital with 50% ownership in the new venture, which was made up
of two corporations, TKS, the manufacturing entity, and JEH
Properties, which owned the real estate connected with the
business.
John estimated he would receive approximately $200,000
in salary in the first year of operations of the new business.
During the proceedings, Karen became employed at Dillard’s
Department Stores as a sales clerk earning $10.00 per hour or
$10,000 per year.
On May 9, 2000, the trial court conducted an
evidentiary hearing on the property division, at which John and
Karen were the only witnesses.
At the hearing, the parties
substantially agreed on the valuation of the marital property of
approximately $4,376,000, but they disagreed on the proper
allocation.
John desired an equal division of the total assets
but did not object to Karen receiving a larger percentage of the
liquid assets.
Whereas, Karen sought a slightly higher
percentage of the total assets and wanted most of the liquid
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assets.
Karen testified that her monthly expenses were
approximately $5,500.
John testified that in response to two
margin calls precipitated by a significant decline in the stock
market, he liquidated the parties’ investment account with Robert
Baird & Co. (Baird Account) in March 2000, which had a net value
of approximately $200,000 at that time.
On May 25, 2000, the trial court entered its Findings
of Fact and Conclusions of Law awarding John and Karen net assets
of $2,075,015 and $2,432,803, respectively.
John received his
new business (TKS and JEH), his life insurance policies, 58% of
the IKS stock, two automobiles, 50% of the proceeds from the
liquidated Baird Account, 50% of the proceeds from the sale of
the Kentucky residence, and miscellaneous cash and jewelry.
Karen received all of John’s and her retirement plan monies, 42%
of the IKS stock, all of the proceeds upon sale of the South
Carolina house, 50% of the proceeds from the liquidated Baird
Account, 50% of the proceeds from the sale of the Kentucky house,
her automobile, and miscellaneous cash and jewelry.
The court
also held that John did not wrongfully squander the money in the
couple’s Baird Account and the parties did not enter into a
binding agreement to make a gift to each of their three sons of a
10% interest in TKS.
On June 5, 2000, John filed a CR 59.05 motion to alter,
amend or vacate the judgment challenging the larger amount of
total assets awarded to Karen, the division of the liquid assets,
and the ruling that there was no agreement between the parties to
make a gift of an ownership interest in TKS to their sons.
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John
also moved for additional findings of fact pursuant to CR 52.02.
On June 26, 2000, the trial court entered a judgment restating
the property division set out in its May 2000 Findings of Fact
and Conclusions of Law.
The trial court denied the motions and
entered no additional factual findings.
This appeal followed.
John challenges the trial court’s valuation and
distribution of the couple’s marital assets.
Under KRS
403.190(1), a trial court must divide marital property “in just
proportions” considering the relevant factors including:
(a) the
contribution of each spouse including the contribution of a
spouse as homemaker; (b) the value of property set apart to each
spouse; (c) the duration of the marriage; and (d) the economic
circumstances of each spouse when the property division becomes
effective.
A trial court is not required to divide marital
property equally, but has discretion as long as the division is
in just proportions given the relevant factors.
See Brosick v.
Brosick, Ky. App., 974 S.W.2d 498, 503 (1998); Russell v.
Russell, Ky. App., 878 S.W.2d 24, 25 (1994).
A trial court’s
decision regarding the proper proportional division will not be
reversed absent an abuse of discretion.
Russell, 878 S.W.2d at
25; Herron v. Herron, Ky., 573 S.W.2d 342, 344 (1978).
An abuse
of discretion involves a decision that is arbitrary,
unreasonable, unfair or unsupported by sound legal principles.
Goodyear Tire and Rubber Co. v. Thompson, Ky., 11 S.W.3d 575, 581
(2000)(citing Commonwealth v. English, Ky., 993 S.W.2d 941, 945
(1999)); Clary v. Clary, Ky. App., 54 S.W.3d 568, 570 (2001).
Meanwhile, a trial court’s valuation of marital property will not
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be disturbed unless it is clearly erroneous and contrary to the
weight of the evidence.
Underwood v. Underwood, Ky. App., 836
S.W.2d 439, 443 (1992); Calloway v. Calloway, Ky. App., 832
S.W.2d 890, 893 (1992); Drake v. Drake, Ky. App., 721 S.W.2d 728
(1986).
John contends the trial court’s property division was
unreasonable and unfair especially with respect to awarding Karen
the entire proceeds from the sale of the South Carolina house.
He asserts that being awarded only 25% of the liquid assets
renders him “unnecessary (sic) cash poor” and without sufficient
cash assets to fund his new business.
He states that the trial
court’s allocation failed to weigh adequately the factor dealing
with the economic circumstances of each spouse and was not
supported by the evidence.
In fact, the trial court’s allocation mirrored John’s
recommended division in most respects, except for the South
Carolina house.
He received a total of $2,073,015 in assets,
$563,178 of which were liquid assets.
John proposed a 65%/35%
division of liquid assets, while the trial court’s order resulted
in a 75%/25% allocation.
Karen was 53 years old with only a high
school education, no training, and no work experience in the past
33 years.
John was a highly paid executive who had earned
between $948,000 and $305,000 between 1996-1999.
a much higher earning potential than Karen.
He clearly has
John voluntarily
embarked on the risky business venture of starting his own
business and has already invested heavily in it.
While a
discussion of the factors in KRS 403.190 and of the facts
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supporting the court’s decision would have been helpful, we
cannot say the trial court abused its discretion in awarding
Karen the entire proceeds from the sale of the South Carolina
house or that additional factual findings were necessary for
proper review.
John also argues the trial court erred by failing to
take into consideration in its property division the various tax
consequences and the fact that the couple’s three sons were to
receive a 30% ownership interest in TKS.
He states that his
testimony that the children would receive an ownership interest
and he would have to pay $60,000-$70,000 in capital gains tax
should he cash in his life insurance policies was unrebutted and
would reduce his share of the property division.
The trial court
rejected John’s claim of a legal contract between the parties
related to giving the sons a 30% interest in TKS and said John
was free to make a gift to the children.
John failed to
establish the existence of a binding agreement, but merely
testified the parties discussed the matter prior to the divorce
proceedings.
He points to a letter “which Karen helped to type
promising” the oldest son a 10% interest in TKS, but the letter
was never produced or introduced into evidence at the hearing.
Absent a legal agreement, Karen should not be required to assume
an equal share of any burden for transferring an interest to the
children in TKS affecting the marital estate.
As for the tax
issue, any tax liability on the life insurance policies arises
only if they are surrendered, which John testified he did not
intend to do.
Moreover, John advocated that Karen could take
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early withdrawals from the retirement accounts, which would
likewise cause negative tax consequences.
Given the equivocal
nature of any agreement on the children’s interest in TKS and any
tax liabilities, we do not believe the trial court was clearly
erroneous or abused its discretion in failing to factor these
issues into the valuation and distribution of the marital assets.
On cross-appeal, Karen objects to the trial court’s
failure to award her permanent maintenance.
She contends that
she was not awarded sufficient funds to maintain the standard of
living established during the marriage.
In deciding whether to
award maintenance, a trial court must conduct a two-stage
evaluation based on the requirements set out in KRS 403.200.
First, the court must determine whether maintenance is justified
in the first instance based on a lack of sufficient property
including the marital property to be received upon dissolution,
and the recipient’s ability to support herself through
appropriate employment.
KRS 403.200(1)(a) and (b); Russell,
supra; Weldon v. Weldon, Ky. App., 957 S.W.2d 283 (1997).
The
second stage involves determining the amount and duration of any
award.
KRS 403.200(2).
A trial court has broad discretion in
deciding whether to award maintenance in the first instance, as
well as in determining the amount and duration of a maintenance
award.
Leveridge v. Leveridge, Ky., 997 S.W.2d 1, 2 (1999);
Gentry v. Gentry, Ky., 798 S.W.2d 928, 937 (1990).
Karen received a total of $2,432,803 with approximately
$1,658,490 being liquid assets available to her.
She maintains
the South Carolina house, valued at $463,604, is not a liquid
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asset because it was still unsold at the time of the hearing.
Nevertheless, Karen had purchased a new house and she had
received and rejected an offer of $429,000 for the South Carolina
house, so conversion of that asset into monetary funds was only a
matter of time.
John presented several scenarios showing that
with prudent investment of the assets she received upon
dissolution, Karen could generate an income sufficient to cover
her stated monthly expenses.
She is in good health, retains some
earning potential, and will have access to a significant amount
of retirement funds either immediately under 26 U.S.C. § 76(t) or
within a few years after reaching age 59 1/2.
We agree with the
trial court that Karen has sufficient property to provide for her
reasonable needs and is not entitled to maintenance.
Karen also challenges the trial court’s finding that
John did not dissipate or act wrongfully with respect to his
handling of the Baird Account.
She notes that the value of this
investment account declined from a net value of $785,000 in
October 1999 to $230,000 in March 2000.
Her primary complaint is
that John liquidated the account without her prior approval.
Dissipation is an equitable doctrine designed to
protect persons from being deprived an equal share of the marital
estate by spouses who wrongfully diminish it by spending or
wasting marital assets for non-marital purposes.
See generally
15 Graham & Keller, Kentucky Practice: Domestic Relations Law §
15.86 (2d ed. 1997); Robinette v. Robinette, Ky. App., 736 S.W.2d
351 (1987).
The party alleging dissipation bears the ultimate
burden of persuasion to show an intent by the dissipator to
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improperly deny the other spouse of marital assets.
See, e.g.,
Brosick v. Brosick, Ky. App., 974 S.W.2d 498 (1998); Bratcher v.
Bratcher, Ky. App., 26 S.W.3d 797 (2000).
John testified that he decided to liquidate the Baird
Account because of its precipitous decline in value that occurred
in conjunction with a general decline in the overall stock
market.
He said there had been several margin calls that forced
him to either infuse additional funds or sell portions of the
account to maintain the required debt ratio.
Karen does not
assert that John should have liquidated the account earlier, but
rather, alleges his unilateral decision to liquidate depleted an
asset of securities that should have been divided between the
parties.
Karen, however, presented no evidence that John’s
conduct resulted in a lower value for the account assets at the
time of the hearing.
Indeed, the value of the account had
declined 34% at a steady rate in the prior six months with little
indication of change.
There was no evidence that John’s decision
conflicted with any advice from the broker handling the account.
Rather than waste marital assets, John’s action served to
preserve the assets of the account.
Karen has not shown that
John intended to deprive Karen of marital assets by liquidating
the Baird Account.
The trial court correctly found that John did
not dissipate or wrongfully waste marital assets.
Finally, Karen argues the trial court should have
awarded her attorney fees.
The award of attorney fees is left to
the sound discretion of the trial court.
Neidlinger v.
Neidlinger, Ky., 52 S.W.3d 513, 520 (2001); Gentry v. Gentry,
Ky., 798 S.W.2d 928, 938 (1990); KRS 403.220.
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The primary
consideration in the decision on attorney fees is the disparity
in the parties’ financial resources.
Gentry, supra; Glidewell v.
Glidewell, Ky. App., 859 S.W.2d 675 (1993).
In this case, Karen
received over $2.4 million in assets, $350,000 more than John,
and approximately 75% of the liquid assets.
The trial court did
not abuse its discretion in denying Karen’s request for an award
of attorney fees.
Cf. Beckner v. Beckner, Ky. App, 903 S.W.2d
528 (1995)(wife entitled to attorney fees due to gross imbalance
in parties’ income and lack of income producing property);
Lampton v. Lampton, Ky. App., 721 S.W.2d 736 (1986)(award of
attorney fees improper where resources of parties approximately
equal).
For the foregoing reasons, we affirm the judgment of
the Boone Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT/CROSSAPPELLEE:
BRIEF FOR APPELLEE/CROSSAPPELLANT:
Robert W. Carran
Taliaferro, Mehling, Shirooni,
Carran & Keys, PLLC
Covington, Kentucky
Kurt A. Philipps
Deters, Benzinger & La Velle
Covington, Kentucky
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