WAYNE ASHBY v. TERESA ASHBY
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RENDERED: JUNE 13, 2003; 10:00 a.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2001-CA-001055-MR
AND
NO. 2001-CA-001056-MR
WAYNE ASHBY
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE ELEANORE M. GARBER, JUDGE
ACTION NO. 97-FC-004268
TERESA ASHBY
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, KNOPF, AND TACKETT, JUDGES.
TACKETT, JUDGE:
Wayne Ashby and Teresa Ashby appeal and cross-
appeal from portions of the decree of the Jefferson Circuit
Court dissolving their marriage.
The trial court’s order
restored Wayne’s non-marital property, divided the marital
estate between the parties, refused to find that Teresa
dissipated marital assets, eliminated arrearages on spousal
support, denied Teresa’s request for an award of attorney’s
fees, and ordered the sale of the parties’ business.
After
careful consideration of the convoluted factual issues involved,
we affirm.
Wayne and Teresa married on September 28, 1979, and
are the parents of two children, a son born in 1980, and a
daughter born in 1984.
During the course of the marriage, the
parties acquired multiple businesses, commercial real
properties, rental income properties, two unimproved lots, and a
newly constructed residence in Bullitt County.
The residential
rental properties consisted of houses on Petwood Drive, Nathan
Hale Way, and Forge Circle.
The parties also owned a commercial
property, on which they operated Orell Liquors, which they
purchased from Wayne’s father.
The property, located at 12821
Dixie Highway, consisted of the building where the store was
located and a top-floor rental apartment.
Just prior to their
separation, the parties purchased two unimproved lots on Rough
River and another piece of commercial property on which they
began operating Orell Bar and Grill.
Wayne and Teresa separated on May 15, 1997, with
Teresa continuing to occupy the marital residence in Bullitt
County while Wayne moved into the house on Petwood Drive.
Teresa filed a petition for dissolution on June 6, 1997, in the
Jefferson Circuit Court and requested child support.
Teresa
testified at the hearing that Wayne was earning over $3,000.00
per month at United Parcel Service while she was only able to
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draw $2,165.00 per month from the liquor store.
The trial court
ordered Wayne to pay $710.00 per month in support for the
parties’ two children.
On July 4, 1997, Teresa filed a motion for temporary
maintenance alleging that she was two months in arrears on the
mortgage payments for the parties’ residence and that Wayne had
removed $6,000.00 from the liquor store cash register.
Wayne
was neither present nor represented by counsel at the hearing;
nevertheless, the trial court determined that Wayne received
notice of the hearing and awarded Teresa $2,400.00 per month for
two months and $1,600.00 per month thereafter.
Unknown to the
trial court or the Domestic Relations Commissioner (DRC), Wayne
had been fired from his job at UPS in July of 1997 after being
involved in a traffic accident in which he was at fault.
His
attorney filed a motion to stay enforcement of the orders;
however, the motion was never ruled on.
On October 28, 1997, the trial court entered an order
directing Teresa to run Orell Liquors and assigned her the
responsibility of managing all of the parties’ rental
properties.
Wayne was ordered not to be present on the premises
of Orell Liquors.
Furthermore, Teresa was to keep records of
all payments she made towards outstanding mortgages on any of
the properties.
Meanwhile, Wayne was ordered to operate Orell
Bar and Grill, but the venture was unsuccessful and he was
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forced to sell it after about a year for less than half the
purchase price.
During the parties’ separation, all of the property
they owned declined drastically in value.
In 1997, the value of
the liquor store as a going concern was $86,000.00.
In
addition, Wayne and Teresa were operating a check cashing
business on the premises which brought in $3,000.00 per month.
The top-floor apartment rented for $350.00 per month.
Shortly
before their separation, Wayne and Teresa had paid his father
$130,000.00, which retired all of their debt on the Orell
Liquors property.
In April 1998, Teresa ceased the check
cashing business and sales at the liquor store declined
dramatically under her management.
In May 1998, Wayne retained a new attorney to
represent him in the dissolution action and his counsel filed a
motion to reduce the child support order.
The following month,
Wayne’s second attorney withdrew and he retained his present
counsel, Rocco Celebrezze.
Mr. Celebrezze filed motions to
terminate Teresa’s maintenance and reduce Wayne’s child support
obligation since one of the children was no longer a minor.
Prior to the scheduled hearing date on Wayne’s motion, Teresa
obtained an order holding Wayne in contempt of court for failure
to pay his child support and maintenance obligations.
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On
July 27, 1998, Wayne paid Teresa $7,500.00 in order to purge a
180 day jail sentence for contempt.
Two months later, Wayne
sold Orell Bar and Grill and paid Teresa an additional
$7,500.00.
On March 24, 1999, the DRC recommended that Teresa’s
maintenance award be terminated retroactively to June 1998 in
light of Wayne’s loss of employment at UPS.
In January 2000,
the original trial judge who had been presiding over the
dissolution proceedings recused and the case was reassigned to
another judge.
On January 6, 2000, the DRC reviewed another of
Teresa’s motions to hold Wayne in contempt for failure to pay
the arrearage on his child support and maintenance and
recommended that he once again be found in contempt.
A week
later, Wayne filed his exceptions to the maintenance order.
On
June 27, 2000, the new judge conducted a partial trial to
determine the primary residence for the parties’ minor daughter.
At the trial, it was decided by an oral order that the daughter
would reside primarily with Wayne and Teresa would have liberal
visitation.
The remaining issues were tried by depositions
which were filed in September 2000.
On February 6, 2001, the trial court entered an order
dissolving the marriage.
Wayne’s child support obligation was
reduced retroactively as of May 12, 1998, and eliminated as of
June 27, 2000.
Teresa was ordered to pay child support as of
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January 2001.
The residence on Petwood Drive which Wayne had
inherited from a grandparent, and Orell Bar and Grill were
restored to Wayne as his non-marital property.
Although both
these properties had been previously sold, the proceeds were
placed in an escrow account until the trial court determined
whether the property was marital or non-marital in nature.
The marital property was divided between the parties, and the
trial court ordered Orell Liquors sold.
The trial court further
denied Teresa’s request to enforce the maintenance order and
Wayne’s request for a finding that Teresa dissipated marital
assets.
Teresa filed a motion to amend, alter, or vacate the
judgment which was denied.
Both parties appealed specific
portions of the trial court’s dissolution decree.
Wayne now argues that the trial court erred when it
refused to find sufficient evidence that Teresa had dissipated
marital assets while managing the liquor store and rental
properties during the parties’ separation.
Prior to the final
payment which retired all debt on the liquor store, the Ashbys
were paying Wayne’s father $1529.00 per month as rent.
In
addition, they rented a truck for $200.00 a month and paid
employees’ salaries totaling approximately $2,000.00 per month.
Under Teresa’s management, the store had none of these expenses
and, consequently, Wayne contends that the store should have
produced an additional $24,000.00 per year for which there is no
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accounting.
Teresa claims that sales at the liquor store
declined drastically while she was in charge and that she was
unable to maintain a checking account for the store because it
was constantly being garnished to meet mortgage obligations on
the parties’ various properties.
As to the rental properties, Wayne points out that the
three residential rental properties netted a total of $501.00
per month after the mortgages were paid.
Nevertheless, under
Teresa’s management all three were sold after foreclosure.
The
Petwood Drive residence, which had a value of $55,000.00, was
mortgaged for $40,000.00 in order to purchase Orell Bar and
Grill and to install $15,000.00 worth of cabinets for the house
in Bullitt County.
Teresa made the last mortgage payment on
June 1, 1997, and the property brought $47,000.00 at the
foreclosure sale.
The residence on Forge Circle was valued at
$65,000.00, had a mortgage of $19,000.00, and was also security
for a Visa equity line of $10,000.00.
Teresa made the last
mortgage payment on this property in September 1998, and it was
sold for $56,000.00 after foreclosure.
The Nathan Hale Way
residence which the parties had purchased from Wayne’s mother
was also valued at $55,000.00 and had a $27,000.00 mortgage.
Teresa ceased making payments on that mortgage on October 10,
1998, and it was sold after foreclosure for $37,000.00.
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The standard of proof for dissipation of marital funds
in a dissolution action is preponderance of the evidence.
We
have previously held that:
The party alleging dissipation must prove
dissipation and the value of the property
. . . . Once the party alleging dissipation
establishes a prima facie case, the burden
of proof shifts to the party charged with
the dissipation to produce evidence
sufficient to show that the expenditures
were appropriate.
Brosick v. Brosick, Ky. App., 974 S.W.2d 498, 502 (1998)
(internal citations omitted).
Wayne argues that the liquor
store should have generated an additional $24,000.00 per year
under Teresa’s management, based on the sales before the
separation.
Since Teresa failed to keep records in accordance
with the trial court’s October 1997 order, he contends that the
only explanation for the decline in sales and the foreclosure on
the rental properties is that Teresa managed them in less than a
properly businesslike fashion or hid the parties’ assets.
Teresa operated the liquor store on a cash basis
occasionally depositing money in other people’s checking
accounts so that bills could be paid.
She presented no records
to document the income stream other than cash register receipts
and a few expenses provided to Barbara Adams, the store’s
bookkeeper.
With regard to the rental properties, Teresa
maintains that a substantial portion of the rent money she
collected was garnished by creditors.
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After the garnishment
began, some tenants refused to pay rent due to confusion over
whether Teresa or her creditor was supposed to collect the
payments.
Consequently, she was forced to evict nonpaying
tenants and was unable to make the mortgage payments.
The trial court conducted a careful analysis of the
dissipation issue and concluded as follows:
Each party has pointed to the poor
business practices and/or fraudulent conduct
of the other. Following review of the
testimony and the exhibits in this case, the
Court finds that both parties together bit
off more than they could chew acquiring two
businesses and three encumbered rental
properties when they had little cash, no
business management training and little
business experience. Even more
problematical, while they were already
overextended, they obtained a huge mortgage
of $328,000 to finance the payoff to Wayne’s
father of the liquor store and the
construction of a 3,000 ft. residence in
[Bullitt County]. Their combined incomes in
the best of times did not enable them to
make the monthly mortgage payments of
$2,350.00 on the [Bullitt County] property.
The parties jointly got in way over their
heads.
Wayne claims that Teresa dissipated or
hid assets generated or expected to be
generated by the liquor store and the rental
properties. The Court finds that both
parties, without ill intent, but because of
lack of business skills and experience
contributed to their joint losses. . . .
(Emphasis in original.)
Moreover, the trial court determined
that a finding that Teresa had dissipated marital assets would
have been based on speculation rather than competent evidence.
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Wayne cites Brosick, Barringer v. Barringer, Ky. App.,
514 S.W.2d 114 (1974), and Bratcher v. Bratcher, Ky. App., 26
S.W.3d 797 (2000) in support of his argument that Teresa should
be found to have dissipated assets in connection with their
businesses.
Brosick and Barringer both, however, involved
husbands who spent marital funds on other women in contemplation
of divorce.
Further, in Bratcher we held that evidence of
dissipation must show that “there was a clear intent on the part
of the dissipator to deprive the spouse of marital assets.”
at 800.
Id.
The applicable standard of review requires that we
uphold the trial court’s factual determinations unless there was
an abuse of discretion.
S.W.2d 852 (1990).
Vanover-May v. Marsh, Ky. App., 793
After a careful review, we believe that the
trial court operated within its discretion in finding a lack of
evidence that Teresa dissipated marital assets in an attempt to
deprive Wayne of their value.
Teresa cross-appeals from the trial court’s order
alleging error in the elimination of arrearage on spousal
support, the restoration of non-marital property to Wayne, the
order for Orell Liquors to be sold, and the refusal to require
Wayne to pay a portion of her attorney’s fees.
A trial court
may award attorney’s fees in a dissolution action only when
there is an imbalance in the parties’ financial resources.
Lampton v. Lampton, Ky. App., 721 S.W.2d 736 (1986).
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At the
time their marriage was dissolved, the Ashbys owned the
commercial property where the Orell Liquors was located and two
unimproved lots on Rough River.
In addition, there was the
approximate amount of $21,000.00 in Wayne’s attorney’s escrow
account representing proceeds from the sales of the foreclosed
marital properties.
The trial court divided the marital
property equally between the parties; thus, there was no
imbalance between their resources which would have justified
awarding Teresa a portion of her attorney’s fees.
Without question, the parties’ most valuable asset at
the time of their divorce was Orell Liquors and the commercial
property on which it was located.
With regard to this property,
the trial court determined the following:
The Court also determines that there is no
way to award the liquor store and/or the
liquor store property to either of the
parties and accomplish an equitable division
of marital assets. At the same time the
Court is concerned that any divisions of
these assets between the parties given the
level of their mutual hostility and
distrust, would be a recipe for disaster at
worst, and unending continued litigation at
best. The Court is further mindful of the
substantial indebtedness of the parties,
particularly with respect to the expected
substantial deficiency judgment to result
upon the foreclosure sale of the property in
[Bullitt County].
. . .
The liquor store and the property on
which the liquor store is located on Dixie
Highway shall be listed for sale within 90
days. Of the proceeds of the sale of these
two properties, the deficiency judgment on
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the [Bullitt County] property shall be paid
as well as any and all remaining property
and/or income taxes. If there are any
remaining proceeds, they shall be divided
equally between the parties. Pending sale,
[Teresa] shall be permitted to operate the
liquor store, but she shall open a checking
account within 7 days of this Order and
maintain accurate accounting of all
inventory, sales, costs and personal draw.
She shall be permitted to draw up to $750.00
per week for her own personal living
expenses.
Teresa contends that the trial court erroneously ordered the
sale of Orell Liquors in order to satisfy a prospective
deficiency judgment.
This ignores the reasoning expressed in
plain language in the trial court’s order which explained that
the business would have to be sold in order to achieve an
equitable division of marital property between the parties.
Teresa cites our decision in Goldstein v. Goldstein,
Ky. App., 377 S.W.2d 52 (1964), in support of her argument that
the trial court should have awarded Orell Liquors to her and
directed her to pay Wayne the value of his interest in the
business in cash.
The distinction between the factual situation
in Goldstein and the case here mitigates against this argument.
In Goldstein, the trial court was only awarding the wife a
fifteen percent interest in the marital business; in the case
sub judice, the trial court divided the marital property evenly
between the parties.
Given the parties’ inability to meet so
many of their financial obligations and Teresa’s evidenced lack
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of success in operating Orell Liquors, we believe the court
acted correctly by not awarding Teresa the business and then
requiring her to buy Wayne’s interest.
With regard to the trial court’s restoration of
Wayne’s non-marital property, Teresa claims that either Petwood
Drive or Orell Bar and Grill should have been assigned to him,
but not both.
Kentucky Revised Statute (KRS) 403.190(1)
requires the trial court in a dissolution action to assign each
party his or her non-marital property prior to dividing the
marital estate.
Wayne inherited the residence on Petwood Drive
which made it his non-marital property pursuant to KRS
403.190(2)(b).
Subsequently, the parties secured a mortgage in
the amount of $40,000.00 against the Petwood Drive property.
Of
this amount, $25,000.00 was used to purchase Orell Bar and Grill
and the balance was used to purchase cabinets for the Bullitt
County residence.
Consequently, when it was purchased, Orell
Bar and Grill was Wayne’s non-marital property because it was
bought with funds traceable to the Petwood Drive property which
he had inherited.
Lampton at 738.
Less than a year after purchasing Orell Bar and Grill,
Wayne was forced to sell it for only $11,000.00.
Thus, the
trial court correctly found that the property did not appreciate
in value due to any joint effort of the parties and thus
remained Wayne’s non-marital property.
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Although Teresa argues
that marital funds paid the mortgage payment on the Petwood
Drive residence, we note this was a rental property which
realized $60.00 per month profit after the mortgage payments.
Finally, Teresa argues that the trial court erred by
eliminating the arrearage on spousal support owed to her.
As
previously stated, the order for maintenance was entered on the
DRC’s recommendation, but without full knowledge of Wayne’s
employment status.
As early as June 1998, Wayne’s counsel filed
a motion to terminate Teresa’s maintenance; however, she
preempted the scheduled hearing date on the motion by obtaining
an order holding Wayne in contempt for failure to pay.
In its
final order dissolving their marriage, the trial court stated:
This is a court of equity. As the Court
declines to find Teresa responsible for her
poor business dealings and record keeping,
the Court similarly declines to hold [Wayne]
accountable for maintenance which never
should have been awarded in the first place
and which was impossible for [Wayne] to pay
at any time during the lengthy pendency of
these proceedings. Accordingly, [Teresa’s]
claims for maintenance arrearages or credits
for arrearages shall be overruled as are
[Wayne’s] claims for credits for alleged
dissipation of assets.
Here, the trial court’s ruling is supported by our decision in
Mudd v. Mudd, Ky. App., 903 S.W.2d 533 (1995) in which we stated
that “our law does not prohibit a trial court from granting a
retroactive reduction in maintenance for the period of time from
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the filing of the motion to the entry of judgment.”
Supra at
534.
For the forgoing reasons, the judgment of the
Jefferson Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT/CROSSAPPELLEE:
BRIEF FOR APPELLEE/CROSSAPPELLANT:
Rocco J. Celebrezze
Jeffrey A. Gorski
Celebrezze & Keeler
Louisville, Kentucky
J. Russell Lloyd
Oliver B. Rutherford
Mobley & Lloyd
Louisville, Kentucky
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