RANDY JOEL OVERSTREET v. JANET DARLENE OVERSTREET
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RENDERED: December 12, 2003; 10:00 a.m.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2001-CA-002544-MR
AND
NO. 2001-CA-002627-MR
RANDY JOEL OVERSTREET
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM HARDIN CIRCUIT COURT
HONORABLE KELLY MARK EASTON, JUDGE
ACTION NO. 99-CI-01195
JANET DARLENE OVERSTREET
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING IN PART,
REVERSING IN PART AND REMANDING
** ** ** ** **
BEFORE:
DYCHE, JOHNSON AND SCHRODER, JUDGES.
JOHNSON, JUDGE:
Randy Joel Overstreet has appealed and his
former wife, Janet Darlene Overstreet, has cross-appealed from
an order entered by the Hardin Circuit Court on October 24,
2001, which sustained in part and overruled in part the
objections filed by Randy and Janet to the Commissioner’s report
concerning the division of the retirement benefits and
accumulated annual leave and compensatory time acquired by Randy
and Janet during their marriage.
Having concluded that the
trial court erroneously determined one of Randy’s retirement
accounts to be entirely marital property and that the trial
court erred by refusing to award Janet a portion of the payment
Randy received as compensation for the annual leave and
compensatory time he had accumulated during the marriage, we
reverse in part and remand.
Having further concluded that the
trial court did not abuse its discretion with respect to the
other rulings challenged in this appeal, we affirm in part.
Randy and Janet were married on August 13, 1981.
The
marriage produced one child, who was over 18 years old at the
time of the divorce.
Before Randy and Janet married, Randy was
employed as a dispatcher with the Kentucky State Police from
November 1, 1973, until May 31, 1975, and he participated in the
Kentucky Employees Retirement System (KERS).
During this 19-
month period, Randy accumulated approximately $400.00 in his
KERS account.
On June 1, 1975, Randy became employed as a
trooper for the Kentucky State Police (KSP).
Shortly
thereafter, Randy withdrew the funds he had accumulated as a
member of the KERS and his account was rendered inactive.
During his tenure as a KSP Trooper, Randy was a member of the
State Police Retirement System (SPRS).
During the marriage,
Randy also established a 401(k) Plan and a 457 Plan with the
Kentucky Public Employees Deferred Compensation Authority.
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In 1983 Randy paid $659.00 to reactive his KERS
account and to purchase the service time that he had lost by
withdrawing the funds he had accumulated as a dispatcher.1
On
January 29, 1999, Randy rolled over $28,351.80 from his 401(k)
Plan into his KERS account for the purpose of purchasing five
years (60 months) of non-qualified service credit.
The Overstreets’ divorce action was initiated in the
Hardin Circuit Court on August 17, 1999, when Randy filed a
petition for dissolution of marriage.
On October 14, 1999,
Randy applied for retirement benefits and selected the “life
with 20 years certain” option on his KERS and SPRS accounts.
Randy did not consult Janet prior to making this decision.
In
fact, on the retirement forms completed by Randy, he indicated
that he was divorced.2
On October 31, 1999, Randy retired from the Kentucky
State Police with 293 months of service as a KSP Trooper, 218 of
those months having been acquired during his marriage to Janet.3
At the time of his retirement, the balance in Randy’s KERS
account was $29,659.52 and the balance in his SPRS account was
$79,390.36.
Randy began receiving monthly benefits in the
1
As a result of this transaction, 20 months of service credit, instead of 19
months, were posted to Randy’s KERS account.
2
The couple’s daughter was named as the beneficiary on the retirement forms.
3
Randy currently serves as the Chairman of the Board of Trustees of the
Kentucky Retirement Systems.
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amount of $659.42 on his KERS account, which was based on the 80
months of service credit he had purchased, and monthly benefits
in the amount of $3,313.64 on his SPRS account, which was based
on 293 months of service plus 23 months of accrued sick leave.4
At the time of his retirement, Randy also had accumulated
several hundred hours of annual leave and compensatory time.
Janet was employed by the Franklin County Health
Department during the marriage and she was also a member of the
KERS.
As of November 1, 1999, the value of Janet’s KERS account
was approximately $9,368.00, which was based on 130 months of
service.
On November 9, 1999, the Hardin Circuit Court
dissolved the Overstreets’ marriage, but all other issues were
reserved for future adjudication.
In December 1999, Randy
received approximately $23,000.00 as payment for the annual
leave and compensatory time he had accumulated over the course
of his career as a KSP Trooper.
After evidentiary hearings were held, the Domestic
Relations Commissioner filed a report on July 11, 2001,
recommending findings of fact and conclusions of law concerning,
inter alia, the division of the retirement benefits and
accumulated annual leave and compensatory time acquired by Randy
and Janet during their marriage.
4
In response to the written
Randy accumulated 19 months of his 23 months of accrued sick leave during
his marriage to Janet.
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objections filed by Randy and Janet, the trial court entered an
order on October 24, 2001, sustaining some of the objections and
overruling the remainder.
This appeal and cross-appeal
followed.
Randy claims in his appeal that the trial court erred
(1) by determining his KERS account to be entirely marital
property; (2) in calculating Janet’s share of the SPRS account;
(3) by not granting his request that Janet receive her share of
his retirement accounts in the form of a lump-sum payment; and
(4) by not granting him a portion of Janet’s retirement account.
Janet claims in her cross-appeal that the trial court erred (1)
by not awarding her damages as a result of Randy’s failure to
consult with her prior to selecting the “life with 20 years
certain” option on the KERS and SPRS accounts; and (2) by
refusing to award her a portion of the $23,000.00 Randy received
as payment for his accumulated annual leave and compensatory
time.
We agree with Randy’s contention that his KERS account
should have been classified as non-marital property since his
legal rights in the account were acquired prior to his marriage
to Janet.5
“Whether certain property is part of the marital
estate subject to division presents a question of law that we
5
Cf. Poe v. Poe, Ky.App., 711 S.W.2d 849, 852-57 (1986) (contractual rights
to portion of pension benefits acquired during the marriage held to be
marital property).
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decide without deference to the trial court’s decision.”6
Randy’s right to purchase service credit with the KERS arose out
of his employment as a dispatcher with the Kentucky State Police
from November 1, 1973, until May 31, 1975, before the marriage.
Although Randy withdrew the funds he initially accumulated in
his KERS account prior to his marriage to Janet, his right to
participate in the retirement system was not terminated as a
result of this transaction.
Moreover, the fact that the value
of Randy’s KERS account was enhanced during the marriage through
the use of marital funds does not alter its non-marital
character.7
Accordingly, we reverse the trial court on this issue
and remand this matter for the restoration of Randy’s nonmarital KERS account and for an appropriate division of the
marital contributions made to that asset.
The trial court shall
6
Chen v. Chen, 416 N.W.2d 661, 663 (Wis.App. 1987).
7
See KRS 403.190(2)(e), which states, in relevant part, as follows:
(2) For the purpose of this chapter, “marital
property” means all property acquired by either
spouse subsequent to the marriage except:
. . .
(e) The increase in value of property acquired before
the marriage to the extent that such increase did not
result from the efforts of the parties during
marriage.
It necessarily follows that property acquired prior to marriage retains its
non-marital character even if marital funds are used to enhance the value of
that property. When the value of non-marital property is enhanced through
the use of marital funds, only the increase in value of the property and the
funds contributed in pursuit of that increase are subject to division as
marital property.
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divide the marital funds used to enhance the value of Randy’s
KERS account and the interest accrued as a result of the marital
contributions to that account as marital property.
As
previously discussed, in 1983 Randy paid $659.00 to reactivate
his KERS account and to purchase the service time that he had
lost by withdrawing the funds he had accumulated during his
employment as a dispatcher with the Kentucky State Police.
Furthermore, on January 29, 1999, Randy rolled over $28,351.80
from his 401(k) Plan into his KERS account.
At the time of his
retirement, the balance in Randy’s KERS account was $29,659.52.
On remand, the trial court should divide the marital interest in
Randy’s KERS account of $29,659.52 between the parties.
However, Janet’s marital share in Randy’s KERS account will have
to be reduced by any monthly retirement benefits she has already
received from Randy’s KERS account.
Randy next contends that the trial court erred in
calculating Janet’s share of his SPRS account.
It is well
settled that issues pertaining to the division of marital
property upon divorce are reviewed under an abuse of discretion
standard.8
“An abuse of discretion exists when the reviewing
court is firmly convinced that a mistake has been made.”9
8
“‘A
See Davis v. Davis, Ky., 777 S.W.2d 230, 233 (1989).
9
Romstadt v. Allstate Insurance Co., 59 F.3d 608, 615 (6th Cir. 1995) (citing
Southward v. South Central Ready Mix Supply Corp., 7 F.3d 487, 492 (6th Cir.
1993)).
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[ ] court abuses its discretion when it relies on clearly
erroneous findings of fact, or when it improperly applies the
law or uses an[ ] erroneous legal standard.’”10
The trial court determined that Janet was entitled to
receive 37.5% of Randy’s SPRS account.
The trial court arrived
at this figure by dividing the number of service months Randy
accumulated during the marriage including accrued sick leave,
which totaled 237 months, by the number of service months he
acquired during his tenure as a state trooper including accrued
sick leave, which totaled 316 months.11
Randy contends Janet is only entitled to receive
34.495% of his SPRS account.12
Randy arrives at this percentage
by dividing the 218 service months he accumulated during the
marriage by 316 months, which consists of the 293 service months
he acquired during his tenure as a KSP Trooper plus his 23
months of accrued sick leave.
While Randy accrued 19 months of
the sick leave during his marriage, he contends that the trial
court erred by adding these 19 months to the 218 service months
accumulated during the marriage for a total of 237 months.
10
Romstadt, 59 F.3d at 615 (quoting Southward, 7 F.3d at 492).
11
At
237 divided by 316 equals 75%, half of which equals 37.5%.
12
As previously discussed, of the 293 total months of service Randy
accumulated as a KSP Trooper, 218 of those months were accumulated during his
marriage to Janet. In addition, Randy accumulated 23 months of accrued sick
leave during his tenure as a KSP Trooper. Randy argues that 218 should be
divided by 316 (293 + 23) in order to arrive at the 68.99% marital portion of
the account, half of which equals 34.495%.
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the same time, Randy argues that his total sick leave of 23
months should be added to his 293 service months for a total of
316 months.
We find no merit whatsoever to this approach.
The
trial court’s calculation of Janet’s share of the SPRS account
does not constitute an abuse of discretion.
The trial court’s
calculation properly considered the marital and non-marital
aspects of Randy’s accumulated service months and sick leave and
that calculation resulted in a fair and accurate division of the
SPRS account.
Randy further contends that the trial court erred by
not granting his request that Janet receive her share of his
SPRS account in the form of a lump-sum payment.
We disagree.
As the trial court noted in its order dated October 24, 2001:
Basically, [Randy] wants [Janet] to
receive her percentage in his retirement
accounts based upon the actuarial value at
the time of divorce rather than allowing
[Janet] to realize the benefit of payment
over a period of time. The basic
unfairness of this position is apparent.
[Randy] wants to impose upon [Janet] a
choice he himself would not and, in fact,
did not make. The law does not require the
Court to allocate the retirement accounts
as [Randy] wants them to be allocated.
It is well settled that “[t]he trial court has wide discretion
in dividing marital property[.]”13
The trial court did not abuse
its discretion by awarding Janet her share of Randy’s SPRS
13
Davis, 777 S.W.2d at 233.
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account in the form of monthly payments as opposed to a lump-sum
payment.
Randy also claims the trial court erred by not
granting him a portion of Janet’s retirement account.
Randy
insists that the trial court was required to award him a portion
of Janet’s retirement account pursuant to KRS 403.190(4), which
states, in relevant part, as follows:
If the retirement benefits of one
spouse are excepted from classification as
marital property, or not considered as an
economic circumstance during the division of
marital property, then the retirement
benefits of the other spouse shall also be
excepted, or not considered, as the case may
be. However, the level of exception
provided to the spouse with the greater
retirement benefit shall not exceed the
level of exception provided to the other
spouse.
The crux of Randy’s argument appears to be based on
his contention that the trial court failed to consider Janet’s
retirement account as an “economic circumstance during the
division of marital property.”
A clear reading of the trial
court’s order, however, indicates that it did in fact consider
Janet’s retirement account as an economic circumstance when
dividing the parties’ marital property.
The order entered by
the trial court on October 24, 2001, states, in pertinent part,
as follows:
It must be kept in mind that the trial court
has broad discretion in the disposition of
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property upon divorce. That mandate
includes the obligation to “divide the
marital property without regard to marital
misconduct in just proportions considering
all relevant factors.” KRS 403.190(1). The
evidence reveals that [Randy] will have an
income which is a number of times greater
than that of [Janet]. . . . A fair division
is realized [ ] by [Janet] being awarded all
of her own retirement account, the value of
which pales in comparison to [Randy’s]
accounts.
Thus, the trial court properly considered the relevant factors
in dividing Janet’s retirement account.
We now turn to the arguments advanced by Janet in her
cross-appeal.
Janet first contends that the trial court erred
by not awarding her damages and attorney’s fees as a result of
Randy’s failure to consult with her prior to selecting the “life
with 20 years certain” option on the KERS and SPRS accounts.
Janet claims that under the option selected by Randy she will
not continue to receive the balance of the benefits due her if
Randy dies within the 20-year payment period.14
While we do not
dispute this contention, Janet has failed to cite any authority
whatsoever indicating that Randy was required to inform her of
14
See KRS 61.635(7), which states, in relevant part, as follows:
Life with twenty (20) years certain. The
member less than age sixty-two (62) may elect to
receive a monthly retirement allowance during his
lifetime which shall guarantee payments for two
hundred and forty (240) months. If the member dies
before receiving payments for two hundred and forty
(240) months, his beneficiary shall receive the
remaining payments for the duration of the two
hundred and forty (240) months period.
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his retirement decision.
The evidence supports the trial
court’s finding that the right to choose a retirement option
belongs solely to the member.
Thus, even if Janet had been
informed of Randy’s decision, she had no legal right to force
him to choose a different option.
The trial court did not abuse
its discretion by refusing to award Janet damages.
Janet next contends that the trial court erred by
refusing to award her a portion of the $23,000.00 Randy received
as payment for his accumulated annual leave and compensatory
time.
The trial court concluded that the $23,000.00 Randy
received as payment for his accumulated annual leave and
compensatory time was not marital property subject to division
pursuant to Bratcher v. Bratcher.15
While the Court in Bratcher concluded that the accrued
sick leave and vacation benefits at issue in that case were not
subject to division as marital property,16 Bratcher did not hold
that accrued sick leave and vacation benefits are always nonmarital.
The appellee in Bratcher, Sheila Bratcher, had yet to
retire and at the time of her divorce she had approximately
$10,800.00 worth of accrued sick leave and $2,800.00 worth of
accrued vacation leave as a result of her employment at
Owensboro Mercy Health Systems.
15
Ky.App., 26 S.W.3d 797 (2000).
16
Sheila was entitled to
Id. at 800-01.
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compensation for any accrued vacation leave in the event of her
retirement or termination of employment whereas any unused sick
leave was subject to forfeiture.
Sheila’s former husband,
Charles Bratcher, claimed her accrued sick leave and vacation
leave constituted marital property subject to division.17
After surveying the law from several jurisdictions
that had addressed the issue, this Court concluded that accrued
leave is different from pension or retirement benefits, which
are subject to division as marital property,18 due to the fact it
is “much more difficult to value, not to mention more personal
than, a pension or retirement benefits.”19
In arriving at this
conclusion, this Court relied on a Maryland case, Thomasian,
supra, that treated accrued holiday and vacation benefits as an
alternative form of wages, since it replaces wages on days when
the worker does not work.20
This Court, like the Maryland Court,
focused on the difficulty of valuing accrued leave time and the
fact that an employee might not actually collect the benefits.21
Since Sheila had no present right to receive her accumulated
17
Id. at 798-99.
18
See Jones v. Jones, Ky., 680 S.W.2d 921 (1984) (military retirement
benefits); and Poe, 711 S.W.2d at 852-57 (nonvested pension plan).
19
Bratcher, 26 S.W.3d at 801 (citing Thomasian v. Thomasian, 556 A.2d 675,
681 (Md.App. 1989)).
20
Id. (citing Thomasian, 556 A.2d at 681).
21
Bratcher, 26 S.W.3d at 800-01.
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vacation leave, and no certain right to ever receive all of her
accumulated sick leave, the Court in Bratcher concluded that the
accumulated leave could not be deemed to be a marital asset
subject to division.
The factual scenario present in Bratcher differs
markedly from that of the case sub judice.
Unlike the accrued
sick leave and vacation leave in Bratcher, the annual leave and
compensatory time that Randy received upon his retirement was
not difficult to value.
Randy received approximately $23,000.00
as payment for the annual leave and compensatory time that he
accumulated over the course of his career as a KSP Trooper.
Moreover, Randy’s right to receive compensation for his accrued
annual leave and compensatory time became certain on October 31,
1999, the date he retired.
As previously discussed, the
appellee in Bratcher had yet to retire.
Thus, her accrued sick
leave and vacation benefits were subject to future dissipation.
This distinction was fundamental to the result reached in
Bratcher.
Simply stated, the case sub judice is distinguishable
from Bratcher.22
issue as well.
Accordingly, we reverse the trial court on this
On remand, Janet’s marital interest in the
22
We believe that our holding herein addresses the concerns raised in Graham
and Keller’s Kentucky Practice Series, wherein it was stated: “The Bratcher
outcome is not necessarily unfair, but the court’s reasoning may come back to
haunt it when the case arises in which an employee has significant accrued
leave acquired during the marriage, can receive money compensation for that
leave, and is about to retire from work with the leave an important part of a
retirement package.” 15 Graham & Keller, Kentucky Practice § 15.54 (1997 &
Supp. 2002).
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annual leave and compensatory time accumulated by Randy during
the marriage should be divided as a part of the trial court’s
division of the marital property.
Based upon the foregoing reasons, the order of the
trial court entered on October 24, 2001, is affirmed in part,
and reversed in part, and this matter is remanded for further
proceedings consistent with this Opinion.
ALL CONCUR.
BRIEF FOR APPELLANT/CROSSAPPELLEE:
BRIEF FOR APPELLEE/CROSSAPPELLANT:
C. Mike Moulton
Elizabethtown, Kentucky
S. Marie Hellard
Tiffany L. Gash
Lawrenceburg, Kentucky
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