CHARLES A. DUVALL v. LISA A. MORETON-DUVALL AND WYNTER RENEAUX COLLINS
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RENDERED: APRIL 29, 2005; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-000802-MR
CHARLES A. DUVALL
v.
APPELLANT
APPEAL FROM OLDHAM CIRCUIT COURT
HONORABLE PAUL W. ROSENBLUM, JUDGE
ACTION NO. 02-CI-00085
LISA A. MORETON-DUVALL AND
WYNTER RENEAUX COLLINS
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, CHIEF JUDGE; DYCHE AND KNOPF, JUDGES.
COMBS, CHIEF JUDGE:
Charles A. Duvall has appealed from orders
of the Oldham Circuit Court granting in part the post-decree
motion of his former-wife, Lisa A. Moreton-Duvall, for
enforcement of the parties’ property settlement agreement and
awarding her attorneys’ fees.
Having concluded that the trial
court correctly applied the law and that it did not abuse its
discretion, we affirm.
Charles and Lisa were married on May 31, 1986.
minor children were born of the marriage:
Three
Austin T. Duvall,
born May 10, 1987; Stuart E. Duvall, born December 23, 1990; and
Zachary M. Duvall, born October 19, 1994.
At the time of the
parties’ separation, Charles was forty-one years of age and
worked as a manager for United Parcel Service.
approximately $115,000.00 per year.
He earned
Lisa was thirty-eight years
of age and was self-employed in a custom, executive-style home
construction firm.
Her annual earnings varied between
$25,000.00 and $96,000.00.
Lisa filed a petition for dissolution of marriage on
February 7, 2002.
The parties agreed early in the proceedings
that they would share physical and legal custody of their
children.
However, extensive discovery was undertaken with
respect to establishing their net worth, annual income,
financial needs, and child support obligations.
On January 2, 2003, following a thorough and prolonged
evidentiary hearing, the court’s Domestic Relations Commissioner
(DRC) entered her recommendations with respect to Lisa’s request
for temporary maintenance, child support, and an advancement of
attorneys’ fees.
The Oldham Circuit Court entered an order
adopting those recommendations.
It awarded Lisa $1,500.00 per
month in temporary maintenance but denied her request for
temporary child support and attorneys’ fees.
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In late January 2003, the parties agreed to mediate
the remaining issues.
After several days of mediation failed to
resolve the differences, Charles filed a motion for a trial
date.
Another evidentiary hearing was held, and a decree of
dissolution was entered on June 2, 2003.
On June 27, 2003, without the direct participation of
their attorneys, the parties entered into a lengthy property
settlement agreement.1
As to the custody of their children, the
parties agreed to continue their 50/50 timeshare arrangement.
They affirmed an equitable division of their real and personal
property and agreed that Charles would pay monthly maintenance
of $600.00 to Lisa for a period of one year.
With respect to their income tax returns, they agreed
to amend their separate 2001 returns in order to file a joint
return for that year.
tax-preparer.
They identified a mutually acceptable
They agreed to file separate income tax returns
for the tax year 2002 and determined that Lisa would claim two
of the children as dependents on her income tax return and that
Charles would claim one on his.
The agreement provided that
“[t]hereafter, the parties will follow the dependency deduction
schedule set forth herein.”
Finally, addressing their tax
obligations, the parties agreed as follows:
1
Because Lisa had acted on her own, her attorneys immediately filed a motion
for leave to withdraw as counsel. The motion was granted by order of the
court entered July 21, 2003.
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The parties each agree to pay taxes on and
accept liability for one-half (1/2) of the
sale of all UPS stock in 2002 equaling
10,488 shares. The parties each agree to
pay taxes on and accept liability for onehalf (1/2) on all of the dividends paid in
2002 from the UPS stock.
Property Settlement Agreement Section V, paragraph D.
The court entered an amended decree of dissolution
incorporating the provisions of the property settlement
agreement on July 21, 2003.
Lisa remarried on September 22,
2003, and Charles’s maintenance obligation was terminated by the
court’s order of October 10, 2003.
On January 14, 2004, Lisa filed a motion requesting
that Charles be ordered to comply with specific portions of the
parties’ property settlement agreement.2
In her motion, Lisa
noted that 10,488 shares of UPS stock had been sold by the
parties during 2002.
The anticipated tax liability on the sale
had totaled $123,000.00.
Two estimated tax payments totaling
$60,000.00 were made from the sale of the stock.
The first
installment of $30,000 had been paid on March 24, 2002, and the
second $30,000 on June 14, 2002.
p.6.
Court Order of April 6, 2004,
(Appendix C of Appellant’s brief.)
While both the tax
liability and the pre-payment of tax had been equally divided
between the parties under the terms of their property settlement
agreement, Lisa complained that Charles had taken credit for the
2
Lisa was represented in this motion by her former attorneys.
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entire $60,000.00 tax pre-payment on his separate 2002 tax
return.
As a result, Lisa had received a notice from the
Internal Revenue Service of an underpayment of taxes totaling
$30,000.00.
In addition, she had been assessed penalties and
interest in the amount of $2,354.88.
Lisa requested that Charles be required to execute an
IRS Form 2848 in order to re-allocate to her tax return one-half
of the $60,000.00 pre-payment.
Lisa also petitioned that she be
reimbursed for one-half of the fees incurred for preparation of
the couple’s QDRO (pertaining to the distribution of Charles’s
UPS retirement benefits); that she be awarded one-half of the
value of a liquidating distribution paid to Charles as a
shareholder in Overseas Partners, LTD (“OPL”), a Bermuda
company; and that she be awarded attorneys’ fees and costs.
Charles argued that each provision of the property
settlement agreement had been meticulously negotiated and that
the omission of terms relating to the tax pre-payment was
intentional.
He denied that the funds derived from OPL were
secreted or mishandled in any way or that he was responsible for
any part of the fees incurred for preparation of the QDRO.
Finally, Charles argued that an award of attorneys’ fees to Lisa
would be unjust in light of her separate estate of more than one
million dollars.
-5-
In its order entered February 10, 2004, the court
concluded as follows:
This Court finds that the respondent
[Charles] was not entitled to claim the
entire $60,000.00 tax prepayment on his
separate 2002 tax return. The Property
Settlement Agreement clearly provides that
each party agrees to pay taxes on and accept
liability for one-half (1/2) of the sale of
all UPS stock in 2002 for these 10,488
shares.
* * * * *
The Court finds that the petitioner [Lisa]
is entitled to recover one-half (1/2) of the
OPL check in the sum of $6,562.00. This
Court specifically finds that [Charles]
violated the Order entered by this Court on
February 20, 2002 by negotiating this check
without obtaining Court permission to do so.
The Court further finds that [Charles]
failed to disclose the receipt of this
check. . . . In addition, the Property
Settlement Agreement executed by the parties
provides that the parties have equally
divided the OPL stock. In fact, [Lisa] did
not receive one-half (1/2) of the $6,562.00
representing liquidation of a portion of
this OPL stock.
(Appendix A of Appellant brief, pp. 2-3)
Although the Court
denied Lisa’s request to charge Charles for one-half of the
costs associated with the preparation of the QDRO, it awarded
her $1,000.00 toward payment of her attorneys’ fees.
Charles then filed a motion to alter, amend, or vacate
the court’s order pursuant to the provisions of CR3 59.05.
3
Kentucky Rules of Civil Procedure.
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In an
order entered March 8, 2004, the court directed the parties to
answer a series of specific questions pertaining to the sale of
the UPS stock in 2002.
They responded by way of extensive
memoranda and exhibits.
In an order entered April 7, 2004, the Oldham Circuit
court modified its previous findings of fact but essentially
reiterated its initial conclusions of law.
The court noted as
follows:
. . .[T]he source of the $60,000.00 paid as
estimated tax payments came from the sale of
the 10,488 shares of UPS stock, clearly a
marital asset. The Court further notes that
in construing contracts, the Courts must
attempt to arrive at the intention of the
parties as expressed in the instrument as a
whole and in so doing consider the subject
matter of the contract, the situation of the
parties and the conditions under which the
agreement is written. See LaFevers v.
LaFevers, Ky. App., 255 S.W.2d 985 (1953).
This Court further notes that an estimated
tax, like taxes that are withheld from wage
employees, are payments made to the Federal
government pursuant to the Internal Revenue
Code in fulfillment of an individual’s tax
liability. They are both methods of
collecting the income tax. The payment of
estimated income taxes is considered payment
to an account to be used toward the income
tax liability imposed by federal statute.
Unlike a tax refund, the parties are not
entitled to the use and benefit of the money
as the money belongs to the United States
Treasury.
This Court finds that the respondent was not
entitled to claim the entire $60,000.00 tax
prepayment on his separate 2002 tax return.
It is abundantly clear that each party to
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the marriage would incur tax liability based
on the sale of the stock in 2002 when they
filed their separate tax returns for 2002.
The Court rejects the respondent’s attempt
to draw a distinction between the allocation
of “tax payment” and “tax liability.” The
“liability” referenced in the Property
Settlement Agreement and to be shared
equally is the tax liability for the 2002
sale of the stock. To the extent the
payment of the estimated taxes arising from
the sale of the UPS stock in 2002 is
considered payment to an account to be used
toward the income tax “liability” imposed by
federal statute, then the property
Settlement Agreement in this case which
specifically provides that the parties
accept the tax liability equally must be
construed to allow the credit for those
estimated taxes to be shared equally.
[Charles] cannot deny that [Lisa] would
incur tax liability resulting from the sale
of the 10,488 shares of UPS stock in the
calendar year 2002. It logically follows
that the parties must share equally in the
credit for the estimated taxes which were
paid from proceeds of the sale of the 10,488
share of UPS stock, a marital asset of the
parties.
(Appendix C of Appellant’s brief, pp. 3-4.)
In light of the
additional work occasioned by Charles’s motion to amend or
vacate, the court increased the award of fees to Lisa’s
attorneys to $2,000.00.
This appeal followed.
Charles argues that the trial court erred by modifying
the terms of the couple’s property settlement agreement and that
the error resulted in an inequitable distribution of the marital
assets.
He also claims that the court erred by granting Lisa’s
attorneys’ fees.
We shall address each contention in turn.
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Charles contends that the trial court erred by
construing the terms of the couple’s property settlement
agreement so that his pre-payment of the federal income taxes
associated with the sale of the UPS stock in 2002 inured
disproportionately to Lisa’s benefit.
In essence, Charles
argues that while the parties agreed to accept liability for
their share of the taxes on the sale of the stock in 2002, his
share was the pre-paid share.
He maintains that:
The Property Settlement Agreement did not
allocate Chuck’s pre-settlement estimated
tax payment – only the tax liability.
Elsewhere in the settlement, Lisa was
awarded other assets which adequately
compensated her for the fact that Chuck
received the tax prepayment as part of his
share of the marital estate.
(Appellant’s brief, p. 3.)
The interpretation of this settlement agreement
presents a question of law.
First Commonwealth Bank of
Prestonsburg v. West, 55 S.W.3d 829 (Ky.App. 2000).
Therefore, we review this issue de novo.
In their agreement, the parties agreed to divide
evenly the tax liability incurred as a result of the sale of the
UPS stock in 2002.
If they had intended to divide between them
the balance of the outstanding tax liability associated with the
sale of the stock, the agreement could have so stated
explicitly.
If they had intended that Lisa alone would pay
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taxes on the remaining tax bill -- with Charles alone to receive
the benefit of the pre-payment, the agreement could have
reflected that intention.
The trial court interpreted the
agreement to mean that the parties expressly intended to accept
the tax liability in even proportions and to divide between them
the $60,000.00 in pre-payment toward the total liability of
$123,000.
We agree.
In unambiguous language, their property
settlement agreement provided as follows:
The parties each agree to pay taxes on and
accept liability for one-half (1/2) of the
sale of all UPS stock in 2002 equaling
10,488 shares. The parties each agree to
pay taxes on and accept liability for onehalf (1/2) on all of the dividends paid in
2002 from the UPS stock.
(Appendix D of Appellant’s brief, p. 16.)
We shall next consider the trial court’s findings of
fact with respect to the liquidating distribution of the OPL
stock.
We review factual findings under the clearly erroneous
standard.
As we stated in Sherfey v. Sherfey,74 S.W.3d 777, 782
(Ky. App. 2002):
“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.” A factual finding is not
clearly erroneous if it is supported by
substantial evidence. “Substantial
evidence” is evidence of substance and
relevant consequence sufficient to induce
conviction in the minds of reasonable
people. [Footnotes omitted].
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If the court’s factual findings are supported by substantial
evidence, they must be affirmed.
In her motion, Lisa contended that Charles had failed
to disclose his receipt of a liquidating distribution of OPL
stock in April 2003 in the amount of $6,562.00.
She indicated
that Charles had negotiated the check on or about June 25, 2003,
and that he had deposited it into the Republic Bank account.
The court made the following findings:
The respondent’s [Charles’s] affidavit
executed herein on March 23, 2004 addressed
the issue of the OPL check in the sum of
$6,562.00. With respect to this OPL check,
respondent’s affidavit states as follows:
“I cannot remember whether I told her I
deposited it into my Republic Bank account,
but that is what I had been instructed to do
for safekeeping and for keeping a paper
trail.”
The check for $6,562.00 represented a
liquidating distribution in the amount of
$2.00 per share, which OPL paid on April 9,
2003 to shareholders of record on March 28,
2003. The distribution arose from the
ownership by the parties of OPL stock, which
the parties divided equally under the
property settlement agreement. Allowing the
Respondent to claim the entire distribution
would violate the clear intention of the
agreement.
This Court concludes that the petitioner
[Lisa] was not advised by the respondent
that the OPL check in the sum of $6562.00
was deposited into the Republic Bank
account. This Court further finds that the
petitioner is entitled to recover one-half
(1/2) of the OPL check in the sum of
-11-
$6,562.00. This court further finds that
the respondent violated the Order entered by
this Court on February 20, 2002 by
negotiating this check without obtaining
court permission to do so. In addition, it
is most significant that the Property
Settlement Agreement executed by the parties
contains the following language regarding
the OPL stock:
OPL STOCK – The parties have equally
divided the husband’s OPL stock between
them, by receipt number, from the most
recent statement available on the date
of implementation. Should any
dividends have been paid on this stock
from the date of the parties filing for
divorce, said dividends will also be
divided equally. This transaction has
been implemented pursuant to the Order
of the Court. Each party shall be
solely responsible for any taxes
associated with their respective
dividends.
The Court concludes that [Lisa] did not
receive one-half (1/2) of the $6,562.00
representing a portion of this OPL stock.
Accordingly, the Court orders that the
respondent shall pay the petitioner the sum
of $3,281.00 plus interest ….
Order of April 6, 2004, pp. 4-6.
brief.)
(Emphasis added).
(Appendix C of Appellant’s
Based upon the express provisions of
the parties’ property settlement agreement and the evidence of
record, we hold that the factual findings of the trial court
were supported by substantial evidence and that it correctly
interpreted the agreement.
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Finally, Charles claims that the court erred by
granting Lisa’s attorneys’ fees.
KRS4 402.220 provides as
follows:
The court from time to time after
considering the financial resources of both
parties may order a party to pay a
reasonable amount for the cost to the other
party of maintaining or defending any
proceedings under this chapter and for
attorney’s fees, including sums for legal
services rendered and costs incurred prior
to the commencement of the proceedings or
after entry of judgment. The court may
order that the amount be paid directly to
the attorney, who may enforce the order in
his name.
In determining that Charles should pay Lisa’s
attorneys’ fees, the court expressly stated that it had
considered the provisions of KRS 403.220.
The court’s award of
attorneys’ fees was supported by the law and the facts, and we
find no abuse of discretion.
(Ky. 2004).
Sexton v. Sexton, 125 S.W.3d 258
In Gentry v. Gentry, 798 S.W.2d 928, 938 (Ky.
1990), the Supreme Court summarized succinctly the rationale for
providing relief on this point:
“[O]bstructive tactics and
conduct, which multiplied the record and the proceedings,” are
proper considerations justifying “both the fact and the amount
of the award.”
The order of the Oldham Circuit Court is affirmed in
all respects.
4
Kentucky Revised Statutes.
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ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Diana L. Skaggs
Sandra G. Ragland
Louisville, Kentucky
Wynter Reneaux Collins
Virginia Collins Burbank
Louisville, Kentucky
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