KAELIN (ANDREA HOGAN) VS. MEINERS (TERRY A.)
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RENDERED: AUGUST 28, 2009; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-000375-MR
&
NO. 2008-CA-000410-MR
ANDREA HOGAN KAELIN,
FORMERLY MEINERS
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM JEFFERSON FAMILY COURT
v.
HONORABLE ELEANORE GARBER, JUDGE
ACTION NO. 06-CI-500547
TERRY A. MEINERS
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CAPERTON, KELLER, AND LAMBERT, JUDGES.
KELLER, JUDGE: Andrea Hogan Kaelin, formerly Meiners (Andrea), appeals
from the family court’s (the court) judgment, arguing the court incorrectly: (1)
determined the marital value of Terry’s stock options; (2) granted Terry’s motion
for summary judgment regarding allocation of his employment contract; (3)
applied a 36% income tax rate in valuing Terry’s non-qualified deferred
compensation plan; (4) determined the amount of maintenance; and (5) awarded
insufficient attorney fees. Both parties appeal the court’s division of the value of
the marital home. Terry cross-appeals arguing the court: (1) failed to consider
evidence of Andrea’s alleged prescription drug abuse in determining her
contribution to the acquisition of marital assets; (2) incorrectly determined the nonmarital value of Terry’s stock options and investment account; (3) inappropriately
valued his investment account with UBS as of the date of separation rather than the
date of dissolution; and (4) incorrectly found that the parties had agreed to the
distribution of additional household goods and furnishings. For the reasons set
forth below, we affirm.
FACTS
The parties were married on March 21, 1994, separated on November
4, 2005, and the court dissolved their marriage by order dated November 2, 2007.
No children were born of the marriage. Terry, whose prior marriage ended in
dissolution, had two children, who spent a significant amount of time living with
the couple during the marriage. During the course of the marriage, Terry worked
as a radio show host and earned a significant amount of money, which will be
detailed as necessary later in this opinion.
Andrea, who has no children, had also been previously married. That
marriage ended when Andrea’s first husband, David Kaelin (David), died in 1990.
Following her first husband’s death, Andrea inherited the couple’s marital home
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and inherited or was the beneficiary of various retirement/investment accounts and
an insurance policy. Andrea operated her own business for a short time at the
beginning of the marriage but did not otherwise work outside the home.
Additional facts will be set forth as we address the issues raised by the parties.
STANDARD OF REVIEW
The issues raised by the parties require differing standards of review,
which we will set forth as we address each issue.
ANALYSIS
There are three primary issues: (1) whether Terry’s employment
contract is a marital asset, subject to division; (2) whether the court properly
determined the marital and non-marital value of Terry’s initial stock option
agreement; and (3) whether the court correctly determined what portion of the
property was nonmarital. We will address these issues first and in that order and
address the remaining issues thereafter.
1. Employment Contract
It is undisputed that Terry entered into a ten-year employment
contract during the course of the marriage. Andrea contends that this contract is a
marital asset and its value is subject to division. Furthermore, Andrea argues the
court erred by granting summary judgment to Terry on this issue. "The standard of
review on appeal of a summary judgment is whether the circuit judge correctly
found that there were no issues as to any material fact and that the moving party
was entitled to a judgment as a matter of law." Pearson ex rel. Trent v. Nat’l
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Feeding Systems, Inc., 90 S.W.3d 46, 49 (Ky. 2002). Andrea’s argument to the
contrary notwithstanding, the issue is a question of law; therefore, we apply the de
novo standard of review. Smith v. Smith, 235 S.W.3d 1, 6-7 (Ky. App. 2006).
In 2005, Terry entered into a ten-year employment contract with Clear
Channel. In pertinent part, the contract provides that Terry would be paid
$240,000 in year one with increases each year thereafter to a payment of $313,000
in year ten for a total payout under the contract of $2,750,400. The contract
provided for additional compensation in the form of stock option awards, if
approved by Clear Channel’s board of directors, and “talent fees” for personal
appearances and endorsements. Furthermore, the contract provided that Clear
Channel could terminate Terry’s employment for cause and that the contract was
“personal in nature and may not be assigned by [Terry] to any other person or
entity.”
Andrea argues before us, as she did before the court, that Terry’s
employment contract contains goodwill, much as there is goodwill in an
accounting or medical practice. See Heller v. Heller, 672 S.W.2d 945 (Ky. App.
1984); Clark v. Clark, 782 S.W.2d 56 (Ky. App. 1990); and Drake v. Drake, 809
S.W.2d 710 (Ky. App. 1991). However, the court agreed with Terry’s argument
that the contract, unlike an accounting or medical practice, is personal to him and
not a divisible attribute of a business.
We agree with the court for two reasons. First, unlike the parties in
Heller, Clark, and Drake, Terry does not operate a business. He is an employee
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and, unlike an accounting or medical practice, Terry’s contract cannot be sold.
Second, as noted in Clark, goodwill “is the expectation that patrons or patients will
return because of the reputation of the business or firm.” Clark, 782 S.W.2d at 59.
Terry does not have patrons or patients, he has listeners and, to the extent there is a
reputation surrounding Terry, it is his, not Clear Channel’s.
We note that the Arizona, California, and New Jersey cases cited by
Andrea are not persuasive. In Mitchell v. Mitchell, 152 Ariz. 317, 732 P.2d 208
(Ariz. 1987), the Supreme Court of Arizona determined that the goodwill from a
professional partnership was no less divisible than goodwill from a professional
corporation. Furthermore, the Court determined that the partnership agreement
was not binding on the wife with regard to valuation and division of any goodwill.
In Golden v. Golden, 270 Cal.App.2d 401, 75 Cal. Rptr. 735 (Cal. Ct. App. 1969),
the California Court of Appeal determined that the wife was entitled to a portion of
the goodwill of her husband’s medical practice. While the Court’s opinion does
contain the language cited by Andrea, that language refers to the goodwill in a
business, not to goodwill personal to an individual. In Dugan v. Dugan, 92 N.J.
423, 457 A.2d 1 (N.J. 1983), the New Jersey Supreme Court was concerned with a
husband’s law practice, a business. It was not concerned with an employment
contract. The preceding cases all involve goodwill associated with a business or
enterprise, not goodwill associated solely with a person.
In In re Marriage of McTiernan and Dubrow, 133 Cal.App.4th 1090,
1099, 35 Cal.Rptr.3d 287, 294 (Cal. Ct. App., 2005), the California Court of
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Appeal discussed the reasons for distinguishing between enterprise and personal
goodwill. As the Court noted:
[e]ndowing "a person doing business" with the capacity
to create goodwill, as opposed to limiting goodwill to "a
business," has wide ramifications. "A person doing
business" includes much of the working population.
Notably, there would be no principled distinction
between husband in this case, who is a director, and
actors, artists and musicians, all of whom could be said to
be "persons doing business." Thus, all such persons who
would have the "expectation of continued public
patronage" would possess goodwill. This would create a
substantial liability, as in this case, without a guaranty
that the liability would be funded. . . . [Because] there is
no guaranty, especially in the arts, that earnings will not
decline or even dry up, even though expectations were to
the contrary.
Finally, in Gaskill v. Robbins, 2009 WL 425619 (Ky. 2009), the
Supreme Court of Kentucky distinguished between “enterprise goodwill,” which
attaches to a business, and “personal goodwill,” which attaches to an individual
business owner. The Court held that, “depending on the facts, goodwill can belong
primarily or only to the person.” Id. at *4. In such a case, the goodwill is personal
and not subject to division upon dissolution of a marriage. Id. at *6. Although
Terry does not own a business, as did Gaskill, any goodwill he has is purely
personal to him. Therefore, the court properly determined that Terry’s
employment contract is not a marital asset.
2. The Stock Option
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In 1992, prior to the marriage, Terry received a stock option grant
from Clear Channel.1 Five years later, during the marriage, Terry exercised his
stock option. The parties did not dispute that a portion of the proceeds from the
stock option was marital; however, they did dispute how to divide those proceeds.
This issue presents a mixed question of fact and law. The “factual findings
underpinning the determination of whether an item is marital or nonmarital are
entitled to deference and, consequently, [are] reviewed under the clearly erroneous
standard. Ultimately, classification is a question of law, which [is] reviewed de
novo.” Smith v. Smith, 235 S.W.3d 1, 6-7 (Ky. App. 2006).
Terry’s expert testified that, for the purposes of categorizing the
proceeds, the effective date of the option should be the date Terry began working
for Clear Channel in 1986. She did so based on a letter from Clear Channel
indicating that the stock option was being offered because of Terry’s “superior
performance and the interest of the Company in keeping [Terry] as a long term
partner.” Using this method resulted in approximately 87% of the proceeds being
categorized as nonmarital and approximately 13% being categorized as marital.
Andrea’s expert testified that the Incentive Stock Option Agreement
should control the effective date of the option. That agreement specified that the
stock option was being granted to “secure” Terry’s continued service. Using this
method resulted in approximately 64% being categorized as nonmarital and
approximately 36% being categorized as marital.
1
Terry also received a stock option during the marriage. There is no dispute regarding that
stock option; therefore, we will address only the 1992 stock option.
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The court, noting that there are no Kentucky cases addressing the
issue, looked to the Supreme Court of Nebraska for guidance. In Davidson v.
Davidson, 254 Neb. 656, 578 N.W.2d 848 (Neb. 1998), the Supreme Court of
Nebraska, noting that most courts recognize that stock options can represent
compensation for past, present, and future performance, adopted the “time rule” for
determining how to divide stock options. The time rule requires the court to
determine “whether and to what extent the options were granted as compensation
for past, present, or future services. Then the trial court should determine what
percentage of each portion thereof was accumulated and acquired during the
marriage.” Id. at 254 Neb. 665, 578 N.W.2d 856. In making that determination,
the court is not bound by the language of the stock option agreement nor the
testimony of the employee. Rather, the court should look to the reasons the option
was granted. Those reasons can include inducing an employee to accept
employment, to reward an employee for past performance, to induce an employee
to continue employment, how the option is handled for tax purposes, and the
regularity with which options are granted. Id. Once the court makes the allocation
between past, present, and future, the court must then determine what percentage
was accumulated during the marriage.
If an option . . . is granted prior to the marriage, that
portion of the option . . . which represents compensation
for past services was accumulated and acquired entirely
outside the marriage. . . . To determine the percentage of
compensation for future services, if any, when the
option . . . is granted prior to the marriage but vests
during the marriage, the trial court should create a
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fraction the numerator of which is the time from the date
of marriage until the option vests and the denominator of
which is the time from the date of the grant to the date
the option vests.
Id. at 254 Neb. 666, 578 N.W.2d 857.
Taking into consideration the letter from Clear Channel, the language
in the stock option agreement, the testimony of the expert witnesses, and Terry’s
age at the time the option was granted, the court determined the primary purpose of
the option was to retain Terry as an employee. Therefore, it allocated 30% for past
performance and, pursuant to the time rule, determined this percentage was Terry’s
nonmarital property. The remaining 70% the court divided according to the above
formula, as follows: 70% x 64% (percentage of time from grant to vesting
preceding the marriage) = 44.8% nonmarital property; 70% x 36% (percentage of
time from grant to vesting during the marriage) = 25.2% marital property. The
court then rounded the preceding percentages and combined nonmarital shares for
a total of 75% nonmarital and 25% marital.
Having reviewed the record, the arguments of counsel, the court’s
opinion, and relevant case law, we discern no error in the court’s reasoning or its
disposition of this issue.
3. Purchase of the Marital Home
In 1992, prior to their marriage, Andrea and Terry purchased a lot on
Bodley Drive in eastern Jefferson County (the Bodley lot) for $136,000. Neither
party had sufficient records to accurately trace their contributions to the purchase
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of this lot. However, both claimed the lion’s share of any nonmarital contribution.
As set forth above, the “factual findings underpinning the determination of whether
an item is marital or nonmarital are entitled to deference and, consequently, [are]
reviewed under the clearly erroneous standard. Ultimately, classification is a
question of law, which [is] reviewed de novo.” Smith v. Smith, 235 S.W.3d 1, 6-7
(Ky. App. 2006).
The parties offered into evidence the closing statement for the Bodley
lot, which was in Terry’s name only. The closing statement indicated that $1,000
in earnest money had been paid, that an additional $35,636.99 was paid at closing,
and that the remaining $99,500 was being financed. Terry’s expert attributed the
earnest money and the amount paid at closing to Terry because his name was the
only name on the closing statement. Andrea conceded that Terry paid the $1,000
in earnest money but contended that she contributed the $35,636.99 paid at closing.
The court reviewed the testimony of the parties and their experts and
concluded the Andrea had paid the $35,636.99 at closing. In doing so, the court
noted that several months before closing, Andrea had sold her previous marital
home and deposited the proceeds from that sale into her checking account. That
account had a balance of $71,565.28 nine days prior to closing and a balance of
$34,874.87 twenty-two days after closing. The court also noted the documents
from the dissolution of Terry’s previous marriage in early 1992, which indicate
that Terry had limited liquid assets at that time. Furthermore, the court noted
testimony from Terry’s brother that he had given Terry $17,000 which Terry stated
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he believed he used toward the purchase of the Bodley lot. However, the court
discounted this testimony as neither Terry nor his brother could produce any
documentation pinpointing when that gift was made. Finally, the court also
discounted Terry’s testimony that Andrea used a portion of the money she received
from the sale of her prior home to operate her business. The court noted that the
tax returns did not reveal any expenditures of that magnitude and that the business
was not incorporated until nearly a year following the closing on the Bodley lot.
In 1993, the parties entered into a contract to have a house built on the
Bodley lot. The parties provided a $29,000 down payment, for which Andrea
provided $15,000 and Terry provided $14,000. In early 1994, prior to the
marriage, the parties closed on the completed house. At the closing, the parties
provided $163,540 toward the total cost of $390,936.67. Andrea claimed that she
contributed the bulk of the $163,540, which Terry disputed. As with the purchase
of the Bodley lot, the parties did not have accurate records from which to trace the
funds contributed to the construction/purchase of the Bodley house.
Terry’s expert testified that she attributed $5,000 of the closing
proceeds to Terry because he had a copy of a check made payable to the title
agency. The remaining $158,540, Terry’s expert divided equally between Andrea
and Terry because both parties were on the closing statement and neither party
could produce documentation to verify their individual contributions. Andrea
disputed the equal division of the $158,540.
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The court reviewed the testimony and documentation from Andrea
showing that, in early 1993, she had sold a lot she purchased following David’s
death for $52,000; that she had received in excess of $93,000 as a distribution from
David’s 401k plan in March 1993; and that she liquidated an investment account
she inherited from David in February 1994, netting $14,307 from that account.
The court also reviewed testimony from Terry that he had sold a house he owned,
netting $17,000; that he had received an additional gift from his brother to put
toward the closing; and that Andrea had expended between $18,000 and $48,000 in
her business prior to the closing. Finally, on reconsideration, the court recognized
that Andrea’s father had given the parties $20,000 each toward the purchase of the
residence. Taking that evidence into consideration, the court determined that
$8,540 could not be adequately traced and it divided that amount equally. The
court then determined that Terry had contributed $44,270 of his nonmarital assets
and that Andrea had contributed $184,907 of her nonmarital assets toward the
purchase of the Bodley lot and house.
On his cross-appeal, Terry argues that the court “engaged in
speculation” regarding the source of the nonmarital funds used to purchase the
Bodley lot and house. Having reviewed the record and the court’s well-reasoned
findings of fact, conclusions of law, and decree of dissolution, as well as its order
on the parties’ motions to amend, alter, or vacate, we disagree. Neither party
provided direct and exacting evidence to support their positions with regard to
tracing; however, there was clearly enough evidence to support the inferences the
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court made regarding the source of the funds used to purchase the Bodley lot and
house. Therefore, we will not disturb the court’s factual findings.
Terry also argues that the court misapplied the law to its factual
findings. According to Terry, because he and Andrea held the Bodley lot and
house as joint tenants prior to the marriage, there is a presumption of equality of
interest. However, the case Terry cites, McLeod v. Andrews, 303 Ky. 46, 196
S.W.2d 473 (1946), is not dispositive because it deals with the disposition of estate
assets and debts, not the disposition of non-marital property which later became, in
part, marital property. Terry’s citation to 48A C.J.S. Joint Tenancy § 24 (2007), is
also not dispositive because it addresses only joint tenants, not joint tenants who
later marry. Furthermore, that section of C.J.S. states that the presumption of
equality may be overcome. Even a cursory review of the record reveals sufficient
evidence to overcome any presumption in favor of equality.
Finally, we note this Court’s reasoning in Glidewell v. Glidewell, 790
S.W.2d 925 (Ky. App. 1990), is persuasive. In Glidewell, an unmarried couple
owned several parcels of real property as joint tenants. This Court determined that
the couple should be treated as a partnership and that each “partner” should recover
his or her “contributions on dissolution of the partnership after payment of the
partnership debts.” Id. at 927.
Based on the above, we discern no error in the court’s application of
the law to the facts and affirm the court’s determination of the parties’ marital and
nonmarital interests in the purchase of the Bodley lot and house.
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4. Improvements to the Bodley Lot and House
Beginning in 1997, the parties began a massive renovation of the
Bodley lot and house, including the addition of a master suite, a lavish inground
swimming pool with a cabana, and landscaping designed to add privacy to the
property. The parties also paid down debt on the Bodley lot and house. The total
cost associated with renovations and reduction of debt was $869,589, more than
twice the original cost of the Bodley lot and house. The funds used to pay for the
renovations and reduction of debt came primarily from the exercise by Terry of his
stock option. Because the funds used were primarily traceable to Terry’s stock
option, the court allocated the marital/nonmarital portions of those funds according
to the formula it used to allocate the stock option, designating $569,564.86 to nonmarital and $300,024.14 to marital.2 In setting forth its calculations, the court
stated that it was not finding and could not find that the expenditures for
renovations “resulted in a dollar for dollar increase in value (or greater than dollarfor-dollar increase).” Ultimately, the parties sold the Bodley lot and house for
$1,400,000, netting $1,153,814.40.
Once the court made the preceding allocation, it then divided the
proceeds from the sale of the Bodley lot and house. In doing so, the court stated,
“This is a difficult case for a strict Brandenburg application.” The court noted the
nonmarital contributions by both parties to the original purchase, the nonmarital
contribution to the renovations and debt reduction, and the marital contribution to
2
We note that a portion of the funds used for the renovations and debt reduction were marital.
The court did not divide those funds, designating them as marital.
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the renovations and debt reduction. Taking those factors into consideration, the
court restored to Terry his initial contribution to the purchase of the Bodley lot and
house plus $569,564.86 of the cost of the renovations and debt reduction. The
court restored to Andrea her initial contribution to the purchase of the Bodley lot
and house, then divided the remaining amount equally between the parties.
Andrea argues that the court made two errors with regard to division
of the proceeds from the sale of the Bodley lot and house: (1) the court’s division
of the cost of renovations and debt reduction to marital and nonmarital was flawed
because the allocation with regard to the stock option was flawed; and (2) the court
should not have attributed any amount of the renovation expenses to nonmarital
funds. Terry argues that the court erred when it divided the marital estate equally
because the court failed to consider Andrea’s alleged failure to contribute to the
acquisition of the marital estate. We will address each argument in the order set
forth above.
As noted above, we discern no error in the court’s allocation of the
proceeds from Terry’s exercise of his stock option. Therefore, we discern no error
in the court’s use of the same formula in dividing the contribution of those
proceeds by Terry to the reduction of debt and the renovations on the Bodley lot
and house.
In support of her second argument, Andrea relies primarily on Travis
v. Travis, 59 S.W.3d 904 (Ky. 2001). Based on Travis, Andrea argues that Terry
had the burden of proving the extent to which the renovations increased the equity
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in the Bodley lot and house. Absent that proof, Andrea argues that any increase in
equity should be deemed marital.
In Travis, the husband contributed $7,500 in nonmarital funds toward
the $47,000 used to acquire and remodel the parties’ marital residence. The house
burned after the parties separated but before the dissolution of their marriage. The
parties collected $63,000 from their casualty insurer. After paying off the
mortgage, $23,364.14 remained for division between the parties. The parties
stipulated that $7,500 of the proceeds represented the husband’s nonmarital
contribution, leaving $15,864.14 to be divided. The husband argued that the
disputed proceeds should be divided pursuant to the Brandenburg formula, with
the majority of the funds attributable to his initial nonmarital contribution and
appreciation on that contribution. The wife argued that the husband should only be
credited with the initial nonmarital contribution and that the remainder should be
deemed marital. The trial court followed the formula proposed by the husband and
awarded him the majority of the $15,864.14. On appeal, the Court of Appeals
reversed and the Supreme Court affirmed.
In its opinion, the Supreme Court reviewed the three-step process a
court must use to divide the parties’ property in a dissolution: “(1) the trial court
first characterizes each item of property as marital or nonmarital; (2) the trial court
then assigns each party's nonmarital property to that party; and (3) finally, the trial
court equitably divides the marital property between the parties.” Id. at 909.
(Footnotes omitted). The Court then stated that, when nonmarital property
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increases in value simply because of general economic conditions, the increase in
value is nonmarital. However, when nonmarital property increases in value due to
the efforts of the parties, the increase is marital. As noted by Andrea, the Court
stated that KRS 304.190(3) creates a presumption that any increase in value is
marital and the spouse seeking a determination to the contrary bears the burden of
proof. The Court then determined that the husband had “introduced no proof from
which the court could determine why the property increased in value.” Id. at 912.
Because the husband had not met his burden of proof, the Court held that the trial
court erred when it allocated any portion of the increase in value to the husband’s
nonmarital share.
As set forth above, the “factual findings underpinning the
determination of whether an item is marital or nonmarital are entitled to deference
and, consequently, [are] reviewed under the clearly erroneous standard.
Ultimately, classification is a question of law, which [is] reviewed de novo.”
Smith v. Smith, 235 S.W.3d 1, 6-7 (Ky. App. 2006). Having reviewed the record,
the relevant law, and the court’s findings, we discern no error in the division of the
proceeds from the sale of the Bodley lot and house. As noted by the court, Travis,
“is more supportive of Terry’s stance in this case than Andrea’s.” The court, as
mandated by Travis, allocated to each party his or her share of nonmarital
contributions to the Bodley lot and house. Some of those contributions occurred
prior to the marriage and some, like the husband’s contribution in Travis, occurred
after the marriage. The court did not allocate any increase in value to Terry’s
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nonmarital contribution; it simply returned that nonmarital contribution to him.
This is precisely what Travis mandates. Therefore, we discern no error in the
court’s division of the proceeds from the sale of the Bodley lot and house.
Finally, on this issue, the language from the court’s findings of fact,
conclusions of law, and decree of dissolution to which Andrea takes exception is
not contrary to the court’s ultimate holding. The court stated that the chart on page
16 of its opinion did not “represent a finding . . . that the expenditures made for
improvements . . . resulted in a dollar for dollar increase in value (or greater than
dollar for dollar increase). . . .” (Emphasis added.) That statement, although it
may have been more artfully expressed, is correct. The court did not attribute any
increase in value to Terry’s nonmarital contribution to the expenditures for
improvements and reduction of debt; it simply returned the nonmarital contribution
to Terry.
Next we address Terry’s argument that the court abused its discretion
by not considering Andrea’s alleged prescription drug abuse when dividing the
marital estate. Andrea’s alleged misuse of prescription medication became an
issue early in the litigation when she filed a motion for an order prohibiting Terry
from communicating with any third party about those allegations. After a hearing,
during which the court stated that the allegations were not particularly relevant, the
court issued a mutual restraining order. That order prohibited the parties from
communicating anything to a third party, other than immediate family members,
counselors, etc., that might “adversely impact either party’s employment or
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reputation.” The order did not settle the matter and, despite a number of
statements by the court that it did not see the particular relevance of the issue,
Terry continued to raise it. Terry argued at trial that Andrea, over the course of the
marriage and because of her abuse of prescription medication, became disengaged,
and did not contribute to the marital estate.
At trial, Terry and one of his sons testified that Andrea did not
participate in family or job related functions, that she slept until noon, and often
spent the day in her pajamas. Terry also testified that Andrea spent an inordinate
amount of time caring for her ill mother and father and visiting with her sister. By
avowal, Terry offered into evidence medical records that he indicated showed
Andrea’s abuse of prescription medication.
On the other hand, Andrea testified that she participated in all events
to which she was invited, helped care for and rear Terry’s sons, and helped care for
her mother and father. Furthermore, Andrea’s brother and sister testified regarding
Andrea’s involvement in the lives of their parents and in the lives of Terry and his
sons. With regard to her health, Andrea testified that she had a congenital defect
that required a number of surgeries, that she continued to have pain from that
condition, and that she took medication to alleviate the pain and to help her sleep.
With regard to the distribution of marital assets, the court stated as
follows:
KRS 403.190(1) provides that following restoration of
each spouse’s property to that spouse, the trial court
“shall divide the marital property without regard to
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marital misconduct in just proportions considering all
relevant factors, including (a) contribution of each spouse
to acquisition of the marital property including
contribution of a spouse as a homemaker;. . .” The court
has briefly summarized and characterized the various
witnesses [sic] testimony concerning Andrea’s
contribution. This court has listened to everyone
carefully, adjudged credibility to the best of its ability
and finds that an equitable division of marital property in
this case is an equal division.”
“Decisions of the court concerning the division of marital property are
within the discretion of that court, and we will not disturb those decisions except
for an abuse of that discretion.” Kleet v. Kleet, 264 S.W.3d 610, 613 (Ky. App.
2007). There is more than sufficient evidence in the record to support the court’s
tacit finding that Andrea contributed to the marital estate; therefore, we discern no
abuse of discretion in the court’s division of the marital property.
5. Maintenance
The trial court, after considering the factors set forth in KRS
403.200(2), determined that Andrea is entitled to receive maintenance at the rate of
$3,750 per month for a period of four years. In doing so, the court noted that
Andrea’s estimated monthly expenses were “speculative at best;” that Andrea
retained the capacity to earn approximately $40,000 per year; that she received a
share of the marital estate in excess of $700,000; and that she retained two
nonmarital IRA accounts valued at approximately $70,000. Andrea contests the
amount of maintenance awarded, questioning the court’s finding that her expenses
were speculative.
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The amount and duration of maintenance are within the sound
discretion of the circuit court. Gentry v. Gentry, 798 S.W.2d 928 (Ky. 1990);
Barbarine v. Barbarine, 925 S.W.2d 831 (Ky. App. 1996). An award of
maintenance will not be disturbed on appeal absent an abuse of discretion. Perrine
v. Christine, 833 S.W.2d 825 (Ky. 1992). An appellate court is not authorized to
substitute its own judgment for that of the trial court where the trial court's decision
is supported by substantial evidence. Combs v. Combs, 787 S.W.2d 260, 262 (Ky.
1990).
Having reviewed the record, and noting, as did the court, that Andrea
estimated a monthly rent payment of $1,600 when she was living rent free in a
condo owned by her father; that she had prospective monthly expenses of $664 for
property taxes and a monthly condo association fee, which payments may have
come from a trust of which Andrea was the beneficiary; that she anticipated a car
payment of $450, although she was driving a 1998 Mercedes; that she would have
educational expenses of $894 for completion of a program leading to a degree in
Art when it is unclear if she had even begun the program; that she had monthly pet
expenses of $400; and that she had monthly personal grooming expenses of $400,
we discern no error in the court’s categorization of these expenses as speculative.
Taking these expenses into consideration, along with Andrea’s nonmarital assets,
her share of the marital assets, and her ability to earn a living, we discern no abuse
of discretion in the court’s award of maintenance.
6. Attorney Fees
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In awarding attorney fees, the court stated as follows:
This has been expensive litigation for both parties.
While Andrea receives substantial assets in this case,
their remains a strong imbalance in resources, in Terry’s
favor. While the court has substantial discretion in
determining the amount of an attorney fee award, the
Kentucky Appellate Courts have held that an allowance
of fees is authorized by KRS 403.220 only when it is
supported by an imbalance in financial resources of the
respective parties. . . .Andrea meets the threshold
requirement for an award. The court orders Terry
Meiners to pay $35,000.00 toward Andrea Meiners’ [sic]
attorney fees within 90 days. Attorney B. Mark Mulloy
may enforce this portion of the judgment within his own
name.
Andrea argues that, in light of the disparity in income between the
parties and Terry’s conduct during the course of litigation, the court abused its
discretion in awarding her only $35,000 in attorney fees. Terry argues that it was
Andrea’s conduct, not his, that was disruptive and prolonged the litigation. We
have reviewed the record and there is evidence from which the court could have
found fault with the conduct of both parties. Furthermore, as noted by the court,
Andrea was awarded significant assets from the marital estate and has the capacity
to earn a living wage. Therefore, we discern no abuse of discretion in the court’s
award of attorney fees.
7. Valuation Date of UBS Account
As previously noted, Terry ultimately placed the proceeds from the
exercise of his stock option into what the parties have referred to as the UBS
account. Following the parties’ separation, Terry used funds from the account to
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pay attorney fees and living expenses, make a donation to the University of
Louisville, put a deposit on a condo unit, pay construction costs, and pay realtors’
fees. The court found that the separation date is the appropriate date for valuation
because Terry exercised total control of the account and expended a significant
amount of money for his own purposes. We note that, although the court altered
the amount available for division in its order on the parties’ motions to alter,
amend, or vacate, the court did not alter the valuation date.
On appeal, Terry argues that the court erred in evaluating the UBS
account as of the date of separation because Andrea did not contribute to the
account beyond that date. Terry argues that Stallings v. Stallings, 606 S.W.2d 163
(Ky. 1980), mandates that evaluation take place on the date of the decree, not the
date of separation. However, in Stallings the question before the Court was
whether property purchased after the parties had physically, but not legally,
separated should be considered marital property. The question before the Court
was not when that property should be valued.
Valuing and dividing property are within the sound discretion of the
trial court. Cochran v. Cochran, 754 S.W.2d 546, 569-70 (Ky. App. 1988).
Because Terry had control of the UBS account and expended a significant amount
from that account for his sole benefit, we discern no error in the court’s choice to
value the account on the date the parties physically separated rather than on the
date of judgment.
8. Income Tax Rate
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Terry has an interest in his employer’s deferred compensation plan.
Terry indicated that the proceeds could not be distributed until sometime in the
future and that any distribution would be subject to income taxes. In order “to
avoid entangling the parties for years in dividing this asset” Terry asked the court
to award the account to him with a credit to Andrea against Terry’s share of the
marital assets, less a 36% deduction for future income tax.
The court initially awarded the account to Terry and ordered that he
pay Andrea half of the value of that account. However, the court did not deduct
the amount of income tax liability from the amount awarded. In its order on the
parties’ motions to alter, amend or vacate, the court adjusted Andrea’s award to
reflect the 36% in income taxes Terry will have to pay on distribution. Andrea
argues that the court abused its discretion because the tax rate far exceeded the tax
rate the parties paid in 2005 and 2006. Terry argues that the rate of taxation in
2005 and 2006 is not an accurate predictor of future tax liability “because the
parties’ filing status and exemptions for dependents effectively lowered his tax
obligation.”
We note that the parties only claimed dependents on their 1997 and
1998 tax returns. They did not claim any dependents in any other year between
1992 and 2005. Although that portion of Terry’s argument is somewhat
disingenuous, we agree with the trial court that the award to Andrea of a fixed
share, when there is a chance Terry might not collect anything and the potential
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future tax rate is unknown, weighs in favor of giving Terry credit for tax at the rate
of 36%.
9. Distribution of Additional Household Goods and Furnishings
Terry argues that the court abused its discretion when it determined
the parties had reached an agreement to divide remaining household goods,
furniture, appliances, and furnishings because no such agreement exists. Andrea
argues that Terry made no reference to the record in making his argument and that
the division of marital property is within the sound discretion of the court.
However, Andrea does not cite us to where in the record we can find the alleged
agreement nor does she indicate what specific property was subject to the alleged
agreement.
“[I]t is not our responsibility to search the record to find where it may
provide support for [Terry’s or Andrea’s] contentions.” Smith v. Smith, 235
S.W.3d 1, 5 (Ky. App. 2006). As this Court did in Smith, “we choose to give little
credence to the arguments by either party that are not supported by a conforming
citation to the record.” Id. Therefore, we affirm the court.
CONCLUSION
For the above stated reasons, we affirm the Jefferson Family Court as
to all issues raised on appeal and on cross-appeal.
LAMBERT, JUDGE, CONCURS.
CAPERTON, JUDGE, CONCURS IN PART, DISSENTS IN
PART, AND FILES SEPARATE OPINION.
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CAPERTON, JUDGE, CONCURRING IN PART AND
DISSENTING IN PART: I concur with the well-reasoned majority on all issues
but for the application of a 36% tax rate to the future distribution from an
employer’s deferred compensation plan.
The brief of the Appellee/Cross-Appellant states:
The trial court’s method of calculating Terry’s future tax
liability was logical and equitable for several reasons.
First, since the plan is unfunded, Terry may never receive
these benefits. Second, it would be unfair to calculate
Terry’s future tax liability on the same basis as his tax
rate during the marriage when the parties’ filing status
and exemptions for dependents effectively lowered his
tax obligation. Finally, the court cannot anticipate with
specificity what Terry’s ultimate tax rate on this asset
will be. The tax applied when distribution occurs, if it
ever does, conceivably could be even greater that the
36% rate applied by the trial court.”
Certainly the Appellee/Cross-Appellant will seek to cast their case in
the best of light before the trial court. In reviewing the above argument: first, an
unfunded plan that may never yield any benefits does not appear to establish any
particular rate of tax; second, while a current tax rate may be assumed to be lower
due to particular circumstances, the anticipation of a change in circumstances does
not appear to establish any definite future tax rate; finally, when a court cannot
discern with specificity a particular tax rate, this does not support an arbitrary tax
rate.
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The case before our Court is not unlike McGinnis v. McGinnis, 920
S.W.2d 68 (Ky. App. 1995). Therein our Court cited Poe v. Poe, 711 S.W.2d 849,
856 (Ky. App. 1986), in stating:
[A] nonvested pension is not overly speculative where
courts . . . are willing to delay the actual division of those
benefits until they are capable of distribution and have in
every sense of the word “vested.” This type of creative
distribution of the award silences any complaints
concerning the speculative nature of future pension
benefits . . . . While it might be argued that such a
solution unnecessarily entangles the courts in
administering dissolution actions, thereby delaying the
resolution of the marital conflict, we note that it would do
so no more than the current application of our
maintenance and child support statutes presently [sic] the
courts to do so.
While I certainly understand the trial courts desire to avoid entangling the parties
for years by dividing the compensation plan, I believe that application of a
speculative tax rate to an uncertain amount of a future distribution is by its terms
speculative and uncertain.
I would reverse and remand for an order directing distribution in
equitable amounts when and if distributed.
BRIEF FOR APPELLANT/
CROSS-APPELLEE:
BRIEF FOR APPELLEE/CROSSAPPELLANT:
B. Mark Mulloy
Louisville, Kentucky
Diana L. Skaggs
Sandra G. Ragland
Louisville, Kentucky
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