Divisibility of Disability Pension Later Reclassified as Ordinary Retirement Pension, Attorney’s Fees, Bailey v. Bailey, Case Digest, Ky Court of Appeals

Buddy Lee Bailey v. Linda Beth Bailey, No. 2012-CA-000508-MR

Published: Affirming

County: Spencer


filed for dissolution of the parties’ thirty year marriage in 2004. During his
employment, Husband actively participated in his employer’s retirement pension
plan. Subsequent to the parties’ separation, Husband was injured and filed for
short term disability. The order entered by the Court after mediation included
a provision that Husband was to provide to Wife information concerning the retirement
account, including the policy, and all information regarding Husband’s
disability. Wife was not provided with this information. The trial court
entered a limited decree of dissolution in December 2004. In August 2006, the
Court entered a judgment against Wife for the value of Husband’s personal
property not returned to him. Husband filed a motion in June 2008 to satisfy
the judgment. Since the pension issue had not been resolved, the Court also
granted Wife’s request that the parties exchange all documents relating to retirement
or disability accounts.

In June 2011, the Court entered an
order holding that Husband’s retirement pension was not subject to division as
marital property because Husband’s retirement pension was converted into a
disability pension. Wife filed a motion to alter, amend or vacate the order
because she was never provided with the retirement policy documents. Husband
was deposed, and Wife received the documents. In January 2012, the Court granted
Wife’s motion to alter, amend or vacate the judgment, holding that Wife was
entitled to entry of a Qualified Domestic Relations Order allocating one half
of the pension benefits accrued from the date of marriage to the date of the
entry of the limited decree of dissolution. The court found that Husband’s
disability pension would be converted to an ordinary retirement pension when
Husband reached the age of 62. Wife was also ordered to satisfy the August 2006
judgment against her, plus statutory interest. Husband filed a motion to alter,
amend or vacate the Court’s January 2012 order. The Court denied Husband’s
motion after a hearing, and Husband appealed.


When the
Court ruled on the divisibility of the retirement plan, the relevant plan
documents had not been made available to Wife or the Court. Because a full and
candid disclosure of the parties’ assets is necessary for an equitable division
of property, the Court did not abuse its discretion in granting Wife’s motion. Once
obtained, the policy clearly stated that when Husband turned 62 his disability
pension would end, and he would become eligible for a normal retirement
pension. The Court of Appeals distinguished this case factually from the
Kentucky Supreme Court’s decision in Holman
v. Holman
, 84 S.W.3d 903 (Ky. 2002), which held that disability benefits
which replace future income should not be classified as marital property.
Husband’s disability benefits would be reclassified on a date certain, which
was different from the facts presented in Holman.
The ordinary pension benefits that were accumulated during the marriage that
would be reclassified as normal pension funds when Husband turned 62 were
marital property. Any other conclusion would be inequitable because it could
allow a spouse to prevent the other spouse from his or her share of retirement
benefits through an election of disability coverage.   

On the attorney’s fees issue,
Husband argued that the Court failed to rule on the motion. Wife argued that
the Court’s silence on the matter was a denial of attorney’s fees. The Court of
Appeals agreed with Wife, stating that attorney’s fees are entirely within the
discretion of the trial court, and the Court in this case clearly considered
the financial resources of both parties throughout the lengthy proceedings.
Nothing in the record could demonstrate that the Court abused its discretion in
failing to award attorney’s fees.


Digested by: McKenzie Cantrell, Attorney, of counsel, Diana
L. Skaggs + Associates