This matter came before the Court on two separate appeals involving the same parties.

The facts of the first appeal concern the marital residence. Pursuant to the parties’ Marital Settlement Agreement, Husband was to pay Wife $15,000.00 after he refinanced the marital home within 90 days. The agreement separately stated that if Husband was unable to refinance, the home would be placed for sale. When Husband did not refinance within 90 days, Wife filed a motion asking the Court to compel the sale of the marital home. Husband asked for additional time to refinance noting his attempts to refinance were frustrated by Wife’s actions. Ultimately, the family court granted Husband additional time to refinance, interpreting the refinance provision and the sale provision as two separate terms. Husband completed the refinance and payed Wife. Subsequent to receiving payment, Wife appealed.

Wife argued that the Court erred by allowing Husband additional time to refinance and interpreting the sale and refinance provisions as two separate agreements. The Court of Appeals disagrees, noting that the delays in refinance were caused by Wife, and holding that the family court properly interpreted the parties’ marital settlement agreement. Wife accepted the payment and therefore cannot now complain about the extension of time.

The second appeal concerns custody and parenting time. In settlement of a DNA action, Wife, who had no contact with children, entered into an agreement to stipulate to the recommendations of court-appointed psychotherapist. The recommendations provided to the Court opined that Mother did “not presently meet minimally adequate parental standards” and called for the children to be evaluated by another mental health professional. The children’s evaluation was subsequently provided to the court concluding reunification with Mother was not in the children’s best interests. Mother then moved the family court to revisit the issue and hold a hearing, which the court denied.

Mother appealed arguing she was entitled to an evidentiary hearing and the court should not have deferred to the experts. The Court of Appeals concludes that mother did stipulate to the expert recommendations, however, the Court holds that Mother should be given an evidentiary hearing to proffer proof that she has complied with therapist recommendation and that visitation would be in the children’s best interest.

Digested by Elizabeth M. Howell

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During the marriage Husband obtained a loan from PNC Bank for his business which wife signed as a guarantor. The parties subsequently entered into a Marital Settlement Agreement which provided each party would be responsible for debt solely in their name and Husband would hold harmless and indemnify Wife for business any debts. Husband defaulted on the business loan and PNC sued Wife in her individual capacity. Wife asked the family court of compel Husband to “indemnify her ‘for any monies paid to PNC and for all costs and attorney fees associated with defending said action and also all costs and attorney fees associated with filing this Motion in family court.’” After a hearing, the family court granted Wife’s motion.

Husband appealed arguing that because Wife personally guaranteed the note she should be obligated to pay the PNC debt. The Court of Appeals affirmed the family court holding that the family court’s finding were not clearly erroneous and based on substantial evidence, notably the MSA clearly stated Husband was responsible for the business debt “absent any exceptions.”

Digested by Elizabeth M. Howell

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During the marriage, Wife paid Husband’s credit card debt. After the divorce was granted, but before the trial court entered an order regarding the division of assets, Husband filed Chapter 7 bankruptcy. His debts were discharged in bankruptcy. Subsequently, the trial court ordered Husband to pay Wife back for her payment of his credit card debts.

The Court of Appeals first considers when Husband’s debt accrued. The Court of Appeals holds that the fair contemplation test applies in Kentucky, therefore the debt accrued before Husband’s bankruptcy petition, as at the time he filed for bankruptcy, he was on notice Wife would seek repayment of the debt. “[T]he ‘prepetition relationship’ or ‘fair contemplation’ test provides that “where the parties could have fairly contemplated a claim prior to bankruptcy, the claim will be held to have arisen prepetition, even when the actual right to payment matures postpetition.”

Next, the court looks to see if the prepetition debt is dischargeable. Husband argues the debt was dischargeable and he shouldn’t have to pay Wife. The Court of Appeals disagrees holding that “the credit card debt in the present case was entirely collateral to child or spousal support, and therefore not dischargeable under 11 U.S.C.A. § 523(a)(5).”

Digested by Elizabeth M. Howell

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Middleton v. Middleton Interesting 50 page opinion and dissent addressing characterization of distributions from family trust, nonmarital tracing and standard of proof, division of marital personalty, assignment of debt, attorney fees and costs.

Middleton v. Middleton Interesting 50 page opinion and dissent addressing characterization of distributions from family trust, nonmarital tracing and standard of proof, division of marital personalty, assignment of debt, attorney fees and costs.

D.L.B. v. Cabinet for Health and Family Services, et al  Conversion of involuntary termination of parental rights action into a voluntary termination action and concurrent dismissal of father from proceedings was abuse of discretion.

Murry v. Murry  Denial of attorney fees in grandparent visitation modification affirmed as there is no fee shifting provision in KRS Chapter 405. Findings that prior visitation order had not been working and presents more problems than it resolves falls short of the requirement that necessary facts be found specifically so case was remanded to trial court to make further factual findings.

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Fortwengler v. Fortwengler  

Fortwengler v. Fortwengler  

A prior appeal affirmed the 50/50 division of debt to husband’s father. Husband sought to garnish wife’s maintenance to satisfy her half of the debt. Trial court’s denial of this request and trial court’s subsequent denial of husband’s father’s motion to intervene for a judgment and payment schedule was affirmed on appeal. Proper procedure is for husband’s father to attempt to collect the debt in a separate action against wife.

C.J.M. v. Cabinet for Health and Family Services 

Termination of parental rights affirmed.

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Published:   Affirming   

County:  Jefferson

Ex-Husband appealed FC’s order
terminating his garnishment of maintenance payments to Wife for satisfaction of
debt to Ex-Husband’s father as well as FC’s order denying Ex-Husband’s parents’
motion to be joined as parties to the dissolution action in order to collect
the debt.

FACTS:

Fortwengler v. Fortwengler, 2011-CA-0018933-MR and 2011-CA-002077-MR

Published:   Affirming   

County:  Jefferson

Ex-Husband appealed FC’s order
terminating his garnishment of maintenance payments to Wife for satisfaction of
debt to Ex-Husband’s father as well as FC’s order denying Ex-Husband’s parents’
motion to be joined as parties to the dissolution action in order to collect
the debt.

FACTS:

When parties divorced, FC ordered that
$20,000 owed to Husband’s father was a marital debt and that each party should
be equally responsible.  Ex-Wife appealed
from this order.  While the appeal was
pending, Ex-Husband filed a non-wage garnishment against Ex-Wife to collect the
debt, in the amount of $1,200, the monthly amount of maintenance he had been
ordered to pay to her.  Ex-Wife filed
motion to quash the garnishment and an affidavit challenging the garnishment,
contending that FC did not have jurisdiction of the issue as an appeal was
pending, that no judgment had been issued to Ex-Husband’s parents because they
were not parties to the case and did not have standing, and that Ex-Husband was
attempting to evade his maintenance obligation. 
Ex-Husband responded that FC did have jurisdiction because Ex-Wife had
not posted supersedeas bond and that FC should set a hearing on the challenge
to the garnishment.  After hearing, FC
granted Ex-Wife’s motion to terminate the garnishment, noting that no common
law judgment has been entered nor had a separate lawsuit been entered by
Ex-Husband’s parents; that they could not assign the debt to Ex-Husband to be
collected in the dissolution as it appeared to be an attempt to circumvent his
maintenance obligation.  Ex-Husband filed
a timely appeal of this order. 
Subsequently, Ex-Husband’s parents filed a motion to intervene in the
divorce proceeding for the limited purpose of setting a payment schedule in
order to effectuate Ex-Wife’s payment of her portion of the debt.  FC denied the motion and Ex-Husband timely
filed an appeal of that order. 

ANALYSIS:

CA noted that Ex-Husband’s frequent
iteration of the phrase “this assignment of error was preserved for appellate
review” is insufficient to identify preservation of issues in the record as
required by CR 76.12(4)(c)(v), but nonetheless proceeded with review on the
merits.

CA disagreed with Ex-Husband’s
contention that because the creditor, his father, testified regarding the debt
and the debtor, Ex-Wife, had an opportunity to cross-examine the creditor and
raise any defenses she may have, his father should not have to obtain a
judgment in separate proceeding, and that FC could have joined his father as a
party to the case for this purpose under KRS 403.150(6).  CA found the additional parties to be jointed
referenced in that statute would not be third-party creditors, but rather
parties who may have custody rights to children of the parties.  The proper method for Ex-Husband’s father to
collect on the debt is through a common law judgment or through a separate
lawsuit.  Regarding his father’s motion
to intervene, CA held that denial of the motion was proper as no attempt had
been made by Ex-Husband’s father to collect the debt via common law judgment or
separate lawsuit. 

Affirmed.

Digested by Michelle Eisenmenger
Mapes, Diana L. Skaggs + Associates  

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No. 2009-SC-000442-DG on review of COA No. 2008-CA-001059-MR

Published:  Affirmed

County:     Laurel 

Howard v. Howard

No. 2009-SC-000442-DG on review of COA No. 2008-CA-001059-MR

Published:  Affirmed

County:     Laurel 

        The questions presented in this case include 1) whether a trial court could enforce through its contempt powers, an obligation to pay a creditor on a marital debt after the obligor received a post-decree bankruptcy discharge and his former wife failed to institute an adversary proceeding in bankruptcy court; 2) whether a motion for modification of child support was properly denied when child support established in divorce decree was based upon parent’s imputed income as a result of a finding of voluntary underemployment; and 3) an award of attorney fees.

        The parties’ divorce decree provided for joint custody of their minor child with husband required to pay child support calculated from his recent history of earnings as a federal prison guard.  Husband testified that the parties agreed he should quit his job at the prison because the wife was also employed there as a guard.  The wife denied making such an agreement.

        The decree also assigned to husband liability for a National City loan on a Dodge Durango which had been repossessed by the time of the decree.

        A little more than a year after the decree, husband filed a motion to reduce child support claiming changed circumstances, including health problems, inability to locate correctional work and filing for bankruptcy.  Wife countered with motion for attorney fees and to hold husband in contempt for failure to pay the debt on the repossessed Durango.  Wife acknowledged she received notice of the bankruptcy and that she did nothing to challenge discharge of the debts.  Husband admitted that under the decree, he was responsible for the Durango debt.

        The trial court found husband to be in contempt for failure to pay the debt on the Durango, denied his motion to modify child support, and ordered him to pay $500 of wife’s attorney’s fees.

        The Court of Appeals affirmed on all issues, as did the Supreme Court.

        With respect to child support modification, the court found that the standard for modification was not met because his affidavit did not definitively establish a material and continuing change of circumstances post-decree.  The court explained that KRS 403.212(2)(d) specifically states that a parent may be voluntarily unemployed or underemployed without finding that the parent intended to avoid or reduce the child support obligation.  In order to prevail, husband needed to show a material, substantial, and continuing change of circumstances existing post-decree which made him less capable of attaining his former income level than existed at the time of the decree.  The trial court did not find the requisite showing, the Court of Appeals agreed, and the Supreme Court affirmed.

        The trial court held husband in contempt for his failure to pay the loan on the Durango.  The bankruptcy statute was amended in 2005 to provide that a Chapter 7 discharge does not discharge a debtor from an obligation incurred in the course of a divorce or separation.  In addition, since state court has concurrent jurisdiction to determine the dischargeability of a debt, Kentucky state courts have jurisdiction to determine whether the husband’s obligation on the Durango was discharged in his bankruptcy.

        Following BAPCPA amendments to the bankruptcy statutes, a non-support divorce debt is excepted from discharge and there is no requirement that a spouse or child participate in the bankruptcy for the debt to be excepted from discharge.  Husband’s payments on the loan were part of the division of marital property and debts, even though in this case there was no hold harmless provision.

        Finally, the trial court is not required to make findings on financial resources when awarding attorney’s fees.  The statute requires only that the trial court must simply consider the parties’ finances before awarded fees.

Digested by Sandra G. Ragland, Diana L. Skaggs + Associates.

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on review of COA No. 2008-CA-000715-MR and 2008-CA-000716-MR

Published:  Opinion Reversing

County:     Greenup

Rice v. Rice, No. 2009-SC-000730-DG

on review of COA No. 2008-CA-000715-MR and 2008-CA-000716-MR

Published:  Opinion Reversing

County:     Greenup

        The Supreme Court accepted discretionary review to determine whether TC abused its discretion in concluding that debt incurred by husband and adult son without wife’s knowledge was marital property and assigning responsibility for one-half the debt to wife.  The CA affirmed, and the Supreme Court reverses.

        The parties divorced after 42 years of marriage. The TC held that $6500 in credit card debt was marital and assigned half the debt to each party.  The debt was incurred by the parties’ adult son with the husband’s knowledge and permission, but the wife didn’t learn about the debt until the bill collectors began to call.  The Court of Appeals affirmed and the Supreme Court accepted discretionary review.

        The burden of proving that a debt is marital is upon the party who incurred it and claims that it is marital.  The allocation of responsibility for debts acquired during the marriage is reviewed for abuse of discretion.

        In Neidlinger v. Neidlinger, 52 S.W.3d 513 (Ky. 2001), the SC explained the four factors to determine the nature of a debt as marital or nonmarital:  1) Was the debt incurred to purchase marital property? 2) Was it necessary to maintain and support the family?  3)What was the extent and participation of each party in incurring or benefitting from the debt? and 4) What are the economic circumstances of the parties after the divorce to allow for payment of the debt.

        In this case, the wife was unaware of and did not participate in incurring the debt nor did she have sufficient assets to pay it.  The court acknowledged that the husband was attempting to help a financially burdened child, but noted that the law puts the burden of self-support on competent adults.  The wife had no legal obligation to pay since she was not a party to the credit card contract.  If she could not be required to pay through normal legal process, there were no equitable grounds for a Family Court to require her to pay half of it.

        Since none of the Neidlinger factors apply, the TC abused its discretion in finding the debt to be marital and assigning any of it to the wife.  Since wife had no legal obligation to support a competent adult child, she may not be required to pay debt incurred for the support without her knowledge, consent and benefit.

        Remanded to trial court for proceedings consistent with this opinion.

Digested by Sandra G. Ragland, Diana L. Skaggs + Associates.

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Rice v. Rice, division of debt. Credit card debt incurred solely by husband and adult son, without wife's knowledge and in which she did not benefit was improperly assigned to her. Digest to follow

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2009-CA-000614-MR and 2009-CA-000632-MR

Published:  Affirmed

County: Jefferson

McGregor v. McGregor

2009-CA-000614-MR and 2009-CA-000632-MR

Published:  Affirmed

County: Jefferson

Mom appealed from FC's order in dissolution action, arguing that FC abused its discretion by setting a shared-custody schedule for the children, by imputing income to her, by awarding an inadequate amount of child support and maintenance, and by its division of the parties’ debts. Dad cross-appealed, asserting that the amount and duration of maintenance was excessive.

Facts

After seven and a half years of marriage, Mom, a homemaker, filed a Petition for divorce from Dad, a pilot.  Subsequently, FC entered temporary orders granting joint custody of their 2 children as well as 50/50 parenting time schedule based around Dad’s work schedule.  FC also ordered Dad to pay Children’s expenses and household bills as well as temporary maintenance of $150 per week.

In its final order, FC continued parameters of temporary parenting time order; imputed income to Mom of $2,000 per month in its child support and maintenance calculation; deviated from the child support guidelines based on the shared parenting schedule and determined child support to be $275 per month; awarded Mom maintenance of $2,000 per month for seven years; and ordered Mom to pay the home equity Line of Credit on the marital residence and half of the mortgage payment until the home was sold, as well as be responsible for her personal credit cards.  

ANALYSIS:

Parenting Schedule

Due to Dad’s occupation, FC concluded that a rigid parenting schedule would prohibit him from having regular contact with the children.   Mom argued that this schedule was unworkable due to Dad’s failure to communicate with her and because Dad’s work schedule changes constantly and with short notice.  CA held that FC’s findings that shared parenting schedule was in Children’s best interests was supported by substantial evidence and thus not clearly erroneous.

Imputation of Income

FC imputed income to Mom in child support and maintenance awards  based on her work history prior to Children’s births as a graphic designer, in which she earned $28,000 per year, and her current status operating two concierge businesses from her home, in which she was earning $515 per month but hoped to someday earn $4,000 to $8,000 per month. 

CA noted that KRS allows a court to base child support on a parent's potential income if it determines that the parent is voluntarily unemployed or underemployed, without finding that the parent intended to avoid or reduce the child support obligation.  However, the maintenance statute does not explicitly address imputation of income to a voluntarily underemployed or unemployed spouse. CA held that, as a matter of first impression, maintenance statute implicitly allows FC to impute income to a voluntarily unemployed or underemployed spouse to determine both the spouse’s entitlement to maintenance and the amount and duration of maintenance.  Thus, FC committed no error in finding Mom to be capable of earning $2,000 per month and imputing such income to her in its child support and maintenance awards. 

Deviation from Child Support Guidelines

CA held that FC justified its deviation from child support guidelines based on the shared-parenting schedule; that the period of time during which children reside with each parent may be considered in determining child support; and a relatively equal division of physical custody may constitute valid grounds for deviating from the guidelines.  CA held that FC committed no error. 

Maintenance

Amount and duration of a maintenance award are matters within the sound discretion of FC.  As noted above, FC was authorized by statute to impute income to Mom.  Although CA noted that evidence may have supported Dad’s suggested award of maintenance in declining amounts, such a result was not required.  Because of Mom’s long gap in employment history while caring for Children, parties’ comfortable lifestyle during marriage, and Dad’s current earning ability, FC found seven years was reasonable duration for full amount of maintenance, and CA found no error.

Assignment of Debt

FC found that Mom took out the home equity line by forging Dad’s signature on the documents, and that funds were not used for home renovations as Mom testified; FC also found that Mom’s personal credit card debts were non-marital as Mom produced no evidence regarding what items she purchased.  CA found no error in finding these debts to be nonmarital.  FC also noted Mom’s ability to pay for home equity line with proceeds from sale of marital residence and thus found allocation of this debt to not be manifestly unfair. 

Digested by Michelle Eisenmenger Mapes, Diana L. Skaggs + Associates  

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