Court Opinion

ID: 9693903
Source: CourtListenerOpinion
Date Created: 2023-08-25 17:09:29.865639+00
Date Added: 2024-06-11T15:10:53.185370
License: Public Domain

RENDERED: AUGUST 18, 2023; 10:00 A.M.
                        NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals
                             NO. 2021-CA-1493-MR

MICHAEL TODD KEENE                                                   APPELLANT

                APPEAL FROM JEFFERSON FAMILY COURT
v.               HONORABLE DERWIN L. WEBB, JUDGE
                       ACTION NO. 20-CI-502330

JENNIFER KEENE                                                         APPELLEE

                                OPINION
                        VACATING AND REMANDING

                                  ** ** ** ** **

BEFORE: COMBS, DIXON, AND LAMBERT, JUDGES.

LAMBERT, JUDGE: This appeal arises from a dissolution action in which

Michael Todd Keene seeks review of the Jefferson Family Court’s division of

marital property. We vacate and remand.

             Michael and Jennifer Keene were married on June 27, 1994, in

Jefferson County, Kentucky. The parties separated in February 2020, and Michael

filed a petition to dissolve the marriage on October 2, 2020. At that time, he was

46 years old and worked as a representative for United Auto Workers with Ford
Motor Company, and Jennifer was 43 years old and worked as a medical assistant

with Norton Healthcare. Michael sought an equitable division of marital property

and debts, and he indicated that he may claim non-marital property. Jennifer filed

a response and a counter petition to dissolve the marriage, seeking an equitable

division of marital property and debts, the restoration of her non-marital property,

temporary and permanent maintenance, and payment of her costs including

attorney fees.

             In November 2020, Jennifer moved the court to enter a status quo

order and for exclusive possession of the marital residence, where she had been

living since the separation, so that she would have privacy and security. Jennifer

also indicated that Michael had removed $6,000.00 from their checking account.

The family court granted the motions later that month. In the status quo order, the

court ordered Michael to pay for the parties’ mortgage, health insurance, car

insurance, and water bill. The court ordered Jennifer to pay her car payment, the

gas and electric, cable, and internet bills, for the home security system, and for

trash pick-up. Michael sought a case management date to discuss the issues and

the return of $20,000.00 Jennifer had removed from their joint account.

             The parties filed their respective pre-trial compliance, and Michael

tendered proposed findings of fact and conclusions of law. Michael moved to

strike Jennifer’s untimely filed proposed findings, noting that she had failed to

                                          -2-
comply with other pre-trial deadlines. In response, Jennifer blamed unreliable

internet access for filing the proposed findings a day late.

                  The family court held a trial on July 16 and 21, 2021,1 and on

September 8, 2021, it entered an order in which it dissolved the marriage and ruled

on the pending issues. The court assigned non-marital property, and it split the

marital property (including the marital residence, vehicles, retirement accounts,

three bonus/profit sharing payments, and personal property) and debts. It also

addressed issues as to the withdrawal of funds from bank accounts, attorney fees,

and the award of maintenance (the court awarded Jennifer $1,500.00 per month for

three years).

                  Michael moved the court to make additional findings pursuant to

Kentucky Rules of Civil Procedure (CR) 52, to alter, amend, or vacate the order

pursuant to CR 59, and to reschedule the October 6, 2021, contempt hearing until

45 days after the final order. He also attached profit sharing information as

ordered by the court, noting that there were only two payments, not three. Michael

sought changes related to the value of the marital residence, the offset of the value

of the vehicles from the value of the marital residence, offsets with his retirement

plan, the amount of maintenance he was ordered to pay, and the attorney fee

1
    The certified record does not include a recording of the trial.

                                                   -3-
award. Jennifer also moved the court to alter, amend, or vacate the order pursuant

to CR 59.05. This was related to the amount and duration of maintenance.

             On November 10, 2021, the family court ruled on the pending post-

judgment motions. It denied Michael’s motion to strike Jennifer’s proposed

findings, noting that it had not signed either party’s proposed findings; denied his

motion to base the value of the marital residence on his father’s testimony, even

though he is a licensed real estate agent, as he was not a disinterested party; and

declined to change its maintenance award. The court also declined to change the

way it calculated the division of the marital property on an individual/line-item

basis as “the overall distribution of assets is equitable. Changing a portion of the

distribution would upset the overall balance contemplated by the Court.” This

appeal now follows.

             On appeal, Michael seeks review of the family court’s division of

marital property. Jennifer contends that the court did not abuse its discretion in the

division of the assets.

             CR 52.01 provides the general framework for the family court as well

as review in the Court of Appeals: “In all actions tried upon the facts without a

jury or with an advisory jury, the court shall find the facts specifically and state

separately its conclusions of law thereon and render an appropriate judgment[.] . . .

Findings of fact, shall not be set aside unless clearly erroneous, and due regard

                                          -4-
shall be given to the opportunity of the trial court to judge the credibility of the

witnesses.” See Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (footnote

omitted) (An appellate court may set aside a lower court’s findings made pursuant

to CR 52.01 “only if those findings are clearly erroneous.”). The Asente Court

defined substantial evidence as:

             “[S]ubstantial evidence” is “[e]vidence that a reasonable
             mind would accept as adequate to support a conclusion”
             and evidence that, when “taken alone or in the light of all
             the evidence, . . . has sufficient probative value to induce
             conviction in the minds of reasonable men.” Regardless
             of conflicting evidence, the weight of the evidence, or the
             fact that the reviewing court would have reached a
             contrary finding, “due regard shall be given to the
             opportunity of the trial court to judge the credibility of
             the witnesses” because judging the credibility of
             witnesses and weighing evidence are tasks within the
             exclusive province of the trial court. Thus, “[m]ere doubt
             as to the correctness of [a] finding [will] not justify [its]
             reversal,” and appellate courts should not disturb trial
             court findings that are supported by substantial evidence.

Id. (footnotes omitted). “The trial court’s conclusions of law are reviewed de

novo. . . . Decisions concerning the division of marital property are also within the

sound discretion of the trial court, and will not be disturbed except for an abuse of

that discretion.” Stipp v. St. Charles, 291 S.W.3d 720, 723 (Ky. App. 2009) (citing

Gosney v. Glenn, 163 S.W.3d 894, 98-99 (Ky. App. 2005), and Neidlinger v.

Neidlinger, 52 S.W.3d 513 (Ky. 2001)). With these standards in mind, we shall

address the issues Michael raises in his appeal.

                                          -5-
                For his first argument, Michael contends that the family court erred in

dividing the parties’ marital property due to a mathematical error with respect to

the division of the values of the equity in the marital residence and the marital

vehicles. Kentucky Revised Statutes (KRS) 403.190(1) provides that the court

must “divide the marital property . . . in just proportions considering all relevant

factors[,]” including each spouse’s contribution to its acquisition, the value of non-

marital property assigned to each spouse, the duration of the marriage, and the

economic circumstances of each spouse when the division becomes effective. We

review a family court’s division of marital assets for abuse of discretion. Young v.

Young, 314 S.W.3d 306, 308 (Ky. App. 2010).

                In its findings, the court determined that the marital residence had a

value of $192,500.00, that there was $152,500.00 in equity, and that each party

was entitled to half of the equity, or $76,250.00. The court awarded the 2019 Ford

Explorer to Jennifer and the remaining three vehicles to Michael. These three

vehicles had a value of $23,500.00, which the court ordered would offset his

interest in the marital residence. The court did not find it necessary for either party

to offset funds each had retained from a joint bank account ($20,000.00 that

Jennifer withdrew) or a tax refund (Michael retained approximately $7,000.00).

As to Michael’s TESPHE2 account, that account contained $149,378.98, and

2
    Tax-Efficient Savings Plan for Hourly Employees.

                                               -6-
divided equally, each party would receive $74,689.00. “However, after dividing

the vehicles, [Michael] is still owed $52,750.00 in equity in the marital residence.

As such, he shall retain all but $21,939.00 of his TESPHE account. [Jennifer] shall

be entitled to that amount as her share.” In addition, Jennifer was awarded half of

the marital portion of Michael’s Ford pension.

             On this issue, Michael argues that the total value of the vehicles he

was retaining ($23,500.00) should be offset from the total value of the marital

residence, rather than just half of it. The court determined that Michael was owed

$52,750.00 in equity in the marital residence, calculated as follows: $76,250.00

(Michael’s one-half interest in the marital residence) minus $23,500.00 (the total

value of the vehicles Michael retained) equals $52,750.00. Michael asserts that the

correct calculation the court should have used was to subtract the total value of the

remaining vehicles (half was Michael’s portion) from the total equity in the house

($152,500.00), meaning that he was owed $64,500.00 in equity for the marital

residence, creating a difference of $11,750.00. This proposed calculation, Michael

argues, would permit each party to be awarded one-half of these marital assets,

which is what the family court intended based on the overall decree. The family

court declined to change this calculation when it ruled on Michael’s post-decree

motion, stating that the overall distribution of the assets was equitable and that the

balance would be upset if a portion of the distribution were to be changed.

                                          -7-
             We agree with Michael that the family court’s calculation was not in

keeping with its references to an equal division of the marital property. The court

should have used either the total value of the equity and vehicles, or half of these

values, to determine Michael’s half of those two categories of marital property, and

then calculate his portion with an offset of the value of the three vehicles he was

retaining. The total amount of the equity in the marital residence and the vehicles

is $176,000.00, meaning that the parties’ portions should have been $88,000.00.

Because Michael was retaining all of the vehicles, which had a value of

$23,500.00, that amount would be offset from his portion. Therefore, he should

have been apportioned $64,500.00, not $52,750.00. The court declined to revisit

its calculation based upon Michael’s post-decree motion, and we hold that this

constitutes an abuse of discretion, especially in light of a lack of findings to

support an unequal division, and the portions of the orders dividing the marital

assets must be vacated.

             Next, Michael contends that the family court failed to consider the tax

consequences of its division of his TESPHE account. The court based the division

of the account on its flawed calculation of the vehicles and equity in the marital

residence, and it therefore must be vacated. However, we shall review this

argument to offer any direction necessary on remand.

                                          -8-
             Michael cites to Atkisson v. Atkisson, 298 S.W.3d 858 (Ky. App.

2009), in support of his argument that the family court erred when it offset post-tax

assets with his pre-tax retirement assets. While he was left with more of the

TESPHE account, he stated that he would incur taxes in order to liquidate the

account before he would be able to use this share of the marital estate or pay

amounts to Jennifer or her attorney as ordered. This, he argues, would disrupt the

intended equal division of marital property.

             In Atkisson, this Court stated:

                    In his second appeal, James contends that Kathleen
             filed the writs of garnishment and judgment lien before
             the compliance dates in the trial court’s judgment had
             passed. As a result of this premature filing, James states
             that he incurred substantial penalties and interest as a
             result of the garnishment against his Allstate pension
             account. James maintains that these expenses should
             come out of Kathleen’s share of the marital property
             since they were incurred as a result of her actions.

             ....

                    But while Kathleen was within her rights to file the
             writs, we question the trial court’s decision to allow
             Kathleen to garnish the tax-deferred accounts. Because
             the trial court allowed the garnishment against these
             accounts, James states that he incurred 10% penalties for
             early withdrawal, plus additional taxes and fees. James
             contends that these penalties should be assessed against
             Kathleen’s share of the marital estate.

                   In the absence of a statutory exemption, tax-
             deferred accounts are subject to garnishment and
             judgment liens like any other account. However, the trial

                                         -9-
court should consider the tax consequences of its division
of marital property. See Broida v. Broida, 388 S.W.2d
617, 621 (Ky. 1965); and Owens v. Owens, 672 S.W.2d
67, 69 (Ky. App. 1984). Otherwise, the payor spouse’s
share of the marital estate might be consumed by the
taxes incurred to liquidate sufficient assets for the payee
spouse’s share.

      In this case, the trial court recognized that James
would incur substantial penalties and taxes by allowing
the garnishments; but the court concluded that James
could have avoided these consequences by paying the
judgments within the time frames provided in the
judgments. Under the specific circumstances of this
case, we disagree.

       The trial court faulted James for his failure to
submit a [Qualified Domestic Relations Order] QDRO by
the February 25 deadline set out in the amended
judgment. Although James failed to meet this deadline, it
is clear from the record that James and his counsel made
a good faith effort to do so. James submitted a QDRO to
Kathleen’s counsel, who responded that a QDRO would
not be necessary.

       We agree with the trial court that James’s
submission of the QDRO to the [sic] Kathleen’s counsel
did not comply with the mandate set out in the judgment.
However, the trial court made no effort to determine
whether James had other accounts which could be
garnished without incurring such drastic tax
consequences. Furthermore, the trial court could have
imposed additional attorney fees and costs for the delay.
Additionally, of course, the amounts bear interest at the
post-judgment rate from December 20, 2007.

      By upholding the garnishment writs against the
tax-deferred accounts, the trial court subjected James to a
penalty which was far in excess of his breach. The
garnishment writ converts a deferred distribution of

                           -10-
             marital assets into a present-value distribution. The
             penalties and taxes imposed on James fundamentally
             alter the underlying allocation of marital assets.
             Consequently, we find that the trial court’s decision to
             uphold the writs amounted to an abuse of its discretion.

                     Since the trial court upheld the garnishment writs,
             James has presumably already incurred the penalties and
             taxes as a result of the early withdrawals. We agree with
             James that these additional expenses should be assessed,
             at least in part, against Kathleen’s portion of the marital
             estate. However, we also agree with the trial court that
             James bears some, if not substantial, responsibility for
             these penalties since he did not fully comply with the
             trial court’s orders. Therefore, we will remand this
             matter to the trial court for a determination of the amount
             of penalties and taxes incurred as a result of the
             garnishment and an appropriate allocation of this amount
             between the parties.

Atkisson, 298 S.W.3d at 865, 867-68.

             Jennifer argues that Atkisson has no application to this case, and we

agree. In that case, there were actual taxes, penalties, and interest that the husband

had to pay due to the garnishment. Here, the court’s award did not require Michael

to liquidate any of his assets and, therefore, he had not incurred any tax

consequences. The court ordered the account to be divided pursuant to a QDRO in

order to prevent the imposition of taxes, penalties, or interest.

             However, on remand, while the family court is not required to

consider the tax consequences of offsetting post-tax assets from pre-tax assets, it

                                         -11-
may do so if it decides that would be an appropriate consideration when it

redivides the marital property.

             Finally, Michael argues that the family court erred in including profit

sharing bonuses in the marital estate that no longer existed at the time of the trial.

He bases this argument on two reasons. First, he argues this part of the award

arose from Jennifer’s untimely filed proposed findings that the court improperly

permitted her to submit, which argument we reject. And second, that he had used

these funds to pay for marital expenses and should not have to owe Jennifer any of

the amount when the court declined to make Jennifer do the same thing with

respect to the $20,000.00 she withdrew. Jennifer, on the other hand, states that

during the trial, Michael admitted that he had received two profit sharing bonuses

during the marriage, but after they had separated. He claimed at trial that he had

used these funds for bills, but the family court found that he had been living with

his parents, incurring virtually no expenses. Jennifer also argues that Michael

failed to preserve this argument for our review, which we also reject.

             As to the merits of the argument, we disagree with Jennifer’s assertion

that the family court’s reference to Michael having virtually no expenses is in

relation to what he spent the bonus money on. Rather, that reference by the family

court is in the section of the order ruling on permanent maintenance. And we

recognize that pursuant to the status quo order, Michael was required to pay the

                                         -12-
parties’ mortgage, health and car insurance, and water bill. Because we are

vacating the division of the marital assets, the court may revisit the division of the

profit sharing bonuses on remand if it so chooses.

             For the foregoing reasons, the orders of the Jefferson Family Court

related to the division of marital property are vacated, and this case is remanded for

further proceedings in accordance with this Opinion.

             COMBS, JUDGE, CONCURS.

             DIXON, JUDGE, DISSENTS AND DOES NOT FILE SEPARATE
OPINION.

 BRIEFS FOR APPELLANT:                      BRIEF FOR APPELLEE:

 Justin R. Key                              Mary Rives Chauvin
 Jeffersonville, Indiana                    Louisville, Kentucky

                                         -13-