Court Opinion

ID: 8482917
Source: CourtListenerOpinion
Date Created: 2022-11-10 16:04:44.727133+00
Date Added: 2024-06-11T16:49:42.888764
License: Public Domain

RENDERED: NOVEMBER 10, 2022; 10:00 A.M.
                    NOT TO BE PUBLISHED

             Commonwealth of Kentucky
                    Court of Appeals

                       NO. 2021-CA-0868-MR

JEFFREY SMITH                                          APPELLANT

           APPEAL FROM CARTER CIRCUIT COURT
v.       HONORABLE JENIFFER BARKER NEICE, JUDGE
                 ACTION NO. 20-CI-00181

LORI SMITH                                              APPELLEE

AND

                       NO. 2021-CA-0906-MR

LORI SMITH                                    CROSS-APPELLANT

         CROSS-APPEAL FROM CARTER CIRCUIT COURT
v.       HONORABLE JENIFFER BARKER NEICE, JUDGE
                   ACTION NO. 20-CI-00181

JEFFREY SMITH                                   CROSS-APPELLEE
                                    OPINION
                                   AFFIRMING

                                   ** ** ** ** **

BEFORE: JONES, MAZE, AND MCNEILL, JUDGES.

MCNEILL, JUDGE: Jeffrey Smith (“Jeffrey”) appeals from a Carter Circuit Court

judgment which held various debts incurred during his marriage to appellee/cross-

appellant Lori Smith (“Lori”) to be his nonmarital debt. Lori cross-appeals from

the same judgment, arguing she was entitled to maintenance. Finding no error, we

affirm.

             Jeffrey and Lori divorced on November 25, 2020, after being married

for forty years. Following the entry of the decree of dissolution of marriage, the

family court held a hearing to determine division of marital property, allocation of

debts, and maintenance. Lori testified that she is disabled and receives $1,200.00

in social security benefits each month and that her monthly expenses are

$1,765.00.

             Jeffrey’s disclosure statement listed his monthly income as $3,200.00

but he testified that he was currently unemployed. He had most recently worked as

a plumber and expected to return to work soon. He also admitted to receiving a

$4,000.00 payroll protection loan for his business, Smith Construction, but claimed

he was not doing work for the company. Jeffrey claimed monthly expenses of

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$4,287.82 but the testimony revealed, and the trial court found, his monthly

expenses to be $2,918.00.

              During their marriage, the parties owned and operated several

businesses, including a daycare, a grocery, and a hardware store (“Smith

Hardware”). By the time of the divorce, all three businesses (or their assets) had

been sold and the parties were heavily in debt, almost all of it associated with

Smith Hardware. Lori primarily worked at the daycare until it was sold to pay off

the debts of the grocery. At that point, Lori began working at Smith Hardware

with Jeffrey, although the level of her involvement was disputed.

              Lori testified that for the first eight years at Smith Hardware she

worked behind the counter and answered the phones. However, for the last two

years she was not involved at all and had no knowledge of the store’s debts.

Jeffrey claimed that Lori was responsible for managing the store’s finances and

purchasing inventory and was fully aware of the debts it incurred. The total debt

associated with Smith Hardware was approximately $192,000.00, including a

$12,697.00 judgment lien owed to First National Bank for a loan used to purchase

a forklift for the store.

              Following the hearing, the trial court entered findings of fact,

conclusions of law, and a judgment, finding that the debts associated with Smith

Hardware were Jeffrey’s nonmarital debt because Jeffrey had not met his burden of

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showing the debts were marital. The court also declined to award maintenance to

Lori, finding that Jeffrey did not have the ability to pay maintenance based upon

his substantial debt. Jeffrey appealed and Lori cross-appealed.

                Turning first to Jeffrey’s appeal, he argues the trial court erred in

ruling the judgment lien was nonmarital debt. We review issues pertaining to the

assignment of debts incurred during the marriage under an abuse of discretion

standard. Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001), overruled on

other grounds by Smith v. McGill, 556 S.W.3d 552 (Ky. 2018). The test for abuse

of discretion is whether the trial court’s decision was “arbitrary, unreasonable,

unfair, or unsupported by sound legal principles.” Artrip v. Noe, 311 S.W.3d 229,

232 (Ky. 2010).

                As an initial matter, we must address the deficiency of Jeffrey’s

appellate brief. His argument section fails to make “reference to the record

showing whether the issue was properly preserved for review and, if so, in what

manner” as required by CR1 76.12(4)(c)(v). We require a statement of

preservation:

                so that we, the reviewing Court, can be confident the
                issue was properly presented to the trial court and
                therefore, is appropriate for our consideration. It also has
                a bearing on whether we employ the recognized standard
                of review, or in the case of an unpreserved error, whether

1
    Kentucky Rules of Civil Procedure.

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             palpable error review is being requested and may be
             granted.

Oakley v. Oakley, 391 S.W.3d 377, 380 (Ky. App. 2012).

             “Our options when an appellate advocate fails to abide by the rules

are: (1) to ignore the deficiency and proceed with the review; (2) to strike the brief

or its offending portions, CR 76.12(8)(a); or (3) to review the issues raised in the

brief for manifest injustice only[.]” Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky.

App. 2010) (citing Elwell v. Stone, 799 S.W.2d 46, 47 (Ky. App. 1990)). Because

the record is small, and we have been able to determine Jeffrey’s argument was

properly preserved, we will ignore the deficiency and proceed with the review.

             “Questions of whether . . . debt is marital or nonmarital are left to the

sound discretion of the trial court[.]” Rice v. Rice, 336 S.W.3d 66, 68 (Ky. 2011).

Factors a trial court may consider when determining how to assign a debt include:

             (1) Was the debt incurred for the purchase of marital
             property? (2) Was the debt 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 divorce to allow for
             payment of the debt?

Id. at 69 (citing Neidlinger, 52 S.W.3d at 523). “The burden of proving that a debt

is marital is upon the party that incurred it and now claims it is marital.” Id. at 68

(citation omitted).

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             The trial court considered these factors and determined Jeffrey had not

met his burden in proving the debts associated with Smith Hardware, including the

judgment lien, were marital. It found that the debts were not incurred for the

purchase of marital property, but business property and that Jeffrey had presented

no evidence that the debts were necessary to maintain or support the family. It

further found that Lori had not participated in incurring the debts, crediting her

testimony to the same. It noted that Jeffrey presented no evidence contradicting

Lori’s claim, or evidence that she personally benefited from the debts. Finally, the

court found that neither party could afford to pay the debts, considering the amount

of debt compared to the parties’ incomes.

              Jeffrey argues the trial court abused its discretion in finding the

judgment lien nonmarital. Specifically, he cites the trial court’s finding that the

debts were incurred for the purchase of business property and argues that since the

hardware store was the couple’s primary source of income, any debt incurred for

the business would “presumably . . . ultimately support them and purchase marital

property.” However, it was Jeffrey’s burden to prove that the debts were incurred

to support or maintain the family or purchase marital property.

             Here, there is no evidence the debt associated with the judgment lien

was necessary to maintain and support the family. Jeffrey testified that the debt

was for the purchase of a forklift but while conceivably understandable, there was

                                          -6-
no testimony as to whether the forklift was necessary to the operation of the

hardware store, much less how the forklift was necessary to the maintenance and

support of the family. In addition to concluding that there was no evidence

incurring the debt was necessary to maintain or support the family, the trial court

found the debt was incurred to purchase business, not marital property, and that

Jeffrey, not Lori, had incurred the debt. We cannot say the trial court abused its

discretion in determining the judgment lien was Jeffrey’s nonmarital debt.

                As to Lori’s cross-appeal, she argues the trial court erred by not

awarding her maintenance. We disagree. “The decision of whether to award

maintenance is within the trial court’s discretion and we may disturb that ruling

only if the trial court abused its discretion or made its ruling based on clearly

erroneous findings of fact.” Smith v. Smith, 235 S.W.3d 1, 17 (Ky. App. 2006)

(citing Powell v. Powell, 107 S.W.3d 222, 224 (Ky. 2003)). Maintenance is

governed by KRS2 403.200, which provides that maintenance may be awarded

only if the court finds that the party seeking maintenance: “(a) Lacks sufficient

property, including marital property apportioned to him, to provide for his

reasonable needs; and (b) Is unable to support himself through appropriate

employment . . . .”

2
    Kentucky Revised Statutes.

                                            -7-
             Here, the trial court found that Lori did not have sufficient property to

provide for her reasonable needs and that she was unable to support herself through

appropriate employment because of her disability. However, it further found that

Jeffrey lacked the ability to pay maintenance because of his substantial business

debt and therefore declined to award maintenance. Lori argues the trial court

should not have considered Jeffrey’s business debts in determining whether to

award maintenance because Jeffrey testified that he was considering bankruptcy.

             While Jeffrey did testify that he had considered bankruptcy and

believed that bankruptcy might be the parties’ best option, he also stated that he

had never been able to bring himself to file for bankruptcy in the past, and Lori has

not alleged Jeffrey has filed for bankruptcy as of the time of the appeal. In

awarding maintenance, “[t]he ability of the spouse from whom maintenance is

sought to meet his needs while meeting those of the spouse seeking maintenance”

is an important factor to be considered by the court. KRS 403.200(2)(f).

             Here, the trial court determined that Jeffrey’s expenses exceeded his

income due to his substantial business debt. The court found Jeffrey’s monthly

income to be $3,200.00 and reasonable monthly expenses to be $2,918.00. The

$192,000.00 of debt associated with Smith Hardware was allocated to Jeffrey. The

trial court properly considered Jeffrey’s ability to meet his own needs when

awarding maintenance. In making its decision, the trial court acknowledged other

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KRS 403.200(2) factors, including the substantial length of and decent standard of

living during the marriage, but noted the parties were “deeply in debt and appear to

have lived well beyond their means.” Thus, the trial court placed higher weight on

this factor relative to the others. Considering the amount of the debt and Jeffrey’s

financial resources, we cannot say the trial court abused its discretion in

prioritizing this factor and declining to award maintenance.

             Based upon the foregoing, the judgment of the Carter Circuit Court is

affirmed.

             ALL CONCUR.

 BRIEFS FOR APPELLANT/CROSS-               BRIEF FOR APPELLEE/CROSS-
 APPELLEE:                                 APPELLANT:

 Derrick E. Willis                         MaLenda S. Haynes
 Grayson, Kentucky                         Grayson, Kentucky

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