Court Opinion

ID: 4667182
Source: CourtListenerOpinion
Date Created: 2021-03-12 15:08:16.662072+00
Date Added: 2024-06-11T08:02:54.265317
License: Public Domain

RENDERED: MARCH 5, 2021; 10:00 A.M.
                        NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals

                             NO. 2018-CA-1099-MR

CLAY F. GOTWALT                                                     APPELLANT

                 APPEAL FROM SCOTT CIRCUIT COURT
v.              HONORABLE LISA HART MORGAN, JUDGE
                       ACTION NO. 15-CI-00115

DONNA F. GOTWALT (now MILLER)                                         APPELLEE

                                    OPINION
                                   AFFIRMING

                                  ** ** ** ** **

BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.

CLAYTON, CHIEF JUDGE: Clay F. Gotwalt (“Clay”) appeals from the Scott

Circuit Court’s order finding that a note executed by Clay and his former wife,

Donna F. Gotwalt (now Miller) (“Donna”) during their marriage represented a

valid marital debt. Upon review of the facts and applicable law, we affirm.
              FACTUAL AND PROCEDURAL BACKGROUND

             Clay and Donna married in October of 1997 and resided in Florida

until 2006, at which time they relocated to Kentucky. During the parties’

marriage, and while they were still residing in Florida, Clay and Donna executed a

note on May 11, 2005 (the “Note”). The trustee of the Robert W. Miller Trust (the

“Trust”) signed the Note as the “Lender,” and Clay and Donna signed the Note as

the “Payees.” The Note stated, in pertinent part:

             FOR VALUE RECEIVED, the undersigned, (jointly and
             severally, if more than one) promises to pay to The
             Robert W. Miller Trust the principal sum of Fifty-Seven
             Thousand Dollars ($57,000.00).

             The said principal shall be payable in lawful money of
             the United States of America at the address to be
             determined by the Trust, or at such place as may
             hereafter be designated by written notice from the Lender
             to the Payee, on the date and in the manner following:

             The full amount of unpaid principal, shall balloon and
             become immediately and fully due and payable, upon
             demand by the Trust no sooner than 15 years from the
             date of payees’ signatures, or upon the sale or passage of
             title of the property parcel number 09-20-32-301-0210-
             0000 located within the town of Geneva, Seminole
             County, Florida, whichever comes first. If the property is
             not sold or titled [sic] passed or if demand for repayment
             is not made by day 1 following the 15 year waiting
             period this note is to become null and void and
             repayment is forgiven.

             ....

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             This note is secured by a mortgage on real estate, made
             by the maker hereof in favor of the said payee, and shall
             be construed and enforced according to the laws of the
             State of Florida. The terms of said mortgage are by this
             reference made a part hereof.

Neither the Note nor any mortgage related to the Note was recorded in the state of

Florida.

             The record reflects that the $57,000.00 amount loaned by the Trust

was deposited into the parties’ joint bank account and was used by Clay and Donna

to purchase the Seminole County, Florida real property referenced in the Note on

July 29, 2005 for $119,000 (the “Raccoon Trail Property”). Thereafter, in

September of 2006, Clay and Donna sold the Racoon Trail Property to a third-

party purchaser for a purchase price of $133,652.00. The parties ultimately

relocated to Kentucky, where they purchased and began construction in 2008 on a

home in Midway, Kentucky (the “Seagull Lane Property”).

             Clay filed a petition for dissolution of marriage in February of 2015,

and the Trust issued a demand for repayment of the loan in September of 2015. In

an order entered on February 14, 2018, the trial court found the Note to be a valid

marital debt owed by the parties and required the parties to repay the Trust the sum

of $57,000.00 from the proceeds of the sale of the Seagull Lane Property.

Specifically, the court found that the Note was “a written instrument, signed by all

parties, stating with specificity the amount owed in terms of the repayment or

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termination.” Moreover, the court found that, although the terms of the balloon

payment allowed for repayment upon the sale of the Raccoon Trail Property, it was

not required. It was only if the “demand for repayment [was] not made 1 day

following a 15-year waiting period” that the Note was null and void. Therefore,

the trial court found that, because the Trust made its demand for repayment within

the 15-year waiting period, the Note represented a valid debt. Additionally, the

trial court concluded that the debt was marital in nature, as it was jointly acquired

and used for marital purposes benefitting both parties equally.

             Clay filed a motion to alter, amend, or vacate the trial court’s order on

February 23, 2018, which was denied by the trial court on June 27, 2018. This

appeal followed.

                                    ANALYSIS

             a. Standard of Review

             On appellate review, “[t]he construction and interpretation of a

contract, including questions regarding ambiguity, are questions of law to be

decided by the court.” First Commonwealth Bank of Prestonsburg v. West, 55

S.W.3d 829, 835 (Ky. App. 2000). Accordingly, this Court’s standard of review of

the trial court’s construction and interpretation of the Note is de novo. Id. We

review the trial court’s factual findings under the “clearly erroneous” standard.

Kentucky Rule of Civil Procedure (CR) 52.01; Largent v. Largent, 643 S.W.2d

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261, 263 (Ky. 1982). A factual finding is not clearly erroneous if it is supported by

substantial evidence. Barber v. Bradley, 505 S.W.3d 749, 754 (Ky. 2016).

“‘Substantial evidence’ is evidence of substance and relevant consequence

sufficient to induce conviction in the minds of reasonable people.” Sherfey v.

Sherfey, 74 S.W.3d 777, 782 (Ky. App. 2002), overruled on other grounds by

Benet v. Commonwealth, 253 S.W.3d 528 (Ky. 2008) (citations omitted). “[T]he

division of marital . . . debt is within the sound discretion of the trial court and will

not be disturbed unless we find an abuse of discretion.” McGregor v. McGregor,

334 S.W.3d 113, 119 (Ky. App. 2011).

             b. Analysis

             As a preliminary matter, Clay argues that Donna’s appellate brief

deviates significantly from the format mandated by CR 76.12 and should therefore

be stricken. Our options when an appellate advocate fails to abide by CR 76.12

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

brief or its offending portions; 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)

(citations omitted). However, because we do not find the deficiencies in the brief

egregious enough to strike Donna’s brief, we decline to strike the brief and proceed

with a review thereof.

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             Clay first argues that the trial court incorrectly interpreted the Note,

failed to give effect to all the terms contained in the Note, and gave no effect to the

condition which actually occurred – namely, the sale and passage of title of the

Raccoon Trail Property in 2006. Under Kentucky law, “[i]n the absence of

ambiguity a written instrument will be enforced strictly according to its terms, and

a court will interpret the contract’s terms by assigning language its ordinary

meaning and without resort to extrinsic evidence.” Frear v. P.T.A. Industries, Inc.,

103 S.W.3d 99, 106 (Ky. 2003) (internal quotation marks and citations omitted).

             In this case, we do not find the trial court’s interpretation of the Note

to be incorrect. The express terms of the Note deal with two separate

circumstances. The first circumstance involves the conditions under which the full

amount of the unpaid principal becomes due and payable, which is upon the earlier

of three separate and individual events:

             (1) the passage of fifteen years from the date the parties
             signed the instrument; or

             (2) the sale of the Raccoon Trail Property; or

             (3) the passage of title of the Raccoon Trail Property.

Therefore, although the express terms of the Note allowed the Trust to collect the

full amount of principal upon the sale or title change of the Raccoon Trail

Property, it was not required to do so.

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             The second circumstance described in the Note involves the

conditions under which the Note becomes “null and void and repayment is

forgiven.” Those two conditions are:

             (1) if the Raccoon Trail Property “is not sold or [title]
             passed;” or

             (2) if demand for repayment is not made by day 1
             following the 15-year waiting period.

Pursuant to the plain language of the Note, the provisions for debt repayment are

separate from the provisions for debt forgiveness.

             In this case, the trial court focused on the provision for debt

forgiveness. The record reflects that the Raccoon Trail Property sold on

September 19, 2006. Therefore, the first condition under which the debt would be

forgiven did not occur. Moreover, the Trust made a demand for repayment on

September 2, 2015. As a result, the second condition under which the debt would

be forgiven did not occur. Therefore, neither of the conditions by which the debt

would be forgiven and the Note would become null and void occurred. “When no

ambiguity exists in the contract, we look only as far as the four corners of the

document to determine the parties’ intentions.” 3D Enterprises Contracting Corp.

v. Louisville and Jefferson County Metropolitan Sewer Dist., 174 S.W.3d 440, 448

(Ky. 2005) (citation omitted). Moreover, “we are not permitted to create an

ambiguity where none exists[.]” West, 55 S.W.3d at 836 (citing Friction Materials

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Co., Inc. v. Stinson, 833 S.W.2d 388, 391 (Ky. App. 1992)). In this case,

substantial evidence supported the trial court’s findings of fact, and a de novo

review reveals no error in its conclusion that the Note evidenced a debt owed by

the parties.

               As an ancillary matter, Clay raises the issue of whether Florida law

governs the applicable statute of limitations regarding the enforceability of the

Note. The statute of limitations issue would be more proper before the Florida

courts with all parties participating, including the Trust. While Clay already

brought suit in Florida in February of 2016 seeking injunctive relief against the

Trust as well as a determination as to the validity and enforceability of the Note,

the Florida court dismissed the suit based on jurisdictional issues. Therefore, we

decline to address any questions related to the applicability of the Florida statute of

limitations to the Note.

               Finally, we find no abuse of discretion in the trial court’s

determination that the debt was marital. In Neidlinger v. Neidlinger, the Kentucky

Supreme Court set forth the following factors which should be considered in

determining if a debt incurred during the marriage is marital and subject to

division. 52 S.W.3d 513, 523 (Ky. 2001), overruled on other grounds by Smith v.

McGill, 556 S.W.3d 552 (Ky. 2018). Such factors are: (1) “receipt of benefits and

extent of participation” of the parties; (2) “whether the debt was incurred to

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purchase assets designated as marital property”; (3) “whether the debt was

necessary to provide for the maintenance and support of the family”; and (4) “the

economic circumstances of the parties bearing on their respective abilities to

assume the indebtedness.” Id. (citations omitted).

             In this case, the record reflects that the $57,000.00 proceeds from the

loan evidenced by the Note were deposited into the parties’ joint bank account and

benefitted both Clay and Donna in enabling them to purchase the marital Raccoon

Trail Property. Moreover, both Clay and Donna were active participants in both

obtaining the Note and utilizing the proceeds therefrom. Therefore, the trial court

did not abuse its discretion in either designating the debt evidenced by the Note as

marital or in equally dividing such debt between Clay and Donna.

                                  CONCLUSION

             For the foregoing reasons, we affirm the Scott Circuit Court’s order.

             ALL CONCUR.

BRIEFS FOR APPELLANT:                      BRIEF FOR APPELLEE:

Michael Davidson                           Clayton B. Patrick
Nam H. Nguyen                              Frankfort, Kentucky
Lexington, Kentucky

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