Opinion
NO. 2015-CA-001000-MR NO. 2015-CA-001702-MR
02-24-2017
JEFFREY L. PETTINGILL APPELLANT v. SARA Y. PETTINGILL APPELLEE
BRIEF FOR APPELLANT: William D. Tingley Louisville, Kentucky BRIEF FOR APPELLEE: Bryan D. Gatewood Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE A. CHRISTINE WARD, JUDGE
ACTION NO. 13-CI-502075 OPINION
REVERSING AND REMANDING
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BEFORE: NICKELL, STUMBO AND THOMPSON, JUDGES. NICKELL, JUDGE: Jeffrey L. Pettingill ("Jeff") challenges two orders entered in February and August 2015 pertaining to dissolution of his brief marriage to Sara Y. Pettingill ("Sara"). The central focus of both appeals is an order entered by the Jefferson Circuit Court on February 19, 2015, and in its wake, the validity of an order entered by the same court while an appeal was pending in this Court. Particularly troubling is the trial court's treatment of Jeff's two retirement accounts—an asset he cashed in and spent for his singular benefit during the marriage—long before Sara petitioned for annulment or dissolution. Reversal and remand for further proceedings is mandated.
FACTS AND PROCEDURAL BACKGROUND
Jeff, a HIPPA security officer, met Sara, a university administrator, in May 2010. Five months later they married and set up housekeeping in a home Sara already owned. Sara used $50,000 inherited from her aunt to renovate the home, a process underway when she met Jeff. According to Sara, other than a small amount of painting, Jeff did not help with maintenance or improvement of the marital home. In her words, he was an "impediment," not a help, but he did make intermittent mortgage payments. Jeff was employed during most of the marriage and consistently earned more money than Sara—at one time, 33.5% more.
In November 2012, Jeff and Sara became parents. They separated on June 30, 2013. On July 5, 2013, Sara petitioned for annulment, or alternatively, dissolution of the marriage. Six days later, Sara successfully petitioned for entry of a domestic violence order (DVO) against Jeff.
In prior litigation, a panel of this Court affirmed issuance of the DVO and the Supreme Court of Kentucky agreed. Pettingill v. Pettingill, 480 S.W.3d 920, 921 (Ky. 2015). A subsequent order was entered by the trial court on April 11, 2016, extending the original DVO another three years. The order renewing the DVO is the subject of a separate appeal before another panel of this Court. Pettingill v. Pettingill, Case No. 2016-CA-000589-ME.
Court-ordered mediation of the dissolution action failed. Trial was originally set for November 1, 2013, but was rescheduled numerous times at Jeff's request—one explanation being his desire to depose several witnesses. Those depositions never materialized.
Prior to trial, Jeff and Sara agreed upon stipulations pertaining to vehicles, stock, retirement accounts, Jeff's student loan debt, and realty—including valuation of the marital home prior to the marriage, near the time of separation, and six months before trial. The parties stipulated the home was Sara's non-marital property, subject to a marital claim by Jeff whose earnings were used to pay down the mortgage. Those stipulations were introduced at trial and used by the court to establish the value of the marital home—a value Jeff now disputes.
The record contains a three-page document titled "STIPULATIONS." Signed by Jeff, Sara and their attorneys, the document is undated, bears no file stamp, and appears to have been prepared by Jeff's counsel. Of particular interest to this appeal is the value of the marital home which according to the document carried a $163,325 loan when purchased by Sara using $29,175 in non-marital funds. The home had a pre-wedding fair market value of $200,000 on October 4, 2010; $215,000 on August 12, 2013, a little over a month after separation; and $263,000 on January 7, 2014. When the stipulations were signed, the pay-off on the home was $124,405. The parties also stipulated Jeff cashed in his Yum Brands retirement account, receiving $8,451.66 in marital money, and cashed in his Schwab Humana 401K retirement account—with a gross value of $26,760.11—but which netted just $18,037.32 due to its early withdrawal. This money was placed in a bank account from which mortgage payments were made and Jeff made purchases. Jeff claimed some of the Schwab Humana account was non-marital but traced no portion of the account to a source outside the marriage. Jeff had no retirement funds at the time dissolution.
Trial finally began on July 30, 2014, with Sara's attorney calling Jeff as the first witness. Later, when Jeff's counsel attempted to refute what he characterized as a "semi-dissipation claim"—based on his client's early cashing of the two retirement accounts without Sara's knowledge—the trial court stated that was irrelevant as no dissipation of assets claim had been asserted, Jeff's Schwab Humana account had been spent, and there was nothing to divide, prompting Jeff's counsel to move to another topic. On November 18, 2014, a limited decree of dissolution was entered granting a divorce, but reserving issues of property division, custody and child support.
In January 2015, the original trial judge retired. On February 19, 2015, with a new judge on the bench, a twenty-two page order—with accompanying findings of fact and conclusions of law—was entered. We comment only on items addressed in that order of importance to the remainder of this Opinion. First, Sara was awarded the marital home which she owned prior to the marriage. According to stipulations, the fair market value of the home near the time of the marriage in November 2010 was $200,000; near the time of separation in June 2013 it was $215,000. Although not mentioned by the trial court, the parties had stipulated the home's value on January 7, 2014—six months before trial and eleven months before entry of a limited decree of dissolution—was $263,000. Second, proceeds of the couple's sale of a marital vehicle for $17,250 were held in escrow by Sara's attorney as marital property. Of that amount, $3,500 was restored to Sara—the amount she had contributed to purchase of the vehicle; the remaining $13,750 was awarded to Jeff as a "just division" of both the car sale proceeds and the increase in the marital home's value during the marriage. Finally, Jeff and Sara were each awarded one-half (an unknown figure at the time of trial) of Sara's university retirement account, but Jeff's portion was reduced by $17,605.89—half of the $35,211.77 he had spent on himself after cashing in his two retirement accounts. The trial court offered no explanation for the reduction other than Jeff had cashed the two accounts early without Sara's knowledge and spent the money on non-marital items.
On February 28, 2015, Jeff moved for modification of the order on eight grounds. He claimed the trial court did not: state when the parties ceased jointly contributing to the marital home; explain its use of an older valuation of the marital home ($215,000) rather than the most recent figure ($263,000) stipulated by the parties; specify both the weight it gave to Jeff having made marital home mortgage payments and the amount he contributed to the mortgage from non-marital funds; identify its reason for finding Sara contributed $5,000 in non-marital money to the marital home mortgage; delineate the proof on which it found Jeff had "dissipated" marital funds and the amount of early retirement dollars he spent on non-marital items; and, did not divide Sara's bank accounts totaling $18,172.64.
Sara opposed modification. She argued Jeff's counsel had drafted the stipulations; the trial court had found Jeff ceased contributing to the marital home when the couple separated; and, the trial court had found Jeff cashed out two retirement accounts early and used the funds for non-marital purposes. Finally, she argued Jeff—not the trial court—was at fault for failing to trace funds alleged to be non-marital to an outside source to establish he alone was entitled to some portion of his Schwab Humana retirement account.
Sara sought leave to file proof of the marital value of her university retirement account. She had not proved its value at trial, believing the account to be non-marital. The trial court disagreed, deeming the account's value and any interest earned during the marriage to be marital property. In her motion for leave, Sara stated TIAA-CREF had calculated the marital portion of this account to be $27,839.27, making Jeff's half $13,919.64—an amount she asked be reduced by $17,605.89 due to Jeff's "dissipation" of that amount "by withdrawing all of his retirement funds during the course of the marriage." As a result, Sara claimed Jeff owed her $3,686.26. In a supplemental trial memo filed two days later, Sara indicated the February order left personalty issues unresolved, reiterated her prior request to offer proof regarding the marital value of her university retirement account, and again stated Jeff had "dissipated" marital funds.
This appears to be Sara's first use of the word "dissipation."
Proof resumed April 1, 2015, with Jeff appearing pro se after his attorney was permitted to withdraw from the case. At the court's request, Sara's counsel summarized past events and stated the purpose of the day's hearing was to decide custody issues and divide property. Seeking to delay trial for a fifth time, Jeff argued distribution of the couple's assets was currently on appeal to this Court. The trial court told Jeff trial would go forward that day and he was mistaken about the status of an appeal. While his attorney had moved the trial court to alter, amend or vacate the February order before withdrawing from the case, he had not appealed the matter to a higher court.
On June 17, 2015, the trial court entered a five-page order denying Jeff's motion to alter, amend or vacate the February order. Rejecting Jeff's claims, the court pointed out it had already found joint contributions to the marital home had ceased on June 30, 2013—the date Jeff and Sara had separated. The court further stated it had used the $215,000 value of the marital home because it was most relevant to calculating and dividing the couple's equity in the asset. That value happened to be closer to the date of separation than the date of trial. Without mentioning the $263,000 value the parties had stipulated for January 7, 2014, the court stated it used the $215,000 value because the parties had agreed all home remodeling and renovation had been completed prior to separation. The trial court also attributed a $15,000 increase in the home's value to Sara's investment of $50,000 in non-marital funds to renovate the home, and found Jeff's claim that he contributed "sweat equity" to the home to be "non-existent or nominal at best." Additionally, the court recognized $40,137.31 had been paid toward the marital home's mortgage over the course of about thirty months, and that money came from a bank account holding funds mostly earned by Jeff. From trial testimony the court knew Sara had inherited $5,000 from her aunt and paid that amount toward the mortgage on December 14, 2010, a few days after the couple's one-month wedding anniversary and just prior to refinancing the home's mortgage. No marital funds were paid toward the mortgage between the wedding and refinancing of the mortgage.
Pleadings refer to two appraisals, but neither was placed in the record, nor was testimony offered from an appraiser. The only data on which the trial court could base its findings and conclusions about the value or the marital home was a set of stipulations agreed to by the parties.
In response to Jeff's request that the court specify the proof on which it had relied to find he had "dissipated" funds from two retirement accounts, the trial court wrote, "[t]he Court made no finding that [Jeff] 'dissipated' any of his retirement funds." Jeff had also asked what part of the $17,605.89 he spent from his retirement accounts was non-marital money. The court explained the entirety of both accounts was marital, a finding particularly true of the Schwab Humana 401K because Jeff had traced no portion of that account to a non-marital source. Finally, Jeff had claimed the court failed to divide Sara's bank accounts and asked the court to now divide those funds evenly. The court rejected the request, citing that portion of its February order wherein it had awarded Sara the entirety of her checking and savings accounts—both before and after the date of the decree—and the same to Jeff regarding his bank accounts. The court deemed this appropriate because it was the couple's custom to separate their earnings and money.
On June 25, 2015, the trial court entered an order addressing Sara's new request for reimbursement of their child's extraordinary medical expenses and for his car insurance. Jeff was ordered to pay both for a total of $2,426.28.
On June 29, 2015, Jeff timely appealed the February 2015 order to this Court. Despite new counsel having filed a notice of appeal, Jeff continued litigating in the trial court. On July 6, 2015, he filed two motions—one to alter, amend or vacate an order addressing custody and visitation entered on June 25, 2015, the other a motion for additional findings in support of an order dealing with property division entered after trial had concluded. Jeff suggested deducting the $2,426.28 in extraordinary healthcare costs and car insurance premiums he was now to pay Sara from the $13,750 in escrowed funds assigned to him in the February order, but not yet disbursed.
Sara was granted sole custody; Jeff was allowed supervised visitation.
As a result of Jeff's second motion, the trial court entered additional findings of fact and legal conclusions in a new order entered August 17, 2015. The court acknowledged it had failed to address all existing issues when trial concluded in April and was correcting that oversight. The court concluded Jeff owed Sara $19,793 to equalize the distribution of personalty. Furthermore, in light of Sara's supplementation of the record, the court now knew Jeff was due $13,919.64 from Sara's university retirement account, but that figure had to be reduced by $17,605.89—one-half of the amount Jeff had withdrawn early from his retirement accounts and spent on himself for non-marital purposes. Without specifically saying it was making a finding of dissipation, three times in the space of nine pages, the trial court stated Jeff "dissipated" his retirement accounts. Under the August order, Sara receives all funds held in escrow ($13,750) and Jeff owes her an additional $9,729.35.
The couple attempted to divide all their personalty based on lists Jeff created. Of the $51,501.22 the couple had amassed in marital property, Jeff proposed retaining items valued at $45,542.22 for himself. Sara did not object, asking to retain just $5,959 worth of items, and to be credited with the difference—a request with which the trial court agreed and ordered Jeff to pay Sara $19,793 to offset the value of the personalty assigned to him.
On August 27, 2015, Jeff moved the trial court to alter, amend or vacate the August order stating it lacked jurisdiction to redistribute Sara's university retirement account. In an order entered on September 16, 2015, the trial court acknowledged it had divided Sara's university retirement account in its February order, but concluded there was no need to alter, amend or vacate the August order because it "merely referenced" its earlier findings.
On October 1, 2015, Jeff moved the trial court to conform its September order to the requirements of CR 54.02. As entered, the order lacked required finality language. The order was amended and Jeff timely appealed. Two appeals, which we have consolidated for judicial economy and efficiency, follow. Having reviewed the briefs, the record and the law, we reverse and remand for further proceedings.
Kentucky Rules of Civil Procedure.
ANALYSIS
Jeff first argues the trial court erroneously entered an order on August 17, 2015, containing additional factual findings and conclusions of law pertaining to property distribution and financial issues addressed in a prior order entered on February 19, 2015, which he had timely appealed to this Court. He correctly argues his filing of the notice of appeal divested the trial court of jurisdiction, preventing it from revisiting previously decided issues. City of Devondale v. Stallings, 795 S.W.2d 954, 957 (Ky. 1990). Stated otherwise, the trial court lost jurisdiction over the case ten days after entering the February order containing finality language. Commonwealth v. Steadman, 411 S.W.3d 717, 721 (Ky. 2013). Anything entered by the trial court ten days after June 17, 2015, on an already resolved issue, was void ab initio. Foremost Ins. Co. v. Whitaker, 892 S.W.2d 607 (Ky. App. 1995). As a result, the order entered by the trial court on August 17, 2015, has no effect.
Jeff is not faultless in this error. On July 6, 2015, having filed the notice of appeal in June, he moved the trial court to make additional findings regarding distribution of property and disbursement of funds held in an attorney's escrow account. Having discovered unresolved issues, Jeff should have withdrawn his appeal or asked us to hold it in abeyance pending resolution of his latest trial court motion. He did neither. Continuing to seek relief in the trial court on previously addressed issues being appealed to this Court invited the trial court to commit error for which he and the trial court must share responsibility.
Jeff next complains the trial court applied an erroneous standard—absence of spousal knowledge and consent—to find he dissipated assets from two retirement funds. Jeff has identified a problem, but it is more basic than applying the wrong standard. The trial court stated it made no finding of dissipation.
Citing CR 52 and 59, on February 28, 2015, Jeff sought modification of the February 19, 2015 order. He argued the trial court had misstated stipulations, failed to comment on the weight it gave evidence, failed to divide bank accounts, and most importantly for our purposes, failed to explain its finding of Jeff's dissipation of assets. While the trial court did not actually say Jeff "dissipated" two retirement accounts in its February 2015 order, it certainly implied he had, stating Jeff:
[t]ook early withdrawals and closed both retirement accounts and spent all of those funds without disclosing or advising [Sara] of his actions. A review of the Republic Bank checking account where [Jeff] deposited those retirement funds reflects that despite having substantial earnings at his disposal, those funds ($35,211.77) were spent without any indication any of those funds were used for marital purposes. The record also clearly reflects that beginning June 30, 2013, when the parties moved apart and ceased living as husband and wife, the parties ceased jointly providing any financial assistance to one another.Immediately after writing the foregoing, the trial court divided Sara's university retirement account evenly. Then, without citing any authority, reduced Jeff's share of that amount by $17,605.89—one-half of his already-spent retirement account. This was a fundamental error by the trial court because absent a finding of dissipation, once a marital asset has been spent, destroyed, sold or given away, it is no longer part of the marital estate and cannot be divided by the court. Ensor v. Ensor, 431 S.W.3d 462, 471-73 (Ky. App. 2013). Here, the trial court's treatment of Jeff's retirement accounts requires reversal and remand.
"Dissipation" occurs when one uses "an asset for an illegal or inequitable purpose, such as a spouse's use of community property for personal benefit when a divorce is imminent." Black's Law Dictionary (10th ed. 2014). In this case, Sara did not allege dissipation of assets, nor did she prove it, and the trial court did not find it.
[A] party claiming dissipation must prove by a preponderance of the evidence that the other party used marital funds for a non-marital purpose while the dissolution was impending and with a clear showing of intent to deprive the other spouse of his or her proportionate share of marital property.Grasch v. Grasch, --- S.W.3d ---, 2016 WL 5319744 *6 (2016); Robinette v. Robinette, 736 S.W.2d 351, 354 (Ky. App. 1987). Furthermore, when disposing of property after dissolution, the trial court
shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors including: (a) Contribution of each spouse to acquisition of the marital property, including contribution of a spouse as homemaker; (b) Value of the property set apart to each spouse; (c) Duration of the marriage; and (d) Economic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children.KRS 403.190(1).
Kentucky Revised Statutes.
The record before us contains no proof Jeff spent his retirement accounts when separation or dissolution was impending. Sara alleged in her trial memorandum Jeff withdrew $26,760 in 2011 from his Schwab Humana account and withdrew another $9,230.40 from retirement accounts in 2012. The record contains no suggestion of marital discord until 2013 when the couple separated. Thus, there was no proof Jeff withdrew funds in 2011 or 2012 in contemplation of separation or divorce. There was also no proof Jeff spent his retirement accounts to intentionally deprive Sara of marital assets. Thus, a finding of dissipation, if one had been made by the trial court, would have been wholly unsupported by the evidence and inappropriate. An undercurrent is the appearance the trial court considered "marital misconduct," contrary to KRS 403.190(1), by reducing Jeff's portion of Sara's retirement account because he spent the money without Sara's knowledge and without using the money for a marital purpose.
Arguably, what happened here is worse than the trial court making an unsupported finding. Since the trial court emphatically stated it made no finding of dissipation, it simply assumed dissipation—without calling it such—under circumstances that would not justify a finding of dissipation due to a lack of assertion and a lack of proof. At most, Jeff spent marital funds during the marriage without his wife's knowledge—an occurrence that no doubt happens in marriages daily. That does not mean in a dissolution action every penny spent by one spouse must be deducted from his side of the ledger and awarded to the other spouse. At least we have been cited no authority for such an outcome and we are confident none exists. Due to the internal inconsistency in the trial court's approach, we reverse and remand for further proceedings in which the trial court restores $17,605.89 to Jeff.
Jeff's final complaint is the trial court incorrectly valued the marital home near the time of separation rather than using a figure stipulated by the parties nearer the time of trial, although still six months before the first witness testified and more than a year before entry of the trial court's order on February 19, 2015. "A party is bound by what he stipulates." Morelock v. NCR Corp., 586 F.2d 1096, 1107 (6th Cir. 1978). Furthermore, a court is bound by facts stipulated by the parties. John L. Humbard Const. Co. v. City of Middlesboro, 237 Ky. 652, 36 S.W.2d 38, 40 (1931). Here, there is no assertion the stipulations entered by Jeff and Sara about the marital home's valuation were flawed or induced by one party overbearing the other. Moreover, neither party asked to be relieved of stipulations pertaining to the marital home. Thus, we have no reason to say the trial court should not have considered the stipulation stating the marital home's fair market value on January 7, 2014, was $263,000.
Sara asked to be relieved of two stipulations pertaining to the value of personalty. That request was granted by the original trial judge. --------
The trial court's goal was to divide the marital estate in "just proportions." Consistent with KRS 403.190, property acquired during separation remains marital, and is to "be valued as of the date of the dissolution decree." Shively v. Shively, 233 S.W.3d 738, 740 (Ky. App. 2007). In this case, a limited decree of dissolution was entered on November 18, 2014. The $263,000 valuation was dated January 7, 2014. Therefore, the trial court should have used $263,000 in calculating the marital home's value. By ignoring that stipulation, the trial court abused its discretion, requiring reversal and remand on yet another ground. Smith v. Smith, 235 S.W.3d 1, 6 (Ky. App. 2006).
For the reasons expressed above, the order entered by the Jefferson Circuit Court on September 16, 2015, is vacated as being void ab initio. The order entered February 15, 2015, is reversed and remanded for further proceedings wherein the court uses the appropriate value of the marital home and restores $17,605.89 to Jeff.
STUMBO, JUDGE, CONCURS.
THOMPSON, JUDGE CONCURS IN RESULT ONLY. BRIEF FOR APPELLANT: William D. Tingley
Louisville, Kentucky BRIEF FOR APPELLEE: Bryan D. Gatewood
Louisville, Kentucky