Patricia Lynn Nalley v. James Leon Nalley ( 2020 )

RENDERED: SEPTEMBER 4, 2020; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2019-CA-001391-MR
PATRICIA LYNN NALLEY APPELLANT
APPEAL FROM WASHINGTON CIRCUIT COURT
v. HONORABLE SAMUEL TODD SPALDING, JUDGE
ACTION NO. 19-CI-00044
JAMES LEON NALLEY APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: CALDWELL, JONES, AND KRAMER, JUDGES.
KRAMER, JUDGE: Patricia Nalley appeals the final order of the Washington
Circuit Court granting her $1,000.00 per month in maintenance for a period of five
years. Patricia appeals both the amount and duration of the maintenance award.
Agreeing with her arguments upon review and further concluding that the basis for
the circuit court’s decision is arbitrary, we vacate and remand for proceedings not
inconsistent with this opinion.
The parties first married in 1980. They had three children and
divorced in 1990. However, Patricia testified that the couple continued to live
together after the first divorce and eventually remarried in 2001.1 Patricia testified
1
The circuit court did not take into account the time period of the first marriage, nor the time the
parties lived together until they remarried. Therefore, this Court also considers only the time
period that the parties were married for a second time, 2001 through 2019.
Patricia testified that the parties agreed to divorce the first time, at the suggestion of James’
mother, because James was not making much money and two of their minor children, who had
serious medical conditions, needed “medical cards.” The circuit court included this explanation
in its findings of facts and conclusions of law. In his brief, James states that “[Patricia] further
alleged that the parties cohabitated during the period between 1990 and their remarriage in 2001,
which Appellee denied.” However, the record does not bear out this statement. James cited to
page 105 in the circuit court record to support this statement, which is page two of the circuit
court’s finding. Therein the circuit court found that “[James] further testified the parties actually
separated on two different occasions before and after their divorce.”
James testified that the parties lived apart for six months and lived apart a separate time for three
to six months when Patricia had “some kind of spell” and moved to Somerset, Kentucky, with
the children. Otherwise, the parties lived together from 1991 until their remarriage in 2001.
Similar to Patricia’s testimony, James testified that the parties needed “medical cards” for two of
their children and could not acquire them while they were married. From statements in the
hearing made by the parties and the court, it appears that this was an acceptable means of
acquiring medical cards for the children. The issues of whether any fraud on the court was
committed in acquiring the first divorce; whether any act associated with this scheme was in
violation of the law as fraudulent, e.g., Kentucky Revised Statute (KRS) 205.8463; or whether
any statute of limitation for potential criminality has passed, are not before this Court. This
Court is not a finder of fact; that is the role of the circuit court. Nonetheless, we do not condone
this conduct and find it very troubling. We note that:
To permit the courts to thus be made tools for the perpetration of
such frauds would bring into disrepute the whole administration of
justice. They are not constructed for the purpose of aiding
unconscionable persons to consummate the frauds which they may
concoct; on the contrary it is the rule that courts will not permit
themselves to be made the instruments by which such fraudulent
schemes are carried out.
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that her highest level of education was ninth grade. She was primarily a
homemaker during the marriage but occasionally worked in unskilled labor,
including factory work and stripping tobacco. Patricia also began experiencing
severe mental health issues during the marriage which require ongoing therapy and
medication. By the time of the divorce proceedings, the Social Security
Administration had determined that Patricia was disabled. For his part, James was
able to build a successful mechanic’s shop and tow-truck business and was the
breadwinner for the family. He still owns the business; two of the parties’ sons are
employed with their father.
Patricia and James separated in October 2018, and Patricia filed a
petition for dissolution of marriage in April 2019. At the time, Patricia was fifty-
five (55) years of age and on disability for mental health reasons. James was sixty
(60) years of age and did not testify to any mental or physical health conditions
that would impair his ability to work. The parties’ children were emancipated by
this point. The parties were unable to agree on division of property and spousal
maintenance for Patricia. The circuit court conducted a hearing and issued
findings of fact and conclusions of law that, in part, included that it had reviewed
Patricia’s medical records, her Social Security award, and considered her
Justice v. Justice, 310 Ky. 34, 38, 219 S.W.2d 964, 966 (1949) (quoting Jagoe v. Jagoe, 194 Ky.
101, 238 S.W. 185, 187 (1921)).
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testimony regarding her mental health and concluded that she was “not capable of
working.” The circuit court awarded her $800.00 per month spousal maintenance
for five years. Patricia filed a motion to alter, amend, or vacate the circuit court’s
findings; she argued that the $800.00 monthly maintenance award was insufficient
to cover her monthly expenses and that the award should extend beyond five years.
The circuit court increased the amount of the maintenance award to $1,000.00 per
month but denied Patricia’s motion to extend the award beyond five years’
duration. Thereafter, Patricia timely appealed the circuit court’s rulings.
In considering the amount and duration of a maintenance award, the
circuit court must consider the factors enumerated in KRS2 403.200(2) which
states,
The maintenance order shall be in such amounts and for
such periods of time as the court deems just, and after
considering all relevant factors including:
(a) The financial resources of the party
seeking maintenance, including marital
property apportioned to him, and his ability
to meet his needs independently, including
the extent to which a provision for support
of a child living with the party includes a
sum for that party as custodian;
(b) The time necessary to acquire sufficient
education or training to enable the party
seeking maintenance to find appropriate
employment;
2
Kentucky Revised Statute.
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(c) The standard of living established during
the marriage;
(d) The duration of the marriage;
(e) The age, and the physical and emotional
condition of the spouse seeking
maintenance; and
(f) The ability of the spouse from whom
maintenance is sought to meet his needs
while meeting those of the spouse seeking
maintenance.
While KRS 403.200 mandates considerations for the circuit courts,
unfortunately “no particular [mathematical] formula has ever been held as the
method for establishing maintenance.” Age v. Age, 340 S.W.3d 88, 95 (Ky. App.
2011). An award of maintenance rests within the sound discretion of the trial court
and will not be disturbed absent a showing that the findings of fact were clearly
erroneous or that the court abused its discretion. Perrine v. Christine, 833 S.W.2d
825, 826 (Ky. 1992); CR3 52.01. “The test for abuse of discretion is whether the
trial judge’s decision was arbitrary, unreasonable, unfair, or unsupported by sound
legal principles.” Sexton v. Sexton, 125 S.W.3d 258, 272 (Ky. 2004) (citations
omitted). We are mindful that, “unless absolute abuse [of discretion] is shown, the
appellate court must maintain confidence in the trial court and not disturb the
findings of the trial judge.” Clark v. Clark, 782 S.W.2d 56, 60 (Ky. App. 1990).
3
Kentucky Rule of Civil Procedure.
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The inherent and intertwined complication we have in reviewing this
matter is the lack of evidence of record to support many of the circuit court’s
findings of fact. In attempting to evaluate the issues on appeal, we cannot resolve
them in a vacuum, particularly when the surrounding circumstances are not based
on competent evidence of record. Indeed, as required by KRS 403.200 and
consistent with caselaw, many factors are considered in setting maintenance. We
cannot adequately review and affirm an award wherein many of the findings of fact
underlying the decision are arbitrary.
One of the primary factors to review under KRS 403.200 is the
property available to the party seeking maintenance and the ability of the party
from whom maintenance is sought to meet his own needs. When the division of
property is at issue, the classification of that property by the circuit court as marital
or non-marital is a required threshold task. Sexton, 125 S.W.3d at 264-65. Neither
Patricia nor James takes issue with the property assigned to them respectively.
However, the struggle this Court has in evaluating the maintenance award is that
the values the circuit court assigned to the properties/assets were either arbitrary or
not properly supported by relevant evidence. Herein, for nearly most of the
property divided by the court (both real and personal), the evidence to support the
value given to the property by the circuit court was lacking. For example, on the
parcels of real estate at issue, the PVA’s value of the property was noted, as was
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the price paid (even though at least two parcels were purchased over twenty years
ago), and then the parties were asked their “opinion” of what they thought the
property was worth. Neither party was qualified to give testimony as to the value
of the real estate at issue. Moreover, the circuit court appears to have just set a
value somewhere in between where the parties thought the fair market value to be.
For example, in regard to the first parcel, located at 6609 Loretto Road (the
property where Patricia lives), the PVA valued it at $48,000.00; James testified
that he thought the property was worth $78,000.00; Patricia testified that she
agreed with the PVA that the property was valued at $48,000.00; and the circuit
court placed a value of $60,000.00 on it.
Regarding a house and lot located at 4515 Highway 52, Loretto,
which the parties purchased in 2011, the PVA assessed it at $50,000.00; Patricia
opined that it was worth $54,000.00; James thought it was worth $42,500.00; and
the circuit court placed a fair market value on it of $54,000.00--despite no other
testimony than that of the parties. We also note that this property was also used as
rental property and was awarded to James. Yet, no rental income was attributed to
him by the circuit court from this property.
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Indeed, this same method was used to place value on the various
parcels of real estate owned by the parties;4 neither party was questioned or
expressed qualifications that they were in any way qualified to evaluate property.
The only evidence that was submitted was the PVA’s value and the parties’
respective, but unqualified, opinion on the value. As is well established in the law,
this method was wholly insufficient to value the properties.
To be qualified to express an opinion upon fair market
value of real property, a witness, including the owner
thereof, must possess “some basis for a knowledge of
market values.” Robinson v. Robinson, 569 S.W.2d
[178,] 179 [Ky. App. 1978)][5] (quoting Com. Dept. of
Highways v. Fister, 373 S.W.2d 720, 722 (Ky. 1963)).
Simply stated, the mere ownership of property does not
qualify a lay person to give an opinion upon market
value. Robinson, 569 S.W.2d 178. In any event, the
actual cost of improvements may be considered as
evidence bearing upon fair market value but should not
be the sole factor. Where the parties fail to offer
sufficient proof as to fair market value of real property,
we remind the family court of our Court’s decision in
Robinson:
There was simply no way in which
the trial court in this action could accurately
fix the value of the property which was the
subject of the action with the total lack of
evidence here. If the parties come to the end
of their proof with grossly insufficient
4
We note that two properties were awarded to James as non-marital, having been purchased after
the parties’ first divorce.
5
Robinson v. Robinson, 569 S.W.2d 178 (Ky. App. 1978), overruled on other grounds by
Brandenburg v. Brandenburg, 617 S.W.2d 871 (Ky. App. 1981).
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evidence on the value of the property
involved, the trial court should either order
this proof to be obtained, appoint his own
experts to furnish this value, at the cost of
the parties, or direct that the property be
sold.
Id. at 180.
Jones v. Jones, 245 S.W.3d 815, 820 (Ky. App. 2008).
To further illustrate the point that the value assigned to the various
real estate at issue herein is not supported by acceptable evidence, we offer the
following example:
In this case, the property interest at issue is the
equity in the Forest Property, a non-marital asset that
Donald received without encumbrances prior to the
parties’ marriage. As explained in a panel of this Court’s
decision, “[a]s used in KRS 403.190 in referring to
restoration of the property of each spouse, the word
‘property’ means equity.” Robinson v. Robinson, 569
S.W.2d 178, 181 (Ky. App. 1978), overruled on other
grounds by Brandenburg, 617 S.W.2d at 873. Here,
while Donald introduced the exhibit from the PVA with
the Forest Property’s assessed value, Kentucky cases
have noted that “[i]n determining the value of land . . .
assessed value, though not conclusive, can be considered
in connection with other evidence of value of property.”
Id. at 180 (emphasis added) (quoting Commonwealth,
Dep’t of Highways v. Rankin, 346 S.W.2d 714, 717 (Ky.
1960)). Therefore, we agree with the circuit court that
neither party produced sufficient evidence as to the fair
market value of the Forest Property.
However, rather than requiring the parties to
produce proof of the Forest Property’s fair market value,
the circuit court essentially equated the actual cost of the
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parties’ improvements to the Forest Property with the
Forest Property’s fair market value. We view this as
clear error. As stated by a panel of this Court in Jones v.
Jones, “the actual cost of improvements may be
considered as evidence bearing upon fair market
value but should not be the sole factor.” 245 S.W.3d
815, 820 (Ky. App. 2008). Rather, Kentucky courts have
held that if there is “grossly insufficient” evidence
concerning the value of the property involved, “the trial
court should either order this proof to be obtained,
appoint [its] own experts to furnish this value, at the
cost of the parties, or direct that the property be
sold.” Id. (quoting Robinson, 569 S.W.2d at 180).
Here, the circuit court was required to determine
the Forest Property’s fair market value based on
substantial evidence in order to determine the parties’
equity in the Forest Property, which equity was the very
property interest needing categorization as marital or
non-marital; ultimately, there was simply no way in
which the circuit court could accurately fix the value of
the property which was the subject of the action due to
the lack of evidence.
Cox v. Cox, No. 2018-CA-001164-MR, 2019 WL 6650531, at *4 (Ky. App. Dec.
6, 2019).6
We also note that the value of the ongoing business was not evaluated.
In sum, James received the entirety of the business, with nothing from it going to
Patricia at all, despite having been married to James during eighteen years of its
operation. Indeed, no value of the business itself, apart from the real estate,
buildings, tools, etc., was assigned. Thus, we are left without a basis of knowing
6
This case is cited for illustrative purposes only.
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the value of assets assigned to James to determine how he can meet his own needs
while paying maintenance to Patricia. Patricia never raised this as an issue; yet, we
are left to question how maintenance can be determined when we do not know the
value of the assets assigned. Moreover, the question here just begs itself: why was
no portion of the value of the business acquired during the marriage assigned to
Patricia? Lest this situation be taken out of the normal context, we pause to note
that ordinarily
“where the value of [non-marital] property
increases after marriage due to general
economic conditions, such increase is not
marital property, but the opposite is true
when the increase in value is a result of the
joint efforts of the parties.” KRS
[403].190(3), however, creates a
presumption that any such increase in value
is marital property, and, therefore, a party
asserting that he or she should receive
appreciation upon a nonmarital contribution
as his or her nonmarital property carries the
burden of proving the portion of the increase
in value attributable to the nonmarital
contribution. By virtue of the KRS
403.190(3) presumption, the failure to do so
will result in the increase being
characterized as marital property.
Travis, 59 S.W.3d at 910-11, (quoting Goderwis v.
Goderwis, 780 S.W.2d 39, 40 (Ky. 1989)) (footnotes
omitted).
Cobane v. Cobane, 544 S.W.3d 672, 682 (Ky. App. 2018).
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Regarding income, the circuit court found that Patricia’s income is
$582.00 per month and that James makes nearly ten times that amount, having the
reasonable ability to earn $5,000.00 per month.7 It also found that Patricia is
unable to work due to ongoing mental and physical health issues. Over the course
of the eighteen-year marriage, her work history was sporadic at best; she did not
graduate from high school; she has no specialized training; and she suffers from
mental illness to the point of total disability. One of the parties’ sons oversees
Patricia’s finances because she is incapable of doing so. Patricia did not receive
any income-producing property in the dissolution, unlike James who received a
rental property8 and the business outright.
Regarding Patricia’s expenses, the evidence of record shows that
Patricia claimed monthly expenses of $3,161.25 in the financial disclosure
admitted into evidence as Petitioner’s Exhibit 9. The circuit court found that her
expenses for household items, gas, telephone, prescriptions, and medical expenses
were inflated and that $2,250.00 was a reasonable amount of monthly expenses for
her. We note that James never established or offered evidence that Patricia’s
claimed monthly expenses of $3,161.25 were not comparable to the standard of
7
James testified that his health insurance was paid through his business, but no testimony was
taken as to the amount. Regardless, the circuit court did not attribute this as income to him.
8
It does not appear that the circuit court included this rental income in James’s monthly income.
He testified that property is currently rented to his brother, who pays $300.00 per month.
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living enjoyed during the parties’ marriage or were not reasonable. The circuit
court only noted one factual discrepancy in Patricia’s expenses: a claimed monthly
insurance payment of $196.50 that was taken out of Patricia’s Social Security
award. Accordingly, we are puzzled based on the evidence and testimony
presented during the hearing how the circuit court came to the amount of
$2,250.00. We cannot find any basis in fact in the record for the circuit court’s
calculation of that amount or for setting the maintenance at $1,000.00 per month.
Patricia received a vehicle that is worth thousands of dollars less than
what is owed and is now responsible for the debt.9 In contrast, James continues to
work and generate income from rental property and the business entity that he
received outright, i.e., James was given all value of the business, including any
good will or increase in value that was established during the marriage, unlike
Patricia, who did not receive any value whatsoever from the business.10 James
assumed no debt from the marriage. The record shows that even considering the
marital property awarded to Patricia, she will be unable to sustain her monthly
expenses moving forward on a maintenance award of $1,000.00 per month limited
to five years. As Patricia points out, if James is ordered to pay her an amount of
9
Patricia’s verified disclosure statement, admitted as Petitioner’s Exhibit 9, indicates Patricia
pays $443.75 per month toward the debt on her vehicle.
10
There was testimony that the business was purchased when the parties were divorced the first
time but continued to cohabitate as noted supra.
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maintenance that, combined with her income from Social Security, enables her to
meet her monthly expenses, he will still be left with a surplus per month after
meeting his own monthly expenses. The circuit court’s decision to limit the
amount of maintenance to $1,000.00 per month is arbitrary considering the factors
enumerated in KRS 403.200, particularly considering the gross disparity in income
between the parties and, as the circuit court found, “[Patricia] is not capable of
working.” Hence, the circuit court’s decision on the amount of maintenance must
be vacated.
Patricia’s next argument is that the circuit court abused its discretion
by limiting the duration of her maintenance award to five years. We agree; the
decision to limit the award to five years was clearly arbitrary. In the order denying
Patricia’s motion to extend the duration of the maintenance award, the circuit court
ruled
[t]he Court notes that after the five-year period [James]
will be 65 years of age. The profession of [James] is
physically demanding, and the Court finds it is not
reasonable to expect [James] to continue to engage in this
type of profession after the age of 65.
The circuit court’s findings in regard to James’s profession are clearly
erroneous and arbitrary for two reasons. First, the only evidence submitted to the
circuit court was testimony that James owns a mechanic’s shop and tow-truck
business and that two of his sons work there as well. James did not testify
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regarding any physical demands of his job, the jobs he performs at the shop, his
physical health, how long he plans to work, etc. In fact, his role in the business,
other than being the owner, is wholly unknown based on the evidence before the
circuit court (i.e., it is possible that his sons perform most of the physical labor in
the business, but the evidence of record simply does not allow for any sort of
determination in that regard). “To review [a] judge’s decision on appeal, it is
important to know what facts the judge relied on in order to determine whether he
has made a mistake of fact, or to even determine if he is right at law, but for the
wrong facts. If a judge must choose between facts, it is clearly relevant which
facts supported his opinion.” Anderson v. Johnson, 350 S.W.3d 453, 455 (Ky.
2011). In the instant action, there were simply no facts before the circuit court
regarding the specific details of James’s role at his business, how physically
demanding it was, or whether he, as the sole owner, would continue to draw a
salary, income, or other benefits if he stopped working there. Therefore, the circuit
court’s decision was clearly erroneous.
Second, the circuit court clearly erred by looking five years into the
future regarding James’s finances. The Kentucky Supreme Court has ruled
[t]he trial court is not required to predict with certainty
what the future financial situation of the parties will be
for three reasons. First, the family court cannot possibly
know what that parties’ financial situation will be [five]
years into the future. Second, the family court is not
required by statute to speculate as to the parties’ future
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finances. Rather, the court must look at the parties’
financial positions as they are at the time the parties
appear before the court, and make reasonable
determinations for that point in time and going forward.
Finally, KRS 403.250 provides for modifying a
maintenance decree upon “a showing of changed
circumstances.” As such, any change in the parties’
financial situation is envisioned in the maintenance
modification statute.
Weber v. Lambe, 513 S.W.3d 912, 918 (Ky. 2017).
At no time did James testify that he planned to retire in five years.
James testified that he hopes to pass the business onto his sons eventually but did
not specify a timeframe for doing so. It is unknown, based on the record before us,
how long James will continue to work at his business; what his plans are with
regard to ownership of the business; or how either of those issues will affect his
future income. It is entirely possible that, in the future, James could continue to
own the business and derive income from it even if his day-to-day role is
diminished. It is also possible that he may continue to derive a salary from the
business even if he transfers ownership to his sons. However, neither of those
scenarios is certain and both require speculation. The circuit court made its
decision on duration solely on its own impression that it would be unreasonable to
make James work past the age of 65, but there was no evidence whatsoever to
support this finding. Contrary to the circuit court’s impression, if and when
James’s financial circumstances change, KRS 403.250(1) enables him to seek
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modification of his maintenance obligation “upon a showing of changed
circumstances so substantial and continuing as to make the terms
unconscionable.”11 The circuit court erred by engaging in speculation regarding
James’s finances five years from the date of dissolution of marriage.
For the foregoing reasons, we conclude that the bulk of the circuit
court’s findings of fact as they relate to a basis to make a maintenance award were
arbitrary, not based on proper evidence of record, or failed to include the value of
assets and other forms of income attributable to James; even if those findings may
stand on remand, neither the amount nor duration of maintenance were supported
by the record and were arbitrary. Accordingly, we VACATE the circuit court’s
findings of fact and rulings regarding the amount and duration of maintenance and
REMAND for proceedings not inconsistent with this Opinion.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Susan Hanrahan McCain Theodore H. Lavit
Springfield, Kentucky Joseph R. Stewart
Lebanon, Kentucky
11
We note that there was a discussion among the circuit court and parties about whether Patricia
will be eligible to collect Social Security retirement benefits through James and at what point she
would be eligible to do so. If Patricia does collect additional sums of money through James’s
Social Security retirement, KRS 403.250 allows James to seek a modification of his monthly
maintenance obligation.
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