Shirley Lynn Hays v. Larry Bracken Hays ( 2020 )

RENDERED: AUGUST 28, 2020; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2018-CA-001718-MR
SHIRLEY LYNN HAYS APPELLANT
APPEAL FROM KNOTT FAMILY COURT
v. HONORABLE DWIGHT S. MARSHALL, JUDGE
ACTION NO. 15-CI-00146
LARRY BRACKEN HAYS APPELLEE
OPINION
AFFIRMING IN PART,
REVERSING IN PART,
AND REMANDING
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BEFORE: CLAYTON, CHIEF JUDGE; DIXON AND MAZE, JUDGES.
MAZE, JUDGE: Shirley Lynn Hays (Shirley) appeals from a decree and judgment
of the Knott Family Court dissolving her marriage to Larry Bracken Hays (Larry).
Shirley argues that the family court abused its discretion in its division of Larry’s
military retirement pay and by declining to award her maintenance. We conclude
that the family court properly calculated the marital portion of the military
retirement and percentages subject to division. However, the family court’s
findings are insufficient to determine whether it properly divided the retirement as
a marital asset. Therefore, this matter must be remanded for additional findings on
this question. Furthermore, we conclude that the family court must make
additional findings regarding Shirley’s entitlement to maintenance after it divides
the marital property. Hence, we affirm in part, reverse in part, and remand for
additional findings.
Shirley and Larry Hays were married on September 15, 1995, and
separated in March 2015. No children were born of the marriage. For the majority
of the marriage, Larry was a member of the United States Air Force. He is now
receiving military retirement pay, which includes a portion attributable to
disability. Shirley worked several jobs during the marriage until taking Social
Security disability in 2017.
Larry filed a petition for dissolution of the marriage on June 24, 2015,
following the parties’ separation while traveling in California. The disputed issues
concerned division of Larry’s military retirement, marital assets and debt, and
maintenance. In September 2016, the parties attended a mediation conference at
which they reached a tentative settlement agreement. However, the draft
agreement did not fully set out the details for dividing Larry’s military retirement
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benefits, providing only that Shirley “shall be awarded a percentage of the
Petitioner’s monthly retirement benefit as currently set by federal law.”
After further discussion, Shirley’s counsel prepared a new draft of the
agreement reflecting that 82% of Larry’s military retirement would be marital and
awarding 41% of the marital portion to Shirley. The proposed agreement provided
that Shirley’s portion of Larry’s military retirement would not be reduced by any
portions attributable to disability payments, Combat-Related Special
Compensation, Veterans Administration disability compensation, or any other
reductions from gross pay. The draft further provided that Larry “shall take no
action to disrupt the election of the Survivor Benefit Plan (SBP), naming [Shirley]
the 100% beneficiary of those benefits.”
Larry declined to sign the agreement. Thereafter, Shirley filed a
motion to enter a dissolution decree based on the draft agreement. In response,
Larry argued that the parties had never reached a meeting of minds on key terms
set out in the draft agreement. Specifically, he noted that federal law did not
permit division of his gross military retirement pay or any portions attributable to
disability benefits. Larry agreed that Shirley was entitled to his SBP election,
which allows her to continue receiving benefits in the event of his death.
However, he stated that the parties had not reached an agreement on who would be
responsible for the monthly premiums on the election.
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The family court directed the parties to try to negotiate an agreement
and set the matter for an additional hearing in thirty days. When the parties still
could not agree on the disputed terms, the family court set the matter for an
evidentiary hearing. Following that hearing, the family court entered findings of
fact, conclusions of law, and a decree dissolving the marriage. In pertinent part,
the court found the proposed settlement agreement to be unconscionable because
the parties had not reached a meeting of the minds. Consequently, the family court
proceeded to divide the marital assets without regard to the proposed agreement.
The family court found that Larry’s total months of military service
were 253 months and he was married to Shirley for 205 months of that period.
Thus, Shirley would be entitled to receive 41% of Larry’s disposable military pay.
The family court reduced this percentage to 34.5%, representing the premium for
Shirley’s SBP election. The court also denied Shirley’s request to base the
payment on Larry’s gross retirement pay, including portions attributable to
disability. Furthermore, the family court directed that this amount be payable only
until Shirley reaches the age of 62, at which time she qualifies to receive a portion
of Larry’s Social Security benefits.
With respect to the other marital property, the family court assigned
two vehicles to Shirley, and awarded the marital real property to Larry. The court
also declined to award Shirley any maintenance beyond Larry’s military retirement
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benefits. Finally, the family court directed that Shirley shall be deemed as the
irrevocable beneficiary of the SBP as Larry’s former spouse. Shirley now appeals
from this judgment. Additional facts will be set forth below as necessary.
Shirley first argues that the family court erred by refusing to enforce
the parties’ settlement agreement. Separation agreements are binding upon a trial
court unless the court finds the agreement to be unconscionable. KRS1 403.180(2).
As discussed above, the family court concluded that the agreement was
unconscionable because the parties had not reached a meeting of the minds as to
essential terms. However, the question of unconscionability is distinct from the
threshold inquiry of whether the parties had entered into an enforceable agreement.
A settlement agreement is a final settlement of the parties’ claims and
is analyzed under the law of contracts. Richey v. Richey, 389 S.W.2d 914, 917
(Ky. 1965). An agreement is unenforceable for indefiniteness if the resolution of
material terms is left open to future negotiations unless a standard is provided from
which a court can supplant the open terms should the negotiations fail. Cinelli v.
Ward, 997 S.W.2d 474, 477 (Ky. App. 1998). We agree with the family court that
the evidence did not show that the parties reached a meeting of the minds on the
essential terms of the settlement agreement.
1
Kentucky Revised Statutes.
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In particular, the testimony of both parties at the final hearing
indicates that they had not reached an agreement on what portions of Larry’s
military retirement were subject to division or the allocation of the monthly
premium for the SBP election. The lack of agreement on these provisions renders
the entire agreement unenforceable because Kentucky follows the traditional “all
or nothing” approach. Id. at 478. An agreement is either enforceable as a binding
contract or it is unenforceable as something less. Id. Given the evidence, the
family court did not clearly err by refusing to enforce any part of the proposed
agreement.
Shirley next argues that the family court abused its discretion in its
division of Larry’s military retirement and the rest of the marital property. A trial
court is to divide marital property in just proportions considering all relevant
factors. KRS 403.190(1). See also Wood v. Wood, 720 S.W.2d 934, 935 (Ky.
App. 1986). However, just proportions do not necessarily mean equal proportions.
Croft v. Croft, 240 S.W.3d 651, 655 (Ky. App. 2007).
In dissolution actions, we review the court’s division of marital
property for abuse of discretion. Smith v. Smith, 235 S.W.3d 1, 6 (Ky. App. 2006).
A court abuses its discretion when it relies on clearly erroneous findings of fact,
when it improperly applies the law, or uses an erroneous legal standard. Overstreet
v. Overstreet, 144 S.W.3d 834, 838 (Ky. App. 2003). Furthermore, a trial court
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abuses its discretion when its decision is arbitrary, unreasonable, unfair, or
unsupported by sound legal principles. McKinney v. McKinney, 257 S.W.3d 130,
133 (Ky. App. 2008).
Shirley contends that the family court failed to properly divide Larry’s
military retirement as a marital asset, instead treating it as only temporary
maintenance. Shirley does not contend that the family court misapplied the
formula set out in Poe v. Poe, 711 S.W.2d 849 (Ky. App. 1986), to determine the
marital portion of Larry’s military retirement. Indeed, the family court determined
the marital portion of the retirement and divided that portion using the percentages
which Shirley advocated.
Rather, she argues that the court should have divided Larry’s gross
retired pay, rather than his disposable retired pay, which is gross retired pay less
authorized deductions. We disagree. In Copas v. Copas, 359 S.W.3d 471 (Ky.
App. 2012), this Court explained that “disability payments are deducted from the
retiree’s gross military retired pay, resulting in the retiree’s ‘disposable retired . . .
pay.’” Id. at 478 (citing Snodgrass v. Snodgrass, 297 S.W.3d 878, 882 n.6 (Ky.
App. 2009)). See also 10 U.S.C.2 § 1408(a)(4). The Court in Copas went on to
state that “[b]ecause the retiree’s disposable retired pay is lower when he or she
receives disability payments, the retiree’s former spouse’s portion of the retiree’s
2
United States Code.
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retired pay is also reduced.” Id. While the Court recognized the potential inequity
of this situation, it concluded that the applicable federal law requires that a state
court only provide for the division of disposable retired pay, not gross retired pay.
Id. at 478-79. Therefore, the family court’s division of Larry’s disposable retired
pay was not erroneous.
Similarly, we find no abuse of discretion in the family court’s
assignment of the SBP election premium to Shirley. As Larry notes, 10 U.S.C. §
1452(a)(1)(A)(iv)(I) provides that the retired pay of a participant in the SBP shall
be reduced by six and one-half percent, representing the premium for the election.
While the family court had the discretion to allocate this reduction between the
parties, we cannot find that it was compelled to do so under the circumstances.
The only significant issue concerns the family court’s decision to
terminate Shirley’s receipt of Larry’s military retirement pay when she reaches the
age of 62. As noted, the family court reasoned that Shirley will become eligible to
receive benefits from Larry’s Social Security. It appears that the family court
treated her receipt of benefits as a form of maintenance, rather than a distinct
marital asset in its own right. It is well-established that it is the pension, not the
benefits, which is the marital asset subject to division by the court. Brosick v.
Brosick, 974 S.W.2d 498, 503 (Ky. App. 1998). The same holds true for vested
military retirement benefits.
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By terminating Shirley’s receipt of benefits at age 62, the family court
effectively reduced her share of the marital asset. It is possible that the family
court considered Shirley’s SBP election as sufficient to reduce her share of the
marital asset. However, that reading is not apparent from the face of the family
court’s findings. Furthermore, we question whether the award of such a contingent
interest would necessarily constitute a division of the marital asset in “just
proportions.”
Under the circumstances, the family court’s findings are insufficient
to determine whether it intended this result or simply mischaracterized the asset.
Consequently, we conclude that this matter must be remanded for additional
factual findings on this question. For purposes of remand, the marital portion of
Larry’s military retirement shall be treated as a marital asset subject to division by
the court. The family court shall set forth its division of Larry’s retirement,
including any reasons to reduce Shirley’s share of the asset through an early
termination of benefits.
Since we are remanding this matter for additional findings, we will
address the remaining issues to the extent they are relevant on appeal. Shirley
argues that the family court abused its discretion by declining to award her
maintenance. KRS 403.200 provides that a trial court may grant maintenance to
either party in a divorce action only if it finds that a party seeking maintenance
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“[l]acks sufficient property, including marital property apportioned to him, to
provide for his reasonable needs; and . . . [i]s unable to support himself through
appropriate employment . . . .” KRS 403.200(1). Under this statute, the court must
first make relevant findings of fact and then determine maintenance considering
those facts. Perrine v. Christine, 833 S.W.2d 825, 826 (Ky. 1992). “In order to
reverse the trial court’s decision, a reviewing court must find either that the
findings of fact are clearly erroneous or that the trial court has abused its
discretion.” Id.
In its findings, the family court noted that it awarded significant
marital assets to Shirley, including a 2007 Majestic Four Winds Recreational
Vehicle (RV) valued between $25,000 and $30,000 and a 2007 Smart Car with a
value of $4,200. Shirley contends that the RV is damaged and notes that the
family court assigned her the $8,000 balance of the debt on the vehicle. Given her
age and disability, Shirley argues that the award of marital assets was insufficient
to meet her reasonable needs. Consequently, she argues that the family court
abused its discretion by declining to award her maintenance.
Based on the family court’s findings, the primary marital assets were
Larry’s military retirement, the house and real property located in Knott County,
the RV, and the Smart Car. The family court did not give significant credence to
Shirley’s testimony that the RV was damaged and worth less than its book value.
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Larry paid Shirley $7,000 when the parties separated and an additional $5,000
during the period after separation. Shirley also agreed to give up her interest in the
real property in exchange for a greater share of Larry’s military retirement. Both
parties are disabled, with limited future earning capacities. However, Shirley
contends that the family court is authorized to account for Larry’s disability
retirement benefits through an appropriate award of maintenance. See Davis v.
Davis, 777 S.W.2d 230, 232 (Ky. 1989).
As discussed above, the division of Larry’s military retirement is the
primary matter in dispute. Consequently, the family court must re-evaluate
Shirley’s entitlement to maintenance once it determines the appropriate division of
that asset. The family court’s determination on maintenance must be supported by
specific findings under KRS 403.200(1).
Accordingly, the judgment of the Knott Family Court is affirmed in
part, reversed in part, and remanded for additional factual findings as set forth
above.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Robin C. Bennett Tammy C. Skeens
Lebanon, Kentucky Pikeville, Kentucky
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