Steven Wayne Arnett v. Monica Michelle Childress

RENDERED: OCTOBER 14, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0348-MR
STEVEN WAYNE ARNETT APPELLANT
APPEAL FROM GREEN CIRCUIT COURT
v. HONORABLE SAMUEL TODD SPALDING, JUDGE
ACTION NO. 07-CI-00148
MONICA MICHELLE CHILDRESS APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.
JONES, JUDGE: Steven Wayne Arnett appeals a judgment of the Green Circuit
Court in favor of his ex-wife, Monica Michelle Childress, for $8,640 and accrued
interest of 6% representing an arrearage of what he owed Childress pursuant to the
terms of their 2007 divorce decree. Arnett asserts the circuit court erred in
awarding Childress post-judgment interest. Upon review, we affirm.
The factual and procedural history of this matter is as follows. On
November 16, 2007, during their divorce proceedings in Green Circuit Court,
Arnett and Childress entered into a separation agreement which provided in
relevant part:
In full settlement of all personal property, [Arnett] shall
further pay to [Childress] the amount of twenty-six
thousand eight hundred fifty dollars ($26,850.00) in the
following increments, to wit:
...
b. [Arnett] shall pay to [Childress] ten thousand dollars
($10,000.00) on April 1, 2008; and
c. [Arnett] shall pay to [Childress] ten thousand dollars
($10,000.00) on July 1, 2008.
On December 26, 2007, when the parties’ marriage was dissolved, the
circuit court incorporated the parties’ separation agreement into its divorce decree.
Notably, the separation agreement and divorce decree were both silent regarding
interest.
The record is also silent until October 7, 2020, when Childress filed a
motion to hold Arnett in contempt. In her motion, Childress informed the circuit
court that Arnett had yet to pay her anything toward the outstanding amounts set
forth above; and she asked the circuit court to compel Arnett to pay her the
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outstanding $20,000 he owed “with interest thereon pursuant to KRS1 360.040.”
However, at the initial contempt hearing that followed, Arnett denied Childress’s
contention. He represented he had paid Childress most or all of what was owed –
not so much in money, but by providing her services pursuant to what he asserted
had been a valid modification of the parties’ separation agreement.
On January 22, 2021, the circuit court held an evidentiary hearing
regarding Arnett’s assertion that he was entitled, due to a post-decree modification
of the separation agreement, to have the value of services he had rendered for
Childress credited toward what he owed her. The footage of that hearing is not of
record, nor did Arnett designate it as part of the record. Thus, we are left to
presume that the findings of fact set forth in the circuit court’s January 26, 2021,
order, which recounted and relied upon much of what was apparently adduced at
that hearing, were consistent with the evidence. See Commonwealth, Dep’t of
Highways v. Richardson, 424 S.W.2d 601, 603 (Ky. 1967), as modified on denial
of reh’g (Feb. 23, 1968).
To summarize, it was undisputed that Arnett failed to pay Childress
any of the $20,000 he owed her pursuant to the separation agreement and decree.
However, the circuit court found the parties had verbally – and validly – agreed to
modify their separation agreement sometime after December 26, 2007, to permit
1
Kentucky Revised Statute.
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Arnett to perform various jobs for Childress and to offset the value of his work
from the $20,000 judgment. The circuit court also found that Arnett had
performed several odd jobs for Childress during the intervening years, and thus
“significant work” pursuant to their modified agreement.
But, as recognized by the circuit court, there were problems with the
parties’ agreement. Arnett and Childress never agreed upon a monetary value for
any of the work Arnett performed pursuant to the modified agreement. And, for
the most part, the two of them either could not recall or could not agree when he
performed the work. As the circuit court found, Arnett first attempted to itemize
and value his work for Childress in 2019, “only after being contacted by
[Childress] about the payment of the indebtedness owed.” Consequently, the
circuit court devoted much of its order to itemizing and assigning monetary values
to the various jobs Arnett had performed for Childress over the years pursuant to
the parties’ modified agreement. Ultimately, the circuit court concluded that the
value of Arnett’s services totaled $11,360, leaving $8,640 due to Childress. The
circuit court then ordered that the arrearage “shall bear interest at the legal rate of
six (6) percent, effective July 1, 2008.”
Arnett moved the circuit court to alter, amend, or vacate its arrearage
judgment, arguing in relevant part:
In the case at bar, [Childress] was aware of the terms of
the settlement agreement and chose not to file a Motion
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to enforce the agreement until 12 years after the last
payment required by the Settlement Agreement was due.
Additionally, [Arnett] and [Childress] modified the
agreement to allow [Arnett] to work off the amount
owed. Had [Arnett] been aware [Childress] was going to
renege on the modified agreement and demand payment
plus interest, he would have made the payments years
ago. It is a flagrant miscarriage of justice to award
[Childress] interest in the case at bar, especially
considering the amount of interest owed would result in
doubling the amount owed to [Childress] pursuant to the
parties’ modified agreement.
The circuit court denied Arnett’s motion. In its February 23, 2021,
order to that effect, it began by noting the general rule, as set forth in Doyle v.
Doyle, 549 S.W.3d 450 (Ky. 2018), that all judgments bear interest. It went on to
recognize that it lacked the discretion to either deny interest or depart from the
statutorily mandated rate of interest without first determining that the claim was
unliquidated or an interest rate was specified in a separate written agreement. Id.
at 456. Further, the circuit court held that while the “damages ordered are best
characterized as unliquidated,” which provided it discretion to determine an
interest rate less than the statutory amount pursuant to KRS 360.040(4), the
equities did not favor a lesser amount here. In relevant part, it explained:
[T]he coercive measures of the statute are necessary to
encourage a party to make timely payments. While this
Court does find there was an oral agreement [Arnett]
would do work in exchange for a reduction of payment,
there is no dispute the payment of the remaining balance
is long overdue in the current case. Additionally, the
initial agreement in this case was entered on November
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16, 2007. [Arnett] was to pay $10,000 by April 1, 2008
and the final payment was to be made on July 1, 2008. It
is undisputed [Arnett] did not complete the excavation
work until 2014 at the earliest. Additionally, [Arnett]
completed the septic work in 2014. It is unclear as to
when the other services were provided. [Arnett] had the
responsibility to pay and this Court has been generous in
crediting [Arnett] with the work performed to offset his
obligation. Accordingly, this Court finds the order of
pre-judgment interest is equitable. Interest will be
ordered at the statutory rate of 6% outlined within KRS
360.040 from the date of original decree of dissolution
for the unpaid amount.
This appeal followed. To be clear, the parties do not contest that
Arnett was entitled to an $11,360 credit against what he owed Childress pursuant
to the separation agreement and divorce decree pursuant to a valid post-decree
modification. They do not contest the circuit court’s finding that, due to the
parties’ poor recordkeeping and lack of agreement regarding the value of Arnett’s
services, the arrearage judgment represented an award of unliquidated damages.
Rather, only one issue is presented. Arnett’s sole argument is that the circuit court
erred by directing him to pay any interest whatsoever in relation to Childress’s
judgment against him. In support, Arnett cites Guthrie v. Guthrie, 429 S.W.2d 32(Ky. 1968), where our then highest court held that although interest should be
imposed on past due child support, it may be denied where there are circumstances
making it inequitable. The Guthrie Court concluded that where the father in that
matter had paid for the children’s expenses rather than his child support obligation,
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the equities could weigh in favor of relieving him of paying interest on the amount
owed. Id. at 37.
Before discussing how Arnett believes the “equities” weighed in his
favor, we note Arnett ignores that what our highest court stated in Guthrie (i.e.,
that judgment interest may be entirely denied) is at odds with its more recent and
binding pronouncement in Doyle: “All judgments bear interest.” Doyle, 549
S.W.3d at 456 (emphasis added). If Guthrie represents any viable exception to that
rule, it is an exception that clearly does not apply to these facts: Guthrie involved
interest on payments of child support, whereas Doyle – like this matter –
specifically involved interest on an outstanding obligation stemming from the
division of marital assets. Thus, irrespective of his reasoning, Arnett is incorrect in
arguing he was entitled to pay no judgment interest.
With that said, we now proceed to how, in Arnett’s view, the
“equities” favored his case. Arnett first contends Childress prejudiced him by
failing to seek judicial enforcement of their 2007 divorce decree until October 7,
2020.
We disagree. Childress acted within the time permitted by the
applicable statute of limitations to collect the arrearage and interest owed to her
pursuant to the divorce decree. KRS 413.090(1). Principles of equity, such as
laches or estoppel by acquiescence, may not be used to bar the collection of
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arrearages within the applicable limitations period. Heisley v. Heisley, 676 S.W.2d
477, 477 (Ky. App. 1984). Moreover, relative to the specific issue of judgment
interest, Childress’s delay is not a factor to be considered at all. In Doyle, 549
S.W.3d at 457, our Supreme Court observed that where a former spouse failed to
comply with a court order, criticism of the efforts of his former partner to collect
should have no bearing on the imposition of interest that accrued by operation of
law. The court observed that the provisions of KRS 360.040 are not designed to be
punitive but are meant to encourage a judgment debtor to comply promptly with
the terms of the judgment and to compensate the judgment creditor for the
judgment debtor’s use of her money. Id. at 458.
As for the remainder of his arguments regarding how the “equities”
weighed in his favor, Arnett next contends:
[T]he parties’ modified the agreement and [Arnett] made
reasonable and diligent efforts to comply with the
modified agreement to work off the balance owed to
[Childress]. Further, has [sic] [Arnett] been aware
[Childress] was going to renege on her part of the
modified agreement and demand full payment plus
interest, he would have made payments on the balance
rather than allowing 12 years of interest accrue against
him.
Regarding Arnett’s assertion that he made “reasonable and diligent
efforts to comply with the modified agreement to work off the balance owed” to
Childress, the circuit court made no such finding; and Arnett cites no evidence of
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record favoring his argument. True, the circuit court gave him a credit for what it
determined was the reasonable value of the work he performed under the modified
agreement; but when Arnett and Childress entered that agreement is not evident
from the record. Thus, it is unclear how long Childress may have waited for Arnett
to perform any given service. To the extent the circuit court assigned any time
frame to any of the work Arnett performed under the agreement, it could only state
Arnett performed some of it in 2014.
As to Arnett’s assertion that he “would have made payments on the
balance rather than allowing 12 years of interest accrue against him[,]” the circuit
court likewise made no such finding, and Arnett cites no evidence of record
favoring his argument. It is unclear how long Childress may have waited –
unsuccessfully – for Arnett to pay her anything before she ultimately agreed to
allow him to credit services toward his debt. Again, however, to the extent the
circuit court assigned any date to any of the work Arnett performed under the
parties’ modified agreement, it could only state Arnett performed it in 2014 –
approximately seven years after Arnett’s $20,000 debt to Childress had already
become an outstanding obligation.
As to his assertion that Childress “renege[d] on her part of the
modified agreement” by demanding judgment interest, the circuit court only
determined the modified agreement permitted Arnett to perform various jobs for
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Childress and to offset the value of his work from the $20,000 judgment. The
circuit court made no determination that the modified agreement also provided
Arnett would not owe Childress judgment interest on what remained of the
principal balance. Nor, for that matter, does Arnett cite any evidence indicating
Childress ever represented to him – much less agreed with him – that he would not
owe her judgment interest on what remained.
Instead, reading between the lines of his brief, it appears much of
what led Arnett to believe he could “work off” an interest-free $20,000 balance
owed to Childress arises from his own unilateral assumption; specifically, his
assumption that because the parties’ November 16, 2007 separation agreement – as
incorporated into the December 26, 2007 divorce decree – was silent regarding
interest, no interest would ever be owed. However, it is inarguable that “everyone
is presumed to know the law; therefore, ignorance of the law is not an excuse.”
Dep’t of Revenue, Finance v. Revelation Energy, LLC, 544 S.W.3d 170, 176 (Ky.
App. 2018). And here, the law provided at all relevant times that a judgment
merely silent about interest should not be interpreted as an interest-free judgment.
See, e.g., Commonwealth, Dep’t of Highways v. Young, 380 S.W.2d 239, 240 (Ky.
1964) (“[T]he fact that a judgment or decree is silent as to interest will not prevent
the recovery of interest thereon.”).
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Indeed, this rule has been applied before in the same situation. In
Hoskins v. Hoskins, 15 S.W.3d 733 (Ky. App. 2000), the parties, Pam and Kevin,
entered into a property settlement agreement which required Kevin to pay Pam
$7,500 within three years of October 10, 1990. Their agreement was incorporated
into the trial court’s subsequent divorce decree; however, their agreement and
divorce decree made no mention of judgment interest. Id. at 733-34. Thereafter,
Kevin refused to pay by the deadline; and Pam sought an order compelling Kevin
to pay her $7,500 pursuant to the terms of the agreement, plus interest at the annual
rate of 12% from October 10, 1993.2 Id. at 734.
Ultimately, the trial court entered judgment in Pam’s favor for $7,500,
but only with interest accrued from the date of its dispositive judgment (i.e.,
October 7, 1998). Id. On appeal, this Court reversed and remanded the case to the
trial court with directions to award Pam post-judgment interest at the statutory rate
of 12% from October 10, 1993, on Kevin’s $7,500 delinquent debt unless the trial
court found such an award to be inequitable. Id. at 735. We explained:
In Courtenay [v. Wilhoit, 655 S.W.2d 41 (Ky. App.
1983)], the property settlement agreement that was
incorporated into the divorce decree ordered the husband
to pay the wife $140,000 in 121 equal monthly
installment payments for her share of the property
division. Both the agreement and the decree were silent
with respect to interest. The wife later moved the court
2
The version of KRS 360.040 effective at that time (and until June 29, 2017) provided that
“12%” was the default rate of statutory interest.
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to award her interest on the amount from the date of the
agreement. The court held that the interest statute
applied to the separation agreement incorporated into the
divorce decree, “but not until a judgment comes into
being via a delinquent payment.” Id. at 42. In other
words, the husband was not required to pay interest
unless he missed a payment. The court held that since
the husband had kept his payments current, there was no
judgment to which KRS 360.040 could apply. Id.Under the principles of Courtenay, the provision in
the property settlement agreement and decree ordering
Kevin to pay Pam $7,500 within three years from the
date of the agreement became an enforceable judgment
when the payment became delinquent at the end of three
years. Furthermore, KRS 403.180(5) provides that
“[t]erms of the agreement set forth in the decree are
enforceable by all remedies available for enforcement of
a judgment, including contempt, and are enforceable as
contract terms.” Thus, we conclude that the trial court
erred in its 1998 order when it stated that there was no
judgment in effect until that time. Pam was therefore
entitled to interest under KRS 360.040 at the annual rate
of 12% from October 10, 1993, unless such an award
would be inequitable. Courtenay, 655 S.W.2d at 42. See
also Stone v. Ky. Ins. Guaranty Ass’n, Ky. App., 908
S.W.2d 675, 677 (1995); Guthrie v. Guthrie, Ky., 429
S.W.2d 32, 36 (1968); Young v. Young, Ky., 479 S.W.2d
20, 22 (1972); Hardin v. Hardin, Ky. App., 711 S.W.2d
863, 865 (1986).
Id. at 734-35 (footnote omitted).
As in Hoskins, the provisions in the property settlement agreement
and decree ordering Arnett to pay Childress $10,000 on April 1, 2008, and $10,000
on July 1, 2008, became enforceable judgments – and entitled Childress to post-
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judgment interest despite the separation agreement’s and divorce decree’s silence
on that point – when those respective payments became delinquent.
We review awards of post-judgment interest under the abuse of
discretion standard. Hazel Enterprises, LLC v. Ray, 510 S.W.3d 840, 843 (Ky.
App. 2017). Here, in sum, Arnett presents nothing demonstrating the circuit
court’s award of 6% interest in its arrearage judgment was inequitable to him, or
that the circuit court otherwise committed an abuse of its discretion that prejudiced
his interests. To the contrary, the circuit court effectively pretended that Arnett
had rendered all his services for Childress before the $20,000 he owed her had
become delinquent, as it only assessed judgment interest on $8,640 (i.e., what
remained of what he owed her, minus his setoff for services rendered).
Additionally, the circuit court assessed post-judgment interest from
July 1, 2008, at a rate of only 6%. It could have held that judgment interest
accrued on Childress’s judgment at a rate of up to 12% until June 29, 2017 – the
effective date of the most recent enactment of KRS 360.040, which only
prospectively lowered statutory judgment interest from 12% to its current rate of
6%. See Ridge v. Ridge, 572 S.W.2d 859, 861 (Ky. 1978) (explaining the
prospective rather than retroactive effect of a statutory amendment of a post-
judgment interest rate). The circuit court balanced the facts and equities in an
appropriate manner, and its ultimate decision “falls within a range of permissible
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decisions.” Miller v. Eldridge, 146 S.W.3d 909, 915 (Ky. 2004). In short, Arnett
presents no basis of error. We therefore, AFFIRM.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Elmer J. George Theodore H. Lavit
Lebanon, Kentucky Lebanon, Kentucky
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