Voluntary Underemployment & Child Support (or Roy’s Very Bad Day)

In a prior post discussing dischargeability of a Dodge Durango Debt from a Divorce, I said that in the case, Howard v Howard, 2008-CA-001059-MR (June 12, 2009)(to be published) the Kentucky Court of Appeals addressed two important domestic support obligation issues. This post reveals that second issue.

As we saw before, Roy lost his argument that the deficiency judgment debt on his Dodge Durango was discharged through bankruptcy. As to his ex-wife Sondra, he remained responsible for the payments because it was agreed to and decreed through the divorce. That made it non-dischargeable as a domestic support obligation and so Sondra could pursue payment through contempt proceedings.

Now, Roy also had left a nice paying job as a federal prison guard claiming a medical reason. Apparently it was not a very good medical reason (or he failed to prove it up) because the trial court determined that his new employment at half his former wages was voluntary. Because it was deemed a voluntary reduction in pay, Roy was ordered to keep paying the same child support as before while earning half the amount of wages as before. He wouldn’t even be able to put gas in the tank of a Durango now.

In order to modify child support, the movant must show “a material change in circumstances that is substantial and continuing.” KRS 403.213. Judges have considerable discretion to decide whether a job change resulting in much less income is voluntary or involuntary. If it is voluntary then that person does not get a break on the child support.

But what if Roy really had a medical problem and could not longer work at the federal prison? Well, if his medical condition was legitimate, and it may have been, then there should have been a trail of documentation that was produced as evidence to the court. If Roy had that evidence, then he needed to pull it together and convince the judge. This is where it actually saves money in the long run to invest in having a good attorney. A good attorney would have either told Roy he was wasting his time because an ingrown toe-nail won’t convice the court, or she would have made sure the evidence was there.

Unfortunately, losing on the Durango Debt and losing on the reduction of child support did not end his very bad day. Roy also had to pay $500.00 towards Sondra’s legal fees. I mean no offense to any of my colleagues that may have represented Roy, and if Roy reads this I am sorry if it seems I am rubbing salt in the wounds, but had he invested in legal counsel knowledgeable in bankruptcy and family law, he could have saved a heap of money in the long run.

Tobacco payments and property allocation; attorney fees

The process of dividing property in a divorces consists of three broad steps as outlined in Jones v. Jones, 2006-CA-001870 (Feb. 1, 2008)(to be published): “(1) classify the property as marital or nonmarital, (2) assign to each party nonmarital property owned by that party, and (3) divide in just proportions marital property.” In the Jones case, the ex-husband, Ricky, appealed the trial court’s classification of Tobacco Transition Payment Program payments (“TTPP”) as marital property.

TTPP is an important source of income for many Kentucky farmer’s and is divided into payments for growers of tobacco and payments for owners of the land where the tobacco would otherwise have been planted. This is where the particulars of the Jones case becomes important. Ricky inherited a life estate in the family farm. Without becoming too bogged down in the technicalities of a life estate, this means the farm was his to use during a lifetime, most likely his own. Since he inherited the farm, it was non-marital property by operation of KRS 403.190(2)(a). Ricky argued that the owner’s share TTPP came to him as the owner of the farm by devise so that it was not a marital asset.

Here, the trial court basically said that Ricky might be right about the owner’s share of the TTPP being non-marital, but the overall division was equitable, so let’s leave it alone. The Court of Appeals disagreed with the trial court and asserted that the owner’s payments under TTPP were compensation for the taking of the property interest of growing tobacco on the property, so it was non-marital.

However, the grower’s TTPP payments took the place of income earned from the sale of tobacco that would have been grown. Therefore, the compensation for loss of income and would be marital. Ricky still won this argument, though, because he and his ex-wife, Lynn, had a prenuptial agreement that specified “life estate in the farm “together with the income produced thereby, shall continue and remain the separate property’ of Ricky.” Id. at 5-6.

Next, Ricky challenged the trial court’s allocation of $44,648.00 out of $67,000.00 in improvements to the farm (main house, garage, lake) as marital. The Court of Appeals analyzed this under KRS 403.190(2)(e) which states:

The increase in value of property acquired before the marriage to the extent that such increase did not result from the efforts of the parties during marriage.

The life estate was given to Ricky before the marriage (obviously or else the pre-nuptial agreement would have involved prescience) and there were improvements made during the marrigage. The problem with the trial court’s analysis came from how it valued those improvements.

The trial court equated the actual cost of improvements to the increase in value of the life estate. This makes no sense because a life estate has much less value than outright ownership (fee simple). Basically, one can sell a life estate, but who would want to buy it? It would come to an end as soon as that life ended, which could be the day after the closing. Thus, the $44,648.00 that the trial court assigned as marital probably exceeded the fair market value of the life estate. Usually, expert testimony is required to determine fair market values. The Court of Appeals remanded the case to the trial court to recalculate the values involved and strongly suggested getting expert testimony.

Finally, Ricky appealed the award of payment of Lynn’s attorney fees. This is often appealed because it really hacks people off to go through a divorce and then have to pay their ex’s attorney fees too. However, these appeals rarely win because such an award is “soundly” in the discretion of the trial court. The court must consider the financial resources of the parties and, if an imbalance in resources exists, can award attorney’s fees. Well Ricky, two out of three ain’t bad.