KAVEN L. RUMPEL, APPELLANT
KATHIE W. RUMPEL (NOW WOLFORD) AND DIANA L. SKAGGS, APPELLEES
Released for Publication September 11, 2014.
ON REVIEW FROM COURT OF APPEALS. CASE NO. 2011-CA-000368-MR. BULLITT CIRCUIT COURT NO. 09-CI-00456.
FOR APPELLANT: William Dennis Sims, James Gregory Troutman.
FOR APPELLEES: Eric Griffin Farris, Lee Remington Williams, Kimberly M. Maraman.
OPINION OF THE COURT BY JUSTICE ABRAMSON. All sitting. All concur.
By decree, the Bullitt Circuit Court dissolved the marriage of Kaven and Kathie Rumpel (now Kathie Wolford), restored to the parties their non-marital property, apportioned between them the marital debts and assets, and awarded Kathie both maintenance and attorneys' fees. The Court of Appeals rejected Kaven's numerous allegations of error and affirmed the trial court's judgment in its entirety. Kaven then sought and was granted discretionary review for this Court to consider his claims that the trial court erred by awarding attorneys' fees as a discovery sanction and by substantially amending, in response to Kathie's post-trial motion, its judgment regarding the value of the principal marital asset, a commercial strip-mall and an associated business that hosts charitable gaming functions. Agreeing with Kaven that the post-judgment amendment amounted to an abuse of the trial court's discretion
under Kentucky Rule of Civil Procedure (CR) 59.05, and agreeing further that the award of attorney's fees must be readdressed by the trial court, we reverse the Court of Appeals' Opinion on these issues, and remand this matter to the circuit court with instructions.
Kaven and Kathie were married in August 1994. Kaven was employed at the time by the Louisville Police Department. He retired from the police department with a full pension in June 1996. At about that same time, Kaven, together with a business partner, Neil Alioto, formed a sub-chapter S corporation they called Advantage Associates, Inc. Advantage purchased a four-plus acre commercial property on Fegenbush Lane in south Louisville. The property had been improved with a small strip mall, and in addition to renting space to three unaffiliated businesses, one of which was a tavern, Advantage used the lion's share of the mall space to house two adjoining bingo halls. Advantage rents the bingo halls to charitable organizations for the purpose of charitable gaming. Within the halls, Advantage also maintains kitchen facilities from which it sells snacks and beer to the bingo patrons. In 1998, to separate its role as owner/landlord from its role as bingo-hall proprietor, Advantage formed a subsidiary, Highview Manor Associates, LLC, and transferred the realty to it.
Also in 1998, Kathie gave up her job with Columbia HCA and began devoting more of her time to homemaking. This included helping to care for Kaven's grandson, custody of whom was eventually awarded to Kathie and Kaven in August 2001.
In January 2006, one of Advantage's former employees pled guilty to two counts of felony theft and admitted that she had stolen in excess of $300,000.00 from the company. She was ordered to make restitution at the rate of $2,000.00 per month, although it appears that by December 2008 the company was receiving a net monthly payment of $1,140.00. At that time--December 2008--Kaven and his business partner Alioto agreed to sever their relationship. As consideration for Alioto's interest in Advantage and its subsidiary, Kaven agreed that Advantage would pay Alioto $22,500.00 immediately, would assign to him the company's right to the former employee's restitution payments, would supplement any restitution payment received by an additional $160.00, and would guarantee Alioto's receipt by the end of the restitutionary period of not less than $100,000.00 in such payments.
A few months after Kaven acquired Alioto's share of the business, in April 2009, he and Kathie separated. On April 20, Kathie petitioned for dissolution and on April 28, Kaven counter-petitioned for the same. On October 28, 2009, Kathie moved pursuant to KRS 403.220 for a preliminary award of attorney's fees. In January 2010, the trial court, having set the matter for trial on April 21, 2010, and having not been shown that Kaven had the wherewithal to pay fees, " reserve[d] ruling on Petitioner's motion for attorney fees to the conclusion of this action." On March 1, 2010, Kathie requested Kaven to provide, among other things, updated financial statements for the businesses (2008 was the last year accounted for), and she requested him to admit both that he had agreed to pay " the other shareholder" (Alioto) $132,500.00 for his 50% share of the businesses, and that, in light of the deal with Alioto, Kaven's 100% interest in the businesses was worth
" $265,000 as of December 9, 2008." In his March 23, 2010 response, Kaven denied both of these statements of purported fact and asserted that more recent financial statements were not available.
On March 25, 2010, Kaven moved for a continuance. He explained that, hoping for a mediated settlement, he had postponed having the businesses appraised, but mediation had (that day) failed, and he therefore needed additional time for appraisals. The motion was granted, and the matter was continued to June 3, 2010. On May 18, 2010, Kathie moved for a continuance on the ground that Kaven had not complied with discovery requests to disclose his appraisers' reports and on the additional ground that she needed time to acquire her own appraisal of the business realty. She indicated that she had recently been made aware that the appraiser who prepared the appraisal upon which she had planned to rely considered himself a friend of both parties and did not want to testify. Kathie's motion, too, was granted, and the trial was rescheduled for November 4, 2010, both parties being ordered to " fully and completely" disclose testifying experts' opinions by the end of July. When a scheduling conflict arose for Kathie's counsel, the trial was moved up, finally, to October 28-29, 2010.
Both parties ultimately obtained separate appraisals of the business realty and Advantage. Kathie's appraisers opined that as of December 2008 the realty had a value of $1.4 million, which was to be offset by Advantage's long-term debts (primarily, but not exclusively, the mortgage on the realty) of about $1.37 million, leaving Advantage with an equity of $28,641 in its realty. That amount was in addition to the going concern value of the bingo/snack-bar business, which Kathie's appraiser opined was $354,600, giving Advantage a total value, according to Kathie's experts, of about $383,000.
Kaven's experts painted a much gloomier picture. According to his real estate appraiser, the realty had been mortgaged more than $500,000 beyond its $810,000 value, and according to his business appraiser the bingo business was a loser. Accepting the $810,000 real estate appraisal, a net-asset appraisal of Advantage yielded a business value of negative $455,000. And accepting Advantage's income tax returns as accurately reflecting its earnings--the company claimed losses in three of the four years used in the appraisal--a capitalized earnings appraisal suggested a business value of about negative $122,000. Averaging these amounts, Kaven's expert opined that Advantage was worth about negative $289,000.
In accord with Kathie's experts, the trial court found that as of the end of 2008, Advantage was worth about $383,000. Casting doubt on Kaven's appraisals, the trial court noted, was evidence that on more than one occasion during the relevant time period a bank had independently appraised the realty as worth in excess of $1.5 million, evidence that Kaven himself had thought Advantage worth acquiring from Alioto for a substantial sum, and evidence that the income data upon which Kaven's experts relied did not include accurate amounts for the cash-based snack-bar part of the business.
At the conclusion of trial, the trial court asked both sides to submit proposed findings of fact and conclusions of law. Among Kathie's proposed findings was the following:
The Court finds that Respondent [Kaven] was requested to admit, pursuant to CR 36 that his interest in Advantage and Highview was valued at $265,000 as of December 9, 2008 and the ...