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Lewis v. Fulkerson

Court of Appeals of Kentucky

September 29, 2017



          BRIEF FOR APPELLANT/CROSS-APPELLEE: William D. Tingley Louisville, Kentucky

          BRIEF FOR APPELLEE/CROSS-APPELLANT: Justin R. Key Louisville, Kentucky Sarah A. Huyck Louisville, Kentucky




         Wade Lewis appeals, and Laura Fulkerson cross appeals, from the final judgment of the Oldham Family Court in which the court resolved the issues of property division and child support in the parties' dissolution action. On appeal, Wade claims the family court erred by awarding Laura the property in a certain trust and excluding the testimony of the attorney who drafted the trust based on attorney-client privilege.

         Laura filed a cross-appeal from the final judgment claiming the family court erred by determining that the proceeds from the sale of Wade's business were his nonmarital property, failing to award her child support, and making her equally responsible for the children's expenses despite the disparity in the parties' income.

         For the reasons stated below, we affirm in part and vacate in part.


         Wade and Laura were married on February 13, 2008, and have three children of the marriage. After multiple separations and failed attempts to reconcile, Laura filed a Petition for Dissolution of Marriage on April 3, 2013, and the family court entered a limited decree of dissolution on May 14, 2014. The facts surrounding Wade's business ventures, as well as the corpus of a trust titled the "Laura Renee Fulkerson Trust, "[1] form the fundamental disputes in this case.

         Wade, along with two business partners Silas Boyle and Chris Page, started Maximum ASP in August 2000. The company was in the business of information technology and built and hosted a "cloud technology" platform for clients. According to the testimony of the attorney who drafted the business formation paperwork, the company was established as a manager-managed business and managed by Wade, Boyle, and Page. The attorney further testified that he later established the separate business entities Maximum COLO (which owned the building Maximum ASP operated out of after leaving leased space) and Maximum Holdings (which owned the holdings of the data center built by Maximum ASP).

         In August 2008, Wade and Boyle bought out 200, 000 shares owned by Page for the value of $1, 773, 750. Page had lost interest in the business and was no longer coming to work regularly. Multiple witnesses testified that Page owed a sizeable debt to the Internal Revenue Service and that this sale price was not based on a business valuation, but instead based on the "cash-on-hand" of the business and how much Page was willing to accept.

         In 2010, Wade and Boyle were approached with an offer to purchase Maximum ASP, Maximum COLO, and Maximum Holdings by Cbeyond Communications.[2] The purchase price was $36, 000, 000 less the value of certain debts of the business. Wade received $7, 413, 687 as the net portion for his shares of the three Maximum businesses. Following the sale, Wade invested in a new business with Boyle, Automobile Storage Solutions, LLC.

         Laura has a doctorate in veterinary medicine and started her own veterinary practice, Stonybrook Animal Hospital, with a business partner in July 2009. Laura and her business partner personally guaranteed a loan in the amount of $378, 246.31 for the business. In 2012, Laura's partner filed for bankruptcy and defaulted on any further payments under the loan. Shortly thereafter, to prevent defaulting on the loan, Laura withdrew $337, 620.79 from the LRF Trust to pay off the remainder of the business loan. The payment of this debt effectively gave Laura a 100% ownership interest in the business.[3]

         During the parties' marriage, they established two transfer on death trusts for themselves. Wade's trust was created in 2009 and Laura's aforementioned LRF Trust was created in 2011. The sum of $1, 700, 000 from Wade and Laura's joint bank account with rights of survivorship was deposited into each trust. The original source of these funds was the proceeds from the sale of Maximum ASP to Cbeyond Communications. The parties agree regarding these facts, however, the intent for establishing the LRF Trust is adamantly contested. It is Laura's position that the trust was a gift given to her to control exclusively, which she did. She further argues that Wade told her on numerous occasions that she could spend the money in the trust any way she wanted and that they would each control the contents of their own trusts. Conversely, Wade argues the trust was established purely for estate planning purposes to avoid future tax implications and that he never advised Laura to spend the money as she saw fit.

         After the parties' final separation, the family court entered a limited decree of dissolution of marriage and orders detailing the temporary child support and parenting schedule. The parties advised the family court that the issues remaining in need of final adjudication were property division, allocation of debt, custody, parenting time, and child support.

         A litany of motions in limine, motions to strike, and motions for sanctions were filed by counsel for both parties before the final hearing. The dispute regarding the testimony of the parties' estate planning attorney who drafted the LRF Trust, Ed Lowry, is of particular note to this appeal.

         The first time attorney Lowry's potential testimony was placed in issue was when Laura issued a subpoena for his deposition in April 2014. The following day attorney Lowry, pursuant to CR[4] 45.04, objected in writing to the subpoena.[5] At the May 2014 Case Management Conference, attorney Lowry appeared on his motion to quash Laura's subpoena.[6] He objected to being deposed based on his belief that there existed an attorney-client privilege between him and both parties. The family court then asked the parties why attorney Lowry needed to be deposed or testify at all. Wade's counsel responded that Laura would be claiming a portion of her trust was a gift, and attorney Lowry could testify whether this was true. The family court then asked the following additional question: "wouldn't it be up to the court to discern [whether it was a gift or not] based on the language of the trust and intentions of the parties?" After further discussion with counsel that day, the family court ordered that attorney Lowry not be deposed or called to ...

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