Mahl v. Mahl
| Decision Date | 27 April 2023 |
| Docket Number | 2021-SC-0481-DG,2021-SC-0487-DG |
| Parties | CHARLES F. MAHL APPELLANT v. LOUANNE MAHL APPELLEE LOUANNE MAHL APPELLANT v. CHARLES F. MAHL APPELLEE |
| Court | United States State Supreme Court — District of Kentucky |
ON REVIEW FROM COURT OF APPEALS NO. 2019-CA-0874 JEFFERSON CIRCUIT COURT NO. 05-CI-500770
COUNSEL FOR APPELLANT/CROSS-APPELLEE: Allison Spencer Russell Simms Russell Law, PLLC
COUNSEL FOR APPELLEE/CROSS-APPELLANT: J. Fox Demoisey Demoisey Law Office, PLLC
After twenty-eight years of marriage and two children, Dr. Charles and Louanne Mahl were divorced in 2007. The circuit court ordered Charles to pay maintenance for ten years, and once that order expired Louanne sought modification. The circuit court held multiple hearings and ultimately modified maintenance and awarded attorney's fees to Louanne's attorney. Charles appealed but failed to name Louanne's attorney as a party in the notice of appeal. Louanne filed a cross-appeal, arguing that Charles's appeal should be dismissed for failure to name an indispensable party. The Court of Appeals declined to address the attorney's fee issue but reversed the circuit court's modification of maintenance. Both parties sought discretionary review in this Court. Having granted discretionary review and carefully reviewed the record, we reverse the Court of Appeals and reinstate the circuit court's judgment.
Dr Charles Mahl (Charles) and Louanne Mahl (Louanne) were married on May 28, 1978 and are the parents of two adult children. Charles and Louanne remained married for twenty-eight years. When the parties married, Charles was in his medical residency program and Louanne was a surgical nurse. Charles started a successful ophthalmology practice in 1982, which grew to twenty-one offices and fifty employees, earning between five and seven million dollars a year at its peak. Louanne worked in Charles's practice as a surgical nurse and office manager, playing a significant role in establishing and operating the practice.
In 1999, Charles became disabled and began receiving $28,360 monthly in disability income. His disability stemmed from back problems, which progressively worsened over the years and eventually led to nerve problems in his leg. At that time, Louanne was unemployed and suffered from back and neck pain related to a broken vertebra sustained in a horseback riding accident in 1999. Her condition was worsened by an automobile accident in 2006. Louanne testified that she did not plan on returning to work and did not believe she could do so.
Louanne filed a petition for dissolution of marriage on March 2, 2005. After a two-day hearing, the circuit court entered a judgment on August 1, 2007 that divided the marital property approximately equally with each party receiving about $4.5 million in assets. Notably, the circuit court ordered that Louanne receive $764,117 from Charles's IRA trust and $59,368 from the parties' joint West End Financial account (collectively the $800,000 judgment). Louanne also received $1,677,749 in proceeds from the sale of their marital residence. In addition, the circuit court awarded Louanne maintenance of $6,000 per month until Charles reached sixty-five years of age in 2017 or upon her death, remarriage, or cohabitation.
Charles appealed and argued, among other things, that the circuit court erred by awarding Louanne permanent maintenance because it failed to make a factual finding under Kentucky Revised Statute (KRS) 403.200(1) that Louanne lacked sufficient property to provide for her reasonable needs. Louanne filed a cross-appeal, raising various issues about the circuit court's division of property and valuation of marital assets. She also argued that the circuit court erred in ordering that maintenance cease when Charles turned sixty-five. The Court of Appeals affirmed the maintenance award, noting that the circuit court's findings were supported by substantial evidence. Mahl v. Mahl, No. 2007-CA-2160-MR &No. 2007-CA-2344-MR, 2009 WL 1884375 (Ky.App. July 2, 2009).
Specifically, the Court of Appeals relied on Louanne's back and neck condition, ADHD, depression, prescription medication use and limits on daily activity in upholding the maintenance award.
In early 2009, while the appeal to the Court of Appeals was pending, the parties received notification that their West End Financial accounts had been frozen. The parties held funds at West End Financial that were managed by the parties' mutual friend, William Landberg. Unfortunately, Landberg lost the entirety of the funds entrusted to him in a Ponzi scheme.[1] Neither party was aware they had been defrauded until they began implementing the mandates of the circuit court's orders. As such, both parties lost a significant amount of money, including the $800,000 in funds awarded to Louanne in the divorce decree. Additionally, Louanne lost $1.38 million that she separately and individually invested with Landberg. At the time the Ponzi scheme was discovered, the accounts were frozen. Despite these losses, Charles continued paying Louanne $6,000 per month in maintenance, for a total of $720,000, until he turned sixty-five as required by the circuit court.
In December 2016, Louanne filed a motion to modify maintenance, alleging changed circumstances. She asserted that the changed circumstances included (1) Charles having returned to an active and robust medical practice despite being disabled at the time of the 2007 divorce decree; (2) her not having received the $800,000 judgment; and (3) her loss of her own sums in the Ponzi scheme. Louanne testified that she has earned no income since the divorce decree, other than approximately $46,700 from the sale of one of the properties she was awarded. She also stated that she is unable to work due to her disability.
After numerous hearings, the circuit court issued an order in June 2018 determining that substantial and continuing change in circumstances occurred, which rendered the original maintenance award unconscionable. As justification for modification, the circuit court recognized that Louanne did not receive the $800,000 judgment nor expected interest income from these funds.[2]At the time of the hearing, neither party had received any of the lost funds from the West End Financial accounts and had pursued legal action against West End Financial to no avail.
Notably, the circuit court indicated that certified financial records demonstrated that Charles withdrew a total of $1,062,272 from various accounts in violation of an April 6, 2005 status quo order in which the circuit court directed that "[n]either party shall make any changes to his or her assets or estate plans which in any way places such assets beyond the reach of the Court." These funds included $702,272 from his IRA trust account, $75,000 from a joint account he shared with Louanne and $285,000 from his individual trust account. Charles stated that he did not pay Louanne any of that money and disputed the authenticity of the certified records. Charles emphasized that Louanne received account statements from West End Financial until 2009 and waited nearly ten years to allege he improperly withdrew funds. The lapse in time made it impossible to know what transactions occurred or who was responsible for the withdrawals.
Ultimately, on March 28, 2019, the circuit court ordered Charles to pay Louanne $8,688 per month in maintenance until her remarriage, cohabitation, or death, or until she collects the $800,000 judgment as originally awarded to her in the 2007 divorce decree, whichever comes first. The circuit court ordered that the 2007 judgment is subject to statutory interest, pursuant to KRS 360.040. In addition, the circuit court ordered Charles to pay $45,619.60 in Louanne's attorney's fees to Jonathan Breitenstein. The circuit court specifically stated that the attorney fee was payable to Mr. Breitenstein who could enforce the judgment in his own name.
Charles filed a notice of appeal on May 30, 2019, raising five issues. Relevant to this appeal, Charles argued that the circuit court abused its discretion in modifying the maintenance award and ordering attorney's fees. Notably, Charles did not name Breitenstein as a party in the notice of appeal or in the prehearing statement in the Court of appeals. In response, Louanne filed a motion to dismiss the entire appeal pursuant to Fink v. Fink, 519 S.W.3d 384 (Ky. App. 2016), wherein the Court of Appeals dismissed an appeal prior to briefing based on the appellant's failure to name an attorney as an appellee in an appeal that challenged an attorney's fee award. The Court of Appeals denied Louanne's motion to dismiss, but in a June 30, 2020 order stated that "while dismissal is not merited, the Court holds that Appellant's claim regarding attorney fees fails for want of jurisdiction."
In its August 6, 2021 opinion, the Court of Appeals concluded that the circuit court abused its discretion in granting Louanne's motion to modify maintenance rather than allowing the maintenance award of $6,000 per month to terminate in 2017 in accordance with the 2007 divorce decree. Specifically, the Court of Appeals disagreed with the circuit court's determination that the changes in circumstances rendered the original maintenance award unconscionable. The Court of Appeals emphasized that both parties suffered losses since the divorce decree and noted that Louanne could have achieved financial stability with proper management of the assets and maintenance payments she received.
Charles and Louanne both filed motions for discretionary review in this Court. Having granted both motions for discretionary review, heard oral arguments, and carefully considered the record, we reverse the Court of...
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