Patten v. Patten

Decision Date17 May 2019
Docket NumberNO. 2017-CA-000784-MR,2017-CA-000784-MR
PartiesPATRICIA ANN PATTEN (NOW NAVE) APPELLANT v. WILLIAM EARLY PATTEN APPELLEE
CourtKentucky Court of Appeals

NOT TO BE PUBLISHED

APPEAL FROM FAYETTE CIRCUIT COURT

HONORABLE TIMOTHY NEIL PHILPOT, JUDGE

ACTION NO. 10-CI-04382

OPINION

REVERSING AND REMANDING

** ** ** ** **

BEFORE: ACREE AND JONES, JUDGES; HENRY, SPECIAL JUDGE.1

ACREE, JUDGE: Patricia Patten (now Nave) appeals the Fayette Circuit Court's December 22, 2016 order denying her motions to enforce the parties' settlementagreement and to set aside the settlement agreement pursuant to CR2 60.02(d) for fraud affecting the proceedings. We reverse and remand for additional proceedings as explained herein.

FACTS AND PROCEDURE

William Patten and Nave married in 1981. At some point they relocated to Kentucky from Oklahoma with their three adopted children. Patten, a tax attorney and CPA licensed in Oklahoma and Missouri, frequently travelled to Oklahoma to meet with his clients. Nave is also an attorney licensed outside Kentucky.

In 2010, Nave petitioned for dissolution of the marriage.3 The divorce was particularly acrimonious and contentious. Nave claimed from the onset that Patten was hiding assets and concealing income,4 and much effort was spent by Nave's counsel to uncover all marital and non-martial assets subject to division.

By letter dated November 23, 2010, Nave's attorney requested certain financial documents from Patten, including:

f. Trust documents for The Russell Lee Patten & Kathryn Elva Patten Trust UTD 9-16-99: . . . Bill admitted that he comingled trust and marital funds in the Trust account. As such we need the trust documents to include the AmeriTrade account statements from 2003 to present, any other broker account and the trust bank account statements form the same period, including U.S. Bank . . . .
k. Bill used to have or currently has a chase Bank account in Ky, an ARVEST account in Oklahoma or Kentucky . . . We are asking for Bill to provide us with 6 years of bank statements for each bank account he currently has or has had within the last six years.
m. There is also a Merrill Lynch account, which was a money market as well as a retirement or deferred tax account. We would request all the statements from inception to present for any Merrill Lynch . . . account, including all those currently open as well as any closed since 1988.

(Emphasis added).

A few months later, Patten submitted, under oath, his preliminary verified disclosure statement (PVDS). Patten disclosed a U.S. Bank account as an asset of his parents' trust, and an Arvest Bank account. Notably, Patten refers to the U.S. Bank account as "segregated" from other U.S. Bank accounts. In a follow up letter, Nave asked Patten to disclose the other U.S. Bank accounts; it is unclear if he complied. (R. 1684). Related to his retirement benefits, Patten claimed all his retirement benefits were contained in five Ameritrade accounts totaling $280,000.00. He neither produced nor identified any Merrill Lynch accounts.

In August 2011, Patten, at Nave's request, executed thirty authorizations for the release of tax and financial records. Included were signed releases for: (1) Arvest Bank; (2) U.S. Bank; (3) Bank of America, in which Merrill Lynch was specifically listed as a subsidiary from which records could be obtained; and (4) Ameritrade. The Authorizations were not limited by date or location, and granted access to any and all financial information, including accounts of Patten individually, two trusts, one corporation, and two limited liability companies.

Record retention policies limited Nave's ability to obtain records beyond seven years from Arvest, U.S. Bank, and Ameritrade. Nave was unable to obtain any records from Merrill Lynch.

Nave noticed Patten's deposition in November 2011 along with a subpoena duces tecum requesting, among other things, "copies of all banking records . . . for 2009, 2010, and 2011 . . . . Please include, but do not limit, to the following accounts: Ameritrade, Bank of America, . . . Arvest Bank . . . U.S. Bank and Merrill Lynch (now affiliated with Bank of America)." Nave continued to assert that Patten had a retirement account with Merrill Lynch that he failed to disclose on his PVDS. She claimed Patten showed her a single Merrill Lynch account in 1991 that had, at the time, a balance of $100,000.00; using a reasonable rate of return, Nave insisted that the account would be in the millions as of 2011.

When questioned at his deposition, Patten continued to represent that he had disclosed all his retirement accounts, those being the five Ameritrade accounts previously identified and disclosed totaling $280,000.00.5 He produced no Merrill Lynch statements in response to the subpoena and prepared three schedules during the divorce proceedings allegedly indicating he had a single Merrill Lynch account containing less than $25,000.00 that was liquidated around 1984. (R. 2066). Patten also testified in his deposition that he lost the parties' tax returns for years 1999-2003, and the electronic data was corrupted.

On December 8, 2011, the parties executed a comprehensive Mediated Separation and Property Settlement Agreement. The Settlement Agreement addressed and resolved all outstanding issues, including child support, health insurance and the division of personal property, real property, retirement accounts, marital debt, and all other assets. The Settlement Agreement awarded Patten his Ameritrade retirement accounts, any Arvest accounts, all trust interests, and all savings bonds in his name or the name of a trust.

To alleviate Nave's fears that Patten was concealing assets, the parties included the following paragraph in the Settlement Agreement:

18. DISCLOSURE. The parties hereby agree that this Separation and Property Settlement Agreement has been reached after both parties have made full disclosure of all assets and liabilities and this agreement is predicatedupon each party being fully aware of the financial resources of the other. If either party has failed to disclose any assets of any nature, said asset shall be deemed joint property of the parties subject to division by the Fayette Family Court and this Agreement shall be amended to provide for an equitable division of said asset.

The trial court declared the Settlement Agreement not unconscionable and incorporated it into the decree of dissolution entered December 11, 2011.

Four years later, on December 11, 2015, Nave filed a motion to enforce paragraph 18 of the Settlement Agreement along with a motion to set aside the decree of dissolution and re-open the Settlement Agreement to restore certain assets to Nave pursuant to CR 60.02(d) for fraud affecting the proceedings. Nave filed an amended motion to enforce on January 28, 2016, and re-filed her CR 60.02(d) motion on April 18, 2016. The underlying basis for her motions, however, remained the same.

She asserted that on or about January 2014, Patten produced documents in an Oklahoma probate action that contradicted his sworn testimony during the divorce proceedings. Specifically, Nave claimed that these documents revealed: (1) Patten purchased savings bonds in 2005-2006 using an undisclosed account at Arvest Bank in Joplin, Missouri; (2) Patten purchased bonds using an undisclosed U.S. Bank account in Lexington, Kentucky; and (3) that in 1999 certain funds were transferred into an undisclosed account with National DiscountBroker (NDB). During the divorce, Patten allegedly represented that these same funds were transferred into an Ameritrade account, not an account with NDB. Related to the bonds, Nave appeared to be claiming Patten used marital funds to purchase savings bonds titled in his sister's name as trustee of a trust. He did so to conceal marital assets. Nave asserted Patten did not disclose the Arvest Bank account in Missouri or the U.S. Bank account in Kentucky during the divorce despite repeated requests for him to do so and emphasized that the Arvest and U.S. Bank accounts discovered in 2014 are different than those initially disclosed by Patten. For example, Nave indicated she was aware Patten had an Arvest account in Oklahoma or Kentucky, as referenced in her counsel's November 23, 2010 letter to Patten, but she was unaware Patten had a different Arvest account, with possibly a different account number, in Missouri.

Nave further claimed that on September 15, 2015, she discovered a back-up disc left in the marital residence referencing four Merrill Lynch accounts, including two retirement accounts, that Patten failed to disclose during the divorce. The disc contained a letter dated July 16, 2001, from Patten to Merrill Lynch stating: "Due to the increase in fee structure I am requesting that Merrill Lynch liquidate the above [WCMA] account and send me a check for the account balance. . . . I would appreciate that the address on all of my accounts (CMA, IRA, and SEP) be changed to the address above." (R. 1656). Nave asserted this letterreveals Patten had several Merrill Lynch accounts as of at least 2001, despite his filings during the divorce that his sole Merrill Lynch account was depleted by 1984. She further argued that that the Merrill Lynch account she had seen 20 years prior containing $100,000.00 would have increased significantly in value. She claimed that Patten committed fraud when he failed to disclose and knowingly undervalued his assets, under oath, four times - in his PVDS, deposition, subpoena response, and when he executed the Settlement Agreement.

Patten responded to Nave's motion, claiming no Merrill Lynch accounts existed when she filed for divorce in 2010. He asserted that, as the 2001 letter indicated, the WCMA account was "closed" in 2001 and its funds distributed to Patten. He attached eight (8) retirement account statements (four (4) Merrill Lynch and four (4) Ameritrade, from a sixty-day period, December 1, 2001 - January 25, 2002), which supposedly revealed that, of the other...

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