Steven Wayne Arnett v. Monica Michelle Childress ( 2022 )


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  •                  RENDERED: OCTOBER 14, 2022; 10:00 A.M.
    NOT TO BE PUBLISHED
    Commonwealth of Kentucky
    Court of Appeals
    NO. 2021-CA-0348-MR
    STEVEN WAYNE ARNETT                                                  APPELLANT
    APPEAL FROM GREEN CIRCUIT COURT
    v.            HONORABLE SAMUEL TODD SPALDING, JUDGE
    ACTION NO. 07-CI-00148
    MONICA MICHELLE CHILDRESS                                               APPELLEE
    OPINION
    AFFIRMING
    ** ** ** ** **
    BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.
    JONES, JUDGE: Steven Wayne Arnett appeals a judgment of the Green Circuit
    Court in favor of his ex-wife, Monica Michelle Childress, for $8,640 and accrued
    interest of 6% representing an arrearage of what he owed Childress pursuant to the
    terms of their 2007 divorce decree. Arnett asserts the circuit court erred in
    awarding Childress post-judgment interest. Upon review, we affirm.
    The factual and procedural history of this matter is as follows. On
    November 16, 2007, during their divorce proceedings in Green Circuit Court,
    Arnett and Childress entered into a separation agreement which provided in
    relevant part:
    In full settlement of all personal property, [Arnett] shall
    further pay to [Childress] the amount of twenty-six
    thousand eight hundred fifty dollars ($26,850.00) in the
    following increments, to wit:
    ...
    b. [Arnett] shall pay to [Childress] ten thousand dollars
    ($10,000.00) on April 1, 2008; and
    c. [Arnett] shall pay to [Childress] ten thousand dollars
    ($10,000.00) on July 1, 2008.
    On December 26, 2007, when the parties’ marriage was dissolved, the
    circuit court incorporated the parties’ separation agreement into its divorce decree.
    Notably, the separation agreement and divorce decree were both silent regarding
    interest.
    The record is also silent until October 7, 2020, when Childress filed a
    motion to hold Arnett in contempt. In her motion, Childress informed the circuit
    court that Arnett had yet to pay her anything toward the outstanding amounts set
    forth above; and she asked the circuit court to compel Arnett to pay her the
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    outstanding $20,000 he owed “with interest thereon pursuant to KRS1 360.040.”
    However, at the initial contempt hearing that followed, Arnett denied Childress’s
    contention. He represented he had paid Childress most or all of what was owed –
    not so much in money, but by providing her services pursuant to what he asserted
    had been a valid modification of the parties’ separation agreement.
    On January 22, 2021, the circuit court held an evidentiary hearing
    regarding Arnett’s assertion that he was entitled, due to a post-decree modification
    of the separation agreement, to have the value of services he had rendered for
    Childress credited toward what he owed her. The footage of that hearing is not of
    record, nor did Arnett designate it as part of the record. Thus, we are left to
    presume that the findings of fact set forth in the circuit court’s January 26, 2021,
    order, which recounted and relied upon much of what was apparently adduced at
    that hearing, were consistent with the evidence. See Commonwealth, Dep’t of
    Highways v. Richardson, 
    424 S.W.2d 601
    , 603 (Ky. 1967), as modified on denial
    of reh’g (Feb. 23, 1968).
    To summarize, it was undisputed that Arnett failed to pay Childress
    any of the $20,000 he owed her pursuant to the separation agreement and decree.
    However, the circuit court found the parties had verbally – and validly – agreed to
    modify their separation agreement sometime after December 26, 2007, to permit
    1
    Kentucky Revised Statute.
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    Arnett to perform various jobs for Childress and to offset the value of his work
    from the $20,000 judgment. The circuit court also found that Arnett had
    performed several odd jobs for Childress during the intervening years, and thus
    “significant work” pursuant to their modified agreement.
    But, as recognized by the circuit court, there were problems with the
    parties’ agreement. Arnett and Childress never agreed upon a monetary value for
    any of the work Arnett performed pursuant to the modified agreement. And, for
    the most part, the two of them either could not recall or could not agree when he
    performed the work. As the circuit court found, Arnett first attempted to itemize
    and value his work for Childress in 2019, “only after being contacted by
    [Childress] about the payment of the indebtedness owed.” Consequently, the
    circuit court devoted much of its order to itemizing and assigning monetary values
    to the various jobs Arnett had performed for Childress over the years pursuant to
    the parties’ modified agreement. Ultimately, the circuit court concluded that the
    value of Arnett’s services totaled $11,360, leaving $8,640 due to Childress. The
    circuit court then ordered that the arrearage “shall bear interest at the legal rate of
    six (6) percent, effective July 1, 2008.”
    Arnett moved the circuit court to alter, amend, or vacate its arrearage
    judgment, arguing in relevant part:
    In the case at bar, [Childress] was aware of the terms of
    the settlement agreement and chose not to file a Motion
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    to enforce the agreement until 12 years after the last
    payment required by the Settlement Agreement was due.
    Additionally, [Arnett] and [Childress] modified the
    agreement to allow [Arnett] to work off the amount
    owed. Had [Arnett] been aware [Childress] was going to
    renege on the modified agreement and demand payment
    plus interest, he would have made the payments years
    ago. It is a flagrant miscarriage of justice to award
    [Childress] interest in the case at bar, especially
    considering the amount of interest owed would result in
    doubling the amount owed to [Childress] pursuant to the
    parties’ modified agreement.
    The circuit court denied Arnett’s motion. In its February 23, 2021,
    order to that effect, it began by noting the general rule, as set forth in Doyle v.
    Doyle, 
    549 S.W.3d 450
     (Ky. 2018), that all judgments bear interest. It went on to
    recognize that it lacked the discretion to either deny interest or depart from the
    statutorily mandated rate of interest without first determining that the claim was
    unliquidated or an interest rate was specified in a separate written agreement. Id.
    at 456. Further, the circuit court held that while the “damages ordered are best
    characterized as unliquidated,” which provided it discretion to determine an
    interest rate less than the statutory amount pursuant to KRS 360.040(4), the
    equities did not favor a lesser amount here. In relevant part, it explained:
    [T]he coercive measures of the statute are necessary to
    encourage a party to make timely payments. While this
    Court does find there was an oral agreement [Arnett]
    would do work in exchange for a reduction of payment,
    there is no dispute the payment of the remaining balance
    is long overdue in the current case. Additionally, the
    initial agreement in this case was entered on November
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    16, 2007. [Arnett] was to pay $10,000 by April 1, 2008
    and the final payment was to be made on July 1, 2008. It
    is undisputed [Arnett] did not complete the excavation
    work until 2014 at the earliest. Additionally, [Arnett]
    completed the septic work in 2014. It is unclear as to
    when the other services were provided. [Arnett] had the
    responsibility to pay and this Court has been generous in
    crediting [Arnett] with the work performed to offset his
    obligation. Accordingly, this Court finds the order of
    pre-judgment interest is equitable. Interest will be
    ordered at the statutory rate of 6% outlined within KRS
    360.040 from the date of original decree of dissolution
    for the unpaid amount.
    This appeal followed. To be clear, the parties do not contest that
    Arnett was entitled to an $11,360 credit against what he owed Childress pursuant
    to the separation agreement and divorce decree pursuant to a valid post-decree
    modification. They do not contest the circuit court’s finding that, due to the
    parties’ poor recordkeeping and lack of agreement regarding the value of Arnett’s
    services, the arrearage judgment represented an award of unliquidated damages.
    Rather, only one issue is presented. Arnett’s sole argument is that the circuit court
    erred by directing him to pay any interest whatsoever in relation to Childress’s
    judgment against him. In support, Arnett cites Guthrie v. Guthrie, 
    429 S.W.2d 32
    (Ky. 1968), where our then highest court held that although interest should be
    imposed on past due child support, it may be denied where there are circumstances
    making it inequitable. The Guthrie Court concluded that where the father in that
    matter had paid for the children’s expenses rather than his child support obligation,
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    the equities could weigh in favor of relieving him of paying interest on the amount
    owed. Id. at 37.
    Before discussing how Arnett believes the “equities” weighed in his
    favor, we note Arnett ignores that what our highest court stated in Guthrie (i.e.,
    that judgment interest may be entirely denied) is at odds with its more recent and
    binding pronouncement in Doyle: “All judgments bear interest.” Doyle, 549
    S.W.3d at 456 (emphasis added). If Guthrie represents any viable exception to that
    rule, it is an exception that clearly does not apply to these facts: Guthrie involved
    interest on payments of child support, whereas Doyle – like this matter –
    specifically involved interest on an outstanding obligation stemming from the
    division of marital assets. Thus, irrespective of his reasoning, Arnett is incorrect in
    arguing he was entitled to pay no judgment interest.
    With that said, we now proceed to how, in Arnett’s view, the
    “equities” favored his case. Arnett first contends Childress prejudiced him by
    failing to seek judicial enforcement of their 2007 divorce decree until October 7,
    2020.
    We disagree. Childress acted within the time permitted by the
    applicable statute of limitations to collect the arrearage and interest owed to her
    pursuant to the divorce decree. KRS 413.090(1). Principles of equity, such as
    laches or estoppel by acquiescence, may not be used to bar the collection of
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    arrearages within the applicable limitations period. Heisley v. Heisley, 
    676 S.W.2d 477
    , 477 (Ky. App. 1984). Moreover, relative to the specific issue of judgment
    interest, Childress’s delay is not a factor to be considered at all. In Doyle, 549
    S.W.3d at 457, our Supreme Court observed that where a former spouse failed to
    comply with a court order, criticism of the efforts of his former partner to collect
    should have no bearing on the imposition of interest that accrued by operation of
    law. The court observed that the provisions of KRS 360.040 are not designed to be
    punitive but are meant to encourage a judgment debtor to comply promptly with
    the terms of the judgment and to compensate the judgment creditor for the
    judgment debtor’s use of her money. Id. at 458.
    As for the remainder of his arguments regarding how the “equities”
    weighed in his favor, Arnett next contends:
    [T]he parties’ modified the agreement and [Arnett] made
    reasonable and diligent efforts to comply with the
    modified agreement to work off the balance owed to
    [Childress]. Further, has [sic] [Arnett] been aware
    [Childress] was going to renege on her part of the
    modified agreement and demand full payment plus
    interest, he would have made payments on the balance
    rather than allowing 12 years of interest accrue against
    him.
    Regarding Arnett’s assertion that he made “reasonable and diligent
    efforts to comply with the modified agreement to work off the balance owed” to
    Childress, the circuit court made no such finding; and Arnett cites no evidence of
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    record favoring his argument. True, the circuit court gave him a credit for what it
    determined was the reasonable value of the work he performed under the modified
    agreement; but when Arnett and Childress entered that agreement is not evident
    from the record. Thus, it is unclear how long Childress may have waited for Arnett
    to perform any given service. To the extent the circuit court assigned any time
    frame to any of the work Arnett performed under the agreement, it could only state
    Arnett performed some of it in 2014.
    As to Arnett’s assertion that he “would have made payments on the
    balance rather than allowing 12 years of interest accrue against him[,]” the circuit
    court likewise made no such finding, and Arnett cites no evidence of record
    favoring his argument. It is unclear how long Childress may have waited –
    unsuccessfully – for Arnett to pay her anything before she ultimately agreed to
    allow him to credit services toward his debt. Again, however, to the extent the
    circuit court assigned any date to any of the work Arnett performed under the
    parties’ modified agreement, it could only state Arnett performed it in 2014 –
    approximately seven years after Arnett’s $20,000 debt to Childress had already
    become an outstanding obligation.
    As to his assertion that Childress “renege[d] on her part of the
    modified agreement” by demanding judgment interest, the circuit court only
    determined the modified agreement permitted Arnett to perform various jobs for
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    Childress and to offset the value of his work from the $20,000 judgment. The
    circuit court made no determination that the modified agreement also provided
    Arnett would not owe Childress judgment interest on what remained of the
    principal balance. Nor, for that matter, does Arnett cite any evidence indicating
    Childress ever represented to him – much less agreed with him – that he would not
    owe her judgment interest on what remained.
    Instead, reading between the lines of his brief, it appears much of
    what led Arnett to believe he could “work off” an interest-free $20,000 balance
    owed to Childress arises from his own unilateral assumption; specifically, his
    assumption that because the parties’ November 16, 2007 separation agreement – as
    incorporated into the December 26, 2007 divorce decree – was silent regarding
    interest, no interest would ever be owed. However, it is inarguable that “everyone
    is presumed to know the law; therefore, ignorance of the law is not an excuse.”
    Dep’t of Revenue, Finance v. Revelation Energy, LLC, 
    544 S.W.3d 170
    , 176 (Ky.
    App. 2018). And here, the law provided at all relevant times that a judgment
    merely silent about interest should not be interpreted as an interest-free judgment.
    See, e.g., Commonwealth, Dep’t of Highways v. Young, 
    380 S.W.2d 239
    , 240 (Ky.
    1964) (“[T]he fact that a judgment or decree is silent as to interest will not prevent
    the recovery of interest thereon.”).
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    Indeed, this rule has been applied before in the same situation. In
    Hoskins v. Hoskins, 
    15 S.W.3d 733
     (Ky. App. 2000), the parties, Pam and Kevin,
    entered into a property settlement agreement which required Kevin to pay Pam
    $7,500 within three years of October 10, 1990. Their agreement was incorporated
    into the trial court’s subsequent divorce decree; however, their agreement and
    divorce decree made no mention of judgment interest. 
    Id. at 733-34
    . Thereafter,
    Kevin refused to pay by the deadline; and Pam sought an order compelling Kevin
    to pay her $7,500 pursuant to the terms of the agreement, plus interest at the annual
    rate of 12% from October 10, 1993.2 
    Id. at 734
    .
    Ultimately, the trial court entered judgment in Pam’s favor for $7,500,
    but only with interest accrued from the date of its dispositive judgment (i.e.,
    October 7, 1998). 
    Id.
     On appeal, this Court reversed and remanded the case to the
    trial court with directions to award Pam post-judgment interest at the statutory rate
    of 12% from October 10, 1993, on Kevin’s $7,500 delinquent debt unless the trial
    court found such an award to be inequitable. 
    Id. at 735
    . We explained:
    In Courtenay [v. Wilhoit, 
    655 S.W.2d 41
     (Ky. App.
    1983)], the property settlement agreement that was
    incorporated into the divorce decree ordered the husband
    to pay the wife $140,000 in 121 equal monthly
    installment payments for her share of the property
    division. Both the agreement and the decree were silent
    with respect to interest. The wife later moved the court
    2
    The version of KRS 360.040 effective at that time (and until June 29, 2017) provided that
    “12%” was the default rate of statutory interest.
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    to award her interest on the amount from the date of the
    agreement. The court held that the interest statute
    applied to the separation agreement incorporated into the
    divorce decree, “but not until a judgment comes into
    being via a delinquent payment.” 
    Id. at 42
    . In other
    words, the husband was not required to pay interest
    unless he missed a payment. The court held that since
    the husband had kept his payments current, there was no
    judgment to which KRS 360.040 could apply. 
    Id.
    Under the principles of Courtenay, the provision in
    the property settlement agreement and decree ordering
    Kevin to pay Pam $7,500 within three years from the
    date of the agreement became an enforceable judgment
    when the payment became delinquent at the end of three
    years. Furthermore, KRS 403.180(5) provides that
    “[t]erms of the agreement set forth in the decree are
    enforceable by all remedies available for enforcement of
    a judgment, including contempt, and are enforceable as
    contract terms.” Thus, we conclude that the trial court
    erred in its 1998 order when it stated that there was no
    judgment in effect until that time. Pam was therefore
    entitled to interest under KRS 360.040 at the annual rate
    of 12% from October 10, 1993, unless such an award
    would be inequitable. Courtenay, 
    655 S.W.2d at 42
    . See
    also Stone v. Ky. Ins. Guaranty Ass’n, Ky. App., 
    908 S.W.2d 675
    , 677 (1995); Guthrie v. Guthrie, Ky., 
    429 S.W.2d 32
    , 36 (1968); Young v. Young, Ky., 
    479 S.W.2d 20
    , 22 (1972); Hardin v. Hardin, Ky. App., 
    711 S.W.2d 863
    , 865 (1986).
    Id. at 734-35 (footnote omitted).
    As in Hoskins, the provisions in the property settlement agreement
    and decree ordering Arnett to pay Childress $10,000 on April 1, 2008, and $10,000
    on July 1, 2008, became enforceable judgments – and entitled Childress to post-
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    judgment interest despite the separation agreement’s and divorce decree’s silence
    on that point – when those respective payments became delinquent.
    We review awards of post-judgment interest under the abuse of
    discretion standard. Hazel Enterprises, LLC v. Ray, 
    510 S.W.3d 840
    , 843 (Ky.
    App. 2017). Here, in sum, Arnett presents nothing demonstrating the circuit
    court’s award of 6% interest in its arrearage judgment was inequitable to him, or
    that the circuit court otherwise committed an abuse of its discretion that prejudiced
    his interests. To the contrary, the circuit court effectively pretended that Arnett
    had rendered all his services for Childress before the $20,000 he owed her had
    become delinquent, as it only assessed judgment interest on $8,640 (i.e., what
    remained of what he owed her, minus his setoff for services rendered).
    Additionally, the circuit court assessed post-judgment interest from
    July 1, 2008, at a rate of only 6%. It could have held that judgment interest
    accrued on Childress’s judgment at a rate of up to 12% until June 29, 2017 – the
    effective date of the most recent enactment of KRS 360.040, which only
    prospectively lowered statutory judgment interest from 12% to its current rate of
    6%. See Ridge v. Ridge, 
    572 S.W.2d 859
    , 861 (Ky. 1978) (explaining the
    prospective rather than retroactive effect of a statutory amendment of a post-
    judgment interest rate). The circuit court balanced the facts and equities in an
    appropriate manner, and its ultimate decision “falls within a range of permissible
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    decisions.” Miller v. Eldridge, 
    146 S.W.3d 909
    , 915 (Ky. 2004). In short, Arnett
    presents no basis of error. We therefore, AFFIRM.
    ALL CONCUR.
    BRIEF FOR APPELLANT:                     BRIEF FOR APPELLEE:
    Elmer J. George                          Theodore H. Lavit
    Lebanon, Kentucky                        Lebanon, Kentucky
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