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Duke v. Duke

Court of Appeals of Tennessee, Nashville

June 27, 2018


          Session April 10, 2018

          Appeal from the Chancery Court for Williamson County No. 33519 James G. Martin, III, Judge

         In this post-divorce matter, the trial court ordered the father, Harold W. Duke, III ("Father"), to deposit $5, 729.17 and $5, 312.50 per month, respectively, into the educational accounts of the parties' two daughters. The court determined that the children's separate trust accounts were not required to be utilized to fund their college expenses. The court also awarded the mother, Kathryn A. Duke ("Mother"), $4, 006.00 for attorney's fees incurred in pursuing a civil contempt petition against Father, as well as $25, 000.00 for attorney's fees and $1, 237.50 in discretionary costs related to establishment of the proper amounts to be contributed by Father to the educational accounts. Father has appealed. Discerning no error, we affirm the trial court's judgment. We decline, however, to award Mother attorney's fees incurred in this appeal.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; Case Remanded

          Steve D. Gibson, Nashville, Tennessee, for the appellant, Harold W. Duke, III.

          Lawrence J. Kamm, Nashville, Tennessee, for the appellee, Kathryn A. Duke.

          Thomas R. Frierson, II, J., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and Richard H. Dinkins, J., joined.



         I. Factual and Procedural History

         This is a post-divorce action presenting issues regarding, inter alia, proper interpretation of the trial court's prior orders and the propriety of the trial court's evidentiary rulings. These parties have been before this Court on appeal on three prior occasions. See Duke v. Duke, No. M2009-02401-COA-R3-CV, 2012 WL 1971144 (Tenn. Ct. App. June 1, 2012) ("Duke I"); Duke v. Duke, 398 S.W.3d 665 (Tenn. Ct. App. 2012) ("Duke II"); Duke v. Duke, No. M2013-00624-COA-R3-CV, 2014 WL 4966902 (Tenn. Ct. App. Oct. 3, 2014) ("Duke III"). In Duke I, this Court explained the factual history prior to the first appeal as follows:

Kathryn A. Duke ("Mother") and Harold W. Duke, III, ("Father") were married on October 12, 1991; they are the parents of three children who were 11, 9 and 7 at the time of the institution of this proceeding. Father is a physician who is the owner of Emergency Services Network, a business engaged in the operation of emergency departments in hospitals. Mother is trained and previously worked as a registered nurse; since the birth of the first child on November 11, 1995, she has not had employment outside the home. Mother initiated this action on May 2, 2007 by filing a complaint for legal separation on grounds of irreconcilable differences and inappropriate marital conduct; she amended the complaint to seek a divorce and by adding Father's substance abuse as a ground. Father counterclaimed, seeking a divorce on grounds of irreconcilable differences and inappropriate marital conduct. After what was clearly a contentious process, a six day trial was held. The court thereafter entered decrees granting Mother a divorce on the ground of inappropriate marital conduct; naming Mother primary residential parent; valuing and dividing the marital assets; awarding Mother rehabilitative alimony of $8, 000 per month for eight years; finding Father guilty of two counts of contempt; and awarding Mother $309, 167.25 in counsel fees.

Duke I, at *1 (footnote omitted).

         During the first appeal, the parties presented numerous issues stemming from the trial court's final decree, including issues regarding the parties' co-parenting time with the children and the court's valuation of marital assets. See Duke I, at *1. One issue raised by Father concerned the court's determination that Father would be required to establish an educational trust for each child, into which he was ordered to contribute $15, 000.00 annually for each of the two youngest children, E.D. and C.D., and $20, 000.00 annually for the eldest child, W.D. See Duke I, at *4. On appeal, this Court stated the following with regard to this issue:

The court ordered that Father establish an educational trust for each child, into which he is to contribute $15, 000 annually for each of two of the children and $20, 000 annually for the third child. While Father acknowledges the court's discretion to order that the trust be established and funded, he contends that the amount of yearly contributions results in balances which are "far in excess of even an expensive education," inequitable, and beyond the amounts contemplated by the Child Support Guidelines. He further argues that, since he had previously established an account for each of the children which is greater than cost of an education at the University of Tennessee, the children's post-high school educational expenses should be paid from that account.
The record shows that Father is the custodian of certain accounts at Stern Agee, which he referred to as "UTMA, 'Uniform Transfer to Minor Act'" accounts, in the name of each of the children which were established prior to the institution of the divorce proceedings. Although Father testified that the accounts are for the college educations of each child, the record is not clear that the accounts are limited to that purpose or that the accounts are what the court intended when it ordered that the educational trusts be established. The order to establish the educational accounts does not give the basis upon which the amount of the annual contribution was determined, and neither party has cited evidence in the record of the anticipated cost of a college education for the children.
While the trial court acted within its discretion in ordering the accounts established, the evidence does not support the amount of the annual contributions ordered. Accordingly, we affirm the decision that Father establish educational accounts for each of the children and remand the case for the court to further consider the amount of the annual contributions. The court may also consider the extent to which the UTMA accounts are presently or can be restricted to provide for the children's education.

Duke I, at *4-5.

         The second appeal in this matter was filed pursuant to Tennessee Supreme Court Rule 10B, regarding the trial court's denial of a motion for recusal. See Duke II, at 667. This Court affirmed the trial court's ruling on appeal, determining that recusal was not warranted. See Duke II, at 674. In Duke II, this Court noted that the case had been reassigned from Judge Timothy Easter to Judge James G. Martin, III, prior to the recusal motion's filing. See Duke II, at 667.

         The third appeal occurred in 2014, following the trial court's modification of the parties' permanent parenting plan. See Duke III, at *1. As this Court explained:

The trial court reduced Father's time with the parties' children to four hours of supervised time every other weekend. The trial court so limited the Father's parenting time as a result of his intentional interference with the children's relationship with Mother. Father appeals the trial court's modification of the parenting schedule. In addition, he claims the trial court erred by: (1) limiting Father's communication with the children; (2) refusing Father's request to retain an expert to rebut testimony by an expert Mother and Father initially agreed would provide a recommendation about parenting time; (3) excluding certain portions of his treating physician's testimony; (4) requiring the children to continue counseling sessions with a psychologist; (5) terminating Father's participation in educational decisions for the children; (6) instituting a permanent injunction against Father; (7) finding Father guilty of six counts of criminal contempt; (8) finding Father in civil contempt; (9) denying Father's requests to reopen the proof to present newly discovered evidence; and (10) awarding Mother $678, 933.05 in attorneys' fees and discretionary costs. We reverse the judgment of the trial court finding Father in civil contempt. We affirm the judgment in all other respects.


         Following the remand from this Court, the trial court conducted a hearing on December 1, 2015, and April 15, 2016, regarding the amount of Father's required contributions to the children's educational trust accounts. See Duke I, at *4-5. At the commencement of the December 1, 2015 hearing, Father's counsel referenced and read an excerpt from the transcript of proceedings held on September 29, 2009 ("2009 Transcript"), before the prior trial judge, Judge Easter, regarding motions to alter or amend filed after the initial divorce judgment. The transcript, however, was not offered as an exhibit at that time.

         During the hearing, Mother presented the testimony of Janet Schneider, Director of College Counseling and Senior Class Dean at the University School of Nashville. Ms. Schneider testified as an expert regarding the potential costs of a post-secondary education for the parties' daughters, utilizing information gathered from Mother regarding the daughters' respective grades and interests.

         Father was questioned during the hearing regarding his income in the years following the divorce. Father acknowledged that his gross income for the years 2010 to 2014 averaged approximately $2, 000, 000.00 per year. Father also testified regarding his assets and liabilities, resulting in the trial court's calculation of Father's net worth of approximately $2, 000, 000.00. Following the testimony of other witnesses, including the parties, on December 1, 2015, the hearing was continued.

         On December 17, 2015, Mother filed a motion seeking permission to disclose financial information to her expert in preparation for the upcoming hearing date. The trial court entered an order on January 11, 2016, noting that a telephonic hearing concerning Mother's motion was conducted on December 17, 2015. In the January 11, 2016 order, the court clarified that it would consider the facts "as of the date when the original Order on the educational accounts was entered, when and if provided, and evidence of reasonable cost for the children's college expenses going forward." The court also found that "educational costs for the parties' oldest child, [W.D.], is a moot issue." The court granted Mother permission to disclose financial information produced during the December 1, 2015 hearing to her expert.

         The hearing regarding the children's educational funds continued on April 15, 2016. Ms. Schneider again testified regarding the projected costs of a post-secondary education for the parties' daughters, having recalculated such costs, at the trial court's direction, based on information available in 2009, the time of entry of the original order regarding educational funds. Father testified concerning his earnings for the years 2005 to 2009, demonstrating that his gross income for those years also averaged approximately $2, 000, 000.00 per year.

         Following the trial's conclusion, the trial court subsequently entered a Memorandum and Order on June 28, 2016. In the Memorandum and Order, the trial court credited the testimony of Ms. Schneider regarding projected higher education costs for the parties' children. The court noted that Ms. Schneider testified concerning her training and credentials, and the court found her to be "credible and well-qualified to testify concerning colleges and universities appropriate for particular students as well as the projected cost of attending those colleges and universities." As the court reiterated, Mother presented Ms. Schneider with personal information regarding the children, including their grade reports, transcripts, teacher comments, and a record of extracurricular activities. Ms. Schneider accordingly prepared a list of recommended colleges that she believed would be suitable for the children and projected the costs of their college educations. According to the court, the parties' son, W.D., was omitted from this analysis because he had already begun attending Emory University and his college tuition was being paid directly by Father.

         The trial court relied upon Ms. Schneider's testimony in determining that the parties' daughter, E.D., would likely incur costs of approximately $247, 000.00 to $288, 000.00 in obtaining her college degree. The court further relied upon Ms. Schneider's testimony in determining that the parties' other daughter, C.D., would likely incur costs of approximately $275, 000.00 to $305, 000.00 in obtaining her college degree. The court noted that the cost of W.D.'s attendance at Emory University would be approximately $225, 000.00 for his remaining three years. The court also noted that Father "did not challenge the accuracy of Ms. Schneider's testimony and the Court finds it credible and reasonable."

         With regard to the children's UTMA accounts, the trial court found that Mother, who was custodian of said accounts, had retained an attorney, Jeffrey Mobley, to advise her regarding estate matters. Upon Mr. Mobley's suggestion, Mother transferred the assets held in the children's UTMA accounts into qualified minors' trusts in order to protect those assets from creditors' claims, provide greater investment opportunities, and provide more flexibility concerning distributions for the children's support. The court found that the assets in the UTMA accounts were, in part, traceable to gifts from Mother's family and that Mother viewed the respective accounts as a "nest egg" for each child. The court further found that each child's trust held assets ranging in value from $125, 000.00 to $141, 000.00 as of October 2015 and had consistently grown in excess of 10% per year.

         The trial court noted that Father had ceased funding the children's educational accounts in 2011 without leave of court, such that these accounts only held $45, 000.00 to $60, 000.00 each. According to the court, if Father had continued to fund these accounts each year in the respective amount ordered by the court in 2009, E.D.'s account would have had a principal balance of $120, 000.00 upon her high school graduation, and C.D.'s account would have had a principal balance of $150, 000.00 when she graduated from high school.

         The trial court determined that Father's average yearly income, after taxes, for the years 2009-2014, was approximately $1, 344, 267.66. Despite Father's significant income, the court acknowledged that Father sought to have the monies in E.D.'s and C.D.'s trust accounts utilized to pay for their college educations before he was obligated to pay additional monies toward their educational expenses. The court ultimately concluded:

While not explained in its ruling, the facts and circumstances before this Court in 2009 suggest that this Court did not intend for the UTMA accounts to be used to fund the children's college education, in whole or in part. In reaching that conclusion, this Court determined it would have so stated had it been the intention of the Court in 2009 for the UTMA accounts to be used to fund each child's college education, in whole or part. The Court named [Mother] the sole custodian of UTMA accounts and directed that [Father] be the custodian of the educational trusts to be funded by him. The Court held that the UTMA accounts were funded with monies provided primarily by [Mother's] family during the course of the parties' marriage. There was no stated intent or purpose that the UTMA accounts be used exclusively for the children's college education.
** *
With knowledge of the foregoing facts in mind, it is this Court's belief that it intended the educational trusts to fund the children's college education without reference to the assets in their UTMA accounts when it made its 2009 decision. While [Father] testified at the trial of these proceedings that funds in the children's UTMA accounts were for the children's college education, [Mother] testified to the contrary. The Court credits [Mother's] testimony.
** *
The parents of these children are wealthy and have provided their children with a lifestyle commensurate with the parents' wealth. As noted above, absent the divorce, it would ordinarily be expected that the parents would provide their children with a college education at an appropriate college or university without contribution by the children from their assets. Upon his attaining age 18 in November 2013, [W.D.] moved from [Mother's] home and began living with his father. He has severed all ties with his mother. [W.D.] attended Emory University during the 2014-2015 academic year, a school costing in excess of $70, 000 a year. [Father] paid the cost of [W.D.'s] attendance without demanding contribution from [W.D.'s] UTMA account or using the money [Father] had set aside in [W.D.'s] educational trust which, at the time of [W.D.'s] attendance at Emory, had a balance in excess of $60, 000. To Order that [E.D.] and [C.D.'s] UTMA assets be used to fund their college education would send a message to [E.D.] and [C.D.] that if they will sever their relationship with their mother, their father will preserve their UTMA assets and pay for their college education. The Court declines to send such a message. [E.D.] and [C.D.] should not be put in that position.

         Relying on the testimony of Ms. Schneider, the trial court determined that E.D.'s college education would cost approximately $275, 000.00 and C.D.'s would cost approximately $300, 000.00. Based on the balance in each daughter's educational account of approximately $45, 000.00, the court found a shortfall of $230, 000.00 and $255, 000.00, respectively. The court thus ordered Father to deposit $23, 750.00 into E.D.'s educational account by August 1, 2016, and $5, 729.17 each month thereafter through August 2019. The court similarly ordered Father to deposit $3, 451.67 per month into C.D.'s educational account for a total of forty-eight months. The court further determined that the ordered contributions, when combined with Father's other ordered obligations with regard to the children, would not exceed 41% of Father's net annual income.

         Mother filed two motions seeking to alter or amend the trial court's ruling. In the first motion, Mother asserted that, based on Father's history of untimely payments, the court should allow her the ability to access the funds in the educational accounts in order to pay the children's college expenses. The court denied this motion. In her second motion, Mother averred that the trial court had made a mathematical error in calculating the payments necessary to fund C.D.'s educational expenses. On July 14, 2016, the court amended its prior order to correct this mathematical error, determining that the appropriate amount of the monthly deposit into C.D.'s educational account would be $5, 312.50. Father filed a timely notice of appeal.

         During the pendency of this appeal, the parties were involved in a dispute regarding the proper content of the appellate record. On February 17, 2017, this Court remanded the matter to the trial court for resolution of this issue. The trial court held a hearing on April 13, 2017, wherein Father's counsel argued that the 2009 Transcript should be made a part of the appellate record because it was referenced by counsel at the beginning of the hearing on December 1, 2015. The trial court determined that the 2009 Transcript should not be part of the appellate record, however, because it was never considered by the trial court when rendering its decision in this matter. This Court entered a subsequent order on May 22, 2017, directing that although the trial court's decision regarding the content of the appellate record was not a judgment subject to appeal as of right, the parties would not be precluded from addressing this issue in their briefs.

         On August 1, 2017, this Court entered an order, noting that Mother had filed a motion seeking to dismiss Father's appeal because Father had filed several motions in the trial court seeking relief pursuant to Tennessee Rule of Civil Procedure 60. This Court determined that a remand was proper to allow the trial court to consider Father's motions, particularly, as pertinent to the issues raised here, considering Father's allegations of fraud. Following a subsequent hearing conducted by the trial court, with Judge Deanna Bell Johnson now presiding, the court determined that Father had failed to substantiate his fraud allegations. The trial court therefore dismissed Father's motions, and this appeal proceeded.

         II. Issues Presented

         Father presents the following issues for our review, which we have restated slightly:

1. Whether the trial court erred by failing to consider the 2009 Transcript when determining the intended meaning of the court's October 26, 2009 order regarding the children's UTMA accounts.
2. Whether the trial court erred by misconstruing the October 26, 2009 order.
3. Whether the trial court erred by granting Mother's motion for a protective order and requiring Father to pay associated attorney's fees.
4. Whether the trial court erred by allowing Ms. Schneider to testify as an expert and by ordering Father to pay Ms. ...

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