RENDERED: MARCH 5, 2021; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals
NO. 2018-CA-1099-MR
CLAY F. GOTWALT APPELLANT
APPEAL FROM SCOTT CIRCUIT COURT v. HONORABLE LISA HART MORGAN, JUDGE ACTION NO. 15-CI-00115
DONNA F. GOTWALT (now MILLER) APPELLEE
OPINION AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.
CLAYTON, CHIEF JUDGE: Clay F. Gotwalt (“Clay”) appeals from the Scott
Circuit Court’s order finding that a note executed by Clay and his former wife,
Donna F. Gotwalt (now Miller) (“Donna”) during their marriage represented a
valid marital debt. Upon review of the facts and applicable law, we affirm. FACTUAL AND PROCEDURAL BACKGROUND
Clay and Donna married in October of 1997 and resided in Florida
until 2006, at which time they relocated to Kentucky. During the parties’
marriage, and while they were still residing in Florida, Clay and Donna executed a
note on May 11, 2005 (the “Note”). The trustee of the Robert W. Miller Trust (the
“Trust”) signed the Note as the “Lender,” and Clay and Donna signed the Note as
the “Payees.” The Note stated, in pertinent part:
FOR VALUE RECEIVED, the undersigned, (jointly and severally, if more than one) promises to pay to The Robert W. Miller Trust the principal sum of Fifty-Seven Thousand Dollars ($57,000.00).
The said principal shall be payable in lawful money of the United States of America at the address to be determined by the Trust, or at such place as may hereafter be designated by written notice from the Lender to the Payee, on the date and in the manner following:
The full amount of unpaid principal, shall balloon and become immediately and fully due and payable, upon demand by the Trust no sooner than 15 years from the date of payees’ signatures, or upon the sale or passage of title of the property parcel number 09-20-32-301-0210- 0000 located within the town of Geneva, Seminole County, Florida, whichever comes first. If the property is not sold or titled [sic] passed or if demand for repayment is not made by day 1 following the 15 year waiting period this note is to become null and void and repayment is forgiven.
....
-2- This note is secured by a mortgage on real estate, made by the maker hereof in favor of the said payee, and shall be construed and enforced according to the laws of the State of Florida. The terms of said mortgage are by this reference made a part hereof.
Neither the Note nor any mortgage related to the Note was recorded in the state of
Florida.
The record reflects that the $57,000.00 amount loaned by the Trust
was deposited into the parties’ joint bank account and was used by Clay and Donna
to purchase the Seminole County, Florida real property referenced in the Note on
July 29, 2005 for $119,000 (the “Raccoon Trail Property”). Thereafter, in
September of 2006, Clay and Donna sold the Racoon Trail Property to a third-
party purchaser for a purchase price of $133,652.00. The parties ultimately
relocated to Kentucky, where they purchased and began construction in 2008 on a
home in Midway, Kentucky (the “Seagull Lane Property”).
Clay filed a petition for dissolution of marriage in February of 2015,
and the Trust issued a demand for repayment of the loan in September of 2015. In
an order entered on February 14, 2018, the trial court found the Note to be a valid
marital debt owed by the parties and required the parties to repay the Trust the sum
of $57,000.00 from the proceeds of the sale of the Seagull Lane Property.
Specifically, the court found that the Note was “a written instrument, signed by all
parties, stating with specificity the amount owed in terms of the repayment or
-3- termination.” Moreover, the court found that, although the terms of the balloon
payment allowed for repayment upon the sale of the Raccoon Trail Property, it was
not required. It was only if the “demand for repayment [was] not made 1 day
following a 15-year waiting period” that the Note was null and void. Therefore,
the trial court found that, because the Trust made its demand for repayment within
the 15-year waiting period, the Note represented a valid debt. Additionally, the
trial court concluded that the debt was marital in nature, as it was jointly acquired
and used for marital purposes benefitting both parties equally.
Clay filed a motion to alter, amend, or vacate the trial court’s order on
February 23, 2018, which was denied by the trial court on June 27, 2018. This
appeal followed.
ANALYSIS
a. Standard of Review
On appellate review, “[t]he construction and interpretation of a
contract, including questions regarding ambiguity, are questions of law to be
decided by the court.” First Commonwealth Bank of Prestonsburg v. West, 55
S.W.3d 829, 835 (Ky. App. 2000). Accordingly, this Court’s standard of review of
the trial court’s construction and interpretation of the Note is de novo. Id. We
review the trial court’s factual findings under the “clearly erroneous” standard.
Kentucky Rule of Civil Procedure (CR) 52.01; Largent v. Largent, 643 S.W.2d
-4- 261, 263 (Ky. 1982). A factual finding is not clearly erroneous if it is supported by
substantial evidence. Barber v. Bradley, 505 S.W.3d 749, 754 (Ky. 2016).
“‘Substantial evidence’ is evidence of substance and relevant consequence
sufficient to induce conviction in the minds of reasonable people.” Sherfey v.
Sherfey, 74 S.W.3d 777, 782 (Ky. App. 2002), overruled on other grounds by
Benet v. Commonwealth, 253 S.W.3d 528 (Ky. 2008) (citations omitted). “[T]he
division of marital . . . debt is within the sound discretion of the trial court and will
not be disturbed unless we find an abuse of discretion.” McGregor v. McGregor,
334 S.W.3d 113, 119 (Ky. App. 2011).
b. Analysis
As a preliminary matter, Clay argues that Donna’s appellate brief
deviates significantly from the format mandated by CR 76.12 and should therefore
be stricken. Our options when an appellate advocate fails to abide by CR 76.12
are: “(1) to ignore the deficiency and proceed with the review; (2) to strike the
brief or its offending portions; or (3) to review the issues raised in the brief for
manifest injustice only[.]” Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky. App. 2010)
(citations omitted). However, because we do not find the deficiencies in the brief
egregious enough to strike Donna’s brief, we decline to strike the brief and proceed
with a review thereof.
-5- Clay first argues that the trial court incorrectly interpreted the Note,
failed to give effect to all the terms contained in the Note, and gave no effect to the
condition which actually occurred – namely, the sale and passage of title of the
Raccoon Trail Property in 2006. Under Kentucky law, “[i]n the absence of
ambiguity a written instrument will be enforced strictly according to its terms, and
a court will interpret the contract’s terms by assigning language its ordinary
meaning and without resort to extrinsic evidence.” Frear v. P.T.A. Industries, Inc.,
Free access — add to your briefcase to read the full text and ask questions with AI
RENDERED: MARCH 5, 2021; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals
NO. 2018-CA-1099-MR
CLAY F. GOTWALT APPELLANT
APPEAL FROM SCOTT CIRCUIT COURT v. HONORABLE LISA HART MORGAN, JUDGE ACTION NO. 15-CI-00115
DONNA F. GOTWALT (now MILLER) APPELLEE
OPINION AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.
CLAYTON, CHIEF JUDGE: Clay F. Gotwalt (“Clay”) appeals from the Scott
Circuit Court’s order finding that a note executed by Clay and his former wife,
Donna F. Gotwalt (now Miller) (“Donna”) during their marriage represented a
valid marital debt. Upon review of the facts and applicable law, we affirm. FACTUAL AND PROCEDURAL BACKGROUND
Clay and Donna married in October of 1997 and resided in Florida
until 2006, at which time they relocated to Kentucky. During the parties’
marriage, and while they were still residing in Florida, Clay and Donna executed a
note on May 11, 2005 (the “Note”). The trustee of the Robert W. Miller Trust (the
“Trust”) signed the Note as the “Lender,” and Clay and Donna signed the Note as
the “Payees.” The Note stated, in pertinent part:
FOR VALUE RECEIVED, the undersigned, (jointly and severally, if more than one) promises to pay to The Robert W. Miller Trust the principal sum of Fifty-Seven Thousand Dollars ($57,000.00).
The said principal shall be payable in lawful money of the United States of America at the address to be determined by the Trust, or at such place as may hereafter be designated by written notice from the Lender to the Payee, on the date and in the manner following:
The full amount of unpaid principal, shall balloon and become immediately and fully due and payable, upon demand by the Trust no sooner than 15 years from the date of payees’ signatures, or upon the sale or passage of title of the property parcel number 09-20-32-301-0210- 0000 located within the town of Geneva, Seminole County, Florida, whichever comes first. If the property is not sold or titled [sic] passed or if demand for repayment is not made by day 1 following the 15 year waiting period this note is to become null and void and repayment is forgiven.
....
-2- This note is secured by a mortgage on real estate, made by the maker hereof in favor of the said payee, and shall be construed and enforced according to the laws of the State of Florida. The terms of said mortgage are by this reference made a part hereof.
Neither the Note nor any mortgage related to the Note was recorded in the state of
Florida.
The record reflects that the $57,000.00 amount loaned by the Trust
was deposited into the parties’ joint bank account and was used by Clay and Donna
to purchase the Seminole County, Florida real property referenced in the Note on
July 29, 2005 for $119,000 (the “Raccoon Trail Property”). Thereafter, in
September of 2006, Clay and Donna sold the Racoon Trail Property to a third-
party purchaser for a purchase price of $133,652.00. The parties ultimately
relocated to Kentucky, where they purchased and began construction in 2008 on a
home in Midway, Kentucky (the “Seagull Lane Property”).
Clay filed a petition for dissolution of marriage in February of 2015,
and the Trust issued a demand for repayment of the loan in September of 2015. In
an order entered on February 14, 2018, the trial court found the Note to be a valid
marital debt owed by the parties and required the parties to repay the Trust the sum
of $57,000.00 from the proceeds of the sale of the Seagull Lane Property.
Specifically, the court found that the Note was “a written instrument, signed by all
parties, stating with specificity the amount owed in terms of the repayment or
-3- termination.” Moreover, the court found that, although the terms of the balloon
payment allowed for repayment upon the sale of the Raccoon Trail Property, it was
not required. It was only if the “demand for repayment [was] not made 1 day
following a 15-year waiting period” that the Note was null and void. Therefore,
the trial court found that, because the Trust made its demand for repayment within
the 15-year waiting period, the Note represented a valid debt. Additionally, the
trial court concluded that the debt was marital in nature, as it was jointly acquired
and used for marital purposes benefitting both parties equally.
Clay filed a motion to alter, amend, or vacate the trial court’s order on
February 23, 2018, which was denied by the trial court on June 27, 2018. This
appeal followed.
ANALYSIS
a. Standard of Review
On appellate review, “[t]he construction and interpretation of a
contract, including questions regarding ambiguity, are questions of law to be
decided by the court.” First Commonwealth Bank of Prestonsburg v. West, 55
S.W.3d 829, 835 (Ky. App. 2000). Accordingly, this Court’s standard of review of
the trial court’s construction and interpretation of the Note is de novo. Id. We
review the trial court’s factual findings under the “clearly erroneous” standard.
Kentucky Rule of Civil Procedure (CR) 52.01; Largent v. Largent, 643 S.W.2d
-4- 261, 263 (Ky. 1982). A factual finding is not clearly erroneous if it is supported by
substantial evidence. Barber v. Bradley, 505 S.W.3d 749, 754 (Ky. 2016).
“‘Substantial evidence’ is evidence of substance and relevant consequence
sufficient to induce conviction in the minds of reasonable people.” Sherfey v.
Sherfey, 74 S.W.3d 777, 782 (Ky. App. 2002), overruled on other grounds by
Benet v. Commonwealth, 253 S.W.3d 528 (Ky. 2008) (citations omitted). “[T]he
division of marital . . . debt is within the sound discretion of the trial court and will
not be disturbed unless we find an abuse of discretion.” McGregor v. McGregor,
334 S.W.3d 113, 119 (Ky. App. 2011).
b. Analysis
As a preliminary matter, Clay argues that Donna’s appellate brief
deviates significantly from the format mandated by CR 76.12 and should therefore
be stricken. Our options when an appellate advocate fails to abide by CR 76.12
are: “(1) to ignore the deficiency and proceed with the review; (2) to strike the
brief or its offending portions; or (3) to review the issues raised in the brief for
manifest injustice only[.]” Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky. App. 2010)
(citations omitted). However, because we do not find the deficiencies in the brief
egregious enough to strike Donna’s brief, we decline to strike the brief and proceed
with a review thereof.
-5- Clay first argues that the trial court incorrectly interpreted the Note,
failed to give effect to all the terms contained in the Note, and gave no effect to the
condition which actually occurred – namely, the sale and passage of title of the
Raccoon Trail Property in 2006. Under Kentucky law, “[i]n the absence of
ambiguity a written instrument will be enforced strictly according to its terms, and
a court will interpret the contract’s terms by assigning language its ordinary
meaning and without resort to extrinsic evidence.” Frear v. P.T.A. Industries, Inc.,
103 S.W.3d 99, 106 (Ky. 2003) (internal quotation marks and citations omitted).
In this case, we do not find the trial court’s interpretation of the Note
to be incorrect. The express terms of the Note deal with two separate
circumstances. The first circumstance involves the conditions under which the full
amount of the unpaid principal becomes due and payable, which is upon the earlier
of three separate and individual events:
(1) the passage of fifteen years from the date the parties signed the instrument; or
(2) the sale of the Raccoon Trail Property; or
(3) the passage of title of the Raccoon Trail Property.
Therefore, although the express terms of the Note allowed the Trust to collect the
full amount of principal upon the sale or title change of the Raccoon Trail
Property, it was not required to do so.
-6- The second circumstance described in the Note involves the
conditions under which the Note becomes “null and void and repayment is
forgiven.” Those two conditions are:
(1) if the Raccoon Trail Property “is not sold or [title] passed;” or
(2) if demand for repayment is not made by day 1 following the 15-year waiting period.
Pursuant to the plain language of the Note, the provisions for debt repayment are
separate from the provisions for debt forgiveness.
In this case, the trial court focused on the provision for debt
forgiveness. The record reflects that the Raccoon Trail Property sold on
September 19, 2006. Therefore, the first condition under which the debt would be
forgiven did not occur. Moreover, the Trust made a demand for repayment on
September 2, 2015. As a result, the second condition under which the debt would
be forgiven did not occur. Therefore, neither of the conditions by which the debt
would be forgiven and the Note would become null and void occurred. “When no
ambiguity exists in the contract, we look only as far as the four corners of the
document to determine the parties’ intentions.” 3D Enterprises Contracting Corp.
v. Louisville and Jefferson County Metropolitan Sewer Dist., 174 S.W.3d 440, 448
(Ky. 2005) (citation omitted). Moreover, “we are not permitted to create an
ambiguity where none exists[.]” West, 55 S.W.3d at 836 (citing Friction Materials
-7- Co., Inc. v. Stinson, 833 S.W.2d 388, 391 (Ky. App. 1992)). In this case,
substantial evidence supported the trial court’s findings of fact, and a de novo
review reveals no error in its conclusion that the Note evidenced a debt owed by
the parties.
As an ancillary matter, Clay raises the issue of whether Florida law
governs the applicable statute of limitations regarding the enforceability of the
Note. The statute of limitations issue would be more proper before the Florida
courts with all parties participating, including the Trust. While Clay already
brought suit in Florida in February of 2016 seeking injunctive relief against the
Trust as well as a determination as to the validity and enforceability of the Note,
the Florida court dismissed the suit based on jurisdictional issues. Therefore, we
decline to address any questions related to the applicability of the Florida statute of
limitations to the Note.
Finally, we find no abuse of discretion in the trial court’s
determination that the debt was marital. In Neidlinger v. Neidlinger, the Kentucky
Supreme Court set forth the following factors which should be considered in
determining if a debt incurred during the marriage is marital and subject to
division. 52 S.W.3d 513, 523 (Ky. 2001), overruled on other grounds by Smith v.
McGill, 556 S.W.3d 552 (Ky. 2018). Such factors are: (1) “receipt of benefits and
extent of participation” of the parties; (2) “whether the debt was incurred to
-8- purchase assets designated as marital property”; (3) “whether the debt was
necessary to provide for the maintenance and support of the family”; and (4) “the
economic circumstances of the parties bearing on their respective abilities to
assume the indebtedness.” Id. (citations omitted).
In this case, the record reflects that the $57,000.00 proceeds from the
loan evidenced by the Note were deposited into the parties’ joint bank account and
benefitted both Clay and Donna in enabling them to purchase the marital Raccoon
Trail Property. Moreover, both Clay and Donna were active participants in both
obtaining the Note and utilizing the proceeds therefrom. Therefore, the trial court
did not abuse its discretion in either designating the debt evidenced by the Note as
marital or in equally dividing such debt between Clay and Donna.
CONCLUSION
For the foregoing reasons, we affirm the Scott Circuit Court’s order.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Michael Davidson Clayton B. Patrick Nam H. Nguyen Frankfort, Kentucky Lexington, Kentucky
-9-