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Earnings From Medical Marijuana Grow Operation Properly Considered “Marital Property”

Posted on Wednesday, December 19, 2018

Earnings from the defendant-husband’s medical marijuana grow operation were correctly included in the parties’ marital estate during their divorce proceedings, the Michigan Court of Appeals has ruled.

As a result, the plaintiff-wife was properly awarded spousal support based on the earnings received from the sale of medical marijuana to qualified patients under the Michigan Medical Marihuana Act (MMMA), MCL 333.26421, et seq., the Court of Appeals held.

In Beauchamp v. Beauchamp (Docket No. 340792, unpublished opinion), the trial court “merely attempted to reach an equitable result in consideration of the unique circumstances of this case,” the Court of Appeals said. “In so doing, the trial court fashioned a spousal support award designed to balance the entirety of the parties’ incomes and needs in a just and reasonable manner.”

The defendant had basically argued the marijuana grow operation should not have been considered marital property. “We disagree,” the Court of Appeals wrote. “In this case, defendant began the marijuana grow operation during the marriage, using funds earned during the marriage. Accordingly, the marijuana grow operation and any income received from sales of marijuana products that occurred during the marriage were appropriately deemed marital property.”

Business Earnings

The defendant’s primary occupation was operating his own drywall business. However, the defendant was diagnosed with cancer in 2014 and was unable to work full time. As a result, he began to rely on earnings from his medical marijuana grow operation. The defendant was a registered caregiver for five qualified patients under the MMMA (although the plaintiff suspected he was selling marijuana to others, too).

The plaintiff filed for divorce in 2016 and requested $2,500 per month in spousal support. During the divorce proceedings, the trial court ordered that the marijuana grow operation be included in the marital assets. The trial court’s rationale for doing so was that the defendant began the operation during the marriage and used money earned during the marriage to start the operation.

For purposes of spousal support, the trial court also held the defendant’s income was a combination of his average income from both the drywall business and the marijuana growing operation. The trial court concluded that, between 2015 and 2017, the defendant earned $15,300 annually from the drywall business and $120,000 annually from the grow operation.

Upon calculating the value of the marital assets, the trial court awarded the marijuana grow operation to the defendant. Then, after considering “the length of the marriage, the ability of the parties to work, their conduct during the marriage, their needs and abilities, fault, the amount of property awarded, and the general principles of equity,” the trial court awarded the plaintiff $1,900 in monthly spousal support.

The defendant appealed. He claimed the trial court wrongly considered the income he received from the marijuana grow operation when calculating spousal support. He also asserted the trial court erred in considering the grow operation (i.e., the marijuana plants) as marital property.

The Court of Appeals disagreed with the defendant’s arguments and affirmed the trial court’s rulings.

Spousal Support Calculation

In its opinion, the Court of Appeals first examined the spousal support award. The panel explained that MCL 552.23(1) “contemplates a case-by-case approach” when determining spousal support and “all relevant factors” must be considered.

The defendant claimed he could not legally profit from the grow and sale of marijuana under the MMMA. “The essence of defendant’s argument is that the trial court effectively required him to participate in illegal activities in order to meet his spousal support obligations,” the Court of Appeals said. “On this point, we disagree. The instant case does not involve a situation, as defendant argues, where the trial court has effectively ordered him to engage in unlawful activities. Indeed, the legality of defendant’s annual earnings is entirely irrelevant.”

The Court of Appeals pointed out the defendant was not tried for illegal marijuana sales or for any crimes at all. “The trial court did not make specific findings of fact indicating that defendant was necessarily engaged in any criminal enterprise. Instead, the trial court merely attempted to reach an equitable result in consideration of the unique circumstances of this case. In so doing, the trial court fashioned a spousal support award designed to balance the entirety of the parties’ incomes and needs in a just and reasonable manner.”

According to the Court of Appeals, evidence showed the defendant received income from the marijuana grow operation “far in excess” of the earnings from his drywall business. “Defendant has cited no authority in support of the proposition that such income cannot be considered in spousal support calculations simply because it may have been acquired via unlawful means.”

The Court of Appeals also rejected the defendant’s claim that the trial court could not have determined he was receiving income from marijuana sales because he repeatedly testified that he was not making any profit from such exchanges. The defendant “acknowledged that he could not ensure that the money received from his qualified patients perfectly offset the cost of maintaining his marijuana grow operation in any given year,” the panel wrote. “Defendant’s frustration that the trial court weighed the evidence presented in a manner inconsistent with his own analysis is not a sound basis for asserting error. … The trial court did not err in concluding that defendant’s monthly income was sufficient to allow him to pay $1,900 per month to plaintiff in spousal support.”

Division Of Marital Property

As for dividing the marital assets, the defendant argued the marijuana grow operation should not have been considered marital property.

“We disagree,” the Court of Appeals stated. “In this case, defendant began the marijuana grow operation during the marriage, using funds earned during the marriage. Accordingly, the marijuana grow operation and any income received from sales of marijuana products that occurred during the marriage were appropriately deemed marital property. … Moreover, defendant has made no showing that the division of the marital estate was inequitable in any way.”

The Court of Appeals further rejected the defendant’s claim that the marijuana grow operation had no value because, in the end, profits are not permitted under the MMMA. “Given defendant’s history of sales producing a profit, along with [the] appraisal and the debt connected to the line of credit, the trial court did not err in valuing the marijuana grow operation.”

In conclusion, the Court of Appeals denounced the defendant’s assertion that, if the marijuana grow operation did possess value greater than the costs associated with its maintenance, then the value of the marijuana plants was a form of income that would not be subject to division as part of the marital estate. “Issues pertaining to the income that defendant earned after the judgment of divorce was issued would be more appropriately assessed under spousal support law, and not the rules governing the division of the marital estate,” the Court of Appeals wrote. “[T]he trial court did not abuse its discretion when it included income that defendant earned from marijuana sales in the calculation of spousal support. … Instead, the court simply treated the marijuana grow operation or existing 17 marijuana plants as a present marital asset. And again, the trial court awarded the marijuana grow operation to defendant.”

Accordingly, the Court of Appeals found that “reversal is unwarranted” and affirmed the trial court’s decision.

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