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Trial Court Did Not Make Required Findings When Valuing Marital Estate

Posted on Wednesday, December 11, 2019

Although two assets in this divorce action were properly allocated to the ex-husband without including their value in the marital estate, the trial court did not make any of the required valuation findings and, therefore, it could not be determined whether the trial court equitably divided the marital estate, the Michigan Court of Appeals ruled in Ripley v Ripley.

The ex-wife in Ripley (Docket No. 327285) argued the trial court wrongly allocated two assets to the defendant – the accounts receivable at his law firm and a GTO – without first including their value in the marital estate. The ex-wife also claimed the trial court’s overall division of the marital estate was inequitable.

“Although the trial court stated that it considered the Sparks [v Sparks, 440 Mich 141 (1992)] factors in the distribution of the marital estate, it made no findings regarding them,” the Court of Appeals held. “Because a trial court’s distribution is intimately related to its findings of fact … and because the trial court made no findings on the Sparks factors, we are unable at this time to effectively review the fairness of the trial court’s distribution.”

Accordingly, “we remand so that the trial court can make findings on the Sparks factors and state those findings on the record,” the Court of Appeals said. “On remand, the trial court may, but need not, change the debts assigned or the assets awarded to plaintiff and defendant or the value of any debt or asset.”

The Court of Appeals further held the trial court applied the incorrect analysis when denying the plaintiff’s request for attorney fees and, as a result, remanded for a new fee determination.

Judges Christopher M. Murray, David H. Sawyer and Patrick M. Meter were on the appellate panel that issued the opinion.

Asset Allocation

On appeal, the plaintiff ex-wife claimed the trial court erred in valuing the defendant’s accounts receivable at his law firm, Liggett & Ripley, PLC, at $0.

“A trial exhibit, which had been prepared by defendant, showed that defendant’s accounts receivable totaled $40,982.92,” the Court of Appeals said. “According to the exhibit, defendant would ‘probably never see’ $15,274.20. A ‘realistic’ amount that he could collect was $25,711.72.”

At trial, however, the defendant testified that he would not be able to collect on any of these accounts receivable. “He had been bugging those clients ‘forever,’ and they did not have the money to pay,” the Court of Appeals noted. “When it divided the marital estate, the trial court stated that it was not giving any value to the accounts receivable. It further explained, when it denied plaintiff’s motion for reconsideration, that it believed defendant’s testimony over the exhibit. We give special deference to a trial court’s findings when they are based on the credibility of witnesses. … Because the trial court found defendant’s testimony that he was unlikely to collect on the accounts receivable credible, we are not left with a definite and firm conviction that the trial court make a mistake in finding that the accounts receivable had no value.” Therefore, “[w]e affirm the trial court’s valuation of the accounts receivable.”

The plaintiff also argued the trial court erred by not including the value of the defendant’s GTO in the assets that it awarded the defendant. “This failure by the trial court does not make any difference in the case,” the Court of Appeals wrote. “Plaintiff and defendant stipulated that the value of the GTO was $54,363, and this stipulation was binding on the trial court.”

According to the Court of Appeals, the trial court found the amount of the GTO loan was $30,465. “The trial court specifically assigned the GTO’s debt, but not its value, to defendant. Regardless, it is clear from the trial court’s statements that it awarded the GTO’s entire value to defendant. Accordingly, defendant’s share of the marital estate included the value of the GTO. And, in analyzing plaintiff’s next argument that the trial court’s distribution of the marital estate was inequitable, we will include the GTO’s value in the share given to defendant.”

Inequitable Distribution?

Next, the Court of Appeals addressed the plaintiff’s argument that the division of the marital estate was inequitable. In doing so, the Court of Appeals noted the goal in divorce proceedings is to reach an equitable distribution of the marital property in light of all the circumstances. “A trial court need not divide the marital estate into mathematically equal portions, but an equitable distribution of the marital estate means that the division will be roughly congruent. … Any significant departure from congruence must be clearly explained.”

According to the Court of Appeals, under Sparks, various factors must be considered when allocating marital assets in a divorce action: 1) duration of the marriage; 2) contributions of the parties to the marital estate; 3) age of the parties; 4) health of the parties; 5) life status of the parties; 6) necessities and circumstances of the parties; 7) earning abilities of the parties; 8) past relations and conduct of the parties; and 9) general principles of equity.

Here, the trial court divided the parties’ liabilities. The trial court assigned various debts to the plaintiff, including several credit card bills, a doctor bill, a loan and a bank line of credit. The total amount of debt assigned to the plaintiff was $136,361. Meanwhile, the trial court assigned numerous debts to the defendant, including several loans (personal loans, student loans and business loans), credit card bills and a bank line of credit. The total amount of debt assigned to the defendant was $236,816. Based on this, the trial court ordered the marital home be sold and the proceeds, following payment of the two mortgages, be split between the plaintiff, who was to receive 40 percent, and the defendant, who was to receive 60 percent. “If the marital home sold for the appraised value of $470,000, the proceeds be split by the parties would be $92,280,” the Court of Appeals observed.

The trial court further ordered that numerous assets be sold with the profits split 40/60 between the plaintiff and the defendant, including vacant land owned by Liggett & Ripley, an automobile, recreational vehicles and a boat. The trial court also ordered that a Chevrolet Suburban be sold, although the parties did not stipulate to a value of the Suburban nor did the trial court give it a value. “Additionally, the trial court ordered that the parties split 109 personal property items and that any of the items on which the parties could not agree be sold,” the Court of Appeals explained. “Plaintiff’s 40% share of the assets to be sold was $73,721, while defendant’s 60% share was $110,580.”

Meanwhile, the parties were permitted to keep certain assets, the Court of Appeals observed. The plaintiff was allowed to keep an IRA and a life insurance policy, while the defendant was permitted to keep an IRA, two life insurance policies of minimal value, the law firm’s office building and office furniture, a business bank account and the GTO.

In addition, the trial court ordered that two credit union accounts be split, with the plaintiff receiving 40 percent and the defendant receiving 60 percent. “Additionally, the trial court allowed the parties to keep their vehicles,” the Court of Appeals said. “Plaintiff kept a 2002 Mercedes, while defendant kept a 2006 Jeep. The parties did not stipulate to values of these two vehicles, nor did the trial court place values on them.”

The total of the assets kept by the plaintiff was $6,221, while the total assets kept by the defendant was $149,431. “Not including the three vehicles for which the trial court did not give a value and the 109 personal property items that could potentially be sold, the total amount of the assets of the marital estate, both retained and sold, was $339,953,” the Court of Appeals observed. “The total amount of the parties’ debt was $373,177. Thus, the marital estate had a value of ($33,224). Plaintiff was assigned $136,361 in debt, while receiving assets worth $79,942. Her share of the marital estate had a value of ($56,419). Defendant was assigned $236,816 in debt, while receiving assets worth $260,011. His share of the marital estate was $23,195. This distribution is a significant departure from rough congruence.”

Even though the trial court asserted that it considered the Sparks factors when distributing the marital estate, “it made no findings regarding them,” the Court of Appeals stated. “Because a trial court’s distribution is intimately related to its findings of fact … and because the trial court made no findings on the Sparks factors, we are unable at this time to effectively review the fairness of the trial court’s distribution. … Accordingly, we remand so that the trial court can make findings on the Sparks factors and state those findings on the record. On remand, the trial court may, but need not, change the debts assigned or the assets awarded to plaintiff and defendant or the value of any debt or asset.”

Attorney Fees

The plaintiff also argued the trial court erred in denying her request for attorney fees.

Addressing this claim, the Court of Appeals cited MCR 3.206(C)(1) and noted that, in a divorce action, a party may request the trial court order the opposing party to pay all or part of the attorney fees and expenses related to the action. “As relevant to this case, a party who requests attorney fees and expenses must allege facts sufficient to show that ‘the other party is unable to bear the expense of the action, and that the other party is able to pay. … Attorney fees should be awarded ‘only as necessary to enable a party to prosecute or defend a suit.’ … Whether a party has an inability to pay is dependent on ‘the particular facts and circumstances of each case.’”

Here, the trial court erred by applying the wrong analysis when it denied the plaintiff’s request for attorney fees, the Court of Appeals said. “First, contrary to caselaw, … the trial court treated as dispositive the fact that plaintiff’s income was greater than her attorney fees. Second, the trial court stated that no caselaw required it to consider plaintiff’s debt.”

However, a party’s inability to pay depends on the “’particular facts and circumstances’ of the case, and consideration must be given to the ‘specific financial situations of the parties,’” the Court of Appeals explained. “The ‘specific financial situations of the parties’ includes the debt held by them.”

Because the trial court applied the wrong analysis when deciding the plaintiff’s request for attorney fees, “we reverse the trial court’s decision denying the request and remand for a new determination,” the Court of Appeals ruled. “On remand, the trial court must give ‘special consideration to the specific financial situations of the parties’ to determine whether plaintiff is unable to bear the expense of the divorce action and whether defendant is able to pay.”

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