Case Title: Mark Brown v. Laura Brown

Citation: 

Docket Number: 07-994

State: arkansas

Court: Arkansas Supreme Court

Date: 2008-05-01T00:00:00Z

Document:
SUPREME COURT OF ARKANSAS

Ne. 07-994

    
   
 
  
  
   
 

MARK BROWN, Opinion Detivered May 1, 2008
APPELLANT,
APPEAL FROM THE UNION
vs. COUNTY CIRCUIT COURT,
NO. DR-05-766-6,
LAURA BROWN, HON, DAVID FREDERIC GUTHRIE,

JUDGE,

AEEIRMED.

ANNABELLE CLINTON IMBER, Associate Justice

Appellant Mark Brown appeals from an order of the Union County Circuit Court,
which divided marital property and set child support. He cites the following four points
where the circuit court erred: 1) in determining the amount of child support when it
considered the income attributable to Mark ina limited partnership; 2) in considering Mark's
interest in the limited partnership to justify an unequal division of marital property; 3) in
finding that the increase in value of the limited partnership's stock brokerage accounts was
marital property; and 4) in finding that two residences were marital property, Because this

appeal presents issues of first impression and of significant publi

 

terest, our jurisdiction is
pursuant to Ark. Sup. Ct. R. 1-2(6)(1) & (4) (2007). We find no error and affirm,
‘Mark and Laura Brown were married in September of 1986 and separated in July of

2005. Laura sought a divorce from Mark on the grounds that they had been living separate
and apart for eighteen continuous months. Following 2 tral, the circuit court entered a
decree of divorce, granting temporary custody of the two minor children to Laura, setting
temporary child support at $250 per week, and taking all issues of property division under
advisement until such time as postrial brief were submitted. A letter opinion confirmed by
final decree granted custody ofthe children to Laura and ordered Mark to pay child support
in the amount of $384 per week, based on his two-year average income. ‘The circuit court
determined that the increase in value of Mark's inheritance from his father, which was
‘maintained ina limited partnership with Mark's mother, was marital property. The court also
found thatthe marital residence and another piece of real estate, both of whiek his mother had
helped to purchase with funds from the limited partnership, were marital property. Because
‘Mark’sonmartal estate was valued at $3,032,703, while Lauras was valued at only $306,780,
the court found an unequal division ofthe marital property to be appropriate. Mark filed a
timely notice of appeal!

‘The limited partnership at ise in this appeal was formed in 1995 under the laws of
the State of Louisiana. Mark's father, George A. Brown, had eamed considerable income as
the owner of cocktail lounges, liquor store, and commercial real estate. He died in 1990 and
had bequeathed to Mark, his only child, all property owned at his death, with the exception
of the marital home and certain furnishings within it and his wife's one-half share of their
community property estate. George A. Brown's will noted that Mark's inheritance was

“subject to the usuffuct heretofore granted to my wife, Billie Jean Brown[,]” Mark and his

"Laura filed a notice of cross-appeal but has since abandoned her argument.

 

 
‘mother, Billie Brown, created the G.A. Brown Properties Limited Partnership after George
‘A. Brown's death, for the purpose of managing the estate

Billie Brown was the sole general partner and was also a Class A limited partner; Mark
‘was a Class B limited partner. Each owned 2 fifty percent partnership interest. Mark
contributed tothe partnership the property he had inherited from his father, and Billie Brown
contributed her one-half share of the community property estate. The partnership agreement
contained the following provision:

Mark S. Brown specifically acknowledges that pursuant to the Judgment of

Possession rendered by the First Judicial District Court, Caddo Parish,

Louisiana in the Succession of George A. Brown on August 25, 1993, as

amended by said Court on November 12, 1993, the property which’ he

contributes to this Partnership is subject to 2 usuffuct in favor of his mother

Billie J, Brown and that such usufruct attaches to and continues over the Class

B Limited Partnership interest which he receives in exchange for such property

‘on the same terms and conditions as the usuffuct over the contributed property

itself]

According to the agreement, the partnership's profits and losses were to be allocated

ified

 

proportionately between the partners, according to their partnership interests. Mark:
that his mother had discretion as to whether to share the partnership's income with him. He
stated that his mother had gifted certain amounts of money to him from the partnership's
assets, but that he had not received income from the partnership. An accountant testified,
however, that Mark's mother had the option to “yield” the usuffuct with respect to properties
in the partnership that had been changed fom their original form. Ifthe property was no
longer part of the original corpus, Billie Brown could allocate a portion of its income to her

son, provided that he was willing to accept the income and to pay taxes on it. According to

 
the accountants testimony, Billie Brown had in the past chosen to allocate certain income to
‘Mark, and he had accepted the income.

‘The marital residence was purchased with funds provided by Mark’s mother from the
G.A. Brown Properties Limited Partnership. Testimony by the parties and by Mark's mother
indicated that the home was intended to be a gift. Mark and Laura later acquired a mortgage
‘on the house to pay for an addition. Payments on the note were made by Mark and Laura.

The other property at issue, known as the West Oak Street property, was purchased
‘asa home for Mark's mother, who at one point intended to relocate to El Dorado from her
former home in Shreveport, Louisiana. The funds for the down payment on the property and
forsome, ifnot al, of the mortgage payments came from the G.A. Brown Properties Limited
Partnership. For estate-tax purposes, however, the property was titled jointly in the names
‘of Mark and Laura, At the time of tril, Mark’s mother had not yet moved into the home,
and Mark was residing there. While Laura agreed thatthe purpose of purchasing the property
‘was to provide a home for Mark's mother, she contended that she had an interest in the
property, as it was titled in her name along with Mark's,

1. Child Support

For his first point on appeal, Mark argues that it was error for the circuit court to
consider his income from the limited partnership in determining the appropriate amount of
child support, because that income was not available for his use. He contends that the
usuffuct in fivor of his mother prevented him from realizing any income from the partnership

and that the only distribusions made to him were provided so that he could pay taxes on the

 
income attributed to him,
(Our standard of review for an appeal from a child-support order is denove, and we will

not reverse a finding of fact by the circuit court unless it is clearly erroneous. Hardy .

 

Wilboune, 370 Ark. 359, __S.W.3d__ (2007). In reviewing a circuit cour’s findings, we
give due deference to that cour’s superior position to determine the credibility of the
witnesses and the weight to be accorded to their testimony. Id However, a circuit court's
conclusion of law is given no deference on appeal. Id

In determining an appropriate amount of child support, courts are to referto the family
support chart contained in our Administrative Order Number 10. See Ark. Code Ann, § 9-
12-312(a)(2) (Repl. 2008). ‘The family support chart provides a means of calculating child
support based on the payor’s net income. Administrative Order Number 10 defines income
as “any form of payment, periodic or otherwise, due to an individual, regardless of source,
including wages, salaries, commissions, bonuses, workers’ compensation, disability, payiments

pursuant to a pension or retirement program, and interest less proper deductions"

 

Administrative Order No. 10, section II. It is well established that this definition of income
is broadly construed, intended to encompass the widest range of potential income sources.
Davis v. Office of Child Support Enforcement, 341 Ark. 349, 20 S.W.3d 273 (2000); White v
White, 95 Ark, App. 274, 236 S.W.3d 540 (2006). The administrative order also states that

for self-employed payors, support isto be calculated based on the last two years’ federal and

 
state income tax returns and the quarterly estimates for the current year.’ Administrative
Order No. 10, section III(c)

‘The circuit court in the instant case calculated Mark's child-support obligation based
‘upon the income reported on his 2004 and 2005 tax returns. Thus, pursuant to the
administrative order and its broad definition of income, the calculation was correct. We ate
‘unconvinced by Mark's argument that his income from the partnership should not have been
considered because it wasnot realized. The administrative order does not distinguish between
realized and recognized income, While our court of appeals has cautioned that income for
child-support purposes may differ from income for tax purposes, the cases articulating a
difference have done so only when the circuit court disallowed depreciation deductions or
recognized gain as income upon the sale or disposition of property. See White v. White, supra;
Brown v. Brown, 76 Ark. App. 494, 68 S.W.3d 316 (2002); Stepp v. Gray, 58 Ark. App. 229,
‘947 S.W.24 798 (1997),

Moreover, the administrative order instructs that the court should also consider “the

 

amount the payor is capable of earning or a net worth approach based on property, life-style,
etc.” Administrative Order No, 10, section III(e). We affirmed the use of the net-worth
approach for child-suppost determinations in Tucker. Office of Child Support Enforcement, 368

Ark, 481, __S.W.3d __(2007)._ It is clear chat Mark’s ownership interest in the G.A.

The panies do not dispute the contention that Matk a elemployed payor. He was,
employed athe time of trial aan analyst with El Dorado Chemis, where he eared
spproximately $40,000 per year. However, the occupation fed on his 2004 and 2005 eax
eturns wat “managerinvetment.”” His tetimony eal confined that he considered hinsel co
bbe a manager-investor, with that being his primary occupation throughout the mariage

6
Brown Properties Limited Partnership is a significant portion of his net worth; thus, that
ownership interest would be 2 proper consideration. In the instant case, we cannot say that
the circuit court clearly erred in finding that Matk’s income for child-support purposes was
that reflected on his tax returns,

HL, Unequal Division of Marital Property

For his second point on appeal, Mark contends that it was error for the circuit court
‘to consider his interest inthe limited partnership in determining that an unequal division of
the marital property was appropriate. He argues that, due to the usufruct in favor of his
‘mother, the property in the partnership has no present value, and perhaps even no future
value, to him.

‘With respect to the division of property in a divorce case, we review the chancellor's
findings of fict and affirm them unless they are clearly erroneous or against the preponderance
of the evidence. Conlee v. Conlee, 370 Ark, 89, S:W.34 __ (2007). The division of
property itself is also reviewed, and the same standard applies. Id, A finding is clearly
erroneous when the reviewing court, on the entire evidence, is eft with the definite and firm
conviction that a mistake has been committed. Id. In order to demonstrate that the
‘chancellor's ruling was erroncous, an appellant must show that the tral court abused its
‘discretion by making a decision that was arbitrary or groundless, Id, We give due deference
to the chancellor's superior position to determine the credibility of witnesses and the weight
to be given their testimony. Id

A circuit court has discretion to consider the partes’ potential opportunities for further

 
acquisition of property when determining the appropriate division of marital asets. At the
time a divorce decree is entered, all marital property is to be distributed one-half to each
party, unless the court finds such a division to be inequitable, Ark. Code Ann, § 9-12-
315(a)(1)(A) (Repl. 2008). In that event, the court is to make some other division that the
court deems equitable, taking into consideration several factors: the length of the marriage;
age, health, and station in life of the partes; occupation of the parties; amount and sources of
income; vocational skill; employability; estate, lubilities, and needs of each party and
‘opportunity of each for further acquisition of capital assets and income; contribution of each
party in acquisition, preservation, or appreciation of marital property, including services as a
homemaker; and the federal income tax consequences of the cour’s division of property. Id.
Clearly, in reaching a determination as to the equitable division of marital property under this
statute, the circuit court was free to consider Mark’s interest in the G.A. Brown Properties
Limited Partnership, and his opportunity to double the size of his estate upon the death of his
‘mother. The limitation on Mark's interest in the partnership, in the form of the usufruct, is
‘of no relevance, as the opportunity to add to his estate is a proper consideration.

In addition, Mark has received some present value from the partnership. He testified
to routine distributions from the partnership since its inception, noting specifically two pieces
of ral estate; a boat, motor, and trailer; vacations; gas for his vehicle; and cellular telephone
service. Therefore, his contention that his interest in the partnership should have been
ignored by the court because it had no present value to him is unavailing.

Likewise, his claim thatthe partnership may have no fature value to him is without

 
‘merit. Under Louisiana law, Mark will receive the value of his contribution to the
partnership at the termination of the usuffuct, which will occur at the time of his mother’s
remarriage or death. The Louisiana Civil Code defines consumable things as things “that
‘cannot be used without being expended or consumed, or without their substance being
‘changed, such 2s money, harvested agricultural products, stocks of merchandise, foodstulls,
and beverages.” La. Civ. Code Art. 536. With respect to consumables subject to a usuftuct,
the usufuctuary becomes the owner ofthem. La. Civ. Code Art. 538. Thus, Mark's mother
“may consume, alienate, or encumber them as [s}he sees fit.” Id. However, at the
termination of the usufiuct, she is “bound to pay to the naked owner either the valte thatthe
things had at the commencement ofthe usufruct or deliver to him things ofthe same quantity
and quality.” Id.

Conversely, nonconsumable things are defined as things “that may be enjoyed without
akeration of their substance, although their substance may be diminished or deteriorated
naturally by time or by the use to which they are applied, such as lands, houses, shares of
stock, animals, furniture, and vehicles." La. Civ, Code Art. 537. With respect to
nonconsumable things subject to a usufruct, “the usufructuary has the right to possess them
and to derive the utility, profits, and advantages that they may produce, under the obligation
Of preserving their substance.” La, Civ. Code Art. 539, However, as the usufructuary,
‘Mark's mother is “bound to use them as a prudent administrator and to deliver them to the
raked owner at the termination of the usuffuct.”. Id

‘Mark will receive value from his interest in the limited partnership at the time of his,

 
‘mother’s remarriage or death. He has already been the recipient of distributions from the

partnership. Therefore, the circuit court did not err in considering his partnership

 

determining that an unequal division of the marital property was appropriate.
IL Irease im Velue of Partnership Interest

For his third point on appeal, Mark contends thatthe increase in value of the limited
partnerships stock brokerage accounts is hs separate property. Hie also argues thatthe circuit
court erred in failing to set forth its reasons for awarding the increase in value of those
accounts to him in the division ofthe marital assets

‘The definition of marital property excludes property “acquired prior to marriage orby
‘ft orby reason of the death of another, including, but not limited to, life insurance proceeds,
payments made under a deferred compensation plan, or an individual retirement account, and
property acquited by right of survivorship, by a tust distribution, by bequest or inheritance,
oor by a payable on death or a transfer on death arrangement{]” Atk. Code Ann, § 9-12-
315(b)(1). Under this exclusion, Matk’s interest in the G.A. Brown Properties Limited
Partnership, which he received by inheritance, was properly deemed nonmarital property,
‘The definition of marital property also excludes the “increase in value of property acquired
prior to marriage orby gift or by reason of the death of another” Ark. Code Ann. § 9-12-
31505).

(Our case law has articulated an exception to this rule for the active appreciation of
nonmarital assets. In Layman v. Layman, 292 Ark. 539, 543, 731 S.W.24 771, 774 (1987), we

held that “when one spouse makes significant contributions of time, effort and skill which are

10.
directly atributable to the increase in value of nonmarital property the presumption arises
that such increase belongs to the marital estate.” We affirmed this rule under the current
version of the statute in Farell v. Farell, 365 Ark, 465, 476, 231 S.W.3d 619, 627 (2006),
‘wherein we stated that “we follow an ‘active appreciation’ analysis in determining if one
spouse's efforts significantly contributed to the increase in value of nonmatital assets[” In
accordance with these decisions, the circuit court in the instant case did not err in determining
that the increase in value of the nonmarital accounts was marital property. By Mark’s own
admission, he expended considerable time and effort during the marriage managing and
investing the assets of the partnership.

Mark nonetheless contends that the Fanell decision is inapplicable here because the
Farell court did not decide whether the increase in value of the stocks at isue was marital or
nonmarital property. We disagree. This court, in addressing the issues on cross-appeal, held
that the trial court “correctly concluded thatthe increase in value of the nonmarital stock was
due in large part to Ms, Farrell's efforts. As we follow an ‘active appreciation’ analysis... we
cannot say thatthe trial court erred in finding that the increase in value was a marital asset.”
1d, at 476, 231 S.W.3d at 627. In short, the Farell decision supports the circuit court's
conclusion in the instant cae that Mark's efforts, which resulted in the increase in value of the
accounts, caused the inerease to be classified as marital property

We also fail to see any merit in Mark's argument that the circuit court filed to set
forth its reasons for awarding him the increase in value of the accounts, It is true chat the

circuit court is required to state its basis and reasons for not dividing the marital property
equally between the partes, and that the basis and reasons should be recited in the order. Ark,
Code Ann. § 9-12-315(2)1)(B). The circuit court isnot required to lst each factor in the
order or to weigh al fctors equally. Hemandez v. Hemandex, 371 Ark. 323, _S.W.34d__
(2007). Furthermore, the specific enumeration of the factors within the statute does not
preclude a circuit court from considering other relevant factors, where exclusion of other
factors would lead to absurd results or deny the intent of the legislature to allow for the
equitable division of property. Id

‘The statute does not require thatthe circuit court ls its basis and reasons regarding
cach individual piece of marital property. Instead, it “must state its basis and reasons for not
dividing the marital property equally between the parties[” Ark. Code Ann. § 9-12-
315(@)(1)(B). We have never required the circuit court to state individual reasons for each
piece of property. Moreover, the circuit court in the instant case sufficiently set forth its
reasons for determining that an equal division of the marital property was inappropriate:

ACA. §9-12-315 sets forth the factors to consider in an unequal division of
property. In this case the parties have been married 20 years, are in the 40s
(Plaintiff, 43; Defendant, 45); in good health and have an affluent lifestyle

PhincitVs the corporate credit manager for Murphy Oil Corporation with a
salary and bonuses of approximately $90,000. Defendant is lab analyst for El
Dorado Chemical Company with asilary of $41,598. In addition, Defendant
‘manages his investments which produced $70,322 in earings and capital gains
for 2005. Each party has above average vocational skills as a resule of their
‘education and work experience and should maintain stable employment at the
present or ahigherlevel. The factor which weighs most heavily inthe decision
for an unequal division of the marital property isthe size ofthe estate and the
‘opportunity of each party to increase their estate, The value of Plant's
nonmarital estate is $306,780 while Defendant's is $3,032,703. Defendant's
‘tate could double in value with an inheritance from his mother. ‘There was
no evidence of any possibilty of a similar inheritance by Plaintiff, Plaintiff's
retiement plans will have to arise from her continued employment.

 

“n-
Defendant’ retirement plans can be satisfied from his present estate. From the
consideration of the statutory factors, I find that an unequal division of marital
Property is appropriate.

IV, Real Estate
For his final point on appeal, Mark argues that the circuit court erred in its disposition

‘ofboth the marital residence and the West Oak Street property. With respect to the marital

residence, he contends thatthe circuit court should have either divided it equally or set forth

its reasons for refusing to do so. With respect to the West Oak Street property, he argues that

a purchase-money resulting trust was established in favor of Billie Brown and that the

property therefore should not have been considered in the division of marital property.

1. Marital Residence
Mark relies on Ark. Code Ann. § 9-12-317 (Repl. 2008) for the proposition that

“entirety property” is not marital property and that it isto be divided equally between the

parties unless the court finds that an equal division would be inequitable, in which case the

‘court must use the criteria set forth in Ark. Code Ann. § 9-12-315 to distribute the property.

[He contends that the marital residence was entirety property that should have been divided

equally, rather than granted to his wife in the court's unequal division of the marital assets.

However, section 9-12-317 actually says that estates by the entirety or by survivorship held

by parties to a divorce are automatically dissolved upon divorce, unless a court order

specifically provides otherwise. Ark. Code Ann. § 9-12-317(2). The patties are to be treated
thereafier as tenants in common. Id, The statute also provides that when a court “dissolves

estates by the entirety or survivorship in real or personal property under this section, the court

Ee
ay distribute the property 2s provided in § 9-12-315. ‘The court shall et forth its reasons
in writing in the decree for making an other than equal distribution to each party, when all
the property is considered together, taking into account the fictors enumerated in § 9-12-
315(@)(1).” Ark. Code Ann. § 9-12-317(0)

‘The marital residence was owned by Mark and Laura as tenants by the entirety. ‘Thus,
the circuit court had the option of disposing of the property in the manner required for the
distribution of marital property, that is, one-half to each party unless such a division would
be inequitable, The circuit court adequately set forth its reasons for the unequal division of
the property, as outlined earlier in this opinion. The court was not required to provide
reasons specific to the marital residence, but rather to provide reasons for the unequal division
“when all the property is considered together[.]” Ark. Code Ann. § 9-12-317(¢). Thus, the
court fulfilled its obligation to supply its reasoning.

2. West Oak Steet Property

Matk r

 

ls on this court's opinion in Eduurds v. Eiluands, 311 Ark. 339, 843 S.W.2d
£846 (1992), in support of his argument that Billie Brown owned a purchase-money resulting
trust in the West Oak Street property. As we stated in Edwards, a resulting trust arises where
‘one disposes of property under circumstances that raise an inference that he or she docs not
intend that the putative grantee should have the beneficial interest in the property. Id
Instead, the inference is that the transferor intends to transfer only bate legal title. HM. A
resulting trust arises in favor of the person who transfers the property or causes it to be

transferred. Id. More specifically, a purchase-money resulting trust “arises where property

 
is purchased and the purchase price is paid by one person and at his/her direction the vendor
converts the property to another person.” Id. at 343, 843 $.W.2d at 849.

‘We stated in Edwards that when a grantor directs that the property be conveyed to a
third party who is a stranger, there is presumption that there has been no gift to the third
party but a conveyance of the property to be held in trust for the grantor. Id. “If, however,
the third party stands in such relationship to the party furnishing the purchase money as to be
the natural object of his/her bounty, things get more complicated, as 2 gift may have been
intended.” Id. at 344, 843 S.W.2d at 849 (citing G.G, Bogert and G.T. Bogert, The Law of
‘Trusts and Trustees § 459 (2d ed, 1991)). Generally, a resulting trust must be proven by clear
and convincing evidence. Id. In situations involving third partes who are the natural objects
‘of the grantor’s bounty, the presumption of a gift must be overcome by clear and convincing
proof that no such gift was intended. Id, We stated the following in Edwards:

Where a motheris the payor and a child is made the grantee, with the mother’s

consent, the courts have not been entirely unanimous in their application of

presumption. Most decisions, however, treat the ease inthe same way as where

the father pays the price, and presume a gif, whether the child be an adult oF

an infant... . Gifs from her to her children, out of mere generosity or for the

purpose of distributing her estate at the end of her life, are quite natural and
1M, at 345, 843 S.W.2d at 849 (quoting Bogert, supra, § 460, at 360-365) (emphasis in
original.

In the instant case, the testimony indicated that the West Oak Street property was

tiled in Mark’s and Laura's names in order to avoid estate taxes. As contemplated in the

Bogert treatise, Mark's mother made a gift to her child “for the purpose of distributing her

“1s.
‘state at the end of her life” 1d. Moreover, Mark testified thatthe property was placed in
his and his wife's names “justso it wouldn't be an esate. Ifmother pases away, we wouldn't
hhave that 28 a tax consequence. It woul already be ours.” This testimony suggests that Billie
Brown intended for her son and his wife to have a beneficial interest in the property, subject
only to her use of it during her lifetime, In addition, Mark was residing in the West Oak
Street house at the time of trial, and his mother was not, indicating a beneficial interest in
Mark’ favor. Finally, Billie Brown testified as follows, when asked about her intentions with
respect to the West Oak Street property: “[I]nstead of paying cash frit like T usually do

everything else I decided I was going to get some interest, you know, and I thought it might

 

as well go to him so I went ahead and just put it in his name, but I'm paying fori.” Again,
the evidence suggests an intention on the part of Billie Brown to grant her son a beneficial
interest in the property. Thus, the presumption of gift has not been overcome by clear and
convincing proof, and no purchase-money resulting trust arose. The property was correctly

deemed marital property.

Affirmed.

16