Court Opinion

ID: 826266
Source: CourtListenerOpinion
Date Created: 2013-03-01 19:55:58.874006+00
Date Added: 2024-06-11T15:37:06.265036
License: Public Domain

Order                                                                       Michigan Supreme Court
                                                                                  Lansing, Michigan

  October 7, 2011                                                                   Robert P. Young, Jr.,
                                                                                              Chief Justice

  142682                                                                            Michael F. Cavanagh
                                                                                          Marilyn Kelly
                                                                                    Stephen J. Markman
                                                                                    Diane M. Hathaway
                                                                                        Mary Beth Kelly
  BETH C. MATTER,                                                                       Brian K. Zahra,
            Plaintiff-Appellant,                                                                   Justices

  v                                                      SC: 142682
                                                         COA: 293421
                                                         Oakland CC Family
                                                         Division: 2005-708339-DO
  RICHARD C. MATTER,
           Defendant-Appellee.

  _________________________________________/

        On order of the Court, the application for leave to appeal the January 20, 2011
  judgment of the Court of Appeals is considered, and it is DENIED, because we are not
  persuaded that the question presented should be reviewed by this Court.

        MARILYN KELLY, J. (dissenting).

         I dissent from the Court’s order denying plaintiff’s application for leave to appeal
  and would reverse the Court of Appeals decision. I agree with the dissenting opinion of
  that court which would have affirmed the circuit court decision. The circuit court held an
  extensive evidentiary hearing and determined that defendant’s gross income for the
  purpose of calculating his spousal support includes certain amounts he treated as
  investment or passive income. It granted plaintiff’s motion for an increase in spousal
  support, but the Court of Appeals reversed that decision.

         The underlying facts are as follows. Soon after the parties’ divorce, defendant left
  his employment as an oncologist at a large Michigan hospital and relocated to Kentucky
  where he took employment with United Surgical Associates PSC (USA). He soon chose
  to become a shareholder of USA. This required him to purchase shares in USA’s captive
  medical equipment affiliate, Radiation Oncology Associates, PLLC (ROA). His
  employment included work for another USA affiliate, United Radiation Oncology
  (URO), which operates cancer treatment centers and uses ROA’s medical equipment to
  treat USA’s cancer patients.
                                                                                            2

       Under the terms of the parties’ judgment of divorce, plaintiff’s spousal support is a
percentage of defendant’s gross earnings. The earnings comprised income from
defendant’s employer and from Premier Radiation Oncology Services P.C. The latter
was a captive affiliate of defendant’s employer, and the income it generated was “passive
interest or investment income.”

        While in Michigan, defendant’s average annual income was $390,000. In 2006-
2007, his first year in Kentucky, defendant asserted that the income subject to his spousal
support obligation was $374,805. But his W-2 reported income of $466,174. Defendant
claimed that the difference between his W-2 income and his salary came from returns on
his investments in USA and ROA, a sum of roughly $90,000. And, he claimed that the
amount of spousal support he should pay must be based solely on his salary. He viewed
it irrelevant that the base used in Michigan included income from his investment in a
captive affiliate corporation of his employer there.

         The circuit court disagreed and ruled that his divorce settlement contemplated that
the income reported on his W-2 was defendant’s income for the purposes of calculating
his spousal support obligation. The court pointed out, in addition, that the language of
the Michigan Child Support Formula supports its position. The Formula would interpret
defendant’s income as his “earnings generated from a business, partnership, contract,
self-employment, or other similar arrangement or from rentals,” and additionally include
“. . . interest, [and] dividends . . . to the extent that they represent income or may be used
to generate regular income.” MCSF 2.01(C)(2) and (5).

       The trial court reasoned that defendant realized the return on his investment in
ROA and URO solely as a result of his employment. Consequently, that income was part
of his gross earnings from his employment. Additionally, the court found that defendant
did not act in good faith in leaving his employment in Michigan. His move to Kentucky
stripped plaintiff of her interest in his supplemental employee retirement plan.

        However, the Court of Appeals majority found the divorce judgment unambiguous
and held that the plain language of the parties’ agreement excluded consideration of
defendant’s investment income from USA and ROA. It also held that defendant did not
breach the implied covenant of good faith and fair dealing, because he did not violate any
of the terms of the parties’ settlement agreement.

       The Court of Appeals majority failed to grasp the equitable nature of spousal
support. It also failed to recognize the ambiguity in the settlement agreement and
incorrectly applied a de novo standard of review. I agree with the Court of Appeals
dissent that this case should have been reviewed for clear error. Had that standard been
applied, the judgment would not have been found to be clearly erroneous, for the reasons
stated in both the Court of Appeals dissenting opinion and the circuit court opinion.
                                                                                                               3

       The circuit court determined that, for purposes of the judgment, the definition of
“investment income” was not the same as the definition used in the Internal Revenue
Code. The proper analysis must take its guidance from the Child Support Formula.
Using that guide, it is apparent that defendant’s income included the gains from his
employment and labor while working with URO. The income accumulated from ROA
and URO was not passive investment income, especially given the relationship between
those captive affiliates. Defendant’s income increased as the number of patients he
treated at URO increased the number of patients using ROA’s equipment.

        Additionally, the machinations that defendant employed to avoid the classification
of this income as gross income beg for the application of equitable principles by the
circuit court. Plaintiff claimed in the trial court, and defendant has yet to rebut, that
defendant represented during the divorce proceedings that he would continue to work at
the Michigan hospital. Plaintiff was unaware when the settlement agreement was written
that defendant would terminate that employment just two months after the judgment of
divorce was entered. Defendant led her to believe that her rights to defendant’s unvested
supplemental employee retirement plan with the Michigan hospital were secure.

       The application of equitable principles, always appropriate in domestic relations
matters, requires a different result under the facts of this case than the Court of Appeals
reached. I would reverse the Court of Appeals decision.

      ZAHRA, J., did not participate because he was on the Court of Appeals panel.

                         I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the
                   foregoing is a true and complete copy of the order entered at the direction of the Court.
                         October 7, 2011                     _________________________________________
       p1004                                                                 Clerk