Court Opinion

ID: 2785405
Source: CourtListenerOpinion
Date Created: 2015-03-11 17:06:24.364536+00
Date Added: 2024-06-11T11:28:35.849443
License: Public Domain

Cite as 2015 Ark. App. 178

                 ARKANSAS COURT OF APPEALS
                                       DIVISION IV
                                       No. CV-14-703

                                                  Opinion Delivered   March 11, 2015
SUNSHINE BROOKS BARNETT
                   APPELLANT                      APPEAL FROM THE PULASKI
                                                  COUNTY CIRCUIT COURT,
                                                  FOURTEENTH DIVISION
V.                                                [NO. 60DR-11-1630]

                                                  HONORABLE COLLINS KILGORE,
BRIAN SCOTT BARNETT                               JUDGE
                                  APPELLEE
                                                  AFFIRMED

                           PHILLIP T. WHITEAKER, Judge

       Sunshine and Brian Barnett were divorced on October 17, 2011. Post-decree, Brian

filed an action to have Sunshine held in contempt. The circuit court found her in willful

contempt based upon three independent bases. Sunshine appeals from the order finding her

in contempt, challenging only one of the bases. Because Sunshine fails to challenge the circuit

court’s alternative, independent bases for its ruling, we affirm.

       This contempt action revolves around the parties’ property-settlement agreement and

what constitutes business debt and other business obligations pursuant to that agreement.

During the marriage, the parties each owned a 25% interest in Cheer City United, an LLC.

In the property-settlement agreement, Brian conveyed his 25% interest in the business to

Sunshine in exchange for her agreement to become solely responsible for the debts and
                                  Cite as 2015 Ark. App. 178

obligations of the business. The property-settlement agreement was accepted by the court

and became a part of the decree.

       Post-decree, Brian received a notice of tax deficiency from the IRS indicating that he

owed $28,463 in back taxes for the 2010 tax year.1 He later received another notice

informing him of an $11,772 deficiency for the 2011 tax year. Both tax notices related to a

failure to report the profits of Cheer City United during the respective tax years.

       Brian took the position below and on appeal that, because the tax deficiencies relate

to the business, these deficiencies are the responsibility of Sunshine under the divorce decree.

In support of his position, Brian points to the evidence that he never received any income or

cash distributions from the business and that Sunshine had never provided him with a K-1 for

the business. As a result, he contends that the profits from the business assigned to him were

never reported on his income tax returns. It is his position that he conveyed away his interest

in the business to Sunshine during the divorce without any remuneration with the

understanding that she would cover any and all expenses and obligations associated with the

business. Because the tax liability incurred was based on the profits of the business, he argues

it is a business-related expense for which Sunshine should be held responsible under the

decree. He also asserts that the tax deficiency is a marital debt that Sunshine failed to disclose

       1
        Because the parties had not yet divorced, the 2010 tax return was filed as a joint
return. The deficiency noted by the IRS was for Brian’s portion of the joint tax liability.

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                                  Cite as 2015 Ark. App. 178

at the time of the divorce, and that, under the decree,2 the responsibility of payment should

likewise fall to Sunshine.

       Sunshine took the position below and on appeal that the tax deficiencies are personal

in nature and not business obligations. She argues that Cheer City United, as an LLC, is not

responsible for payment of the taxes. The individual members of the business are responsible

for the taxes, which included Brian for the tax years at issue. In support of her position, she

points to the evidence that she had also received notices of tax deficiency from the IRS, that

she is responsible for her portion of the taxes, and that the distributions received by her from

the company were during the marriage and deposited into their joint checking account.

       After hearing the testimony of the parties and two accountants, the court found

Sunshine’s testimony to be not credible and held Sunshine in contempt. In doing so, the

court made three independent and alternative findings to support its contempt citation. First,

the court found that the small-business section of the divorce decree covered more than just

the ordinary expenses of the business; instead, it covered all debts and obligations related to

Cheer City United, including Brian’s personal tax liability derived from the profits of the

business. Second, the court found that, even if the debt was construed to be marital debt, the

court could allow for an unequal division of the debt. Third, the court found that Sunshine’s

       2
           The decree provided, in part:

       The parties each warrant that there is not any debt outstanding other than mentioned
       heretofore. Any party who has failed to disclose a debt herein shall assume payment
       for said indebtedness and shall indemnify and hold the other party harmless thereon.

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                                 Cite as 2015 Ark. App. 178

failure to provide Brian with the K-1s from the business created an undisclosed debt payable

by Sunshine under the divorce decree.

       Sunshine appeals only the first basis for the court’s ruling. She argues that the trial

court erred in finding that the terms of the divorce decree were unambiguous and in finding

that their income tax liabilities were debts or obligations relating to the business as

contemplated by the divorce decree. More specifically, she claims that the divorce decree

drafted by Brian’s attorney was intentionally vague and ambiguous and, therefore, should have

been strictly construed in her favor. She asserts that, at a minimum, the evidence revealed

that the parties had failed to come to a mutual understanding as to the scope of the business-

expense provision of the decree and, as such, the decree was ambiguous. She further contends

that Brian’s personal tax liability is not a business expense, and therefore it was not her

responsibility to pay those taxes under the divorce decree. She continues that, at the worst,

the debts were a marital debt incurred prior to the divorce and should be equitably split

between the parties.

       As noted above, Sunshine does not challenge the two other alternative findings to

contempt. Most notably, she does not challenge the court’s finding that she failed to provide

Brian with the K-1s and that this undisclosed debt became her responsibility under the decree.

With regard to the K-1s, she takes the position that she did not understand the significance

of them and simply placed them in a folder. She did testify that she believed she had given

the K-1s to Brian, but could not provide any details about doing so. However, it is the duty

of the trial court to determine the credibility of a witness. Fort v. Estate of Miller, 2014 Ark.
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                                Cite as 2015 Ark. App. 178

App. 498, 442 S.W.3d 891. Here, the trial court did not find Sunshine to be credible.

Because Sunshine fails to challenge the circuit court’s alternative, independent basis for its

ruling, we affirm. See Fairpark, LLC v. Healthcare Essentials, 2011 Ark. App. 146, 381 S.W.3d
852.

       Affirmed.

       HARRISON and VAUGHT, JJ., agree.

       Quentin E. May, PLC, by: Quentin E. May, for appellant.

       Hilburn, Calhoon, Harper, Pruniski & Calhoon, LTD., by: Natalie Dickson and Lauren

Ballard, for appellee.

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