Court Opinion

ID: 4257022
Source: CourtListenerOpinion
Date Created: 2018-03-22 07:13:06.962695+00
Date Added: 2024-06-11T14:45:44.778184
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

CYNTHIA JANICE BOCKART,                                              UNPUBLISHED
                                                                     March 20, 2018
               Plaintiff-Appellant,

v                                                                    No. 335833
                                                                     Lapeer Circuit Court
NICHOLAS CHRISTIAN BOCKART,                                          LC No. 15-049169-DM

               Defendant-Appellee.

Before: MURRAY, P.J., and CAVANAGH and FORT HOOD, JJ.

PER CURIAM.

       Plaintiff appeals as of right the trial court’s judgment of divorce which was entered
following a two-day bench trial in this divorce action. We vacate the portions of the judgment
addressing spousal support and the distribution of the marital estate and remand for proceedings
consistent with this opinion.

                                       I. BACKGROUND

         Plaintiff and defendant, both 39 at the time of trial, were married on June 11, 2005, and
separated on September 25, 2015. Plaintiff filed for divorce on October 1, 2015. During the
marriage, plaintiff was a stay-at-home mother, raising the parties’ two young children.
Defendant ran a successful business, Romeo Floors, which in the year leading up to the judgment
of divorce, experienced a financial downturn and incurred significant alleged debt in the
approximate amount of $108,000. Plaintiff testified at trial that throughout the parties’ marriage
she “helped out” with defendant’s business, assisting with tasks such as answering the telephone,
helping customers, running errands, and dropping deposits off at the bank. However, plaintiff
was not on the payroll of the business. In the three years before trial, plaintiff worked from
home part-time doing website maintenance for a charter school, earning $11,000 annually. At
trial, plaintiff testified that she was taking steps to find herself a full-time job. At the time of
trial, plaintiff was living with the parties’ two children in a home that her father had purchased
for her, and while the arrangement called for her to pay approximately $750 in rent, plaintiff was
not yet in a position to do so.

        Following the two-day bench trial, where the key issues were the distribution of the
marital estate and the award of spousal support to plaintiff, the trial court entered a judgment of
divorce distributing the parties’ marital estate and declining to enter an award of spousal support
to plaintiff. Notably, aside from a Lexus vehicle that carried significant mileage, which
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plaintiff’s father had purchased for her so that she would have a safe vehicle in which to
transport the parties’ young children,1 the trial court awarded the bulk of the marital estate to
defendant, stating its intention to assist the parties in avoiding bankruptcy. Plaintiff now appeals
as of right, challenging both the distribution of the marital estate and the trial court’s decision to
not award her spousal support.

                       A. THE BUSINESS DEBT OF ROMEO FLOORS

        At trial, defendant testified that he had followed his father’s footsteps and entered the
flooring business at a young age, starting to do flooring installation at the age of 21. Defendant
further testified that his business, Romeo Floors, had experienced a financial downturn, in part
because of significant road construction that took place outside of his business. According to
defendant, the business is an S-corporation,2 and defendant has a 100 percent ownership of the
business. In 2015, defendant paid himself $43,216 in income from the business. Defendant’s
father was diagnosed with cancer in October 2014 and passed away in November 2015.
According to defendant, losing his father, and going through the divorce, along with the loss of
spending as much time with his children, greatly impacted defendant’s ability to work.

        Defendant testified that as a matter of course he would pay personal expenses from his
business accounts, and that his accountant would separate the personal expenses from business
expenses. Once plaintiff filed for divorce, defendant’s income and expenses were impacted
because he was required to pay all of the bills at the marital home, even though he was not living
there as a result of a personal protection order (PPO) that was entered following an incident of
alleged domestic violence. Defendant also had to pay plaintiff court-ordered spousal support
during the pendency of the lower court proceedings.3 According to defendant, he also incurred
additional expenses, such as paying for clothes for the parties’ children for his parenting time

1
  Plaintiff testified that during the course of their marriage, while he was under the influence of
alcohol, defendant forced her to sign over the title to the vehicle to him, as he was upset that she
had let a male friend drive the vehicle. According to plaintiff, defendant suspected her of having
an extramarital affair with the male friend. Defendant testified that he borrowed $5,000 from his
stepmother, which he still owed at the time of trial, to complete that transaction.
2
  “[A]n S-corporation is a small business which has elected, under 26 USC 1362(a)(1), to be an S
corporation for tax purposes. The effect of that election is that the corporation’s income and
losses pass through to the individual shareholders as if the income and losses belonged to the
members of a partnership.” Diez v Davey, 307 Mich App 366, 379-380; 861 NW2d 323 (2014)
(citation and quotation marks omitted). According to the Diez Court, “a sole shareholder of an S
corporation is, in particular, uniquely situated insofar as he or she possesses a power over
corporate funds not enjoyed by an average employee and may, given this power, be especially
able to manipulate the distribution of income, or lack thereof, from the corporation.” Id. at 380.
3
  The trial court’s October 13, 2015 order required defendant to pay plaintiff monthly spousal
support of $500 and ordered the parties to “maintain the status quo with respect to the payment
of the household bills by paying them in the same pattern as they have done so during the course
of their marriage.”

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with them, clothing for himself, preschool fees for the parties’ daughter, veterinary expenses for
the parties’ dog, his attorney fees related to the divorce, $2200 in attorney fees for plaintiff
related to the divorce and $1500 for an appraiser to appraise his business. During the pendency
of the lower court proceedings, defendant lived with his step-mother, and he testified that he felt
he should pay her $500 a month for allowing him to live with her. Defendant also borrowed
upwards of $30,000 from his step-mother for his attorney fees in the divorce. According to
defendant, he paid all of the expenses that he was required to, “but I put myself in debt because
of it.” Defendant also testified that because he was paying all of his expenses from the business,
he had to take money from his business to cover the expenses.

        During trial, defendant introduced as evidence several outstanding invoices for amounts
that Romeo Floors owed as business debt to third parties. These included invoices to third-
parties for supplies, utilities, insurance, and sub-contracting services. The business also owed
outstanding rent in the amount of $18,000. Defendant also produced a promissory note payable
to his aunt for a $10,000 loan given to defendant to “keep [Romeo Floors] going.” Defendant
also stated that Romeo Floors owed the State of Michigan approximately $8,000 for outstanding
sales tax. According to defendant, at the time of trial, Romeo Floors was in debt in the amount
of $108,000, and he planned to sell the business.

                                          II. ANALYSIS

        Turning first to the award of spousal support, plaintiff asserts that the trial court’s
decision was inequitable, particularly where its decision was founded on its incorrect assumption
that plaintiff should be held liable for debts incurred by defendant’s business. We agree.

                                    A. SPOUSAL SUPPORT

        The decision whether to award spousal support to a party is a matter within the trial
court’s discretion, and this Court will affirm the trial court’s ruling unless “firmly convinced that
it was inequitable.” Richards v Richards, 310 Mich App 683, 690; 874 NW2d 704 (2015)
(citation and quotation marks omitted). In reviewing a trial court’s award of spousal support, we
review the trial court’s factual findings for clear error. Berger v Berger, 277 Mich App 700, 727;
747 NW2d 336 (2008). “If the trial court’s findings are not clearly erroneous, we must
determine whether the dispositional ruling was fair and equitable under the circumstances of the
case.” Loutts v Loutts, 298 Mich App 21, 26; 826 NW2d 152 (2012).

       The governing statute, MCL 552.23(1) provides, in pertinent part:

               Upon entry of a judgment of divorce or separate maintenance, if the estate
       and effects awarded to either party are insufficient for the suitable support and
       maintenance of either party and any children of the marriage who are committed
       to the care and custody of either party, the court may also award to either party
       the part of the real and personal estate of either party and spousal support out of
       the real and personal estate, to be paid to either party in gross or otherwise as the
       court considers just and reasonable, after considering the ability of either party to
       pay and the character and situation of the parties, and all the other circumstances
       of the case.

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       This Court has recognized a number of factors that a trial court ought to consider when it
determines whether it should award spousal support:

       (1) the past relations and conduct of the parties, (2) the length of the marriage, (3)
       the abilities of the parties to work, (4) the source and amount of property awarded
       to the parties, (5) the parties’ ages, (6) the abilities of the parties to pay [spousal
       support], (7) the present situation of the parties, (8) the needs of the parties, (9)
       the parties’ health, (10) the prior standard of living of the parties and whether
       either is responsible for the support of others, (11) contributions of the parties to
       the joint estate, (12) a party’s fault in causing the divorce, (13) the effect of
       cohabitation on a party’s financial status, and (14) general principles of equity.
       [Olson v Olson, 256 Mich App 619, 631; 671 NW2d 64 (2003).]

        In its written opinion and order following the two-day bench trial, before addressing
spousal support, the trial court addressed defendant’s business, and the debts that the business
owed. The trial court stated that defendant, “despite whatever corporate form the business was
set up under, for all intents and purposes here, is the sole proprietor of Romeo Floors.”
Recognizing that the business had undergone significant financial losses in the previous year, the
trial court had ordered it sold, noting that the “current expenses associated with the business
appear to exceed $108,000.00,” and that defendant had assumed personal liability for those
debts. In ordering that the business be sold, the trial court stated that plaintiff would be held
“harmless” for the debts of the business.

         Additionally, the trial court, in the context of determining matters of child support not at
issue in this appeal, recognized that while running his business in the years leading to the parties’
divorce, defendant’s income fluctuated between $40,000 and $60,000 annually. The trial court
observed that as it had ordered defendant to be held responsible for all household bills during the
lower court proceedings, as well as spousal support, defendant had paid these expenses through
his business accounts, “giving an appearance of an inflated income.” As a result, according to
the trial court, defendant did not pay necessary business expenses and loans during the pendency
of the lower court proceedings, and the business debts ballooned to $108,000.

        The record evidence further reflected that at the time of trial, defendant had one job offer
that would pay him $37,000 annually. Plaintiff, on the other hand, made $11,000 annually while
working from home. While plaintiff had made $30,000 before the birth of her first child, she had
not been part of the work force since 2008, when the parties’ first child was born, and the parties’
second child was born in 2011. Since that time, plaintiff had assumed primary responsibility for
the care and rearing of the two minor children. The trial court imputed $20,000 in income to
plaintiff, and $40,000 to defendant.

       In declining to award spousal support to plaintiff, the trial court observed that defendant
had been ordered to pay plaintiff $500 a month in spousal support during the pendency of the
divorce action, as well as $2,200 toward plaintiff’s attorney fees, and $1,500 in fees to appraise
defendant’s business for the purposes of this action. Defendant was also responsible for all
vehicle leases, household bills, and the trial court appeared to empathize with defendant having
to shoulder such responsibilities when he could not enter the marital home because of the PPO
being entered. The trial court also noted that plaintiff has a Bachelor’s Degree in Fine Arts from

                                                -4-
the University of Michigan, Flint, while defendant has a high school diploma, and that both were
in good health in spite of the stress associated with the divorce proceedings. In the trial court’s
words, “[p]laintiff will certainly have estimated monthly expenses exceeding her monthly
anticipated income [following the entry of the divorce judgment,] but this Court is relieving her
of the primary debt responsibilities. Therefore, this Court orders that no spousal support will be
ordered to be paid by either party.” (Emphasis added.)

         A review of the trial court’s written opinion as a whole demonstrates that the trial court’s
decision to not award any spousal support to plaintiff flowed from its conclusions that (1)
plaintiff was partially responsible for the debt of defendant’s business, and (2) by not holding her
liable for the business debt, plaintiff was receiving what the trial court viewed as a favorable
outcome. Under the specific circumstances of this case, where plaintiff, with defendant’s
agreement, throughout the duration of an 11 year marriage, left the work force to care for the
parties’ young children while defendant ran his successful business, we disagree with the trial
court’s conclusion that this decision was equitable. Our conclusion is buttressed by the fact that,
in determining that spousal support should not be awarded, the trial court essentially presumed
that plaintiff was responsible for the debt of defendant’s business, a finding that was apparently
pivotal to its analysis. However, the trial court was required, after weighing the credibility of the
witnesses who testified at trial, to determine whether the debts of the business were joint
liabilities, or instead reserved to “the individual responsibility of one of the parties.” Reed v
Reed, 265 Mich App 131, 157; 693 NW2d 825 (2005). Additionally, “[c]orporations, even when
owned by a sole shareholder” are recognized to be “separate entities under the law[.]” Diez v
Davey, 307 Mich App 366, 381; 861 NW2d 323 (2014).

        Our review of the record reflects that the trial court did not undertake a thorough factual
inquiry as to the origin of the debts of defendant’s business, and who was responsible for their
creation. Instead, the trial court generally attributed part of the responsibility for the debts to
plaintiff, given defendant’s claim at trial that the debts were incurred because he was ordered to
maintain the household bills and pay plaintiff spousal support throughout the lower court
proceedings. Notably, the trial court did not specifically consider whether these alleged joint
debts arose from any responsibility on the part of plaintiff. Where the record reflects that
plaintiff played a minimal role, if any, in the running of defendant’s business, particularly with
regard to its financial affairs, remand is necessary to (1) allow the trial court the opportunity to
thoroughly consider and set forth factual findings concerning plaintiff’s responsibility, if any,
concerning each of the debts leading to the creation of the total alleged business debt of
$108,000,4 and (2) then revisit its determination regarding whether plaintiff should be precluded
from an award of spousal support. On remand, in evaluating whether an award of spousal
support is appropriate, the trial court is also to consider and render specific detailed factual
findings with respect to all of the spousal support factors set forth in Olson, 256 Mich App at
631.

4
 These business related debts are set forth in defendant’s trial brief filed in the lower court file.
On remand, the trial court should also make a determination that each invoice is properly
charged to and owed by defendant’s business, as opposed to unrelated businesses.

                                                 -5-
                                      B. THE MARITAL ESTATE

       On appeal, plaintiff also challenges the distribution of the marital estate. While we
disagree with plaintiff’s contentions challenging the trial court’s valuation of marital assets,
remand is necessary to allow the trial court to reconsider its distribution of the marital estate.

        “In deciding issues on appeal involving division of marital property, this Court first
reviews the trial court’s findings of fact. Findings of fact, such as a trial court’s valuations of
particular marital assets, will not be reversed unless clearly erroneous.” Butler v Simmons-
Butler, 308 Mich App 195, 207-208; 863 NW2d 677 (2014) (citations omitted). “A finding is
clearly erroneous if we are left with a definite and firm conviction that a mistake has been
made.” Cunningham v Cunningham, 289 Mich App 195, 200; 795 NW2d 826 (2010). “If this
Court upholds the trial court’s findings of fact, it must then decide whether the dispositional
ruling was fair and equitable in light of those facts. The trial court’s dispositional ruling is
discretionary and will be affirmed unless this Court is left with the firm conviction that it was
inequitable.” Reed, 265 Mich App at 150 (citation omitted).

        “The goal in distributing marital assets in a divorce proceeding is to reach an equitable
distribution of property in light of all the circumstances.” Berger, 277 Mich App at 716-717
(citation omitted). “To reach an equitable division, the trial court should consider the duration of
the marriage, the contribution of each party to the marital estate, each party’s station in life, each
party’s earning ability, each party’s age, health and needs, fault or past misconduct, and any
other equitable circumstance.” Butler, 308 Mich App at 208. “The trial court must consider all
relevant factors but not assign disproportionate weight to any one circumstance.” Berger, 277
Mich App at 717 (citation and quotation marks omitted).

        In distributing the marital estate, the trial court awarded plaintiff a Lexus automobile that
carried significant mileage, as well as a number of pieces of personal property based on a list of
items that plaintiff desired. The marital home was awarded to defendant, including the entire
marital portion of the home’s equity, which the trial court calculated to be $58,765.91. In so
ruling, the trial court required defendant to assume sole responsibility for a lien held by the
Internal Revenue Service (IRS) in the amount of $18,649.08.5 The trial court awarded $25,300
worth of personal property contained in a pole barn located on the property of the marital home
to defendant. The trial court also found that most of the parties’ guns were purchased by or
gifted to defendant, and therefore, it awarded the guns and safe to defendant. Noting that
defendant had testified that the business assets of Romeo Floors, including the business’s trucks,
“would bring in approximately $15,000.00[,]” the trial court “order[ed] the business sold and
order[ed] the Defendant to sell the business assets to offset a portion of the business debt and to
further assume the balance of the business debt, holding the Plaintiff harmless.”

       As an initial matter, to the extent that plaintiff challenges the trial court’s valuation of
defendant’s business, the trial court’s valuation of $15,000 was grounded in the record evidence,
where plaintiff’s witness, Joseph Cunningham, an expert in the valuation of businesses, testified

5
    On appeal, plaintiff does not contest her liability for this IRS lien.

                                                    -6-
that the business was worth approximately $16,000. The trial court’s valuation of the marital
equity in the home was also correct, particularly where plaintiff conceded during trial that the
marital equity in the home was approximately $58,000. However, a review of the trial court’s
ruling reflects that the trial court’s distribution of the marital estate in this case was premised on
its assumption that plaintiff bore joint responsibility for the debts of defendant’s business. For
example, at the conclusion of its ruling, the trial court recognized that it was awarding the bulk
of the marital estate to defendant, but expressed its apparent concern that defendant had been
responsible for providing for plaintiff and the minor children, all while he could not enter the
marital home as a result of a PPO entered against him. The trial court also referenced that its
decision relieved plaintiff “of the primary debt responsibilities.” Again, as we have observed
above, the trial court did not undertake a thorough factual inquiry into the nature of the alleged
debts of the business, instead presuming that plaintiff bore partial responsibility for these debts,
even where she had minimal involvement in defendant’s business. Under the circumstances of
this case, we are not convinced that the trial court’s distribution of the marital estate was
equitable. On remand, after undertaking the necessary inquiry into plaintiff’s responsibility with
respect to the alleged debts of the business, the trial court shall reconsider its disposition of the
marital estate to ensure that it is just and equitable in light of all the circumstances.

                                        III. CONCLUSION

        We vacate the portions of the divorce judgment addressing spousal support and the
distribution of the marital estate and remand for proceedings consistent with this opinion. We do
not retain jurisdiction. Plaintiff, as the prevailing party, may tax costs pursuant to MCR 7.219.

                                                              /s/ Christopher M. Murray
                                                              /s/ Mark J. Cavanagh
                                                              /s/ Karen M. Fort Hood

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