In Re: The Marriage of Robin R. Phillips v. Thomas R. Lloyd (mem. dec.) ( 2016 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), FILED
this Memorandum Decision shall not be Nov 17 2016, 8:37 am
regarded as precedent or cited before any
CLERK
court except for the purpose of establishing Indiana Supreme Court
Court of Appeals
the defense of res judicata, collateral and Tax Court
estoppel, or the law of the case.
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Michael H. Michmerhuizen Michael A. Setlak
Barrett McNagny LLP Perry D. Shilts
Fort Wayne, Indiana Shilts & Setlak LLC
Fort Wayne, Indiana
IN THE
COURT OF APPEALS OF INDIANA
In Re: The Marriage of November 17, 2016
Robin R. Phillips, Court of Appeals Case No.
90A05-1605-DR-1221
Appellant-Respondent,
Appeal from the Wells Circuit
v. Court
The Honorable Kenton W.
Thomas R. Lloyd, Kiracofe, Judge
Trial Court Cause No.
Appellee-Petitioner.
90C01-1504-DR-40
Bailey, Judge.
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Case Summary
[1] Robin Phillips (“Wife”) appeals the trial court’s valuation and division of the
marital estate following the dissolution of her marriage to Lloyd Phillips
(“Husband”).
[2] We affirm in part, reverse in part, and remand with instructions.
Issues
[3] Wife raises multiple issues on appeal, which we consolidate and restate as:
I. Whether the trial court abused its discretion in valuing the
marital estate; and
II. Whether the trial court abused its discretion in dividing the
marital estate.
Facts and Procedural History
[4] Prior to marrying in 2006, Wife and Husband were in a live-in relationship for
several years. In November 2001, Wife purchased a home that would later
become the marital residence (“Marital Residence”). Because the Marital
Residence needed repairs, Wife and Husband waited to move in together. Over
the next few months, they worked on the home together and began cohabitating
there around March 2002. Wife paid the mortgage and the household bills.
[5] When Wife and Husband began living together, each had certain personal
assets. Among them, Wife owned a restaurant, which she purchased in 1997
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(“Restaurant”), and a rental property in Zanesville, which she purchased in
1999. Husband owned a home and had money in a 401(k).
[6] While Wife and Husband were cohabitating, but before they married, Husband
sold his home and gave some of the proceeds to Wife. During their
cohabitation, Wife purchased a rental property in Huntington (“Huntington
Rental”).
[7] Wife and Husband married on January 31, 2006. During the marriage, Wife
purchased two additional rental properties in Zanesville (we refer to the three
properties in Zanesville collectively as the “Zanesville Rentals”).
[8] Throughout the relationship, Husband was employed and earned between
$30,000 and $35,000 per year since 2011. Toward the end of the relationship,
Wife earned around $200 per week from the Restaurant, or around $10,400 per
year. The parties kept separate accounts but would exchange money. When
Husband received paychecks, he would give Wife money to pay bills. Neither
kept an accounting of the money they exchanged. Once they married, Husband
paid for Wife’s health insurance. Each year, they filed joint tax returns, and
Wife received the refunds.
[9] Before and during the marriage, Wife and Husband were engaged in buying
and selling goods together. The venture involved purchasing goods at auctions
and attending flea markets, shows, and swap meets. They also sold goods on
eBay. Husband withdrew money from his 401(k) to purchase a trailer as well as
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goods for the buying and selling venture. Any proceeds from the venture went
to Wife and toward purchasing more goods.
[10] Wife and Husband also “flipped” properties together. Wife purchased the
properties in her name and Husband helped renovate them. Sometimes, they
rented the properties; sometimes they sold the properties outright. Wife paid
for the properties and received the income whereas Husband contributed labor
and equipment toward the properties. Husband also contributed labor and
equipment to the Restaurant, where Wife would allow Husband to eat for free.
[11] During the relationship, Wife incurred credit card debt and eventually
negotiated a settlement amount. To pay the settlement, Wife borrowed money
from her mother, Melba Edwards (“Edwards”). Wife borrowed additional
money from Edwards to pay off debt associated with the Restaurant.
[12] In April 2015, Wife sold the Zanesville Rentals. Shortly after the sale, Husband
filed a Petition for Dissolution of Marriage on April 22, 2015. Around this
time, Wife paid debts using proceeds of the sale along with other assets.
[13] The parties entered into a mediated partial settlement agreement, which left to
the trial court the division of all real estate and debts. Following a hearing on
February 24, 2016, the trial court suggested that the parties tender proposed
findings and conclusions, which they did. On April 28, 2016, the trial court
entered its findings, conclusions, and order of dissolution of marriage. In so
doing, the trial court adopted Husband’s proposals verbatim.
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[14] The trial court purported to order an equal division of the marital estate. Based
on the trial court’s valuation, Wife was to pay a $49,675.00 equalization
payment to Husband. The trial court further ordered that if Wife did not pay
the judgment within thirty days, Wife was to sell or eventually auction certain
real estate. The order did not allocate any sale or auction costs to Husband.
[15] Wife now appeals.
Standard of Review
[16] Here, as permitted by Indiana Trial Rule 52(A), the trial court entered findings
of fact sua sponte. Our court will “not set aside the [trial court’s] findings or
judgment unless clearly erroneous . . . .” Ind. Trial Rule 52(A). Findings are
clearly erroneous only when the record contains no facts to support them either
directly or by inference. Quillen v. Quillen, 671 N.E.2d 98, 102 (Ind. 1996). A
trial court’s judgment is clearly erroneous if “its findings of fact do not support
its conclusions of law or . . . its conclusions of law do not support its
judgment.” Id. Where, as here, the trial court adopts verbatim a party’s
proposed findings and conclusions, it does not alter our standard of review. See
Cook v. Whitsell-Sherman, 796 N.E.2d 271, 273 n.1 (Ind. 2003). However, the
practice “weakens our confidence as an appellate court that the findings are the
result of considered judgment by the trial court.” Id. (citing Prowell v. State, 741
N.E.2d 704, 708-09 (Ind. 2001)).
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[17] Here, Wife raises challenges to the trial court’s valuation and division of the
marital estate. We review such challenges under an abuse of discretion
standard. Quillen, 671 N.E.2d at 102; Fobar v. Vonderahe, 771 N.E.2d 57, 59
(Ind. 2002). The trial court abuses its discretion when its decision is clearly
against the logic and effect of the facts and circumstances before it, including
the reasonable inferences to be drawn therefrom. Quillen, 671 N.E.2d at 102;
Taylor v. Taylor, 436 N.E.2d 56, 58 (Ind. 1982). We do not weigh the evidence,
but will consider the evidence in a light most favorable to the judgment.
Quillen, 671 N.E.2d at 102; Fobar, 771 N.E.2d at 59.
Discussion and Decision
Valuation of the Marital Estate
[18] Wife contends that the trial court abused its discretion in valuing the marital
estate. In asserting error, Wife points to the trial court’s (1) handling of debts
paid following the sale of the Zanesville Rentals; (2) omission of an undisputed
mowing bill; and (3) valuation of the Huntington Rental.
[19] Under Indiana Code Section 31-15-7-4(a), a trial court must include all marital
property in the marital pot for division, whether it was owned by either spouse
before the marriage, acquired by either spouse before final separation, or
acquired by their joint efforts. “Marital property includes both assets and
liabilities.” Birkhimer v. Birkhimer, 981 N.E.2d 111, 120 (Ind. Ct. App. 2012).
Although the trial court has “broad discretion in ascertaining the value of
property in a dissolution action,” Quillen, 671 N.E.2d at 102, the trial court
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generally has no authority to exclude or set aside any assets or liabilities of the
parties, and it must divide all property and debts. Birkhimer, 981 N.E.2d at 120.
[20] Starting with the Zanesville Rentals, Wife sold the properties in April 2015, just
prior to Husband’s initiation of the dissolution proceedings. The parties agree
that, after costs associated with the sale, Wife netted $49,403.00. Wife alleges
that she used all of the proceeds, along with additional assets, to pay debts.
Among those debts, Wife paid $38,000.00 to Edwards.1 The original balance
of the Edwards loan was $45,943.00.
[21] In its order, the trial court identified the $49,403.00 in proceeds as an asset.
The order also identified the Edwards loan balance as $45,943.00—the original,
unreduced amount, which would offset $38,000 of the proceeds. Wife points
out, however, that she spent a total of $51,461.50 toward reducing debt, thus
spending $13,461.50 more than the $38,000.00 payment on the Edwards loan.
Although the trial court’s calculation offsets the $38,000.00 payment on the
Edwards loan, the trial court did not account for the other potential offsets.
[22] At the hearing, Husband challenged the amount paid to Edwards:
Q. Okay. So the debt to her mother of $38,000.00 is what
you don’t agree to?
1
Wife complains that the trial court erred in finding that it was “obvious that Wife had only paid [Edwards]
in anticipation of the divorce proceedings,” (Appellant’s App. Vol. II at 12), but establishes no basis upon
which the alleged error prejudiced her. We accordingly do not address her argument in this respect. See T.R.
61.
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A. Yes.
Q. Okay. But everything else of the bills that she paid, you
agree to?
A. Yes.
[23] (Tr. at 47.) However, in Husband’s proposed findings and conclusions—which
the trial court adopted—Husband nevertheless (1) accounted for the full
amount owed to Edwards, which encompassed the previously disputed $38,000
payment; and (2) omitted the remaining debt that Husband did not earlier
dispute. Husband does not now contest the amount of the Edwards loan and
Husband does not directly address the remaining non-Edwards debt.
[24] The trial court must divide all marital property. Ind. Code § 31-15-7-4(a). In
valuing the marital estate, it was illogical for the trial court to fully account for
the Edwards loan, which Husband had initially disputed, yet to exclude the
non-Edwards debt that Husband agreed to at the hearing. Accordingly, we find
that the trial court abused its discretion in excluding the additional debt paid
following the sale of the Zanesville Rentals in its valuation of the marital estate.
[25] Similarly, Wife points to an undisputed $774.00 mowing bill that was not
included in the trial court’s calculation and which Husband now concedes was
error. Husband invites us to avoid disturbing the trial court’s judgment because
the amount of the bill was de minimus. However, in light of the existing
valuation error, and Husband’s concession of error as to the mowing bill, on
remand the trial court should include this bill in the marital pot.
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[26] We turn next to the trial court’s valuation of the Huntington Rental. The trial
court determined that the value of the Huntington Rental was $17,500.00. In
reaching this value, the trial court used a June 24, 2015 appraisal showing the
value was $28,000.00 and subtracted a mortgage balance of $10,500.00. Wife
baldly contends that the trial court should have instead used a mortgage balance
of $10,971.05. However, the portions of the record that Wife directs us to do
not provide support for that figure. The argument section of the appellant’s
brief must “contain the contentions of the appellant on the issues presented,
supported by cogent reasoning,” along with citations to the authorities, statutes,
and parts of the record relied upon. Ind. Appellate Rule 46(A)(8)(a). Failure to
comply with this rule results in waiver of the argument on appeal. See Reed v.
Reid, 980 N.E.2d 277, 297 (Ind. 2012) (finding waiver when an argument failed
to conform to Indiana Appellate Rule 46(A)(8)(a)). Moreover, this Court does
not sift through a record to locate error so as to state an appellant’s case for her.
Wright v. Elston, 701 N.E.2d 1227, 1230 (Ind. Ct. App. 1998), trans. denied.
Because Wife’s argument is undeveloped, the issue is waived for review.
[27] In sum, we find that the trial court abused its discretion by omitting two
undisputed marital debts when valuing the marital estate, which were the non-
Edwards debts paid following the sale of the Zanesville Rentals and the $774.00
mowing bill. We instruct the trial court to account for these marital debts in
reaching its valuation of the marital estate.
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Division of the Marital Estate
[28] Wife also argues that the trial court erred in dividing the marital estate. She
focuses on whether the trial court abused its discretion in (1) ordering an equal
division of the marital estate and (2) not requiring Husband to share in potential
sale or auction costs incurred as a result of the trial court’s order.
[29] Indiana law requires that marital property be divided “in a just and reasonable
manner,” I.C. § 31-15-7-4(b), and provides for the statutory presumption that
“an equal division of the marital property between the parties is just and
reasonable.” I.C. § 31-15-7-5. This presumption, however, may be rebutted by
a party who presents relevant evidence, including evidence of the following
factors:
(1) The contribution of each spouse to the acquisition of the
property, regardless of whether the contribution was income
producing.
(2) The extent to which the property was acquired by each
spouse:
(A) before the marriage; or
(B) through inheritance or gift.
(3) The economic circumstances of each spouse at the time the
disposition of the property is to become effective, including the
desirability of awarding the family residence or the right to dwell
in the family residence for such periods as the court considers just
to the spouse having custody of any children.
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(4) The conduct of the parties during the marriage as related to
the disposition or dissipation of their property.
(5) The earnings or earning ability of the parties as related to:
(A) a final division of property; and
(B) a final determination of the property rights of the
parties.
Id.
[30] In dividing marital property, the trial court must consider all of the statutory
factors, but it is not required to explicitly address all of the factors in every case.
Eye v. Eye, 849 N.E.2d 698, 701-02 (Ind. Ct. App. 2006). A party challenging
the trial court’s division of marital property must overcome a strong
presumption that the court considered and complied with the applicable statute.
Campbell v. Campbell, 993 N.E.2d 205, 212-13 (Ind. Ct. App. 2013), trans. denied.
Moreover, we are to consider the trial court’s disposition “as a whole, not item
by item.” Fobar, 771 N.E.2d at 59. We recognize that
in crafting a just and reasonable property distribution, a trial
court is required to balance a number of different considerations
in arriving at an ultimate disposition. The court may allocate
some items of property or debt to one spouse because of its
disposition of other items. Similarly, the factors identified by the
statute as permitting an unequal division in favor of one party or
the other may cut in different directions. As a result, if the
appellate court views any one of these in isolation and apart from
the total mix, it may upset the balance ultimately struck by the
trial court.
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Id. at 60.
[31] Here, in determining that Wife failed to rebut the presumption that an equal
division was just and reasonable, the trial court found:
[T]he parties cohabitated for four to five years prior to the
marriage. Both parties contributed financially, and property and
money was comingled by way of sales of real and personal
property. While Wife argues she contributed more than
Husband did during the period of cohabitation and during the
marriage, Husband always maintained full-time employment.
He also provided health insurance for the parties and performed
contributed [sic] his services to the rental properties and business.
(Appellant’s App. Vol. II at 11.) The trial court further concluded:
Deviating from the statutory presumption or excluding some of
this property from the marital estate would not be just and proper
given that it had all been comingled with other marital property.
Further, all property, real and personal, was used to pay down
marital debts, some of which Wife considered her individual
debt. Wife has not rebutted the presumption of an equal division
of assets and debts.
(Appellant’s App. Vol. II. at 12.)
[32] Wife asserts that she rebutted the presumption of an equal division of assets and
debts. In arguing that the factors supported an unequal division, Wife points to
specific assets she purchased prior to the marriage, namely, (1) the Restaurant
where she earns her income; (2) the Marital Residence, which she purchased
while the parties were cohabitating prior to marriage; and (3) certain rental
properties, including the Huntington Rental. Wife would also set aside the
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proceeds from the sale of the three Zanesville Rentals, one of which she
purchased prior to any relationship with Husband. Wife emphasizes that these
assets were in her name and that she made all of the payments associated with
them. Wife also observes that due to her economic circumstances at the time of
the disposition, she would be forced to liquidate assets to satisfy the payment,
leaving her with significantly fewer assets than she had prior to the parties’
cohabitation and marriage. Wife observes that whereas she may ultimately
need to liquidate the Restaurant, her source of income, to satisfy the
equalization payment, Lloyd would leave the marriage with “a substantial cash
position with his livelihood intact.” (Appellant’s Br. at 24.)
[33] In arguing that the trial court erred, Wife posits that the present case is
analogous to both In re Marriage of Marek, 47 N.E.3d 1283 (Ind. Ct. App. 2016),
trans. denied, and Doyle v. Doyle, 756 N.E.2d 576 (Ind. Ct. App. 2001). In Marek,
this Court reversed the trial court’s equal division of the marital estate where
“the findings made by the trial court and nearly all the statutory factors listed
favor[ed] an unequal distribution of the marital estate. No findings support[ed]
an equal division.” Marek, 47 N.E.3d at 1292. In Doyle, we found error when
the trial court considered the appreciation of certain assets belonging to the wife
to be a marital asset. There, the pertinent accounts were solely in the wife’s
name and were wholly untouched since the wife had deposited personal injury
settlement money into them eleven years prior to the parties’ four-year
marriage. Neither of the parties had contributed marital assets to the accounts.
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[34] Both Marek and Doyle are distinguishable. Unlike in Marek, here, the trial court
made findings that supported an equal division of the marital estate. The trial
court noted Husband’s contributions to the rental properties and the
Restaurant, his funding of the parties’ health insurance, and the extent to which
the parties commingled “property and money . . . by way of sales of real and
personal property,” (Appellant’s App. Vol. II at 11). The trial court further
observed that “all property, real and personal, was used to pay down marital
debts, some of which Wife considered her individual debt.” (Appellant’s App.
Vol. II at 12.) Thus, unlike in Doyle, the assets were not wholly sequestered and
there were marital contributions to them.
[35] Wife separately takes issue with the trial court’s finding that the parties
commingled money and property because the properties were in her name, she
paid the bills, and the parties kept separate accounts. However, the evidence
favoring the judgment supports the finding of commingling. Moreover,
although wife also takes issue with the trial court’s consideration of the parties’
conduct during their period of premarital cohabitation, this Court has
consistently indicated that a trial court may, but is not required to, consider
periods during which couples cohabitate prior to their marriage when dividing
the marital estate. See Hendricks v. Hendricks, 784 N.E.2d 1024, 1027 (Ind. Ct.
App. 2003); Chestnut v. Chestnut, 499 N.E.2d 783, 787 (Ind. Ct. App. 1986).
[36] In summary, then, we cannot say that the trial court abused its discretion in
equally dividing the marital estate.
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[37] We turn next to Wife’s final contention, which is that the trial court abused its
discretion by not requiring Husband to share in potential sale or auction costs
incurred as a result of the trial court’s order. In carrying out its equal division
of the marital estate, the trial court ordered that Wife make an equalization
payment to Husband within thirty days. The pertinent part of the order
provides as follows:
If Wife does not pay the judgment in full, then [the Marital
Estate] shall be listed for sale for a period not to exceed three (3)
months. If the property does not sell within that time period,
then the property shall be placed for auction. After expenses of
the auction have been paid, Husband shall be paid from the
proceed[s] of that sale up to the amount of the equalization
judgment in his favor. If the proceeds do not satisfy the
equalization judgment owed to Husband, then Wife shall
immediately sell the [Huntington Rental] and use the proceeds of
that sale to compensate Husband for any shortfall in the
judgment owed to him. If that property is not sold within three
months from the date it has been listed for sale, that property
shall be placed for auction.
(Appellant’s App. Vol. II at 13.)
[38] Wife challenges the trial court’s failure to allocate potential sale or auction costs
to Husband. Wife argues that because the order requires her to sell or auction
property within thirty days if she is unable to pay the judgment, the order’s
potential effect would be to reduce her equal share. Thus, Wife essentially
argues that one outcome of the order is a deviation from an equal division of
the marital estate in Husband’s favor.
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[39] Wife directs our attention to Keown v. Keown, 883 N.E.2d 865 (Ind. Ct. App.
2008). In Keown, the trial court ordered the wife to sell the marital residence
and had heard evidence regarding the costs of the sale. The trial court factored
those costs into its valuation of the marital estate, which husband alleged was
error. In resolving Keown, we looked to Dowden v. Allman, 696 N.E.2d 456, 458
(Ind. Ct. App. 1998). In Dowden, we found error when a trial court never
ordered the sale of real estate but nevertheless included costs of sale in its
valuation. Although there was error in Dowden, we did not find error in Keown,
reasoning that “because the trial court ordered [the wife] to sell the marital
residence, it did not abuse its discretion by reducing the property’s value by the
costs of sale because those costs were a direct result of the disposition and were
based on evidence presented at the hearing.” Keown, 883 N.E.2d at 870.
[40] Keown and Dowden are inapposite here. Together, Dowden and Keown would
suggest that it is within a trial court’s discretion to include evidence-based costs
within the contingency portion of an order such as this one. Here, however,
Wife is challenging the trial court’s omission of those costs, alleging that the
omission amounts to error. Unlike in Dowden, here the trial court’s order did
provide for a potential sale or auction. Although the sale or auction was a
contingency, turning on Wife’s ability to pay the equalization payment within
thirty days, a court-ordered sale or auction was nevertheless one potential
outcome of the order. In contrast to Keown, however, here there was no
evidence of precisely what the sale or auction costs would be. Yet, at the
hearing, both Wife and Husband did acknowledge that, should there be a sale
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of property, there would be costs. (Tr. at 48, 93.) Husband stated that, to some
extent, he was willing to share in those costs. (Tr. at 48.) Moreover, it was not
in dispute that due to Wife’s financial circumstances, she would be unable to
pay an equalization payment without selling real estate. (Tr. at 42, 93.)
[41] We find that, under these facts and circumstances—where the undisputed
evidence is that there would be costs following the sale of real estate, that Wife
would necessarily sell real estate to satisfy an equalization payment, and that
Husband would be willing to share in those costs to some extent—the trial court
abused its discretion by allocating those costs solely to Wife when crafting a
contingency in its order that mandated the sale or auction of real estate. This is
because, under these facts, the trial court’s failure to include costs resulted in
one potential outcome of its order being a deviation in favor of Husband. The
outcome would be a deviation because it would effectively reduce Wife’s
marital share while preserving Husband’s. “A trial court may deviate from an
equal division so long as it sets forth a rational basis for its decision.” Campbell,
993 N.E.2d at 212. Here, Husband argued only for an equal division of the
marital estate and the trial court, by its order, intended to carry out an equal
division of the marital estate. Thus, the potential deviation in favor of Husband
was against the logic and effect of the facts and circumstances before the court.
To achieve a just and reasonable result, on remand we instruct the trial court to
account for the existence of costs incurred as a result of the contingency in the
trial court’s order, and order that Husband and Wife share those costs.
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Conclusion
[42] The trial court erred in valuing the marital estate. Although the trial court did
not abuse its discretion in ordering an equal division of the marital estate, the
trial court abused its discretion in omitting a potential cost when giving effect to
its equal division of the estate.
[43] Affirmed in part, reversed in part, and remanded with instructions.
Riley, J., and Barnes, J., concur.
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