In re: the Marriage of: Carrie A. Chapman v. Stephen L. Chapman ( 2014 )

Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before
Apr 04 2014, 8:46 am
any court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.
ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
CHRISTOPHER M. FORREST, ESQ. MICHAEL H. MICHMERHUIZEN
Forrest Legal LLC Barrett & McNagny LLP
Fort Wayne, Indiana Fort Wayne, Indiana
DANIEL M. GRALY, ESQ. CORNELIUS B. HAYES
Fort Wayne, Indiana Hayes & Hayes
Fort Wayne, Indiana
IN THE
COURT OF APPEALS OF INDIANA
IN RE: THE MARRIAGE OF: )
CARRIE A. CHAPMAN, )
)
Appellant, )
)
vs. ) No. 02A05-1307-DR-343
)
STEPHEN L. CHAPMAN, )
)
Appellee. )
APPEAL FROM THE ALLEN SUPERIOR COURT
The Honorable Robert J. Schmoll, Special Judge
Cause No. 02D07-0907-DR-714
April 4, 2014
MEMORANDUM DECISION - NOT FOR PUBLICATION
BAILEY, Judge
Case Summary
Carrie Chapman (Mother) appeals the trial court’s award of child support in the
dissolution of her marriage to Stephen Chapman (Father).
We affirm.
Issue
Mother raises two issues on appeal, one of which we find dispositive and restate as
whether the trial court abused its discretion when it failed to impute income to Father from a
trust and its successor limited liability company.1
Facts and Procedural History
In December 1997, Father’s parents created a trust, which provided that Father, the
sole beneficiary, would receive a distribution of the trust’s assets on his fifty-fifth birthday on
November 13, 2010. The trust’s assets initially consisted of stock in Waterfield Mortgage, a
company that Father’s grandfather founded in the 1920’s or 1930’s. Father’s mother
inherited the stock from her parents. The mortgage company was eventually sold, and the
stock was replaced with cash and other assets.
At the time the trust was created, Mother and Father were engaged. They married a
month later in January 1998. During the course of the marriage, Father was employed as an
attorney at a local law firm, and Mother took care of the parties’ home and children, three
boys born in 2000, 2002, and 2005. In 2006, apparently following the sale of the stock in the
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Mother also argues that the trial court’s failure to properly calculate Father’s weekly gross income requires
reapportionment of attorney fees. Because we affirm the trial court’s calculation of Father’s weekly gross
income, we need not apportion attorney fees.
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trust, Father transferred $3,000,000 to Mother for estate planning purposes. At some point,
Father’s parents established separate trusts for each of the parties’ sons. In 2009, these trusts
had values of $584,000, $616,000, and $479,000.
Mother filed a petition for dissolution of marriage in June 2009. In May 2010, the
trustees filed a verified petition to reform the trust and modify the date of distribution of the
trust assets to Father. At a hearing on the petition, Father’s father testified that the purpose of
the trust was to pass the property inherited by Father’s mother to Father. In November 2010,
the trial court granted the trustee’s petition to reform the trust based on language in the trust
and ordered that Father’s interest in the trust would not vest prior to six months after the final
dissolution decree and completion of any appeal. Mother appealed, and this Court reversed
the trial court’s decision. See Chapman v. Chapman, 953 N.E.2d 573 (Ind. Ct. App. 2011),
trans. denied. Specifically, this court held that language in the trust did not support the
reformation. Id. at 583.
After the Indiana Supreme Court denied transfer in Chapman, Father’s father,
individually and as trustee of the trust, created a limited liability corporation known as
Pathfinder Investments, LLC. In March 2012, Pathfinder managers amended the agreement
and exchanged $19.5 million in trust assets for membership units in the limited liability
corporation. Father had no prior knowledge of the exchange. Although Father owns
approximately 95% of Pathfinder, he has no control over the management of the company.
He is prohibited from withdrawing or reducing the capital contributions without the express
consent of all other members, he forfeited all ownership in the assets transferred to
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Pathfinder, he has no right to request or demand payment of income earned by the company,
and he is not allowed to resign or liquidate his ownership interest or transfer ownership units
without the consent of the other members who can object to the liquidation for any reason.
The stated purpose for the creation of Pathfinder was an estate planning device.
A few months later, in May 2012, the trial court approved the parties’ Partial
Mediated Settlement Agreement, which resolved all issues relating to the division of marital
assets and liabilities. Specifically, pursuant to the terms of this agreement, Mother was
awarded in part the mortgage-free family home in Fort Wayne valued at $500,000, all
household goods in her possession at the home, a 2009 Lexus, and all cash in her possession,
including at least seven different accounts. Father was awarded in part the family’s
condominium in Boca Raton, Florida, the Fort Wayne home he purchased after the parties
separated, all possessions in those two homes, a 2005 Volvo, all General Electric stock, and
“[a]ll assets, including growth thereon or proceeds thereof in whatever current form of the
Stephen L. Chapman Irrevocable Trust established in 1997.” Appellant’s App. p. 100. The
agreement further provided that Father would pay Mother a lump sum of $4,300,000 as a
property equalization payment.
In December 2012, the parties submitted a Second Partial Mediated Settlement
Agreement, which resolved all issues relating to child custody and parenting time.
Specifically, pursuant to the terms of the agreement, the parties share joint legal custody of
the three boys. Mother has primary physical custody, and Father has parenting time
consistent with the terms of the Indiana Parenting Time Guidelines, subject temporarily to
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specific Settlement Agreement provisions.
In January 2013, the trial court held a three-day hearing to determine the sole
remaining issue regarding child support. The parties agreed that Mother’s weekly gross
income for child support purposes is $3609, which is based on Mother’s income from her
$7,000,000 investment portfolio. Father argued that his weekly gross income for child
support purposes is $7,638, which is based on his income from his $11,000,000 investment
portfolio. According to Father, based on these two incomes, his weekly child support
obligation would be $893.56.
Mother, however, asked the trial court to impute income to Father from the trust and
its successor Pathfinder, LLC. According to Mother, imputing this income would increase
Father’s weekly gross income to $18,956. With this imputed income, Father’s weekly child
support obligation would be $2,221.67 per week.
Although the parties never used the trust income during the course of the marriage,
both parties testified at the hearing that their children had a high standard of living during the
marriage. Specifically, the children attended a private school, went on several vacations
every year, had large birthday parties, and participated in country club activities such as
swimming, golf, and tennis. According to Mother, the $861 she was receiving as child
support at the time of the hearing was not sufficient for her sons to maintain the standard of
living they enjoyed during the marriage. Father, however, testified that the children’s
standard of living is actually higher now than it would have been had the marriage remained
intact. According to Father, although Mother was awarded a mortgage-free $500,000 home
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in the property settlement, she recently purchased a $711,000 home, which is larger than the
family home. She also added wood floors and a bedroom to the new home for an additional
$44,000. As a result, the children now live in a nicer house than they did during the marriage.
In addition, Father continues to pay the $42,000 tuition for their private school as well as the
county club fees.
Following the hearing, the trial court issued an order denying Mother’s request to
impute income from the trust and its successor Pathfinder, LLC, to Father’s weekly gross
income. Mother appeals.
Discussion and Decision
Mother argues that the trial court erred in calculating Father’s weekly gross income.
Specifically, she contends that the trial court should have imputed income to Father from the
trust and its successor limited liability company.
Child support calculations are made utilizing the income shares model set forth in the
Indiana Child Support Guidelines. Sandlin v. Sandlin, 972 N.E.2d 371, 374 (Ind. Ct. App.
2012). The guideline approach is promulgated in Indiana Code section 31-16-6-1, which
considers, among other things, the standard of living the child would have enjoyed if the
marriage had not been dissolved and the financial resources and needs of the noncustodial
parent. Nikolayev v. Nikolayev, 985 N.E.2d 29, 33 (Ind. Ct. App. 2013). The trial court is
vested with broad discretion in making child support determinations. Sandlin, 972 N.E.2d at
374. A trial court’s calculation of child support under the Guidelines is presumptively valid.
Morgal-Henrich v. Henrich, 970 N.E.2d 207, 212 (Ind. Ct. App. 2012).
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A trial court’s decision regarding child support will be upheld unless the trial court has
abused its discretion. Id. A trial court abuses its discretion when its decision is clearly
against the logic and the effect of the facts and circumstances before the court or if the court
has misinterpreted the law. Id. We do not reweigh the evidence or judge the credibility of
the witnesses upon review. Sandlin, 972 N.E.2d at 375. Rather, we consider only the
evidence most favorable to the judgment and the reasonable inferences to be drawn
therefrom. Id.
The Indiana Child Support Guidelines define “weekly gross income” in part as
follows:
[A]ctual weekly gross income of the parent if employed to full capacity,
potential income if unemployed or underemployed, and imputed income based
upon “in-kind” benefits.
This court has previously explained that the phrase “actual income” as used in the Guidelines
necessarily implies that the income be not only existing in fact but also currently received by
the parent and available for his immediate use. Carmichael v. Siegel, 754 N.E.2d 619, 628
(Ind. Ct. App. 2001).
In Carmichael, which is instructive to the case before us, the parents were divorced in
1992. Father assigned $286,000 in various IRAs to Mother. The trial court granted custody
of the parties’ two children to Father. When Father’s income declined and the parties’ son’s
expenses increased, Father filed a petition to modify Mother’s support obligation. Following
a hearing, the trial court imputed $20,400 to Mother’s weekly gross income based on the
earnings of her IRAs and ordered her to pay $10,000 of her son’s yearly tuition as well as
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$109 per week in child support. Id. at 624-25.
On appeal, we concluded that where the annual returns of a parent’s IRAs are
automatically reinvested and there is no indication that previous withdrawals from the IRAs
were made to fund the parent’s living or lifestyle expenses, those returns generally should not
be considered “actual income” when calculating the parent’s child support obligation. Id. at
629. Such returns are not currently received by the parent nor immediately available for his
or her use. Id. We therefore concluded that Mother’s IRA earnings were not weekly gross
income as the phrase is used in the Child Support Guidelines. Id.However, we also recognized that income that is not “actual” may be imputed to a
parent under certain circumstances. Id. For example, a trial court may impute income to a
parent that is voluntarily unemployed considering the parent’s work history, occupational
qualifications, prevailing job opportunities, and earnings levels in the community. Id. at 625,
629. In-kind benefits that a parent receives that reduce his or her living expenses may also be
imputed as income. Id. Further, the public policy behind the payment of child support may
require the imputing of income in any situation where a parent is intentionally committing
misconduct by deliberately hiding his or her income in order to avoid making support
payments. Id. at 630. Lastly, regular and continuing payments made by a subsequent spouse
that reduce the parent’s costs may also be the basis for imputing income. Id. Our review of
the purposes underlying the imputing of income revealed that none was implicated. Id. at
629. We therefore concluded that the trial court erred in imputing income from the earnings
of Mother’s IRAs. Id,
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Here, as in Carmichael, growth in Pathfinder is automatically reinvested because
Father has no right to request or demand payment of income earned by the company, and he
has never taken withdrawals from the trust to fund his living or lifestyle expenses. Because
Father does not currently receive these returns, and they are not immediately available for his
use, earnings from the company are not weekly gross income.
Further, none of the purposes underlying the imputing of income are implicated in this
case. Specifically, Father is not voluntarily underemployed, no in-kind benefits supplement
his income, Father is not deliberately hiding his income to avoid making support payments,
and he has no subsequent spouse that reduces his costs. Here, as in Carmichael, the trial
court did not err in failing to impute income from the trust and its successor company to
Father’s weekly gross income for child support purposes.
We further note that our review of the evidence reveals that the trust’s assets initially
consisted of stock in a mortgage company founded by Father’s grandparents eighty to ninety
years ago. The purpose of the trust was to pass this property to Father. The trust and all
assets including growth thereon were awarded to Father in a mediated settlement, and the
parties never used the trust income during the course of the marriage. Father’s support
obligation will be approximately $900 per week in addition to the $42,000 he pays for his
children’s education and country club dues. The parties’ children’s standard of living has not
suffered.
Our standard of review is flexible enough to permit the trial court to fashion a child
support order that is tailored to the circumstances of the particular case before it and
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consequently reflects its best judgment. Johnson v. Johnson, 999 N.E.2d 56, 60 (Ind. 2013).
Here, the trial court fashioned a solution that it believed was equitable to both parties, and its
decision is not clearly against the logic and effect of the facts and circumstances before the
court.
Conclusion
The trial court did not abuse its discretion when it failed to impute income to Father
from the trust and its successor limited liability company.
Affirmed.
FRIEDLANDER, J., and KIRSCH, J., concur.
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