Farrell v. Farrell ( 2017 )

Cite as 2017 Ark. App. 7
ARKANSAS COURT OF APPEALS
DIVISION I
No.CV-16-436
OPINION DELIVERED: JANUARY 18, 2017
CYNTHIA BUTLER FARRELL
APPELLANT APPEAL FROM THE SEBASTIAN
COUNTY CIRCUIT COURT,
FORT SMITH DISTRICT
V. [NO. 66DR2009-580]
HONORABLE JIM D. SPEARS,
HANFORD FRANCIS FARRELL JUDGE
APPELLEE
AFFIRMED IN PART; REVERSED
IN PART; AND REMANDED
ROBERT J. GLADWIN, Judge
Cynthia “Cindy” Farrell and Hansford “Hank” Farrell were divorced by decree
entered in November 2011. Cindy appeals for the third time1 and argues that the Sebastian
County Circuit Court should have provided a more equal distribution of the marital assets
and that the court erred in denying her requests for alimony and attorney’s fees. We agree
that the circuit court’s division of the marital property was not equitable to either party.
Accordingly, we reverse in part, affirm in part, and remand.
This was a marriage lasting more than thirty years. The parties agreed that all of their
substantial amount of property was marital property. The major asset and the crux of this
dispute is Hank’s minority interest in a conglomerate of closely held family businesses
1
Farrell v. Farrell, 2014 Ark. App. 601 (Farrell II); Farrell v. Farrell, 2013 Ark. App.
23, 425 S.W.3d 824 (Farrell I).
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referred to by the circuit court and the parties as the Farrell-Cooper Companies. He also
owns an interest in what the parties called the Texas entities or ventures. The circuit court
valued the marital interest in the Farrell-Cooper Companies at $9.9 million after applying a
discount, with the entire interest being awarded to Hank. Cindy was awarded the remaining
marital property, which included the proceeds from the sale of the marital home, another
house in Fort Smith, and the parties’ IRA and 401K accounts, with a total value of
approximately $1.045 million. Cindy was also awarded lifetime alimony to compensate for
the unequal property division. Cindy’s appeal of the decree led to our opinion in Farrell I.
Following remand from Farrell I, the circuit court valued the Texas entities at $1.6
million, with each party’s share valued at $800,000. The court then applied a thirty-five
percent minority discount to Cindy’s share, with her share calculated at $670,148.58. This
brought Cindy’s share of the marital estate to approximately $5.2 million. The Texas entities
were assigned, in their entirety, to Hank. The court increased Cindy’s alimony to $13,000
per month. Cindy also appealed this decision.
In Farrell II, we noted lack of clarity in the circuit court’s ruling. There was
uncertainty as to whether the periodic payments labeled “alimony” were traditional alimony
or payments for Cindy’s share of the marital property. We noted that the court appeared to
make an unequal distribution of the marital estate without stating the basis for such a
division, as required by Arkansas Code Annotated section 9-12-315(a)(1)(B) (Repl. 2015).
We also stated that the fact Hank was awarded all of the parties’ income-producing property
while Cindy had to wait many years before she received her full share of the marital estate
was a concern. The circuit court was directed to consider whether Hank should be required
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to obtain a loan to pay Cindy for her share of the marital property. We further suggested
that the court consider some type of security for the payments. Finally, we granted the
circuit court permission to reconsider whether Cindy should receive “traditional,” need-
based alimony and any possible tax consequences.
Following the remand from Farrell II, the circuit court confirmed that the monthly
payments to Cindy were intended to compensate her for her share of the marital estate. The
court conducted a hearing on November 12, 2015, to determine whether Hank should be
required to obtain a loan to pay Cindy and what security could be provided to Cindy for
the payment of the money owed her. During the hearing, the parties presented evidence
addressing whether Hank would be able to obtain a loan with which to pay Cindy for her
share of the marital estate. Cindy also proposed that Hank sign a note to her in the amount
of approximately $4.2 million on very favorable terms.
At the conclusion of the hearing, the circuit court asked both parties to submit
proposed findings of fact and conclusions of law. The court later adopted the findings of fact
and conclusions of law submitted by Hank. The court concluded that Hank was unable to
obtain a loan from a commercial bank and rejected Cindy’s proposal that Hank sign a
promissory note in her favor secured by his interest in the family businesses. The court found
that such an arrangement would be unfair to Hank. The court also denied Cindy’s request
for need-based alimony and denied her petition for attorney’s fees. A decree incorporating
the findings and conclusions was entered on February 4, 2016. This appeal followed.
In the earlier appeals, we set forth our standard of review as follows:
On appeal, we review divorce cases de novo. We give due deference to the
circuit court’s superior position to determine the credibility of witnesses and the
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weight to be given their testimony. With respect to the division of property in a
divorce case, we review the circuit court’s findings of fact and affirm unless those
findings are clearly erroneous. The obligations imposed upon a trial court by our
property-division statute are quite exacting. Arkansas Code Annotated section 9-12-
315(a) (Repl. 2009) provides that “[a]ll marital property shall be distributed one-half
to each party unless the court finds such a division to be inequitable.” The court may
make some other division that it deems equitable; however, when it decides not to
divide the property equally between the parties, it must recite its basis and reasons
for the unequal division in its order.
Farrell I, 2013 Ark. App. 23, at 6, 425 S.W.3d at 829 (alteration in original) (citations
omitted). We have noted that
[t]he circuit court has broad powers to distribute property in order to achieve
a distribution that is fair and equitable under the circumstances; it need not do so
with mathematical precision. The critical inquiry is how the total assets are divided.
We will not substitute our judgment on appeal as to the exact interest each party
should have but will decide only whether the order is clearly wrong.
Id. at 7, 425 S.W.3d at 830 (citations omitted).
We find merit in Cindy’s first argument that the circuit court erred in its distribution
of the parties’ marital property. Cindy argues that she is entitled to receive approximately
$4.2 million as her share of the marital estate.
In each of its orders leading to Farrell I and Farrell II, the circuit court found that each
party’s share of the marital estate was worth approximately $5.2 million. It did not modify
that finding in subsequent orders; the only mention of an unequal distribution was of the
stock in the Farrell-Cooper Companies being awarded to Hank with Cindy receiving most
of the parties’ liquid assets. Therefore, we surmise that the circuit court intended for each
party to receive an equal share of approximately $5.2 million. Under the decree as amended,
Cindy was awarded $1.045 million in liquid assets. Hank was permitted to pay to Cindy her
outstanding share of the property division as “alimony” of $13,000 per month for the
remainder of Cindy’s life. The circuit court later clarified on remand from Farrell II that the
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payments were indeed intended as reimbursement for Cindy’s share of the marital property.
However, the court made no provision for what would happen to the payments in the event
of the death of either party. The court also did not address interest on the payments.
The circuit court’s approach is not equitable to either party. As we pointed out in
Farrell II, it would take over twenty-six years to pay Cindy the remaining $4.16 million due
for her share of the marital property. Farrell II, supra, at 7. It is unfair to Hank to make him
continue until he is in his eighties to pay Cindy for her share of the marital property. It is
likewise unfair to make Cindy wait until she is also in her eighties to have the full enjoyment
of her share of the marital property while Hank is able to fully use his share now. By
requiring that all property be divided and distributed at the time the divorce decree is
entered, Arkansas Code Annotated section 9-12-315(a) seeks to disentangle the parties’
financial affairs and make them free from each other’s interference. The rationale for such a
statute was well explained by the New Hampshire Supreme Court as follows:
Any court order that postpones distribution, thereby financially linking the parties to
one another following a judgment of dissolution, invites future strife when one of
the parties seeks to enforce the order. In addition, the spouse awaiting distribution
could find [himself] or herself deprived of, or forced into further litigation
concerning, the ordered share of marital property by intervening events such as the
obligor’s bankruptcy, fraudulent transfer of assets, or untimely death. As such, a trial
court should award a property settlement to be effected immediately where
practicable.
In the Matter of Harvey & Harvey, 899 A.2d 258, 268 (N.H. 2006), overruled on other grounds
In the Matter of Chamberlin & Chamberlin, 918 A.2d 1 (N.H. 2007).
Here, the parties’ major asset is Hank’s stock in the Farrell-Cooper Companies and
the Texas entities. Arkansas Code Annotated section 9-12-315(a)(4) governs this issue and
provides as follows:
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(4) When stocks, bonds, or other securities issued by a corporation, association, or
government entity make up part of the marital property, the court shall designate in
its final order or judgment the specific property in securities to which each party is
entitled, or after determining the fair market value of the securities, may order and
adjudge that the securities be distributed to one party on condition that one-half
(1/2) the fair market value of the securities in money or other property be set aside
and distributed to the other party in lieu of division and distribution of the securities.
In Hodges v. Hodges, 27 Ark. App. 250, 770 S.W.2d 164 (1989), we applied the statute and
pointed out that a circuit court has two options when dividing corporate stock in a divorce:
(1) designate the specific property in stock to which each party is entitled or (2) order that
the stock be distributed to one party and the other party receive one-half of the fair market
value of the stock in money or other property. We specifically held that the statute did not
authorize a stock sale and division of the proceeds.
We recognize that the Farrell-Cooper Companies and the Texas entities are closely
held family corporations and, as such, have limited marketability. We further recognize that
the circuit court did not want to make Cindy a shareholder because her lack of knowledge
of the business and her lack of trust toward Hank’s family members running the business
would make her, in the words of her attorney, an “officious intermeddler.” We also have
before us the circuit court’s finding that Hank lacks the ability to borrow sufficient funds
with which to pay Cindy for her interest in the marital property. 2 However, these findings
cannot in any way justify the circuit court’s departure from its obligation to make an
2
We note that the circuit court’s findings on remand from Farrell II attempted to rely
on the fact that coal prices (one of the businesses of the Farrell-Cooper Companies) had
fallen since the trial in 2011 to justify an unequal division of the marital property. However,
such hindsight cannot use subsequent events to alter the value of the marital property that
existed as of the date of the divorce. See Skokos v. Skokos, 344 Ark. 420, 40 S.W.3d 768
(2001).
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equitable division of the parties’ marital property. Nor do the same findings justify ignoring
section 9-12-315(a)’s command that the marital property be distributed at the time of the
divorce. See Russell v. Russell, 275 Ark. 193, 628 S.W.2d 315 (1982). Accordingly, we hold
that the circuit court erred by allowing Hank to pay a substantial portion of Cindy’s share
of the marital property over a multi year period. Upon remand, the circuit court should,
pursuant to section 9-12-315(a)(4), order an immediate equal division of the stock. Hank is
to be given credit against Cindy’s share of the marital property for the monthly “alimony”
payments he has made since entry of the original decree.
This brings us to Cindy’s second argument that the circuit court abused its discretion
in failing to award her traditional, need-based alimony. In denying Cindy’s request for
traditional alimony, the circuit court found that there was “insufficient evidence presented
[at the trial] in 2011 to support traditional ‘need-based’ alimony: $1.0-plus million in
investable cash, plus the equitable reimbursement alimony, would reasonably address any
need(s) that had been presented by [Cindy].”
The decision to grant alimony lies within the sound discretion of the circuit court
and will not be reversed on appeal absent an abuse of discretion. Stuart v. Stuart, 2012 Ark.
App. 458, 422 S.W.3d 147. A circuit court abuses its discretion when it exercises its
discretion improvidently, or thoughtlessly and without due consideration. Id. The purpose
of alimony is to rectify the economic imbalance in earning power and standard of living of
the parties to a divorce in light of the particular facts of each case. Davis v. Davis, 79 Ark.
App. 178, 84 S.W.3d 447 (2002). In fixing the amount of alimony to be awarded, the circuit
court is given great discretion, and the appellate courts will not disturb the award on appeal
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unless there is an abuse of that discretion. Id. The primary factors to be considered in making
or changing an award of alimony are the need of one spouse and the ability of the other
spouse to pay. Id. Secondary factors to be considered by the trial court include (1) the
financial circumstances of both parties; (2) the amount and nature of the income, both
current and anticipated, of both parties; (3) the extent and nature of the resources and assets
of both parties; and (4) the earning ability and capacity of both parties. Id. The amount of
alimony awarded should not be reduced to a “mathematical formula” because the need for
flexibility outweighs the need for relative certainty. Id.
Cindy argues that the circuit court failed to consider the proper factors in denying
her request. There was no additional evidence presented on remand from either appeal
dealing with factors bearing on alimony. The court’s original 2011 letter opinion stated that
the court considered all of the factors relevant to alimony. The parties were married for over
thirty years. Cindy was 55 years old at the time of trial in 2011, making her now 60. Cindy
was not employed outside of the home during that entire time, and she has no likelihood
of earning much in the future. She has a number of health problems, and the circuit court
did not direct Hank to continue providing health insurance for her. These factors would
support an award of need-based alimony. Hank also clearly has the ability to pay, as shown
by the testimony at trial. On the other hand, Cindy was awarded $1 million in cash. We
have now held that she is entitled to approximately $4.16 million in stock in the closely-
held corporations. As the circuit court said in its original 2011 letter opinion, that is a
sufficient estate so that Cindy would not have a “need” for traditional alimony.
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We cannot say that the circuit court’s decision denying Cindy alimony was made
thoughtlessly and without due consideration. Thus, it was not an abuse of discretion.
Finally, Cindy argues that the circuit court abused its discretion in failing to award
her attorney’s fees for the work done on appeal in Farrell II. Cindy sought approximately
$18,000 in attorney’s fees. Hank argues that the circuit court lacked jurisdiction to award
fees because the remand from Farrell II was a limited one, and we did not designate attorney’s
fees as one of the issues for the circuit court to clarify. The circuit court ruled, without
explanation, that each party was to bear his or her own fees and costs.
Hank is correct. We did not discuss fees as an issue for the remand from Farrell II.
We have held that a trial court was without authority to award attorney’s fees following an
appeal where the additional fees on appeal were not awarded by the direction of the
appellate court, were not of a ministerial nature in following the appellate mandate, and
were for services of the prevailing party’s attorney on appeal. Nat’l Cashflow Sys., Inc. v.
Race, 307 Ark. 131, 817 S.W.2d 876 (1991).
Affirmed in part; reversed in part; and remanded.
HARRISON and VAUGHT, JJ., agree.
Davis, Clark, Butt, Carithers & Taylor, PLC, by: Constance G. Clark and William
Jackson Butt II, for appellant.
Ralph C. Williams and Nancy A. Martin; and Smith, Cohen & Horan, PLC, by:
Matthew T. Horan, for appellee.
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