Scott Alan Batt v. Mary Cathryn Batt ( 2013 )

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Scott Alan Batt, FILED
Petitioner June 24, 2013
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
vs) No. 12-0289 (Monongalia County 06-D-320) OF WEST VIRGINIA
Mary Cathryn Batt,
Respondent
MEMORANDUM DECISION
Petitioner Scott Alan Batt, by counsel James Wilson Douglas, appeals the Circuit Court
of Monongalia County’s “Order Granting the Petitions for Appeal” entered on April 13, 2010,
and “Order Denying the Petition for Appeal” entered on January 20, 2012. Respondent Mary
Cathryn Batt, who is pro se on appeal, asserts cross-assignments of error from the same orders
pursuant to Rule 10(f) of the Rules of Appellate Procedure.
This Court has considered the parties= briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds no substantial question of law and no prejudicial error. For these
reasons, a memorandum decision affirming is appropriate under Rule 21 of the Rules of
Appellate Procedure.
The parties were married in March of 1994, separated in July of 2006, and were divorced
by the final divorce order entered by the Family Court of Monongalia County on December 31,
2008. Both parties appealed the final divorce order to circuit court, which by order entered on
April 13, 2010, affirmed in part and reversed and remanded in part. After entry of additional
orders by the family court, both parties again appealed to circuit court. In its order of January 20,
2012, the circuit court affirmed. We apply the following standard of review:
In reviewing a final order entered by a circuit judge upon a review of, or upon a
refusal to review, a final order of a family court judge, we review the findings of
fact made by the family court judge under the clearly erroneous standard, and the
application of law to the facts under an abuse of discretion standard. We review
questions of law de novo.
Syl., Carr v. Hancock, 216 W.Va. 474, 607 S.E.2d 803 (2004).
In the appeal and cross-appeal, the parties raise a total of twenty assignments of error.
However, there is extensive overlap in these assignments of error. In general, the parties raise
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issues of allocation of custodial responsibility for their children, child support, spousal support,
and credits to offset equitable distribution.1
ALLOCATION OF CUSTODIAL RESPONSIBILITY
The parties have two minor children. Both parties presented testimony to the family court
on the amount and type of care that they provided to the children during the marriage. Pursuant
to West Virginia Code § 48-9-206(a), the general rule is that a court shall allocate custodial
responsibility so that the proportion of custodial time the child spends with each parent
approximates the proportion of time each parent spent performing caretaking functions for the
child prior to the separation. After considering the evidence, the family court made a finding of
fact that in the two-year period prior to the separation, the parties had been “roughly equal”
caretakers of the children. The family court proceeded to order a schedule where the children are
with Ms. Batt approximately sixty percent of the time and are with Mr. Batt approximately forty
percent of the time (including overnight visits).
Both parties argue that this allocation was an abuse of discretion. Mr. Batt argues that he
performed more than forty percent of the parenting before the separation, while Ms. Batt argues
that Mr. Batt performed less than forty percent. The family court heard the testimony and was in
a position to evaluate the credibility of the witnesses. After carefully considering the record on
appeal and the parties’ arguments, neither party has convinced us that the family court abused its
discretion on this issue.
CHILD SUPPORT
Characterization of temporary support payments:
Mr. Batt was ordered to pay Ms. Batt $7,000 per month during the pendency of the
divorce proceedings. During a September 27, 2006, temporary hearing, the parties and the family
court decided not to characterize this money at that time. Instead, the parties agreed that at some
point in the future, the family court would decide whether this money was spousal support, child
support, and/or an advance on equitable distribution. In the final divorce order, the family court
concluded that all of this money was an advance on equitable distribution. The family court also
found that Mr. Batt owed no child support. In the first appeal to circuit court, the circuit court
found that those two rulings were in error. The circuit court reversed those rulings and remanded
the case to the family court to calculate an award of child support for Ms. Batt and to determine
how much of this $7,000 per month should have been categorized as child support.
Mr. Batt argues that the circuit court retroactively modified a child support award, which
is generally prohibited by Syllabus Point 2, Hayhurst v. Shepard, 219 W.Va. 327, 633 S.E.2d
272 (2006). However, we disagree with Mr. Batt’s characterization of the circuit court’s ruling as
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The appendix record reflects that in 2011, Ms. Batt filed a bankruptcy petition in the
United States Bankruptcy Court for the Northern District of West Virginia. On October 31, 2011,
the bankruptcy court lifted the automatic stay to permit the lower courts and this Court to make
final determinations about equitable distribution in this divorce case.
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a “retroactive modification.” These temporary payments had already been made. The reason that
the payments were not characterized until later is that the parties had agreed to delay this
decision. One of the possible characterizations was always that some or all of the money would
be deemed to be child support. The family court ultimately made the decision on how to
characterize the money, and the circuit court reversed that decision on appeal. Under these
particular facts, we determine that this was not a retroactive modification.
Calculating Mr. Batt’s income for purposes of calculating child support:
As set forth above, on April 13, 2010, the circuit court remanded this case to the family
court for, inter alia, a calculation of Mr. Batt’s child support obligation. During the marriage, the
parties owned closely-held companies engaged in the business of real estate, including owning
rental properties. Mr. Batt continued operating the businesses after the separation and divorce.
During the marriage the businesses were very profitable, but the family court found unrefuted
evidence that the businesses had been unprofitable in recent years.
Both parties assert several errors regarding the family court’s determination of Mr. Batt’s
gross income for purposes of calculating his child support obligation. We will first address Mr.
Batt’s assigned errors, and then we will turn to Ms. Batt’s assigned errors. West Virginia Code §
48-1-228(b)(7) sets forth how to calculate gross income from self-employment or the operation
of a business, including the requirement of averaging income over a thirty-six month period:
Income from self-employment or the operation of a business, minus ordinary and
necessary expenses which are not reimbursable, and which are lawfully
deductible in computing taxable income under applicable income tax laws, and
minus FICA and medicare contributions made in excess of the amount that would
be paid on an equal amount of income if the parent was not self-employed:
Provided, That the amount of monthly income to be included in gross income
shall be determined by averaging the income from such employment during the
previous thirty-six-month period or during a period beginning with the month in
which the parent first received such income, whichever period is shorter[.]
On November 5, 2010, the family court entered an order determining that during the
pendency of the divorce, Mr. Batt had owed zero child support in 2006; $275 per month in 2007;
and $352.65 per month in 2008. To calculate the 2007 and 2008 amounts, the court attributed the
minimum wage to both parties.
In an order entered on September 30, 2011, the family court determined the amount of
child support Mr. Batt owed after the divorce. This time, the family court did not attribute any
income to the parties. The family court found that Mr. Batt had negative self-employment
earnings in 2007 through 2010, and a small amount of interest income. However, the family
court counted as income $136,909 in capital gains that Mr. Batt reported receiving in 2010 from
the sale of real property. The family court found that Ms. Batt also had negative self-employment
earning income, some business losses, and a small amount of interest income. The family court
counted as income $39,068 in capital gains that Ms. Batt reported receiving in 2010 from the sale
of real estate. After applying the child support formula, the family court concluded that Mr. Batt
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owed zero child support for 2009 and $235.17 per month for 2010. This was affirmed by the
circuit court in its January 20, 2012, order. When the family court made these calculations, the
parties had not yet filed their 2011 tax returns, thus the family court was unable to calculate Mr.
Batt’s 2011 child support obligation.
First, Mr. Batt argues that the family court erred by not reducing his 2010 gross income
by $104,140 in carry-forward net operating losses that his businesses suffered in 2008 and 2009
but that he had not been able to deduct until his 2010 federal tax return. Because Mr. Batt’s
businesses are limited liability companies, business income and losses are included on his
personal income tax returns. Mr. Batt argues that West Virginia Code § 48-1-228(b)(7) provides
for a reduction in gross income for lawfully deductible expenses. The circuit court rejected Mr.
Batt’s argument, finding that the family court had already considered these same losses when
calculating Mr. Batt’s negative self-employment earnings for 2008 and 2009. The circuit court
found that to use the $104,140 in 2010 would be duplicative. We find no error in this reasoning.
Next, Mr. Batt argues that it was error to include his capital gains earnings in the
calculation of his 2010 gross income. West Virginia Code § 48-1-228(c) provides that capital
gains “may” be counted as gross income “[d]epending on the circumstances of the particular
case[.]” Mr. Batt argues that this was a one-time sale of real estate that would not reoccur, and
this was real estate that Mr. Batt had been awarded in equitable distribution. Upon a
consideration of the parties’ circumstances, the circuit court found no error, and neither do we.
The family court also counted capital gains that Ms. Batt received in 2010 as part of her gross
income for purposes of the child support formula. Moreover, in light of the parties’ negative
employment earnings in 2010, this money obviously was needed to support the children. Finally,
the circuit court anticipated that the family court would be recalculating the child support award
when the parties’ 2011 tax returns became available. If Mr. Batt’s 2011 gross income is
substantially changed such that the amount of child support would be more than fifteen percent
different, Mr. Batt could pursue a motion for modification pursuant to West Virginia Code § 48­
11-105.
Mr. Batt argues that even if the family court correctly counted the capital gains as income
in 2010, the family court abused its discretion in determining what amounts to use. He argues
that the family court attributed only $39,038 in capital gains for Ms. Batt’s sale of two
undeveloped lots in the Windsor subdivision, while attributing $35,085 in capital gains for Mr.
Batt’s sale of just one undeveloped lot in the same subdivision. The circuit court found that
during the family court’s evidentiary hearing, Mr. Batt had failed to question the amount of
capital gains that Ms. Batt was reporting, and it is unknown whether the lots are of the same size
or value. Based upon a lack of information in the record, the circuit court could not find that the
family court had abused its discretion. We agree.
Furthermore, Mr. Batt argues that the family court erred by ordering him to pay child
support when he is unable to pay. He argues that he has had to borrow money from both business
and personal assets to pay the court-ordered child support and spousal support. Ms. Batt
responds, and argues in a cross-assignment of error, that Mr. Batt has manipulated his income to
avoid paying child support. Ms. Batt asserts that the “shareholder loans” Mr. Batt took from his
businesses should be counted toward his gross income because he has absolute control over these
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closely-held businesses; he has the sole discretion to determine whether the money he takes from
the businesses is categorized as a “salary” or as “loans”; and there are no documents reflecting
that he has any obligation to repay the loans. Mr. Batt replies that there is no evidence that he has
artificially reduced his income; to the contrary, the family court found there was unrefuted
evidence from Mr. Batt’s expert that the businesses have been unprofitable. Because we find the
family court carefully considered the parties’ respective incomes and capital gains when
applying the child support formula, we find no abuse of discretion.
Finally, Ms. Batt asserts that the family court erred by not attributing significant income
to Mr. Batt for the years 2009 and 2010. She argues that the family court disregarded evidence of
Mr. Batt’s earning capacity, specifically, that he previously earned $80,000 per year as a bank
loan officer and he has three college degrees. She argues that no reasonable person in Mr. Batt’s
position would continue spending time on business ventures that have lost money for years,
when he could obtain gainful employment for which he is qualified. In light of the entirety of the
parties’ circumstances, we cannot conclude that the family court committed clear error or an
abuse of discretion. During the marriage, Ms. Batt reaped the rewards of these same business
ventures when they were profitable. Furthermore, in its September 30, 2011, order, the family
court was very clear when instructing the parties that they both needed to support their children.
The family court warned that if Mr. Batt’s businesses showed a loss for a third straight year in
2011, and Mr. Batt lacked other sources of income, then the family court would impute income
to him going forward.
SPOUSAL SUPPORT
At the time of their separation, both parties were self-employed. Through their closely-
held companies, they owned real estate and operated rental properties. Mr. Batt argued that this
was a short-term marriage, Ms. Batt inflated her expenses, Ms. Batt had potential rental income
of $12,000 per year, and Ms. Batt had other available resources. Furthermore, Mr. Batt presented
expert vocational testimony that Ms. Batt has the ability to earn wages of $58,594 per year. In
the final divorce order, the family court attributed an annual income of $58,594 to Ms. Batt and
awarded her rehabilitative spousal support of $3,000 per month for sixty months.
In the first appeal to circuit court, Ms. Batt argued that it was error to attribute this much
income to her because she did not have full-time, gainful employment during the marriage and
she lacks a college degree. She argued that Mr. Batt has a college degree and a law degree,
controls all of the rental units, and that his previous employment as an accountant and bank loan
officer proves that he has the capacity to earn a higher income than he now claims. Ms. Batt
argued that although the parties completed a tax return(s) listing her salary as $50,000 from their
family-owned businesses, this was a decision made by their accountant and no non-family
business would ever pay that much for what was essentially clerical work that she performed.
The circuit court reviewed the evidence and the parties’ arguments and concluded that
“there is a basis for a nominal amount of” permanent rehabilitative spousal support. The circuit
court did not decide what that amount should be. Instead, the circuit court ordered that the family
court should retain jurisdiction and, at the end of the sixty months, reassess the parties’
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circumstances and modify, terminate, or extend the rehabilitative spousal support as may be
justified at that time.
Mr. Batt argues that the circuit court erred in not making a final, conclusive decision on
the spousal support issue, instead leaving the matter open for modification after sixty months.
We note that rehabilitative spousal support is modifiable pursuant to West Virginia Code § 48-8­
105(b). Although Mr. Batt understandably is eager to have finality now, we find no reversible
error in the circuit court’s decision.
Ms. Batt argues that the family court did not award her enough spousal support and that
she is entitled to a permanent award at this time. Again, we find no reversible error. The record
shows that the lower courts carefully considered the evidence, and Ms. Batt may seek a
modification at the end of sixty months.
Finally, Mr. Batt asserts that the family court failed to consider that he must borrow from
his personal and business assets to pay the spousal support. Ms. Batt responds that Mr. Batt
manipulated his income to avoid paying spousal support. These are the same arguments that the
parties made with regard to child support. We reject these arguments for the same reasons we
rejected them above.
CREDITS TO OFFSET EQUITABLE DISTRIBUTION
Pursuant to a temporary order, Mr. Batt paid certain marital debt during the pendency of
the divorce case. In the first appeal to circuit court, Mr. Batt argued that he did not receive the
correct amount of credit against equitable distribution for the marital debt he paid up through the
November 12, 2008, final divorce hearing. See Conrad v. Conrad, 216 W.Va. 696, 702, 612
S.E.2d 772, 778 (2005) (“Recoupment of payment of marital debt by one party prior to the
ultimate division of marital property has often been permitted upon a final equitable distribution
order.”) (Citations omitted). The circuit court agreed with Mr. Batt and in its April 13, 2010,
order remanded this issue to the family court for correction. On remand, the credit for Mr. Batt’s
payments through November 12, 2008, was corrected to Mr. Batt’s satisfaction.
However, on remand Mr. Batt asked the family court to give him additional credit for
debt he paid after the November 12 hearing through the entry of the final divorce order on
December 31, 2008. Moreover, on remand Ms. Batt asserted that she had also paid interim
marital debt so she also sought a credit. Ms. Batt asked to vouch the record with this information.
The family court refused both requests for additional credits, and the circuit court affirmed.
We find no error in these rulings because both requests for credit were untimely. Mr. Batt
would have known of his additional payments when the December 31, 2008, final divorce order
was entered, yet he failed to file a motion for reconsideration or raise this particular issue in the
first circuit court appeal. It is not clear from Ms. Batt’s pro se brief exactly what interim martial
debt she is referencing, but nonetheless she should not have waited until the 2010 remand to
raise this issue for the first time.
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Ms. Batt also asserts error with regard to a credit that Mr. Batt was given for mortgage
payments he made on a Deep Creek rental condominium for the period March 31, 2009, through
June 18, 2010. This condominium had been marital property but was awarded to Ms. Batt in the
December 31, 2008, final divorce order. Mr. Batt asserted that that this property was still in both
of their names, but Ms. Batt was failing to pay the mortgage so he had to pay it. Ms. Batt argues
that Mr. Batt was still controlling the rental unit and receiving the rental income and deductions.
It appears that this request for credit was timely asserted. We find no abuse of discretion in the
family court’s decision to give Mr. Batt a credit for these post-divorce payments.
Finally, the family court directed that certain amounts that Mr. Batt was ordered to pay
are to be collected by the Bureau for Child Support Enforcement for remittance to Ms. Batt. Mr.
Batt argues that Ms. Batt also owes him money—including attorney’s fees, condominium fees,
and a Conrad credit—yet the family court did not offset his debt to her by the amount of her debt
to him. We find that such procedural matters are best left to the family court’s discretion,
particularly since any judgments were not yet final because the case was subject to appeal.
After a thorough review of the parties’ numerous assignments of error, we conclude that
the lower courts fairly balanced the parties’ rights, properly applied the law, and did not abuse
their discretion or commit clear error. For the foregoing reasons, we affirm.
Affirmed.
ISSUED: June 24, 2013
CONCURRED IN BY:
Chief Justice Brent D. Benjamin
Justice Margaret L. Workman
Justice Menis E. Ketchum
Justice Allen H. Loughry II
DISSENTING:
Justice Robin Jean Davis
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