Davis v. Davis , 489 S.W.3d 195 ( 2016 )

Cite as 2016 Ark. App. 210
ARKANSAS COURT OF APPEALS
DIVISION III
CV-14-533
No.
DON DAVIS Opinion Delivered: April 13, 2016
APPELLANT
APPEAL FROM THE POPE
V. COUNTY CIRCUIT COURT
[NO. DR-2012-417]
CHERYL DAVIS
APPELLEE HONORABLE DENNIS CHARLES
SUTTERFIELD, JUDGE
AFFIRMED;
MOTION TO STRIKE DENIED
WAYMOND M. BROWN, Judge
In this divorce case, appellant Don Davis argues that the circuit court erred in
dividing his and appellee Cheryl Davis’s property and in failing to award him attorney’s fees.
We affirm the circuit court’s rulings. 1
I. Background
Don and Cheryl were divorced in 2014. During their nineteen-year marriage, they
owned a pawn shop, which they sold in 2007. After the sale of the pawn shop, Don did not
work outside the home. He drew Social Security and was apparently disabled.
Cheryl, who is fifteen years younger than Don, continued to work after the pawn
shop was sold. In 2007, she and her mother, Helen McCoy, purchased a business called
1
On certification, our supreme court ruled that the decree in this case was a final,
appealable order. Davis v. Davis, 2016 Ark. 64. The case was then remanded to our court
for a decision on the merits.
Cite as 2016 Ark. App. 210
Bethany’s Design Center for $180,000. Each of them paid $25,000 down, with the balance
of the purchase price to be paid in installments of $5,000 per month to the former owner,
Ms. Self. Later on, Cheryl and Helen invested another $12,500 apiece in the business. They
considered themselves equal partners in Bethany’s and both worked at the shop. Cheryl paid
herself $350 per week as wages, but she and Helen agreed that Helen’s wages would be
deferred to a later date. Helen worked at Bethany’s for four years.
Bethany’s generated sufficient revenue to pay expenses, repay Ms. Self, and repay
Cheryl’s and Helen’s capital investments. Nevertheless, according to Cheryl, the economy
was performing poorly and the business was expensive to operate. There was evidence the
company’s finances were buttressed by receiving $100,000 in insurance proceeds following
a 2009 fire and by Cheryl’s using her and Don’s credit card and line of credit for extra
revenue during the shop’s “slow months.”
At some point in 2012, Cheryl and Don separated, and in July 2012, Cheryl sued
Don for divorce. The court entered a temporary order giving Cheryl possession of Bethany’s
but prohibiting the disposal of marital property. Despite this order, Cheryl decided that
Bethany’s should close, and she began selling the store’s inventory at reduced prices in late
2012. 2 By early 2013, the business had sold approximately $220,000 worth of inventory for
$98,000. Upon consulting with an accountant, Cheryl used $67,000 of the sale proceeds to
pay Helen for her four years of deferred salary. Cheryl and Helen testified that they arrived
at the $67,000 figure by calculating the amount that Cheryl had been paid over the same
2
Don asked that Cheryl be held in contempt for violating the agreed temporary
order. The court refused to do so and instead ordered Cheryl to make Bethany’s financial
records available to Don.
2
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time period: approximately $1,400 per month for 48 months.
Following the sale, Bethany’s was left with about $5,000 worth of inventory and
some debt on Cheryl and Don’s credit card and line of credit. The remainder of the $98,000,
save a few hundred dollars, went toward Bethany’s final operating expenses.
After liquidating Bethany’s, Cheryl moved from Pope County to Eureka Springs. In
May 2013, she bought a business there with the help of a $45,000 loan from Helen. She
also signed a contract to buy a house, for which Helen loaned her $5,000 as earnest money.
A month later, in June 2013, a trial was held on the parties’ property-division issues.
Don asked for an unequal division of marital property in his favor, claiming that Cheryl had
dissipated marital assets by selling Bethany’s inventory for less than fifty percent of its value,
then paying $67,000 of the sale proceeds to Helen. Don also informed the court that Cheryl
had possibly acquired marital property in Eureka Springs, and he asked that a substantial part
of a large firearm collection be declared his separate, non-marital property.
Following the trial, the circuit court entered an order that essentially divided all
marital property equally. The court declined to make an unequal division of marital property
based on Don’s allegation that Cheryl had dissipated Bethany’s assets. The court found that
Bethany’s “did not do that well” and was a “failure,” plus the court credited Helen’s
testimony that the $67,000 she received from the proceeds of Bethany’s inventory was
compensation for her investment in and work at Bethany’s. However, the court found fault
with Cheryl’s making the $67,000 payment to Helen before paying off Bethany’s debts. The
decree therefore ordered Cheryl to pay two-thirds of the debt on her and Don’s credit card
and $15,000 on their line of credit.
3
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With regard to Cheryl’s Eureka Springs business and home, the court found that
there was no equity to divide in those properties because Cheryl had acquired them solely
with borrowed money. The court did, however, hold Cheryl fully responsible for the debt
on the properties. As for Don’s claim that part of the gun collection was his separate
property, the court noted Don’s testimony on this issue lacked credibility, and the court
ruled that all firearms proven by the evidence were marital property. 3 Finally, each party
was ordered to pay his or her own attorney’s fees. Don filed this appeal. 4
II. Standard of Review
We review divorce cases de novo. 5 However, we will not reverse the circuit court’s
findings of fact unless they are clearly erroneous. 6 Findings are clearly erroneous when the
reviewing court, on the entire evidence, is left with a firm conviction that a mistake has
been committed. 7 We give due deference to the circuit court’s superior position to
determine the credibility of the witnesses and the weight to be given their testimony. 8 We
3
The court did award Don one gun safe that Cheryl had given to him as a gift.
4
The court also ordered a sale of the parties’ marital home, with the proceeds divided
equally; ordered the parties to equally divide the remaining monthly payments owed to
them on the sale of rental property; ordered the remaining assets of Bethany’s to be sold
with the proceeds divided equally; and ruled that Don would receive foreign currency
worth $80,000 as his sole property.
5
Fields v. Fields, 2015 Ark. App. 143, 457 S.W.3d 301.
6
Id.
7
Webb v. Webb, 2014 Ark. App. 697, 450 S.W.3d 265.
8
Fields, supra.
4
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will not substitute our judgment on appeal as to what property interest each party should
have; we will decide only whether the court’s order is clearly wrong. 9
III. Division of Property
At the time a divorce decree is entered, the circuit court shall distribute all marital
property one-half to each party unless the court finds such a division to be inequitable. 10
There is a presumption that an equal division is fair and equitable. 11 A circuit court has
broad powers to distribute property in a divorce case, and it need not do so with
mathematical precision. 12 The purpose of our property-division statute is to enable the trial
court to make a division that is fair and equitable under the circumstances. 13 The court is
vested with a measure of flexibility in apportioning the total assets, and the critical inquiry
is how the total assets are divided. 14
A. Request for Unequal Property Division
Don argues first that the circuit court should have made an unequal division of marital
property in his favor because Cheryl fraudulently dissipated marital assets. He cites the fact
that Cheryl sold Bethany’s assets for less than half their value, paid Helen $67,000 from the
9
Id.
10
Ark. Code Ann. § 9-12-315(a)(1)(A) (Repl. 2015).
11
Webb, supra.
12
Id.
13
Barron v. Barron, 2015 Ark. App. 215.
14
Jones v. Jones, 2014 Ark. 96, 432 S.W.3d 36.
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sale proceeds, then received a $50,000 loan from Helen to buy a home and business in
Eureka Springs. Don correctly states that an unequal distribution of property or other
compensatory measure may be justified based on one party’s fraudulent transfer or
dissipation of marital assets. 15
Don begins by challenging the legitimacy of the $67,000 payment to Helen. We see
no basis for reversal on this point. The testimony demonstrated that Helen worked at
Bethany’s for four years with no salary and that both she and Cheryl agreed from the
beginning of their endeavor to defer her salary to a later date. Cheryl and Helen also testified
that the $67,000 figure was based on the same $350 per week that Cheryl had been paid
over a four-year period. Significantly, the trial judge found that Helen’s testimony on this
point was credible, and we defer to his superior position to determine a witness’s
credibility. 16 Under these circumstances, the evidence supports the court’s finding that the
$67,000 payment to Helen was legitimate compensation for her participation in the
Bethany’s enterprise.
Don argues next that Bethany’s was a successful business, and he takes issue with the
language in the decree that Bethany’s “did not do that well” and was “a failure.” While we
agree that characterizing the business as a failure may have been an overstatement, we do
not view each of the court’s findings in isolation. 17 Rather, we determine whether all factors
15
See Skokos v. Skokos, 332 Ark. 520, 968 S.W.2d 26 (1998); Freeman v. Freeman,
2013 Ark. App. 693, 430 S.W.3d 824.
16
Fields, supra.
17
See Boudreau v. Pierce, 2011 Ark. App. 457, 384 S.W.3d 664.
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considered in the aggregate support the court’s ruling. 18 In this case, there was evidence that
Bethany’s was operating in a difficult economic climate and that at least part of its ability to
meet expenses was facilitated by the $100,000 in fire-insurance proceeds and by Cheryl’s
use of her and Don’s credit card and line of credit.
For his final argument on this point, Don contends that other reasons justify an
unequal division of property in his favor. He cites Arkansas Code Annotated section 9-12-
315(a)(1)(A), which sets forth various factors that a court must take into account in making
an unequal distribution of marital property. These include the parties’ health, income, and
employability, among others. Don contends that because he is older than Cheryl, receives
social-security benefits, and is disabled, an unequal distribution in his favor was warranted.
As a threshold matter, Don did not develop this argument in circuit court nor obtain
a ruling on it. The argument is therefore waived on appeal. 19 In any event, we conclude
that the court’s overall division of marital property was equitable, especially in light of the
presumption in favor of equal distribution of marital assets.20
B. Eureka Springs Property
Don argues next that the circuit court erred in failing to grant him an interest in the
home and business that Cheryl purchased in Eureka Springs approximately one month
before trial. For the following reasons, we do not agree with Don that reversal is warranted.
18
Id.
19
See Colquitt v. Colquitt, 2013 Ark. App. 733, 431 S.W.3d 316.
20
Webb, supra.
7
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We observe at the outset that the Eureka Springs business and the real-estate contract
undisputedly qualified as marital property. Assets acquired after separation but prior to
divorce are marital property. 21 In particular, we have held that a real-estate contract, signed
before a divorce decree is entered, is an enforceable right that is classified as marital
property. 22 However, the evidence at trial was that Cheryl acquired the business and made
her down payment on the house with borrowed money. The circuit court therefore noted
that there was no divisible equity in either property. As a result, the court awarded the
properties to Cheryl but held her responsible for all of the indebtedness thereon.
On the record before us, we cannot say that the circuit court clearly erred in its
ruling. The proof, as developed at trial, does not reveal the existence of any equity in the
Eureka Springs properties. Consequently, the court recognized the impracticality of making
a division where there was nothing to divide. 23 Moreover, the court saddled Cheryl with
all of the debt on the properties. The critical inquiry is how the total assets are divided. 24
Applying this standard, there is no reversible error.
C. Gun Collection
Much of the controversy at trial involved a large gun collection that was valued at
$67,627. Don asked the court to award at least some of the guns to him as his separate
21
O’Neal v. O’Neal, 55 Ark. App. 57, 929 S.W.2d 725 (1996).
22
Page v. Anderson, 85 Ark. App. 538, 157 S.W.3d 575 (2004).
23
See Ark. Code Ann. § 9-12-315(a)(1)(A), which requires marital property to be
“distributed.”
24
Jones, supra.
8
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property. The court instead ruled that all of the guns in evidence were marital property,
except for one gun safe that Cheryl had given Don.
On appeal, Don argues that the circuit court clearly erred in failing to award him any
guns as his separate property. However, it is apparent from the record that the evidence on
this issue was in utter conflict. Don testified that he had received some of the guns as gifts
and that he had given his entire gun collection to his daughter Candace in 2010. His
testimony was somewhat corroborated by a family friend. 25 However, Don’s testimony
conflicted with his own trial exhibits, which indicated that he had given Candace some, but
far from all, of his guns.
According to Cheryl, Don brought home 156 guns in 2007 after the pawn shop
closed—a business in which she and Don were equal shareholders. She stated that she was
unaware that Don had given the firearms to anyone and that, when she left the marital
residence, the guns were still there as far as she knew. 26
It was Don’s burden to prove what guns were his separate property. 27 Further, the
conflicting proof on this issue was for the trial court to resolve. 28 The court expressly found
that Don’s testimony on this matter was not credible, and we defer to the court’s superior
25
Candace did not testify.
26
Cheryl testified that Don owned three to five guns when they got married, but
the evidence does not reveal anything further about the identity or disposition of those guns.
27
Johnson v. Johnson, 2011 Ark. App. 276, 378 S.W.3d 889.
28
Kuelbs v. Hill, 2010 Ark. App. 427, 379 S.W.3d 47.
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position to determine a witness’s credibility. 29 We therefore decline to hold that the trial
court’s decision to treat the guns as marital property was clearly erroneous.
IV. Attorney’s Fees
Don’s final argument is that the circuit court erred in ordering both parties to bear
their own attorney’s fees. He contends that the court should have awarded attorney’s fees
to him because Cheryl had the greater ability to pay. He cites his age, ill health, and limited
income as justification for a fee award in his favor. He also claims he is entitled to fees in
light of other matters that occurred during trial, along with Cheryl’s alleged “intentional”
dissipation of Bethany’s assets and “illusory” loans from Helen.
It is well established that the circuit court has the inherent power and discretion to
award attorney’s fees in a divorce case. 30 The trial court has the superior ability to make this
determination, and we will not reverse absent an abuse of discretion. 31
The court did not abuse its discretion here. We note initially that we have rejected
Don’s arguments regarding the sale of Bethany’s assets and Cheryl’s acquisition of the Eureka
Springs properties. We further observe that the parties’ marital property was evenly divided
by the divorce decree and each stands to benefit from the proceeds once the property is
sold. Cheryl was also given responsibility for most of the existing debt, and Don received
some foreign currency as his separate property, which the testimony showed had a value of
29
Fields, supra.
30
Guthrie v. Guthrie, 2015 Ark. App. 108, 455 S.W.3d 839.
31
Webb, supra.
10
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$80,000. The issue of attorney’s fees must be viewed in light of and in conjunction with
property-distribution issues. 32 As well, a court does not abuse its discretion simply by failing
to order the party having more income to pay the other party’s attorney’s fees. 33
Under these circumstances, we will not reverse the trial court’s ruling on this point. 34
Affirmed.
VIRDEN and HIXSON, JJ., agree.
Owings Law Firm, by: Tammy B. Gattis, for appellant.
Wood Law Firm, P.A., by: Russell A. Wood; and Robert S. Tschiemer, for appellee.
32
Id.
33
Id.
34
Don asks that we strike Cheryl’s supplemental abstract and addendum on the
ground that they are unnecessary and duplicative. We deny the motion to strike. However,
we note that we have not considered Cheryl’s supplemental abstract and addendum in
making our ruling.
11