Opinion
353435
10-14-2021
MEAGAN RENE THOMAS WELLS, Plaintiff-Appellee, v. RYAN DAVID WELLS, Defendant-Appellant.
UNPUBLISHED
Grand Traverse Circuit Court LC No. 18-014509-DM
Before: Redford, P.J., and K. F. Kelly and Letica, JJ.
Per Curiam.
Defendant appeals as of right the judgment of divorce that dissolved his marriage with plaintiff. Because the trial court failed to make findings of fact and render valuations of any marital or separate property subject to division, we vacate the property settlement in the divorce judgment and remand for proceedings consistent with this opinion.
I. BASIC FACTS AND PROCEDURAL HISTORY
In 2009, plaintiff and defendant married. At that time, they were living in a home that defendant had purchased in 2006. The home was a quadplex. Plaintiff's name was added to the title of the property in 2014. Defendant and plaintiff lived on the main floor of the quadplex and rented out the three upper units. Over the years, the parties worked in various jobs and created different companies. At one point, the couple worked for Hybra Advanced Technologies, a company that defendant cofounded. Defendant also assisted with his parents' company, Leasewell, Inc., a company in which he had an ownership interest. In 2013, the parties opened Center City Kitchen, LLC. Center City Kitchen rented out its kitchen to chefs who needed a workspace, with equipment available at the site. The parties owned 50% of the company, and defendant's parents owned the other half. In 2014, the parties left Hybra. Defendant turned his attention toward Leasewell, and plaintiff secured a job at Republic National Distributing Company.
In May 2015, one of the rental units in the home was vacant, and the parties decided to rent it out through the platform Airbnb. Upon learning that they could earn more money using Airbnb than renting out the room to a long-term tenant, the parties continued to do so. In June 2018, plaintiff stopped working at Republic National. When the parties were renting out two of the three rooms using Airbnb, they were approached by condominium owners about managing their properties. In response, plaintiff and defendant created 147, LLC. However, shortly thereafter, plaintiff left defendant and filed for divorce.
In February 2020, the trial court held a three-day bench trial. Because the parties stipulated that neither would receive spousal support and they had resolved any issues regarding child custody and child support, the issues raised at trial included property distribution and fault. Both parties presented several witnesses who testified regarding the home and the businesses, and the trial court admitted a deposition from plaintiff's valuation expert witness. Additionally, both parties presented testimony regarding their relationship and who was at fault for its breakdown. Plaintiff alleged that defendant was abusive while defendant claimed that plaintiff had a drinking problem. After the bench trial concluded, both parties submitted closing statements, and the trial court entered an opinion and order addressing the property division. In April 2020, the trial court entered the parties' divorce judgment. Defendant now appeals.
II. STANDARD OF REVIEW
"In granting a divorce judgment, the trial court must make findings of fact and dispositional rulings." Reed v Reed, 265 Mich.App. 131, 150; 693 N.W.2d 825 (2005). This Court reviews for clear error a trial court's factual findings in a divorce action related to the division of property. Cunningham v Cunningham, 289 Mich.App. 195, 200; 795 N.W.2d 826 (2010). "A finding is clearly erroneous if we are left with a definite and firm conviction that a mistake has been made." Id. "If this Court upholds the trial court's findings of fact, it must then decide whether the dispositional ruling was fair and equitable in light of those facts." Reed, 265 Mich.App. at 150. "The trial court's dispositional ruling is discretionary and will be affirmed unless this Court is left with the firm conviction that it was inequitable." Id. Remand is warranted where the trial court's dispositional holding is insufficient for this Court to determine whether the trial court reached the proper result on the basis of its findings of fact. See City of Jackson v Thompson-McCully Co, LLC, 239 Mich.App. 482, 489; 608 N.W.2d 531 (2000).
III. VALUATION
Defendant contends that the trial court clearly erred by failing to value the home and businesses. We agree.
"As a prelude to [the] property division, a trial court must first make specific findings regarding the value of the property being awarded in the judgment." Olson v Olson, 256 Mich.App. 619, 627; 671 N.W.2d 64 (2003). "There are numerous ways in which a trial court can make such a valuation, but the most important point is that the trial court is obligated to make such a valuation if the value is in dispute." Id. Accordingly, once trial commences, it triggers the trial court's duty to determine a value. Id. at 628. "[A] trial court clearly errs when it fails to place a value on a disputed piece of marital property." Id. at 627-628.
At trial, the parties disputed the value of the home and the three business-147, LLC, Center City Kitchen, and Leasewell. Defendant requested that the trial court award him the home, which he alleged was worth $20,000. He arrived at that valuation after subtracting the mortgage and home equity line from the home's appraised value of $325,000 and removing his $20,000 premarital equity in the home. At trial, defendant testified that the line of credit had a balance of $47,000, and the mortgage had a balance between $240,000 and $250,000. Plaintiff's name was not listed on the line of credit and the mortgage. He also testified that he put a down payment on the home of $17,000, which was money that he borrowed from his parents. Additionally, Robert Follett, defendant's appraiser, testified that the home's value was $325,000. To reach that value, Follett treated the property as a multiple-family dwelling and considered the rental income from the units in the home. Mike Trombley, the Traverse City Code Enforcement Officer, testified that the home was certified as a multiple-family dwelling.
On the contrary, plaintiff submitted that the home's value was $299,000, and she requested that the trial court award the home to her. Her valuation was computed by using $299,000, the home's appraised value of $584,000, minus the home equity loan and mortgage. At trial, plaintiff presented witnesses in support of her argument. Christopher Hathaway, a Farm Bureau Insurance agent, testified that the replacement cost value of the home was $741,880. Lynn Moon, a real-estate agent, testified that the house was worth at least $575,000 and opined that she would list the property for $580,000 after reviewing the property's tax information and looking at similar single-family homes. However, she also alleged that it would cost $900,000 to convert the property into a single-family residence. Steve Reamer, a real estate appraiser, testified that the home was worth $584,000. He also argued that Follett's appraisal value was too low because it did not account for the property's highest and best use, which was as a single-family residence, even if the residence had to be renovated into a single-family residence. He estimated that it would cost only $10,000 to do so and specifically disagreed with Moon's estimate.
On cross-examination, both Hathaway and Moon acknowledged that they were not real estate appraisers.
The trial court ultimately awarded the home to plaintiff and found that it had a mortgage of $238,000 and a $47,000 home equity line in defendant's name. However, the trial court failed to place a value on the home. Because the value of the home was in dispute, the trial court was obligated to do so and clearly erred by disregarding its obligation. See id.
Regarding 147, LLC, defendant alleged that the value of 147, LLC, was $14,719, which was the actual income of 147, LLC, excluding his personal home Airbnb income, and he requested that the trial court award the business to him. At trial, there was evidence that the net income of 147, LLC, in 2018 was $14,720. Additionally, at trial, defendant testified that he disagreed with the figures that plaintiff's valuation expert, Jason Bodmer, used in his valuation, and he opined that Bodmer's valuation was unrealistic. Defendant requested that the trial court depreciate Bodmer's valuation, and he estimated that the net profits of 147, LLC, for the last year or two were approximately $30,000. Plaintiff requested the trial court award the business to defendant and relied on Bodmer's valuation of the company at $164,000 as of December 31, 2018.
The trial court awarded 147, LLC, to defendant finding that he was in the best position to own and operate it. However, again, the trial court failed to place a value on 147, LLC. Therefore, the trial court clearly erred. See id.
Regarding Center City Kitchen, plaintiff asserted that the value of the business was $24,000, and she requested that the trial court award it to defendant. Plaintiff relied on Bodmer's valuation of $48,000, and it was undisputed at trial that she and defendant owned 50% of the business.
On the contrary, defendant claimed that the company had no value when its personal property value was adjusted to its actual value. In support of his argument, defendant testified at trial that Center City Kitchen was not making any profit. Additionally, he testified that Bodmer's computation was incorrect because he placed a value of $50,000 on the company's personal property when $50,000 was not the actual value of the property. Defendant contended that he had only spent $8,000 on equipment for the company and that $50,000 was simply the assessor's estimate because defendant did not file for a tax exemption from personal-property tax. Barbara McCullen, defendant's tax preparer, also testified that the equipment in the kitchen was used and worth only between $8,000 and $10,000. Additionally, Amy Dehaan, a township assessor, testified that if someone relied on her personal property estimate of $50,000 as a valuation, that person would have made an error. She did not know the appraised value of the equipment and personal property in Center City Kitchen, and she estimated the value by looking at similarly situated businesses. However, Bodmer specifically testified that he relied on Dehaan's assessment information.
The trial court ultimately awarded Center City Kitchen to defendant, finding that he was in the best position to own and operate it. Again, in rendering its award, the trial court failed to place a valuation on the property. Therefore, the trial court clearly erred. See id.
Regarding Leasewell, defendant argued that he had a 3.542% ownership interest in the company worth $16,878.74, and he contested Bodmer's valuation. Defendant's mother, June Wells, and defendant testified that he owned 3.542% of the company.
Plaintiff requested that the trial court impute a 40% ownership interest to defendant and award him that interest, which she opined was worth $191,000. In support of her argument, she relied on the fact that defendant had guaranteed a loan for Leasewell using tax records that signified he had a 40% interest. However, June testified that the tax forms indicating that defendant had a 40% ownership interest had been corrected upon learning of the mistake. McCullen also testified at trial that she had completed tax paperwork for Leasewell indicating that defendant had a 40% ownership interest because defendant told her that was his ownership interest, but she was working on amending and refiling the company's tax returns to reflect the 3.542% interest. June had instructed her to do so in January or February 2019, which was after plaintiff filed for divorce. Additionally, at trial, defendant recognized that he had reported during discovery that he owned a 6% and then an 8% interest in the company and that he guaranteed a $1.5 million promissory note and a $50,000 revolving line of credit for Leasewell under the assumption that he owned a 40% interest in the company. Although Bodmer valued a 40% minority interest in Leasewell at $191,000, he testified that if defendant owned less than 40%, then the valuation would be less than $191,000.
Ultimately, in the opinion and order and divorce judgment, the trial court awarded Leasewell to defendant. However, it never clarified the ownership percentage that it assigned to defendant and the value of that percentage. This constitutes clear error. See id.
Therefore, because the parties disputed the values of the businesses and home and the trial court failed to value them, we vacate and remand this case to the trial court to conduct a valuation of the assets in dispute. See id. at 629.
IV. SEPARATE VERSUS MARITAL PROPERTY
Defendant submits that the trial court clearly erred by holding that his interest in Leasewell and his payments toward the home before he married plaintiff were part of the marital estate. We conclude that a remand is necessary to address this issue.
"In any divorce action, a trial court must divide marital property between the parties and, in doing so, it must first determine what property is marital and what property is separate." Cunningham, 289 Mich.App. at 200. "Generally, marital property is that which is acquired or earned during the marriage, whereas separate property is that which is obtained or earned before the marriage." Id. at 201; see MCL 552.19. However, MCL 552.401 permits the invasion of a spouse's separate property "if it appears from the evidence in the case that the party contributed to the acquisition, improvement, or accumulation of the property." "When one significantly assists in the acquisition or growth of a spouse's separate asset, the court may consider the contribution as having a distinct value deserving of compensation." Reeves v Reeves, 226 Mich.App. 490, 495; 575 N.W.2d 1 (1997). "Once a court has determined what property is marital, the whole of which constitutes the marital estate, only then may it apportion the marital estate between the parties in a manner that is equitable in light of all the circumstances." Cunningham, 289 Mich.App. at 201. "As a general principle, when the marital estate is divided each party takes away from the marriage that party's own separate estate with no invasion by the other party." Id. (quotation marks and citation omitted).
In this case, it is unclear whether the trial court awarded defendant his ownership interest in Leasewell as separate or marital property. The trial court clearly awarded defendant his interest in Leasewell, but it never made any findings or statements regarding whether defendant's Leasewell shares were marital or separate property even though the parties clearly had contrary positions on that issue. Defendant argued that the trial court should award him his stock in Leasewell as his separate, premarital property because he received his shares six years before marrying plaintiff. Plaintiff also argued that the trial court should award defendant his interest in Leasewell, and although plaintiff did not specifically request that the trial court deem Leasewell marital property, she grouped in Leasewell with her analysis of the overall division of marital property.
We conclude that the trial court clearly erred by distributing the marital property before determining the parties' separate property, and we remand this case for the trial court to place its findings on the record regarding whether defendant's share of Leasewell were marital or separate property. See Cunningham, 289 Mich.App. at 200. Further, the trial court did not resolve the interest that defendant held in Leasewell. Defendant asserted that he received a 3.542% interest in Leasewell before he married plaintiff, while plaintiff submitted that the trial court should consider her valuation as a marital interest.
Additionally, defendant contends that the trial court clearly erred by finding that the home was entirely marital property. He submits that the down payment he made on the home along with the mortgage payments before he married plaintiff were his separate property. Indeed, in Reeves, 226 Mich.App. at 495, the "defendant provided a $14,000 down payment for the condominium before the parties married, and equity was built up in the condominium as a result of payments solely made by defendant before the parties married." Id. Additionally, "the condominium may have appreciated after defendant purchased it but before the parties married." Id. This Court recognized that "[t]he sharing and maintenance of a marital home affords both spouses an interest in any increase in its value (whether by equity payments or appreciation) over the term of a marriage" and that "[s]uch amount is clearly part of the marital estate." Id. at 495-496. However, this Court held that the trial court should have considered the down payment, the equity, and appreciation in the home before the marriage as part of the defendant's separate estate and that it clearly erred by considering the entire equity of the property "as part of the marital estate." Id.
In this case, the trial court did not explicitly state that defendant had a separate interest in the home prior to the marriage. The trial court did note that plaintiff contributed to the equity in the marital home. However, because the trial court failed to place its conclusions of law and findings of fact on the record, we cannot determine whether the trial court concluded that "sweat equity" and plaintiff's use of her inheritance money offset any separate premarital interest held by defendant. Accordingly, the trial court must resolve this issue on remand. See id.
V. PROPERTY DISTRIBUTION
Finally, defendant submits that the property distribution was inequitable and the trial court failed to consider whether he could have made a cash payment to equalize the property distribution if the quadplex was awarded to him. Because the resolution of this issue is contingent on the valuation of property, the nature of the property as separate or marital, and the issue of equity held in any separate property, the trial court must resolve this dispute on remand.
"In dividing marital assets, the goal is to reach an equitable division in light of all the circumstances." McNamara v Horner, 249 Mich.App. 177, 188; 642 N.W.2d 385 (2002). "While each spouse need not receive a mathematically equal share, any significant departures from congruence must be explained clearly by the court." Welling v Welling, 233 Mich.App. 708, 710; 592 N.W.2d 822 (1999). "When dividing the estate, the court should consider the duration of the marriage, the contribution of each party to the marital estate, each party's station in life, each party's earning ability, each party's age, health, and needs, fault or past misconduct, and any other equitable circumstance." Id. (quotation marks and citation omitted). "Although the significance of these factors will vary depending on the facts of a given case, each factor need not be given equal weight where the circumstances dictate otherwise." Id.
Defendant contends that the trial court failed to divide the property into roughly equal portions. Indeed, as noted, the trial court erroneously failed to value the businesses and the home even though the parties disputed the value of those assets. Additionally, although plaintiff and defendant challenged whether the trial court should find that defendant's interest in Leasewell was separate property and whether the trial court should award defendant $20,000 from the value of the home as separate property, the trial court failed to identify what was separate and marital property. Recognizing the trial court's error, defendant provides this Court with various scenarios regarding how the trial court possibly valued the property to prove that the distribution was not roughly equal. However, because the trial court failed to assign value to the businesses and the home and delineate marital or separate property, we cannot determine whether the property division was equitable "in light of all the circumstances." McNamara, 249 Mich.App. at 188. We also cannot determine whether there was a departure from congruence or whether that departure was warranted. Welling, 233 Mich.App. at 710. This is evident because trial courts must, before dividing the marital property, determine whether property is marital or separate property and value the marital property. See Cunningham, 289 Mich.App. at 200; Olson, 256 Mich.App. at 627.
Defendant also submits that the trial court clearly erred by awarding plaintiff the home without designating a lump sum cash equalization payment to plaintiff. Defendant seemingly relies on the sentimental value of the home and the fact that his family members live nearby, a benefit for his son. We have concluded that the trial court must make determinations regarding value, particularly in light of outstanding debt. Thus, on remand, in delineating findings of fact and conclusions of law in rendering a congruent property award, the trial court can specify any equalization payment necessary for defendant to acquire this asset in the property division, if plausible.
In their briefs on appeal, both parties contend that the other is causing harm to their respective credit ratings. Defendant asserts that plaintiff did not make the mortgage payments on the marital home, and this adversely affected his credit rating because the mortgage was solely in his name. Plaintiff contends that a default on the mortgage occurred by defendant prior to the trial court's award of the home to her. On remand, we presume that the parties will apprise the trial court of any issues affecting the value of the property and the businesses.
Plaintiff contends that, as the only party to present expert valuation testimony, the trial court's decision must be affirmed. However, the trial court, as the trier of fact, was entitled to believe all, part, or none of a witness's testimony. Brown v Pointer, 41 Mich.App. 539, 552; 200 N.W.2d 756 (1972), rev'd on other grounds 390 Mich. 346 (1973). Furthermore, defendant cross-examined plaintiff's expert, Bodmer, and protested the foundation and calculations underlying Bodmer's valuation decisions. A party seeking to include an asset in the marital estate has the burden of proving a reasonably ascertainable value. Wiand v Wiand, 178 Mich.App. 137, 149; 443 N.W.2d 464 (1989). Although Bodmer was the only valuation expert presented, the trial court was not required to accept the methodology employed to arrive at his calculations, particularly when a "niche" business such as Airbnb was involved, and the foundation underlying the determined valuation was called into question. The trial court may consider whether it needs to appoint a disinterested expert to assist in the property determination. Steckley v Steckley, 185 Mich.App. 19, 23; 460 N.W.2d 255 (1990).
Vacated with regard to the property settlement of the divorce judgment and remanded for further proceedings consistent this opinion. We do not retain jurisdiction.