JAMES ALDEN HAINES V KELLY JO HAINES
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STATE OF MICHIGAN
COURT OF APPEALS
JAMES ALDEN HAINES,
UNPUBLISHED
December 15, 2009
Plaintiff-Appellee/Cross-Appellant,
v
No. 285932
Tuscola Circuit Court
LC No. 06-023380-DM
KELLY JO HAINES,
Defendant-Appellant/CrossAppellee.
Before: Talbot, P.J., and O’Connell and Davis, JJ.
PER CURIAM.
The parties appeal as of right a judgment of divorce. We affirm in part, reverse in part,
and remand.
The facts in this case, and most of the provisions of the parties’ divorce, are uncontested,
and the record shows that they were commendably cooperative with each other during these
proceedings. The parties had been married for almost twenty years, and they both spent much of
their lives working for plaintiff’s family grocery business in one capacity or another. The only
serious issues below and on appeal are an attorney fee award to defendant and whether two
entities – a trust and an LLC – were marital assets or plaintiff’s separate assets.
In divorce cases, the trial court’s findings of fact are reviewed for clear error, and the trial
court’s dispositional rulings are reviewed for an abuse of discretion. Reed v Reed, 265 Mich App
131, 150; 693 NW2d 825 (2005). This Court does not reverse dispositional rulings unless firmly
convinced that it was inequitable in light of the facts. Id. The trial court’s first task is to
determine what assets are marital and what assets are separate. Id. Marital assets need not be
divided mathematically equally, “but the trial court must clearly explain divergence from
congruence.” Id. at 152. Separate assets may be invaded and distributed only if the other spouse
contributed to those assets in some way, or if the other spouse’s distribution is insufficient for his
or her suitable support and maintenance. Id.
This Court reviews a trial court’s ultimate award of attorney fees for an abuse of
discretion, but any underlying factual findings are reviewed for clear error, and any underlying
questions of law are reviewed de novo. Reed, supra at 164. “Either by statute or court rule,
attorney fees in a divorce action may be awarded only when a party needs financial assistance to
prosecute or defend the suit.” Id. While attorney fees may only be awarded to the extent a party
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requires them to participate in an action, “[i]t is well settled that a party should not be required to
invade assets to satisfy attorney fees when the party is relying on the same assets for support.”
Gates v Gates, 256 Mich App 420, 438; 664 NW2d 231 (2003).
Plaintiff’s father was the owner of the business for which the parties worked as
employees. Both started out in low-level roles at a store in Caro, and they transferred to another
store in Vassar, where defendant performed office duties and plaintiff became manager.
Plaintiff’s father created the LLC as a holding company for the proceeds of his decision to sell
the Caro store, in which plaintiff had had a 27 percent interest – apparently unbeknownst to him
at the time. Plaintiff’s father converted plaintiff’s ownership interest in the Caro store into a
minority ownership interest in the LLC. The LLC was an S-corporation and thus passed profits
or losses on to the shareholders personally, and it made one distribution to the parties – who filed
taxes jointly – to cover a capital gains liability. The LLC held a variety of stocks.
Plaintiff’s father also created a trust that he gifted to plaintiff, which he testified was for
“estate planning and too much too soon destroys the work ethic . . . I just didn’t want to give him
that kind of money.” The trust’s sole asset was a minority interest in the Vassar store and it
never made any distributions. Although the trust was irrevocable, it would be transferred to
plaintiff when plaintiff reached the age of 55, and in the meantime, plaintiff had absolutely no
rights or privileges therein. Plaintiff’s father testified that plaintiff did not even know about the
trust when the trust was created. Both the LLC and the trust were in plaintiff’s name only. The
parties’ experts generally agreed on the present values of plaintiff’s interests in the trust and
LLC, but the evidence showed that it was not possible to predict what – if anything – the trust
would be worth by the time plaintiff reached the age of 55.
The trial court found neither the trust nor the LLC to be marital property, but it decided –
apparently sua sponte – to exercise its equitable powers to invade the LLC in the amount of
$250,000 based on defendant’s needs. The trial court’s thorough opinion recounted the fact that
the parties had lived a comfortable lifestyle while married. They earned, on average, a total of
approximately $175,000 a year and receiving a number of gifts, financial and otherwise, from
plaintiff’s parents. However, after the divorce, defendant’s income would be approximately
$59,000, including both imputed income and child support, while plaintiff’s would be in excess
of $100,000 after deduction of spousal and child support. Furthermore, defendant returned to
school to make herself employable, and she would be required to obtain her own health
insurance. The trial court recognized that it could not “equalize” anything from plaintiff’s
parents, but it found invasion of plaintiff’s LLC equitable and necessary. The trial court
deducted from that invasion $75,000 as credit for money plaintiff advanced to defendant for her
support during the proceedings, which the parties had agreed would be credited against the
ultimate property distribution.
After trial and a post-trial hearing, the trial court also determined that it was necessary to
award attorney fees to defendant. Defendant had incurred undisputed attorney fees of
approximately $71,000, and she requested $55,000. The trial court concluded that defendant had
had some ability to pay her attorney fees, on the basis of excess income and, apparently, the
$75,000 advance, so it awarded attorney fees in the amount of $20,000. The trial court further
found that plaintiff was currently carrying significant debt due to loans he had obtained to,
among other things, pay defendant for her share of the marital residence. Because it found that
plaintiff would not “be able to keep his head above water” if the court ordered a large lump
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payment, it ordered payment by a transfer of money from plaintiff’s 401(k) account to
defendant’s 401(k) account.
Defendant argues first that the LLC should have been considered a marital asset, either
because plaintiff’s interest was intended to belong to both parties notwithstanding being titled in
plaintiff’s name alone, or because her efforts contributed to the asset’s appreciation. We
disagree. Most of the appreciation is due to plaintiff’s father’s control of its investments, and
defendant’s status at the Caro store was that of being one employee out of almost a hundred.
The trial court found plaintiff’s father credible in stating that the only reason for making the
transfers to plaintiff was for estate planning purposes. Although plaintiff’s father clearly
intended for plaintiff’s entire family to lead a comfortable lifestyle and for plaintiff eventually to
take over the family business, at no time did he testify that he intended the LLC to be owned by
both parties. In short, while the evidence is not overwhelming, we are not “left with the definite
and firm conviction that a mistake has been made.” Reed, supra at 150.
Defendant also argues that the trust should have been considered a marital asset, for
essentially identical reasons. We again disagree. The trial court found that plaintiff simply did
not have any “true” interest in the trust, because he would only theoretically receive any control
of or benefit in the trust in twelve years, by which time the trust might not even be worth
anything. The undisputed evidence was indeed that it was not even possible to predict what, if
anything, the trust would be worth when plaintiff finally received any functional rights thereto.
Future assets can be included in the marital estate and distributed, even if they will not be
received until some time after the divorce is finalized. McNamara v Horner (After Remand), 255
Mich App 667, 670; 662 NW2d 436 (2003). Even unvested or contingent interests in pension,
annuity, or retirement benefits may be considered part of the marital estate where equity so
requires. MCL 552.18(2); Baker v Baker, 268 Mich App 578, 582; 710 NW2d 555 (2005).
However, the trust is not a pension, annuity, or retirement benefit. Otherwise, the party seeking
to include an asset in the marital estate “bears the burden of proving a reasonably ascertainable
value.” Wiand v Wiand, 178 Mich App 137, 149; 443 NW2d 464 (1989). The trust is not
excluded from the marital estate simply by virtue of being presently of no functional value until a
future contingency. However, unless it is a pension, annuity, or retirement benefit, the trust is
excluded from the marital estate if whatever value plaintiff will receive cannot be reasonably
ascertained. The trial court properly excluded the trust from the marital estate on that basis.
Defendant next argues that the trial court should have invaded the LLC by a larger
amount, and on cross-appeal, plaintiff argues that the trial court should not have invaded the
LLC at all. We disagree with both parties.
Plaintiff argues that defendant did not demonstrate a need for the LLC to be invaded. But
a “demonstration of additional need” is made if “a division of the marital assets alone would [be]
insufficient for suitable support in the manner to which the [parties] were accustomed.” Reeves v
Reeves, 226 Mich App 490, 494; 575 NW2d 1 (1997). Here the parties previously shared an
income of $175,000 and a number of other benefits derived from plaintiff’s parents or the
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corporation. After the divorce, defendant’s income will be $59,000, a sum that includes child
support and imputed income,1 and she no longer has access to the other resources the parties had
shared. The trial court recognized that it would be impossible to completely equalize the parties’
post-divorce lives, because much of their “lavish” lifestyle had simply been funded outright by
plaintiff’s parents, something that obviously could not be distributed. But it also found that
plaintiff would be able to continue leading a comfortable life, while defendant would lead a
much more spartan lifestyle. The trial court did not err in finding that defendant demonstrated
additional need.
Defendant contends that the trial court erred in not distributing enough of the LLC. It
does seem readily apparent that the trial court’s invasion of the LLC was a small portion of the
total value of plaintiff’s asset, and it is also readily apparent that the invasion does not actually
equalize the parties’ income. However, defendant does not make any argument purporting to
state what would be an equitable distribution. The trial court structured the invasion as
$250,000, reduced by a prior stipulated advance by plaintiff of $75,000, to be paid at a rate of
$1,000 a month for approximately the next 14½ years. The result is that defendant’s annual
effective income (again including child support and imputed income) would be increased to
$71,000, which is approximately 40% of her half of the parties’ pre-divorce income.
Marital estates should be apportioned “to reach an equitable division in light of all the
circumstances,” which means that the portions need not be exactly equal, but there must be some
clearly explained reason for any significant inequalities. Welling v Welling, 233 Mich App 708,
710; 592 NW2d 822 (1999). However, apportionment of separate assets in a divorce is not
intended to achieve equality per se, but rather is for the purpose of providing for one spouse’s
remaining needs, “as the court considers just and reasonable, after considering the ability of
either party to pay and the character and situation of the parties, and all the other circumstances
of the case.” MCL 552.23(1); see also Charlton v Charlton, 397 Mich 84, 92-94; 243 NW2d
261 (1976). The trial court’s division of a separate asset is therefore highly discretionary, and a
plain reading of the statute shows that the equities to be considered include more than just one
spouse’s needs and the other’s abilities.
Given the invasion of the LLC, the parties continue to have a significant discrepancy in
their annual incomes. But as the trial court observed, complete equality is not necessarily
possible here, and the purpose of invading a separate asset is not to achieve equality, but rather to
achieve an equitable accommodation of the parties’ needs under all of the facts and
circumstances of the case. We are simply not able to discern anything from the record or the
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We note that the age of the children shows that child support will continue for only a short
period of time. Spousal support was set at $2,301 a month for 7.5 years or until death of either
party, until defendant remarries, or until defendant “cohabits without benefit of marriage in an
intimate relationship for six months or longer.” We note that this last provision appears on its
face to be a grossly impermissible and inappropriate dictation of an adult’s sex life. But this
Court has explained that “cohabitation” is actually a multi-factored factual determination that
looks to many factors of a relationship, and it explicitly cannot be founded on sexual intercourse
alone. See Smith v Smith, 278 Mich App 198, 200-204; 748 NW2d 258 (2008).
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parties’ arguments from which we could find that amount of the trial court’s invasion was an
abuse of discretion.
Next, defendant argues that the trial court’s award of attorney fees in the form of a
transfer between the parties’ 401(k) accounts was impermissible. We disagree. Defendant’s
primary argument is that no case and no statute anywhere has ever approved of this manner of
transfer. We conclude that the significant fact is the absence of any case or statute disapproving
of this manner of transfer. Defendant’s argument that she cannot immediately access funds in
her 401(k) account without incurring a tax penalty is well-taken, but we agree disagree that it is a
“sham award.” Her 401(k) account has real value, and as the trial court observed, she has other
ways to use the money therein. Significantly, we find no clear error in the trial court’s finding
that plaintiff simply could not pay the award in any other way.
Finally, defendant argues that the trial court abused its discretion by granting an
insufficient attorney fee award. We agree.
“It is well settled that a party should not be required to invade assets to satisfy attorney
fees when the party is relying on the same assets for support.” Gates, supra at 438. The trial
court found that defendant had some ability to pay her attorney fees from excess income.
However, the evidence showed that she had to take out a loan and invade a significant portion of
the $75,000 advance from plaintiff to pay her attorney fees. The trial court observed that
plaintiff had had to use some of his capital to pay his attorney, so “then as a matter of principle
[defendant] should also be called upon to invade capital to some extent.” While this principle
has some appealing symmetry, it overlooks the fact that the $75,000 advance was intended to
help support defendant during the pendency of the divorce. Thus, the trial court’s award of
attorney fees appears to be based on a finding that defendant had to invade assets that she was
relying on for support, yet nevertheless requiring her to do so. Furthermore, as discussed, an
award by transfer between 401(k) accounts does not give defendant the immediate ability to
realize the full amount of transferred money.
We conclude that the trial court should have granted the full amount of attorney fees
requested by defendant. We therefore remand this matter to the trial court for entry of an order
transferring an additional $35,000 from plaintiff’s 401(k) account to defendant’s 401(k) account.
In all other respects, we affirm. We do not retain jurisdiction.
/s/ Michael J. Talbot
/s/ Peter D. O’Connell
/s/ Alton T. Davis
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