Judy Cooke v. John Cooke

Annotate this Case




November 3, 2004









John Mauzy Pittman, Judge

Judy Cooke has appealed from a divorce decree entered by the Independence County Circuit Court, primarily complaining about the court's decision concerning the parties' interests in White River Insurance Agency, Inc. (WRIA), White River Insurance of Calico Rock (WRCR), and White River Insurance of Mountain View (WRMV). We affirm the circuit court's decision in all respects.

Appellant and appellee John Cooke were married on March 2, 1996, and separated on October 1, 2001. No children were born of the marriage. Before they married, the parties entered into an antenuptial agreement that provided that, in the event of divorce, Mr. Cooke's corporate stock in the insurance agencies listed above would be subject to division according to Ark. Code Ann. § 9-12-315. The agreement provided that certain property (not involved in this dispute) would not be considered subject to an equitable division under Ark. Code Ann. § 9-12-315(a)(1) but that "all other marital and non-marital property should be subject to the provisions of the entire Section A.C.A. 9-12-315." At that time, Mr. Cooke owned 1,864.5 shares of stock in WRIA, two shares of stock in WRMV, and one share of stock in WRCR. Two other individuals also owned stock in WRIA. Dick Bernard owned 1,864.5shares of stock, and Dan Fagan owned 3,729 shares of stock. Before and during the marriage, Mr. Cooke was employed by WRIA and Mrs. Cooke taught school.

During the parties' marriage, Mr. Fagan and his wife divorced and the Fagans' shares were purchased by WRIA as treasury shares on October 31, 1996. To fund the purchase, the corporation borrowed between $500,000 and $550,000 from Citizens Bank of Batesville, and the redeemed stock was pledged as security for the debt. At the time of trial, WRIA still owed Citizens Bank between $500,000 and $550,000. It also owed First Community Bank of Batesville approximately $100,000. After the Fagan purchase, Mr. Cooke owned 50% of the outstanding stock in WRIA; however, his number of shares remained the same.

Mr. Cooke also purchased a one-twelfth interest in WRMV and WRCR from the Fagans for $24,600, using marital funds.

James Edwards, who was a stockholder in WRMV and WRCR, died in 1995, and Mr. Fagan and Mr. Cooke received life-insurance proceeds. Using premarital funds from a money-market account in his name, along with his share of the life-insurance proceeds (which he received before he married Mrs. Cooke), Mr. Cooke purchased one-twelfth of the shares of stock in WRMV and WRCR from Mr. Edwards's estate. Those shares of stock were issued in Mr. Cooke's name after the parties married.

Mr. Cooke filed for divorce in January 2002, and trial was held in June 2003. The parties settled several of the property issues and submitted to the trial court for resolution their dispute regarding their interests in WRIA, WRCR, and WRMV, along with Mrs. Cooke's request for alimony and attorney's fees. On August 1, 2003, the circuit court entered a decree granting a divorce to Mr. Cooke on the basis of eighteen months' separation and distributing the parties' property. On August 4, 2003, Mrs. Cooke filed a motion for new trial or, in the alternative, to amend the court's findings of fact and conclusions of law. The circuit court set aside paragraphs 8 through 34 of the original divorce decree and reopened the proceeding to allow the introduction of additional evidence. At a hearing, wherein additional testimony was taken and exhibits were introduced, Mr. Cooke testified that he had opened a money-market account at Citizens Bank during the parties' separation.

The circuit court entered an amended divorce decree on November 4, 2003, finding that, although Mr. Cooke's ownership interest in WRIA had increased from 25% to 50% during the marriage, its value had not increased; valuing Mrs. Cooke's marital interest in WRCR and WRMV at $12,300 (one-half of the purchase price of the Fagan stock); finding that Mrs. Cooke was responsible for one-half of a marital debt of $30,000 to WRIA; awarding Mrs. Cooke $11,217 as a reallocation of marital income during the parties' period of separation; denying her request for alimony; and denying her request for attorney's fees. The amended divorce decree did not mention the distribution of Mr. Cooke's account at Citizens Bank. This appeal followed.

Mrs. Cooke makes the following arguments on appeal: (1) the circuit court erred in finding that Mr. Cooke's percentage increase in ownership of WRIA's outstanding stock was not marital property; (2) the circuit court's valuation of Mr. Cooke's ownership interests in WRCR and WRMV are clearly against the preponderance of the evidence; (3) the circuit court's allocation to Mrs. Cooke of one-half of the $30,000 debt to WRIA is clearly against the preponderance of the evidence; (4) the circuit court's award of $11,217 to Mrs. Cooke as a reallocation of marital income during the separation is clearly against the preponderance of the evidence; (5) the circuit court erred in failing to award Mrs. Cooke any interest in the Citizens Bank account; (6) the circuit court erred in failing to award alimony to Mrs. Cooke; (7) the circuit court erred in failing to award attorney's fees to Mrs. Cooke.

We review traditional equity cases de novo on the record and will not reverse a finding of fact by the trial judge unless it is clearly against the preponderance of the evidence. Hunt v. Hunt, 341 Ark. 173, 15 S.W.3d 334 (2000). In reviewing the trial judge's findings, we give due deference to the trial judge's superior position to determine the credibility of the witnesses and the weight to be accorded to their testimony. Id.

White River Insurance Agency, Inc.

Appellant's argument regarding WRIA is self-contradictory. In her statement of her point on appeal, she asserts that the trial court erred in finding that appellee's increase in ownership of WRIA during the marriage is marital property. However, in her argument, she asserts that all of appellee's 1,864.5 shares of stock in WRIA were, pursuant to the terms of the antenuptial agreement, which referred to Ark. Code Ann. § 9-12-315, subject to division as marital property. In either case, we disagree with her interpretation of the agreement. As explained below, Ark. Code Ann. § 9-12-315 (Repl. 2002) sets forth exceptions to the presumption that all property acquired during the marriage is marital property, and some of those exceptions apply to this case.

The trial court made the following findings about WRIA:

12. The plaintiff testified, and the anti-nuptial [sic] agreement reflects, that the plaintiff had 1864.5 shares of stock in White River Insurance Agency, Inc. prior to his marriage to the defendant. The plaintiff has testified that at the time he acquired the stock, and at the time of the marriage, those shares represented 25% of the outstanding issued shares of White River Insurance Agency, Inc. No additional shares have been purchased or acquired by the plaintiff or defendant since the marriage.

13. The parties have both testified that the defendant did not contribute to or participate in the operation of White River Insurance Agency, Inc. during the pendency of the marriage. No funds or property of the defendant were invested in White River Insurance Agency, Inc.

14. The plaintiff testified that during the parties' marriage, White River Insurance Agency, Inc. redeemed the outstanding shares of Dan and Donna Fagan as treasury stock. The Fagans were paid based upon a percentage of premiums retained over a five (5) year period by the corporation. The Fagans were paid by White River Insurance Agency, Inc. in monthly payments, which decreased over the repayment period as the corporation's retained premiums decreased for that same period.

15. The plaintiff further testified that the ultimate cost to the corporation for the purchase of the Fagan stock was in excess of $500,000.00. He also testified that the corporation borrowed $500,000.00 to $550,000.00 from Citizen's Bank of Batesville to fund the purchase of the treasury stock from the Fagans. The redeemed stock of White River Insurance Agency, Inc. is pledged to Citizen's Bank of Batesville to secure repayment of those loans, which still carry a balance of between $500,000.00 and $550,000.00. The plaintiff also testified that there is additional corporate debt in the form of a loan from First Community Bank of Batesville in excess of $100,000.00 that has accumulated since the marriage of the parties.

16. The redemption of the "Fagan stock" by White River Insurance Agency, Inc. as treasury stock resulted in the plaintiff owing 50% of the outstanding issued shares and Richard Bernard owing 50% of the outstanding shares of the corporation. The defendant argues that the stock redemption enhanced the position of the plaintiff during the course of marriage, and that the defendant is entitled to a ruling that the percentage increase is marital property and subject to valuation under A.C.A. 9-12-315(a)(4).

17. The series of events outlined above regarding the redemption of the Fagan Stock is uncontroverted. The plaintiff still owns only those stocks purchased prior to the marriage and governed by the anti-nuptial [sic] agreement.

18. The plaintiff testified that he has been involved in several transactions involving the sale of insurance agencies and is familiar with values of insurance agencies such as White River Insurance Agency, Inc. He testified regarding several factors that have adversely affected the value of independent insurance agencies including the following:

A. Decreased commissions on premium dollars;

B. Increased overhead expense;

C. A decreasing number of insurance companies willing to do business with an agency whose volume of business is as low as White River Insurance Agency's.

19. As outlined herein, there is in excess of $600,000.00 in debt according to the plaintiff. Revenues from commissions have remained relatively flat. Retained premiums have decreased as evidenced by the decreasing payments to the Fagans.

20. The Plaintiff has testified that in his opinion, the value of his ownership interest in White River Insurance Agency, Inc. has not increased since the marriage of the parties given the factors outlined above.

21. The Defendant did not offer any independent testimony regarding the valuation of White River Insurance Agency, Inc.

22. The Defendant did introduce a financial statement prepared by the plaintiff in support of a loan application through Citizen's Bank of Batesville in January, 2001. In that loan application, the plaintiff values his interest in the various agency stocks at $600,000.00.

23. The Plaintiff responded that the estimation of value two and one-half years ago is not reflective of the current value of White River Insurance Agency, Inc. He likewise testified that the 2001 valuation does not take into account the debt of the corporation, or a loan from his father related to the original stock in excess of $100,000.00.

24. Taking the record as a whole, the court finds that there is not adequate testimony or other evidence to establish an increase in value of the ownership interest of the plaintiff in White River Insurance Agency, Inc. during the course of the marriage which would justify an allocation to the defendant under A.C.A. 9-12-315(a)(4).

The trial court, therefore, based this decision on his finding that the value of appellee's interest in WRIA did not increase during the marriage. It noted that appellant did not contribute her money or services to WRIA. The evidence supports both findings.

We review division-of-property cases de novo. Copeland v. Copeland, 84 Ark. App. 303, 139 S.W.3d 145 (2003). The trial court's findings as to the circumstances warranting a property division will not be reversed unless they are clearly erroneous. Williams v. Williams, 82 Ark. App. 294, 108 S.W.3d 629 (2003). There is a presumption that all property acquired during the marriage is marital property. McKay v. McKay, 340 Ark. 171, 8 S.W.3d 525 (2000). Arkansas Code Annotated section 9-12-315(a)(1) (Repl. 2002) provides that all marital property shall be distributed one-half to each party unless the court finds such a division to be inequitable; in that event, the court shall make some other division that the court deems equitable, taking into consideration certain enumerated factors. The statute further states that, when property is divided pursuant to these considerations, the court must state in the order its reasons for not dividing the marital property equally. Williams v. Williams, supra.

Arkansas Code Annotated section 9-12-315 does not compel mathematical precision in the distribution of property; it simply requires that marital property be distributed equitably. Williams v. Williams, supra. The statute vests the trial judge with a measure of flexibility and broad powers in apportioning property, nonmarital as well as marital, in order to achieve an equitable distribution; the critical inquiry is how the total assets are divided. Id. The overriding purpose of the property-division statute is to enable the court to make a division that is fair and equitable under the circumstances. Smith v. Smith, 32 Ark. App. 175, 798 S.W.2d 442 (1990). 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. Boxley v. Boxley, 77 Ark. App. 136, 73 S.W.3d 19 (2002).

Additionally, the trial court's finding regarding the valuation of a business will not be overturned unless it is clearly erroneous. Miller v. Miller, 70 Ark. App. 64, 14 S.W.3d 903 (2000). This is true even when the testimony as to its valuation is sharply contested. See McClard v. McClard, 50 Ark. App. 189, 901 S.W.2d 33 (1995); Bolan v. Bolan, 32 Ark. App. 65, 796 S.W.2d 358 (1990). Appellee testified without contradiction that the corporation is still liable for the approximate cost of the redemption of the Fagan stock and that it also owes approximately $100,000 to First Community Bank. Although appellant points out that appellee's testimony is contradicted as a matter of law, the trial court was entitled to believe him. See Scott v. Scott, ___ Ark. App. ___, ___ S.W.3d ___ (Apr. 28, 2004). The trial court's finding that appellee's interest in WRIA did not increase in value during the marriage, therefore, is not clearly erroneous. Also, even if it had increased in value, there is nothing in the record to suggest that appellee contributed any funds or services to WRIA that would warrant an award to her of a portion of an increase in value, as is permitted by Ark. Code Ann. § 9-12-315(a)(2). See Smith v. Smith, supra.

Therefore, appellee's interest in WRIA remained the same, in value and in the number of shares of stock, as it was at the time of the parties' marriage, and, according to Ark. Code Ann. § 9-12-315(b)(1), it is nonmarital property. Under Ark. Code Ann. § 9-12-315(b)(5), any increase in its value would have been nonmarital property.

In the settlement incorporated into the amended decree, appellant received all of her retirement account, a van, some bank stock, some rental property in Cherokee Village, and another parcel of real property. Her interest in another tract of rental property was converted into a tenancy-in-common, and she was entitled to one-half of the proceeds from the sale of the marital home. She also received one-half of the parties' Edward D. Jones account. In the context of the overall distribution, we cannot say that the trial court's decision on this issue is clearly erroneous.


Appellant argues that the trial court's findings of fact regarding the value of appellee's interests in WRCR and WRMV are clearly against a preponderance of the evidence. Again, we disagree. The circuit court expressed its findings about WRCR and WRMV in this fashion:

9. The testimony is clear that 1/12 of the stock in White River Insurance of Calico Rock and 1/12 of the stock in White River Insurance of Mountain View was purchased in the name of the Plaintiff during the course of the marriage.

10. The testimony is clear that 1/12 of the stock in White River Insurance of Mt. View and 1/12 of the stock in White River Insurance of Calico Rock purchased by the plaintiff from the James Edwards Estate is non-marital property. Even though the certificates were issued to the plaintiff after the marriage, the funds used to purchase the stock were life insurance proceeds obtained by the plaintiff prior to the marriage and pre-marital funds of the plaintiff.

11. The plaintiff further testified that an additional 1/12 interest in White River Insurance of Mt. View and 1/12 interest in White River Insurance of Calico Rock was purchased from Daniel Fagan. The purchase price for this stock was $24,600.00 for both corporations. It appears that all of the funds to purchase the Fagan stock were marital funds and the 1/12 interest in these corporations purchased from Fagan are marital property subject to division. The plaintiff has testified that the stock is probably worth about the same now as it was at the time of purchase. The plaintiff will retain those shares of stock and pay the defendant $12,300.00 for her interest therein.

First, as to the Edwards stock, appellee testified without contradiction that he purchased it with life-insurance proceeds that he received before the marriage and with funds from an account that he owned prior to the marriage. Although the stock was purchased after the marriage, nonmarital funds were used. Under Ark. Code Ann. § 9-12-315(b)(2), the stock was "property acquired in exchange for property acquired prior to the marriage" and, thus, was not marital property. When the issue is whether a source of funds is marital or nonmarital, we defer to the trial judge's superior position to resolve credibility questions pertaining to the issue. Dalrymple v. Dalrymple, 74 Ark. App. 372, 47 S.W.3d 920 (2001).

Appellee did not dispute appellant's claim to a marital interest in the WRMV and WRCR stock purchased from the Fagans; their dispute was over its value at the time of the divorce. Its purchase price was $24,600. Appellee testified that the stock's value had not changed, and the trial court believed him. We also affirm on this point.

Marital Debt

Appellant also challenges the trial court's allocation of one-half of the $30,000 marital debt to WRIA. The trial court discussed its decision concerning the debt to WRIA as follows:

26. The only remaining unresolved debt involves a "draw account" owed by the Plaintiff to White River Insurance Agency, Inc. The testimony reflects that the draw account is a loan from the corporation to the plaintiff. The plaintiff has testified that the balance owed to the corporation is $30,000.00. There does not appear to be a dispute as to the existence of the draw account, or the balance outstanding.

27. The testimony of the plaintiff, which was uncontroverted, was that the draw account was used, among other things, to pay marital bills, note payments on marital debts, insurance premiums for the benefit of the parties for the purchase of 1/12 of White River Insurance of Mountain View and Calico Rock, and general expenses of the parties and their individual children.

28. The court finds that the "draw account" is marital debt and there is no basis for an unequal division of that debt. Accordingly, the plaintiff and defendant will each be responsible for one-half (½) of the debt, or $15,000.00 each, to satisfy the draw account with White River Insurance Agency, Inc.

Appellee testified that a significant portion of this debt was used to fund the purchase of the Fagan stock in WRMV and WRCR, as well as to pay for the family's routine expenses such as the mortgage, gasoline, automobile insurance, utilities, and a VISA card. Appellant contends that the trial court should not have credited appellee's testimony, because "all of the documentary evidence" contradicts it, pointing to appellee's January 25, 2001 financial statement and the corporation's tax returns for 1998-2002, which did not list the debt. This was a question of fact for the trial court to decide, and its finding is not clearly erroneous.

Because Ark. Code Ann. § 9-12-315 does not apply to the division of marital debts, there is no presumption that an equal division of debts must occur. Ellis v. Ellis, 75 Ark. App. 173, 57 S.W.3d 220 (2001). Nevertheless, the trial court has authority to consider the allocation of debt in a divorce case. Box v. Box, 312 Ark. 550, 851 S.W.2d 437 (1993). In fact, we have stated that an allocation of the parties' debt is an essential item to be resolved in a divorce dispute, Ellis v. Ellis, supra, and that it must be considered in the context of the distribution of all of the parties' property. Boxley v. Boxley, supra. A judge's decision to allocate debt to a particular party or in a particular manner is a question of fact and will not be reversed on appeal unless clearly erroneous. Williams v. Williams, supra; Ellis v. Ellis, supra. We affirm on this issue.

Post-Separation Earnings

Appellant also challenges the trial court's finding of fact that she is entitled to only $11,217 as a reallocation of the parties' income during their separation. There is no dispute that earnings acquired subsequent to marriage are classified as marital property. Box v. Box, supra. This is what the trial court said about the reallocation of income:

35. The Court finds that there is a disparity in the incomes of this action, taking into account the testimony of the parties and the income and expense information introduced at trial. The court further finds that all of the parties' incomes during this period is marital property. The defendant is awarded $11,217.00 from the plaintiff [as] a reallocation of income through the date of the final hearing in June 2003.

Appellant asserts that Defendant's Exhibit 26 demonstrated that appellee had a net income of $107,309, while her net income was only $37,304. Therefore, she argues, the trial court should have equally divided the difference of $70,005.

Appellee refers to Defendant's Exhibit 24, an income and expense summary, and the parties' testimony as support for the trial court's finding. He states that, after giving each party credit for his or her share of the marital expenses paid out of net income, he had $81,324 and appellant had $46,507 in remaining income. He argues that his child-support obligations to his children from a former marriage and his repayment of his debt to his father reduced his net income by $23,600 during that period. Therefore, he argues, his spendable income was $57,724, appellant's was $46,507, and the actual difference was $11,217. Appellee points out that the trial court awarded the entire amount to appellant.

Obviously, the trial court accepted appellee's figures in making this determination of fact, and we see no reason to overturn his decision on this issue.

Citizens Bank Account

Appellant also contends that the trial court erred in failing to award her one-half of the Citizens Bank account. The amended decree, however, was silent as to this account. An appellant's failure to obtain a ruling on an argument is a procedural bar to this court's consideration of that issue on appeal. Gwin v. Daniels, ___ Ark. ___ , ___ S.W.3d ___ (June 3, 2004.)

Even if the trial court had addressed this issue, its failure to award appellant an interest in that account would not be error. Appellee testified that he set up this account with $7,200 that he inherited from his grandmother and that he also deposited funds from his checking account. Because appellant was awarded one-half of the difference between the parties' net incomes, it would have been inequitable to also give her one-half of this account without any evidence that it was funded by another source.


Appellant also finds fault with the trial court's refusal to award her alimony. In rejecting her request for alimony, the trial court made the following findings:

29. The defendant seeks an award of alimony. The parties lived together as husband and wife for five (5) years and seven months. The parties have lived apart for the last twenty months. There has been no temporary support paid or ordered since the separation of the parties on October 1, 2001.

30. The plaintiff testified that the parties moved to Batesville and he started working with White River Insurance Agency, Inc. in November of 1996. Since that time he contributed $4,500.00 per month to the marital bank accounts. The defendant testified she contributed approximately $1,600.00 per month during that some [sic] period of time, but that she expects her current and future take home pay to be approximately $2,000.00 per month.

31. The plaintiff continues in the same position with White River Insurance. The defendant is employed as a schoolteacher as she was prior to the marriage to the plaintiff.

32. It is clear that there is a disparity in income between the parties. The court must, however, consider other factors. As it relates to the question of alimony, the following facts in the record are relevant:

A. The parties lived together for only five (5) years while the plaintiff was employed with White River Insurance in Batesville;

B. The defendant has lived without support from the plaintiff for twenty months;

C. The defendant has significant independent resources in the form of bank stock, rental property and other land that was accumulated during the marriage and prior to the marriage which she will retain.

D. The plaintiff will be left with significant debt after the marriage in the form of personal debt and personal guarantees of corporate debt.

E. The parties accumulated income during the marriage while increasing debt in the form of the "draw account" and failure to retire corporate debt which will have to be paid by the plaintiff after the divorce of the parties.

33. Considering all of the factors outlined above, the court finds that it would not be appropriate to award alimony to the defendant from the plaintiff.

An award of alimony is not mandatory. McKay v. McKay, supra. A trial court's decision regarding alimony is a matter that lies within its sound discretion and will not be reversed on appeal absent an abuse of that discretion. See Hiett v. Hiett, ___ Ark. App. ___, ___ S.W.3d ___ (Apr. 14, 2004). The purpose of alimony is to rectify economic imbalance in the earning power and the standard of living of the parties to a divorce in light of the particular facts of each case. Ellis v. Ellis, supra. The primary factors that a court should consider in determining whether to award alimony are the financial need of one spouse and the other spouse's ability to pay. Id. The trial court should also consider other factors including, among other things: (1) the financial circumstances of both parties; (2) the amount and nature of the parties' income, both current and anticipated; (3) the extent and nature of the resources and assets of each of the parties; (4) the earning ability and capacity of both parties. Id.

Appellant points out that she has relied on financial assistance from her parents since the parties separated and that there is a significant disparity in the parties' respective incomes. The trial court, however, relied on the facts that the parties were married for only five years; that appellant owns a significant amount of assets; and that appellee has a large amount of personal debt and has personally guaranteed a significant amount of corporate debt. In view of these considerations, we cannot say that the trial court abused its discretion in refusing to award appellant alimony.

Attorney's Fees

Appellant additionally asserts that the circuit court erred in refusing to award her attorney's fees. Although courts have the inherent power to award attorney's fees in a domestic-relations proceeding, Miller v. Miller, supra, they are not required to do so. SeeArk. Code Ann. § 9-12-309(a)(2) (Repl. 2002). The trial court's decision on this issue will not be reversed absent an abuse of discretion. Page v. Anderson, ___ Ark. App. ___, ___ S.W.3d ___ (Apr. 7, 2004); Miller v. Miller, supra. In making this determination, the trial court must consider the relative financial positions of the parties. Jablonski v. Jablonski, 71 Ark. App. 33, 25 S.W.3d 433 (2000). Given the factors discussed above in regard to appellant's claim for alimony, the trial court did not abuse its discretion in denying her request for attorney's fees.


Stroud, C.J., and Crabtree, J., agree.