Appeals Court Vacates, Remands Various Orders In Divorce Case

The defendant is entitled to relief, the Michigan Court of Appeals has ruled, because the trial court erred in several respects when issuing the judgment of divorce, the spousal support order and the child support order.

After a bench trial and numerous hearings in Thomas v Thomas (Docket No. 366112), the Van Buren County Circuit Court entered a judgment of divorce, a spousal support order and a child support order. The defendant appealed the judgment and the orders, arguing that the trial court:

• should have granted his motion to change custody because he established proper cause or a change of circumstances to warrant an evaluation of the best interest factors in MCL 722.23.

• erred by not imputing a greater income to the plaintiff, which he claimed affected the propriety of both the child support and spousal support orders.

• abused its discretion by not giving him credit for, or offsets against, his status quo payments while the divorce proceedings were ongoing.

“We agree that the trial court erred in several respects that warrant relief,” the Court of Appeals said. “The trial court’s order dismissing defendant’s motion to change custody is vacated. The trial court’s calculation of plaintiff’s actual income is affirmed, but the amount of additional income it imputed to plaintiff is vacated. The trial court’s decision to order spousal support is affirmed, but the amount of spousal support is vacated. The trial court’s child support order is also vacated. This case is remanded for additional proceedings ….”

Judge Noah P. Hood, Judge Christopher M. Murray and Judge Allie Greenleaf Maldonado were on the panel that issued the 14-page unpublished opinion.

Background

The plaintiff and the defendant were married in 2005 and had four children together. Shortly after they were married, the defendant established his own excavating business. The plaintiff was a stay-at-home mother for most of the 15-year marriage.

The plaintiff filed for divorce in June 2020. She also filed ex parte motions for a restraining order to prevent the dissipation of the marital estate and for the exclusive use of the marital home. The Van Buren County trial court granted the motions and entered the orders.

The trial court entered a status quo order requiring the defendant to deposit $2,100 each month into the plaintiff’s joint bank account so that she could continue to pay the expenses that she had been paying using that account. The order also gave the plaintiff the exclusive use of the parties’ Yukon Denali. When the defendant objected to the status quo order, the trial court held a hearing and modified the order to require the defendant to deposit $1,600 a month into the joint account. Otherwise, the trial court affirmed the orders requiring the defendant to maintain the status quo and giving the plaintiff exclusive use of the marital home and the Denali.

The trial court conducted a bench trial and, in 2022, gave its oral ruling presumably settling the property disputes and determining the defendant’s income from his excavation business. However, the parties continued to argue over various issues and, as of November 2022, the trial court still had not entered a divorce judgment, a spousal support order or a child support order. Around this same time, the defendant filed a motion to change custody based on proper cause or a change in circumstances.

The trial court held a hearing in April 2023 and addressed the continued disputes. The trial court held that the defendant’s request for a change of custody was “premature” and dismissed the motion. The trial court also canceled all future hearing dates. The trial court entered the judgment of divorce in April 2023, as well as a uniform spousal support order and a child support order.

The defendant appealed.

Best Interest Hearing Required

On appeal, the defendant argued the trial court erred by sua sponte dismissing his motion for a change in custody without notice and without addressing the merits of the motion.

“We agree,” the Court of Appeals wrote. “The trial court’s sua sponte dismissal of defendant’s motion to change custody was based on its apparent belief that it could not hear such a motion until the prior custody order was incorporated into a final judgment.”

Michigan caselaw “has made it clear” that a temporary custody order entered by stipulation without an evidentiary hearing or best interest findings “is not a true custody order as anticipated by the Child Custody Act, MCL 722.21 et seq.,” the Court of Appeals said, citing Thompson v Thompson, 261 Mich App 353 (2004). The Thompson panel said, “It is improper to decide the issue of custody on the pleadings alone when no evidentiary hearing is held because parties cannot conclusively agree regarding child custody.”

Applying the Thompson holding to this case, the trial court “essentially entered into the judgment of divorce [and] the stipulated temporary custody order, even though at the time of entry of the judgment proceedings were underway on defendant’s contested motion to change custody,” the Court of Appeals said. “Moreover, it did so by dismissing defendant’s motion, and without ever making findings regarding the best interests of the children. It is well established that ‘[a] trial court must consider the factors outlined in MCL 722.23 in determining a custody arrangement in the best interests of the children involved.’”

Here, the trial court’s failure to make the required best interest findings “when it was clearly apparent” the parties had a continuing dispute over custody “was a clear legal error,” the Court of Appeals said. “Therefore, we must vacate the trial court’s custody award and remand for a hearing regarding the best interests of the children.”

Actual & Imputed Income

The defendant also argued the trial court erred by not imputing enough income to the plaintiff under the Michigan Child Support Formula (MCSF). “We vacate the trial court’s decision to impute income and order additional fact-finding,” the Court of Appeals said.

Regarding actual income, the defendant claimed the trial court erred by not considering various sources of income the plaintiff had. “Each of these arguments is without merit,” the Court of Appeals said.

First, the defendant contended the trial court should have considered the payments that it ordered him to make while the case was ongoing. “Those payments, however, were in effect spousal support and child support payments intended to maintain the status quo pending resolution of the divorce. Accordingly, the trial court did not err by declining to consider those payments because the formula specifically excludes them from income.”

Second, the defendant asserted the trial court should have considered the fact that the plaintiff had a joint bank account with her mother and had regular income in the form of gifts from her mother. “Plaintiff’s testimony permitted an inference that she regularly borrowed money from her mother, but that the money transfers were not gifts because she had the intent to repay them,” the Court of Appeals observed. “The bank account was similarly just a tool to enable quick transfers of money deposited by her mother. Accordingly, the trial court did not clearly err to the extent that it credited plaintiff’s testimony and found that these payments were not income to plaintiff.”

Lastly, the defendant argued the trial court erred by failing to consider that the plaintiff likely had income from family trusts. “The evidence established that plaintiff did not have any income from her mother’s trust because her mother had not yet died and that her grandparents’ trust had been depleted,” the Court of Appeals explained. “Accordingly, evidence showed that the trusts were not income for purposes of calculating child support.”

Therefore, the defendant “has not shown that the trial court erred when it failed to find that plaintiff had income from these sources,” the Court of Appeals held.

As for imputed income, the defendant asserted the trial court abused its discretion when imputing income to the plaintiff by not following the requirements set forth in the MCSF. In addition, he claimed the trial court erred by imputing less income to the plaintiff than her actual earning ability.

“In this case, the trial court determined that it would impute income to plaintiff in passing as part of its decision on the property award,” the Court of Appeals wrote. “The trial court seems to have only considered plaintiff’s education, her recent employment history, and the presence of the children in the home. The record suggests that the trial court did not consider the majority of the factors required [under the MCSF]. The court clearly did not go through each factor listed by 2021 MCSF 2.01(G)(2) and did not articulate how that factor applied or state that the factor did not apply, as required by 2021 MCSF 2.01(G)(4)(c).”

In her appellate brief, the plaintiff addressed each MCSF factor and cited testimony “that would have supported a finding in favor of the trial court’s decision for each factor,” the Court of Appeals said. “The problem, however, is not that there was no evidence to support specific findings regarding each of the factors required to impute income under the MCSF. The trial court did not comply with the requirements to analyze each factor or state that the factor did not apply, and the trial court could not impute income to plaintiff without complying with the requirements of the MCSF.”

Accordingly, the trial court “erred as a matter of law when it elected to exercise its discretion without complying with the requirements of the MCSF,” the Court of Appeals held, vacating the trial court’s decision in this regard. “On remand, the trial court shall determine whether to impute income to plaintiff and how much income to impute by using the factors provided in 2021 MCSF 2.01(G)(2).”

Formula Deviation

The defendant further argued the trial court abused its discretion by refusing to deviate from the MCSF and by ordering him to pay back child support because of the ongoing status quo payments he made while the divorce was pending. 

The Court of Appeals agreed, noting the MCSF allows a deviation from the support calculations “when the trial court has ordered one spouse to make payments that reduced his or her income available for child support … and that provision clearly applied to the facts of this case without regard to whether the payments were characterized as status quo payments.”

The defendant “made thousands of dollars of payments to support plaintiff and the children during the pendency of the divorce,” the Court of Appeals observed. “Despite these payments, the trial court calculated defendant’s child support obligation for the same period as though he had not made any payments. It essentially treated defendant as though he had completely failed to support his children during that time frame and had all the income from that period available to pay support. The court also did not adjust plaintiff’s income to reflect that she had the benefit of these payments. Instead, the trial court imputed an income to plaintiff that was less than the benefit that she received in payments that defendant made on her behalf and on behalf of the children.”

When the trial court denied the defendant’s request for a credit, it explained the case “had been pending for a long time through the fault of both parties and that it was difficult to determine defendant’s actual income,” the Court of Appeals noted. “It also reasoned that defendant would likely make a lot more income in the future. These reasons are not well-taken. The fact that defendant had to make the payments for an inordinately long period did not militate against a deviation - rather, it strongly suggested that it would be unjust or inappropriate for the court to not make some provision for the required payments given how long he had made them.  There was also no evidence that defendant would be making substantially more income in the future, and even if he were to have an increase, that increase would justify a future recalculation of his support obligation - it would not justify a past unjust or inappropriate child support order.”

Accordingly, “we vacate the order for child support and remand for recalculation of the child support applicable to the period for which defendant was required to make the various status quo payments,” the Court of Appeals concluded.

Spousal Support Recalculation

The Court of Appeals further found the defendant’s claim that the trial court erred by ordering spousal support “was without merit.”

Despite this, “we vacate the support award and remand this case for recalculation of the amount of spousal support,” the Court of Appeals said, emphasizing that when deciding whether to order spousal support, Michigan courts “must use a case-by-case approach that examines all the facts and circumstances surrounding the case; there is no strict formula. … The trial court should make specific findings for each of the factors that are relevant to the particular case.”

Here, the defendant asserted the trial court’s findings regarding his income and the outlook of his excavation business were without evidentiary support. “The record showed that defendant’s excavation business suffered in part because of the problems associated with the divorce. He also lost the ability to bid on state projects and projects in Allegan County due to losses on his more recent financial statements. Notwithstanding these concerns, defendant testified that the negative year was a ‘weird year,’ and he was hopeful that he could turn things ‘back around.’ The evidence supported an inference that defendant would be able to maintain the business and generate a stream of income that was at least comparable to the income that he derived during the pendency of the divorce.”

The defendant also argued the trial court did not adequately consider the property award to the plaintiff that was, in his view, sufficient for the plaintiff’s financial maintenance. “None of the property awarded to plaintiff could be expected to generate revenue. Defendant’s award, by contrast, included the businesses, which had generated, and continued to generate, a substantial stream of income. Plaintiff’s property would only generate revenue if it were sold. Plaintiff could not reasonably be expected to sell the home in which she lived; a spouse normally should not be required to invade his or her property for his or her own support. … This argument is without merit.”

The defendant further claimed that, due to equitable considerations, the trial court’s decision was not “just and reasonable” as required by MCL 552.23(1). “According to defendant, the [trial] court did not consider the status quo payments defendant made to plaintiff during the pendency of the divorce, wrongfully blamed and punished defendant for the breakdown in the marriage, and failed to consider that plaintiff was voluntarily unemployed.” However, the payments made to maintain the status quo during the pendency of the proceeding “were not probative of plaintiff’s needs moving forward,” the Court of Appeals said. “Moreover, defendant’s argument that he was being punished for causing the breakdown in the marriage is unsupported by the record.”

Even though the trial court did not abuse its discretion by determining that an award of spousal support was appropriate, “it premised its exercise of discretion on the imputation of income that was determined without fully complying with the requirements of the MCSF, which, as already noted, must be reexamined on remand,” the Court of Appeals said. “Indeed, the [trial] court expressly incorporated its decision to impute an income of $10 per hour for 40 hours a week into its decision regarding spousal support. Because the recalculation of plaintiff’s earning potential might affect the trial court’s determination concerning the amount and length of any award of spousal support, we affirm the trial court’s decision to award spousal support but vacate the amount. On remand, the court shall revisit this issue in light of its decision on remand regarding imputation of income.”

No ‘Double-Dipping’

The defendant further alleged the trial court engaged in impermissible “double dipping” by failing to account for the status quo payments when entering the child support and spousal support awards. To support this argument, the defendant cited Loutts v Loutts, 298 Mich App 21 (2012).

“We disagree,” the Court of Appeals said. “While defendant’s arguments with respect to this issue are not clear, it is clear that Loutts does not help him. First and foremost, in Loutts, this Court held that double-dipping was a permissible exercise of a court’s discretion. Second, defendant is not describing the scenario present in Loutts. Defendant does not argue that the court erred by considering the salary he earned from his business; rather, he argues that the court erred by failing, in his view, to consider the fact that plaintiff had been receiving ongoing status quo payments. … Defendant does suggest that the ‘double-dipping’ occurred because of assets that plaintiff received through the property award, but this argument was addressed with respect to defendant’s spousal support arguments.”

In conclusion, the defendant “has failed to establish any basis for relief with respect to any alleged ‘double dipping’ of assets,” the Court of Appeals held.