Opinion
24A-DC-460
08-07-2024
James Small, Appellant v. Kelly Small, Appellee
ATTORNEY FOR APPELLANT Zechariah S. Landers Hinkle, Racster &Schemenaur, P.C. Portland, Indiana ATTORNEY FOR APPELLEE James A. Schafer Muncie, Indiana
Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.
Appeal from the Delaware Circuit Court Trial Court Cause No. 18C04-2109-DC-289 The Honorable John M. Feick, Judge
ATTORNEY FOR APPELLANT Zechariah S. Landers Hinkle, Racster &Schemenaur, P.C. Portland, Indiana
ATTORNEY FOR APPELLEE James A. Schafer Muncie, Indiana
MEMORANDUM DECISION
Brown, Judge
[¶1] James Small ("Husband") appeals the trial court's order dividing marital property and awarding attorney fees. We reverse and remand.
Facts and Procedural History
[¶2] Husband and Kelly Small ("Wife") were married in 1998. In September 2021, Wife filed a petition to dissolve the marriage. An entry in the chronological case summary ("CCS") in April 2023, states: "Agreement reached. Parties to submit agreement and decree." Appellant's Appendix Volume II at 8. On May 19, 2023, the court held a hearing at which it stated "I thought this was settled last time," Husband's counsel stated "we weren't able to resolve it by agreement," and the court stated "who backed out? [Husband]? That means you'll be paying some additional attorney fees . . . [b]ecause we're here spending Court time and their time and everybody else's." Transcript Volume II at 4. On August 8, 2023, the court issued a "Decree of Dissolution of Marriage" stating the parties' marriage was dissolved and scheduling "a final hearing on property settlement" for October 3, 2023. Appellant's Appendix Volume II at 40-41.
[¶3] On October 3, 2023, the court held the scheduled hearing. Wife testified the marital residence and property was appraised for $180,000. The following exchange occurred during the direct examination of Wife:
Q. [Y]ou understand that [Husband is] asking for credit for a gift or a loan or something from [] his mother and father?
A. I've heard.
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Q. What do you know about that?
A. I don't know anything about, we have an apartment that we started building onto our barn that we built as a (inaudible).
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Q. About when are we talking? Give us a time.
A. Same time that we built the barn, we had an apartment built on for a place for my in-laws to stay when they came here or like a retirement home. And we put money into it, they put money into it. And they have used it. They've lived there for the last several years. Few years. They have used it.
Q. Do you know how much money they put into it?
A. I do not.
Q. Ok. I've told you that [H]usband, through his attorney, has indicated that this was a loan to you and not a gift. The money they put in.
A. No. I--
Q. What's your position on that?
A. I don't know anything about a loan.
Q. Did you sign any loan papers?
A. I have not signed any loan papers.
Q. Ok. Were you ever told that you were paying money back or had to pay money back?
A. I have no information on the monies between the two of them at all.
Q. In fact, was there conversation where you were told that this money was your early inheritance or something like that?
A. Always. She always joked about it and said hey, might as well use it and get some use out of it. It was not, you know, no (inaudible) no loan mentioned at all.
Transcript Volume II at 20-21. Wife testified that she earned about $34,000 a year. When asked "[a]re you asking that he be responsible for additional attorney fees as a result of having this hearing since we had this resolved by everybody's agreement at one time," she replied affirmatively. Id. at 23.
[¶4] On cross-examination of Wife, the following exchange occurred:
Q. [T]he monies that were utilized to pay down or to build this barn, you agree that the money, both from [Husband's] parents and monies that you had benefitted the property?
A. Yes.
Q. Value wise?
A. Of course.
Q. Ok. In fact, didn't the appraisal, one of the appraisals that was conducted indicate that the, without the barn on the property, it would have been valued at about a hundred and forty eight thousand? Does that sound about right?
A. I think they did it separately, so yeah. I think that was the hundred and forty eight. Without the barn and apartment. A hundred and eighty with the barn and the apartment.Id. at 25.
[¶5] Husband indicated there was a mortgage on the property of $82,546.27. During the examination of Husband, the following exchange occurred:
Q. Ok. Let's talk about the building of this barn on your property. That seems to be a source of contention between the two of you. Describe to the Judge how that barn came about being built on your real estate.
A. Pretty much we'd start talking about it cause the barn was so old and falling apart. What we originally had on the property. She got an inheritance and we talked about it and we talked about starting and building it and it was supposed to be twenty four by twenty four. And I talked to my parents and I was like, I don't think that's going to be big enough. Could we get a loan from you to build it bigger, and she knew all about it at that time. So we decided to build a fifty by fifty barn at that time.
Q. Ok. So how much money did you borrow from your parents?
A. Close to fifty four thousand and some dollars.
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Q. Ok. Have you made payments back to your mom and dad on that loan? A. I was making payments to her.
Q. Ok.
A. And all this started happening and she told me to hold on and we will do this when it gets taken care of.
Q. Ok. So while you've had other obligations during the pendency of the divorce case, you haven't been making the payments, but you had been making some payments prior?
A. I have, yes. Now. What I can to her.Id. at 31-32. Husband testified his annual salary was about $64,000 a year. When asked "you're asking the Judge [to] also include this fifty four thousand dollar loan to your mom and dad," he replied "Yeah. She knew about it, so." Id. at 32. Husband presented evidence that the balance in his retirement account was $69,421.82.
[¶6] Husband's mother testified that she and her husband loaned money to the parties to finish the barn and that she expected to be repaid. Husband's counsel handed Husband's mother a document and asked if she was familiar with it, and she testified "[y]es. That's my writing," "[i]t's showing that [Husband] gave cash starting January of 21 of fifty dollars," and "it was showing fifty four thousand dollars." Id. at 43. The court admitted the document into evidence. The document shows the original amount of the loan of $54,000 and lists payments of fifty dollars for each month beginning in January 2021 and ending in August 2022. Husband's mother indicated that she stayed in the barn two or three months a year.
[¶7] The court issued an order titled "Property Settlement Agreement" on October 17, 2023. Appellant's Appendix Volume II at 42. After Husband filed a motion to correct error, the court held a hearing and issued an "Amended Order on Property Distribution" which provided:
1. [Wife] shall keep all property in her possession and shall be responsible for any debt thereon.
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4. [Husband] shall keep all property in his possession and be responsible for all debts in his name.
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7. [Husband] has retirement accounts at First Fleet/Principal and is vested.
8. [Husband] shall execute a QDRO to [Wife] for 55% of said account as of the date of filing in this dissolution.
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18. [Husband] has requested the equity in the house be reduced by an alleged loan from his parents. Said loan was not reduced to writing, was not consented to by [Wife], a co-owner, and was not recorded. As such the debt is unenforceable pursuant to the statute of frauds, and further could not be used to encumber said property without the consent of [Wife].
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20. [Husband's] income is approximately 2% times greater than [Wife's] and this matter has been delayed by [Husband] given the 4 attorneys.
21. Due to the disparity in incomes, it is fair and just to attribute 45% of the retirement and home equity to [Husband] and 55% attributed to [Wife].
22. [Husband] may purchase the marital residence within 45 days of this Order. Otherwise, the property is to be sold.
23. Upon sale the remaining balance of mortgage and costs associated with the sale shall be paid prior to distribution.
24. [Husband] is ordered to pay $2,400.00 additional attorney fees to [Wife's counsel].Id. at 52-54.
Discussion
[¶8] Husband argues the trial court erred in not including the loan from his parents in the marital estate to be divided between the parties, in ordering a deviation from an equal division of the marital property based on its erroneous finding regarding the parties' incomes, and in ordering him to pay attorney fees.
[¶9] We determine whether the evidence supports the trial court's findings of fact and whether the findings of fact support the conclusions thereon. Yanoff v. Muncy, 688 N.E.2d 1259, 1262 (Ind. 1997). Findings are clearly erroneous when the record contains no facts to support them directly or by inference. Id.
[¶10] The division of marital property is a two-step process. Estudillo v. Estudillo, 956 N.E.2d 1084, 1090 (Ind.Ct.App. 2011). First, the trial court determines what property must be included in the marital estate. Id. It is well established that all marital property goes into the marital pot for division, whether it was owned by either spouse before the marriage, acquired by either spouse in his or her own right after the marriage and before final separation of the parties, or acquired by their joint efforts. Ind. Code § 31-15-7-4(a); Falatovics v. Falatovics, 15 N.E.3d 108, 110 (Ind.Ct.App. 2014). The requirement that all marital assets be placed in the marital pot is meant to ensure that the trial court first determines that value before endeavoring to divide property. Falatovics, 15 N.E.3d at 110. Marital property includes both assets and liabilities. Capehart v. Capehart, 705 N.E.2d 533, 536 (Ind.Ct.App. 1999), trans. denied.
[¶11] After determining what constitutes marital property, the court must then divide the marital property under the presumption that an equal split is just and reasonable. Estudillo, 956 N.E.2d at 1090 (citing Ind. Code § 31-15-7-5). The presumption may be rebutted by a party who presents relevant evidence that an equal division would not be just and reasonable. Ind. Code § 31-15-7-5. In making this determination, the court may consider evidence regarding the following factors: the contribution of each spouse to the acquisition of the property; the extent to which the property was acquired by each spouse before the marriage or through inheritance or gift; the economic circumstances of each spouse at the time the disposition of the property is to become effective; the conduct of the parties related to the disposition or dissipation of their property; and the earnings or earning ability of the parties. Id.
A. The Loan
[¶12] The trial court found that the loan from Husband's parents was unenforceable based on the Statute of Frauds and thus did not divide the outstanding balance of the loan between the parties. Husband argues that the Statute of Frauds is not applicable.
[¶13] As noted above, all marital property goes into the marital pot for division, including property "acquired by either spouse in his or her own right after the marriage and before final separation of the parties" and property "acquired by their joint efforts." Ind. Code § 31-15-7-4(a). Also, marital property includes the parties' debts. Capehart, 705 N.E.2d at 536. The loan from Husband's parents was a debt acquired by Husband in his own right or acquired by the parties' joint efforts and thus constitutes marital property. See Ind. Code § 31-15-7-4(a). Further, the Indiana Statute of Frauds merely prohibits a person from bringing certain actions on an unwritten contract. See Ind. Code § 32-211-1. However, the distribution of unwritten loans as marital property is not equivalent to bringing a cause of action on those loans. It is well settled that the Statute of Frauds "does not govern the formation of a contract but only the enforceability of contracts that have been formed." Jernas v. Gumz, 53 N.E.3d 434, 445 (Ind.Ct.App. 2016) (citing Schuler v. Graf, 862 N.E.2d 708, 712-713 (Ind.Ct.App. 2007) (citing Fox Dev., Inc. v. England, 837 N.E.2d 161, 165 (Ind.Ct.App. 2005)), trans. denied; 14 Richard R. Powell, POWELL ON REAL PROPERTY § 81.02[1][a] (Michael A. Wolf ed. 2000) (the writing requirement "is generally viewed as crucial to the enforceability of a contract, but not necessarily to its validity")), trans. denied. Contracts which do not satisfy the Statute of Frauds are voidable, not void. Id. at 447 (citing 14 Richard R. Powell, POWELL ON REAL PROPERTY § 81.02[1][a] (courts treat a contract that is not enforceable under the Statute of Frauds as voidable, but not absolutely void, and this distinction is important because an oral contract may be successful if the Statute of Frauds defense is not raised in the pleadings)). The Statute of Frauds is an affirmative defense, and affirmative defenses must be specifically pled. Id. In this dissolution of marriage proceeding, Husbands' parents are not parties, and they did not bring a cause of action on the loan. The debt should not have been excluded from the marital estate based on the Statute of Frauds.
[¶14] During their marriage, the parties received $54,000 from Husband's parents. The funds were used toward the completion of a barn on the parties' property and thus benefited the marital property and the parties. Wife testified that an appraisal of the property which included the barn valued the property at about $180,000 while an appraisal which did not include the barn valued the property at about $148,000. Husband's mother testified regarding the loan and that she expected to be repaid. According to the ledger kept by Husband's mother and her testimony, Husband made twenty payments totaling $1,000 from January 2021 through August 2022. The trial court erred in failing to include the outstanding balance of the loan in the marital estate to be divided between the parties. We reverse the court's findings as to the loan and remand for a division of the outstanding debt between the parties.
As discussed below, the evidence does not support a deviation from the presumption of an equal division. We express no opinion as to the most appropriate method of distributing the debt between the parties.
B. Property Division
[¶15] The trial court based its determination that Wife shall receive fifty-five percent of "the retirement and home equity" on "the disparity in incomes," specifically finding that Husband's income was "approximately 2% times greater" than Wife's income. Appellant's Appendix Volume II at 54. The evidence does not support the court's finding. The testimony established that Wife earned about $34,000 per year and that Husband earned about $64,000 per year. The finding that Husband's income is two and one-half times greater than Wife's income is clearly erroneous. Aside from this erroneous calculation, the trial court did not find, and our review of the record does not reveal, that Wife presented evidence which rebutted the presumption of an equal division of the marital property based on the factors in Ind. Code § 31-15-7-5. We reverse the trial court's order to the extent it ordered an unequal division of Husband's retirement funds and the equity in the parties' real property and remand with instructions to follow the statutory presumption that an equal division is just and reasonable.
C. Attorney Fees
[¶16] We review a trial court's decision to award attorney fees in connection with a dissolution decree using an abuse of discretion standard. Ahls v. Ahls, 52 N.E.3d 797, 802-803 (Ind.Ct.App. 2016). "Pursuant to Indiana Code Section 31-15-10-1, a trial court may order a party in a dissolution proceeding to pay a reasonable portion of the other party's attorney's fees, after considering the parties' resources, economic condition, ability to engage in gainful employment and earn income, and other factors bearing on the reasonableness of the award." Id. at 803 (citation omitted).
[¶17] In ordering that Husband pay attorney fees to Wife's counsel, the trial court did not make findings related to the parties' resources or other factors bearing on the reasonableness of the award. While Husband's income is higher than Wife's, we note that Wife and Husband will each receive significant assets. To the extent the trial court asked "who backed out" of the proposed settlement agreement and commented "[t]hat means you'll be paying some additional attorney fees," Transcript Volume II at 4, we note there is no indication that Husband signed a written agreement or assented to an agreement under oath on the record, see Akers v. Akers, 849 N.E.2d 773, 775-776 (Ind.Ct.App. 2006) (the writing requirement of Ind. Code § 31-15-2-17 can be satisfied by the parties signing a written document or acknowledging under oath their assent to terms of an agreement recited in open court), and we find it was improper to penalize Husband for his decision not to agree to the proposed settlement and to present evidence at a final hearing. Based on our review of the record, we reverse the court's order that Husband pay $2,400 in attorney fees.
[¶18] For the foregoing reasons, we reverse the trial court's decision: (1) excluding the debt owed to Husband's parents from the marital pot for division between the parties; (2) deviating from the presumption that an equal division is just and reasonable; and (3) ordering Husband to pay attorney fees. We remand with instructions for the trial court to divide the marital estate consistent with this opinion.
[¶19] Reversed and remanded.
May, J., and Pyle, J., concur.