In Loutts v Loutts, Court of Appeals Docket No 297427 [For Publication], several issues were presented. The financial issues were complex, and it is apparent that, especially with the valuation and "double-dipping" issue, there was much expert testimony.
The Court first considered the Appellant's issue regarding failure of the trial court to award attorney fees and costs of expert valuations.
Although the defendant repeatedly requested an award of attorney fees and expert fees during the course of this divorce case, the trial court never addressed her requests. Therefore, the COA held that consideration of the issue was necessary to a proper determination of the appeal, and that the COA had the right to consider it because the trial court’s failure to address the defendant’s repeated requests for an award of attorney and expert fees constituted plain error. This issue was remanded to the trial court.
The COA, in considering this issue looked at Heller v Heller, an Ohio case and also at McCallister v McCallister, 205 Mich App 84; 517 NW2d 268 (1994) where "double-dipping" with respect to an award of a pension to husband and whether wife could, once husband retired, still receive spousal support where those payments came out of husband's only income--that same pension.
“‘Double dipping’—or ‘tapping the same dollars twice’—refers to situations where a
business or professional practice is valued by capitalizing its income, some or all of which is also treated as income for spousal support purposes.” Cunningham, “Double Dipping” Revisited: Food for Thought, 27 Mich Fam LJ No. 1, 6 (1999).
The COA's decision: Upon entry of a judgment of divorce or separate maintenance, if the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party and any children of the marriage who are committed to the care and custody of either party, the court may also award to either party the part of the real and personal estate of either party and spousal support out of the real and personal estate, to be paid to either party in gross or otherwise 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. [My emphasis] The award of spousal support is made on a case-by-case basis, citing MCL 552.23(1), McCallister, supra, and Stoltman v Stoltman, 170 Mich App 653, 658; 429 NW2d 220 (1988).
Then the COA considered the specific circumstances of this case. Here, plaintiff husband had founded a business which was evaluated as worth $280,000, and the trial court awarded the defendant $140,000 as half the value of the business. The plaintiff apparently earned $240,000 per year, but in determining spousal support, the court imputed $130,000 as income, to avoid twice considering the value of the business and income of the plaintiff in the contexts of both property division and spousal support.
On appeal, defendant wife argued that the trial court improperly reduced the plaintiff husband’s income in determining spousal support. The COA decided that the trial court had improperly applied a strict rule against consideration in both contexts rather than considering all of the circumstances of the case, and thus remand was necessary for a redetermination based on all the circumstances. On remand, the court should not take a bright-line approach to this issue, but should determine whether “double dipping” will achieve an outcome that is just and reasonable within the meaning of MCL 552.23(1).Two Ohio cases, Heller v Heller I and Heller v Heller II were cited. The COA's stated that the trial court’s reliance on Heller Iwas misplaced because in a subsequent appeal in Heller, the appellate court stated that its determination that a double dip was inequitable was based on the facts of that case alone and was not a determination that double dipping is never permissible: In fact, in Heller II, that Court held:
In the first appeal, there was no language in our decision to suggest that
this court intended to promulgate a flat prohibition against double dipping
applicable to every income-producing asset; rather, this court addressed the
“double dip” issue only as it applies to the facts of this case. [Heller v Heller,
2010 Ohio 6124 (Ohio App, 2010) (Heller II), slip op at 2.]
In remanding this case to the trial court, the COA directed the trial court to redetermine spousal support, including whether the equities in this case warrant utilizing the value of QPhotonics for purposes of both property division and spousal support.
The COA also held that the trial court erred in imputing $40,000/year to defendant wife when calculating alimony. On remand, the trial court was direccted to make specific factual findings regarding the factors which are relevant to the particular case. Defendant wife argued that in this case, the award of spousal support of $1,510 per month for four years was inadequate, considering that the parties had been married for 21½ years, their income disparity was significant, she was responsible for supporting the parties’ adult son. Although the defendant had the education and skills to obtain employment, she had almost no employment history. The COA held that the trial court’s conclusion that defendant wife could obtain a job in higher education was speculative and that the imputation at $40,000/year was improper. On remand, the trial court was directed to use $34,000/year as imputed income to the defendant, per the defendant concession.
The four-year non-compete provision was upheld, especially in light of the fact that defendant wife had agreed to it.
Judge Dinofrio wrote a concurring opinion to express why the non-compete provision was necessary, specifically because the record supported the ability of defendant wife to compete in fiber optics, given her relationships with people expressly qualified to form a competing company. It would be unfair to give her half the value of the business and then allow her to compete directly by forming a company that could/would have the same commercial application.
See below for the opinion and other resources.
MCL 552.23 (1): Upon entry of a judgment of divorce or separate maintenance, if the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party and any children of the marriage who are committed to the care and custody of either party, the court may also award to either party the part of the real and personal estate of either party and spousal support out of the real and personal estate, to be paid to either party in gross or otherwise 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.