Family Law Case Review: L. Birkhimer v. N. Birkhimer

Case:  Lisa A. Birkhimer v. Neil S. Birkhimer
by Mike Kohlhaas, Bingham Greenebaum Doll

In a lengthy and comprehensive opinion arising from a complex marriage dissolution, the Court of Appeals held that: (1) the trial court erred by not including in the marital estate a debt owed by Wife to her father; (2) the trial court erred in calculating Wife’s income by backing out taxes and other expenses paid by Wife, rather than using Wife’s gross income; (3) Husband waived any argument that the trial court used an improper valuation date by not raising the issue at the trial level; (4) the trial court erroneously issued a child support order that assigned the same parent the obligation to pay the children’s controlled expenses, but also gave that same parent the parenting time credit; (5) the attorney fee and litigation expense order issued in favor of Husband and against Wife was within the trial court’s discretion; and (6) the trial court decision not to require specific additional security for a large property settlement judgment was not an abuse of discretion.

Husband and Wife married in 1992. They had two children. The parties settled in Noblesville in 1997, motivated in part by Wife’s desire to be closer to her family. Wife’s father and brother were owners of the McGonical car dealership in Kokomo. In 1999, Wife’s father decided to gift to Wife partial interests in various real estate holding companies that were related to the dealership. In addition, Wife’s father sold to Wife a 25% interest in the car dealership, pursuant to which Wife’s father took a note from Wife for $596,600. The terms of the note provide for Wife to pay her father monthly interest-only payments, with the principal to be forgiven upon father’s death.

In 2005, Wife filed for a legal separation, which was later converted to a dissolution. The final hearing was held over seven days between July 2010 and February 2011. The Court issued its Decree in August 2011.

The parties reached a partial settlement agreement on custody and parenting time, but child support remained in dispute. In its Decree, the trial court created its own child support worksheet which ordered Wife to pay the children’s controlled expenses, but also awarded Wife the parenting time credit. As a result, Wife was ordered to pay Husband $77 per week in child support.

A significant issue in dispute was the date of valuation for Wife’s various interests in the family business. Expert valuation testimony was presented by both parties. Ultimately, the trial court used the date of separation to value the businesses, and adopted the values for that date presented by Husband’s experts. However, the trial court also decided to divide the overall marital estate 67% to Wife. The net result was that Wife was ordered to pay Husband $870,948 to true-up the trial court’s intended overall division.

Wife appealed, and Husband cross-appealed, on various issues. First, Husband assigned error to the date of separation valuation date adopted by the trial court. The Court of Appeals noted that a trial court may use any valuation date from the date the petition for dissolution is filed, until the date of final hearing. The nuance in this case is that the trial court used as its valuation date the day Wife’s petition for legal separation was filed. However, since Husband failed to raise this objection at the trial court level, the Court of Appeals concluded the any objection was waived.

Next, Wife argued that the trial court erred when it did not include as a liability the $596,600 note that Wife made with her father in order to buy her share of the car dealership. The Court of Appeals agreed that this debt should have been included in the marital estate. However, the Court of Appeals also noted that, on remand after the note is included, the trial court could conclude that a division other than 67% to Wife would then be appropriate.

Third, the Court of Appeals reviewed the trial court’s child support calculation. Wife’s income situation was fairly complicated, including $48,000 per year in W-2 income for work at the dealership. In addition, Wife received free use of a vehicle which the trial court valued at $1,065 per month. In addition, the trial court found that Wife received an average of $61,000 in irregular dividends and distributions from the various entities. The trial court added these sources of income together – the wages, the free car, and the irregular income – to determine Wife’s income for child support purposes. However, Husband argued – and the Court of Appeals agreed – that the trial court’s analysis of Wife’s income improperly backed out taxes, payment of interest on the note to Wife’s father, and Wife’s mortgage payments. The Court of Appeals ordered the issue remanded for a recalculation of Wife’s gross income.

Next, Wife assigned error to the trial court’s child support calculation when it both ordered Wife to pay the children’s controlled expenses, but also gave Wife the parenting time credit. The Court of Appeals, reviewing the Indiana Child Support Guidelines, noted that one parent should receive the obligation to pay controlled expenses, and the other parent should always receive the parenting time credit.  On remand, the trial court was instructed to prepare a new child support worksheet that allocated the controlled expenses to Wife, and the parenting time credit to Husband.

Wife also assigned error to an attorney fee and expense award that was issued against her and in Husband’s favor. Reviewing the totality of the evidence, the Court of Appeals agreed with Husband that the award was supported, including because this was a complex case that required Husband’s counsel to undertake extensive discovery and valuation of Wife’s various business interests.

Finally, Husband appealed the trial court’s decision not to order any particular security on the $870,948 property settlement judgment that was issued in Husband’s favor. The Court of Appeals reviewed applicable statute and case law, concluding that this judgment automatically generated a lien against

Wife’s real estate and chattels and, thus, was not truly an unsecured judgment. In addition, while statute would have permitted the trial court to provide for additional security, the Court of Appeals believed that the trial court considered that concern and concluded, within its discretion, that additional security was not warranted.

The trial court’s decree was affirmed in part, reversed in part, and remanded.

To view the text of this opinion in its entirety, click here: Lisa A. Birkhimer v. Neil S. Birkhimer

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