Issues: Child support; The Michigan Child Support Formula (MCSF); "Income"; 2013 MCSF 2.01(C) & (C)(2); 2013 MCSF 2.01(E)(1), (2) & (4); Earnings generated by an S corporation; Ross v. Auto Club Group; JS v CC (MA); In re Marriage of Brand (KS); Tebbe v. Tebbe (IN App.); Reliance on an expert's determination of "excess working capital" in the plaintiff-father's S corporation (SGC); Earnings retained by SGC; Undistributed profits said to "belong to the corporation"; Dodge v. Ford Motor Co.; 2013 MCSF 2.01(C)(2)(a); 2013 MCSF 2.01(E)(4)(a) & (d)(i); Whether the MCSF requires calculation of a parent's income as though he or she operates a business in a particular manner and distributes some specific percentage of "excess" profits; Exercise of business judgment; Churella v. Pioneer State Mut. Ins. Co.; 2013 MCSF 2.01(E)(1)(a); Zold v. Zold (FL Dist. Ct. App.); Ewald v. Ewald; Including in the calculation of plaintiff's income funds distributed to him for payment of taxes arising from SGC's earnings; 2013 MCSF 2.01(B); 2012 MCSF 2.01(E)(1)(b); Custody and parenting time; MCL 722.28; Claim that the trial court should have awarded equal parenting time; Children's best interests; Berger v. Berger; Shade v. Wright; MCL 722.23; MCL 722.27a(6) & (7)(a); Attorney fees; MCR 3.206(C)(1) & (2); Loutts v. Loutts; Myland v. Myland
Court: Michigan Court of Appeals (Published)
Case Name: Diez v. Davey
e-Journal Number: 58396
Judge(s): Hoekstra and Wilder; Concurring in part, Dissenting in part – Fort Hood
The court held that the trial court erred in calculating the plaintiff-father's income for purposes of child support insofar as it focused on an expert's business judgment of how plaintiff's S corporation (SGC) "could be run, rather than the historical practices of the business and plaintiff's efforts, if any, to shield income in the corporation." Further, any funds that were distributed to plaintiff for the payment of SGC's taxes should not have been used in his income calculation. However, the trial court did not abuse its discretion in awarding custody or parenting time, or in awarding the defendant-mother attorney fees. Thus, the court affirmed in part, vacated in part, and remanded for reconsideration of plaintiff's income under the MCSF. The parties never married, but over the course of a 16-year relationship they had 3 children. The trial court awarded the parties joint legal and joint physical custody. The parenting time schedule provided plaintiff with approximately 122 overnight visits per year. Crediting the testimony of a CPA (C), the trial court set plaintiff's monthly child support at $7,062. It awarded defendant $118,000 in attorney fees. Plaintiff argued on appeal that the trial court erred in relying on C's determination of "excess working capital" in SGC as a basis for attributing income to him, and by including in its calculation of his income funds distributed to him by SGC to pay "the tax burden attributable to SGC's corporate income." The court noted that the MCSF does not "identify undistributed corporate profits as income to a parent where there is no evidence of a reduction in distributions compared to historical practices. Given that the MCSF does not expressly include this class of corporate earnings within a parent's income, where there is no evidence of a reduction in distributions compared to historical practices, it would be inappropriate to adopt a brightline rule including undistributed earnings retained by an S corporation within the calculation of a parent's income under the MCSF in all circumstances." The court found that "nothing in the plain language of the MCSF indicates a parent should be imputed with income as though he or she runs his or her business in line with industry averages, or that he or she should be charged with income as though some set percentage of 'excess working capital' had been distributed." The trial court "erred by adopting the opinion of an expert who evaluated plaintiff, not based on how plaintiff historically ran the business, but based on, in essence, the substitution of his own business judgment for that of plaintiff's in terms of how much income the business could relinquish." The court also held that funds distributed to shareholders by an S corporation "to actually offset payment of taxes on earnings retained by the corporation should not be included as income to the shareholder-parent under the MCSF."
Issues: Paternity dispute; The Revocation of Paternity Act (RPA)(MCL 722.1431 et seq.); Standing; MCL 722.1441(3)(a) & (c); Parks v. Parks; Glaubius v. Glaubius; Applicability of judicial estoppel; Wells Fargo Bank, NA v. Null; Harmless error in the exclusion of testimony; MCR 2.613(A); Request for attorney fees and costs as sanctions under MCR 2.114; Edge v. Edge; MCR 2.114(D); Kitchen v. Kitchen
Court: Michigan Court of Appeals (Published)
Case Name: Sprenger v. Bickle
e-Journal Number: 58395
Judge(s): Murphy, Sawyer, and M.J. Kelly
In a matter of first impression, the court held that the plaintiff could not establish standing under MCL 722.1441(3)(a) in light of his testimony that he knew the defendant was married before her divorce was finalized. Further, his claim under MCL 722.1441(3)(c) failed because there was effectively no supporting evidence. Thus, the court affirmed the trial court's order granting defendant's motion to dismiss in this paternity dispute. It also upheld the trial court's denial of defendant's motion for sanctions under MCR 2.114, noting that the RPA was "newer legislation" and the facts of the case were unique. Plaintiff previously filed suit under the Paternity Act. He brought this action under the RPA. It was dismissed on the basis that he again lacked standing. "MCL 722.1441(3)(a) is concerned with situations in which the child at issue was conceived during wedlock, while MCL 722.1441(3)(c) regards situations wherein the child was not conceived during the marriage, negating the need to supply the extra proofs required under subsection (3)(a)." After an evidentiary hearing, the trial court dismissed the case and denied plaintiff's motion for genetic testing, finding that he did not show that "conception occurred after the divorce judgment was entered for purposes of MCL 722.1441(3)(c), and that plaintiff knew defendant was married at the time of conception for purposes of MCL 722.1441(3)(a), if conception had actually occurred during the marriage." On appeal, plaintiff challenged its findings under both provisions. The court noted that summary disposition principles did not apply, as the trial court conducted an evidentiary hearing and made factual findings based on the evidence presented. The court reviewed its factual findings for clear error. "In analyzing MCL 722.1441(3)(a), there needs to be a finding or an assumption that conception occurred during the marriage." The provision "clearly envisions and applies to circumstances in which a male has sexual intercourse with a married female, not knowing her to be a married woman at the time, nor with adequate information such that he should have known about her marital status." Plaintiff did not and could not "establish standing under MCL 722.1441(3)(a) in light of his testimony that he knew defendant was married prior to April 8, 2011, when the divorce was finalized." As to MCL 722.1441(3)(c)(i), the court held that "the trial court did not clearly err in finding that plaintiff failed to demonstrate that conception occurred outside of marriage. The evidence overwhelmingly pointed to conception taking place during defendant's marriage" to her ex-husband.
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