Court of Appeals

Cite as 2024 Ark. App. 190

ARKANSAS COURT OF APPEALS

DIVISION II

No.  CV-22-488

STEPHANIE POTTER BARRETT, Judge

            This is the third appeal of the division of assets and debts from Holly and Craig Ballegeer’s thirty-four-year marriage. Craig appeals the March 20, 2020, order in this third appeal after a final order was entered.  On appeal, he argues the circuit court  (1) failed to implement the letter and spirit of the mandate; (2) clearly erred when deviating from the district’s administrative plan in declining to reassign the case to the original circuit judge to implement this court’s mandate; (3) clearly erred in declining to consider trial exhibits and trial testimony from the original divorce hearing to identify a statutory basis for the apparent unequal property division; (4) clearly erred in declining to consider Craig’s proffered evidence to provide statutory support for the circuit court’s original decision; (5) clearly erred by declining to consider whether Holly could or would buy Groundskeeper; (6) clearly erred in ordering an unlawful 6 percent interest rate on the purchase of his one-half of Groundskeeper and awarding it retroactively to the original date of divorce; and (7) clearly erred in failing to consider Holly’s bad-faith conduct in attempting to destroy the marital asset during the pendency of the first appeal.  We reverse and remand for further proceedings.  

            The parties were divorced in August 2017.  Originally, in dividing the parties’ marital property, the circuit court determined that one-half of the value of Groundskeeper, the parties’ landscaping and maintenance-contracting business, was valued at $183,000, and it ordered a reverse auction to divide the business—Craig would have the first right to buy Holly’s interest in the business for $183,000; if he refused, then Holly would have the right to buy Groundskeeper at that price.  If neither purchased the business at that price, the value would be reduced in $5,000 increments until one party exercised the right to buy Groundskeeper.  The circuit court also determined that the tax debt for Groundskeeper, which had not been paid for several years, would be assumed by the party who purchased the business and would be that party’s responsibility. Holly appealed, among other issues, the manner in which the circuit court divided Groundskeeper.  This court reversed and remanded the case on the issue of the division of Groundskeeper, holding that this method of awarding Groundskeeper was, in effect, an unequal distribution because by allowing a reverse auction between the parties, one party may be forced to accept an amount less than $183,000 for his or her one-half interest; this court held that if the circuit court intended this unequal distribution, the basis for the unequal distribution must be stated.  Ballegeer v. Ballegeer, 2019 Ark. App. 269, 577 S.W.3d 66 (Ballegeer I).

            On remand, the case was assigned to Judge Marc McCune, who was not the judge who issued the divorce decree.  Judge McCune stated that he understood this court’s opinion to mean that Craig had to buy the business for $183,000.  Craig’s counsel disagreed, arguing that on remand, the circuit court was to state its reasons for an unequal distribution.  Craig’s counsel moved to have a sale of Groundskeeper on the courthouse steps and to reassign the case to the judge who had issued the divorce decree.  These motions were denied, and the circuit court ordered Craig to purchase Holly’s one-half interest in Groundskeeper for $183,000 plus 6 percent interest from the date of the divorce (October 5, 2017) for a total of $206,915.34 as of December 9, 2019 (the date of the hearing).  At a hearing held on January 9, 2020, Craig raised the issue of appropriate deductions against the $183,000 he owed Holly, including an attorney’s fee she had been ordered to pay, the value of guns that had not been returned to him, his one-half value of Holly’s retirement account, and the fact that he had made substantial payments to the parties’ tax debt; however, the circuit court refused to allow that testimony, stating that they were there only to hear Craig’s plan as to how he intended to buy Holly’s interest in Groundskeeper.  Craig was allowed to proffer testimony showing that he had paid around $226,000 on the Groundskeeper taxes from 2013 to 2017, with approximately $8,000 left outstanding; he also proffered that Holly had started her own landscaping business named “Higher Groundskeeping” and that she had tried to solicit business from the two Groundskeeper customers.  An order was entered on March 30, 2020, ordering Craig to pay $3,463.63 a month for sixty months, beginning April 15, 2020, until the total amount of $207,817.74 was paid. Craig appealed the circuit court’s order, arguing seven points; Holly cross-appealed.  This court dismissed the appeal and cross-appeal without prejudice because an outstanding contempt motion had not been resolved; therefore, there was not a final appealable order.  Ballegeer v. Ballegeer, 2021 Ark. App. 390 (Ballegeer II).  In Ballegeer II, this court noted in a footnote, in response to the new circuit judge’s statement that his understanding was that Craig had to buy Holly out of Groundskeeper for $183,000,  “We emphasize that our opinion did not require a specific party to buy the other’s interest in the marital business.” Id. at 4 n.1.

            Domestic-relations cases are reviewed de novo on appeal, but the appellate court does not reverse a circuit court’s findings unless they are clearly erroneous; a finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been made.  Sanchez v. Weeks, 2023 Ark. App. 531, 678 S.W.3d 907.

            On remand, the circuit court was asked if it intended that the distribution of Groundskeeper be unequal, which this court had decided it was, then the circuit court had to state the basis for the unequal distribution of marital property, which it had not done.  When a decree of divorce is entered, all marital property shall be distributed one-half to each party unless the court finds such a division to be inequitable; in that event, the court shall state and provide its reasons in writing for not dividing marital property equally, taking into consideration the length of the marriage; age, health, and station in life of the parties; occupation of the parties; amount and sources of income; vocational skills; employability; estate, liabilities, and needs of each party and opportunity of each for further acquisition of capital assets and income; contribution of each party in acquisition, preservation, or appreciation of marital property, including homemaker services; and the federal income tax consequences of the court’s division of property.  Ark. Code Ann. § 9-12-315(a) (Repl. 2020). 

However, on remand, the case was not assigned to the judge who had issued the divorce decree, who was the only person who could give the basis for the “reverse auction” division.  This court made it clear in Ballegeer II that the language in Ballegeer I did not require a specific party to buy the other party’s interest in Groundskeeper, yet the circuit court read Ballegeer I to mean that the sole option it was given was to require Craig to buy Holly out of her interest in Groundskeeper.  This finding was clearly erroneous, especially in light of the clarification in Ballegeer II. 

            If the circuit court is unable to explain why Groundskeeper was originally divided unequally, then numerous options are available to it for division.  While it would have been most efficient on remand for the original presiding judge to have been assigned the case since he was most familiar with the parties and the evidence surrounding the value of Groundskeeper, and only he could explain the reasoning behind the “reverse auction” division of the business, he did not accept assignment of the case for reasons undisclosed on the record.  As such, it was incumbent on the new presiding judge to acquaint himself well with the facts of the case, which includes reviewing all the previous trial testimony and evidence on which the first presiding judge used to arrive at the original decision.  Additionally, it was clearly erroneous for the circuit court to refuse to consider additional evidence of the value of Groundskeeper and the debt Craig alone had substantially paid off.  Both parties have brought appeals since the divorce was granted in 2017.  The value of Groundskeeper is unclear, if there is any value at all, more than six years later.  In order to make an informed decision, the circuit court will have to take testimony and evidence as to the value of Groundskeeper and what has occurred to affect the value of the asset during the interim appeals.  In Moore v. Moore, 2019 Ark. 216, 576 S.W.3d 15, a case dealing with the distribution of marital and nonmarital property, our supreme court held that a circuit court has flexibility and discretion in redistributing all the property to achieve an equitable distribution, and its prior opinion in no way limited that broad discretion.  Likewise, here, this court held in Ballegeer II that nothing in Ballegeer I required a particular party to purchase Groundskeeper, but if the circuit court intended an unequal distribution, it must state its reasons for that unequal distribution.  This opened the door for the court to state a reason for an unequal distribution or to distribute it equally.  However, the circuit court did not explore, or even take evidence on, the option of equal distribution because it believed it was constrained by the mandate to require Craig to purchase Holly’s marital share of Groundskeeper for $183,000, which was simply not what the mandate held.

Should the circuit court divide the marital property equally—after determining the value of one-half of Groundskeeper—it could require Holly to purchase Craig’s share of Groundskeeper; it could require Craig to purchase Holly’s one-half share of Groundskeeper; it could arrive at another equal division of the asset; it could order Groundskeeper to be sold; or, if it states its reasons for doing so in writing, it could make an unequal distribution of that particular marital asset.  However, if it makes an unequal distribution of Groundskeeper, it will also have to address the federal income-tax consequences pursuant to Arkansas Code Annotated section 9-12-315(a)(1)(A)(ix).  If Groundskeeper is ordered to be sold, the issue of the back taxes must be addressed because the original circuit judge tied the payment of those taxes to the party who purchased Groundskeeper.   The taxes are joint personal debts of the parties; back taxes were due from 2014, 2015, and 2016;  and Groundskeeper’s income, because it is a pass-through entity, passes through to the parties, and taxes are personally paid on that income. Craig testified he had paid approximately $226,000 in back taxes at the time of the December 2019 hearing. It was unclear exactly how much tax liability remained to be paid. While Arkansas Code Annotated section 9-12-315 provides that all marital property shall be distributed equally to each party unless the court finds such a division to be inequitable, it is well settled that section 9-12-315 does not apply to the division of marital debts.  Sanchez, supra.  If Craig is not ordered to purchase Holly’s share of Groundskeeper, the circuit court will also have to address how the asset is to be divided—as well as the tax liability—and credit Craig for the amounts that he has paid since April 2020. We reverse and remand this case for further proceedings consistent with this opinion.

Reversed and remanded.

Gruber, J., agrees.

Gladwin, J., concurs.

Robert J. Gladwin, Judge, concurring.  I agree that the circuit court erred when it found that this court held that Craig was required to purchase Holly’s interest in Groundskeeper for $183,000. However, I disagree that the case should be remanded for further proceedings. I would simply hold that Groundskeeper be sold on the courthouse steps and that the proceeds be divided equally between the parties.

As stated in the majority opinion, this is the third appeal in the ongoing litigation between Craig and Holly. In the first appeal, this court affirmed in part and reversed and remanded in part. See Ballegeer v. Ballegeer, 2019 Ark. App. 269, 577 S.W.3d 66 (Ballegeer I). In the original divorce decree, Judge Mike Medlock ordered that Groundskeeper be sold by the unusual process of a “reverse auction.” This court held that the “reverse auction” could result in an unequal distribution of the marital property; accordingly, we remanded to the trial court to simply explain the reasoning for such a distribution. Id. at 7, 577 S.W.3d at 71 (citing Ark. Code Ann. § 9-12-315(a)(1)(A) & (B)).

On remand, the case was inexplicably reassigned to Judge Mark McCune. At the hearing held after the remand of Ballegeer I, Judge McCune stated that he understood this court’s opinion to mean that Craig was required to buy Holly’s interest in Groundskeeper. He then entered an order to that effect. That order was appealed, and we issued an opinion in Ballegeer v. Ballegeer, 2021 Ark. App. 390 (Ballegeer II). That opinion exhaustively set out the arguments made by each party’s counsel at the January 9, 2020 hearing. We dismissed that appeal for lack of a final order. Most importantly, in footnote 1, we attempted to warn the circuit court that this court did not hold that a specific party was required to purchase the other’s interest in Groundskeeper. Id. at 4. That warning was not heeded. The finality issues were resolved, and the order now before us again orders Craig to buy Holly’s interest in Groundskeeper for $183,000.

The only requirement that this court made on remand in Ballegeer I was for the circuit court to explain the reasoning for the “reverse auction” finding, which resulted in an unequal distribution of that marital asset. Judge Medlock refused to explain, and Judge McCune could not explain the reasoning behind the “reverse auction.” Because no reason was given for an unequal distribution of marital assets, the law requires that the property be divided equally. See Ark. Code Ann. § 9-12-315(b) (Repl. 2020); Sanchez v. Weeks, 2023 Ark. App. 531, at 6, 678 S.W.3d 907, 911 (noting that all earnings or other property acquired by each spouse after marriage must be treated as marital property unless it falls into one of the statutory exemptions contained in section 9-12-315(b)). It is unnecessary for the circuit court to hold another hearing. The marital property should be divided equally, and any corresponding debt should likewise be divided equally.

Henry Law Firm, by: Mark Murphey Henry, for appellant.

Smith, Cohen & Horan, PLC, by: Matthew T. Horan, for appellee.