Reason: I attest to the accuracy and integrity of this document Date: Cite as 2020 Ark. App. 389 ARKANSAS COURT OF APPEALS 2021-07-08 09:42:06 Foxit PhantomPDF DIVISION I Version: 9.7.5 No. CV-19-441
JOHN ANTHONY MIDDLETON Opinion Delivered: September 9, 2020
APPELLANT APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, V. SIXTEENTH DIVISION [NO. 60DR-17-3534]
CATHY J. MIDDLETON HONORABLE MORGAN E. WELCH, JUDGE
APPELLEE AFFIRMED
MEREDITH B. SWITZER, Judge
John and Cathy Middleton were married on September 9, 1995, separated on
September 29, 2017, and divorced on January 24, 2019. John brings this appeal, challenging
the order entered by the circuit court in the divorce proceeding in two regards. First, John
contends the circuit court erred in its unequal distribution of property and allocation of
marital debt. Specifically under this point, he makes the following arguments: (a) the
allocation of the entire IRS debt to John was clearly erroneous; (b) the distribution of
property was inequitable; and (c) characterizing the shop as marital property was error.
Second, John contends the circuit court erred by awarding alimony to Cathy. We affirm.
In the divorce decree, the circuit court found that there was a marital debt of at least
$382,029.60 owed to the Internal Revenue Service (IRS) and that John was solely
responsible for paying the IRS debt plus all associated interest and penalties. The court
reasoned that it would be inequitable to hold Cathy responsible for any portion of the debt because of the disparity in the parties’ earning capacity and because the debt existed as a
result of John’s “egregious mismanagement of marital funds” and wasting marital funds by
“excessive gambling.”
The court further found that there were three parcels of marital real property
(encumbered by the federal tax liens): (1) a mobile home located on approximately three
acres and valued at $68,405.00; (2) 2.79 acres valued at $20,775; and (3) a lot adjacent to
the marital home with a “shop” located thereon, which was valued at $55,000. The court
concluded it would be inequitable to order the properties sold or award any of them to
Cathy because of the tax liens. Consequently, the court awarded the parties’ real property
to John and ordered him to pay Cathy $72,090 as her half of the value of the properties.
With respect to the marital business, Mid-South Boring, LLC, the court found that
the business was created in 1999 and that Cathy assisted John in running the business,
undertaking a range of tasks from bookkeeping to field work. The court found the value
of the business to be $268,250, considering the equipment value, accounts receivable,
checking account balance, and accounts payable. The court specifically noted that it
accorded significant weight to Cheryl Shuffield’s expert testimony and adopted her work as
the findings of the court. Ms. Shuffield was retained as an expert to assist with analysis of
financial records and other matters in the case. Cathy was awarded $134,125 as her one-
half interest in the business, and the court gave John the option of paying that amount in
full within thirty days of the decree’s entry or paying at the rate of $2,000 per month until
the amount was paid in full.
2 Beyond the aforementioned divisions, for the most part, the parties were awarded all
marital personal property in his or her possession. The parties owned four vehicles, two of
which were awarded to John (along with responsibility for all debts, expenses, and insurance
related thereto), one of which was awarded to Cathy, and the fourth was given to their
adult daughter. Each party retained all funds in any checking or similar account held in his
or her sole name. The court awarded Cathy $2,500 in marital funds that were being held
in her attorneys’ trust account because they were intended to be used for repairs to the
marital home, but the repairs were never made. Aside from the IRS tax debt, the parties
agreed to the division of remaining marital debt and each party was solely responsible for
any and all other debts in his or her sole name.
In addition, the court found that both permanent and rehabilitative alimony were
appropriate for Cathy, awarding her $3,500 per month for two years and $2,000 per month
thereafter until her death or remarriage. Additional findings, rulings, and rationales for the
circuit court’s decisions will be discussed in addressing John’s arguments on appeal.
We review divorce cases de novo on appeal. Hayden v. Hayden, 2020 Ark. App.
152, 594 S.W.3d 912. The circuit court’s findings of fact regarding property division will
be affirmed unless they are clearly erroneous or clearly against the preponderance of the
evidence. Id. A finding is clearly erroneous when the reviewing court, on the entire
evidence, is left with a definite and firm conviction that a mistake has been made. Moore v.
Moore, 2019 Ark. 216, 576 S.W.3d 15. We also give due deference to the circuit court’s
determination of the credibility of the witnesses and the weight to be given to their
testimony. Id.
3 I. The Distribution of Property and Allocation of Marital Debts
In his first point of appeal, divided into three subpoints, John contends that the circuit
court clearly erred in its distribution of marital property and allocation of marital debts. We
disagree.
All marital property shall be distributed one-half to each party unless the court finds
such a division to be inequitable. Moore, supra (citing Ark. Code Ann. § 9-12-315(a) (Repl.
2015)). If the circuit court finds such a division would be inequitable, then it shall make
some other division that the court deems equitable, taking into consideration a list of nine
factors set forth in Arkansas Code Annotated section 9-12-315. Hayden, supra; Ark. Code
Ann. § 9-12-315. The nine factors are the (1) length of the marriage; (2) age, health, and
station in life of the parties; (3) occupation of the parties; (4) amount and sources of income;
(5) vocational skills; (6) employability; (7) estate, liabilities, and needs of each party and
opportunity of each for further acquisition of capital assets and income; (8) contribution of
each party in acquisition, preservation, or appreciation of marital property, including services
as a homemaker; and (9) federal income tax consequences of the court’s division of property.
Id. The court must state its basis and reasons for not dividing the marital property equally
between the parties, and the basis and reasons should be recited in the order. Id. When a
circuit court does not recite any of the statutory reasons why an unequal distribution is
equitable, reversal is required. Id. However, the circuit court is not required to list each
factor in its order or to weigh each factor equally. Moore, supra. Moreover, the specific
enumeration of the statutory factors does not preclude the circuit court from considering
other relevant factors, where exclusion of other factors would lead to absurd results or deny
4 the intent of the legislature to allow for the equitable division of property. Id. Exceptions
to the rule of equal distribution will always depend on the specific facts as reflected by the
circuit court’s findings and conclusions. Doss v. Doss, 2018 Ark. App. 487, 561 S.W.3d
348. The statute requires the lower court simply to explain its reasons for not dividing the
marital property equally, not to recite each of the statutory factors in the order. Id.
The allocation of marital debt must be considered in the context of the distribution
of all the parties’ property. Hayden, supra. Arkansas Code Annotated section 9-12-315 does
not apply to the division of marital debt, and there is no presumption that an equal division
of debts must occur. Goodson v. Bennett, 2018 Ark. App. 444, 562 S.W.3d 847. A
determination that debts should be allocated between the parties on the basis of the relative
ability to pay is not a decision that is considered clearly erroneous. Doss, supra.
A. The IRS Debt
For his first argument under Point I, John contends the circuit court clearly erred in
allocating the entire IRS debt to him. We disagree.
The circuit court found that the federal tax debt incurred during the marriage was at
least $382,029.60 and specifically found that it was a marital debt. John does not challenge
the accuracy of the amount of this debt. Instead, he argues that the circuit court’s ruling
was inequitable and clearly erroneous because Cathy enjoyed the benefits of the business
income that gave rise to the tax liability but didn’t want to be responsible for the taxes. Our
de novo review does not leave us with a definite and firm conviction that the circuit court
made a mistake in requiring John to be solely responsible for this tax debt. The circuit court
considered this marital debt in the context of the distribution of the parties’ property. The
5 court explained that John’s failure to pay taxes had been a point of contention in the
marriage and, after consulting with a CPA, Cathy filed separate returns and paid her own
taxes. The court also specifically found that it would be inequitable to hold Cathy
responsible for any portion of the tax debt because there was such great disparity in the
parties’ earning capacity, and the federal tax debt was due to John’s mismanagement of
marital funds. John himself testified that he made enough money to pay off all the tax liens
and still have in excess of $300,000 to $400,000; instead, John wasted that money through
his excessive gambling. We hold that the circuit court did not clearly err.
B. The Real Property, Business, and Dissipated Marital Funds
Under this subpoint, John contends the circuit court’s division of the parties’ real
property, business, and dissipated marital funds was so inequitable as to require reversal. We
In particular, John challenges three awards made by the circuit court: (1) The circuit
court awarded the real property to John but ordered that he pay Cathy one-half the value
of the real property in a lump sum, which was determined to be $72,090; (2) the circuit
court awarded John the business, Mid-South Boring, LLC, but ordering him to pay Cathy
her one-half interest in the business in the amount of $134,125, either in a lump sum or at
the rate of $2,000 per month until paid in full; and (3) the circuit court ordered John to
reimburse Cathy for one-half of the marital funds the court found John had dissipated
($179,388.17). The total dollar amount awarded to Cathy was $385,603.17, $134,125 of
which could be paid in monthly installments of $2,000 until paid in full. John received the
marital real property and the business.
6 The gist of John’s argument under this point is that he will be reduced to poverty if
the circuit court’s awards remain in place. He argues that the real property is essentially
worthless because of the tax liens and that the business has no prospective jobs for the
foreseeable future and could not be expected to earn the same amount of revenue that it
had in the past. He further argues that even if he were able to sell the real property and
liquidate the business, he would not have enough money to pay the IRS debt much less the
amounts the court ordered him to pay.
The circuit court explained that it would be inequitable to order any of these
properties sold because neither party would receive any value from the sale as a result of the
IRS liens attached to the property. The court further explained that it would also be
inequitable to award any of these properties to Cathy because they remained encumbered
by John’s debts.
As with the first subpoint, the circuit court’s division of the real property and
reimbursement of dissipated funds to Cathy hinged, in part, on its conclusion that Mid-
South Boring could be expected to earn the same amount of revenue that it had in the past.
Although the following findings were noted in the decree as part of the alimony award, it
is fair to take note of them with respect to the court’s other property decisions when
considering John’s income. Specifically, the circuit court found that it did not consider
financial information provided by John to be credible and that John’s CPA’s opinion was
only as reliable as the information John provided to him. The circuit court found that
Cheryl Shuffield was the only professional who had conducted an independent review of
John’s income. Based on Ms. Shuffield’s calculations, the court found that John earned a
7 pretax income of more than $30,000 per month. After subtracting monthly expenses of
$6,542, as shown in John’s affidavit of financial means, the court further found that he would
still have over $24,000 per month available to pay spousal support and current income taxes.
The court noted that John was forty-seven years old and had no health issues that would
impact his ability to earn income, while Cathy was fifty-three years old and had a high-
school education, minimal work experience, and health problems that limited her ability to
perform physically demanding tasks. We hold there was no clear error in the circuit court’s
award regarding the marital real property, the business, and the dissipated marital funds.
C. The Characterization of the “Shop Property”
For his final subpoint, John contends that the circuit court clearly erred in
characterizing the “shop property” as marital property. He alleges that even though he did
not receive the deed until after the marriage, he paid for the property in full prior to the
marriage. Alternatively, he claims that even if he did not pay for the property in full prior
to the marriage, he paid a “large amount,” and at a minimum, the court should have
determined that this property was at least partially nonmarital. We are not persuaded that
John met his burden of proving the portion of the property he claimed was nonmarital and
therefore find no clear error on this point.
John executed a purchase agreement with respect to the property at 11110
Muscadine Lane on September 5, 1990. Pursuant to the purchase agreement, the purchase
price for the property was $13,500, to be paid in monthly installments until paid in full.
John was also responsible for paying taxes, assessments, and insurance and to provide the
seller with proof of such payment. Upon payment of the entire debt, the seller would
8 convey to John the described property by warranty deed. In the case of default, the seller
had the option to rescind the agreement. In the event of rescission, all moneys paid would
be retained by the seller, not as a penalty, but as rent for the property, and the relation of
the parties thereafter was to be that of landlord and tenant.
John and Cathy married in 1995. John testified that he completed payment for the
property before the marriage, but he acknowledged that he did not acquire the deed to the
property until after the marriage. As with other financial information provided by John, the
circuit court did not find John’s testimony regarding payment for the property to be
credible. Other than his own testimony, John presented no evidence to establish the value
of the portion of the property that he alleges is nonmarital. As the circuit court noted in
the decree, “[b]ecause [John] failed to present clear and convincing evidence quantifying
any alleged nonmarital portion of the property, the Court is unable to find the property
partially non-marital.”
Even on appeal, John argues that even if he did not pay for the property in full, he
paid for a “large amount,” yet he still has not established that amount. Cathy, on the other
hand, presented evidence showing that marital funds were used not only to finish paying
for the property but also to make significant improvements to the property, including the
addition of the “shop” to the property. Moreover, the court found that John failed to
provide any evidence of the value of this property, so the court adopted Cathy’s valuation
of $55,000. Under these circumstances, we are not left with a definite and firm conviction
that the circuit court made a mistake in characterizing the “shop property” as marital.
9 In short, our de novo review of the circuit court’s allocation of the IRS debt to John
and its division and award of the real property, the business, and the repayment of dissipated
marital funds convinces us that the circuit court did not clearly err.
II. Alimony
For his final point of appeal, John argues that the circuit court erred by awarding
alimony to Cathy. We do not agree.
Generally, the purpose of alimony is to rectify economic imbalances in earning power
and standard of living in light of the particular facts in each case. Goodson v. Bennett, 2018
Ark. App. 444, 562 S.W.3d 847. The primary factors to be considered in determining
whether to award alimony are the financial need of one spouse and the other spouse’s ability
to pay. Id. Secondary factors for consideration include the following: the financial
circumstances of both parties; the couple’s past standard of living; the value of jointly owned
property; the amount and nature of the parties’ income, both current and anticipated; the
extent and nature of the resources and assets of each of the parties; the amount of income
of each that is spendable; the earning ability and capacity of each party; the property awarded
or given to one of the parties, either by the court or the other party; the disposition made
of the homestead or jointly owned property; the condition of health and medical needs of
both husband and wife; the duration of the marriage; and the amount of child support should
also be considered. Foster v. Foster, 2016 Ark. 456, 506 S.W.3d 808. Arkansas Code
Annotated section 9-12-312(a) authorizes permanent alimony, and section 9-12-312(b)
authorizes rehabilitative alimony. The same factors may be considered in deciding whether
to award either type of alimony. Foster, supra.
10 An award of alimony is within the circuit court’s sound discretion, and this court
will not reverse the circuit court’s decision to award alimony absent an abuse of that
discretion. Foster, supra. The circuit court may make an award of alimony that is reasonable
under the circumstances, and the amount of alimony should not be reduced to a
mathematical formula because the need for flexibility outweighs the need for relative
certainty. Id. Moreover, the circuit court is in the best position to view the needs of the
parties in connection with an award of alimony. Id.
Here, the circuit court found that both permanent and rehabilitative alimony were
appropriate for Cathy, awarding her $3,500 per month for two years and $2,000 per month
thereafter until her death or remarriage. In making these awards, the court considered
various factors: the parties had been married twenty-three years; John had generated nearly
all the marital income; Cathy had been a stay-at-home mother and assisted John with the
business, without pay; Cathy later worked part time in a retail store and at the time of the
divorce was earning minimal income caring for her disabled father; Cathy was fifty-three
years old, had a high-school education, health issues, and minimal work experience—
making it unlikely she would be able to establish a career path to afford the standard of living
she had enjoyed during the marriage; Cathy’s current income and anticipated earning
capacity were not sufficient to cover her basic monthly living expenses of $6,345; and she
had not yet reached retirement age and had some bookkeeping and other experience that
could be expanded, given time.
The court also noted that John had a demonstrated ability to pay alimony. As part of
the divorce, John had been awarded the well-established marital business and would
11 presumably continue to earn substantial income from it. The court reasoned that John
therefore had a high earning capacity and income in excess of his monthly living expenses.
The court also considered that John was only forty-seven years old and did not have any
health issues that impacted his ability to earn income. The court found that John’s exhibits
regarding his income were not credible and his affidavit of financial means was unreliable.
As previously noted, the court found that Cheryl Shuffield was the only professional who
had conducted an independent review of John’s income, and using her calculations, the
court found that John earned a pretax income of more than $30,000 per month, his affidavit
of financial means showed living expenses of $6,542 per month, and that after subtracting
his monthly expenses, John would still have over $24,000 per month available to pay spousal
support and current income taxes. John’s ability to pay alimony was also demonstrated by
the fact that he spent an average of $22,903 per month on gambling and supported his live-
in girlfriend, who did not work. In reaching its decision, the circuit court also noted that
Cathy had been awarded a sum well in excess of $350,000, and while her income would
never be commensurate with John’s, she had some ability to earn some amount of income.
The circuit court considered the primary and secondary factors for determining
whether to award alimony and explained its rationale for awarding both permanent and
rehabilitative alimony and the appropriateness of the amounts awarded with respect to each.
We hold the court did not abuse its discretion in making these awards.
Affirmed.
ABRAMSON and VIRDEN, JJ., agree.
12 Davidson Law Firm, by: Joshua M. Allen and Charles Darwin “Skip” Davidson, for
appellant.
Dover Dixon Horne PLLC, by: Gary Rogers and Adrienne M. Griffis, for appellee.