Scott Alan Baker v. Kerry Comissiong Baker

CourtMichigan Court of Appeals
DecidedJune 27, 2024
Docket364555
StatusUnpublished

This text of Scott Alan Baker v. Kerry Comissiong Baker (Scott Alan Baker v. Kerry Comissiong Baker) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Scott Alan Baker v. Kerry Comissiong Baker, (Mich. Ct. App. 2024).

Opinion

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

SCOTT ALAN BAKER, UNPUBLISHED June 27, 2024 Plaintiff-Appellant,

V No. 364555 Bay Circuit Court KERRY COMISSIONG BAKER, LC No. 2021-003190-DO

Defendant-Appellee.

Before: O’BRIEN, P.J., and M. J. KELLY and FEENEY, JJ.

PER CURIAM.

Plaintiff appeals as of right the parties’ judgment of divorce. On appeal, plaintiff takes issue with (1) the manner in which the trial court calculated plaintiff’s annual income for purposes of determining spousal support and (2) the trial court’s ordering plaintiff to “contribute the sum of $10,000.00 toward the attorney fees and costs incurred by” defendant. We affirm the trial court’s calculation of plaintiff’s income but reverse its award of $10,000.

I. BACKGROUND

The parties were married in 1989. Plaintiff worked as an ear, nose, and throat doctor, while defendant worked as a physical therapist. Plaintiff ran his own practice and was the sole owner of Baker Ear, Nose, and Throat Associates PLC (Baker ENT). Defendant ran her own business between 2017 and 2022, and worked for Mid-Michigan Physical Therapy and Rehab Specialists at the time of trial.

Timothy Quast, the accountant for Baker ENT, testified that plaintiff had structured his practice so that he did not receive an income in the form of wages. Christopher Sheridan, a certified public accountant, explained that plaintiff was “not allow[ed]” to receive a “W-2 wage” because he chose to set up Baker ENT as a “schedule C” for tax purposes.

Plaintiff testified that he did not have a personal credit card for at least ten years before the parties separated in 2022, and that he used the Baker ENT credit card for his personal expenses. Quast and plaintiff reported that some of plaintiff’s personal expenses were paid for using draws from Baker ENT. Quast explained that plaintiff’s draws would come from either the net income

-1- of the practice or from money that the practice borrowed. According to Quast, between 2019 and 2021, plaintiff increased Baker ENT’s debts “to the banks and [to] the [Small Business Administration]” from $0 to $352,390. This included establishing a line of credit. Quast said that this “money was available for draws, and was used, in fact, for draws, over many of those last three years.” He added that plaintiff would need to earn an additional $118,000 per year pretax to retire Baker ENT’s $352,390 debt within five years.

Quast reported that, in 2019, plaintiff withdrew $65,000 from Baker ENT’s line of credit, $45,496.87 of which went toward the purchase of a house for the parties’ son, and the other $20,000 of which was used for home improvements. Because this $65,000 was taken from Baker ENT’s line of credit, it could not be separated out from the other expenses (both business and personal) that the line of credit was used to pay for. When Quast was asked how much of Baker ENT’s line of credit “represents the balance on the house that was purchased for [the parties’ son],” Quast reiterated that it was “not possible” to know because of the nature of a line of credit—while plaintiff made payments on the line of credit, those payments, Quast explained, were “not attributable to any one asset” but instead paid down the overall debt. Quast opined that, while the $65,000 draw on Baker ENT’s line of credit “was used to acquire something personally,” it did not “represent income at that time” because it was a liability that had to be repaid.

Plaintiff testified that, in May 2021, after “things had deteriorated” and the parties “decided to get divorced,” he withdrew $55,000 from Baker ENT to pay the down payment on a new house for himself, and another $24,283 to cover six months of payments toward that house. Plaintiff said that he also paid a retainer for his divorce attorney through a $10,000 draw from Baker ENT.

Robert Looby, a certified public accountant who testified on behalf of plaintiff, was asked to determine an appropriate income to attribute to plaintiff. Looby believed that an appropriate estimate of plaintiff’s average net income for the past three years was $380,000. Looby calculated this estimate by considering information provided by Quast’s office on plaintiff’s financial statements, including Baker ENT’s net income, stimulus payments, and government loans that were forgiven. Looby explained that he considered the stimulus payments and forgiven loans as sources of income to normalize plaintiff’s income during years in which his practice was hindered by the pandemic. Looby noted, however, that plaintiff would also be responsible for “healthcare costs” and “the self-employment tax,” which would reduce his overall income. Looby believed that taking these reductions would “put [plaintiff’s] income right around 340 to $345,000.”

Looby opined that net income and distributions from a business should be considered separately. Looby explained that distributions “just reflect[] what you’ve drawn out of the business,” so distributions could be more than income one year and less the next. “The distributions don’t have anything to do with your net income,” Looby said.

Sheridan, who testified on behalf of defendant, was also asked to estimate an appropriate amount of income to attribute to plaintiff. Sheridan believed that plaintiff’s income should be calculated by looking at the total money that plaintiff received from Baker ENT. This was because, according to Sheridan, plaintiff’s “way of earning a W-2 wage [was] taking out the excess cash that’s left over in the business.” In other words, Sheridan believed that all of the “excess cash that [plaintiff] received” from Baker ENT constituted plaintiff’s “compensation” from his practice. The average of Baker ENT’s payments to plaintiff over the last three years was $443,280, Sheridan

-2- said. This was not plaintiff’s taxable income, Sheridan clarified, but was “money that’s going straight into [plaintiff’s] pocket that he can then pay personal expenses with or do with what he would please.”

To ensure that his estimate of plaintiff’s income “made sense,” Sheridan performed five “sanity” or “validity checks.” These checks, Sheridan explained, were surveys of the industry to see “what would the industry tell me someone in this position, this industry, with this experience, what would they earn as a reasonable compensation . . . .” Sheridan said that his “sanity checks” confirmed that his $443,000 estimate for plaintiff’s income was reasonable.

Quast disagreed with Sheridan and opined that plaintiff’s draws from Baker ENT should not be the basis for determining plaintiff’s income. This was because, according to Quast, those draws were sometimes taken against a bank loan that the practice was still obliged to repay. When asked to provide an annual wage for plaintiff, Quast said that, considering plaintiff’s debt obligations, a reasonable average annual income attributable to plaintiff was $320,000.

The trial court, in an opinion from the bench, said that Quast and Looby were “good experts” but “their analysis was all based on net income, which is essentially a tax analysis.” This was not entirely reflective of plaintiff’s income, the court opined, because plaintiff relied on Baker ENT’s credit card and cash draws from the business to fund his personal expenses, yet Quast and Looby’s analysis did not necessarily look at these charges and draws as benefits that plaintiff received from Baker ENT as compensation.

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Bluebook (online)
Scott Alan Baker v. Kerry Comissiong Baker, Counsel Stack Legal Research, https://law.counselstack.com/opinion/scott-alan-baker-v-kerry-comissiong-baker-michctapp-2024.