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APPEAL FROM THE MONROE CIRCUIT COURT. The Honorable Frank M. Nardi, Special Judge. Cause No. 53C06-0905-DR-331.
ATTORNEYS FOR APPELLANT: BRUCE M. PENNAMPED, NANCY L. CROSS, Cross Pennamped Woolsey & Glazier, P.C., Carmel, Indiana.
ATTORNEYS FOR APPELLEE: ANDREW C. MALLOR, KENDRA G. GJERDINGEN, Mallor Grodner, LLP, Bloomington, Indiana.
BARNES, Judge. BAKER, J., and CRONE, J., concur.
Jeff Crider appeals various parts of the trial court's decree dissolving his marriage to Christina Crider, as well as several post-judgment orders. Several business entities in which Jeff has an interest also have intervened in this case. We affirm in part, reverse in part, and remand.
The restated issues before us are:
I. whether the trial court properly ordered Jeff to pay any attorney fees Christina might incur in enforcing a monetary judgment;
II. whether the trial court properly ordered Jeff to make a cash equalization payment to Christina of $4,752,066 plus 8% statutory post-judgment interest;
III. whether the trial court properly valued a closely-held business in which Jeff held stock;
IV. whether the trial court properly valued two other businesses in which Jeff held membership interests;
V. whether the trial court properly excluded from the marital estate purported loans Jeff's father made to him;
VI. whether the trial court properly delayed, for ninety days from the date of the dissolution decree, implementation of a reduction in Jeff's child support obligation from his provisional support obligation, and then subsequently modified
the decree to entirely reverse that reduction;
VII. whether the trial court properly granted Christina a security interest in Jeff's stock and membership interests in several closely-held family businesses and ordered that one-half of those stock and membership interests be transferred to Christina if Jeff failed to pay the cash equalization payment within 180 days of the dissolution decree;
VIII. whether the trial court granted a continuing lien against future property Jeff may acquire in order to satisfy the equalization judgment;
IX. whether the trial court properly ordered attachment of future loan proceeds Jeff may receive in order to satisfy the equalization judgment; and
X. whether the trial court properly entered garnishment, attachment, and child support income withholding orders against Jeff.
Jeff and Christina were married in 1992. They had two children during their marriage, one of whom is now emancipated. Christina first filed for divorce in 2006 and filed for legal separation in 2007, but both actions were dismissed. In May 2009, Christina filed another divorce petition.
Jeff is involved in a large number of business entities with his father, Robert, and his brother, Steve. The primary family business is Crider & Crider, Inc. (" CCI" ), which is engaged in road and other construction work primarily in the Bloomington area. Jeff, Robert, and Steve are the only shareholders of this closely-held S corporation. Jeff owns approximately 42.25% of the stock, Steve 42.25%, and Robert the remaining 15.5%. Two of the other family businesses are Logan Land Development, LLC, (" Logan" ) and North Park, LLC. Both entities own property in a planned unit development (" PUD" ) site in Bloomington called North Park. Jeff's interest in these entities is 33%. Other business entities at issue here, along with Jeff's interest therein, are: J.E. Crider & Son, LLC (30%), Crider Holding Company, LLC (33%), Crider Family Limited Partnership 1 (24%), Lancor, LLC (50%), North Eastern Holdings, LLC (33%), and South Central Holdings Corp. (33%). Jeff also owned a fifty percent interest in Jefferson Centre, LLC, but it had no value at the time of dissolution. We will refer to the Crider businesses together as the " Crider Entities." None of the Crider Entities were joined in the dissolution action; after a final dissolution decree was entered, they were granted permission to intervene in the case.
In 1993, Robert, Jeff, and Steve signed a stock transfer restriction agreement with respect to their holdings in CCI. The agreement prohibited any shareholder from encumbering any of their shares without prior written consent from the other shareholders, unless certain narrow exceptions were met. Additionally, the agreement purported to prohibit any transfer of shares to any other person unless first CCI, and then the other shareholders, were given the option to purchase the shares. It also required that any outside purchaser of CCI stock agree in writing to be bound by the agreement. It further stated, " No Shareholder shall sell, give away or otherwise dispose of any of his Shares (whether voluntarily or involuntarily, by operation of law or otherwise)" to any person in violation of the agreement, and that any such transfer of stock would be " void ab initio and of no force or
effect whatsoever." Intervenors's App. p. 160.
The LLCs also had restrictions on the transfer of membership interests written into their operating agreements. The operating agreement for Lancor provided in part:
If any Membership Interest becomes subject to any Involuntary Transfer, the remaining Members shall have the option for a period of thirty (30) days to purchase such Membership Interest. The purchase price and terms of purchase shall be the purchase price and terms as if the Member died on the occurrence of the Involuntary Transfer. If the remaining Members do not purchase the Membership Interest of the Member subject to the Involuntary Transfer, the Members shall proceed with reasonable promptness to liquidate the business of the Company. The procedure as to liquidation and distribution of assets shall be governed by this Agreement with reference to termination in the event of a Member's death.
Id. at 172. The operating agreements for North Eastern Holdings and North Park contain identical provisions regarding involuntary transfer of membership interests. The operating agreement for Jefferson Centre contains identical language regarding the right of the other members to purchase a membership interest subject to an involuntary transfer, but is silent with respect to what should happen if the remaining members decline to exercise that right. Finally, there is different language in the operating agreements for J.E. Crider & Sons and Logan governing involuntary transfers. Those agreements provide that if one member's interest is transferred without the consent of the other members,
the transferee shall have no right to participate in the management of the business and affairs of the Company or to become a Member, and such transferee shall only be entitled to receive the share of profits or other compensation by way of income and the return of contributions to which the transferor of such Interest in the Company would otherwise be entitled.
Id. at 205.
During the first ten years of the marriage, Christina primarily was a " stay-at-home" parent taking care of the children, at Jeff's request. In 2002, she started an interior design business, but it was not profitable and she closed the business in 2012, when it had a remaining inventory of $52,000. Christina also had some part-time employment during the marriage.
Jeff's finances are complicated. There can be no doubt, however, that he earns considerably more per year than the $72,000 in salary that he received from CCI and that Jeff often characterizes as his only income. There was evidence presented that through 2007, CCI regularly made sizeable annual distributions to its shareholders, Jeff, Steve, and Robert. After that time, Jeff (and Steve and Robert) began loaning money to CCI instead, despite the fact that gross profits for the company were largely unchanged. For example, according to CCI's balance sheets, in 2007, it distributed $6,298,614 to the shareholders on gross profits of $8,131,994. In 2009, the year Christina filed for divorce, CCI paid no distributions to its shareholders, the shareholders instead loaned $3,784,829 to CCI, and its gross profits were $8,920,606. Steve later stated
that companies who bonded CCI on its construction projects required the shareholder loans in order to provide greater equity in the company, but in fact the bonding companies indicated that this was not necessary and that CCI was a very financially sound company.
After 2007, Jeff was reluctant to provide personal financial statements to banks who loaned money to CCI based in part on Jeff's personal guarantee. The last time Jeff provided a personal financial statement was in 2007, before Christina filed for divorce, and it estimated his personal net worth at more than $11,000,000. Jeff's income tax returns are not helpful in determining his actual income. For example, his 2010 return reflects an adjusted gross income of $931,199 and a tax refund of $138,686. His 2011 tax return reflects an adjusted gross income of -$430,424, but still a tax refund of $128,594. An accountant for CCI indicated that the income figures on the tax returns are largely meaningless, because individual shareholders of an S corporation, like Jeff, must report on their returns income that passes to them from the corporation, even if the corporation does not actually make any distributions to the shareholders. The accountant also testified that CCI would pay " bonuses" to the shareholders to compensate them for any tax liability caused by the pass-through income, even if it did not make shareholder distributions.
Further uncertainty about what Jeff's income is comes from the June 2012 " Agreed Entry Modifying Child Support Obligation" upon emancipation of the couple's oldest child. That agreement listed Jeff's weekly income as $17,737, or $922,324 per year, with a resulting weekly support obligation of $1,257.13 for the one remaining child. The Criders' lifestyle also reflected a high level of income. The marital home sold for nearly $1.5 million during the pendency of the divorce, the couple owned a condominium in Hilton Head, South Carolina, they had floor tickets to Indiana University basketball games, and they took private flights for vacations. Also, after the parties separated in 2009, Jeff withdrew $40,000 from an account of Crider Holding Company and deposited it into an account of a woman he was dating.
Robert also " loaned" Jeff large sums of money on several occasions. In 2001, Robert purportedly loaned $415,000 so Jeff could purchase additional shares of CCI stock from Robert; the promissory note for this loan had a due date of December 31, 2006. In October 2007, Robert purportedly loaned Jeff an additional sum of $608,040.27; the promissory note for this loan had a due date of October 30, 2009. In December 2007, Robert purportedly loaned Jeff an additional sum of $1,026,614.79; the promissory note for this loan had a due date of December 31, 2012. Jeff never made any payments toward any of these loans, which, according to Jeff, " were an estate planning device to transfer ownership of the Crider Entities at [Robert's] death at a pre-determined price" and to reduce the size of Robert's estate. Appellant's Br. p. 39.
In addition to these purported loans, in 2005 Jeff sold his interest in another company, HIS Constructors, to Robert in exchange for a promissory note in the amount of $530,000. Robert has paid $50,000 toward this note, which Jeff expects his father to eventually pay in full. Robert, in fact, later sold his interest in HIS Constructors for $1.2 million. Also, in October 2007, Jeff " loaned" $2,107,412 to CCI. In October 2008, this note was rewritten to reflect an outstanding debt of $1,649,994.48, although CCI had not, and never has, made any payments on the loan. There also was evidence that at the end of
2009, Jeff was entitled to receive a bonus from CCI of over $175,000, but that he instead characterized this bonus as a loan from CCI.
The trial court conducted a dissolution hearing over the course of eleven days and received extensive evidence and testimony from both parties. In part, there was widely divergent testimony from various experts regarding the proper valuation of CCI and Jeff's interest in it. Part of the discrepancy was related to whether CCI's value should be reduced to account for purportedly unfunded union pension liabilities; Christina presented evidence that there should be no such reduction, while Jeff presented evidence that there should be a reduction in an amount of over $4.5 million. The parties also presented varying evidence regarding the value of the heavy machinery and equipment that CCI owned. Christina's accounting expert utilized an appraisal that valued the machinery and equipment at $20.1 million, using a " desk top" methodology that valued all the machinery and equipment CCI owned in 2009. Jeff's accounting expert, by contrast, utilized different appraisals, based on sales of comparable equipment and machinery at auction, with a resulting value range between $9,599,575 and $10.2 million. However, these appraisals excluded equipment that CCI had owned in 2009 that it later disposed of before the appraisals took place. Ultimately, Christina's expert placed a total value on CCI of $15.6 million, with the value of Jeff's interest being $4,321,000.
There was also conflicting testimony and evidence regarding the valuation of North Park and Logan. Both entities owned land in North Park PUD totaling over 291 acres. Experts for Christina and Jeff presented wildly varying estimates of the value of the land owned by North Park and Logan combined. Christina's expert, in particular, opined that the value of the 291-acre North Park PUD property in 2009--which was only partially developed at the time--was approximately $9,650,000, over $33,000 per acre. This valuation was based in part on the sale in 2006 of eighty-four acres within the North Park PUD to Bloomington Hospital at a cost of $150,000 per acre. Christina's expert also considered the pre-discount value of the property to be $24,343,000, with the discount taking into account the cost of developing the land. By contrast, Jeff's expert opined that the prospect of further developing the North Park PUD land was especially dim in 2009, and further believed it would be very costly to develop the land in accordance with the PUD's requirements. He placed a total value on the 291 acres of $1,820,000, or approximately $6,000 per acre.
Christina's and Jeff's experts also differed as to the proper valuation of certain bonds held by North Park in 2009. Although sometimes described by the parties as tax increment financing (" TIF" ) bonds, they were not in fact TIF bonds in 2009. Instead, they were bond anticipation notes (" BANs" ) issued by Monroe County in anticipation of the issuance of $7 million in TIF bonds in 2010, which in fact were issued by Monroe County. In 2009, the BANs were listed on North Park's balance sheet as an asset with a book value of $5,759,522. The BANs were issued to assist Monroe County with start-up development costs of the North Park PUD. The TIF bonds that replaced the BANs were supposed to be repaid through increased property tax revenues from the North Park PUD as the land was developed and the value of the land rose. In his valuation of North Park, Christina's expert included the 2009 book value of the BANs, as listed in North Park's financials that year. Jeff's expert, by contrast, asserted that the TIF bonds that replaced that
BANs were worth much less than the book value of the BANs, because development in North Park was slow in occurring and it was unlikely that sufficient property tax revenue would arise in order to fully repay the TIF bonds and, essentially, they would be defaulted. In accordance with this analysis, Jeff's expert valued the BANs in 2009 at $1,150,000.
On June 26, 2013, the trial court entered a final dissolution decree, accompanied by extensive findings of fact and conclusions thereon. With respect to the valuation of CCI, the trial court largely accepted the methodology and conclusions of Christina's expert, except with respect to the valuation of the company's heavy equipment and machinery. It rejected the " desk top" appraisal used by Christina's expert and found it was more appropriate to value the equipment and machinery using auction value, as Jeff's experts had done. However, the trial court also noted that Jeff's experts failed to appraise all the equipment and machinery CCI owned in 2009, which it had chosen as the marital estate's proper valuation date. The trial court assigned a value of $11 million to the equipment and machinery. Also, with respect to the valuation of CCI, the trial court found that it should not be reduced by over $4.5 million for an unfunded pension liability, as Jeff's expert claimed it should have been. The trial court found CCI to have a total value of $10,150,746, and Jeff's 42.5% interest in the company to be worth $2,810,506, after discounts for non-marketability and the fact that many of Jeff's shares were non-voting.
With respect to the value of the real estate in the North Park PUD, the trial court accepted the valuation placed on it by Christina's expert. This resulted in Jeff's 33% interest in North Park being valued at $1,614,000 and his 33% interest in Logan being valued at $2,853,000. Also, regarding North Park, the trial court noted that it was listing the BANs as an asset worth $5,759,522 on its 2009 financial statements, and that North Park did in fact receive TIF bonds worth more than that amount in exchange for the BANs in 2010. The trial court also rejected as too speculative the contention of Jeff's expert that no development would take place in North Park through 2021, when the TIF bonds were due. Thus, the trial court included the $5,759,522 in its calculation of North Park's total value.
The trial court also excluded the purported loans from Robert to Jeff as marital liabilities. It did include the note payable by Robert to Jeff as a marital asset, as Jeff agreed it should be. The trial court also excluded the $1,649,994.48 loan from Jeff to CCI as a marital asset.
Ultimately, the trial court found that the total value of Jeff's business and real estate interests in 2009 was over $11 million, which was offset by little marital debt. The trial court evenly split the marital estate, which resulted in Christina and Jeff each being entitled to $5,510,930 in assets. However, because Christina received few liquid assets, the trial court required Jeff to make an equalization payment to Christina of $4,752,066. It also reduced that ...