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Scott v. Corcoran

Court of Appeals of Indiana

October 28, 2019

Kriston M. Scott, Appellant-Defendant,
Gerald J. Corcoran, III, Appellee-Plaintiff.

          Appeal from the Lake Circuit Court Trial Court Cause No. 45C01-1009-DR-856 The Honorable Marissa McDermott, Judge, The Honorable Lisa A. Berdine, Magistrate Judge

          Attorney for Appellant Tula Kavadias Crown Point, Indiana

          Attorney for Appellee Andrew P. Martin Saint John, Indiana

          Tavitas, Judge.

         Case Summary

         [¶1] Kriston M. Scott ("Mother") appeals from the trial court's order denying her petition for rule to show cause regarding Gerald J. Corcoran, III's ("Father") failure to pay child support; and denying her request for attorney's fees.[1] We affirm in part, reverse in part, and remand.


         [¶2] Mother raises three issues on appeal, which we revise and restate as follows:

I. Whether the trial court abused its discretion in denying Mother's request for further extension of time to submit proposed findings of fact and conclusions of law.
II. Whether the trial court clearly erred in denying Mother's petition for rule to show cause regarding Father's failure to timely pay child support.
III. Whether the trial court clearly erred in finding that Father overpaid child support to Mother and in entering a money judgment against Mother and in favor of Father.
IV. Whether the trial court clearly erred in failing to order Father to pay Mother's attorney's fees incurred for defending against Father's petition for an accounting, which petition Father withdrew at the close of the four-day evidentiary hearing.


         [¶3] Mother and Father married in 2002 and have two children. During the marriage, Mother worked primarily as a homemaker, and Father was employed as an operations manager for Scrap Metal Services ("SMS"). In 2013, Father's annual base salary from SMS was approximately $150, 000.00. Father is a minority shareholder in SMS, [2] in which he once owned a 20.65 percent interest. Father is also a shareholder in SMS Realty and other SMS entities (collectively, "the subsidiary companies"). In addition to his salary, Father receives distributions from SMS and the subsidiary companies in profitable years.

         [¶4] Father filed to dissolve the marriage and, on November 26, 2013, the trial court approved an agreed decree of dissolution ("Agreed Decree") that incorporated the parties' negotiated settlement agreement and settled outstanding issues of property division, custody, parenting time, and child support. The relevant portion of the Agreed Decree for purposes of this appeal is as follows:

         5. CHILD SUPPORT

Commencing December 1, 2013, the Father shall pay Two Hundred and Thirty Five Dollars ($235.00) per week in Guideline Child Support and, consistent with the Guideline treatment for irregular income, shall pay 12% of all income earned by the husband in excess of $2, 903.79 per week as set forth in the attached Child Support Worksheet. The 12% of irregular income based Child Support shall include income received in the last quarter of 2013. Thereafter, the Husband shall file his Federal tax returns no later than November 1st of each year and shall immediately notify the Mother of his filing. The parties shall have 30 days to calculate the 12% of irregular income and to calculate the support owed thereon consistent with the Indiana Child Support Guidelines, and taking into consideration support paid by Father to Mother for the year 2013. The Father shall have 30 days thereafter to pay all amounts owed for said irregular income. Any amount not paid within the 30 days shall become a judgment against the Father. . . . .
The parties agree that in order to determine Father's excess income that the following information shall be considered:
In addition to wages and rental income in the form of Distributions from SMS Burnham, LLC, Father receives other income Distributions from various entities in which he has an interest, including but not limited to Scrap Metal Services, LLC. The parties further agree that Father may at time receive "disbursed income" (distributions received) and "undisbursed income" (pass through income) from these entities. Consistent with the holdings in Tebbe v. Tebbe, 815 N.E.2d 180, 182 (Ind.Ct.App. 2004), the parties agree that any undisbursed income of Father, i.e. pass through income, shall not be included in Father['s] gross income for making the calculation of child support, however, all disbursed income received and as demonstrated on Father's K-1's and his tax returns shall be included in Father's gross income for child support purposes.
The parties further agree that in order to properly calculate Father's support obligation, the income tax on the undisbursed portion of his income shall be calculated and then deducted from Father's income. All the remaining Distributions, excluding the undisbursed as indicated and the tax on the undisbursed, shall then be used to calculate Father's gross income.
Finally, the parties agree that Father's tax rate may and likely will be in excess of the presumed tax rate set forth in the Indiana Child Support Guidelines as the rate exists in 2013, and as it may change in subsequent years. To that end, the parties agree to adjust the calculation of Father's child support by adjusting the calculation to reflect the actual tax rate that Father pays each year on the disbursed and regular income used for his support obligation calculation, but not the tax rate that Father pays on his undisbursed income.

         Appellant's App. Vol. II pp. 48-50 (footnotes omitted). In the Agreed Decree, Father also agreed to execute an authorization to allow Mother to obtain his federal tax return "directly from the IRS annually" and to provide "his complete federal and all state income tax returns, his 1099s from all sources, including his INT, DIV and related forms, and his K-1's from all sources" to Mother. Id. In 2012 and 2013, Father paid $37, 230 for irregular child support. Father did not pay irregular child support in 2014.

         [¶5] In dividing the marital property in the Agreed Decree, the trial court, inter alia, assigned to Mother Father's interest income from a promissory note ("Note") for approximately $1.155 million between Father and SMS.[3] Mother was to receive monthly interest payments of approximately $9, 000.00 on the Note and the principal when it was due. In 2015, SMS temporarily ceased making interest payments to Mother because of financial difficulties.[4] The Agreed Decree provided that "once [ ] interest income which Mother receives on the Promissory Note . . . terminates, [ ] Mother shall be entitled to a modification of support as that event will constitute . . . change[d] circumstances." Id. at 50. Father did not pay any irregular child support in 2015.

         [¶6] On August 12, 2015, Mother filed a petition for modification of child support in which she alleged a continuous and substantial change in circumstances warranting modification of the child support order for various reasons, including the suspension of interest payments on the Note. Mother also filed a verified motion for rule to show cause regarding Father's failure to timely produce his 2013 and 2014 tax returns and Father's failure to pay Mother "any sum . . . arising from [ ] his excess income." Id. at 63. At the time, Father was paying his agreed-upon base support of $235.00 per week. Mother also sought attorney's fees.

         [¶7] In April 2016, Father paid a lump-sum payment of $108, 021.00 for irregular child support to Mother, based on calculations based on his original tax returns. On April 26, 2016, Father filed a petition to modify child support in which he asked the trial court to deviate from the recommended child support pursuant to the Indiana Child Support Guidelines; and Father requested that the trial court, "in determining a proper child support amount for the children[, ] tak[e] into consideration that the support payments being made by [F]ather to [M]other [we]re in excess of a reasonable and necessary amount to provide for the care and expenses of the children." Id. at 71. Father also sought an accounting of Mother's use of all child support monies and attorney's fees.

         [¶8] On February 12 and 13, July 30, and November 26, 2018, the trial court conducted a multi-day hearing on Mother's petition to modify child support and motion for rule to show cause, filed on August 12, 2015, and on Father's petitions to deviate from the Child Support Guidelines and for an accounting, filed on April 26, 2016. On the first day of the hearing, Mother testified, under questioning by her counsel, that Father failed to timely supply Mother with his tax returns as required in the Agreed Decree.

         [¶9] Mother's expert, certified public accountant and certified valuation expert, Jill Jones testified that Mother hired her to aid in crafting the formula prescribed in the Agreed Decree for calculating Father's income for purposes of child support. Jones testified that Father's failure to timely produce his tax returns hampered her calculation efforts.[5] Jones further testified that Father suffered significant business losses of approximately $4.4 million in 2015, carried the losses back on his already-filed tax returns, and amended his 2013 tax returns to carry back his losses. Jones testified that she needed the amended 2013 tax returns for purposes of calculating Father's income for child support but that, as of the first day of the hearing-February 12, 2018-Father still had not provided his amended tax returns to Mother.

         [¶10] Father's expert, certified public accountant Gary Shutan, testified that his calculations of Father's income for child support purposes were based on Father's original tax returns and not on the amended returns. Shutan testified that the amended 2013 tax returns had no effect on the amount of child support Father was required to pay pursuant to the Agreed Decree.

         [¶11] After the February 13, 2018, portion of the hearing, the trial court continued the hearing and ordered Father to:

provide all amended returns. The signed copies. And all attachments that support those returns within fourteen days. The parties are then to have their respective accountants review those amended returns and recalculate [Father's child support obligation] pursuant to their formulas . . . . And those are to be submitted to the Court within sixty days.

Tr. Vol. III p. 104. Father, then, produced his amended tax returns.

         [¶12] At the hearing on July 30, 2018, counsel for Mother moved to admit Father's 2015 tax return as well as his amended 2013 tax return into evidence. Jones testified that she had performed an updated computation of Father's child support obligation for 2013 to reflect the impact of Father's business losses carried back on the child support calculation, pursuant to the Agreed Decree.[6] Jones testified that there was a "significant difference" in the accountants' final calculations of Father's income for purposes of child support for 2013. Tr. Vol. III p. 132. Jones testified, regarding the disparity between her calculations and Shutan's calculations, that Shutan used an effective rate of forty-three ...

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