Farrell v. Farrell

Cite as 2017 Ark. App. 7

ARKANSAS COURT OF APPEALS
DIVISION I
No.CV-16-436

OPINION DELIVERED: JANUARY 18, 2017
CYNTHIA BUTLER FARRELL
APPELLANT APPEAL FROM THE SEBASTIAN
COUNTY CIRCUIT COURT,
FORT SMITH DISTRICT
V. [NO. 66DR2009-580]

HONORABLE JIM D. SPEARS,
HANFORD FRANCIS FARRELL JUDGE
APPELLEE
AFFIRMED IN PART; REVERSED
IN PART; AND REMANDED

ROBERT J. GLADWIN, Judge

Cynthia “Cindy” Farrell and Hansford “Hank” Farrell were divorced by decree

entered in November 2011. Cindy appeals for the third time1 and argues that the Sebastian

County Circuit Court should have provided a more equal distribution of the marital assets

and that the court erred in denying her requests for alimony and attorney’s fees. We agree

that the circuit court’s division of the marital property was not equitable to either party.

Accordingly, we reverse in part, affirm in part, and remand.

This was a marriage lasting more than thirty years. The parties agreed that all of their

substantial amount of property was marital property. The major asset and the crux of this

dispute is Hank’s minority interest in a conglomerate of closely held family businesses

1
Farrell v. Farrell, 2014 Ark. App. 601 (Farrell II); Farrell v. Farrell, 2013 Ark. App.
23, 425 S.W.3d 824 (Farrell I).
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referred to by the circuit court and the parties as the Farrell-Cooper Companies. He also

owns an interest in what the parties called the Texas entities or ventures. The circuit court

valued the marital interest in the Farrell-Cooper Companies at $9.9 million after applying a

discount, with the entire interest being awarded to Hank. Cindy was awarded the remaining

marital property, which included the proceeds from the sale of the marital home, another

house in Fort Smith, and the parties’ IRA and 401K accounts, with a total value of

approximately $1.045 million. Cindy was also awarded lifetime alimony to compensate for

the unequal property division. Cindy’s appeal of the decree led to our opinion in Farrell I.

Following remand from Farrell I, the circuit court valued the Texas entities at $1.6

million, with each party’s share valued at $800,000. The court then applied a thirty-five

percent minority discount to Cindy’s share, with her share calculated at $670,148.58. This

brought Cindy’s share of the marital estate to approximately $5.2 million. The Texas entities

were assigned, in their entirety, to Hank. The court increased Cindy’s alimony to $13,000

per month. Cindy also appealed this decision.

In Farrell II, we noted lack of clarity in the circuit court’s ruling. There was

uncertainty as to whether the periodic payments labeled “alimony” were traditional alimony

or payments for Cindy’s share of the marital property. We noted that the court appeared to

make an unequal distribution of the marital estate without stating the basis for such a

division, as required by Arkansas Code Annotated section 9-12-315(a)(1)(B) (Repl. 2015).

We also stated that the fact Hank was awarded all of the parties’ income-producing property

while Cindy had to wait many years before she received her full share of the marital estate

was a concern. The circuit court was directed to consider whether Hank should be required

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to obtain a loan to pay Cindy for her share of the marital property. We further suggested

that the court consider some type of security for the payments. Finally, we granted the

circuit court permission to reconsider whether Cindy should receive “traditional,” need-

based alimony and any possible tax consequences.

Following the remand from Farrell II, the circuit court confirmed that the monthly

payments to Cindy were intended to compensate her for her share of the marital estate. The

court conducted a hearing on November 12, 2015, to determine whether Hank should be

required to obtain a loan to pay Cindy and what security could be provided to Cindy for

the payment of the money owed her. During the hearing, the parties presented evidence

addressing whether Hank would be able to obtain a loan with which to pay Cindy for her

share of the marital estate. Cindy also proposed that Hank sign a note to her in the amount

of approximately $4.2 million on very favorable terms.

At the conclusion of the hearing, the circuit court asked both parties to submit

proposed findings of fact and conclusions of law. The court later adopted the findings of fact

and conclusions of law submitted by Hank. The court concluded that Hank was unable to

obtain a loan from a commercial bank and rejected Cindy’s proposal that Hank sign a

promissory note in her favor secured by his interest in the family businesses. The court found

that such an arrangement would be unfair to Hank. The court also denied Cindy’s request

for need-based alimony and denied her petition for attorney’s fees. A decree incorporating

the findings and conclusions was entered on February 4, 2016. This appeal followed.

In the earlier appeals, we set forth our standard of review as follows:

On appeal, we review divorce cases de novo. We give due deference to the
circuit court’s superior position to determine the credibility of witnesses and the

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weight to be given their testimony. With respect to the division of property in a
divorce case, we review the circuit court’s findings of fact and affirm unless those
findings are clearly erroneous. The obligations imposed upon a trial court by our
property-division statute are quite exacting. Arkansas Code Annotated section 9-12-
315(a) (Repl. 2009) provides that “[a]ll marital property shall be distributed one-half
to each party unless the court finds such a division to be inequitable.” The court may
make some other division that it deems equitable; however, when it decides not to
divide the property equally between the parties, it must recite its basis and reasons
for the unequal division in its order.

Farrell I, 2013 Ark. App. 23, at 6, 425 S.W.3d at 829 (alteration in original) (citations
omitted). We have noted that

[t]he circuit court has broad powers to distribute property in order to achieve
a distribution that is fair and equitable under the circumstances; it need not do so
with mathematical precision. The critical inquiry is how the total assets are divided.
We will not substitute our judgment on appeal as to the exact interest each party
should have but will decide only whether the order is clearly wrong.

Id. at 7, 425 S.W.3d at 830 (citations omitted).

We find merit in Cindy’s first argument that the circuit court erred in its distribution

of the parties’ marital property. Cindy argues that she is entitled to receive approximately

$4.2 million as her share of the marital estate.

In each of its orders leading to Farrell I and Farrell II, the circuit court found that each

party’s share of the marital estate was worth approximately $5.2 million. It did not modify

that finding in subsequent orders; the only mention of an unequal distribution was of the

stock in the Farrell-Cooper Companies being awarded to Hank with Cindy receiving most

of the parties’ liquid assets. Therefore, we surmise that the circuit court intended for each

party to receive an equal share of approximately $5.2 million. Under the decree as amended,

Cindy was awarded $1.045 million in liquid assets. Hank was permitted to pay to Cindy her

outstanding share of the property division as “alimony” of $13,000 per month for the

remainder of Cindy’s life. The circuit court later clarified on remand from Farrell II that the

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payments were indeed intended as reimbursement for Cindy’s share of the marital property.

However, the court made no provision for what would happen to the payments in the event

of the death of either party. The court also did not address interest on the payments.

The circuit court’s approach is not equitable to either party. As we pointed out in

Farrell II, it would take over twenty-six years to pay Cindy the remaining $4.16 million due

for her share of the marital property. Farrell II, supra, at 7. It is unfair to Hank to make him

continue until he is in his eighties to pay Cindy for her share of the marital property. It is

likewise unfair to make Cindy wait until she is also in her eighties to have the full enjoyment

of her share of the marital property while Hank is able to fully use his share now. By

requiring that all property be divided and distributed at the time the divorce decree is

entered, Arkansas Code Annotated section 9-12-315(a) seeks to disentangle the parties’

financial affairs and make them free from each other’s interference. The rationale for such a

statute was well explained by the New Hampshire Supreme Court as follows:

Any court order that postpones distribution, thereby financially linking the parties to
one another following a judgment of dissolution, invites future strife when one of
the parties seeks to enforce the order. In addition, the spouse awaiting distribution
could find [himself] or herself deprived of, or forced into further litigation
concerning, the ordered share of marital property by intervening events such as the
obligor’s bankruptcy, fraudulent transfer of assets, or untimely death. As such, a trial
court should award a property settlement to be effected immediately where
practicable.

In the Matter of Harvey & Harvey, 899 A.2d 258, 268 (N.H. 2006), overruled on other grounds

In the Matter of Chamberlin & Chamberlin, 918 A.2d 1 (N.H. 2007).

Here, the parties’ major asset is Hank’s stock in the Farrell-Cooper Companies and

the Texas entities. Arkansas Code Annotated section 9-12-315(a)(4) governs this issue and

provides as follows:

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(4) When stocks, bonds, or other securities issued by a corporation, association, or
government entity make up part of the marital property, the court shall designate in
its final order or judgment the specific property in securities to which each party is
entitled, or after determining the fair market value of the securities, may order and
adjudge that the securities be distributed to one party on condition that one-half
(1/2) the fair market value of the securities in money or other property be set aside
and distributed to the other party in lieu of division and distribution of the securities.

In Hodges v. Hodges, 27 Ark. App. 250, 770 S.W.2d 164 (1989), we applied the statute and

pointed out that a circuit court has two options when dividing corporate stock in a divorce:

(1) designate the specific property in stock to which each party is entitled or (2) order that

the stock be distributed to one party and the other party receive one-half of the fair market

value of the stock in money or other property. We specifically held that the statute did not

authorize a stock sale and division of the proceeds.

We recognize that the Farrell-Cooper Companies and the Texas entities are closely

held family corporations and, as such, have limited marketability. We further recognize that

the circuit court did not want to make Cindy a shareholder because her lack of knowledge

of the business and her lack of trust toward Hank’s family members running the business

would make her, in the words of her attorney, an “officious intermeddler.” We also have

before us the circuit court’s finding that Hank lacks the ability to borrow sufficient funds

with which to pay Cindy for her interest in the marital property. 2 However, these findings

cannot in any way justify the circuit court’s departure from its obligation to make an

2
We note that the circuit court’s findings on remand from Farrell II attempted to rely
on the fact that coal prices (one of the businesses of the Farrell-Cooper Companies) had
fallen since the trial in 2011 to justify an unequal division of the marital property. However,
such hindsight cannot use subsequent events to alter the value of the marital property that
existed as of the date of the divorce. See Skokos v. Skokos, 344 Ark. 420, 40 S.W.3d 768
(2001).

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equitable division of the parties’ marital property. Nor do the same findings justify ignoring

section 9-12-315(a)’s command that the marital property be distributed at the time of the

divorce. See Russell v. Russell, 275 Ark. 193, 628 S.W.2d 315 (1982). Accordingly, we hold

that the circuit court erred by allowing Hank to pay a substantial portion of Cindy’s share

of the marital property over a multi year period. Upon remand, the circuit court should,

pursuant to section 9-12-315(a)(4), order an immediate equal division of the stock. Hank is

to be given credit against Cindy’s share of the marital property for the monthly “alimony”

payments he has made since entry of the original decree.

This brings us to Cindy’s second argument that the circuit court abused its discretion

in failing to award her traditional, need-based alimony. In denying Cindy’s request for

traditional alimony, the circuit court found that there was “insufficient evidence presented

[at the trial] in 2011 to support traditional ‘need-based’ alimony: $1.0-plus million in

investable cash, plus the equitable reimbursement alimony, would reasonably address any

need(s) that had been presented by [Cindy].”

The decision to grant alimony lies within the sound discretion of the circuit court

and will not be reversed on appeal absent an abuse of discretion. Stuart v. Stuart, 2012 Ark.

App. 458, 422 S.W.3d 147. A circuit court abuses its discretion when it exercises its

discretion improvidently, or thoughtlessly and without due consideration. Id. The purpose

of alimony is to rectify the economic imbalance in earning power and standard of living of

the parties to a divorce in light of the particular facts of each case. Davis v. Davis, 79 Ark.

App. 178, 84 S.W.3d 447 (2002). In fixing the amount of alimony to be awarded, the circuit

court is given great discretion, and the appellate courts will not disturb the award on appeal

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unless there is an abuse of that discretion. Id. The primary factors to be considered in making

or changing an award of alimony are the need of one spouse and the ability of the other

spouse to pay. Id. Secondary factors to be considered by the trial court include (1) the

financial circumstances of both parties; (2) the amount and nature of the income, both

current and anticipated, of both parties; (3) the extent and nature of the resources and assets

of both parties; and (4) the earning ability and capacity of both parties. Id. The amount of

alimony awarded should not be reduced to a “mathematical formula” because the need for

flexibility outweighs the need for relative certainty. Id.

Cindy argues that the circuit court failed to consider the proper factors in denying

her request. There was no additional evidence presented on remand from either appeal

dealing with factors bearing on alimony. The court’s original 2011 letter opinion stated that

the court considered all of the factors relevant to alimony. The parties were married for over

thirty years. Cindy was 55 years old at the time of trial in 2011, making her now 60. Cindy

was not employed outside of the home during that entire time, and she has no likelihood

of earning much in the future. She has a number of health problems, and the circuit court

did not direct Hank to continue providing health insurance for her. These factors would

support an award of need-based alimony. Hank also clearly has the ability to pay, as shown

by the testimony at trial. On the other hand, Cindy was awarded $1 million in cash. We

have now held that she is entitled to approximately $4.16 million in stock in the closely-

held corporations. As the circuit court said in its original 2011 letter opinion, that is a

sufficient estate so that Cindy would not have a “need” for traditional alimony.

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We cannot say that the circuit court’s decision denying Cindy alimony was made

thoughtlessly and without due consideration. Thus, it was not an abuse of discretion.

Finally, Cindy argues that the circuit court abused its discretion in failing to award

her attorney’s fees for the work done on appeal in Farrell II. Cindy sought approximately

$18,000 in attorney’s fees. Hank argues that the circuit court lacked jurisdiction to award

fees because the remand from Farrell II was a limited one, and we did not designate attorney’s

fees as one of the issues for the circuit court to clarify. The circuit court ruled, without

explanation, that each party was to bear his or her own fees and costs.

Hank is correct. We did not discuss fees as an issue for the remand from Farrell II.

We have held that a trial court was without authority to award attorney’s fees following an

appeal where the additional fees on appeal were not awarded by the direction of the

appellate court, were not of a ministerial nature in following the appellate mandate, and

were for services of the prevailing party’s attorney on appeal. Nat’l Cashflow Sys., Inc. v.

Race, 307 Ark. 131, 817 S.W.2d 876 (1991).

Affirmed in part; reversed in part; and remanded.

HARRISON and VAUGHT, JJ., agree.

Davis, Clark, Butt, Carithers & Taylor, PLC, by: Constance G. Clark and William
Jackson Butt II, for appellant.

Ralph C. Williams and Nancy A. Martin; and Smith, Cohen & Horan, PLC, by:
Matthew T. Horan, for appellee.

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