Sherman v. Boeckmann II

Cite as 2016 Ark. App. 568

ARKANSAS COURT OF APPEALS
DIVISION I
No. CV-14-1096

Opinion Delivered November 30, 2016

JEANNIE SHERMAN APPEAL FROM THE CROSS
APPELLANT COUNTY CIRCUIT COURT
[NO. 19-DR-12-81-4]
V.
HONORABLE KATHLEEN BELL,
RAYMOND BOECKMANN JUDGE
APPELLEE

AFFIRMED IN PART; REVERSED IN
PART; AND REMANDED IN PART

BRANDON J. HARRISON, Judge

This case is a companion case to Sherman v. Boeckmann, 2016 Ark. App. 567, also

handed down today. These two appeals arise out of contentious and protracted divorce

litigation between appellant Jeannie Sherman and appellee Raymond Boeckmann. In this

appeal, Sherman argues that the circuit court erred in its rulings concerning her postdecree

use of money awarded to her in the decree. We affirm in part, reverse in part, and remand

in part.

The circuit court entered its decree granting a divorce and dividing the marital

property on 30 September 2013. Each party was awarded one-half of the stock in four

family business corporations the parties agreed are marital property: B and L Properties, Inc.
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(B&L); L and K Properties, Inc. (L&K); Boeckmann and Sons, Inc. (Sons Inc.); and Logan

Centers, Inc. (Logan or Logan Center). Prior to the litigation, Boeckmann owned 100

percent of the stock in Sons Inc; Sherman owned 100 percent of the stock in Logan Center;

and each party owned 50 percent of the stock in L&K and B&L. The court also equally

divided approximately sixteen banking accounts, including some owned by the parties’

corporations. The court’s decree was later amended to incorporate exhibits showing the

total account balances of approximately $3.6 million as of the first day of trial. The two

Logan Center accounts had a combined balance of $1.6 million.

On 29 October 2013, Boeckmann filed a verified petition for contempt citation

alleging Sherman had violated the mutual restraining order and the temporary order by

withdrawing approximately $1.1 million from the Logan Center account for her personal

use. Among the withdrawals was one for approximately $560,000 paid to the Internal

Revenue Service, a withdrawal of $126,000 for payment of state taxes, and another

withdrawal of $350,000 to Sherman herself. Boeckmann sought a distribution of a like

amount to himself, as well as one-half of the increase in value of an investment account

solely in Sherman’s name and valued at over $1 million. Sherman responded to the petition,

asserting that the circuit court was without jurisdiction to control the actions of Logan

Center because it was a separate entity and not a party to the action.

On 20 November 2013, Boeckmann filed another petition for contempt citation

contending that Sherman had failed to comply with the court’s order amending the decree

that required her to account for certain funds withdrawn from the Logan Center accounts

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and to pay Boeckmann approximately $94,000 from the Logan Center accounts and her

personal funds.

The court held a hearing on November 25 addressing predecree petitions. The court

also addressed some issues raised in Boeckmann’s postdecree petitions.

Boeckmann filed yet another petition for contempt on December 31, contending

that Sherman had removed another $490,000 from Logan Center accounts in Wynne banks

and used the funds to purchase a certificate of deposit. Sherman was also alleged to have

opened other accounts on behalf of Logan Center at a Batesville bank to which Boeckmann

did not have access. It was also claimed that Sherman withdrew an additional $633,000

from the Logan Center accounts for her own personal use or to place in another account.

Boeckmann sought an accounting and access to any new Logan Center accounts.

Sherman responded to this petition, again asserting that the court lacked jurisdiction

to control Logan Center’s activities, including limiting her salary from the corporation; that

the court did not divide Logan Center’s cash or other assets; and that Boeckmann’s remedy

was to bring a shareholder action instead of a contempt action in the divorce case.

On 24 January 2014, Boeckmann filed still another contempt petition that

overlapped with some of the allegations contained in the December 31 petition. There was

an allegation that Sherman had removed approximately $638,000 from a marital investment

account and transferred it to a checking account in her sole name on 10 December 2013.

Another allegation was that Sherman had increased her salary to $18,000 per month, instead

of the $12,000 amount that the court had set in a temporary order during the pendency of

the divorce.

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In her motion to dismiss the January 2014 petition, Sherman argued that the

temporary order and the ex parte restraining order prohibiting either party from disposing

of any property were superseded by entry of the divorce decree, which did not contain such

an injunction. She further argued that she should not be held in contempt for transferring

money from one Logan Center account at one bank to a new Logan Center account at a

different bank. Responding to Boeckmann’s allegations concerning her payment of salary

to herself, Sherman argued that the court lacked authority to control the day-to-day

activities of Logan Center and that, upon entry of the decree, there was no further order

limiting expenses to the ordinary course of business. Sherman also asserted that there was a

distinction between Boeckmann’s owning one-half of the stock in Logan Center and his

owning one-half of the corporation’s assets.

On 5 February 2014, the court entered its order from the 25 November 2013

contempt hearing. The court asked for briefs on whether it lacked authority to hear

contempt matters because Sherman had filed a notice of appeal. It also took under

advisement the issue of what to do about Sherman’s tax payments from the Logan Center

accounts. The court found Sherman in contempt because she had spent approximately

$32,000 from Logan Center accounts that the court found not to be in the ordinary course

of business. Sherman was ordered to pay Boeckmann one-half of the amount from her

personal funds. Sherman was also found in contempt for paying herself more than $12,000

per month. Although Sherman was ordered to pay Boeckmann one-half of any sums she

was paid over $12,000 per month, no reimbursement amount was set. The court ordered

that neither party transfer funds from one account to another and that Sherman was

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prohibited from treating the Logan Center account as her personal account. She was also

ordered to take all necessary steps to have Boeckmann’s name placed on all Logan Center

accounts. Boeckmann was awarded his attorney’s fees and costs; however, the amounts

were not specified and were to be based on a later submission of time records by

Boeckmann’s attorney. Sherman timely filed a notice of appeal from this order.

In late February 2014, the court held a hearing on Sherman’s motion to dismiss and

Boeckmann’s two petitions for contempt. From the bench, the court dismissed all of the

allegations that occurred as a result of the bench ruling from the November 2013 hearing.

The court issued its letter opinion disposing of the remaining issues in March 2014. The

court noted that it had previously approved Sherman’s payment of her taxes from the Logan

Center account as being in the ordinary course of business. As a result, the court ruled that

it could not now hold Sherman in contempt. The court found the funds utilized by

Sherman were marital property. The court required Sherman to reimburse the Logan

Center for various sums aggregating approximately $504,000 from her personal funds.

Boeckmann was awarded judgment against Sherman of approximately $439,000,

representing sums Sherman had previously been ordered to pay. Sherman was also ordered

to remove her children as signatories from any bank accounts, certificates of deposit, or

similar assets. As a sanction for the February 5 contempt findings, Sherman was ordered to

pay Boeckmann’s attorney’s fees in the sum of $20,000 from her personal funds.

Prior to entry of an order from the February 2014 hearing, the court addressed

another letter to the attorneys, ruling that unless specified otherwise, Boeckmann was

entitled to an offset for any marital funds Sherman used for her personal benefit. The court

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found that approximately $58,000 in expenditures had been made for Sherman’s personal

benefit and not that of the corporation. The court further found that Sherman had used

marital funds to purchase a home in Heber Springs. The court declared the house and any

personal property that had been purchased with marital funds to be marital property, which

the court ordered sold and the proceeds divided equally. The court declined to hold

Sherman in contempt or to require reimbursement by her to the corporation. It did,

however, again caution Sherman against using the Logan Center assets for her personal

benefit. Sherman was also ordered to account for all expenditures made from the investment

account at a Batesville bank and to repay any personal expenditures within thirty days. An

order memorializing the court’s rulings and incorporating the various letter opinions was

entered, and this appeal followed.

On appeal Sherman argues that the circuit court lacked jurisdiction over the matter

so that the order appealed from is void; that the court erred in granting judgment to

Boeckmann for funds Sherman used to pay her state and federal taxes; that the court erred

in controlling the action of the Logan Center, a separate entity, in four specific ways; that

the court erred in ordering a house Sherman purchased after entry of the decree sold and

the proceeds divided equally; that the court erred in ordering Sherman to remove her

children as signatories from various bank accounts; and that the court erred in ordering her

to pay Boekmann $20,000 in attorney’s fees as a contempt sanction.

It has long been the rule in Arkansas that, in certain cases, a process for contempt

may be used to effect civil remedies, the result of which is to make the innocent party whole

from the consequences of contemptuous conduct. Omni Holding & Dev. Corp. v. 3D.S.A.,

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Inc., 356 Ark. 440, 156 S.W.3d 228 (2004); Walker v. Fuller, 29 Ark. 448, 469 (1874);

Pinnacle Point Props., LLC v. Metro. Nat’l Bank, 2012 Ark. App. 268; Butler v. Comer, 57

Ark. App. 117, 942 S.W.2d 278 (1997); Payne v. White, 1 Ark. App. 271, 614 S.W.2d 684

(1981).

Arkansas law provides that all marital property shall be distributed when a divorce

decree is entered, creating a bright-line rule for determination of whether property is or is

not marital property. Ark. Code Ann. § 9-12-315(a) (Repl. 2015); Page v. Anderson, 85

Ark. App. 538, 157 S.W.3d 575 (2004). The circuit court recognized this by amending its

original decree to incorporate certain exhibits listing the parties’ various bank accounts and

balances being divided. These marital accounts included certain accounts titled in the names

of the parties’ corporations. By failing to challenge the finding that these corporate accounts

were marital property, Sherman has waived our review of that issue. See Payne v. Donaldson,

2010 Ark. App. 255, 379 S.W.3d 22.

With these principles in mind, we turn to the merits of Sherman’s arguments. In her

first point, Sherman argues that the circuit court lacked jurisdiction over the matter given

the appeal of the decree in the companion case, resulting in the order from which this appeal

was taken being void. She further argues that the court lost jurisdiction to modify its decree

after ninety days had passed. We disagree. Here, the original divorce decree, entered after

a lengthy and contested trial, addressed in detail the parties’ marital property. The decree

also stated, “[T]his Court retains jurisdiction of this matter to enter any orders in the future

necessary to effect the terms of this decree.” In his postdecree pleadings, Boeckmann did

not simply seek to hold Sherman in contempt; he also sought relief in the form of

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distribution of sums equal to those Sherman had withdrawn from the parties’ various

accounts—both personal and corporate—that the circuit court had found to be marital

property. Because the court was acting to carry out the division of marital property already

announced in its decree, it was acting within its express reservation of jurisdiction. Cox v.

Cox, 17 Ark. App. 93, 704 S.W.2d 171 (1986). So the Rule 60 time limits do not apply.

Id.

Next, Sherman contends that the court erred in granting judgment to Boeckmann

for her paying her “personal” income tax obligations with funds from the Logan Center.

We disagree here, too. During the the divorce proceeding, the court found that Sherman’s

payment of her 2011 state and federal tax liability with funds from the Logan Center was in

the ordinary course of business for that corporation. When Sherman again used corporate

funds to pay her 2012 taxes, Boeckmann sought to hold her in contempt and for a

distribution of like sums. The court adhered to its earlier ruling that the payment of taxes

was in the ordinary course of business. Nevertheless, the court awarded Boeckmann

judgment for approximately $345,000, representing one-half of the taxes paid.

Sherman’s argument does not, in our view, appreciate the full importance of her

payment of the 2012 taxes. That the circuit court found the tax payments had been made

in the ordinary course of business is not pivotal; instead, we must consider the nature of the

obligation, the timing of payment, and the source of money used in payment. Sherman

concedes that, because Logan Center was an S corporation and she was the sole shareholder

at the time, the tax obligation was her personal obligation. This obligation was also from

the year the parties separated. She paid the taxes in September 2013, prior to the entry of

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the divorce decree, with funds from Logan Center. Those funds were found to be marital

property and Sherman does not challenge that finding. Parties to a divorce often must use

marital funds to meet necessary expenses incurred while the case is pending, and the circuit

judge has discretion to determine whether it was necessary to use those funds, whether the

amount used was reasonable, whether fraud or overreaching occurred, and whether an offset

is appropriate. Williams v. Williams, 82 Ark. App. 294, 108 S.W.3d 629 (2003). Here, the

court found that an offset was appropriate, and we cannot say that the court’s order is clearly

wrong.

Sherman’s third point challenges the circuit court’s jurisdiction over the conduct and

operation of Logan Center, a nonparty corporation, by controlling and limiting the amount

of money spent by the corporation. She has four subpoints.

In her first one, Sherman argues that the circuit court erred in ordering her to

reimburse Logan Center for salary paid to her in excess of $12,000 per month after the

divorce. Sherman argues that the court lacked jurisdiction to control Logan Center’s actions

because it is a separate legal entity and not a party to this action. She further says that there

was no postdecree order limiting her salary in the future. We disagree, because the circuit

court limited the reimbursement to the period between the date the divorce complaint was

filed and when the divorce decree was entered.

In its decree, the court ruled that Boeckmann was entitled to reimbursement for

one-half of the amount that Sherman had paid herself as salary in excess of $12,000 per

month. But the court did not specify an amount until the entry of its 21 May 2014 order

addressing Boeckmann’s postdecree petitions. The court found that Sherman was to repay

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approximately $262,000 for her excess salary. By specifying the amount Sherman owed in

excess salary, the circuit court was enforcing its determination, first set out in the decree,

that Boeckmann was entitled to reimbursement for one-half of Sherman’s “excess” salary.

Cox, supra. Moreover, as explained in the discussion of Sherman’s tax obligation, the court

found that Logan Center’s bank accounts were marital property, a finding Sherman does

not challenge.

Sherman’s second subpoint argues that the circuit court erred in ordering her to

reimburse Logan Center approximately $20,000 for funds spent in the “token economy.”

There was testimony at the trial and the contempt hearings that Logan Center provided

mental-health services to its clients. As part of these services, Logan Center set up what was

referred to as a “token economy,” where it would take the clients to Walmart or Sam’s

Club and provide them with money to spend as they wished as a reward and to teach them

about the value of money. The average “token economy” payment to Walmart or Sam’s

Club was $200 per month. The court found that Logan Center spent more than $20,000

for this “token economy” between June and December 2013. Sherman was ordered to

reimburse the corporation for this amount, less the $200 per-month average payment.

We find no error in the circuit court’s ruling on this issue. These expenditures were

made during the pendency of the divorce proceedings. Thus, the court could determine

how marital funds were to be used and whether an offset was proper. Williams, supra. But

this control ends when the divorce decree is entered. Because some of the expenditures

were clearly made after entry of the decree, Sherman was entitled to spend her money as

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she wished. We therefore remand this issue to the circuit court to determine the amount

spent before the divorce decree was entered.

We take Sherman’s third and fourth subpoints together. In the third subpoint, she

argues that the circuit court erred in controlling the actions of Logan Center by requiring

her to reimburse the corporation for approximately $162,000 she had removed from its

accounts. The fourth subpoint challenges the circuit court’s finding that Sherman spent

approximately $58,000 in Logan Center funds for her personal benefit. We agree that the

circuit court erred.

In October 2013, after the decree had been entered, Sherman withdrew

approximately $633,000 from a Logan Center account in a Wynne bank. She deposited

$471,000 into a new Logan Center account at a Batesville bank that same month. There

was, however, approximately $162,000 unaccounted for by Sherman. She was ordered to

reimburse the corporation in this amount.

Between October and December 2013, Sherman wrote checks on Logan Center

accounts totaling approximately $58,000. These sums included $10,000 to Sherman herself;

$37,500 to her attorney; $6,000 to her children; and the rest to pay various personal bills.

The court ordered reimbursement to the corporation for these sums.

The circuit court erred in doing so. As we mentioned earlier, the court found that

the parties’ bank accounts—including accounts belonging to Logan Center—were marital

property and that each party was entitled to one-half of the balances. Because the

withdrawals occurred beginning in October 2013, after the decree had been entered,

Sherman was using funds that had been awarded to her and were her separate property. See

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Page, supra (holding entry of divorce decree is the clear dividing line for determining when

property purchased after separation is marital property). Moreover, there was no showing

that Sherman had withdrawn more than her half of the funds. Therefore, the circuit court

erred in requiring her to reimburse the corporation for those funds.

The circuit court’s order of the sale of Sherman’s home and its contents presents a

similar problem, and we hold that the court erred in ordering the sale of Sherman’s home.

There was testimony that Sherman had withdrawn an undetermined amount of money from

a Logan Center investment account following entry of the divorce decree. She used

approximately $180,000 to purchase a home and some furnishings for it in December 2013.

The circuit court ordered Sherman to account for, and repay, all sums removed from this

investment account. The court further ordered the house and its contents sold and the

proceeds divided equally between the parties.

Again, the court erred in doing so. First, the house was not marital property, having

been purchased in December 2013, at a time after the decree had been entered. See Page,

supra. And by ordering the house sold and the proceeds divided equally, the court gave

Boeckmann more than his half of the money removed from the Logan Center accounts.

He had already been awarded one-half of the funds that Sherman withdrew from the Logan

Center account. Sherman then used a portion of that money to buy the house. Under the

court’s ruling, Boeckmann will thus improperly receive one-half of the sum removed from

the Logan Center account plus one-half of the proceeds from the sale of the house.

We disagree with Sherman’s next argument—that the court erred in ordering her to

remove her children as signatories from various bank accounts. The court found that all of

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the parties’ accounts were marital property. Sherman’s failure to challenge this finding

means that we are required to accept that determination. Payne, supra. Nor does she explain

how she was prejudiced by the court’s ruling that removed the children as signatories from

those accounts. It was her burden to show that the circuit court committed prejudicial

error. Muskogee Bridge Co. v. Stansell, 311 Ark. 113, 842 S.W.2d 15 (1992). Error that does

not result in prejudice is not reversible. Id. Further, Sherman fails to support her argument

with citations to authority, and arguments not supported by convincing legal authority will

not be addressed on appeal. McCutchen v. Huckabee, 328 Ark. 202, 943 S.W.2d 225 (1997).

Finally, Sherman argues that the court erred in directing her to pay $20,000 of

Boeckmann’s attorney’s fees as a sanction for contempt. She cites Applegate v. Applegate,

101 Ark. App. 289, 275 S.W.3d 682 (2008), for the proposition that, without a valid finding

of contempt, the court could not impose sanctions. We disagree, because Sherman was

found in contempt in the court’s February 2014 order. That order also reserved certain

issues, such as the “token economy” and reimbursement for the payment of Sherman’s taxes,

which were later addressed in the court’s May 2014 order. The February 2014 order also

awarded Boeckmann his attorney’s fees pending submission of the attorney’s timesheets.

The court finally ruled on the issue in the May 2014 order by ordering Sherman to pay

$20,000 in attorney’s fees.

The award of attorney’s fees in a domestic-relations case is a matter within the circuit

court’s discretion, and there is no fixed formula for determining what constitutes a

reasonable amount. Webb v. Webb, 2014 Ark. App. 697, 450 S.W.3d 265. An award of

attorney’s fees will therefore not be set aside absent an abuse of discretion. Id. Under these

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circumstances, we cannot say that the circuit court abused its discretion in awarding

attorney’s fees to Boeckmann as a sanction.

Affirmed in part; reversed in part; and remanded in part.

ABRAMSON and KINARD, JJ., agree.

Ford & Cook, PLC, by: Paul N. Ford, for appellant.

John D. Bridgforth, P.A., by: John D. Bridgforth, for appellee.