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STATE OF MICHIGAN
COURT OF APPEALS


JUDITH A. ZWERK, Plaintiff-CounterdefendantAppellee, V MICHAEL A. ZWERK, Defendant-CounterplaintiffAppellant.

UNPUBLISHED February 8, 2005

Nos. 247527; 253660 Saginaw Circuit Court LC No. 00-035840-DO

Before: Murphy, P.J., and White and Kelly, JJ. PER CURIAM. Defendant Michael A. Zwerk appeals as of right in Docket No. 247527 and by leave granted in Docket No. 253660. On appeal, defendant challenges the trial court's jurisdiction to entertain the divorce action, the judgment of divorce relative to property division and spousal support, the failure of the court to reopen proofs, the court's authority to enter a postjudgment order after the claim of appeal was filed, and the substance of that postjudgment order. We affirm in part and remand in part. I. Jurisdiction Defendant challenges the jurisdiction of the Saginaw Circuit Court to hear the divorce action filed by plaintiff and enter judgment, where the parties had been lifelong residents of Tuscola County, which is also the location of the marital property, including the farming operation, and where defendant had moved only temporarily to a Saginaw County apartment after leaving the marital home without intent, allegedly, to make Saginaw County a permanent place of abode. We reject defendant's argument. MCL 552.9(1) provides: A judgment of divorce shall not be granted by a court in this state in an action for divorce unless the complainant or defendant has resided in this state for

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180 days immediately preceding the filing of the complaint and, except as otherwise provided in subsection (2),1 the complainant or defendant has resided in the county in which the complaint is filed for 10 days immediately preceding the filing of the complaint. The circuit court's jurisdiction in a divorce action is strictly statutory. Stamadianos v Stamadianos, 425 Mich 1, 5; 385 NW2d 604 (1986). The ten-day county residency requirement set forth in MCL 552.9(1) "represents a jurisdictional limitation on the circuit court's power to enter a divorce decree." Stamadianos, supra at 7. Consequently, if the residency requirements of the statute are not met, the court cannot grant a judgment of divorce and must dismiss the case. Smith v Smith, 218 Mich App 727, 730; 555 NW2d 271 (1996). Subject-matter jurisdiction may be raised at any time. Id. at 729-730. Jurisdiction under the statute cannot be conferred by waiver or consent of the parties. Id. at 733. Whether a court has subject-matter jurisdiction under the statute is a question of law that this Court reviews de novo. Id. at 729; Colbert v Conybeare Law Office, 239 Mich App 608, 613-614; 609 NW2d 208 (2000). A determination regarding "residency" and "intent," however, also concerns a question of fact, and the trial court's factual findings are entitled to great weight. Leader v Leader, 73 Mich App 276, 283; 251 NW2d 288 (1977). The residency requirement must be met on the original filing date. Pierson v Pierson, 132 Mich App 667, 671; 347 NW2d 779 (1984). Additionally, the Smith panel, addressing MCL 552.9(1), stated: When used in statutes conferring jurisdiction, residence is interpreted to mean legal residence or domicile. The issue of legal residency is principally one of intent. Presence, abode, property ownership, and other facts are often considered, but intent is the key factor. [Smith, supra at 730-731 (citations omitted).] Residence is defined under Michigan law as a place of abode accompanied with the intention to remain. Leader, supra at 280. Here, we begin by noting that defendant admitted the allegation contained in plaintiff's complaint that he had resided in Saginaw County for more than ten days. Furthermore, defendant filed a counterclaim for divorce in Saginaw County. Defendant did not raise the jurisdictional issue until approximately seventeen months after the litigation was commenced. The issue was again raised post judgment in a motion for relief from judgment. Momentarily setting aside the issue of intent, there is no dispute that, at the time the complaint was served on defendant, he had been present and living in Saginaw County for more than ten days, his place of abode had been Saginaw County for more than ten days, and he had held a leasehold property interest in Saginaw County for more than ten days.

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Subsection (2) is inapplicable.

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Focusing now on defendant's intent, we find that the most relevant evidence reflecting intent to remain in the county, for at least an entire year, is the one-year lease executed by defendant. The lease agreement contained a provision which indicated that defendant would be held responsible for all obligations under the lease should he depart before the one-year lease period expired. Defendant was questioned whether it was his intention to live in the apartment when he signed the lease, and he responded, "I was going to move in there, yes." Although he had not changed his voter registration or driver's license before moving out two months later, he had taken his clothing to the apartment, his mail was delivered to the apartment, phone service was connected, and defendant slept at the apartment. We acknowledge that defendant also testified that it was not his intention to stay in the Saginaw County apartment; however, when asked why he left the complex, defendant stated, "I just decided to move in with my mother. My mother was living by herself, and I just didn't care to pay the rent." This explanation suggests that his proclaimed intention not to remain in the apartment developed at around the time he moved out and was not representative of his intention upon first moving into the apartment and at the time the complaint was served. Regardless of defendant's subjective assertions of his intent, the lease agreement speaks volumes and is indicative of an intent to reside in the apartment at the relevant time. The lease reflects objective evidence of intent that we find more compelling than defendant's self-serving testimony. Accordingly, we find no error in the trial court's ruling that the residency requirement of MCL 552.9(1) was satisfied and that the court thus had jurisdiction to entertain the divorce action and enter judgment.2 II. Property Division, Valuation, and Award of Alimony in Gross Defendant presents numerous arguments asserting error relative to the trial court's factual findings and legal conclusions with respect to the valuation and division of the parties' property. In Gates v Gates, 256 Mich App 420, 422-423; 664 NW2d 231 (2003), this Court, referencing the standards applicable for appellate review of rulings regarding property division and valuation of assets, stated: In reviewing a trial court's property division in a divorce case, we must first review the trial court's findings of fact. Draggoo v Draggoo, 223 Mich App 415, 429; 566 NW2d 642 (1997), citing Sparks v Sparks, 440 Mich 141, 151; 485 NW2d 893 (1992). "If the trial court's findings of fact are upheld, [we] must decide whether the dispositive ruling was fair and equitable in light of those facts. The dispositional ruling is discretionary and should be affirmed unless [we are]

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Defendant's reliance on Lehman v Lehman, 312 Mich 102; 19 NW2d 502 (1945), is misplaced because in Lehman, the plaintiff admitted that he went to Chippewa County to merely visit his parents at which time he filed suit, despite the fact that the parties had been married and resided in Wayne County. The Michigan Supreme Court declared that neither party was a resident of Chippewa County and that the Chippewa Circuit Court lacked jurisdiction to enter a divorce decree. Id. at 106-107. Here, defendant was not visiting Saginaw County but had signed a lease and was residing in an apartment.

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left with the firm conviction that the division was inequitable." Id. at 429-430, citing Sands v Sands, 442 Mich 30, 34; 497 NW2d 493 (1993) . . . . The goal in distributing marital assets in a divorce proceeding is to reach an equitable distribution of property in light of all the circumstances. McNamara v Horner, 249 Mich App 177, 188; 642 NW2d 385 (2002). The division need not be mathematically equal, but any significant departure from congruence must be clearly explained by the trial court. Id. The trial court's disposition of marital property is intimately related to its findings of fact. Id. [Alterations in original.] Defendant first argues that the trial court erred in failing to realize that his partnership interest in the farming operation constituted only 27.5 percent; therefore, the court erred in valuing the partnership and thus the marital estate. Defendant maintains that the court erred in finding that the partnership simply gave away $1,177,000, in finding that the sales price was quite a windfall for the purchasers, and in finding that defendant received an inflated price, $469,156, on the sale of his partnership interests. The inquiry regarding which assets comprise the marital estate is distinct from the question of the valuation of those assets. Byington v Byington, 224 Mich App 103, 114 n 4; 568 NW2d 141 (1997). A trial court must make specific findings regarding the value of property being awarded in a judgment. Olson v Olson, 256 Mich App 619, 627; 671 NW2d 64 (2003). For purposes of dividing property, marital assets are typically valued at the time of trial or the time judgment is entered, although the court may, in its discretion, use a different date. Byington, supra. A court commits error when it fails to value a business interest. Steckley v Steckley, 185 Mich App 19, 23; 460 NW2d 255 (1990). Although the trial court may have made a misstatement regarding the partnership while rendering an extensive ruling from the bench, we find no basis for reversal. When the court stated that the partnership simply gave away $1,177,000 (the listed value of the commodities), it had evidently lost track of the fact that defendant had a limited interest, that two of the purchasers already held partnership interests, and that a downward adjustment for prior year profit withdrawal and taxes had been made to the initial value placed on the partnership by defendant and others. Yet, the trial court did not necessarily err in concluding that the purchasers received a windfall, where there was expert testimony by plaintiff's CPA that the valuation process was improper, did not meet recognized standards for valuating assets for purposes of a sale, and placed an inappropriate emphasis on what the purchasers could afford. She opined that the succession transaction was part sale and part gift. Plaintiff's CPA could not place an actual value on defendant's interests in the partnership and corporation as she did not perform an independent valuation. There was conflicting expert as well as lay testimony regarding the validity of the transaction, the soundness of the valuations, the methods used to value the business entities, and the appropriateness of discounting. In divorce actions, the trial court "has the best opportunity to view the demeanor of the witnesses and weigh their credibility." Stoudemire v Stoudemire, 248 Mich App 325, 339; 639 NW2d 274 (2001). This Court gives special deference to a trial court's findings when based on the credibility of witnesses. Draggoo, supra at 429. We are not prepared to conclude that the court erred in finding that the purchasers received a windfall.

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Next, and more importantly, we review the court's valuation of defendant's partnership interest. The trial court noted in its ruling that defendant's interest in the partnership equaled 27.5 percent,3 and, ultimately, the court valued defendant's interest in the partnership as being the equivalent of the face value of the two partnership notes4 ($469,156), which defendant received as the consideration for his partnership interest. Defendant argues that the court should have valued his partnership interest by calculating the dollar amount that reflects 27.5 percent of $1,276,000 ($350,900) and that the court was mistaken in finding that defendant received an inflated price for his interest. We cannot conclude that the court clearly erred in valuing defendant's partnership interest at $469,156. There was a rational basis for this calculation, i.e., the two notes. While defendant maintains, in light of taxes, that the value of the two notes actually equals a smaller amount than their face value and is the equivalent of his 27.5 percent share of the $1,276,000 total value, and thus defendant did not receive an inflated price, there was no testimony to bear this argument out and support defendant's position. In Nalevayko v Nalevayko, 198 Mich App 163, 164; 497 NW2d 533 (1993), this Court stated that it is not an abuse of discretion per se for a trial court to decline to consider tax consequences when distributing marital assets. If, however, in the court's opinion the parties "have presented evidence that causes the court to conclude that it would not be speculating in doing so," it may consider the effects of taxation in distributing the marital assets. Id. Here, the lack of evidentiary support defeats defendant's argument. Moreover, the amortization schedule for the partnership note that has a face value of $133,456 reflects that, after consideration of interest payments, the total payment received will be $203,335. This is approximately $70,000 over the face value of the note and was not considered by the court. Furthermore, the trial court found that the partnership's total value was at least $1,276,000. We additionally note that that the succession plan has an open-ended provision that contemplates the payment of additional monies to defendant and Larry Zwerk should the farming operation outperform expectations. Finally, under the circumstances of this case, taking into account tax consequences flowing from the consideration provided to defendant pursuant to the succession transaction is highly suspect and would be inequitable, where the court found that the transaction was in essence a sham and an improper attempt to dissipate the marital estate. In our discussion below, we find no clear error regarding this conclusion by the trial court. Although we do not deny that payments on the notes may indeed have tax implications, without evidence of the extent of the tax burden and an explanation of the burden, and considering that one of the partnership notes accumulates interest, which was not considered, and that the court believed the transaction to be a sham and the total consideration given for the

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This finding evidences the court's understanding that defendant's interest was indeed limited.

The partnership transaction included a promissory note and a "Guaranteed Payment Agreement." For ease of reference, and while understanding that there are distinguishing features, we shall refer to these documents as notes unless otherwise indicated.

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partnership to be at the low end of its actual value, we cannot find error in the court's valuation of the partnership interest.5 There was evidence to support the court's finding of value. Defendant next argues that the trial court erred in valuing the parties' real property when the court decided to value the corporation pursuant to the initial values calculated by defendant, his CPA, and the individuals purchasing the farming operation, instead of the actual consideration received by defendant as part of the sale and redemption of his shares in the corporation. The parties stipulated that approximately 551 acres of farmland had a value of $1,051,790, which the court used in calculating the value of the marital estate. The corporation paid defendant for his shares, in part, by deeding real property held by the corporation, and defendant contends that this property is part of the 551 acres discussed above. Therefore, according to defendant, because the trial court treated the corporate transaction as if it had not occurred and valued the corporation presale, the valuation necessarily included the value of the real property held by the corporation that was subsequently deeded to defendant. But this property was also included in the valuation of the 551 acres of farmland. Hence, this real property was counted twice in the court's calculation of the total value of the marital estate. Defendant testified that the corporation real estate that was transferred to him and Larry Zwerk as part of the family succession agreement, and which land was included in the court's valuation of the corporation, was land that was also part of the 551 acres to which the parties stipulated to value, which value was also included in the court's calculation of the marital estate. This land was the subject of the two September 2000 quitclaim deeds, the first of which transferred the property from the corporation to plaintiff and defendant jointly. The legal description is contained in the judgment of divorce as part of the real property awarded to defendant. Plaintiff argues that there was more farmland rent received in 1999 than in 2000, the year of the transaction, thus there could not have been an increase in farmland held by the parties as a result of the sale and therefore the 551 acres did not include the corporate real estate. This argument does not take into consideration that the annual December farmland rent payments are affected by crop yield and market prices. Although the record appears to support defendant's contention, we are not certain from our review whether the real estate was counted twice. Therefore, we remand the case to the trial court for a specific determination whether the 551 acres of land subject to the stipulation included the property that was transferred from the corporation and included in the corporation's value. If indeed the property was counted twice, the court is to recalculate the marital estate without twice counting the value of the one-time corporate property. Additionally, the court accepted the initial value placed on the corporation, which reflected that the real property held by the corporation had a value of $400,000. The evidence at trial suggested that the property had a value of $365,000. The record is unclear what value was placed on the property as part of the computation of the stipulated total value of the 551 acres. On remand, the trial court is to make a specific finding regarding the value of the property, and it then shall make the necessary adjustments in determining the total value of the

We additionally note that the succession plan states that a tax discount has already been applied in determining how much consideration would be paid to defendant for his interests.

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marital estate and ultimately the amount to be awarded to plaintiff as alimony in gross pursuant to the sixty/forty division of the estate. Defendant next argues that the trial court erred in disregarding the succession plan and treating defendant's interests as if the transaction never occurred. Defendant maintains that plaintiff never requested the court to disregard the succession plan, but instead sought a valuation premised on the consideration received, with the issue of the validity of the transaction and any damages flowing therefrom being decided in the Tuscola County lawsuit. Where property or assets have been placed outside the marital estate as a device to avoid fair distribution, it will be considered a marital asset. See Thames v Thames, 191 Mich App 299, 309; 477 NW2d 496 (1991); Wiand v Wiand, 178 Mich App 137, 146-148; 443 NW2d 464 (1989); see also 2 Michigan Family Law, Property Division,

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