Demers v. Demers

• Decision Date: 10 December 2003
• Docket Number: No. M2002-01970-COA-R3-CV.,M2002-01970-COA-R3-CV.
• Citation: 149 S.W.3d 61
• Parties: Kevin Stanley DEMERS v. Karen Annette Wallace DEMERS.
• Court: Tennessee Court of Appeals

149 S.W.3d 61

Kevin Stanley DEMERS v. Karen Annette Wallace DEMERS.

No. M2002-01970-COA-R3-CV.

Court of Appeals of Tennessee, at Nashville.

August 5, 2003 Session.

December 10, 2003.

Permission to Appeal Denied by Supreme Court May 10, 2004.

Troy Lee Brooks, Mount Juliet, Tennessee, for the appellant, Kevin Stanley Demers.

Gregory D. Smith, Nashville, Tennessee, for the appellee, Karen Annette Wallace Demers.

OPINION

HOLLY M. KIRBY, J., delivered the opinion of the court, in which W. FRANK CRAWFORD, P.J., W.S., and DAVID R. FARMER, J., joined.

This involves a post-divorce petition to reduce child support. The mother and father were divorced in 1998, and the mother was awarded custody of the parties' three children. The father was ordered to pay child support plus private school tuition, based on substantial annual earnings from self-employment. In December 2000, the father filed a petition to have his child support payments reduced based on a decline in his business. The father later liquidated the assets of his business and quit work. He subsequently amended his petition, asserting that he had earned no income since the liquidation of his business. After a bench trial, the trial court rejected the father's petition for a reduction in child support, finding that the father was willfully underemployed. The father now appeals. We affirm, finding that the evidence does not preponderate against the trial court's determination that the father was willfully underemployed.

Petitioner/Appellant Kevin Stanley Demers ("Father") and Respondent/Appellee Karen Annette Wallace Demers ("Mother") were married in 1986 and had three children during their marriage. Soon after Father and Mother married, they formed Demers, Inc. ("Demers Inc."), which bought and sold printing presses. Father had worked in the printing press industry since he graduated from high school, and he never attended college. Father controlled the company's operations, and Mother worked in the accounting aspect of the business. The company was quite successful. There were only approximately five printing press companies in the country of a size and scope similar to Demers Inc., although there were hundreds of similar businesses that were considerably smaller.

The parties divorced in May 1998. Not surprisingly, prior to that, Mother had ceased working with Demers Inc. Although Father's income from Demers Inc. varied from year to year, for purposes of setting child support, his annual income was determined to be $250,000.¹ In the martial dissolution agreement signed by the parties, Father retained the business and paid Mother a total of $1.8 million as a property settlement. Father sold some of his assets and took out a $1.3 million loan against the company in order to pay Mother the $1.8 million within the required time limitations. In the divorce decree, Mother was awarded custody of the parties' children (ages fourteen, twelve, and nine at the time of trial), and Father was ordered to pay monthly child support of $4,100 under the guidelines, plus $1,250 per month for the children's private school education. Father was also required to provide medical insurance and maintain life insurance.

In 1999 and 2000, the business declined substantially. On December 12, 2000, Father filed a petition pursuant to Tennessee Code Annotated § 36-5-101(a)(1) to reduce his monthly child support payments. In his petition, he alleged that a reduction in support was necessary because of a "reduction in business due to market circumstances beyond his control." In June 2001, Father held an auction and sold most of the company's assets at discounted prices. After the auction, Father ceased working. On February 20, 2002, Father filed an amended petition stating that he had earned no income since the June 2001 auction, and that his living expenses were funded by a line of credit from Region's Bank. Father sought to reduce his monthly support payments from $5,350 ($4,100 plus $1,250 tuition) to a total of $1,272, consistent with an earning capacity of $50,000 per year. Father alleged that his earning capacity was severely diminished by the necessary auction of the assets of Demers Inc. In May 2001, pending the trial court's decision on his petition, Father unilaterally reduced the child support payments to his proposed amount.

On February 26, 2002, a bench trial was held on Father's petition. At the time of trial, Father was forty-three years old. Father testified on his own behalf. Father said that, by December 2000, Demers Inc. was heavily in debt due to the loans he took out against the company to pay Mother her $1.8 million settlement. In addition, he claimed that the advent of the internet negatively impacted his business because prospective clients could find available printing equipment, particularly in other countries, simply by using an internet search, obviating the need for an American printing press broker such as Demers Inc. Because of the decline in business and the interest he had to pay on the loan, Father "was not making the money," and he said that he "was actually paying more child support than [he] was paying [himself]." On top of this, in approximately January 2001, Father was sued by Western Printing Company ("Western Printing") in South Dakota.

Father testified that, in June 2001, he held the auction to liquidate the company's assets, in order to pay off the company's debts with the proceeds. About an hour before the June 2001 auction, Father was served with an injunction from the Western Printing lawsuit, requiring him to pay all the proceeds of the auction into the local chancery court, to be held pending the outcome of the lawsuit. Father claimed that he was presented with the injunction in the presence of some very well-financed bidders, and that this had a chilling effect on the auction, causing it to be significantly less successful than he had anticipated.² Despite this, after the auction, Father was able to fully pay the debts of Demers Inc. After paying these debts, Father owned, free and clear, the $600,000 manufacturing facility out of which Demers Inc. had done business. At the time of trial, Father was actively trying to sell the facility.

Father testified that, since the June 2001 auction, he has not had any income. Father explained that after the auction, he spent the great majority of his time dealing with the South Dakota Western Printing lawsuit, which was finally resolved in his favor in February 2002, just prior to the trial on his child support petition. He claimed that his living expenses, including attorney's fees and child support, were being paid by the line of credit against his house that he obtained from Regions Bank. In addition, Father said, he sold some assets to meet his financial obligations. Father sold his larger BMW vehicle for $35,000 and bought an older model for $12,500. He also sold a Regal boat for $16,400. At the time of trial, Father had a Ferrari worth $55,000 that he was attempting to sell, but he also owned a sailboat worth $90,000 that he wanted to keep. Father acknowledged that he had other assets, including an antique printing press collection worth $50,000; a retirement account worth $70,000; an investment account worth $28,000; a race car worth $6,000; and $15,000 in a bank account in England.

When asked about his plans for future employment, Father testified that he had made a commitment to start a parts manufacturing business, but said that it would take two to three years to develop. He said that no other company in the area would hire him because he was overqualified and he might learn their business and compete. Father stated that he was willing to work, but that he did not know of any other position that would earn him the $250,000 annual income on which the original child support award was based. He maintained that he did not liquidate Demers Inc. in order to avoid paying child support.

On cross-examination, Father acknowledged that his sister, who lives in Florida, began a business called Demers Parts, which was engaged in buying and selling printing press parts. Demers Parts had operated out of Father's building since early 2001, and paid no rent to Father for the use of the space. Father testified that his sister was not actually involved in the operation of Demers Parts, but that his brother was quite involved in the company. Prior to his work with Demers Parts, Father's brother had no experience in the printing press business. Father also acknowledged that, at the June 2001 auction, he sold equipment with a street value of $150,000, to Demers Parts for $31,000.³ He also admitted that, a few months after the auction, he sold a machine for $178,000, the proceeds of which went into Demers Parts. Father admitted to helping Demers Parts sell machines and parts, but he denied having been paid any money by the company for his services. Father said that his brother lives with him, paying no rent. Father also admitted that he sold a company van belonging to Demers Inc. for $8,500 and, using that money, bought his brother a $10,000 Mustang. Further, Father admitted to using the Demers Inc. charge card and checking account frequently for personal use, such as in payment for football season tickets, travel expenses, restaurant expenses, gasoline, and other expenses. In fact, between October 2000 and March 2001, Father spent $33,126 of Demers Inc. funds on travel and entertainment, including a trip to Italy. Father insisted that all of the trips were business related.

Father's accountant, George Shick ("Shick"), also testified at trial. Shick said that Father hired him to assist in gathering the funds to pay Mother the $1.8 million settlement in the MDA. Shick said that this took about a year. To accomplish that goal, Shick noted, Father sold his home and purchased a much less expensive one, and took out the $1.3 million loan against Demers Inc. Shick estimated that Father's post-settlement...