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McGahhey v. McGahhey

Court of Appeals of Arkansas, Division II

December 5, 2018



          Taylor & Taylor Law Firm, P.A., by: Andrew M. Taylor and Tasha C. Taylor, for appellant.

          Robert S. Tschiemer, for appellee.


         Gary McGahhey and Rebecca McGahhey were divorced by order of the Arkansas County Circuit Court on November 8, 2016. That order reserved the issue of dividing the parties' interests in certain shares of stock and certificates of deposit. The court addressed those issues in a supplemental opinion dated March 14, 2017. In it, the court found that the stock at issue was Rebecca's separate property and that the certificates of deposit were marital property. Gary now appeals, arguing that those characterizations and divisions were erroneous. We affirm in part and reverse and remand in part.

         Gary and Rebecca McGahhey were married on August 23, 1990. Just two months before the couple were married, Rebecca's father died, and Rebecca inherited one third of the stock in Little Prairie Farms, Inc. Her sister and stepmother each also inherited one-third of the stock. About four years later, Rebecca and her sister decided they wanted to buy out their stepmother's interest for $300, 000. Rebecca's sister paid $150, 000 outright, and Rebecca borrowed $150, 000 from First National Bank to pay for her half. Until around the year 2000, Rebecca made the payments on the note from the income from Little Prairie Farm, Inc., which she kept in a separate account. In 2000, Rebecca realized she would not be able to make the annual note payment, so Gary withdrew $40, 000 from his separate nonmarital account and deposited it into Rebecca's account for her to make the note payment. At trial, Gary argued that the later-purchased stock was marital, or that he was at least entitled to reimbursement for the $40, 000 he loaned to Rebecca to cover the note. Rebecca contended that the $40, 000 was a gift.

         Two certificates of deposit are also at issue. These CDs are held at Arkansas County Bank. At both the temporary hearing and the final hearing, Gary testified that they were acquired from funds he had inherited from his father and that they had always been maintained solely in his name. At the conclusion of the hearing, the court invited both sides to submit briefs on the property issues and took the matter under advisement. The first order entered was on November 8, 2016. In that order, the court granted the divorce, divided some property not at issue here, and reserved the matter of the later-purchased stock and the two CDs. Gary was instructed to "provide proof of the alleged nonmarital status" of the CDs that were held at Arkansas County Bank.

         On February 14, 2017, the court issued a letter opinion finding that the contested stock was Rebecca's nonmarital property and that the $40, 000 was a gift. It further found that the CDs were marital property. Three days later, Gary filed a motion for modification of the order (even though the order had not yet been entered), asserting that he was able to obtain copies of the original CDs and that these copies established that the CDs were his nonmarital property. Rebecca responded and argued the court should not modify its order. A supplemental order was then entered on March 14, 2017, and it was consistent with the letter opinion. The court treated the motion for modification as a motion under Arkansas Rule of Civil Procedure 59 and entered a formal order denying it on March 15, 2017. Gary timely appealed from both the supplemental order and the order denying his motion for modification.

         On appeal, divorce cases are reviewed de novo. Kelly v. Kelly, 2011 Ark. 259, at 5-6, 381 S.W.3d 817, 822-23. With respect to the division of property, we review the circuit court's findings of fact and affirm them unless they are clearly erroneous, or against the preponderance of the evidence; the division of property itself is also reviewed, and the same standard applies. Id. A finding is clearly erroneous when the reviewing court, on the entire evidence, is left with the definite and firm conviction that a mistake has been committed. Id. In order to demonstrate that the circuit court's ruling was erroneous, the appellant must show that the circuit court abused its discretion by making a decision that was arbitrary or groundless. Id. We give due deference to the circuit court's superior position to determine the credibility of witnesses and the weight to be given their testimony. Id.

         I. Little Prairie Farms, Inc., Stock Interest

         In Arkansas, with a few exceptions, all property acquired during a marriage is marital property. The exceptions are set out in Arkansas Code Annotated section 9-12-315(b) (Repl. 2015), and consist of

(1) Property acquired prior to marriage or by gift or by reason of the death of another, including, but not limited to, life insurance proceeds, payments made under a deferred compensation plan, or an individual retirement account, and property acquired by right of survivorship, by a trust distribution, by bequest or inheritance, or by a payable on death or a transfer on death arrangement;
(2) Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, ...

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