Full Opinion

DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT THOMAS EDWARD ADAMS, Appellant, v. JACQUELINE ADAMS, Appellee. No. 2D21-527 June 10, 2022 Appeal from the Circuit Court for Polk County; Dana Y. Moore, Judge. Victor R. Smith and Jeffrey I. Burry, of Victor Smith Law Group, P.A., Winter Haven, for Appellant. Brandon J. Rafool, of The Rafool Firm, Winter Haven (withdrew after briefing); Robert B. Peddy, Jr., of Law Office of Peddy P.A., Lakeland (substituted as counsel of record), for Appellee. STARGEL, Judge. Thomas Adams (the former husband) appeals from a final judgment dissolving his marriage to Jacqueline Adams (the former wife). The final judgment ratified a partial mediated marital settlement agreement entered into by the parties regarding the equitable distribution of their marital assets and liabilities and resolved the contested issues of alimony and attorney's fees. On appeal, the former husband raises numerous arguments regarding the trial court's findings under the alimony factors set forth in section 61.08, Florida Statutes (2019), as well as its decision to award attorney's fees to the former wife. Because we find merit in several of the former husband's arguments, we reverse in part. Background After twenty-eight years of marriage, the former husband filed a petition for dissolution of marriage on May 14, 2018.1 In his petition, he requested identification and segregation of nonmarital property, including his business interests in the John P. & Ann Adams Family Limited Partnership (the Family Limited Partnership), Landmark Investments, Inc., and Triple A Properties, Inc., as well as a home in Winter Haven. The former wife filed an 1 The parties had two children born of the marriage, both of whom had reached the age of majority at the time of filing. 2 answer and counterpetition in which she requested permanent periodic alimony as well as an award of attorney's fees and costs. The parties entered into a partial mediated marital settlement agreement resolving all issues concerning the equitable distribution scheme and the identification of nonmarital assets. After dividing their assets and liabilities, the parties agreed that the former husband would make a $150,000 equalizing payment to the former wife. In exchange, the former wife waived any further claims for equitable distribution, including claims for enhancement of the former husband's nonmarital assets. On May 14, 2019, the trial court held a final hearing on the remaining issues of alimony and attorney's fees. The former husband testified that he earns wages from his job as a helicopter pilot for Christian Television Network and from his interest in Adams Fruit Company. In addition, he earns K-1 income2 from his 2 Otherwise known as "pass-through income," this refers to an S corporation's "income, deductions, losses, and credits" that are taxed directly to the corporation's shareholders based on each shareholder's pro rata share of ownership and which must be reported to the IRS on a K-1 statement. Zold v. Zold, 911 So. 2d 1222, 1224 n.2 (Fla. 2005) (citing 26 U.S.C.A. § 1366 (West Supp. 2005)); Wamsley v. Wamsley, 957 So. 2d 89, 91 (Fla. 2d DCA 2007). 3 ownership interests in the Family Limited Partnership, Triple A Properties, and Landmark Investments. The former husband explained that he and his two siblings each hold a thirty-three percent interest as limited partners in the Family Limited Partnership, while his parents, as general partners, hold a one percent interest. The partnership does not distribute income to the limited partners but rather retains and reinvests it. However, because each partner must nevertheless pay taxes on their share of the company's profits, the company does make distributions to each limited partner in an amount sufficient to cover their respective tax liability on that income. The former husband testified that a similar approach is taken with Triple A Properties, of which he owns a one-third interest. That company, which is in the business of managing rental properties, retains its profits to invest in additional properties and only distributes monies to its shareholders to cover the income taxes on each shareholder's respective share of the company's profits. Regarding his interest in Landmark Investments, the former husband testified that he holds a five percent interest in the 4 company that he inherited when his uncle passed away. The former husband receives distributions for his share of profits from Landmark Investments. According to the former husband, this income, along with his income from Christian Television Network and Adams Fruit Company, comprises the money he receives from which he pays living expenses. The former wife testified that she works part-time as a substitute teacher, earning approximately $500 per month. She stated that since the dissolution filing, her temporary alimony payments of $1,750 were not sufficient and that her standard of living had gone down. Moreover, because the parties resided together during the pendency of the dissolution action, she did not have to pay a mortgage, taxes, insurance, or rent, and she had been receiving health insurance from the former husband through Adams Fruit Company. The former wife testified that she will be forced to obtain her own health insurance after the dissolution at a cost of approximately $1,000 per month. In addition, she planned to purchase a residence for $280,000 with an expected monthly payment of $1,800 and would incur additional expenses for property insurance, taxes, utilities, and maintenance. 5 During the hearing, the parties' 2016, 2017, and 2018 tax returns were entered into evidence. In addition, both parties presented expert testimony from certified public accountants. The former wife's CPA expert prepared a marital income analysis for the period from 2014 to 2018 for the parties jointly and for the former husband individually, as well as an analysis of the value of the former husband's ownership interests in his family businesses. At the conclusion of the hearing, the trial court stated that it would take the matter under advisement. During a telephonic hearing on June 6, 2019, the trial court announced its determination that the former wife was entitled to alimony and had a need for the same and that the former husband had the ability to pay. The court noted the parties' "pretty high standard of living" but excluded from its determination gifts and luxuries made available by the former husband's parents. The court found that the former wife had "some ability to work" and could earn $1,000 per month. The trial court ultimately concluded that the former husband should pay the former wife $3,500 per month in permanent alimony and maintain health insurance for the former wife at a cost not exceeding $1,000 per month. The court 6 also ordered the former husband to pay all the former wife's attorney's fees and costs incurred in the dissolution proceedings and half the cost of the former wife's fee expert. After the ruling had been announced, the following exchange occurred: [FORMER HUSBAND'S COUNSEL]: What is the finding with regard to the husband's income? THE COURT: I made the finding that we did include the pass-through income. [FORMER HUSBAND'S COUNSEL]: All of it? THE COURT: I'll have to go back and -- I'll send you an email on that. I was working on this at home, and unfortunately I left that section, but not all of it. The trial court subsequently issued a memorandum of ruling stating its finding that the former husband was a "material participant" in Triple A Properties and Landmark Investments and that the income generated therefrom contributed to the marital standard of living. Regarding the Family Limited Partnership, the trial court found that the former husband was not a "material participant" and that the income generated by the company did not contribute to the marital standard of living. On October 29, 2019, the trial court rendered a Final Judgment of Dissolution of Marriage. The final judgment found 7 that the former wife had a need for, and the former husband had the ability to pay, permanent alimony and that no other form of alimony was fair and reasonable under the circumstances. In accordance with the trial court's oral findings, the final judgment ordered the former husband to pay $3,500 per month in permanent periodic alimony to the former wife and, additionally, pay the premium for her health insurance up to $1,000 per month. The final judgment also ordered the former husband to pay the former wife's attorney's fees and costs in the total amount of $37,159 (after applying a credit for a portion of the former wife's attorney's fees previously paid by the former husband). The former husband moved for rehearing of the final judgment. He argued that many of the trial court's findings regarding his net income, the valuation of nonmarital assets, and the alimony factors were either insufficient or not supported by competent substantial evidence. After a hearing, the trial court denied the motion. This appeal followed. I. Alimony A trial court's award of alimony is reviewed on appeal for an abuse of discretion. Wabeke v. Wabeke, 31 So. 3d 793, 795 (Fla. 2d 8 DCA 2009). In determining whether to award alimony, the trial court must "make a specific factual determination as to whether either party has an actual need for alimony . . . and whether either party has the ability to pay alimony." § 61.08(2). This court has recognized that "[t]he failure to make specific findings regarding need and ability to pay 'may preclude meaningful appellate review[ ] and result in a case having to be reversed and remanded.' " Horowitz v. Horowitz, 273 So. 3d 263, 267 (Fla. 2d DCA 2019) (alteration in original) (quoting Ruberg v. Ruberg, 858 So. 2d 1147, 1155 (Fla. 2d DCA 2003)). Additionally, "where the record does not contain substantial, competent evidence to support the trial court's findings regarding the amount of alimony awarded, the appellate court will reverse the award." Farley v. Farley, 858 So. 2d 1170, 1172 (Fla. 2d DCA 2003) (citing Wendroff v. Wendroff, 614 So. 2d 590 (Fla. 1st DCA 1993)). A. The Former Husband's Net Income The former husband's first argument is that the trial court committed reversible error by failing to make sufficient findings regarding his net income for the purposes of determining his ability to pay alimony. 9 "The ability to pay alimony must be based on the party's net income." Conlin v. Conlin, 212 So. 3d 487, 488 (Fla. 2d DCA 2017); see also Moore v. Moore, 157 So. 3d 435, 436 (Fla. 2d DCA 2015) ("An award of alimony must be based on the income that is available to the party, i.e., the party's net monthly income."); see also Vega v. Vega, 877 So. 2d 882, 883 (Fla. 3d DCA 2004) (noting that "net income is the relevant benchmark" in determining alimony (citations omitted)). "Basing an alimony award on gross income rather than net income is reversible error." Hampson v. Hampson, 310 So. 3d 161, 162 (Fla. 2d DCA 2021) (citing Hanson v. Hanson, 217 So. 3d 1165, 1166 (Fla. 2d DCA 2017)). In determining that the former husband had the ability to pay alimony, the trial court referenced several sources of income: his employment as a helicopter pilot, dividend and interest income, salaries from family businesses that he works in (presumably Adams Fruit Company), and income from his interests in Triple A Properties and Landmark Investments. Based on this evidence, the court concluded that the former husband has "substantial wealth" and a "substantial earning ability." However, the final judgment is bereft of any findings as to his net income from these sources. 10 While the final judgment does identify the former husband's 2018 income of $34,694 from Triple A Properties and $40,823 from Landmark Investments, as well as his combined income of $78,269 from those businesses in 2017, it is clear from the record that those figures evidence his gross income from those sources, not his net income. And while the final judgment also references the marital income analysis prepared by the former wife's expert, that document also fails to reflect the former husband's net income. Because this cursory discussion of the former husband's various sources of income fails to clearly demonstrate that the trial court's alimony determination was based on his net income, we must reverse the alimony award. See Cooper v. Cooper, 278 So. 3d 765, 766 (Fla. 2d DCA 2019) (reversing alimony award where "[t]he judgment [made] no finding regarding the former husband's net income" and the appellate court could not "ascertain whether the trial court determined the former husband's net income in fashioning the appropriate award"); Conlin, 212 So. 3d at 489 ("[T]he record before us simply does not clearly demonstrate that the alimony award was based on the former husband's net income as required."). On remand, the trial court is directed to make 11 specific findings as to the former husband's ability to pay alimony based on his net income. In addition, the trial court should also consider and address the tax consequences of the alimony award. See § 61.08(2)(h); Cooper, 278 So. 3d at 766. B. The Former Wife's Need for Alimony The former husband also contends that the trial court failed to make sufficient findings establishing the former wife's need for alimony. This, too, requires reversal of the alimony award. In the final judgment, the court found that the former wife "has an ongoing need for permanent alimony" and then, in the next sentence, awarded her $3,500 per month in permanent alimony and ordered the former husband to pay her health insurance premium up to $1,000 per month. But while the final judgment repeatedly refers in general terms to the former wife's limited financial resources, there is no finding specifically establishing the amount of her need for alimony. This is error. See O'Connor v. O'Connor, 782 So. 2d 502, 503-04 (Fla. 2d DCA 2001) (holding that trial court committed reversible error by setting alimony without finding the amount of receiving spouse's need); Matajek v. Skowronska, 927 So. 2d 981, 987 (Fla. 5th DCA 2006) (same). 12 Accordingly, we also instruct the trial court to make the required findings as to the amount of the former wife's need for alimony on remand. C. Undistributed Pass-Through Income Next, the former husband argues that the trial court erroneously considered undistributed pass-through income from his stake in Triple A Properties in determining his ability to pay alimony. In Zold v. Zold, 911 So. 2d 1222, 1231 (Fla. 2005), the supreme court held that "undistributed 'pass-through' income that has been retained by a corporation for corporate purposes does not constitute income within the meaning of chapter 61." "This is because the undistributed 'pass-through' income will be used by the corporation to maintain corporate operations and therefore cannot be used by a shareholder-spouse to satisfy financial obligations imposed upon dissolution of marriage." Id. When this issue is contested by the parties, the burden is on the shareholder-spouse to prove that the income was properly retained for corporate purposes and not impermissibly retained to avoid alimony. Id. at 1233. In determining whether the shareholder-spouse has met this burden, the court must consider 13 (1) "the extent to which the shareholder-spouse has access to or control over pass-through income retained by the corporation"; (2) "the limitations set forth in section 607.06401(3)[, Florida Statutes,] governing corporate distributions to shareholders"; and (3) "the purpose(s) for which the 'pass-through' income has been retained by the corporation." Zold, 911 So. 2d at 1233. The former husband testified that he owns a one-third interest in Triple A Properties and that his older brother is responsible for the management of the company. He explained that Triple A Properties retains its profits to reinvest into additional properties and only distributes funds to its shareholders in amounts sufficient to cover the taxes on their respective shares of the profits. This testimony was essentially unrefuted at the final evidentiary hearing. In fact, the former wife's expert even acknowledged during his testimony that it is common for real estate companies like Triple A Properties to retain their profits to make additional investments. Nevertheless, the trial court found that the former husband's undistributed pass-through income from Triple A Properties should be considered in determining his ability to pay alimony. This finding was based on the trial court's determination that "the 14 [former] husband is a material participant in [Triple A Properties] and the income generated by the compan[y] contributed to the marital standard of living."3 Zold, however, draws no distinction based on whether the shareholder-spouse is materially involved in the company. Rather, the analysis in Zold focuses on the shareholder-spouse's access to or control over the pass-through income, the statutory limitations on corporate distributions to shareholders, and the purposes for which the pass-through income has been retained by the corporation. See id. Here, there are no findings in the final judgment addressing the analysis set forth in Zold, nor is there any indication in the record that the trial court considered those factors in analyzing the former husband's undistributed pass-through income from Triple A Properties. The trial court erroneously relied on its determination that the former husband was a material participant in the company in finding that his undistributed pass-through income should be 3 While the trial court made the same findings as to the former husband's interest in Landmark Investments, the former husband does not dispute that his share of the profits from Landmark Investments—which, unlike Triple A Properties, does not retain its profits—was properly considered in determining his ability to pay alimony. 15 considered in determining alimony. Accordingly, the trial court is instructed to reconsider this issue on remand under the appropriate analysis.4 We note that there may be some confusion as to whether the former husband has previously taken distributions from the Family Limited Partnership and Triple A Properties in amounts greater than necessary to meet his tax obligations. If true, any such distributions would not constitute "undistributed" pass-through income. Thus, that is a separate issue from the question of whether the undistributed portions of the former husband's pro rata share of profits from Triple A Properties should be considered in determining alimony. However, should the trial court find that any portion of the former husband's pass-through income that was distributed to him must be included in the determination of alimony, it should make specific findings to that effect. D. Valuation of Nonmarital Assets 4 We express no opinion as to whether the undistributed pass- through income at issue should ultimately be considered in determining the former husband's ability to pay alimony and leave the issue to be decided by the trial court in the first instance after analyzing the issue under the correct legal framework. 16 Finally, the former husband argues that the alimony award must also be reversed because the trial court made findings as to the value of his nonmarital business interests that were not supported by competent substantial evidence. See § 61.08(2)(d) (requiring the trial court to consider the nonmarital assets distributed to each party). We agree. The final judgment includes a finding that the former husband's shares of the family businesses (the Family Limited Partnership, Landmark Investments, Triple A Properties, and Adams Fruit Company) had a total value of $16,558,987.5 The trial court relied on the former wife's Exhibit #9, which is a document prepared by the former wife's expert compiling the parties' marital income over several years along with estimates for the values of the former husband's interest in each company. The former husband asserts that these valuations are inaccurate because the former wife's expert failed to apply a lack-of-marketability discount due to the former husband owning minority interests in those entities. 5 The final judgment contains a typographical error listing the value of these interests as $16,558.98. 17 This court has held, in the equitable distribution context, that "a trial court should be accorded the discretion to determine whether a marketability discount should apply to the valuation of a closely held corporation in a dissolution of marriage case where the court is traditionally charged with achieving equity through the use of various remedies." Erp v. Erp, 976 So. 2d 1234, 1239 (Fla. 2d DCA 2008). That same discretion should be accorded in the context of the trial court's decision to apply a marketability discount in determining the value of the former husband's business interests for the purposes of determining alimony in this case. We emphasize, however, that such discretion is certainly not unbridled, and the trial court's findings must still be supported by competent substantial evidence. Cf. Kendall v. Kendall, 677 So. 2d 48, 49 (Fla. 4th DCA 1996) (holding that competent substantial evidence supported trial court's decision not to discount spouse's interest in family companies for purposes of equitable distribution). The former wife's expert acknowledged during his testimony that he did not apply a lack-of-marketability discount to the estimated values of the former husband's business interests listed in Exhibit #9. However, he then proceeded to explain that a thirty 18 percent lack-of-marketability discount would "probably" apply to the former husband's interests in the Family Limited Partnership, Adams Fruit Company, and Triple A Properties. This was tantamount to an admission that the estimates listed in Exhibit #9 were unreliable as to the value of the former husband's interests in those entities. As such, we agree with the former husband that the court's finding as to the total value of his business interests—which was based on the values listed in Exhibit #9—was not supported by competent substantial evidence. See Fla. Rate Conf. v. Fla. R. R. & Pub. Utils. Comm'n, 108 So. 2d 601, 607 (Fla. 1959) ("[A]n essential finding or conclusion solely [based] on unreliable evidence should be held insufficient."). On remand, the trial court shall make findings as to the value of the former husband's business interests that are supported by competent substantial evidence in the record.6 6 While we do not address the former husband's remaining arguments pertaining to the valuation of his interests in the family businesses, the former husband may, if appropriate, raise those arguments on remand in the trial court. 19 II. Attorney's Fees In deciding the issue of attorney's fees in a dissolution case, section 61.16(1) requires the trial court to "primarily consider the relative financial resources of the parties." The purpose of this provision is to ensure that both parties will have similar access to competent legal counsel. Rosen v. Rosen, 696 So. 2d 697, 699 (Fla. 1997) (citing Canakaris v. Canakaris, 382 So. 2d 1197 (Fla. 1980)). To determine whether an award of attorney's fees is appropriate, "the trial court must look to each spouse's need for suit money versus each spouse's respective ability to pay." Rosen, 696 So. 2d at 699. The standard of review for an award of attorney's fees is abuse of discretion. Arena v. Arena, 103 So. 3d 1044, 1045 (Fla. 2d DCA 2013) (citing Anciaux v. Anciaux, 666 So. 2d 577, 578 (Fla. 2d DCA 1996)). The portion of the final judgment finding that the former wife was entitled to attorney's fees states, "The Court finds that there is a need for and an ability to pay the [former] [w]ife reasonable attorney's fees, costs, and suit money based upon its findings above." The trial court made no specific findings regarding the former wife's need for or the former husband's ability to pay 20 attorney's fees. See Perez v. Perez, 100 So. 3d 769, 771 (Fla. 2d DCA 2012) ("[T]he trial court must make specific factual findings . . . supporting its determination of entitlement to an award of attorney's fees."). While the trial court attempted to piggyback on its findings as to the parties' need and ability to pay under the alimony factors, we have already determined that those findings were deficient in the context of alimony, and we similarly conclude that they are insufficient to support an award of attorney's fees under section 61.16(1). Accordingly, we reverse the award of attorney's fees and remand for the trial court to make the required findings based on the parties' need and ability to pay. Conclusion For the reasons discussed herein, we reverse the portions of the final judgment awarding alimony and attorney's fees to the former wife and remand for further proceedings consistent with this opinion. In addressing these issues on remand, the trial court may take additional evidence as necessary and, if appropriate, shall adjust the amount of the alimony and attorney's fees awards. In all other respects, we affirm the Final Judgment of Dissolution of Marriage. 21 Affirmed in part; reversed in part; remanded with instructions. MORRIS, C.J., and SMITH, J., Concur. Opinion subject to revision prior to official publication. 22