STOUT v. STOUT (2025)

MEMORANDUM DECISION

Case Summary

[1] Anthony Stout (“Husband”) appeals a trial court order holding him in contempt and ordering him to pay a portion of Christine Stout's (“Wife”) attorney fees. We affirm.

Facts and Procedural History

[2] Wife and Husband were members of Stout Heating and Cooling, LLC (the “LLC”), an Indiana limited liability company. Each had an equal ownership interest in the LLC. Wife served as the LLC's recordkeeper and filed tax returns on its behalf. In 2017 and 2018, Wife filed Form 1040s with the Internal Revenue Service (“IRS”) stating Wife and Husband were “Married filing jointly.” Ex. Vol. 3 at 12, 34. The forms included the LLC's profit and loss statements and its business expenses for the respective years.¹

[3] In October 2019, Wife petitioned to dissolve her marriage to Husband. While Wife's petition was pending, Wife and Husband learned their tax returns for 2017 and 2018 were being audited by the IRS. In April 2021, Wife and Husband entered into a Mediated Settlement Agreement (the “Agreement”) relating to Wife's dissolution petition. The trial court approved the Agreement. In addition to dissolving the marriage, the Agreement included the following relevant provisions:

3.6. Payment of Marital and Individual Debts. Wife shall be responsible for, pay and hold Husband harmless from any and all debt in her individual name. Husband shall be responsible for, pay and hold Wife harmless from any and all debt in his individual name and/or in the name of Stout Heating and Cooling LLC, including but not limited to all debt on which Wife is an authorized user and/or guarantor on the account ․ Each party shall be responsible for, indemnify and hold the other party harmless from any debt incurred in her/his individual name from prior to or any time after the date of filing of the Verified Petition for Dissolution of Marriage and for any debt/liabilities for which they are ordered to pay herein. “Debt” for purposes of this provision includes but is not limited to any debt incurred at any time for any reason prior to or after the date of filing of the Verified Petition for Dissolution of Marriage for: medical/healthcare expenses, credit/charge card accounts, school loans, tax obligations, business expenses and non-payment/default of any loan, promissory note, or debt due or that may become due at any point in the future or debt or obligation otherwise.

* * *

3.9. Tax Returns. The Parties shall file their 2019 and 2020 Federal and State Income Tax Returns, married/separately. If taxes are owed for 2019 and/or any prior year to 2019, the Parties shall be responsible for, pay and hold the other party harmless from any tax obligation due related to their separate income tax. Husband shall also be responsible for any and all income tax obligations of Stout Heating and Cooling LLC and shall hold Wife harmless and indemnify her from the same. If either party owes taxes on his/her separate income tax for 2019 or before, the party shall cooperate in every way (including holding harmless, indemnification, supporting claims/defenses of innocent spouse or otherwise to protect the non-owing spouse) with the other party to ensure that no claim or demand or lien may be assessed against the other party that does not owe on the tax obligation.

Appellant's App. Vol. 2 at 25–27. About a month after the trial court approved the Agreement, the IRS sent Wife and Husband a Notice of Deficiency of nearly $370,000.

[4] In September 2021, Wife filed a petition with the United States Tax Court to “try to fix [the] audit rather than do nothing.” Tr. Vol. 2 at 35. Only Wife was named in the petition. Throughout the tax case, Wife went to distributors, businesses, and banks to patch together relevant documentation. Husband did not participate in or aid Wife with the tax case and at times denied her access to LLC business documents. By mid-December 2022, Wife and the IRS reached a Stipulated Decision, under which Wife agreed to $18,592 and $36,763 deficiencies for tax years 2017 and 2018, respectively.

[5] In March 2023, Wife petitioned to hold Husband in contempt for, among other reasons, violating the Agreement by failing to pay tax debts related to the LLC. After a hearing, the trial court found the LLC had tax debts of $23,434.83 for 2017 and $43,952.54 for 2018.² The trial court ordered Husband to pay these amounts plus any accumulated interest and fines, concluding the debts were “related to Stout Heating and Cooling, LLC.” Appellant's App. Vol. 2 at 18. Wife also moved for attorney fees. And after taking the matter under advisement, the trial court awarded Wife $893 in attorney fees, a portion of her requested amount.

The trial court did not abuse its discretion in holding Husband in contempt.

[6] We first note Wife did not file an appellee's brief. When the appellee fails to submit a brief, we will reverse the trial court's judgment upon a showing of prima facie error. Trinity Homes, LLC v. Fang, 848 N.E.2d 1065, 1068 (Ind. 2006). Prima facie error is error “at first sight, on first appearance, or on the face of it.” Id. (quotation omitted). While reviewing under this less-stringent standard, we “need not undertake the burden of developing an argument on the appellee's behalf.” Id.

[7] “Contempt of court generally involves disobedience of a court or court order that ‘undermines the court's authority, justice, and dignity.’ ” Reynolds v. Reynolds, 64 N.E.3d 829, 832 (Ind. 2016) (quoting In re A.S., 9 N.E.3d 129, 131 (Ind. 2014)). Civil contempt—the type of contempt relevant here—is “misconduct arising from ‘a violation of a court order which results in a proceeding for the benefit of the aggrieved party[.]’ ” A.S., 9 N.E.3d at 132 (quoting Duemling v. Fort Wayne Cmty. Concerts, Inc., 188 N.E.2d 274, 276 (1963)). “Civil contempt ‘is not an offense primarily against the dignity of the court, but rather is for the benefit of the party who has been injured or damaged by the failure of another to conform to a court order issued for the private benefit of the aggrieved party.’ ” Id. (quoting Duemling, 188 N.E.2d at 276). Determining whether a party is in contempt is a decision left to the trial court's sound discretion. Reynolds, 64 N.E.3d at 832. Accordingly, we review the trial court's judgment for abuse of discretion, reversing “only if there is no evidence or inference therefrom” to support the decision. Id. (quoting Steele-Giri v. Steele, 51 N.E.3d 119, 124 (Ind. 2016)).

[8] Husband acknowledges that under the Agreement, he is responsible for all debt and tax obligations of the LLC. Yet Husband claims the trial court abused its discretion in holding him in contempt because the “tax deficiencies presented to the trial court were the tax deficiencies of the parties, not [the LLC].” Appellant's Br. at 8.³ In so arguing, Husband emphasizes the LLC's status as a pass-through entity. In one respect, Husband is correct. A limited liability company is generally treated by federal and state taxing authorities like a partnership—income “passes through” the entity and is taxed to the member or members.⁴ Five Star Concrete, L.L.C. v. Klink, Inc., 693 N.E.2d 583, 586 (Ind. Ct. App. 1998); Ind. Code. art. 23-18. But Husband reads the trial court's order holding him in contempt too narrowly.

[9] After a hearing, the trial court found the debts were “related to” the LLC. Appellant's App. Vol. 2 at 18. Plenty of evidence supports this finding. For example, Wife repeatedly testified the audit related only to reported business expenses of the LLC, not the parties’ individual wages. See, e.g., Tr. Vol. 2 at 24. And the steps Wife took to address the audit, like obtaining relevant documentation from distributors who did business with the LLC, supports the conclusion the tax debts at issue were tied to the LLC. The Agreement allocates these debts to Husband. The trial court therefore did not abuse its discretion in holding Husband in contempt for failing to pay the tax deficiencies.

The trial court did not abuse its discretion in ordering Husband to pay a portion of Wife's attorney fees.

[10] Husband also claims the trial court erred in ordering him to pay a portion of Wife's attorney fees. Trial courts have the inherent authority to award attorney fees for civil contempt. Reynolds, 64 N.E.3d at 835. This authority is derived from the court's power to enforce compliance with its orders. McCallister v. McCallister, 105 N.E.3d 1114, 1120 (Ind. Ct. App. 2018). “[O]nce a party is found in contempt, the trial court has the authority to compensate the aggrieved party for losses and damages resulting from another's contemptuous actions, including the award of attorney fees.” Id.

[11] The trial court ordered Husband to pay $893 of Wife's attorney fees, finding Wife's request “reasonable” and “necessary to pursue” her contempt petition. Appellant's App. Vol. 2 at 20. Because Husband failed to pay debts and tax deficiencies allocated to him under the Agreement, thereby causing Wife to file a motion to hold Husband in contempt and incur attorney fees, we conclude the trial court did not abuse its discretion in ordering Husband to pay a portion of Wife's attorney fees. See McCallister, 105 N.E.3d at 1121 (concluding the trial court did not abuse its discretion in ordering ex-husband to pay ex-wife's attorney fees for failing to abide by the parties’ marital settlement agreement).

Conclusion

[12] The trial court did not abuse its discretion in holding Husband in contempt or awarding Wife attorney fees.

[13] Affirmed.

FOOTNOTES

1.   As the trial court noted and Husband argued below, it appears the LLC's tax returns were improperly filed. Generally, a multi-member LLC files an IRS Form 1065. Each member then includes a completed Schedule K-1 on their personal tax return. Regardless, Wife and Husband filed jointly, and Wife explained she and Husband worked together to prepare the returns.

2.   These amounts equaled the stipulated deficiencies plus accrued interest as of May 2023.

3.   Husband would have us go a step further and declare the entire tax deficiency is Wife's debt alone. We decline his invitation to do so. Although only Wife's name is listed on the tax court case and the resulting Stipulated Decision, the tax returns at issue were filed jointly by Wife and Husband. As the trial court explained, Husband was “aware of [the] process ․ and could have done whatever he needed to do to join in this fight against the tax man,” but he did not. Tr. Vol. 2 at 59. Not to mention, Wife's efforts to substantially reduce the tax deficiencies benefitted Husband as well.

4.   Although taxed as a pass-through entity by default, an eligible LLC may elect to be taxed as a corporation for federal tax purposes by filing IRS Form 8832. See 26 C.F.R. § 301.7701-3(c) (2020). This process is sometimes referred to as the “check-the-box” election. Based on the record before us, however, there is no evidence the LLC made such an election.

Kenworthy, Judge.

Felix, J., and DeBoer, J., concur.