Retzer v. Retzer

Michael Retzer (plaintiff) and Nancy Retzer (defendant) were married. The Retzers formed a closely held corporation, Retzer and Retzer, Inc. (the corporation), to run a McDonald’s franchise. To do so, the Retzers obtained a few loans from banks and family members. Michael owned 51 percent of the corporation’s stock and Nancy the remaining 49 percent. The business performed very well. Michael eventually filed for divorce. During divorce proceedings, the trial court contemplated the best way to achieve an equitable division of the Retzers’ assets. The trial court determined that an equitable division of the assets required Nancy to receive a reasonable return on her stake in the corporation. Considering Michael’s integral role in the corporation and his ability to operate the corporation in a manner that could have significantly affected Nancy’s ownership stake, the trial court came up with a creative solution to mitigate the potential for unfairness. The trial court valued Nancy’s interest in the corporation at approximately $1.1 million and deemed 8 percent to be a reasonable annual return. Accordingly, the trial court ordered Michael to pay Nancy $88,000 per year in equal monthly installments. However, the trial court framed the award as alimony less any money Nancy received from the corporation, which obligated Michael to pay the annual return regardless of the corporation’s performance and incentivized Michael to run the business profitably for himself and Nancy. Michael appealed.