NO. 80-286
IN THE SUPREME COURT OF THE STATE OF MONTANA
1981
IN RE THE MARRIAGE OF
ANDREW J. BECK,
Petitioner and Appellant,
and
DORIS BECK,
Respondent and Respondent.
Appeal from: District Court of the Third Judicial District,
In and for the County of Powell.
Honorable Robert Boyd, Judge presiding.
Counsel of Record:
For Appellant:
Lea2hart Law Firm, Helena, Montana
For Respondent:
Daniels and Mizner, Deer Lodge, Montana
Submitted on briefs: February 17, 1981
Decided: July 9, 1981
~ i l e d : JUL 9 - 1988
%w9 . r b Clerk
Mr. Justice Daniel J. Shea delivered the Opinion of the
Court.
Andrew J. Beck appeals from that portion of a judgment
of the Powell County District Court dividing the parties'
property as a result of a marital dissolution. He contends
that the trial court's findings and conclusions are not
supported by the evidence, that the court failed to consider
the tax consequences of its property division, and that the
court should not have considered certain assets which the
husband brought into the marriage to be marital property
subject to division.
Although we rule that the trial court could properly
consider the assets which the husband had brought into the
marriage, we nonetheless must vacate the judgment and order
a new hearing. The findings and conclusions are not supported
by the evidence. Further, the court should have considered
the tax consequences of the property division.
Andrew J. Beck (husband) and Doris Beck (wife) were
married in 1966 in Elko, Nevada. It was the third marriage
for each of them. Both had children from previous marriages,
but no children were born to them during this marriage.
At the time of their marriage, the husband owned a
substantial amount of ranch property in Powell County,
identified as the Gold Creek property, the Red Hills property,
and the Larabie Ranch.
During the marriage, the husband granted the wife, by
joint tenancy deed, an undivided one-half interest in the
Larabie ranch property. It is approximately 760 acres and
was appraised at $393,462.80. Most of the land has been
leased to others. In 1980, they received $14,000 in rental
from the land, but in 1981, the rental income increased to
approximately $16,000 per year.
During the marriage, the husband sold the Gold Hills
property under two contracts for deed, one to Don Beck, and
the other to Ronald Cunningham. Payment from both land
contracts is assigned to the First Security Bank of Deer
Lodge and the Federal Land Bank of Missoula. In this appeal,
the husband contends that neither party receives income from
the contracts. The wife, however, contends that the husband
will receive a significant amount of cash from these two
contracts under the property distribution ordered by the
trial court. Her claim is unsubstantiated.
The Red Hills property contains about 2,100 acres and
is subject to a life estate in Andrew A. Beck (the father of
the petitioner-husband here). The fair market value of this
property has been appraised at $247,386.
The husband and wife acquired other property during
their marriage, in particular, two bars that they later
resold for profit. These bars were purchased with the
husband's funds but were improved by the wife's efforts
before they were resold.
The only evidence regarding the value of the property
was introduced by the husband. The trial court adopted the
wife's proposed findings and conclusions almost in toto. We
consider here only the major findings covering the division
of the property.
The only evidence of the property value was introduced
by the husband, as previously stated. He also introduced
the only evidence of the debts of the parties. The undisputed
evidence was that the Larabie ranch property had a value of
$393,462.80, and that the Red Hills property had a fair
market value of $247,386. The total estate was valued at
$740,573.95. The trial court adopted the wife's proposed
finding that the total value of the estate is $760,000.
The husband introduced evidence that the proceeds from
the contract for sale of the Gold Hills property were un-
available to either the husband or wife because they were
assigned to a bank. The husband's accountant testified that
the contract payments from the Don Beck contract were
"completely assigned to the First Security Bank in Deer
Lodge and the Federal Land Bank in Missoula." Under cross-
examination, the accountant testified that the First Security
Bank mortgage on the property had been paid off, but that
the bank was holding the contract proceeds under an assignment
until the parties' other unspecified indebtednesses to the
bank were paid off. The accountant also testified that the
proceeds from the Cunningham contract were also assigned to
these banks. This testimony was uncontradicted. In fact,
the only evidence introduced by the wife concerning their
income was that they received $14,000 per year from rentals
on the Larabie place.
The undisputed evidence is that the parties have an
indebtedness of approximately $92,000. The husband introduced
into evidence a cash-flow chart showing that the annual
income of the parties was $23,583, including the income from
the Larabie property. This evidence was uncontradicted.
Adopting the wife's proposed findings, the trial court
awarded the wife the Larabie ranch (valued at $393,000)
together with the right to receive the rental income (now
$16,000 per year).
The court awarded the rest of the property to the
husband--the Red Hills property (valued at $247,386, but
d
subject to a life estate), and the Gold Hills property--being
sold to Don Beck and Ronald Cunningham under contracts for
deed. The trial court also ordered the husband to pay all
debts of the parties, amounting to over $92,000. The trial
court based this order in part on a finding that the husband
would have an annual income of $23,583 per year. The court
found his income to be sufficient to support the husband
and also for him to pay all income taxes, mortgages, attorney
fees, and miscellaneous indebtednesses of the parties,
amounting to over $92,000. The uncontradicted evidence,
however, is that the husband's annual income is only $9,000
per year, and from this he must not only support himself but
pay approximately $92,000 in bills.
The error lies in the failure of the trial court to
recognize an error, pointed out in the motion for a new
trial, that the $23,583 annual income figure for the husband
was based in part on $14,000 rental income of the Larabie
ranch property. The court, however, not only awarded this
ranch to the wife, but also awarded her the rental income,
thereby cutting the income available to the husband to a
little over $9,000 per year. The uncontradicted evidence is
that the lease payments from the Larabie ranch amount to the
greatest portion of the total income available for distribution
to the parties. From this $9,000 annual income, the husband
must meet his own living expenses plus pay off over $92,000
of the debts.
Following entry of judgment, the husband moved for a
new trial on the grounds that the findings and conclusions
were unsupported by the evidence, and also because in
entering the decree, the court failed to consider the tax
consequences of the property division. The motion was
initially noticed up for hearing, but a later minute entry
indicates that the hearing was vacated upon stipulation of
the parties. Both sides presented affidavits in support of
their position on the motion for a new trial. In her counter-
affidavit resisting the husband's motion for a new trial,
the wife attested that the trial court's property division
left the husband several sources of income which could
furnish him with over $25,000 annually. The wife's allegations
are, however, partially speculative in nature and wholly
unsupported by the evidence. These alleged amounts of
income are not set forth in the record. The wife has
pointed to absolutely no evidence in the record either
supporting the trial court's findings nor refuting the
husband's contentions that the property division left him
with only $9,000 in yearly income.
The motion for a new trial was not again noticed up for
hearing, and the trial court took no action on the motion.
As a result, under Rule 59 (d), M.R.Civ.P., the motion was
deemed denied ten days after the wife served her counter-
affidavit. A timely notice of appeal was filed, and this
appeal followed.
With no support in the record, the wife baldly asserts
that the husband will have a gross annual income of $37,000,
and that he will have a net annual income of $21,000. She
bases this argument in part on an unfounded premise that
proceeds from the Gold Hill contracts are subject to mortgage
payments to the Federal Land Bank in the amount of only
$16,000 annually. The record supports neither the gross
annual income of $37,000 nor the $16,000 annual mortgage
payments.
The only evidence supports a finding that the husband
would have an annual net income of just over $9,000. ~urther
the only evidence supports a finding that the value of the
marital estate is $740,673.95 rather than the figure of
$760,000 set by the trial court at the suggestion of the
wife. The trial court could have arrived at these findings
or conclusions only if it disbelieved portions of the husband's
evidence, but if the trial court did not believe this evidence,
it was not free to arbitrarily set figures not supported by
the evidentiary record. Findings and conclusions may not
rely solely on a perceived lack of credibility; rather, they
must be supported by evidence. See, In Re Marriage of Lippert
(1981)I - Mont. -, 627 P.2d 1206, 38 St.Rep. 625.
The conflict between the evidence and the findings
resulted from the trial court's wholesale adoption of the
wife's proposed findings and conclusions. We recently disapproved
of such a practice. See, ~omaskie ~omaskie (1981),
v. Mont .
,
- 625 P.2d 536, 539, 38 St.Rep. 416, 419, citing Canon 19,
Canons of Judicial Ethics, 144 Mont. at xxvi--xxvii. See also,
Louis Dreyfus & C1E.v. Panama Canal Co. (5th Cir. 1962), 298
F.2d 733, 737; and Roberts v. Ross (3rd Cir. 1965), 344 F.2d
747, 751-752, which persuasively set forth reasons why the trial
court should do its own work when drafting final findings and
conclusions.
Because the findings are clearly erroneous (see Rule 52 (a),
M.R.Civ.P.), we must set them aside and vacate the judgment.
There is another reason, however, to vacate the judgment. AS
the result of the property division ordered by the court, the
husband moved for a new trial based in part on his claim that
some harsh tax consequences would befall him and that the trial
court had failed to consider these tax consequences. While we
need not detail the tax consequences here, for we order a new
hearing in any event, we take this occasion to hold that where
a property distribution ordered by a court includes a taxable
event precipitating a concrete and immediate tax liability,
such tax liability should be considered by the court before
entering its final judgment.
In Re Marriage of Gilbert (1981), - Mont. -I
- P.2d -, 38 St.Rep. 743, we held that a ~istrict
Court does not abuse its discretion by refusing to
consider theoretical tax consequences when the court-ordered
property distribution does not contemplate any taxable
event which triggers present tax liability. But where a
present tax liability will be triggered by the court-ordered
distribution, the court must make allowance for such tax
impact. Other courts have held that a property distribution
must make allowance for the tax impact incurred by a husband
on account of a court-ordered transfer of an interest in
real property to the wife. See, e.g., Wahl v. Wahl (1968),
39 Wis.2d 510, 159 N.W.2d 651. See generally, Annot.,
Divorce - Separation:
or Consideration - - Liability or
of Tax -
Consequences - Determining Alimony - Property Settlement
in or
Provisions, 51 A.L.R.3d 461. We hold, therefore, that at
a new hearing, the trial court must consider any concrete
and immediate adverse tax impact that a division of marital
property might have on the parties.
A final issue raised by the husband is that only
$15,000 acquired by the parties during their marriage through
the sale of two bars is subject to equitable distribution
between the parties. He argues that he owned the property
before the marriage and it should still be his upon the
dissolution of the marriage. Therefore, he asks this Court
to rule that the joint tenancy transfer to the wife of an
undiviced one-half interest in the Larabie ranch must be
set aside. The only purpose of that transfer, he argues, was
to benefit the widow if the husband should die, and, because
they are now divorced, that purpose has been mooted. He
therefore asks that the one-half interest be set aside and
the Larabie ranch be restored to him as the donor.
-8-
Section 40-4-202, MCA, specifically directs the
court to equitably apportion between the parties property
"belonging to either or both, however and whenever acquired
and whether the title thereto is in the name of the husband
or wife or both." This statute refutes the husband's
argument, and we need not say more. An uncontested fact
is that the trial court found both parties to be in ill
health and not able to find gainful employment. Dividing
only the $15,000 profit realized from the sale of the bars
is not our idea of an equitable property division.
The judgment is vacated and this cause remanded for
further proceedings consistent with this opinion.
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We Concur:
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