No. 85-364
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986
IN RE THE ,MARRIAGE OF
JANET MARIE WESSEL,
Petitioner a.nd Respondent,
and
LESTER FAY WESSEL,
Respondent and Appell-ant .
APPEAL FROM: The District Court of the Fifth Judicial District,
In and for the County of Madison,
The Honorable Frank Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
W.G. Gilbert, Jr., W.G. Gilbert, TI1 and Thomas R.
Scott, Dillon, Montana
For Respondent:
Berg, Coil, Stokes & Tollefsen; Michael C. Coil,
Bozeman, Montana
Submitted on Briefs: Dec. 5, 1985
Decided: March 4 , 1986
Filed: MAR 4:- '1986
M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion o f t h e
Court.
T h i s i s an appeal- by t h e husband from a judgment o f t h e
District Court of the Fifth Judicial District, Madison
County, dividing the marital property of the parties and
e s t a b l i s h i n g a payment p l a n by which t h e husband was t o buy
o u t t h e w i f e ' s i n t e r e s t i n t h e family ranch corporation. We
affirm.
Janet Wessel ("Janet") and Lester Wessel ("Lester")
grew up in ranching families i n Madison County, Montana.
They were m a r r i e d i n 1967 and had t h r e e c h i l d r e n , a l l minors
a t t h e time of t r i a l . Nine y e a r s i n t o t h e i r m a r r i a g e , J a n e t
and Lester, together with Lester's parents, incorporated
their various ranching interests into a Sub Chapter S
corporation known as the "Wessel F.anch." 1,000 s h a r e s of
s t o c k were issued t o each of the four stockholders i n t h e
corporation, with Lester's parents receiving 670 shares,
L e s t e r r e c e i v i n g 2 5 1 s h a r e s and J a n e t r e c e i v i n g 79 s h a r e s .
The corporation thereafter provided Janet and L e s t e r w i t h
their home, all utilities, various groceries, a car, and
various living necessities. L e s t e r a l s o r e c e i v e d $800 a s h i s
monthly wage from t h e c o r p o r a t i o n .
During L e s t e r ' s and J a n e t ' s marriage, Janet's father
p a s s e d away. J a n e t ' s mother i n h e r i t e d t h e f a m i l y r a n c h known
a s t h e "Wellman Ranch." A s p a r t of J a n e t ' s mother's e s t a t e
planning, s h e g i f t e d t h e r a n c h under an a n n u i t y p l a n t o J a n e t
and h e r s i s t e r w i t h e a c h r e c e i v i n g a o n e - h a l f interest i n the
ranch.
A f t e r seventeen years of marriage, J a n e t p e t i t i o n e d t o
have h e r m a r r i a g e w i t h L e s t e r d i s s o l v e d . Janet subsequently
p u r c h a s e d a mobile home t o l i v e i n w i t h h e r c h i l d r e n u s i n g
funds loaned Erom the Wessel Ranch corporation. Janet also
started working at a local bakery, netting approximately $115
per week.
The Madison County District Court, after a trial held
December 13 and 14, 1984, dissolved the marriage of the
parties. In its judgment dated February 21, 1985, the
District Court ordered, in relevant part to this appeal, that
a11 of the stock owned by the parties in the Wessel Ranch
shall be divided so that Lester and Janet each receive 165
shares. Further, Lester was given the opti-on of purchasing
Janet's 165 shares of stock at $800 per share for a total of
$132,000, less a $15,000 credit for his assumption of Janet's
mobile home loan.
The judgment further provided that if Lester failed to
exercise the purchase option regarding Janet's shares of
stock by October 1, 1985, he was to execute and deliver to
Janet a promissory note for the principal sum of $117,000.
The note was to be dated March 5, 1985, and to provide for
equal annual payments, amortized at 8% interest over a period
of 30 years (approximately $10,300 per year) , with a final
balloon payment due on March 5, 1995. The note was to
provide for the right of pre-payment and was to be secured
with Lester's shares of stock in the Wessel Ranch. The first
annual payment on the note is due on March 5, 1986.
The judgment also provided that Janet's one-half
interest in her family ranch ("Wellman Ranch") being gifted
to her from her mother under an annuity plan, was not part of
the marital estate and therefore not subject to any marital
claim.
In addition, the District Court ordered the following,
although Lester does not specifically object to these items
except as they relate to his ability to pay Janet for her
shares of stock in the Wessel Ranch:
1. The parties were awarded joint custody of the
children with Janet having physical custody of the two
youngest children and Lester having to pay Janet $300 per
month in child support. Lester was awarded custody of the
oldest child and is responsible for his support.
2. Lester shall provide medical insurance for all
three children.
3. Lester shall assume the $15,000 loan on Janet's
mobile home.
4. The parties' credit card and bank loans shall be
shared equally by Janet and Lester.
5. Lester shall assume the loan on Janet's car.
It should also be noted that although at the time of
trial the net worth of the Wessel Ranch exceeded $1,000,000,
the record indicates the ranch is currently suffering some
financial difficulties. The record shows the ranch is
overburdened with operating debt, and the generally
distressed agricultural economy shows little prospect of
immediate relief for the ranch. Also, the dissolution of the
parties' marriage has compounded the ranch's credit
situation.
Lester basically presents the following issues for
review by this Court:
(I) Did the District Court abuse its discretion by
ordering Lester to buy Janet's shares of stock in the family
ranch corporation?
(2) Did the District Court abuse its discretion by
excluding from the marital estate ranch property gifted to
Janet by her mother?
(3) Is the evidence adequate to support the District
Court's Findings of Fact and Conclusions of Law?
Under the first issue, Lester basically concedes that
the judgment of the District Court ordering him to buy
Janet's shares of stock in the Wessel Ranch is appropriate,
but he argues that the judgment should be modified to provide
for a lower annual payment without interest. Lester argues
in light of the financial condition of the ranch, neither he
nor the ranch have the assets or funds to pay the sums to
Janet mandated by the District Court. Specifically, Lester
argues the District Court disregarded the rule of In Re
Marriage of Jacobson (1979), 183 Mont. 517, 525, 600 P.2d
1183, 1187-88, which states:
It must be remembered that the primary
riqht to be considered in disposinq of
maEital property is the right of kach
~ a r t vto an eauitable a~nortionmentof
.
L 4 .' L I
the marital assets. While it is the
policy of the courts of this state to
;void*splitting up a ranch or forcing its
sale where there is any reasonable
alternative, that policy, however
commendable, cannot be used to override
the wife's right to an equitable share of
the marital property. (Emphasis added.)
Lester argues there was no "equitable apportionment of the
marital assets" by the District Court because it is not
financially possible for him or the ranch to satisfy the
requirements of the judgment. We disagree.
First, it must he noted that the District Court has the
discretion during a marriage dissolution to determine what
method of payment is best suited for dividing up the parties'
respective interests in a family ra.nch corporation. For
example in Burleigh v. Burleigh (1982), 200 Mont. 1, 650 P.2d
753, this Court held that in place of awarding actual shares
of stock to the wife, the District Court can award annual
payments to the wife as payment for her shares of stock held
in a family ranch corporation.
We can similarly dispose of the husband's
contention that the District Court should
have made a distribution of the stock in
kind, i.e., that the wife should have
been given some of the shares instead of
the right to annual payments. Simply
because this option was open to the court
is no reason that the district judge had
to select it. Under the circumscribed
standard of review established by Zell
and numerous other cases, there was no
error in the District Court's failure to
distribute the property in kind.
Burleigh, 650 P.2d at 757.
Therefore, because Burleigh supports the District
Court's method of paying Janet for her shares of stock in the
Wessel Ranch, the only question remaining is whether the size
of the annual payments and the interest rate chosen by the
District Court are proper or if they are an abuse of
discretion which requires reversal.
While Lester strongly argues that no interest should be
charged on any annual payments he will make to Janet, this
Court has already stated that allowing interest on an amount
to be paid over time is within the discretion of the District
Court.
The 7 percent interest rate is below that
charged by commercial and governmental
lending institutions. The case of In re
Marriage of Brown (1978), Mont., 587 P.2d
361, 367, 35 St.Rep. 1733, merely
suggested that the District Court could
order the remaining balance paid without
interest. It did not say that the trial
court could not allow interest, and the
allowance of interest lies within the
court's sound discretion.
Jacobson,
The interest rate of 8% awarded by the District Court
in this case is below the legal rate allowed by current
statutory law ( 31-1-16 MCA) , and was well below the
market rate in effect at the time of this judgment and is
also below the current market rate. Clearly such an award of
interest does not result in substantial injustice and
therefore was not an abuse of discretion by the District
Court.
Lester's major complaint concerning the District
Court's judgment is that the size of the annual payments
required of him to purchase Janet's shares of stock in the
family ranch corporation are too large. Lester basically
argues that the evidence is insufficient to support the size
of these annual payments. Specifically, Lester argues:
1. That his first year payment of all the sums due to
Janet under the judgment (including child support, loans,
stock payment) is nearly $25,000.
2. That he does not now have, and cannot obtain, funds
to purchase Janet's shares of stock.
3. The Wessel Ranch does not now have, and cannot
obtain, funds to purchase Janet's shares of stock in light of
its current financial distress.
4. That Lester's parents (the majority stockholders of
the FJessel Ranch) do not now have, and cannot obtain, funds
to purchase Janet's shares of stock.
Lester argues, in light of the above listed items, that
the payment schedule set up by the District Court will be
impossible for him to meet. Therefore, Lester points out, it
is highly probable that the Wessel Ranch may be forced to
liquidate in order to cover the obligations the District
Court has imposed upon him in favor of his ex-wife. We
disagree with Lester's conclusions.
First, this Court notes that requiring a husband to buy
his ex-wife out of a family business will undoubtedly always
be a financial burden. While Lester argues that he will be
unable to meet this burden, the following facts presented at
trial tend to counter his argument:
1. The Wessel Ranch does have a - worth of over
net
$1,000,000 giving the stock a net worth of over $1,000 per
share.
2. Considering all the benefits received by Lester
through the ranching corporation (including groceries,
vehicles, housing, etc. .. 1, his actual annual income
exceeds $20,000.
3. Lester stands to inherit the entire Wessel Ranch
corporation.
Further, there is no evidence in the record that an
award to Janet of one-half of the marital estate in the sum
of $132,000 will require liquidation of the family ranch.
There are numerous alternatives available to Lester to cover
his obligation short of liquidation, and to suggest that the
only alternative to satisfy his obligation is to liquidate
the entire Wessel Ranch which has a net value of over
$1,000,000 has little merit. Also, although Lester makes a
valid argument that the ranching industry is currently
suffering from hard times, the cattle business by nature is
cyclical and simply because Janet has chosen to dissolve this
marriage at the bottom of the cycle should not preclude her
from receiving her fair share of the marital estate
accumulated after 17 years of diligent effort with Lester.
Lastly, the actual size of the annual payments required
of Lester are not too large. The District Court amortized
the payments over thirty years and required a balloon payment
on March 5, 1995. The use of a thirty year amortization
schedule is not so short or so abnormal in today's financial
markets as to cause this Court to conclude that the use of
the same is an abuse of discretion by the District Court.
In conclusion under this issue, while there is little
doubt that the District Court's judgment requiring Lester to
purchase Janet's 165 shares of stock in the Wessel Ranch is a
hardship, the District Court did not abuse its discretion by
using an 8% interest rate and requiring Lester to pay his
obligation on an annual basis for 30 years in the sum of
approximately $10,300 per year. We hold there was a
"equitable apportionment of the marital assets'' as required
by Jacobson quoted above.
Under the second issue, Lester argues that the "Wellman
Ranch" property being gifted to Janet by her mother for
inheritance purposes should have been included in the marital
esta-te. The District Court directly addressed this issue in
its findings of fact and conclusions of law as follows:
The petitioner [Janet] has acquired a
one-half interest in a $360,000 parcel of
property [Wel-lman Ranch], gifted to her
from her mother under an annuity plan.
While there is a, claim that respondent
[Lester] contributed to this separate
estate in kind a.nd by Wessel Ranch money,
the contribution was not significant.
This property will be considered. as
separate property unencumbered by any
marital claim, as will respondent's
potential inheritance from his father and
mother.
This Court has previously addressed the question of
whether property received by gift or property inherited by
one of the parties is to be considered in determining the
marital estate. On facts not unsimilar to those of the
instant case, this Court held as follows:
Here, respondent received her stock in
Mill Creek Farm as a gift under her
parents ' estate planning scheme.
Moreover, neither party worked on the
farm except for isolated odd jobs. At
trial, appellant replied "absolutely not"
when asked if he felt he had made a
significant contribution to the farm
operation. He also agreed with counsel's
remark that appellant made no claim to
any interest in the family
farm ... [Tlhe District Court could
justifiably find that appellant had no
interest in respondent's stock.
(Citations omitted.) We hold that there
was no abuse of discretion in excluding
respondent's stock from the marital
estate.
Becker v. Becker (Mont. 1 9 8 5 ) , 707 ~ . 2 d 526, 528-29, 42
In the instant case, Janet received her one-half
interest in the Wellman Ranch belonging to her side of the
family directly from her mother. Janet's mother would give
Janet funds each yeax from lease payments on the ranch, and
these funds would then be returned to Janet's mother in the
form of payments for the ranch. The record indicates this
complex arrangement was clearly for estate planning purposes.
Further, the District Court found Janet's one-half interest
in her family ranch was acquired by gift and Lester's
contribution to the ranch was not significant.
Thus the facts in the instant case are very similar to
the facts contained in the Becker case. In the instant case,
as in Becker, the wives received their interest in the family
ranch/farm as gifts directly from their sides of the family.
Also in both of these cases the gifts were made for estate
planning purposes. Further, the husbands in both cases did
not contribute significantly to the property.
Although the District Court did not have the benefit of
the Becker decision at the time it made its ruling in the
instant case, it obviously followed the logic expressed in
Becker very closely and did not abuse its discretion by
excluding Janet's interest in the Wellman Ranch from the
marital estate.
The third and final issue raised by Lester is whether
the findings of fact and conclusio~sof law of the District
Court are supported by the evidence. This Court has
established, through a long line of cases, the standard of
review in dissolution actions. First, the standard of review
is clear regarding the division of marital property.
"In dividing property in a marriage
dissolution the district court has far
reaching discretion and its judgment will
not be altered without a showing of clear
abuse of discretion. The test of
discretion is whether the trial court
acted arbitrarily without employment of
conscientious jud.gment or exceeded the
bounds of reason resulting in substantial
injustice."
Becker, 7 0 7 P.2d at 528; citing In re Marriage of Vert (~ont.
Second, we note this Court will not set aside the trial
court's findings of fact unless shown to be clearly
erroneous.
Findings of fact shall not be set aside
unless clearly erroneous, and due regard
shall be given to the opportunity of the
trial court to judge the credibility of
the witnesses.
Furthermore, findings of fact are not
clearly erroneous if supported by
substantial credible evidence.
This Court's function ...
is not to
substitute its judgment in place of the
trier of facts but rather it is "confined
to determine whether there is substantial
credible evidence to support" the
findings of fact and conclusions of law.
[Citations omitted.] Although conflicts
may exist in the evidence presented, it
is the duty and function of the trial
judge to resolve such conflicts. His
findings will not be disturbed on appeal
where they are based. on substantial
though conflicting evidence. [Citations
omitted. ]
In Re Marriage of Obergfell (Mont. 1 9 8 5 ) , 708 P.2d 561,
563-64, 42 St.Rep. 1414, 1417-18.
b
!
e conclude, as explained in the opinion above, that
the District Court did not abuse its discretion in dividing
the marital property of the parties. Also, we hold there is
substantial credible evidence on the record to support the
findings of fact and conclusions of l a w of the District
Court. Therefore, we a£firm the District Court's
distribution of the marital estate.
The judgment of the District Court is affirmed.