No. 8 8 - 5 1 4
IN THE STJPREMF COURT OF THE STATE OF MOhTTAMA
1989
IN RE THE MARRIAGE OF
MARTHA HETdEN HOCKADAY,
Petit-ionerand Respondent,
and
HUGE W. HOCKADAY,
Respondent and Appellant.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Michael Keedy, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
M. Dean Jel lison, Kal-ispell, Montana
For Respondent:
Bruce McEvoy; Warden, Christiansen, Johnson & Rerg,
KalispelJ , Montana
Submitted on Briefs: April 6, 1989
Decided: June 1, 1989
iled: ,. . Y
A
--._ .. .,: .
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Mr. Justice L. C. Gulbrandson delivered the 0pini.on of the
Court.
Hugh Hockaday, the husband, appeals the division of
property mandated in the final dissolution of marriage decree
entered by the Eleventh Judicial District Court, Flathead
County. Martha Hockaday , the wife , filed a cross-appeal
requesting the correction of numerous factual and
mathematical errors in the District Court's findings of fact
and conclusions of law. We affirm the District Court's
valuation of those marital properties disputed by appellant
and the method employed by the court to equitably distribute
the property. We remand the case, however, for a correction
of various errors, more specifically enumerated herein, and
for an alteration of the final judgment as deemed necessary
by the District Court to assure the equitable division of the
marital estate after correction of these enumerated errors.
The husband raised the following issues on appeal:
1. Did the District Court fail to make a reasonable
valuation of the family home, Lots 32, 33 and Lot 37, and of
Hockaday Reproductions, Inc.?
2. Did the District Court err in failing to determine
the net worth of the marital estate prior to ordering a
division of the estate property?
3. Did the District Court err in awarding Lot 37 to
the wife after erroneously finding that the husband owned the
property even though his mother held title to the Tlot?
The wife raised the following issues on cross-appeal:
1. Did the District Court err by valujnq the husband's
premarital debt to Montana Forest Products at two different
amounts in two different Findings of fact?
2. Did the District Court err in valuing the husband's
debt to Valley Rank of Kalispell at $15,000 when the evidence
indicated the debt was approximately $4,000?
3. Did the District Court err in finding that the
husband had incurred a premarital alimony debt to a former
spouse but then failing to include this debt in its
evaluation of assets and debts existing at the time of the
parties' marriage?
4. Did the District Court err by failing to include
the total $13,834.30 value of improvements to Lots 32 and 33
in Finding No. 24, a finding detailing the value of the
marital estate at the time of the hearing?
5. Did the District Court err, after reimbursins the
wife for all other inheritance expended for marital purposes,
in failing to reimburse her for those life insurance policy
benefits amounting to $1,916 which she inherited hut
similarly expended during the marriage?
Hugh and Martha Hockaday were married on March 17,
1979. On December 12, 1984, the wife filed a petition for
dissolution of: their marriage and for equitable division of
the marital estate. The parties made several attempts at.
reconciliation after 1984, but these attempts failed.
Thereafter, a hearing on the petition was held on December 14
and. 1.5, 1987. On July 8, 1988, the District Court issued its
findings of fact, conclusions of law and final decree
di-ssolving the marriage and dividing the marital property.
The court's division of the marital property was made
after its considerat.ion of the length of the marriage, the
occupation of each, their respective employment histories and
the future employment and income opportunities for each in
light of their age, health and skills. The court noted that
the husband worked in construction, building first log homes
and then docks and retaining walls when the market for home
construction slowed. His good health would allow for his
continued work within the field of construction. Further, as
an only child, he stood to inherit property and money when
his elderly mother died.
The court noted that the wife, on the other hand, did
not have this potential future expectancy of inheritance
income as both her parents had already died. Moreover, the
court recoanized that the wife had a limited potential for
future job advancement and salary increases in her present
occupation as a legal secretary. She had been employed as a
special education administrator in Hardin, Montana and had
been working toward her doctorate in the field prior to her
marriage. She had a promising chance for job advancement
within that field. After she married and moved to the
Flathead Valley area, however, she was unable to find
employment within this field of expertise. She then worked
as a homemaker, helping raise her husband's two children from
a prior marriage, and at various odd jobs. She had often
helped her hu-sband in his construction business. The court
noted that the wife would be unable to return to her prior
profession within the field of education, after her nine-year
absence from the field, without further schooling and a
recertification.
The court also based its division of the marital estate
upon a consideration of the amount of property each party
brought to the marriage and of the value of the marital.
estate at the time of dissolution. Rased on the evidence
elicited. at the dissolution hearing, the court determined the
assets and debts of each party at the time of their marriage
and t.he value of the marital estate at the time of the
hearing, excluding the amount of inherited or gifted property
received by each party during the marriage. These
evaluations detailed in Findings Nos. 3 3 , 3 4 , and 35 are
summari-yed as f0ll0~7~:
Marital Inheritance
Premarital Estate During
Assets/ (Debts) -
- -- --- - - -
-- Value Marriage
HUSBAND
Lot 39/residence $153,617
Koonce Contract Income 18, O O C
Lots 32/33
T o 37
ot
1975 Chevy truck
Tractors
Sawrnill/Tools
Artwork-Bronzes
Quarter horses
Household/Furnishings
Mortgage on home
17alley Bank
Montana Forest Prod.
A 1 imony
TOTATJS :
WIFE
Arlee Acreage
North Fork Acreage
1974 Ford Truck
Library
Stock
Money Life Ins.
Cash Value
Teacher's Retirement
Household/Furnishings
Life Ins. Benefits/
from Father
1,oans /from Mother
Kal ispell Lot
Lot ?AA Note
Mobile Home
Jeep
First Natll/
Whitefish, MT
I , i t + l e Horn State Rank (2,631)
TOTALIS : $21,221
MUTUAL ACQUISITIONS
JJots 32/33-Improvements
5ot 37-Improvements
Two Trucks
1978 Cadillac
Hockaday Reproductions
Stock/So. Cal. Electric
Jewelry
Note Receivahle/Fis Son
Danny on Prints
TOTALS :
Total Marital Estate: $208,742
(excluding inheritance1
Total Premarital Estate:
(Husband = 104,300)
(Wife = 21,231)
Increased value of
Marital Estate:
Reimbursement to Wife
for Expended inheritance:
Remaining Increase in Marital Estate: $54,167.70
(Divided Equatly)
As is apparent from the foregoing chart, a substantial
amount of the wife's inherited monies and premarital assets
had been sold and/or spent during the course of the marriage.
The court thus awarded $29,053.30 of the increased value of
the marital estate to the wife to reimburse her For the
$15,219 loaned by her mother to meet marital expenses, and
later subtracted from the wife's inheritance amount, and for
the additional $13,834.30 in improvements to Lots 32/33 which
the court generally traced to the wife's inheritance and
liquidated premarital assets. This reimbursement effectively
insured that the wife received a return of all her
inheritance, except the $1,916 in life insurance benefits
from h e r father's estate. The court then divided the ~ a . e
r!u
of the remaining increase in the marital estate equally
between the two.
Each party was awarded the total value of their
respective premarital assets and the increased value of the
marital estate as apportioned by the court. Because of the
husband's greater future income potential, the court
determined that equity demanded also awarding the wife the
value of the majority of her inheritance. Because many of
the wife's premarital assets had been sold during the
marriage, the court determined that Lots 32, 33 and 37, which
constituted the sum of the husband's advance inheritance,
would have to be given to the wife to comprise her total.
The award of Lots 32 and 33 also served to guarantee the
wife's continued right to reside on these lots in her mobile
home, a residence she established after her husband obtained
a court order expelling her from the family home. The
husband retained Lot 39 and the family home.
The husband appealed from the court's valuation and
division of the marital estate.
I. CHALLENGES TO THE COURT'S VALUATIONS
Appellant challenges the District Court's valuation of
several pieces of property. We will review these alleged
valuation errors and reverse the District Court's valuatior!
and subsequent property division only upon a showing that the
court acted arbitrarily or clearly abused its discretion so
as to create a substantial injustice. In re Marriage of Hall
(Mont. 1 9 8 7 ) , 740 P.2d 684, 686, 44 St.Rep. 1321, 1323. This
standard of proof for reversal is necessarily high because a
district court has broad discretion when valuing and
distributing property in a dissolution action. In re
Marriage of Stewart (Mont. 1988), 757 P.2d 765, 767, 4 5
St.Rep. 850, 852. The court's valuation need only be
r~asonabl-e in light of competent evidence submitted. In re
Marriage of Milesnick (Mont. ?988), 765 P.2d 751, 755, 45
St.Rep. 2182, 2187.
Appellant's first challenge is to the valuation of Lot
39 at $153,617 at the time of dissolution. He contends this
valuation is unreasonable and amounts to an abuse of
discretion by the District Court. This value reflects an
increase of $68,637 from the $85,000 value assigned by the
court to the T,ot at the time of marriage. The husband
asserts that this increase is erroneous as Lot 39 was worth
$125,000 at the time of the marriage and it did not
appreciate in value during the marriage.
The District Court based its valuation of Lot 39 on the
wife's testj-mony, which the court concluded generally was
more credible than the husband's. Her testimony regarding
the value of the Lot was supported by the Flathead County
Treasurer's valuation of the property. The husband, on the
other hand, offered no concrete evidence in support of his
valuation.
The extensive improvements made during the marriage to
the family home, located on Lot 39, provide a further
illustration of the increased value of the property. These
improvements included a remodeled kitchen and bathroom, new
carpeting and linoleum upstairs, construction of an outside
deck and driveway, and the installation of a large garden and
landscaped yard. The parties also converted the unfinished
basement of the home into a bathroom, den, bedroom, study
area, family room with rock fireplace, and a fruit room,
thereby doubling the living area of the home. Evidence of
these extensive improvements and the valuation by the county
and by the w i F ~indicate that the District Court's valuation
was reasonable. We therefore conclude that the court's
valuation of Lot 39 was not arbitrary nor the product of an
abuse of dS scretlon.
Appellant's second challenge is to the court's
valuation of Lots 32 and 33 at $18,760, a value which
included $17,789.30 in improvements made during the marriage.
Appellant asserts this valuation unreasonably placed the
value of Lots 32 and 33 at the time of marriage at $971.
The District Court's findings of fact, when viewed as a
whole, indicate that the court valued Lots 32 and 33 at the
time of dissolution not at a total $18,760, but rather at
$18,760 plus the value of improvements, or $36,549.30.
Finding No. 25 placed the base value of the Lot at the time
it was gifted to the husband at $18,760. Finding No. 24
recognized $3,955 in improvements attributable to the joint
efforts of both parties. Finding No. 27 recognized an
additional $13,834.30 in improvements to the Lots arising
from the investment of monies directly traceable to the
wife's inheritance or liquidated premarital assets. The sum
of these findings, $36,549.30, is consistent with the
testimony of both the husband and the wife, the county's
valuation of the property, and the bills submitted for
improvements made to the Lots. Fe therefore hold that the
7
court did not act arbitrarily or abuse its discretion when it
valued Lots 32 and 33.
The District Court admittedly utilized an oftentimes
confusing methodology for valuing the various properties and
for attributing the value to the entitled party. Moreover,
the District Court failed to apply this methodology in a
consistent manner; the court failed to include that portion
of the $13,834.30 attributable to the wife's inheritance
monies in its Finding No. 25, which detailed the wife's
inherited property, or on the other hand, to include that
portion attributable to her premarital assets in Finding No.
? 4 , which detari l.ed the value of those items benefiting the
marital estate, excluding inheritance monies. We direct the
court to correct this omission upon remand.
Appellant's third challenge is to the District Court's
valuation of Lot 37 at $16,540, a value which appellant
contends included $1.0,000 worth of improvements made during
the marriage. Again, we hold that the value of the Lot
stated in Finding No. 25, listing inheritance values, did not
include the value of improvements made during the marriage.
The court valued the lot at the time of dissolution at the
- of the $16,540 value at the time it was gifted and the
sum
$l0,000 in improvements made during the marriage.
Appellant failed to show that either of these two
values were arbitrary. The wife's testimony and the Flathead
County Treasurer ' s valuation of the property support the
court's $1.6,540 valuation of the unimproved lot. The court
cited to the wife' s testimony and to the turn-around in
profits from the orchard as support for its valuation of the
improvements made to Tlot 37 at $10,000. The orchard went
from a non-profitab1.e orchard with a loss of approximately
54,500 in 1980, at the beginning of their marriage, to a
productive orchard capable of producing a net profit of
$3,000-$4,000. This improvement can be attributed to the
increased care of the orchard and to the addition of a
combination of 125 new cherry, peach and apricot trees on
Lots 37 and 38, as well as favorable weather conditions. ' nI
light of this evidence, we hold that the court's valuation of
the property and improvements on it did not amount to a clear
abuse of discretion.
Appellant lastly challenges the court's valuation of
Hockaday Reproductions, Tnc., a business venture commenced to
market and sell a limited number of art prints of paintings
done by the husband's father, a well-known local artist. The
court valued the parties' 50% share of the corporation at
$20,000. Yet, appellant contends that those remaining unsold
prints would not sell without a great expenditure of time and
money, and thus they were worth only the value of the paper
on which they were printed.
We hold that the court's valuation of the parties'
share of Hockaday Reproductions was not arbitrary. Both
parties testified that 250 sets of prints were created by an
initial $3,000 investment. Enough prints were sold, roughly
twenty sets of prints at the retail price of $175 for a set
of five prints (or at $40 for each individual print), to
recover the initial investment by a11 parties to the venture.
The potential income available from the remaining
approximately 230 sets at this retail price could total
$40,240. Although the husband asserted that a substantial-
amount of time and money would be necessary to market and
sell the remaining prints, he failed to provide any evidence
or estimates of this monetary amount. In light of all the
evidence the court's estimated valuation of the parties' 50%
share in Hockaday Reproductions at $20,000 appears
reasonable, and we hold that the court did not abuse its
discretion in so valuing the corporation's worth.
11. NET WORTH OF THE MARITAL ESTATE
Appellant contends that the District Court erroneously
failed to determine the net worth of the marital estate.
This determination is required prior to a division of the
property, and appellant contends the court abused its
discretion when it failed to make such a determination.
Indeed, this Court has previously held that a district
court must determine the net worth of a marital estate prior
to division of the estate. Schultz v. Schultz (1980), 188
Mont. 363, 365, 613 P.2d 1022, 1024. This determination of
net worth is necessary before a court may equitably apportion
all the property and assets belonging to the parties as is
r e q u i r e d hy 5 4 0 - 4 - 2 0 2 , MCA. The c o u r t need n o t , however,
precisely detail the parties' net worth in one finding.
Rather, t h e f i n d i n g s a s a whole must be s u f f i c i e n t t o a l l o w
for the determination of the parties' net worth. In re
M a r r i a g e of I,eProwse 11982), 198 Mont. 357, 362, 646 P.2d
526, 529.
W ho1.d
e that the f i n d i n g s a s a whole g e n e r a l l y were
s u f f i c i e n t l y d e t a i l e d and e x h a u s t i v e . The f i n d i n g s , however,
contain several errors which prevent an accurate
cletermj-nation o f t h e p a r t i e s ' n e t worth. W order these
e
errors corrected upon remand. Specifically, the District
C o u r t e r r o n e o u s l y awarded t h e e n t i r e v a l u e o f Lot 37 t o t h e
w i f e d e s p i t e t h e f a c t t h e h u s b a n d ' s mother h o l d s t i t l e t o t h e
property. The husband had o n l y a l i m i t e d e q u i t y , by v i r t u e
o f a few payments c r e d i t e d t o him under a c o n t r a c t f o r d e e d ,
i n t h e property a t t h e time o f dissolution. The D i s t r i c t
C o u r t o n l y may award t h a t e q u i t y a c q u i r e d by t h e husband i n
t h e property. W t h e r e f o r e d i r e c t t h e c o u r t t o make f u r t h e r
e
f i n d i n g s a s t o t h e e x a c t amount o f e q u i t y a c q u i r e d by t h e
husband i n t h e Lot a t t h e t i m e o f t h e d i s s o l u t i o n and t o make
a l l necessary corrections t o t h e r e l e v a n t findings, notably
t o F i n d i n g s Nos. 1 5 ( b ) , 25 and 36, and t o t h e d i - s t r i b u t i o n of
the marital estate as deemed necessary in l i g h t of these
corrections.
We also direct the court to address the followjnq
errors raised by cross-appellant. We note the cross-
a p p e l l a n t f i l e d ! a n o t i c e t o amend t h e f i n d i n g s t o a l l o w t h e
District Court t o correct these errors, b u t t h e c o u r t was
unable t o address t h e s e e r r o r s before t h e n o t i c e o f appeal
was filed. First, the findings erroneously listed the
husband's d e b t t o Montana F o r e s t P r o d u c t s a t two d i f f e r i n g
values: Ftnding No. 7(j) listed the debt a t $700, w h i l e
Find5no WO. 33 1i.sted the same debt at 5900. Second,
Findings Nos. 24 and 30 list the debt owed to Valley Rank at
$15,000 (while Finding No. 23 mentions a $5,000 debt), even
though both parties concede, and the testimony at the
dissolution hearings indicates, that the debt owed was only
$4,000. Third, the court considered and listed the
premarital debts of both parties in Finding No. 33, yet it
failed to list the amount of the recognized alimony debt owe$L
by the husband. Fourth, as previously mentioned in Section T
above, the court failecl to include the $13,834.30 in
improvements made to Lots 32 and 33 either in Finding No. 24
or 25. The fifth allegation of error by cross-appell-ant,
that the court erred in failing to reimburse the wife for the
expended $1,916 in inheritance monies, is without merit. The
court need not assure the return of all the wife's
inheritance, it need only equitably divide the property. The
final property division, after correction of the
above-mentioned errors, would appear to be equitable.
We affirm the District Court's valuations, but remand
this case for correction of the above-mentioned errors and
for redistribution of the marital estate as deemed necessary
by the District Court, in light of these corrections, to
assure an equitable propert!- division.
We concur: