No. 90-526
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
IN RE THE MARRIAGE OF
MARY IRENE JOHNSTON,
Petitioner and Appellant,
JUL 2 5 1991
JOHN RICHARD JOHNSTON,
Respondent and Cross-Appellant.
L >;*ifL
d
CLERK OF SU$RPZilf~ECBUR?
STATE OF MONTANA
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Russell Fillner, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Stephen C. Moses; Moses Law Firm, Billings, Montana
For Respondent:
Kenneth D. Tolliver and James C. Reuss; Wright,
Tolliver & Guthals, Billings, Montana
Submitted on Briefs: March 21, 1991
Filed:
Chief Justice J. A. Turnage delivered the Opinion of the Court.
Mary Irene Johnston appeals and John Richard Johnston cross-
appeals from the division of marital property in the judgment
dissolving their marriage, entered in the District Court of the
Thirteenth Judicial District, Yellowstone County. We affirm.
Both parties raise the issue of whether the District Court
erred in allocating the proceeds of certain stock in Coca-Cola
Bottling Company of Bismarck, Inc. (Bismarck Bottling). John also
raises the issue of whether the District Court erred in failing to
take properly into consideration Mary's expected inheritance.
Mary Irene Johnston married John Richard Johnston on October
30, 1980, in Bellingham, Washington. Following their marriage, the
couple resided in Bellingham. John was employed at a local Coca-
Cola bottling company and Mary was employed at Rainier Brewing.
The couple adopted one child who is now an adult.
Mary's father, Carl Boustead, resided in Bismarck, North
Dakota, where he owned and operated Bismarck Bottling, a closely-
held corporation. It was Carl's desire to have his family close
to him and he oftentimes expressed his wish that Mary and John move
to Bismarck.
In February 1982, Carl offered John employment at Bismarck
Bottling. John accepted this offer and in June 1982, the parties
moved to Bismarck. John proved to be a hard-working and diligent
employee of Bismarck Bottling. He continually assumed more
responsibility within the company and was eventually promoted to
operations manager in 1985.
In December 1982, Carl caused Bismarck Bottling to issue ten
shares of its stock to John and Mary. A similar issue of ten
shares was made to Mary's brother, Hunt, and his wife. Two years
later, in December 1984, Bismarck Bottling issued another ten
shares of its stock to John and Mary, and also to Hunt and his
wife. In October 1985, Bismarck Bottling issued twenty shares of
its stock to John and Mary and twenty shares to Hunt and his wife.
In total, John and Mary were issued forty shares of Bismarck
Bottling stock, which amounted to 11.85% of the issued stock.
In 1982, the value of Bismarck Bottling was between $3.2 and
$4 million. Carl sold Bismarck Bottling in 1986 for approximately
$10 million. John and Mary's 11.85% interest in Bismarck Bottling
generated proceeds of $889,000 pre-tax and $689,000 after tax.
The proceeds were placed in an investment account at First Bank in
Bismarck. By way of additional deposits and reinvestment of
earnings, the account grew in value to $866,071.
After Carl sold Bismarck Bottling in 1986, the new owners
hired John as the plant manager. John remained as plant manager
for approximately one year. Thereafter, John and Mary relocated
to Billings, Montana. In August 1988 the couple separated, and in
July 1989 the District Court dissolved their marriage.
In determining the property settlement, the court noted that
Carl gave numerous gifts to the couple over a four-year period,
3
and, at the time of the dissolution, the value of these gifts
exceeded the net worth of the couple. In addition to the Bismarck
Bottling stock, these gifts included 1) cash used for payments on
the parties1 home in el ling ham; 2) the equity in a home in
Bismarck owned by Carl, which the parties later sold, using the
proceeds as a down-payment for another home; 3) automobiles; 4)
cash used to purchase certificates of deposit; 5) cash used to
build a garage; 6) cash used for home renovations; and 7) an
educational trust for the parties1 son.
In its findings, conclusions, and order dissolving the
parties1 marriage, the court awarded Mary, inter alia, all of the
value of the Bismarck Bottling stock at the time the stock was sold
and the proceeds invested. It awarded John half of the apprecia-
tion in the investment account which arose after the Bismarck
Bottling stock was sold in 1986 and the proceeds thereof invested,
totaling $82,581.29. The court later amended this property
allocation and awarded John an additional $141,360 from the
investment account "after consideration of the marital appreciation
of the parties1 ownership interest in [Bismarck Bottling] and
[John's] marital contribution to that appreciationu from 1982 to
1986. From this order, Mary appeals and John cross-appeals.
I
Did the District Court err in allocating the proceeds of the
sale of the Bismarck Bottling stock?
In determining the division of assets in a marriage dissolu-
tion, each case must be examined individually, with an eye to the
unique circumstances before the court. In re Marriage of Jorgensen
(1979), 180 Mont. 294, 299, 590 P.2d 606, 610 (citation omitted).
A court must also consider the statutory criteria under 1 40-4-
202 (I), MCA, and eauitablv apportion the marital assets. It is not
necessary that an equitable distribution be an equal division of
the marital assets. E.g., In re Marriage of Mayers (1984), 210
Mont. 173, 682 P.2d 718. Regarding marital assets traceable to
gifts, 1 40-4-202(1), MCA, provides:
In dividing property ... .. .
acquired by gift,
bequest, devise, or descent the court
shall consider those contributions of the
other spouse to the marriage, including:
(a) the nonmonetary contribution of a home-
maker ;
(b) the extent to which such contributions
have facilitated the maintenance of this prop-
erty; and
(c) whether or not the property division
serves as an alternative to maintenance ar-
rangements.
Our standard of review is whether the District Court's distribution
is based on substantial credible evidence. In re Marriage of Johns
(1989), 238 Mont. 256, 258, 776 P.2d 839, 840. This Court will
only overturn the findings of a district court where they represent
a clear abuse of discretion. Johns, 776 P.2d at 840.
Mary argues that the District Court erred when it awarded John
an additional $141,360 based on marital appreciation of the
~ismarckBottling stock and John's marital contribution to that
appreciation from 1982 to 1986. She asserts that because the stock
was a gift from her father, it should be considered as principally
a gift to her. Furthermore, she argues that the appreciation in
the value of the stock occurred in 1986 and was substantially due
to the unique franchise agreement held by her father, and not to
any contribution John made to Bismarck Bottling from 1982 to 1986.
Accordingly, she maintains that John is not entitled to any marital
appreciation of the Bismarck Bottling stock for these years.
Mary cites In re the Marriage of Herron (1980), 186 Mont. 396,
608 P.2d 97. In Herron, this Court reversed a district court,
holding that it abused its discretion when it allocated a 50/50
property division where most of the property of the marital estate
was traceable to gifts or bequests from the wife's father. This
Court further provided in Herron:
George Robbins thus gifted or bequeathed over
a quarter of a million dollars to the Herrons
during the course of their marriage. The
property was given to the Herrons jointly, but
Mr. Robbins certainly did so to provide for
his only daughter. The property should be
considered as principally gifts to Mrs. Her-
ron.
Herron, 608 P.2d at 100.
In the present case, there was a clear conflict in the
evidence on the nature of the gifts of Bismarck Bottling stock from
Carl to Mary and John. Carl testified that the stock was a gift
intended for Mary's comfort and to effectuate his own estate plan.
However, John testified that the stock was given to him and Mary
in recognition of his hard and diligent work in improving the
financial position and the case sale position of Bismarck Bottling.
The court initially agreed with Mary, as indicated in finding # 22:
[tlhese gifts from Carl and his wife to John
and Mary were motivated by Carl's desire to
provide for his daughter's comfort and to
effectuate an estate plan. The gifts were
given to them jointly, but Carl did so to
provide for his only daughter. Carl Is gifts
totalled more than the net worth of the par-
ties. Accordingly, the marital estate should
be considered as principally gifts to Mary.
...
There is substantial evidence in the record to support this
finding. However, in its amended findings of fact and judgment,
at additional finding # 18, the court casts doubt on the continued
vitality of its earlier finding by stating that John "was a joint
recipient of the stock." John argues that, as a joint recipient
of the stock, he was an acquiring spouse and is entitled to one-
half of all of the investment account traceable to the proceeds of
the Bismarck Bottling stock, not just the appreciation of the
stock.
There were clear conflicts in the evidence on the reasons for
the increased value of Bismarck Bottling between 1982 and 1986.
Mary's expert testified that the increase in the value of the
business occurred precipitously in 1986 due to the unique nature
of the franchise agreement. In addition to his own testimony, John
presented the testimony of the district manager for Coca Cola
during the years 1983 to 1986, who testified that, in his opinion,
Carl was essentially retired from the business during those years
and that John worked very hard at Bismarck Bottling as lwanintegral
part of what happened there."
The District Court found, in its amended findings of fact and
judgment at "additional finding of factw # 18, that
[gliven the clear record as to respondent's
contribution to the preservation and apprecia-
tion of the partiesw stock in Coca-Cola Bot-
tling of Bismark [sic], Inc., and the fact
that the husband was a joint recipient of the
stock, the Court finds it equitable to allo-
cate one-half the appreciation to the husband,
being $141,360.00.
That finding is supported by substantial evidence presented by John
and supports the courtws award to John of half of the marital
appreciation of the partiesw ownership in Bismarck Bottling.
However, the court also left standing its finding # 22 that
. . . John also asserts that he had con-
tributed to the increase in value of the
Carl's [sic] Coca-Cola business in Bismarck
and that he increased the annual case sale by
over 300,000 cases between 1982 and 1985.
However, this was only a 7.4 percent average
annual case sale increase as compared to an
average annual case 'sale increase of 11 per-
cent for the period 1974 through 1982. The
substantial increase in the value of the
company was related to the unique franchise
agreement held by Carl, as well as other
market conditions prevailing at the time of
the sale.
The above findings of the District Court are internally
inconsistent. However, the court did make findings which support
its division of the marital estate. It found that the Bismarck
Bottling stock should be considered as principally a gift to Mary.
It also found that John contributed to the preservation and
appreciation of the stock. The absence of a 50/50 property
distribution and the finding that John contributedto the preserva-
tion and appreciation of the stock distinguish this case from
Herron. Without approving of the court's contradictory findings,
we affirm the District Court's allocation of the proceeds of the
Bismarck Bottling stock.
Did the District Court err in failing to take properly into
consideration Mary's expected inheritance?
,
Section 40-4-202 (1) MCA, provides that the court shall
consider, inter alia, I1future acquisition of capital assets and
income1' when apportioning a marital estate in a dissolution
proceeding. Here, John argues that the court failed to adequately
consider Mary's expected future inheritance upon Carl's death.
Carl testified that he gave all the generous gifts to Mary and John
for Mary's comfort and to effectuate an estate plan. He further
testified that Mary could expect a ulpittanceln any future
of
inheritance following his death as he planned to devise his
remaining estate, if any, to llsome my favorite charities and a
of
fine hospital in Bismarck." Basing Mary's future acquisition on
an inheritance to be received upon the death of her father is
highly speculative and thus, inappropriate. We therefore hold that
the District Court did not err regarding consideration of Mary's
expected inheritance.
Af finned.
We concur:
Justices
Justice Terry N. Trieweiler dissenting.
I respectfully dissent from the opinion of the majority. I
would reverse the ~istrictCourt's failure to equally divide the
proceeds from the sale of stock in the Bismarck Bottling Company,
which was jointly owned by the parties.
The disposition of the disputed property is controlled by
,
5 40-4-202 (1) MCA, which requires that district courts "eauitablv
apportion between the parties the property and assets belonging to
either or both." (Emphasis added.)
That portion of 5 40-4-202, MCA, which relates to the interest
"of the other spouse1' in property acquired by gift is not
applicable to this case because the District Court made a specific
finding of fact that the parties were joint recipients of the
stock. The proceeds from the sale of the stock were deposited in
a joint account and at all times dealt with as a marital asset
prior to the entry of the divorce decree. To deny John any
interest in the proceeds from the sale of jointly owned stock which
had an after-tax value of $689,000 at the time of sale, was not
equitable and was a clear abuse of the trial court's discretion.
The following facts illustrate the inequity of the property
distribution in this case.
When John and Mary were married, John was employed by a
Coca-Cola bottler in Bellingham, Washington. However, Carl
Boustead preferred that his daughter return to Bismarck.
Therefore, John and Mary were persuaded to return to Bismarck where
11
John took a reduction in salary to take a position in top
management of Bismarck Bottling.
John worked in the sales department, the delivery force, the
production team, the management team, and in the warehouse. He
eventually became operations supervisor, and by 1985 was promoted
to the position of operations manager. For all practical purposes,
the day-to-day operations were managed by John while Mary's father
spent more and more time relaxing at his winter home in Arizona.
From 1982 to 1985, John and Mary were jointly given 40 shares
of stock in Bismarck Bottling which represented 11.85 percent of
the total outstanding stock. In its Amended Findings of Fact, the
court specifically found that the parties were joint recipients.
It did not find that the stock was given to Mary alone.
There is no question that John contributed to the appreciation
of the stock. The District Court specifically found that the value
of total outstanding stock in Bismarck Bottling increased from
$4 million in 1982, when John went to work for the company, to
$10 million in 1986, when the company was sold. In other words,
the value of the company increased by 150 percent under John's
leadership.
There was no evidence, nor any specific findings by the
District Court, that Mary did anything to contribute to the
appreciation of Bismarck Bottling or the stock that was issued to
the parties.
John was described by other employees at the plant as a hard
worker who brought professionalism to the bottling business, while
Mary's father and brother were depicted as being superficially and
irregularly involved in the business's management.
After the Bismarck Bottling Company was sold in 1986, the new
owners hired John as the plant manager. During the 12 months of
operation prior to the sale, with Mary's family members involved
in its management, the company produced profits in the neighborhood
of $700,000. However, during the 12 months after acquisition,
under John's sole management, the profits increased to $1.3
million.
When the bottling company was sold in 1986 for approximately
$10 million, the partiesv 11.85 percent interest generated proceeds
of $889,000, which netted them $689,000 after taxes. The proceeds
were placed in an investment account at First Bank of Bismarck.
As part of the sale, John executed a non-compete agreement,
as well as a consulting agreement. The total contributions to the
sale proceeds from John's consulting and non-compete agreements
amounted to $112,157, which was also placed in the parties
investment account. These proceeds had nothing to do with the
stock gifted to Mary and John, and had nothing to do with any
efforts on the part of Mary. Yet, the District Court's decree
totally deprives John of this income which resulted directly and
exclusively from his efforts.
Less than two months ago in Keedy v. Keedy (Mont. 1991), -
P.2d , 48 St.Rep. 572, we affirmed a District Court decree which
awarded Carol Keedy 50 percent of the appreciated value of baseball
cards acquired by her husband as an 11-year-old boy which, for the
most part, had been stored in his mother's garage in Nebraska
during the couple's marriage.
It has been said that consistency is the hobgoblin of small
minds. However, it certainly has a place in jurisprudence. If
so, it would not be apparent to the average lawyer in Montana who
tries to reconcile our two most recent decisions on the division
of marital property.
In the K e e d ~case, pre-acquired marital property was, for all
practical purposes, divided equally between the parties, even
though the non-acquiring spouse contributed nothing to its
appreciation. In this case, property which was given jointly to
both parties was distributed exclusively to the spouse who
contributed nothing to its appreciation.
I believe the district courts of this state deserve better
guidance than this regarding future disposition of marital and
non-marital property.
For these reasons, I would reverse the District Court's
disposition of the parties' joint investment account, and divide
it equally between Mary and John.