No. 92-277
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
IN RE THE MARRIAGE OF
STEPHEN W. TAYLOR,
Petitioner and Appellant,
and
JUDITH A. TAYLOR,
Respondent and Respondent.
APPEAL FROM: District Court of the Tenth Judicial District,
In and for the County of Judith Basin,
The Honorable Peter L. Rapkoch, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Ward N. Ernst, Attorney at Law, Stanford, Montana
For Respondent:
Marcia Birkenbuel, Attorney at Law, Great Falls,
Montana
Submitted on Briefs: September 4, 1992
Decided: February 25, 1993
Filed:
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Appellant Stephen Taylor appeals from a decree of dissolution
fromthe Tenth Judicial District, Judith Basin County, dividingthe
marital property of the parties.
We affirm.
We present the issues on appeal in the following order:
1. Was the District Court's division of the stock clearly
erroneous?
2. Was the District Court's valuation of Stephen's shares of
stock clearly erroneous?
3. Did the District Court err by ordering a cash settlement
in lieu of distributing Taylor Honey, Inc., shares of stock to
Judith?
4. Did the District Court err by awarding attorney fees when
they were not pled and no evidence was submitted to determine if
attorney fees were required?
The parties were married on May 13, 1974, in Reno, Nevada.
Neither party brought assets to the marriage. Two children were
born into the marriage. On February 22, 1991, Stephen filed a
petition for dissolution. The parties' only disputes in this case
concern the value of Stephen's stock in the honey business and the
award of attorney fees to Judith.
At the time of the dissolution, Stephen was 40 years old and
had a high school education. Judith was 36 years old, had a high
school education, and had attended a vo-tech school for one year.
2
Throughout their marriage, Judith was primarily responsible for
raising the children and maintaining the home. She worked
part-time as a waitress and worked in the family honey business.
For the past three years, she was employed by the United States
Forest Service, earning approximately $13,750 a year.
In 1982, Stephen's parents formed Taylor Honey, Inc., for the
purpose of producing honey. Stephen worked in the business
throughout the marriage. It is undisputed that over the years
Stephen's parents gifted stock in the business to Stephen and his
brother for estate planning purposes. Stephen received a total of
8969 shares, or 25.9 percent of the corporate stock. Stephen never
received any dividends from the stock and earns a yearly salary of
approximately $27,000. Only Stephen, his parents, and his brother
are shareholders in the business. Stephen and his brother actually
run the day-to-day affairs of the business, while the parents work
as advisors. At the time of trial, Stephen was president of the
corporation.
At trial, Stephen testified that the stock he received was
worthless. Stephen's father testified with some uncertainty that
the value of the corporation ranged from $250,000 to $800,000.
Both Stephen and his father testified as to their future business
concerns regarding government regulations, and troubles with mites
and African bees which could affect the viability of the business.
On the other hand, Stephen's expert testified that the net
value of the business was between $458,878 and $646,878. He
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discounted Stephen's share of the stock by 20 percent because it
was a minority share, and valued the stock from $95,000 to
$134,033. Judith's expert witness valued the business between
$900,000 to $950,000 and valued the stock between $230,000 to
$245,000. Financial statements entered into evidence valued the
business over the last five years between $1,000,000 and
$1,400,000.
In its decree, the District Court valued the corporation at
approximately $917,000. The court concluded that as a result,
Stephen's 25.9 percent share of stock amounted to $237,500. The
court determined that the stock was marital property and awarded
Judith a $109,483 cash settlement for her share of the marital
estate. The court allowed Stephen the option of paying Judith's
share of the marital estate in a cash settlement of four annual
installments of $25,000 each, with 10 percent interest and $25,000
down. The court allowed Judith to encumber Stephen's stock if the
need arises. The court allowed Stephen to offset his payments on
the parties' home mortgage against the $109,483. The court also
ordered Stephen to pay Judith's attorney fees. Stephen appeals the
decree.
I.
Was the District Court's division of the stock clearly
erroneous?
Our standard of review regarding the division of the marital
estate has recently changed to the following:
4
In the past, this Court has employed an abuse of
discretion standard in reviewing a lower court's
determination of the appropriate division of the marital
estate. This Court has recently clarified that our
standard of review in regard to the factual findings of
the district court relating to the division of martial
property is whether the district court's findings are
clearly erroneous.
In re Marriage of Danelson (Mont. 1992), 833 P.2d 215, 219, 49 St.
Rep. 597, 599.
Section -
40-4-202(1)(a) (b), MCA, requires the court to
consider the nonmonetary contributions of a spouse when dividing
the marital estate and whether such contributions facilitated the
maintenance of the property. The statute also mandates that the
court examine whether the division of the marital estate serves as
an alternative to maintenance. Section 40-4-202(1)(c), MCA.
Stephen contends that he did not make monetary contributions
to the stock, nor did he facilitate the maintenance of the stock.
He contends that, as a result, it would have been impossible for
Judith to contribute to the value of the stock, and the stock
should not be included as part of the marital property. We
disagree.
There is substantial evidence to support the court's finding
that both Stephen and Judith contributed to the maintenance of the
honey business stock. Stephen is a minority shareholder in the
company with only four employees. He works 16 hour days, seven
days a week, in making the business a going concern. Stephen also
takes the bees to ~alifornia in the fall of each year for
approximately two months to pollinate certain crops. In addition,
he is the president of the company.
Judith's contributions were of equal importance. She
maintained the household and took care of the children for 17%
years. The record reflects that on occasion she also worked for
the company. Judith's nonmonetary contributions as a homemaker
facilitated the maintenance of the honey business because Stephen
would not have been able to devote the considerable time and effort
the business required were it not for Judith's caring for the
children and the home. The court did not grant Judith a
maintenance award and the division of the marital property served
as an alternative to maintenance. We hold that the District
Court's division of the marital property was not clearly erroneous.
11.
Was the District Court's valuation of Stephen's shares of
stock clearly erroneous?
Stephen attacks the District Court valuation of the honey
business stock at $237,500. In our review of a district court's
valuation of marital property, we have established several
principles which guide us. When there is a dispute over property
in a marriage dissolution, the district court may assign any value
that is within the range of values presented into evidence. In re
Marriage of Kramer (1987), 229 Mont. 476, 747 P.2d 865. However,
if the values are widely conflicting, then the district court must
state its reasons for determining a certain value. In re Marriage
of Glass (1985), 215 Mont. 248, 697 P.2d 96.
In this instance, the evidence of the value of Taylor Honey,
Inc., ranged from practically zero to $1,400,000. The evidence
indicated the value of Stephen's shares ranged from zero to
$245,000. The court valued Stephen's shares at $237,500.
Apparently, the District Court averaged the high and low figures
offered by Judith's expert to arrive at $237,500. This value falls
within the ranges presented at trial.
In addition, the court gave its reasons for its valuation,
stating that it believed the family's fear of African bees and
mites was merely speculation and did not pose a current threat
which would reduce the value of the business. In addition, the
court stated that it also considered the company's financial
statements, which presented a higher valuation of the corporation
than those presented by the parties' expert witnesses.
Stephen also maintains that the District Court did not take
into account all of the company's liabilities. Specifically, he
charges that the court failed to take into account tax liabilities
that he would incur because he would be forced to sell his shares
of stock in order to make the necessary cash payments for Judith's
share of the marital estate. We held in In re Marriage of Lee
(1991), 249 Mont. 516, 519, 816 P.2d 1076, 1078, that the court
must take into account tax liabilities for a court ordered
distribution which results in a taxable event that precipitates a
7
"concrete and immediate tax liability." Unlike Lee, no evidence
was introduced at trial relating to a concrete and immediate tax
liability that Stephen might incur if he were to sell his shares of
stock. In addition, there was no evidence introduced at trial that
Stephen would have to sell his stock in order to pay any cash award
to Judith, nor was he ordered to do so by the court.
Stephen also contends that the District Court did not properly
discount the value of his stock because he is a minority share
holder. Stephen's expert witness discounted Stephen's shares of
stock 20 percent because he was a minority shareholder. On the
other hand, Judith's expert did not apply any discount to the value
of the stock. The expert explained that he did not apply a
discount to Stephen's shares because he was basing his values on
the corporation's underlying assets and not on the market value of
the stock. We have stated that it would be inappropriate to
discount stock when the value of the corporation was arrived at by
determining the market value of the underlving assets. In re
Marriage of Buxbaum (1984), 214 Mont. 1, 8, 692 P.2d 411, 414.
Finally, Stephen argues that the court failed to take into
account the debentures issued to Stephen's parents as a formal debt
of the corporation. The record indicates that the debentures were
not consistently reported in financial statements, nor did the
corporation pay these debts on a regular basis. Therefore, they
did not constitute a formal debt of the corporation. We hold that
the District Court's valuation of Stephen's shares of stock in
Taylor Honey, Inc., was not clearly erroneous.
111.
Did the District Court err by ordering a cash settlement in
lieu of distributing Stephen's shares of stock to Judith?
Stephen assails the District Court's order requiring a cash
settlement. He contends that after paying child support, he is
left with only $14,796 to meet the rest of his obligations under
the order, as well as his own living expenses. The record reveals
that Taylor Honey, Inc., is a closely held family corporation.
Only Stephen, his brother, and their parents have shares in the
corporation. Stephen and his brother control the day-to-day
operation of the business, plus they also determine when to pay
dividends to stockholders. The corporation has not paid dividends
since its inception, nor is it expected to pay dividends in the
future. If Judith were to receive an in-kind distribution of
stock, she would not likely receive any benefits. In In re
Marriage of Johnson (1986), 223 Mont. 383, 726 P.2d 322, we were
faced with a similar factual situation. In that case, we held that
itwas proper for the District Court to award a cash settlement in
lieu of an in-kind distribution of stock where the spouse was part
of a closely held family corporation. Johnson, 726 P.2d at 324.
We hold that the District Court did not err by ordering a cash
settlement in lieu of distributing shares of stock.
IV.
Did the District Court err by awarding attorney fees when they
were not pled and no evidence was submitted to determine if
attorney fees were required?
Stephen maintains that the court's award of attorney fees was
in error because Judith did not request attorney fees in the
pleadings and no evidence was presented to determine if an award of
attorney fees was necessary.
Section 40-4-110, MCA, grants the district court the
discretion to award reasonable attorney fees after considering the
financial resources of both parties. Absent an abuse of
discretion, this Court will not overturn the district court's
decision denying attorney fees. In re Marriage of Manus (1987),
225 Mont. 457, 733 P.2d 1275. We have stated that although the
statute does not specifically require that attorney fees be pled,
it would be good practice to so. In re Marriage of Johnsrud
(1977), 175 Mont. 117, 572 P.2d 902.
Judith did not request attorney fees in her pleading.
However, at the end of her complaint she did request "for such
further relief as the Court deems just and proper." In a recent
case, we held that such language allowed the District Court to
grant a larger maintenance award than that pled by the wife. In re
Marriage of Eide (1991), 250 Mont. 490, 821 P.2d 1036. We
concluded that Rule 54(c), M.R.Civ.P., provided:
Except as to a party against whom a judgment is entered
by default, every final judgment shall grant the relief
to which the party in whose favor it is rendered is
entitled, even if the party has not demanded such relief
in his pleadings.
Eide
t 821 P.2d at 1039. Rule 54(c), M.R.Civ.P., grants the
district court discretion which must be viewed according to the
circumstances of the case. Eide, 821 P.2d at 1039.
In its findings, the court considered the financial resources
of the parties and concluded that Stephen should pay Judith's
reasonable attorney fees. We hold that the District Court did not
err in awarding reasonable attorney fees to Judith.
We affirm.
We concur:
Justice Terry N. Trieweiler concurring in part and dissenting in
part.
I concur with the majority's conclusions that it was
reasonable to include Stephen's stock in the marital estate and
divide it between the parties; the District Court's valuation of
the stock was not clearly erroneous; and the District Court did not
err by awarding attorney fees, even though they were not
specifically sought by the pleadings.
I dissent from the part of the majority opinion which affirms
the District Court's judgment ordering that a cash settlement be
paid to Judith in lieu of her share of the marital estate's stock
in Taylor Honey, Inc.
I conclude that the only reasonable way to distribute the
value of the stock is an in-kind distribution. If the stock has a
marketable value, then Judith can sell it as well as Stephen. If
the stock is not marketable, then Stephen cannot convert it to cash
any more than Judith, and there was no evidence that he had any
other assets, nor sufficient income with which to pay Judith
$109,000 in cash at the rate of $25,000 per year.
Excluding the shares in Taylor Honey, Inc., Stephen was
awarded property from the marital estate with a net value of $2876.
There was no evidence that he had any other property.
His net yearly income, after payment of federal and state
taxes, is $21,538. However, from that income he has a yearly child
support obligation of $6742, leaving him approximately $14,000 per
year with which to pay all of his living expenses.
12
The family residence was awarded to Judith, so presumably
Stephen will have to pay for other living arrangements out of the
remaining disposable income that he has.
Only four witnesses testified regarding the value or
transferability of the stock in the family business. Both Stephen
and his father testified that there was no market for the stock.
Stephen's expert witness, Dan ~uckovich,testified that he
doubted the stock was marketable. Even ~udith'sexpert, ~icholas
Bourdeau, denied that he had come to any conclusion that the stock
could be sold.
The predicament in which Stephen is left by the ~istrict
Court's judgment is compounded by the fact that the District Court
accepted the appraisal from Judithf expert, which was based on the
s
value of the business assets. The only way for Stephen to obtain
the cash with which to satisfy the District Court's decree would be
to sell the business assets, or some portion of them. There was no
evidence that t h e business could continue to generate the kind of
income which is necessary for Stephen to pay child support and his
own living expenses if he is forced to sell off some of the assets
which are necessary to generate business income.
Maybe the majority and the District Court are aware of some
means by which Stephen can raise $25,000 a year to satisfy the
District Court decree and still meet his child support obligation
and pay his own l i v i n g expenses. However, I have been unable to
make that determination from anything that is found in the record
on appeal.
Therefore, I conclude that there was no substantial evidence
to support the District Court's judgment that $109,000 in cash
should be paid to Judith in lieu of her interest in the stock in
Taylor Honey, Inc., that was included in the marital estate. I
would reverse that part of the District Court judgment and remand
for purposes of amending the decree to award Judith the appropriate
number of shares in the family corporation.
February 25, 1993
CERTIFICATE O F SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Ward N. Ernst
Attorney at Law
P.O. Box 559
Stanford, MT 59479
Marcia Birkenbuel
Attorney at Law
613 Strain Bldg.
Great Falls, MT 59401
ED SMITH
CLERK O F THE SUPREME COURT
STATE O F MONTANA
BY:
~eput~(
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