NO. 93-241
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
IN RE THE MARRIAGE OF
JEFF M. SMITH, JR.,
Petitioner and Appellant,
and
LISA SMITH,
Respondent and Respondent.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Jack L. Green, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Don C. St. Peter and Linda Osorio St. Peter,
Worden, Thane & Haines, Missoula, Montana
For Respondent:
Paulette C. Ferguson and Lori Ballinger,
Attorneys at Law, Missoula, Montana
Submitted on Briefs: March 10, 1994
fj:,R 2 4 1994~ Decided: March 24, 1994
Filed: :
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Petitioner/appellant, Jeff Smith, appeals from a final decree
of dissolution from the Fourth Judicial District Court, Missoula
County, ordering the establishment of a trust fund for the minor
child and child support, reassigning custodianship of another trust
account for the minor child, evaluating the marital estate, and
awarding cash, monthly maintenance, and attorney fees to
respondent, Lisa Smith.
We affirm in part, reverse in part, and remand for further
proceedings in accordance with the provisions of this opinion.
Appellant raises the following issues on appeal:
1. Did the District Court err when it ordered Jeff to
establish a $200,000 trust account for the parties' minor child?
2. Did the District Court err when it ordered the minor
child's trust account to be set up under the joint control of
petitioner and respondent?
3. Did the District Court erroneously evaluate the marital
estate?
4. Did the District Court err when it awarded Lisa $500,000
in cash?
5. Did the District Court err when it awarded Lisa $1250 in
monthly maintenance in addition to $500,000 in cash?
6. Did the District Court err when it awarded Lisa $1250 in
monthly child support?
7. Did the District Court abuse its discretion when it
ordered Jeff to pay Lisa's attorney fees?
2
The parties married on June 21, 1986, at Buckingham, Virginia.
It was Jeff's third marriage, and Lisa's second. Jeff is 34 years
old and Lisa is 31. The parties have lived in Missoula since 1989.
One child was born the issue of the marriage. The parties
separated in February 1991 when the child was six months old. Lisa
has provided the day-to-day care for the child. Jeff is frequently
out of the Missoula area on trips, and during the separation he did
not visit the child on a regular basis. Lisa testified that the
reasonable monthly expenses for her and the child are approximately
$2500.
Jeff is a high school graduate. He attended college, but did
not receive a degree. He attended outdoorsman school and is a
certified dive master, a multi-engine rated pilot, and a licensed
hot rod driver. Jeff has worked in Montana as a trapper, started
a video business, and has been an entrepreneur. He inherited
$1,696,164 in distributions from his mother's estate, approximately
$2.1 million dollars in insurance proceeds, and expects to receive
approximately $6 million more from her estate.
Lisa is a high school graduate who also attended outdoorsman
school and one adult education class each in art and photography.
She has worked as a food preparer in a small cafe, as a farm hand
on Jeff's family horse farm in Virginia, and for a short time as a
trapper. She aided her husband in the beginning of a video
business and in a communications business. She has been a
homemaker and a full-time mother of the parties' minor child. In
3
addition, she was a hostess for Jeff's business clients in their
Jeff testified that he had intended to set up a trust fund for
the child by purchasing an annuity, and that he had already
researched the cost of the annuity. Also, prior to her death,
Jeff's mother gifted $20,000 to the parties' minor child in the
form of a check delivered to Montana, naming Jeff as the custodian
of that account. Thereafter, Jeff borrowed $15,000 of the gift for
his business, Underwater Fantaseas. Jeff maintained that the money
had been invested, but the record does not reveal that he has
protected the investment. Further, Jeff testified that he planned
to sell one-half of the stock in the corporation to his companion
for $1000.
ISSUE 1
Did the District Court err when it ordered Jeff to establish
a $200,000 trust account for the parties' minor child?
The District Court ordered Jeff to fund a $200,000 trust for
the minor child by the purchase of an annuity. We have held that
"there is an abuse of discretion where the court adopts a proposed
trust that is beyond the authority of the court to order." In re
Marriage of Alt (1989), 218 Mont. 327, 334-35, 708 P.2d 258, 262.
In a dissolution proceeding, § 40-4-202(2), MCA, governs whether a
district court may set aside a portion of the marital estate in a
trust for the benefit of the parties' children. Section
40-4-202(2), MCA, provides:
The court may protect and promote the best interests of
the children by setting aside a portion of the jointly
and separately held estates of the parties in a separate
fund or trust for the sunnort, maintenance, education,
and oeneral welfare of anv minor, dependent, or
incompetent children of the parties. [Emphasis added].
Here, the court exceeded the authority granted in
5 40-4-202(2), MCA, to set up a trust. The record does not
establish that the trust was needed for support, maintenance,
education, and general welfare of the parties' minor child until he
reached majority. In fact, in addition to a $200,000 trust
account, the court awarded Lisa $1250 per month in child support
which, Lisa had stated, was the amount of monthly expenses
necessary to support the child.
The District Court abused its discretion when it ordered Jeff
to establish a $200,000 trust for the minor child, and we reverse
on this issue.
ISSUE 2
Did the District Court err when it ordered the minor child's
trust account to be set up under the joint control of petitioner
and respondent?
The gift to the parties' minor child from Jeff's mother was
deposited by Jeff in a separate account and subsequently invested
by Jeff in some of his enterprises. Apparently because there was
joint custody of the parties' minor child, the court directed the
account be established with both Lisa and Jeff as custodians of the
fund. In the decree of dissolution, the court ordered:
The petitioner shall immediately return the $20,000 plus
interest he borrowed from the minor child. The money
5
shall be deposited in a savings account in a reputable,
secure financial institution. Both parties shall be
trustee for the money and the money shall not be borrowed
by either party. Prior to the time the child reaches the
age of majority, the money [can] be used for educational
or unusual expenses for the minor child.
We conclude that this order of the court will protect the
interest of the minor ~child. We affirm on this issue.
ISSUE 3
Did the District Court erroneously evaluate the marital
estate?
The District Court found that all assets acquired during the
marriage should be included in an equitable distribution of the
marital estate. The District Court failed to identify or describe
the assets acquired during the marriage, or assign values to them,
and failed to consider the contingent liabilities associated with
those assets. We hold that this was an abuse of discretion.
Marriage of Dirnberger (1989), 237 Mont. 398, 401-02, 773 P.2d 330,
332. The court also abused its discretion for failure to follow
the provisions of § 40-4-202, MCA.
We reverse the District Court on this issue and remand for a
determination of the value of the estate in accordance with
§ 40-4-202, MCA.
ISSUE 4
Did the District Court err when it awarded Lisa $500,000 in
cash?
In April 1991, several months after the parties separated,
Jeff's mother died leaving him $2.1 million in life insurance
proceeds and over $7.6 million in inheritances.
6
The District Court found that Jeff's prior-acquired, gifted,
vested inheritance properties and property acquired during the
marriage should be included in the marital estate and subject to an
equitable division of assets and liabilities. The court then
apportioned $500,000 to Lisa as a cash settlement.
While in a dissolution proceeding the trial court has
far-reaching discretion in making a determination as to whether an
asset is included in the marital estate and in making the final
property division, it still must comply with the statute governing
division of property. Becker v. Becker (1985), 218 Mont. 229, 232,
707 P.2d 526, 528. Section 40-4-202, MCA, controls the division of
property in a proceeding for dissolution, and provides in pertinent
part:
(1) . . . the court . . . shall . . . finally equitably
apportion between the parties the property and assets
belonging to either or both . . . . In dividins nronerty
acuuired nrior to the marriase: nrooertv acauired by
oift, beouest, devise, or descent . . . the court shall
consider those contributions of the other spouse to the
marriage, including:
(a) the nonmonetary contribution of a homemaker:
(b) the extent to which such contributions have
facilitated the maintenance of this property; and
(cl whether or not the property division serves as
an alternative to maintenance arrangements. [Emphasis
added].
Recently, we held that an inheritance received by one spouse
during the parties' separation, but before a decree of dissolution,
could be included in the marital estate. Marriage of Isaak v.
Smith (1993), 257 Mont. 176, 848 P.2d 1014. In Isaak, we vacated
the property distribution ordered by the district court that had
excluded from the marital estate some of the property devised to
7
the husband by his father's will. The father built a home for the
parties on a 21-acre parcel of land. The land and home were still
in the father's estate at the time of his death. The parties'
marriage was dissolved over seven months after the father died
while the probate on the father's estate was still open. The
district court found that the father had intended a future gift of
the home to the couple and included it in the marital estate. The
court excluded from the marital estate the rest of the fathers'
estate that the husband inherited. We held that the district court
properly included the 21-acre parcel and home under § 40-4-202,
MCA, but should have included all of the inheritance property in
the marital estate. We reasoned that although the parties had
separated several months before the father's death, at which time
the husband's inheritance vested, the parties had attempted to
reconcile before and after the father's death. The husband moved
back into the home with the wife and the couple sought some marital
counseling. We concluded that the appropriate result was that, on
remand, the district court should include not only the 21-acre
parcel and the home, but the other inherited property in the
marital estate. However, we emphasized that the district court
should be guided by all the provisions of 5 40-4-202, MCA.
This case is distinguishable from Isaak in that, unlike the
couple in w, Jeff and Lisa had separated permanently before
Jeff's inheritance had vested. Regardless, we hold that the fact
that an acquiring spouse may receive an inheritance after
separation but prior to dissolution of the parties' marriage does
8
not, in and of itself, justify inclusion of the inheritance in the
marital estate. What is key in a separation situation is that the
district court apply the factors in 5 40-4-202, MCA, before
including inheritance property in the marital estate. The court
cannot distribute to the non-acquiring spouse property acquired
prior to the marriage or acquired by gift, bequest, devise, or
descent when there is no evidence that the spouse made any
contribution to those assets in any form.
Therefore, we overrule that portion of Isaak that allows a
district court to distribute inheritance property in the marital
estate without strict application of the factors set out in
5 40-4-202, MCA.
It is clear from the record here that Lisa had nothing to do
with the property to which Jeff became entitled after the
separation. The District Court should not have distributed in the
marital estate properties that Jeff received after the parties
separated, absent application of the factors in 5 40-4-202, MCA.
We hold that the court abused its discretion in including Jeff's
inherited property in the marital estate. We reverse the District
Court on this issue.
ISSUE 5
Did the District Court err when it awarded Lisa $1250 in
monthly maintenance in addition to $500,000 in cash?
For the reasons set forth in our holding in Issue 4, we
reverse the District Court's award of a $500,000 cash settlement
and remand on the issue of monthly maintenance for a determination
9
by the court on whether Lisa is entitled to maintenance, and if she
is, what is reasonable maintenance under g 40-4-203, MCA.
ISSUE 6
Did the District Court err when it awarded Lisa $1250 in
monthly child support?
Lisa testified that the total monthly expenses for her and the
child were $2500. The District Court found that Lisa was entitled
to $1250 in monthly child support for the minor child. We agree
with Jeff that the District Court is bound to determine an award of
child support pursuant to the factors set forth in § 40-4-204, MCA,
as well as the Uniform Child Support Guidelines. The record does
not reveal the basis for the support obligation under the
Guidelines or why application of the Guidelines would be unjust or
inappropriate. We hold that the District Court erred when it
awarded $1250 in monthly child support, and remand for a
redetermination of child support in accord with 5 40-4-204, MCA,
and the Guidelines.
We reverse and remand on this issue.
ISSUE 7
Did the District Court abuse its discretion when it ordered
Jeff to pay Lisa's attorney fees?
In a dissolution proceeding, "[t]he court from time to time,
after considering the financial resources of both parties, may
order a party to pay a reasonable amount for the cost to the other
party . . . .I' Section 40-4-110, MCA. Recently, we have restated
that the party receiving the award of attorney fees first must make
10
a showing of necessity. Marriage of Welch (1993), 257 Mont. 222,
228, 848 P.2d 500, 503. We reverse and remand on the issue of
attorney fees for a determination of whether or not there is a
necessity for the award of attorney fees.
We affirm in part, reverse in part, and remand for further
proceedings in accordance with the provisions of this opinion.
Justice
We concur:
Chief Justice
Justices
11
Justice Fred J. Weber concurs and dissents as follows.
I dissent from the conclusions and holding in Issue 4 and
concur in the balance of the issues in the majority opinion.
Under Issue 4, the issue is stated as Did the District Court
err when it awarded Lisa $500,000 in cash? The majority held that
the District Court should not have distributed to Lisa marital
estate properties which Jeff received after the parties separated,
absent application of the factors in $3 40-4-202, MCA. The
foundations for the holding of the Court are the following
statements in the majority opinion:
. . . The court cannot distribute to the non-acquiring
spouse property acquired prior to the marriage or
acquired by gift, bequest, devise, or descent when there
is no evidence that the spouse made any contribution to
those assets in any form.
Therefore, we overrule that portion of Isaak that
allows a district court to distribute inheritance
property in the marital estate without strict application
of the factors set out in 5 40-4-202, MCA.
In substance the majority reached the conclusion that because the
wife had not made any contribution to the specific asset received
after separation, she was not entitled to receive a share of such
assets. I disagree emphatically with that conclusion.
Following are the pertinent portions of § 40-4-202(l), MCA,
underscoring the beginning portion which was not included in the
majority opinion:
Division of property. (1) In a proceedino for dissolution
of a marriaqe, . . . the court, without reqard to marital
misconduct. shall . . . finallv equitably apportion
between the parties the pronertv and assets belonains to
either or both, however and whenever acquired and whether
the title thereto is in the name of the husband or wife
or both. . . . In dividing property acquired prior to the
marriage: property acquired by gift, bequest, devise, or
12
descent: property acquired in exchange for property
acquired before the marriage or in exchange for 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 homemaker;
(b) the extent to which such contributions have
facilitated the maintenance of this property; and
Cc) whether or not the property division serves as
an alternative to maintenance arrangements. [Emphasis
supplied.]
Section 40-4-202(l), MCA. The underscored portion states that the
court shall "equitably apportion 'I between the parties the property
belonging to either or both, however and whenever acquired and
whether titled to either one or both. Clearly that portion of the
statute affords no basis to suggest that property acquired by
descent or devise after separation is not to be equitably
apportioned between the parties.
In a similar manner, the following portion of § 40-4-202(l),
MCA, requires the court to "consider those contributions of the
other spouse to the marriage" and requires the court to consider
the nonmonetary contributions of Lisa in this case, the extent to
which such nonmonetary contributions have facilitated the
maintenance of this property, and finally whether the property
division serves as an alternative to maintenance. Of particular
import is the requirement that the court consider the nonmonetary
contribution of a homemaker. As above quoted, the majority has
concluded that there could not be distributed to Lisa property
acquired by Jeff by bequest, devise or descent where there is no
evidence that Lisa made any contribution to those assets in any
13
form. That is a significant reduction from the broad requirements
of the statute. Under the statute the court is required to
consider Lisa's contribution "to the marriage" including the
nonmonetary contribution on her part as a homemaker - those
contributions to the marriage and as a homemaker may have nothing
to do with contribution to the assets themselves but are still
required by statute to be considered. In addition, the statute
requires the court to consider whether the property division serves
as an alternative to maintenance arrangements for Lisa. The
majority has disregarded those other provisions of the statute.
The above quotation of the majority opinion stated the
majority has overruled that portion of Isaakthat allows a district
court to distribute inherited property without strict application
of the factors set out in 5 40-4-202, MCA. As I read Isaak there
is no portion of Isaak which allows the district court to
distribute inherited property without strict application of 5 40-4-
202, MCA. In fact Isaak states the following for the assistance of
the District Court on remand:
For the assistance of the District Court on remand,
we emphasize it must be guided by the provisions of 5 40-
4-202, MCA. The requirement of the court is that it
"finally, equitably apportion" the marital estate, and
this extends to inherited property as well as other
property. The statute requires the court to consider
such items as duration of marriage, health, occupation,
amount of income, and needs of the parties. The general
provisions of subparagraph (1) also require that the
court consider the relationship of apportionment to
maintenance and the opportunity of each for future
acquisitions of capital assets and income. As above
quoted, the statute also provides that in dividing
property acquired by devise or descent, the court shall
consider the contributions of the other spouse to the
marriage including:
(a) the nonmonetary contribution of a homemaker;
14
(b) the extent to which such contributions have
facilitated the maintenance of the property: and
Cc) whether or not the property division serves as
an alternative to maintenance arrangements.
Section 40-4-202(l), MCA. We emphasize that the District
Court should consider all appropriate provisions of 5 40-
4-202, MCA.
Isaak, 848 P.2d at 1017-18. As the reader will note, &%a-.&
emphasizes that the district court should consider all appropriate
provisions of 5 40-4-202, MCA. As a result, I don't find a basis
for overruling any portion of Isaak.
My particular concern is that the above quoted portion of the
majority opinion appears to require that a spouse must have made
contribution to the specific assets which constitute property
acquired prior to marriage or acquired by gift, bequest, devise or
descent--and if there has been no contribution to the specific
assets, there can be no distribution to the spouse. I conclude
that is in direct derogation of 3 40-4-202 (1) , MCA, and
incidentally is prohibited under u.
As I review the District Court's action in this case, I do not
conclude that it abused its discretion in including Jeff's
inherited property in the marital estate. I further conclude that
there are a number of reasons set forth under which the District
Court properly included that property, even in the absence of any
direct contribution to the property by Lisa.
I dissent from the majority’s holding on
15
Chief Justice J. A. Turnage:
I join in the concurring and dissenting opinion of Justice
16
March 24, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Don C. St. Peter, Esq.
Linda Osorio St. Peter, Esq.
WORDEN, THANE & HAINES, P.C.
P.O. Box 4147
Missoula, MT 59806
Lori Ballmger
PAULETTE C. PBRGUSON
210 N. Higgins, Suite 302
Missoula, MT 59802
ED SMITH
CLFJRK OF THE SUPREME COURT