In Re the Marriage of Hanni

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No. 98-585

IN THE SUPREME COURT OF THE STATE OF MONTANA

2000 MT 59

299 Mont. 20

997 P. 2d 760

IN THE MARRIAGE OF:

RONALD HANNI,

Petitioner and Respondent,

and

JACALYN HANNI,

Respondent and Appellant

APPEAL FROM: District Court of the Second Judicial District,

In and for the County of Silver Bow,

The Honorable John W. Whelan, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Carol Everly, Missoula, Montana

For Respondent:

Mark A. Vucurovich, Henningsen, Vucurovich & Richardson, Butte, Montana

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Submitted on Briefs: July 1, 1999

Decided: March 9, 2000

Filed:

__________________________________________

Clerk

Justice William E. Hunt, Sr. delivered the Opinion of the Court.

¶1.Jacalyn Hanni (Jacalyn) appeals the August 11, 1998, Findings of Fact and Conclusions
of Law of the Second Judicial District Court, Silver Bow County, dissolving her marriage
with Ronald Hanni (Ron), dividing the marital assets and obligations of the parties, and
providing for the custody and support of the minor child of the marriage. We affirm.

¶2.The issues on appeal are:

I Did the District Court err in the equitable distribution of the marital property?

II Did the District Court err by not awarding Jacalyn maintenance?

III Did the District Court refuse to allow "full and complete discovery" for the purposes of
determining Ron's financial status?

FACTUAL BACKGROUND

¶3.Jacalyn and Ron were married on April 23, 1981. At the time of this action, Ron was
55 years of age and Jacalyn was 45. One child, Ronald, Jr., was born of the marriage. He
has yet to be emancipated and has been living with his father since the date of separation.
Ron filed for dissolution on May 5, 1995. The parties have agreed on child custody and
visitation with a Settlement Master.

¶4.During the marriage, the parties' standard of living was above average to high. Ron is a
certified pubic accountant and has been a partner in his accounting firm since 1972. At the

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time of the dissolution, Ron was receiving a gross draw of approximately $6,900 per
month from his accounting practice, and an annual net bonus of between $11,000 and
$12,000. During the marriage, Jacalyn worked a variety of jobs, attended college, and
graduated with a degree in accounting. She was also a licensed real estate agent and
engaged in sporadic employment as a real estate agent in Butte-Silver Bow County. For a
time, Jacalyn also worked as an in-house bookkeeper at a casino in Butte. Thereafter, the
parties purchased a restaurant known as "Terry's" for the purpose of starting their own
casino operation.

¶5.The business was renamed "Jacalyn's," and Jacalyn was employed there as a full-time
manager during the latter part of the marriage. Testimony at trial established that she
worked as much as ten hours a day, five to seven days a week. Jacalyn took an average
monthly draw of $2,415 during her time as a manager. By August 31, 1995, the restaurant
sales, food, bar, machine, and live keno figures were down $324,927.00 from the previous
year. In September, Ron took over management of the business, which was finally closed
in July of 1996. After the couple's separation, Jacalyn moved to Washington state where
she worked part-time as an accountant, for a total income of $13,585 in the year prior to
the dissolution.

¶6.The parties filed a business bankruptcy, but substantial debts associated with the
business were personally guaranteed by Ron. Although Jacalyn has the option of filing for
bankruptcy (and since the judgment, has done so) Ron is precluded from filing personal
bankruptcy because many of the personal guarantees associated with the failed business
are to clients of the accounting firm of which he is a partner. Should Ron file personal
bankruptcy, the result would be that he would no longer maintain the income he now has
as a partner of the accounting firm, and he would also lose any interest he has in various
other partnerships.

¶7.The District Court ordered the assets of the marriage consisting of personal property,
life insurance, stock in Ron's accounting partnership, interest in P.B. Partnership, interest
in P.G.A. Building, and interest in Ron's profit-sharing plan be distributed with a total of
$174,317 going to Ron and $44,708 to Jacalyn. The court additionally ordered $234,775
in marital and personally guaranteed business debt to Ron, and $53,084.29 of personal
debt to Jacalyn which was incurred by her after the marriage. The District Court
concluded that Jacalyn was not entitled to maintenance.

¶8.I Did the District Court err in the equitable distribution of the marital property?

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STANDARD OF REVIEW

¶9.In 1992, this Court changed its standard of review regarding a district court's findings
of fact in the division of marital estates from an abuse of discretion standard to a clearly
erroneous standard. In re Marriage of Sacry (1992), 253 Mont. 378, 381, 833 P.2d 1035,
1037; In re Marriage of Danelson (1992), 253 Mont. 310, 317, 833 P.2d 215, 219. We
review the factual findings of a district court relating to the division of marital property to
determine whether the court's findings are clearly erroneous. In re Marriage of DeCosse
(1997), 282 Mont. 212, 217, 936 P.2d 821, 824; Danelson, 253 Mont. at 317, 833 P.2d at
219.

¶10.We review a district court's conclusions of law relating to the division of marital
property to determine whether those conclusions are correct. DeCosse, 282 Mont. at 217,
936 P.2d at 824; Danelson, 253 Mont. at 317, 833 P.2d at 219-20. The basis for simply
determining if the lower court's conclusions are correct is that there is no discretion in
determining a question of law. The lower court either correctly or incorrectly applies the
law. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 803 P.2d 601.

¶11.The distribution of marital property in a dissolution action is governed by § 40-4-202,
MCA, which provides in part:

[i]n a proceeding for dissolution of a marriage, legal separation, or division of property
following a decree of dissolution . . . the court, without regard to marital misconduct,
shall . . . finally equitably apportion between the parties the property and assets belonging
to either or both, however and whenever acquired and whether the title thereto is in the
name of husband or wife or both . . . . [T]he court shall consider the duration of the
marriage . . . ; the age, health, station, occupation, amount and sources of income,
vocational skills, employability, estate, liabilities, and needs of each of the parties;
custodial provisions; whether the apportionment is in lieu of or in addition to maintenance;
and the opportunity of each for future acquisition of capital assets and income.

Section 40-4-202(1), MCA.

¶12.The District Court found that Ron's employability is good, his opportunity to acquire
income or assets is excellent, and his health was questionable due to a recent 21 day stay
in the hospital and a two month recovery period. The Court further found that Jacalyn
could work full-time as an accountant if she chooses to, but that since the date of

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separation she has made little effort to obtain full-time employment. It found that Jacalyn's
health, up to the date she left her job at Jacalyn's Restaurant, was good. She had no health
problems until the dissolution, and stress caused by the dissolution has caused her to work
part-time.

¶13.In analyzing the parties' financial situation, the District Court found that after the sale
of the business and the business bankruptcy, the parties were left with debt that was
personally guaranteed. The Court found that Ron should assume all marital debt and
remaining debt from the operation of Jacalyn's, totaling $234,755. Ron also personally
guaranteed debt owed to former owners of Jacalyn's in the amounts of $105,670 and
$62,602. Additionally, Ron owes $3,333 to a former partner of the accounting firm for the
purchase of stock. The court found that Jacalyn had incurred significant debt after the
parties' separation, and had increased her spending habits since the separation. At the time
of trial she had incurred personal debt in the amount of $53,084.29.

¶14.The District Court found that at the time of the marriage, Ron had an interest in his
profit-sharing plan of $20,287, and Jacalyn had a bank account of $34,780.57. The court
found that the interest in the profit-sharing plan was not an asset of the marriage, but
concerning Jacalyn's bank account stated; "the evidence presented clearly shows that the
money was co-mingled" with marital assets which were used for the down payments on
the purchase of two different homes. The court found that the money was considered an
"investment made and lost during the marriage" because all real property owned by the
parties was sold and the proceeds used to pay off debt secured by the property.

¶15.The District Court concluded that the assets and debts of the marriage were to be
distributed as follows: Jacalyn received $33,335 in personal property and a total of
$11,373 in cash from a life insurance policy for a total asset distribution of $44,708. Ron
received $7,602 in Newland and Co. (accounting firm) stock, a partnership interest worth
$57,775 in Professional Bldg. Partnership, $3,200 of partnership interest in P.G.A.
Building, Deer Lodge, and $66,615 in the accounting firm's profit-sharing plan, for a total
asset distribution of $174,317. Ron then received $234,775 in marital and failed business
debt which was personally guaranteed by him. The court gave to Jacalyn the $53,084.29 in
personal debt which she had incurred after the couple had filed for dissolution.

¶16.In support of its distribution of the marital debts and assets, the District Court stated
that the interest in Newland and Co. stock, the Professional Bldg. Partnership, the P.G.A.
Bldg. (Deer Lodge) and the profit-sharing plan were to go to Ron as their value of

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$135,192 was approximately 57.6 percent of the debt he had personally guaranteed and all
of which would be lost if he filed personal bankruptcy. It further found that the business
venture known as Jacalyn's resulted in the complete eradication of any marital estate that
was accrued by the parties prior to that time, and concluded that if Ron did not honor his
personal guarantees with regard to the failed business, his position as a partner in the
accounting firm would be in jeopardy because the firm would lose clients and credibility
in the community.

¶17.Jacalyn claims the District Court did not act within its discretion in dividing the
property because it imposed a de facto stock discount upon shares in the Professional
Corporation, failed to include the interest in Ron's profit-sharing plan as marital asset, and
interjected fault into a no-fault dissolution.

Stock Valuation

¶18.The testimony of Jacalyn and her expert, a C.P.A., estimated the value of Ron's
partnership profit-sharing interest at $243,365 based upon 1994 figures. This value was
calculated prior to major borrowing as a result of business losses and other spending by
the parties. The District Court found this testimony not credible as it was based on
projections that did not occur, because this value did not take into account outstanding
uncollectible loans in it, and because the expert testified that the best evidence of value is
the current status of the plan.

¶19.The District Court adopted Ron's value of the plan, ($31,615) but added an additional
$35,000 for additions and earnings to the plan for a value of $66,615. The court further
found that the stock valuation was determined by the stock purchase agreement. Pursuant
to that agreement, the value was $7,602. The court also found that Ron's interest in the
partnership buildings was controlled by the partnership agreement for Professional
Building Partnership and that the equity in the office building located at 2900 Lexington
Avenue in Butte, Montana was $210,000, with Ron's 25 percent interest totaling $57,775
as of January 2, 1998. Finally, the District Court found that the partnership equity in the P.
G.A. Company (office building in Deer Lodge, Montana) was $12,800, with Ron's 25
percent interest valued at $3,300 as of January 2, 1998.

¶20.This Court has established several principles by which we review a district court's
valuation of marital property. It is well settled law that "[w]hen there is a dispute over
property in a marriage dissolution, the district court may assign any value that is within the

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range of values presented into evidence." In re Marriage of Taylor (1993), 257 Mont. 122,
127, 848 P.2d 478, 481. "However, if the values are widely conflicting, then the district
court must state its reasons for determining a certain value." Marriage of Taylor, 257
Mont. at 127, 848 P.2d at 481. In re Marriage of McNellis (1994), 267 Mont. 492, 499,
885 P.2d 412, 416.

¶21.In this case, the District Court assigned a value within the range presented into
evidence at trial. It chose Ron's valuation, added nearly $35,000 to it, and then gave its
reasons for determining that value.

¶22.This Court has stated that:

[a] District Court has broad discretion in determining the value of property in a
dissolution. Its valuation can be premised on expert testimony, lay testimony,
documentary evidence, or any combination thereof. The court is free to adopt any
reasonable valuation of marital property which is supported by the record. As long as the
valuation of property in a dissolution is reasonable in light of the evidence submitted, we
will not disturb the finding on appeal.

In re Marriage of Robinson (1994), 269 Mont. 293, 296, 888 P.2d 895, 897.

¶23.We conclude that the District Court's valuation of the stock was reasonable and
supported by the evidence. It was not clearly erroneous and we will not disturb that
finding on appeal.

Profit Sharing

¶24.Jacalyn asserts that she was the primary care provider for the children and contributed
her time to the operation of the family business for the benefit of the entire family. She
claims this allowed Ron the opportunity to maintain his accounting duties without taking
time from those duties to care for the children and operate the family business. As a result,
she believes the $20,287 profit-sharing plan in Ron's accounting firm should be included
in the marital estate as was the $34,780.57 bank account which she had prior to the
marriage.

¶25.The bank account which Jacalyn brought into the marriage was not segregated from
the other marital assets but was co-mingled when it was used as a down payment on the

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purchases of the parties' homes. As the District Court noted, ". . . these monies were co-
mingled with marital assets and as such are considered investments made and lost during
the marriage. All real property owned by the parties was sold and the proceeds used to pay
off debt that was secured by it." In contrast, Ron had an established interest in the profit-
sharing plan at the time of the marriage. Although Jacalyn was arguably the primary care
provider, the record does not reflect how her non-monetary contributions would have
facilitated the maintenance of a profit-sharing interest which existed prior to the marriage.

¶26.Section 40-4-202 (1), MCA, provides in part:

[i]n dividing property acquired prior to the marriage . . . the court shall consider those
contributions of the other spouse to the marriage, including: (a) the non-monetary
contributions of a homemaker; (b) the extent to which such contributions have facilitated
the maintenance of this property; and (c) whether or not the property division serves as an
alternative to maintenance arrangements.

Section 40-4-202 (1)(a)-(c), MCA.

¶27.J27.acalyn argues that "based upon § 40-4-202(1)(b), MCA, the circumstances
demand a re-analysis of the findings." As previously stated, we review the factual findings
of a district court relating to the division of marital property to determine whether the
court's findings are clearly erroneous.

¶28.In light of the amount of debt that the District Court assigned to Ron, its grant to him
of the profit-sharing plan is reasonable. Section 40-4-202, MCA, vests the district court
with broad discretion to apportion the marital estate in a manner which is equitable to each
party under the circumstances. In re Marriage of Maedje (1994), 263 Mont. 262, 265, 868
P.2d 580, 582. Ron received roughly $175,000 in assets, and $235,000 in debt. Jacalyn
received approximately $45,000 in assets and $53,000 in debt. The District Court's
distribution of marital assets was not clearly erroneous and we will not disturb that finding
on appeal.

Fault

¶29.Jacalyn claims the District Court made findings which interjected fault into the
dissolution. She alleges that the following findings:

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[s]ince the date of separation, Jacalyn has made little effort to obtain full-time
employment . . . ; [u]nder Jacalyn's management of the restaurant, sales in food, bar,
machine and live keno were down $324,927.00 . . . ; [o]n September 15, 1995, Ron took
over management of the restaurant and due to the debt condition, it was closed in July of
1996; Jacalyn has no restrictions to filing personal bankruptcy and can discharge her . . .
debt by doing so; Jacalyn has incurred significant personal debt after the separation of the
parties . . ." amount to an interjection of fault into the dissolution which dictates reversal
and remand of this case for a trial upon the merits.

¶30.Section 40-4-202, MCA, expressly provides that the court is not to consider any
marital misconduct in disposing of the marital assets. In Collett v. Collett (1981), 190
Mont. 500, 621 P.2d 1093, the district court concluded that the husband "be required to
pay the . . . balance remaining unpaid upon said home and land as it becomes due in
partial recompense for the failure of [the husband] to account to [the wife] for her share of
the (proceeds of the 1978 real estate sale.)" Collett, 190 Mont. at 503, 621 P.2d at 1095.
This Court found that such a conclusion was "akin to an assessment of punitive damages."
Collett, 190 Mont. at 504, 621 P.2d at 1095.

¶31.We conclude that those findings with which Jacalyn takes issue were proper and aided
the District Court in considering the equitable distribution of the property. They did not
interject fault into the dissolution and do not dictate reversal of the District Court.

¶32.II Did the District Court err by not awarding Jacalyn maintenance?

¶33.In reviewing an award of maintenance, this Court's role is limited to a determination
of whether the District Court's findings are clearly erroneous. In re Marriage of
Eschenbacher (1992), 253 Mont. 139, 142, 831 P.2d 1353, 1355.

¶34.Prior to judgment, the parties stipulated that starting August 10, 1995, Ron would pay
Jacalyn maintenance in the amount of $1,600 per month. On October 7, 1996, the District
Court reduced the maintenance payment to $800 per month when testimony showed that
Ron was having to borrow money in order to make the payments. Ron's total spousal
support obligation over that time period was $37,600, of which he paid $17,000. The
District Court also found that during that same period, from August, 1995, through
October, 1996, Ron paid $7,230.39 toward Jacalyn's expenses, $19,734.55 in mortgage
payments, and $10,959.42 in cash payments. As a result, the court found that Ron's
payments for Jacalyn's benefit "clearly exceed the [maintenance] obligation" which he

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owed to Jacalyn.

¶35.Jacalyn argues that the District Court failed to distinguish between income-producing
and income-consuming property and erred in applying the rules for awarding maintenance.

Characterization of Property

¶36.Jacalyn claims the District Court failed to distinguish between income-producing and
income-consuming property and that such error constitutes prima facie error justifying this
Court's reversal and remand for a new trial on the merits. The district court may award
maintenance only if it finds that the spouse seeking maintenance: (a) lacks sufficient
property to provide for his reasonable needs; and (b) is unable to support himself through
appropriate employment . . . . § 40-4-203(1), MCA (emphasis added). This Court has
defined "sufficient property" as that phrase appears in § 40-4-203(1)(a), MCA, to mean
that the property must be income-producing rather than income-consuming. Pfeifer v.
Pfeifer (1997), 282 Mont. 461, 473, 938 P.2d 684, 692.

¶37.Moreover, the true net worth of the marital estate must be accurately determined in
accordance with the requirement of § 40-4-202, MCA, before the issues of equitable
apportionment and maintenance can be resolved. In re Marriage of Lundvall (1990), 241
Mont. 172, 175, 786 P.2d 10, 12. This Court has stated that:

a specific finding regarding the nature of the properties awarded to the spouse seeking
maintenance is required. In re Marriage of Tow, 229 Mont. 483, 486, 748 P.2d 440, 441-
442. Indeed, such specific findings are encouraged in order that, on review, this Court can
follow a district court's rationale more closely. Subsequent to Marriage of Tow, however,
we clarified the "specific finding" requirement by stating that such a finding is not
required when "[i]t is obvious from the findings and conclusions that the court considered
the character of the property . . ." in addressing the award of maintenance. In re Marriage
of Cole (1988), 234 Mont. 352, 356, 763 P.2d 39, 42.

In re Marriage of Dorville (1992), 254 Mont. 111, 114-15, 836 P.2d 588, 590.

¶38.We have discussed this rationale for differentiating between income-producing
property and income-consuming property. Citing the California Court of Appeals we
stated:

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the practical effect of a property division awarding income consuming property to one
spouse and income producing property to the other leaves one spouse in possession of
property the spouse is unable to maintain while placing the other party in control of assets
that generate a comfortable living . . . [t]he [California] court found this situation
inequitable and held that maintenance should be employed as a remedy.

In re Marriage of Herron (1980), 186 Mont. 396, 408, 608 P.2d 97, 103 (citing Brawman
v. Brawman (1962), 199 Cal.App.2d 876, 19 Cal.Rptr. 106, 110).

¶39.In its Supplemental Memorandum Re Maintenance, intended to clarify and
supplement the Findings of Fact and Conclusions of Law entered in this matter, the
District Court stated:

[t]he financial aspect of this dissolution was particularly difficult to resolve. The business
venture known as Jacalyn's Restaurant resulted in the dissipation of any marital estate that
was accrued by the parties prior to that time. This Court took into account Ron's financial
situation, the personal guarantees he was required to make in order to retain his position at
Newland and Company, Jacalyn's ability to work full-time, and her apparent disregard for
living within her means.

Jacalyn has an income producing asset, namely her degree and her experience in
accounting. Additionally, there is no question but that she could meet her needs, were she
not living beyond her means. Furthermore, Jacalyn failed to prove an inability to support
herself through appropriate employment.

It is doubtful that either party will ever maintain the standard of living enjoyed during the
marriage prior to the opening of Jacalyn's Restaurant. The record evidence disclosed that
Ron cannot meet the needs of his son, service the debt resulting from the marriage and pay
maintenance. This Court found that Jacalyn had the ability to gain full-time employment
which would provide her with sufficient income. On the basis of these findings, this Court
found that Jacalyn did not meet either of the statutory requirements for an award of
maintenance.

¶40.The District Court clearly found that Jacalyn did not meet the two requirements
necessary to award maintenance under § 40-4-203(1)(b), MCA, and we have concluded
that the court equitably divided the property between the parties. Furthermore, there was
testimony that Jacalyn worked 10 hours a day, 5-7 days per week while managing

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Jacalyn's, and the record shows that Jacalyn is able to support herself through appropriate
employment. As a result, we can not conclude that it was clearly erroneous for the District
Court not to award Jacalyn maintenance. In the final analysis, "[i]t is not a question of
whether we could be persuaded to reach a different conclusion after considering the same
evidence. The test is whether the District Court had adequate evidence to support its
conclusions." Pfeifer, 282 Mont. at 474, 938 P.2d at 692.

¶41.We conclude that the specificity of the District Court's findings as to the value of the
profit-sharing interest, partnership interests, and properties demonstrates that it sufficiently
considered the nature of those assets. The District Court's findings are supported by
substantial evidence, and are not clearly erroneous. While it is certainly unfortunate that
both parties in this matter leave the marriage with significantly more debts than assets, the
District Court did not err in its decision not to award Jacalyn maintenance.

¶42.III Did the District Court refuse to allow "full and complete discovery" for the
purposes of determining Ron's financial status?

¶43.Jacalyn argues that the District Court refused to allow her full and complete discovery
because it struck from the Deposition and Subpoena Duces Tecum, references to income
tax returns and other financial documents for Newland and Co., Professional Bldg.
Partnership, and P.G.A. Company. She claims that as a result she could not prepare a case
and therefore such refusal is clear error justifying the reversal and remand of this case for
trial on the merits. Ron asserts that Jacalyn now raises these issues for the first time on
appeal, and therefore this Court should not consider them.

¶44.The general rule in Montana is that this Court will not address either an issue raised
for the first time on appeal or a party's change in legal theory. Unified Industries, Inc. v.
Easley, 1998 MT 145, ¶ 15, 289 Mont. 255, ¶ 15, 961 P.2d 100, ¶ 15. The basis for this
general rule is that "it is fundamentally unfair to fault the trial court for failing to rule
correctly on an issue it was never given the opportunity to consider." Easley, ¶ 15.

¶45.After a thorough review of the record, there is no evidence that Jacalyn ever objected
below to the District Court's striking of any portion of her discovery requests. Therefore,
we will not now consider that issue on appeal.

¶46.Affirmed.

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/S/ WILLIAM E. HUNT, SR.

We Concur:

/S/ J. A. TURNAGE

/S/ JAMES C. NELSON

/S/ JIM REGNIER

/S/ TERRY N. TRIEWEILER

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