No. 02-649
IN THE SUPREME COURT OF THE STATE OF MONTANA
2004 MT 40
IN RE THE MARRIAGE OF
TERESA LEE HERRERA,
Petitioner, Respondent and Cross-Appellant,
and
RICHARD ALEX HERRERA,
Respondent and Appellant.
APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. BDR 2000-241,
Honorable Jeffrey M. Sherlock, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
John L. Hollow, Attorney at Law, Helena, Montana
For Respondent:
Ronald F. Waterman, Gough, Shanahan, Johnson and
Waterman, Helena, Montana
Submitted on Briefs: March 13, 2003
Decided: February 24, 2004
Filed:
__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.
¶1 Teresa Herrera (Teresa) petitioned for dissolution of her marriage to Richard Herrera
(Richard) in the First Judicial District Court, Lewis and Clark County. Following a non-jury
trial, the District Court entered Findings of Fact, Conclusions of Law, and Decree of
Dissolution, dissolving the parties’ marriage, distributing the couple’s property, setting child
support obligations, and approving the shared parenting plan. Richard appeals, and Teresa
cross-appeals, from the District Court’s property distribution. Teresa additionally cross-
appeals from the court’s failure to award attorney fees. We affirm in part, reverse in part,
and remand.
¶2 The parties raise the following issues on appeal:
¶3 1. Did the District Court err in awarding Teresa one-half of the equity in the family
home when a substantial portion of the funds to construct the home came from Richard’s
inherited or gifted monies?
¶4 2. Did the District Court err by including the entire value of Richard’s Merrill Lynch
retirement account and a 1992 Ford pickup in the marital estate when the equity in these
properties represented gifted or inherited funds?
¶5 3. Did the District Court err in excluding Richard’s fractional interest in his family’s
properties in Broadwater County and a cabin near Canyon Ferry Lake from the marital
estate?
¶6 4. Did the District Court err in not awarding Teresa attorney fees?
FACTUAL AND PROCEDURAL BACKGROUND
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¶7 Richard and Teresa were married August 8, 1987, in Helena, Montana. About a year
and a half prior to the marriage, Richard had inherited in excess of $50,000 in gold and silver
from his father. On the day before the parties’ wedding, Richard purchased a condominium
in Seattle, Washington, using money that had been gifted to him from his father as a down
payment. After the wedding, Richard and Teresa moved to Seattle, where Richard worked
as a mechanical engineer for Boeing and Teresa sought employment. Teresa eventually
gained work as a receptionist at a nearby shopping mall and then shortly thereafter as a
receptionist for Boeing. The parties thereafter sold the condominium and, using the sale
proceeds, purchased another home in the Seattle area.
¶8 In 1993, shortly after the birth of their second child, Richard and Teresa returned to
Helena. For the next two years, they lived with Richard’s mother while they constructed a
home on a lot that Richard, along with his mother and four siblings, had inherited from
Richard’s father in 1986. In October 1994, Richard’s family deeded the property to Richard
and Teresa, based upon an oral promise to pay $15,000 for the lot, which was subsequently
never paid. By the time of trial, the lot was valued at $51,000.
¶9 In financing the construction of the Helena residence, Richard and Teresa used the
money they received from the sale of their Seattle residence, approximately $25,000, as well
as $30,000 from a Workers’ Compensation settlement which Richard received as a result of
work-related injuries in the early part of 1996. Richard also contributed a portion of his gold
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inheritance, between $30,000 and $40,000, as well as $20,000 which had been gifted to him
by his godmother.
¶10 For her part, Teresa contributed approximately $10,000 to the construction of the
Helena residence–funds from her retirement account at Boeing–and acted as the primary
caretaker for the parties’ minor children. Teresa also shared in a mortgage on the family
residence, which was originally $65,000.
¶11 In 1995, after moving into the Helena residence, Richard and Teresa had their third
child. Shortly thereafter, Teresa obtained employment at a local physical fitness center,
working part-time in the center’s daycare facility. As she did so, she continued to care for
the parties’ three minor children, who accompanied Teresa at work. Teresa maintained her
employment at the fitness center for the duration of the parties’ marriage, and, at the time of
trial, was working full-time as the center’s bookkeeper.
¶12 Richard also maintained employment throughout the marriage. After returning to
Helena, Richard worked briefly for State Farm Insurance Company before obtaining a sales
position at a local car dealership, where he worked for approximately one year. Richard
thereafter went to work for Allstate Insurance Company as a claims representative, where
he continued to work up through the time of trial.
¶13 In conjunction with his past employment, Richard held a Merrill Lynch retirement
account, which was valued at approximately $23,255 at the time of trial. Although the
account represented retirement contributions Richard accrued during his employment with
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Boeing, the account was funded, in principle part, by a $14,000 gift from Richard’s
godmother.
¶14 Richard also owned a fractional interest in several parcels of real property. In 1995,
Richard purchased a one-half interest in a lot located in Broadwater County for $1,250, again
using a portion of the gold he inherited from his father. The only expense associated with
this property was the payment of taxes, which were minimal, and which Teresa helped to
pay. At trial, the parties agreed the lot was worth $7,500.
¶15 Additionally, Richard held a one-fifth interest in a cabin located near Canyon Ferry
Lake, which he and his four siblings had inherited from Richard’s parents. Throughout the
marriage, Richard and Teresa shared the use of the cabin with Richard’s siblings, and paid
a proportionate part of the expenses associated with the cabin. At trial, the parties agreed
the cabin was worth a total of approximately $60,000.
¶16 In June 2000, Richard and Teresa separated. The following month, Teresa petitioned
for dissolution of marriage in district court. At trial, the parties agreed to a shared parenting
schedule. However, they disputed the division of assets, many of which Richard considered
as non-marital, or as being acquired with his inherited and gifted funds.
¶17 On March 26, 2002, the District Court issued its Findings of Fact, Conclusions of
Law, and Decree of Dissolution, concluding that all of the monies acquired during the
marriage, regardless of source, were commingled and used for the parties’ mutual benefit,
and that Teresa’s non-monetary contributions as a homemaker equaled the value of Richard’s
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inherited and gifted contributions to the family residence. As such, the court divided the
parties’ marital property almost equally, and awarded Teresa one-half of the equity in the
family home, or $93,000. The court additionally concluded that Richard’s Merrill Lynch
account and 1992 Ford pickup, acquired primarily with inherited funds, were marital assets,
and awarded each of these items to Richard. However, the court excluded Richard’s
interests in the Broadwater property and Canyon Ferry cabin from the marital estate,
reasoning that these properties were not titled in Teresa’s name, and had been kept separate
from the parties’ other marital assets. Both parties appeal from the District Court’s
distribution of property, and Teresa additionally appeals from the court’s failure to rule on
her request for attorney fees.
STANDARD OF REVIEW
¶18 The standard of review of a district court’s division of marital property is whether the
district court’s findings of fact are clearly erroneous and whether the court correctly applied
the law. In re Marriage of Foreman, 1999 MT 89, ¶ 14, 294 Mont. 181, ¶ 14, 979 P.2d 193,
¶ 14. A finding is clearly erroneous if it is not supported by substantial evidence, if the
district court misapprehended the effect of the evidence, or if our review of the record
convinces us the district court made a mistake. In re Marriage of Deist, 2003 MT 263, ¶ 14,
317 Mont. 427, ¶ 14, 77 P.3d 525, ¶ 14. Where substantial credible evidence supports the
court’s findings and judgment, this Court will not alter the district court’s decision unless
there is an abuse of discretion. In re Marriage of Griffin (1996), 275 Mont. 37, 43, 909 P.2d
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707, 710-11. The test for abuse of discretion in a dissolution proceeding is “whether the
district court acted arbitrarily without employment of conscientious judgment” or whether
the district court “exceeded the bounds of reason resulting in substantial injustice.” In re
Marriage of Engen, 1998 MT 153, ¶ 26, 289 Mont. 299, ¶ 26, 961 P.2d 738, ¶ 26.
DISCUSSION
¶19 Did the District Court err in awarding Teresa one-half of the equity in the family
home when a substantial portion of the funds to construct the home came from Richard’s
inherited or gifted monies?
¶20 Richard challenges the District Court’s equal division of the equity in the parties’
marital residence, arguing that the court erred in applying the provisions of § 40-4-202, MCA
(1999), which controls distribution of a marital estate. He maintains that it is well
established that a non-acquiring spouse is entitled only to share in the appreciated or
preserved value of pre-acquired or inherited property which is attributable to his or her
efforts. Richard contends that, because more than half of the equity in the marital residence
was funded by his gifts and inheritances, the District Court erred in awarding Teresa half of
the equity in this asset. In response, Teresa maintains that her non-monetary contributions
as a homemaker facilitated the maintenance and appreciation of the marital residence, and
that, consequently, she is entitled to half of the equity.
¶21 Section 40-4-202, MCA, provides, in relevant part:
In a proceeding for dissolution of a marriage . . . the court, without regard to
marital misconduct, shall . . . equitably apportion between the parties the
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property and assets belonging 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 descent; property acquired in exchange for property
acquired before the marriage or in exchange for property acquired by gift,
bequest, devise, or descent; the increased value of property acquired prior to
marriage . . . 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
(c) whether or not the property division serves as an alternative to
maintenance arrangements.
As we have previously recognized, this section provides for equitable distribution of pre-
acquired property, regardless of the manner in which title to the property is held, taking into
consideration the contributions of the non-acquiring spouse to its preservation or
appreciation. Stoneman v. Drollinger, 2000 MT 274, ¶ 18, 302 Mont. 107, ¶ 18, 14 P.3d 12,
¶ 18. A non-acquiring spouse is entitled to an equitable share of the appreciated or preserved
value of the inherited property which is attributable to his or her efforts. Stoneman, ¶ 18.
However, pre-acquired or gifted property need not be included in the marital estate where
the non-acquiring spouse did not contribute to the property’s preservation or appreciation.
See Engen, ¶ 29.
¶22 In this case, Richard concedes that Teresa’s monetary and non-monetary contributions
as a homemaker facilitated the maintenance and appreciation of the marital residence.
Accordingly, it is undisputed that Teresa is entitled to an equitable portion of the equity in
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the family home. Nonetheless, we conclude the District Court erred in its division of the
equity in the marital residence because the court failed to correctly apply the provisions of
§ 40-4-202, MCA.
¶23 The District Court equally divided the equity in the marital residence on the basis that
Richard’s gifted and pre-acquired properties had been commingled with the parties’ joint
funds. However, it is well-settled that, “regardless of who holds title, pre-acquired or gifted
property need not be included in the marital estate unless the nonacquiring spouse
contributed to its preservation or appreciation.” Engen, ¶ 29 (emphasis added). While it is
inequitable to award the value of an asset solely to the acquiring spouse upon dissolution
when an inheritance is not traceable and both parties have contributed to the increased value,
see In re Marriage of Steinbeisser, 2002 MT 309, ¶ 37, 313 Mont. 74, ¶ 37, 60 P.3d 441,
¶ 37, that is not the case here. As demonstrated by its factual findings, the District Court was
able to reasonably trace the parties’ respective contributions to the construction of the marital
residence. For instance, the court found that Richard inherited more than $50,000 in the
form of gold and silver from his father prior to the marriage, and that, of this amount,
$30,000 to $40,000 had been invested in the parties’ home. The home was constructed on
a lot valued at $51,000 at the time of trial, which had been deeded to the parties by Richard’s
family. The court additionally found that Richard received a $28,000 gift from his
godmother during the construction of the marital residence, and that approximately $20,000
of this was used to build a garage and finish the home’s basement. Because Richard’s pre-
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acquired and gifted contributions were traceable, the District Court erred when it simply
divided the equity in the marital residence equally, without regard to the parties’
contributions. Teresa is entitled only to an equitable share of the appreciated or preserved
value of Richard’s pre-acquired and gifted contributions which is attributable to her efforts.
¶24 We note that the District Court further supported its decision to award Teresa one-half
of the home’s equity by finding that the property division served as an alternative to
maintenance. See § 40-4-202(1)(c), MCA. However, Teresa did not seek maintenance at
trial, and the parties concurred in their proposed findings that neither party was entitled to
receive maintenance. Accordingly, we hold the District Court erred in its application of
§ 40-4-202, MCA, and thus in its division of the equity in the marital residence. We reverse
this portion of the decree and remand for further proceedings to determine the portion of
equity in the family home to which Teresa is entitled by way of her contributions to the
home’s preservation and appreciation in value.
¶25 On remand, it is appropriate for the District Court to consider the extent to which
Teresa’s contributions, including her non-monetary contributions as a homemaker, facilitated
the preservation or appreciation of the marital residence. See § 40-4-202(1)(a), MCA. As
we have previously recognized, the work of a homemaker can be an important contribution
because the marital estate may be substantially depleted if those necessary services had to
be purchased. In re Marriage of Smith (1995), 270 Mont. 263, 268, 891 P.2d 522, 525. In
this case, the record reflects that Teresa acted as the primary caretaker of the parties’ three
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minor children and maintained the family household throughout the parties’ marriage. She
additionally helped support the family through part-time employment and contributed her
Boeing retirement account, a $10,000 value, to the construction of the marital residence. The
task upon remand is to determine the extent to which these, and other such contributions,
facilitated the preservation or appreciation of the pre-acquired and gifted monies invested in
the marital residence, and to apportion the equity between the parties accordingly.
¶26 Did the District Court err by including the entire value of Richard’s Merrill
Lynch retirement account and a 1992 Ford pickup in the marital estate when the equity
in these properties represented gifted or inherited funds?
¶27 As in the previous issue, Richard contends the District Court erred by including his
Merrill Lynch retirement account, valued at approximately $23,255 at the time of trial, and
1992 Ford pickup within the marital estate because each of these assets were acquired using
his gifted monies. In its Findings of Fact and Conclusions of Law, the District Court found
that the Merrill Lynch retirement account was funded by Richard’s Boeing retirement and
approximately $14,000 that he received as a gift from either his mother or godmother. This
notwithstanding, the court found the entire account was a marital asset since its value and
balance had fluctuated throughout the marriage and its proceeds had been used to pay various
marital expenses. The court likewise found that the 1992 Ford pickup was a marital asset,
despite determining that it had been purchased primarily with gifted and inherited monies,
because Teresa had helped to operate and maintain the vehicle.
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¶28 The disposition of these properties is once again controlled by § 40-4-202, MCA.
As assets acquired by gift, bequest, devise, or descent during the marriage, they are not part
of the marital estate unless the non-acquiring spouse made contributions to the preservation
or appreciation of that property. In re Marriage of Rolf, 2003 MT 194, ¶ 22, 316 Mont. 517,
¶ 22, 75 P.3d 770, ¶ 33; see also In re Marriage of Herron (1980), 186 Mont. 396, 404, 608
P.2d 97, 101. Moreover, “a non-acquiring spouse is not entitled to a share of the increase
in premarital property when the property’s appreciation is due simply to market factors.” In
re Marriage of Steinbeisser, ¶ 47.
¶29 As we have stated before, the first prong of our standard of review of a district court’s
finding is whether it is supported by substantial evidence. In re Marriage of Gerhart, 2003
MT 292, ¶ 29, 318 Mont. 94, ¶ 29, 78 P.3d 1219, ¶ 29. In this case, Teresa presented no
evidence that she contributed to the appreciation or preservation of Richard’s Merrill Lynch
retirement account, which fluctuated in value over the course of the marriage. The fact that
funds from the account were occasionally used for family expenses does not justify an equal
division of this asset. See In re Marriage of Luisi (1988), 232 Mont. 243, 245, 756 P.2d 456,
458 (finding that husband did not contribute to preservation of inheritance where, due to
insufficient household budget, wife was forced to use her inheritance to feed, clothe, and
shelter her family). Furthermore, Teresa’s use and periodic maintenance of the 1992 Ford
pickup does not constitute a contribution so significant as to entitle her to half of its value.
Because the District Court’s findings with respect to the Merrill Lynch account and 1992
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Ford pickup are not supported by substantial credible evidence, they are clearly erroneous,
and the conclusion of law based thereon is incorrect. Accordingly, we reverse that portion
of the decree, and award these assets to Richard.
¶30 Did the District Court err in excluding Richard’s fractional interest in his
family’s properties in Broadwater County and a cabin near Canyon Ferry Lake from
the marital estate?
¶31 On cross-appeal, Teresa argues that the District Court erred in failing to award her an
equitable portion of the appreciation in the Canyon Ferry cabin and Broadwater properties,
because the parties paid taxes and expenses associated with the properties from marital
funds. However, as Richard points out, the Broadwater property was acquired strictly with
his inherited monies, and the taxes associated with the property were minimal, approximately
$40 per year. The District Court additionally found that the marital funds expended to
maintain the Canyon Ferry cabin were minimal, and excluded this asset from the marital
estate.
¶32 In determining the exact distribution of an asset acquired by gift or bequest during the
marriage, no set formula can be established as to how the assets should be equitably
distributed. Herron, 186 Mont. at 402, 608 P.2d at 100. In this case, there is no evidence
that Teresa made any significant contribution to the preservation or appreciation of these
non-marital assets. Accordingly, we hold the District Court did not err in excluding the
Broadwater property and Canyon Ferry Lake cabin from the marital estate.
¶33 Did the District Court err in not awarding Teresa attorney fees?
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¶34 Teresa asserts that the District Court erred in disregarding her request for attorney
fees, which she sought pursuant to her Verified Petition for Dissolution. However, Teresa
presented no evidence or argument in support of her request for attorney fees after initially
raising it as an issue in her petition, and we will not fault the District Court for failing to
consider evidence which was never presented. See In re Marriage of Rush (1985), 215
Mont. 498, 502, 699 P.2d 65, 67 (affirming district court’s denial of attorney fees where no
supporting evidence was submitted at any of the hearings). We further note that Teresa
effectively waived this as an issue on appeal when, in her Proposed Findings of Fact and
Conclusions of Law, she concluded that “[e]ach of the parties has been allocated resources
sufficient such that each party is responsible for his or her own attorneys fees and costs.”
Accordingly, we cannot conclude that the District Court erred in disregarding Teresa’s
request for attorney fees.
¶35 Affirmed in part, reversed in part, and remanded for further proceedings consistent
with this opinion.
/S/ JIM RICE
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We concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ JIM REGNIER
/S/ PATRICIA O. COTTER
/S/ W. WILLIAM LEAPHART
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