In Re the Marriage of Williams

April 5 2011

DA 10-0355

IN THE SUPREME COURT OF THE STATE OF MONTANA

2011 MT 63

IN RE THE MARRIAGE OF:

JENNY L. WILLIAMS,

Petitioner and Appellant,

and

BOBBY L. WILLIAMS,

Respondent and Appellee.

APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DR 04-1205
Honorable G. Todd Baugh, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Mark D. Parker; Parker, Heitz & Cosgrove, PLLC, Billings, Montana

For Appellee:

Stephen C. Mackey; Towe, Ball, Enright, Mackey & Sommerfeld, PLLP,
Billings, Montana

Submitted on Briefs: March 2, 2011

Decided: April 5, 2011

Filed:

__________________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.

¶1 Jenny L. Williams (Jenny) appeals from an order entered in the Thirteenth Judicial

District, Yellowstone County, that awarded child support and distributed the marital estate of

her former marriage to Bobby L. Williams (Bobby). The District Court’s order followed this

Court’s remand in In re Marriage of Williams, 2009 MT 282, 352 Mont. 198, 217 P.3d 67

(Williams I). We affirm in part, reverse in part, and remand for further proceedings

consistent with this opinion and Williams I.

¶2 We review the following issues on appeal:

¶3 Did the District Court correctly deny Jenny’s motion for a substitution of judge after

this Court remanded for further proceedings in Williams I?

¶4 Did the District Court correctly omit Bobby’s income from B&J Properties for the

calculation of child support based on its conclusion that the omitted income never had been

used to enhance the children’s standard of living?

¶5 Did the District Court correctly permit an alternative payment method that allows

Bobby to defer payment until 2024 or 2025 when § 40-4-202, MCA, requires a final,

equitable apportionment?

FACTUAL AND PROCEDURAL BACKGROUND

¶6 This Court heard the appeal of the District Court’s initial distribution of the

Williams’s marital estate and award of child support in Williams I. We identified three

incorrect conclusions of the District Court and remanded for further proceedings by the

District Court. Williams I, ¶ 47. The District Court did not allow the parties to submit
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additional trial testimony on remand. The District Court issued its “order pursuant to

remand” on July 15, 2010.

¶7 We issued our decision in Williams I on August 25, 2009. The case returned to

Department 5, the Honorable G. Todd Baugh, who has proceeded over the Williams’s

dissolution since Jenny filed her petition in 2004. Jenny moved to substitute Judge Baugh.

Bobby objected. Bobby argued that no right for substitution under § 3-1-804(12), MCA,

existed because this Court had not remanded for a new trial. Jenny argued that the remand

required a new trial and entitled her to the substitution. Judge Baugh agreed with Bobby and

concluded that Jenny had not asked for a new trial on appeal, that our remand did not require

a new trial, and that only he could reconsider apportionment based on the evidence in the

record. Judge Baugh interpreted the remand to require a mathematical recalculation based

on the existing record. Judge Baugh ordered that the matter be reassigned to his department.

¶8 The parties agreed that remand in Williams I required consideration of three issues.

The first issue involved the erroneous double deduction of $67,706 that Jenny had withdrawn

from a retirement account. The court corrected the matter and neither party appeals the

correction. The second remanded issue required a recalculation of Bobby’s child support

obligation and directed the court to use Bobby’s tax returns, B&J Properties’ (B&J) financial

statements, and any other relevant information to determine objectively Bobby’s income for

child support purposes. Williams I, ¶ 33. The third remanded issue required the court to

exercise its broad discretion and equitably reapportion the Williams’s marital estate. Id. at
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¶ 46. We specifically directed the court to reapportion the estate by including the entire

value of Bobby’s interest in the marital portion of B&J, a closely-held corporation that

Bobby co-owns with his father. Id. at ¶ 40.

¶9 Both parties briefed the issues on remand and the court heard arguments on February

19, 2010. The parties changed their positions regarding the need for the court to consider

additional evidence from their positions during the substitution of judge proceedings. Jenny

argued that no new evidence could be taken in light of the court’s order that the remand did

not require a new trial. Bobby argued that the financial position of the parties had changed

substantially and that equitable apportionment pursuant to the factors in § 40-4-202, MCA,

required consideration of additional evidence, including increases in Jenny’s income and

financial hardship experienced by Bobby. The court declined to take additional evidence and

issued its order based on the existing record.

¶10 The court concluded that Bobby’s income from B&J had not been used to increase the

family’s standard of living and ordered that Bobby’s child support obligation was to remain

at $1,000 per month. The court also concluded that Bobby owed Jenny an additional

$117,633 for her interest in B&J. The court ordered the $117,633 to be paid with or without

interest in any manner agreed upon by the parties. If the parties could not agree on payment,

the court provided an alternative payment arrangement. The alternative allowed Bobby to

pay Jenny 7% of his interest in B&J in 2024 or 2025. The alternative additionally required

that Bobby pay Jenny 7% of any dividends or transfers of money or assets received from

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B&J before 2024 or 2025. Jenny appeals the District Court’s decisions regarding

substitution, child support, and the alternative payment arrangement.

STANDARD OF REVIEW

¶11 A district court’s determination whether to substitute a judge presents a question of

law. In re Marriage of Toavs, 2002 MT 230, ¶ 15, 311 Mont. 455, 56 P.3d 356. We review

a district court’s distribution of marital property and child support award to determine

whether the court’s findings of fact are clearly erroneous. Williams I, ¶ 14. We review for

correctness a district court’s conclusions of law. Id.

¶12 Did the District Court correctly deny Jenny’s motion for a substitution of judge after

this Court remanded for further proceedings in Williams I?

¶13 Section 3-1-804(12), MCA, entitles each party to one motion for substitution of

district judge if this Court reverses or modifies a judgment on appeal and remands to the

district court for a new trial. Jenny requested on appeal in Williams I that we not remand for

a new trial because she “would be better off with no relief than an expensive, drawn-out,

completely new trial on all of the issues” and that “[t]he record supports all of the relief

Jenny requires without the necessity of a new trial on all issues.” We directed “the District

Court to re-calculate Bobby’s child support obligation and reapportion the Williams’s entire

marital estate.” Williams I, ¶ 46. We directed the District Court to use tax returns, financial

statements, and any other relevant information to determine objectively Bobby’s income for

child support purposes. Id. at ¶ 33. We recognized that our decision likely affected the

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equitable factors considered by the court and directed the court to “exercise its ‘broad

discretion’ to apportion equitably the estate” consistent with the opinion. Id. at ¶ 46.

¶14 We agree with the District Court that we did not remand for a new trial. We

remanded for “further proceedings” in Williams I, not for a new trial. Id. at ¶ 47. The

Williams’s dissolution proceedings began in 2004. The trial took eight days and extended

over six months. The parties did not appeal many of the issues tried and decided in that trial.

We also affirmed the court’s conclusion regarding maintenance that Bobby raised in

Williams I. Id. at ¶ 24. We did not contemplate or indicate in Williams I that all the issues

should be retried.

¶15 We specifically remanded for a reconsideration, recalculation, and reapportionment of

the three issues where we reversed the court’s conclusions. Judge Baugh sat in the best

position to recalculate Bobby’s child support obligation and reapportion the marital estate on

the existing record without retrying the entire case. We directed the court to use its

discretion to consider the equitable factors in reapportioning the marital estate. The District

Court concluded that it did not need additional evidence to reapportion the Williams’s

marital estate and recalculate the child support payments in a manner consistent with

Williams I. The court correctly concluded that Williams I did not require a new trial and that

it sat in the best position to reconsider the evidence, recalculate child support payments, and

reapportion the estate on the existing record.

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¶16 Did the District Court correctly omit Bobby’s income from B&J Properties for the

calculation of child support based on its conclusion that the omitted income never had been

used to enhance the children’s standard of living?

¶17 The District Court in Williams I had determined that Bobby earned $110,000 per year

for purposes of child support calculations. The court ordered Bobby to pay child support in

the total amount of $1,000 per month for his three children based on the $110,000 income.

The court’s $110,000 determination omitted additional income that Bobby earned from B&J.

Had the District Court included the income from B&J, Bobby’s annual income would have

increased by about $200,000 per year and his monthly child support payments would have

increased to about $5,500. We concluded in Williams I that the District Court incorrectly

omitted Bobby’s income from B&J for the calculation of child support. We remanded for

the District Court to determine objectively Bobby’s income for child support purposes based

on Bobby’s tax returns, B&J’s financial statements, and other relevant information.

Williams I, ¶ 33.

¶18 Section 40-4-204(3)(a), MCA, requires the court to determine the child support

obligation according to the uniform child support guidelines and the standards in § 40-4-204,

MCA. “The guidelines must be used in all cases.” Section 40-4-204(3)(a), MCA. The

Department of Health and Human Services has established uniform child support guidelines.

Admin. R. M. 37.62.101 to 37.62.148. The guidelines define applicable terms, Admin. R.

M. 37.62.103; explain how to determine income, Admin. R. M. 37.62.106; provide for the

allowable and non-allowable deductions, Admin. R. M. 37.62.110 to 37.62.111; establish
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percentages to be used for standard of living provisions, Admin. R. M. 37.62.128; and

provide guidance in several other areas. The guidelines create a uniform system to be used

across the state and prevent litigants from seeking dissolutions in a forum believed to order

greater or lesser child support obligations. The Department of Health and Human Services

has developed a child support determination worksheet that must be used in all child support

determinations under the guidelines. Admin. R. M. 37.62.148.

¶19 Both Bobby and Jenny completed and filed the child support determination

worksheet. Jenny calculated Bobby’s income according to his reported average income on

his 2004-2006 tax returns. She calculated that Bobby’s income equaled $267,868 and

resulted in a child support obligation of $5,570 per month total for the three children of the

marriage. Bobby presented his annual income to be $110,000, obligating him to pay child

support in the total amount of $11,442 per year. The difference between Jenny’s and

Bobby’s calculations resulted from Bobby’s continued omission of his reportable income

from B&J.

¶20 We already have determined that the income that Bobby receives from B&J

constitutes actual income for child support purposes. Williams I, ¶¶ 31-33. Admin. R. M.

37.62.106 guides the determination of income for child support. Id. at ¶ 28. Income

includes actual income, imputed income, or any combination thereof that fairly reflects a

parent’s resources available for child support. Admin. R. M. 37.62.106(1). Actual income

includes “economic benefit from whatever source derived,” including, but not limited to,

income from salaries, wages, earnings, profits, dividends, pensions, interest, trust income,
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and annuities. Admin. R. M. 37.62.106(2)(a). Actual income also includes “gross receipts

minus reasonable ordinary and necessary expenses” for parents who receive income or

benefits from an ownership interest in a business. Admin. R. M. 37.62.106(2)(b).

¶21 The District Court acknowledged that the income from B&J constituted an economic

benefit to Bobby that must be included as income for child support. The court again decided

to omit Bobby’s income from B&J and reinstated the $1,000 per month child support

obligation. The court reasoned that Bobby did not use his income from B&J to “add to the

standard of living” of the children because B&J did not pay out dividends regularly. The

court concluded that $1,000 per month met the children’s needs and preserved their standard

of living. The court’s reasoning ignores the fact that Bobby used B&J funds to subsidize his

standard of living by paying for an airplane, the airplane’s service, his pilot license, a

condominium in Arizona, and by paying down company debt that increased Bobby’s

personal worth. Williams I, ¶¶ 31, 40. We fail to see how the court could reason that Bobby

had not used B&J income to “add to the standard of living of the parents or the children.”

¶22 Admin. R. M. 37.62.106 requires that the actual income of a parent fairly reflect the

parent’s resources available for child support. Bobby argues that the B&J income does not

constitute available income for child support payments. The District Court likened the

operation of B&J to a retirement account. B&J uses its profits to pay down its debts, build

up its equity, and save on interest. This practice increases Bobby’s net worth by about

$200,000 per year. We already have rejected the argument that Bobby’s income from B&J

constitutes mere overstated taxable income. Williams I, ¶¶ 31-33. The income constitutes
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actual disposable income subject to inclusion in the child support calculation. Id. If Bobby

can build up his value in B&J like a “retirement account,” he can use the income to pay child

support. We pointed out in Williams I that Bobby owns a 50% interest with his father and

historically has chosen to spend B&J’s income on items other than dividends, including a

private plane, condominium, and debt. Id. Retirement accounts normally do not allow a

person to withdraw funds without penalty to be used to purchase airplanes, condominiums,

and pay down corporate debt.

¶23 We reverse the District Court’s decision to depart from the child support guidelines.

The child support guidelines give guidance for uniform standard of living provisions.

Admin. R. M. 37.62.128. The child support guidelines “must be used in all cases.” Section

40-4-204(3)(a), MCA. The guidelines provide no exception for income because the income

cannot be traced to an increase in the children’s standard of living. The principle that parents

have the first priority to meet the needs of their children according to their financial ability

underlies the child support guidelines. Admin. R. M. 37.62.101(2). A child’s standard of

living should not be affected adversely because the parents decide to dissolve their marriage.

Id. The court shall recalculate Bobby’s child support obligation pursuant to the child support

guidelines and based on Bobby’s actual income as determined by Admin. R. M. 37.62.106.

¶24 Did the District Court correctly permit an alternative payment method that allows

Bobby to defer payment until 2024 or 2025 when § 40-4-202, MCA, requires a final,

equitable apportionment?

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¶25 Section 40-4-202(1), MCA, requires that the court shall “finally equitably apportion

between the parties the property and assets belonging to either or both.” Jenny argues that

the court’s conclusion that Bobby could withhold payment of her interest in B&J until 2024

or 2025 does not comply with the statute’s finality requirement. Bobby responds that the

court did not abuse its discretion because the awarded value of B&J was “locked up” and

could not be presently paid. We agree with Jenny that postponing payment until 2024 or

2025 does not provide the parties with the finality required by the statute.

¶26 Absent unique circumstances, the marital estate should be valued at or near the time

of dissolution. In re Marriage of Lopez, 255 Mont. 238, 244, 841 P.2d 1122, 1125 (1992).

This Court has recognized a limited exception in cases where the nature of the assets or the

course of conduct by the parties required appraisal at an earlier time than at formal legal

dissolution. Id., 841 P.2d at 1125. The Court has concluded that the date of separation can

be used as the appraisal date when one spouse accrued significant wealth and the other

accrued significant debts after the parties had separated but before formal dissolution. In re

Marriage of Wagner, 208 Mont. 369, 380, 679 P.2d 753, 758-59 (1984); In re Marriage of

Gebhardt, 240 Mont. 165, 169-70, 783 P.2d 400, 402-03 (1989). The limited exception did

not apply, however, to a wife’s student loans accrued after separation, but before dissolution,

when the wife began attending school after a no-fault termination from her job. In re

Marriage of Lopez, 255 Mont. at 244, 841 P.2d at 1125.

¶27 The unique circumstances of cases such as Wagner and Gebhardt justified an earlier

appraisal date than at the time of formal dissolution. The parties have not cited any cases
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that support allowing the appraisal to occur at a future date. The parties also have not

presented any special factual circumstances that justify a future appraisal. The court had

sufficient information before it to evaluate the present value of B&J and determine that

Jenny’s share equaled $117,633. No reason exists to justify postponing payment of Jenny’s

share until 2024 or 2025. Payment would provide finality to the parties as the statute

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

¶28 Jenny does not challenge the District Court’s determination that her interest in B&J

equals $117,633. Neither party argues that the court’s order to pay $117,633 affects the

equitable distribution of the marital estate. We agree with Bobby that interest began

accruing when the court established an ascertainable amount owed to Jenny in its order

pursuant to remand. In re Marriage of Gerhart, 245 Mont. 279, 284, 800 P.2d 698, 701

(1990). The District Court shall enter judgment for $117,633 to be paid to Jenny

immediately, together with interest from July 14, 2010, at 10% per annum.

CONCLUSION

¶29 We affirm the District Court’s conclusion that our opinion in Williams I did not order

a new trial and entitle Jenny to a substitution of judges. We reverse the court’s reinstatement

of the $1,000 child support obligation and remand for recalculation of Bobby’s child support

obligation. We strike the court’s alternative arrangement for payment of Jenny’s property

interest in B&J and direct the court to enter judgment as set forth in ¶ 28.

/S/ BRIAN MORRIS

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We Concur:

/S/ MIKE McGRATH
/S/ JAMES C. NELSON
/S/ BETH BAKER
/S/ MICHAEL E WHEAT

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