Muenster v. Muenster

#24924-aff in pt & rev&rem-KERN, Circuit Judge
2009 SD 23

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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CARLEEN ANN MUENSTER, Plaintiff and Appellee,

v.

THEODORE ROOSEVELT MUENSTER, Defendant and Appellant.

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APPEAL FROM THE CIRCUIT COURT
OF THE SECOND JUDICIAL CIRCUIT,
MINNEHAHA COUNTY, SOUTH DAKOTA

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HONORABLE KATHLEEN K. CALDWELL
Judge

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MARY H. BURD
Burd Law Office Attorneys for plaintiff
Sioux Falls, South Dakota and appellee.

MARK F. MARSHALL
Davenport, Evans, Hurwitz & Smith, LLP Attorneys for defendant
Sioux Falls, South Dakota and appellant.

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CONSIDERED ON BRIEFS
FEBRUARY 17, 2009

OPINION FILED 4/8/09
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KERN, Circuit Judge

[¶1.] Theodore Roosevelt Muenster (Ted) appeals from a judgment and

decree of divorce granted to Carleen Ann Muenster (Carleen) challenging the trial

court's division of property, the determination of child support and the finding that

he was in contempt of court. We affirm the property division and contempt finding

and reverse and remand for recalculation of Ted's child support.

BACKGROUND

[¶2.] Ted and Carleen were married on October 19, 1996. At the time of the

marriage, the parties were living in a home owned by Ted on St. Paul Street in

Sioux Falls, South Dakota. Carleen had obtained a bachelor's degree in business

administration and was working for Specialized Card Services, earning $32,000 per

year. Ted had not yet earned his bachelor's degree and was working for his mother,

Karen Muenster, maintaining her rental properties. Ted had previously bought and

sold several real properties in Sioux Falls. In 1997, Ted completed his

undergraduate degree and the parties' first child, Emily, was born September 14,

1997.

[¶3.] In August 1998, the parties moved to Vermillion so Ted could pursue a

law degree. In October 1998, Carleen obtained a job at the law school in the Dean's

Office, earning a salary of $32,000 per year and the job provided medical insurance

for the children. The parties lived with Carleen's mother for the first eight months.

The parties sold the house on St. Paul Street in Sioux Falls for approximately

$79,000. With the proceeds they paid off marital debts, including some of Ted's

undergraduate expenses, and purchased two rental properties in Vermillion: 217

and 225 N. University (University) and 515 E. Clark (Clark) in which they resided.
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The parties sold the University property to clear debt and purchased a duplex at

200 and 202 N. Pine Street (Pine). All the properties were titled jointly by the

parties. The parties received about $2,000 per month in net income from the rental

properties.

[¶4.] The parties' second child, Alexander, was born October 22, 2000.

Carleen enrolled in graduate school in 2001. Ted graduated from law school in

2003, and elected not to take the bar exam but continued to manage the rental

property on Pine Street and work with his mother in real estate ventures. In 2003,

the parties moved to Sioux Falls as Carleen obtained a paid internship at "West

Central" as a counselor. The parties lived rent-free in a furnished home located on

Harriet Lee belonging to Ted's parents. The parties' third child, Olivia, was born

January 1, 2004. Carleen obtained her master's degree in the spring of 2004.

[¶5.] As the couple now had three small children, they decided Carleen

should remain at home with the children. Alex had ADHD and she began home

schooling him. Ted worked at Wells Fargo and Home Depot, earning between $10

and $13 per hour. He later obtained employment as the director of the Chiesman

Foundation at a salary of $38,000 per year. His position was eliminated after three

months and he collected unemployment benefits for eight months. Ted obtained his

real estate license and worked at Century 21 but never sold a house.

[¶6.] On June 13, 2007, Carleen filed for divorce, interim custody of the

parties' children, child support and interim spousal support. At the time of the

divorce proceeding, Carleen was unemployed and Ted indicated he was working full

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time as a real estate agent and managing the rental properties the parties owned in

Vermillion. Their only income was the $1,300 per month they were now receiving

as net income from the rental properties. The trial court ordered Ted to pay

Carleen her one-half share of the rental income ($650) and the court ordered both

parties to obtain employment. Carleen promptly obtained employment with Capital

Card Services at a salary of $47,705 per year.

[¶7.] On August 16, 2007, Carleen filed motions to compel answers to

interrogatories, to hold Ted in contempt for failing to pay the $650 per month and

for modification of support. A hearing was held on September 24, 2007, at which

time the parties agreed that the answers to interrogatories had been received and

that the accounting regarding the rental income would be produced in two weeks.

Prior to the hearing, Ted satisfied the child support arrearages generated by the

court's prior order of $650 per month. The trial court ordered Ted to immediately

seek gainful employment and ordered that the remaining $650 in equity from the

parties' rentals would be given to Carleen to assist with her child care expenses,

which now exceeded $840 per month, and as temporary support. The court also

ordered that on or before October 8, 2007, Ted would comply with Carleen's

discovery request to provide a full accounting of the rental income received.

[¶8.] On October 31, 2007, Carleen filed a second motion seeking to have

Ted held in contempt of court for failing to comply with the court's order directing

him to produce the financial information and for failing to pay 100 percent of the

rental income to Carleen.

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[¶9.] A hearing was held on December 10, 2007, and counsel for the parties

again agreed that an accounting of the rental income would be made within two

weeks to Carleen's counsel. Counsel also obtained clarification from the court

regarding the September 24, 2007, order which provided that Ted would pay

Carleen 100 percent of the net income from the rental property.

[¶10.] On December 12, 2007, Karen Muenster delivered to the sheriff a

notice to quit and vacate the property at 2304 Harriet Lee, thereby beginning

eviction proceedings against Carleen and the children who were still residing in the

Muenster residence. Carleen vacated the property voluntarily and obtained an

apartment for herself and the couple's three children. On January 8, 2007, Karen

Muenster filed mechanic's liens totaling $44,910 against the Pine Street property

($33,563) and against the Clark Street property ($11,347) for taxes paid, repairs,

improvements and property management fees beginning in 2002 and ending

December 31, 2007. At the time of the divorce, the Clark Street property was

valued at $70,152 and had a mortgage of $60,185. The Pine Street property was

valued at $109,087 and had a mortgage of $70,496. The parties' combined equity in

both properties was $48,558. Thus, the mechanic's liens were nearly equal to the

parties' equity in the two properties.

[¶11.] The case proceeded to a trial before the court on March 6, 2008. At

trial, Ted testified and produced some evidence that he brought into the marriage

approximately $177,000 in premarital assets obtained from the sale of several

properties he had purchased prior to marriage and the proceeds from the sale of the

St. Paul Street residence in Sioux Falls in 1998. Carleen testified that Ted had not

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paid her the $1,300 per month ordered by the court. Ted testified that he was

working for his brother but not receiving any income. He also testified that the

expenses on the rentals had increased and that they were now only netting $650 per

month.

[¶12.] The trial court awarded the parties' only income producing property,

the Vermillion rentals, to Carleen and set Ted's child support at $1,000 per month.

The court held Ted in contempt of court for failing to comply with the court's

October order requiring Ted to pay Carleen $1,300 per month. The court also found

that Ted colluded with his mother in the filing of the mechanic's liens to tie up the

parties' equity in the property. The court determined the liens were not filed in

good faith and ordered Ted to pay Carleen's attorney's fees associated with her

defense of the mechanic's liens and to reimburse Carleen for the equity in the

properties if the liens were upheld.

[¶13.] On appeal, Ted raises the following issues:

Whether the trial court abused its discretion in dividing
the marital estate?

Whether the trial court erred in determining the amount
of child support by imputing a prior income?

Whether the trial court erred in its finding of contempt of
court?
STANDARD OF REVIEW

[¶14.] On appeal a trial court's division of property and award of child

support is reviewed using an abuse of discretion standard. Billion v. Billion, 1996

SD 101, ¶ 14, 553 NW2d 226, 230 (citations omitted). "Abuse of discretion refers to

a discretion exercised to an end or purpose not justified by, and clearly against,

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reason and evidence." Godfrey v. Godfrey, 2005 SD 101, ¶ 11, 705 NW2d 77, 80

(citing Pellegrin v. Pellegrin, 1998 SD 19, ¶ 10, 574 NW2d 644, 646). The correct

inquiry "is not whether we would have made the same ruling, 'but whether a

judicial mind, in view of the law and the circumstances of the particular case, could

reasonably have reached such a conclusion.'" Id. (quoting DeVries v. DeVries, 519

NW2d 73, 75 (SD 1994)).

[¶15.] "We review a trial court's findings as to contempt under a clearly

erroneous standard." Driscoll v. Driscoll, 1997 SD 113, ¶ 10, 568 NW2d 771, 773

(citing Taecker v. Taecker, 527 NW2d 295, 298 (SD 1995)).

ANALYSIS AND DECISION

Division of Property

[¶16.] "South Dakota Codified Law 25-4-44 authorizes [trial] courts to

equitably divide the marital estate in a divorce proceeding." Terca v. Terca, 2008

SD 99, ¶ 20, 757 NW2d 319, 325. "All property may be divided, regardless of its

title or origin." Christians v. Christians, 2001 SD 142, ¶ 13, 637 NW2d 377, 381 n1

(citing Radigan v. Radigan, 465 NW2d 483, 486 (SD 1991)). This includes property

with premarital origins. Strickland v. Strickland, 470 NW2d 832, 836 (SD

1991)(noting that "[t]his Court has consistently held that the trial court has

discretion in determining how to consider premarital assets")(citation omitted). A

court is not required to "give both divorcing parties credit for all their premarital

assets in order to make an equitable division of property." Pellegrin, 1998 SD 19, ¶

19, 574 NW2d at 648.

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[¶17.] Ted first contends that the trial court abused its discretion when it

deemed the Vermillion rental properties part of the divisible marital estate. His

assertion is premised on the fact that the properties were purchased with proceeds

from the sale of his premarital property and that Carleen did not contribute

financially to the acquisition of the Vermillion rentals or their management. Ted

testified that he entered the marriage with a net worth of $177,000. During trial,

however, it became clear that this figure was somewhat inflated. Ted reported

capital gains of $10,000 on his tax returns in 1996 and $34,500 in 1997. The parties

sold the unmortgaged St. Paul Street residence in 1998 for $79,000 when they

moved to Vermillion. The parties used these funds to pay living expenses and debts

and to purchase the Vermillion rental properties which they titled jointly in their

names. Although Carleen did not have premarital funds to contribute to purchase

the properties, her valuable contributions to the acquisition and maintenance of the

properties may not be ignored. Courts are directed to consider a party's indirect

contributions, especially where, as here, one spouse's efforts permit the other spouse

to acquire and maintain property with "assets that otherwise would be required for

the support and maintenance of the family." Terca, 2008 SD 99, ¶ 25, 757 NW2d at

326. "Only in the case where one spouse has made no or de minimis contributions

to the acquisition or maintenance of an item of property and has no need for

support, should a court set it aside as non-marital property." Billion, 1996 SD 101,

¶ 21, 553 NW2d at 232.

[¶18.] Carleen earned $32,000 per year in 1996 and 1997. In 1998, she

worked for the Dean of the Law School and again earned $32,000 per year while

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Ted attended and completed law school. She also provided primary care for the

parties' children and maintained the household. Carleen's consistent income and

contributions as mother and wife were substantial, well beyond de minimis and,

thus, the property was appropriately considered marital property subject to

equitable division.

[¶19.] In making an equitable division of property, "there is no rigid formula

that must be followed, nor any fixed percentage to which either party is entitled."

Clement v. Clement, 292 NW2d 799, 801 (SD 1980)(internal citations omitted).

However, "[w]e have identified certain factors for a trial court to consider when

dividing marital property." Novak v. Novak, 2006 SD 34, ¶ 4, 713 NW2d 551, 552.

These include: "(1) the duration of the marriage; (2) the value of the property

owned by the parties; (3) the ages of the parties; (4) the health of the parties; (5) the

competency of the parties to earn a living; (6) the contribution of each party to the

accumulation of the property; and (7) the income-producing capacity of the parties'

assets." Id. (citing Billion, 1996 SD 101, ¶ 21, 553 NW2d at 232).

[¶20.] The trial court considered each of the required factors and awarded

Carleen the Vermillion properties. Ted claims that the trial court's consideration of

the factors was precursory and that the award of all income earning property to

Carleen was an abuse of discretion. At the time of trial both parties were 42 years

of age and in good health. Ted had suffered from a thyroid condition which was

under control and not an impediment to employment.

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[¶21.] "The trial court is clearly authorized and directed to consider the

contribution of each party to the accumulation of assets" when dividing marital

property. Korzan v. Korzan, 488 NW2d 689, 692 (SD 1992). As determined by the

trial court, Carleen's contribution to the parties' accumulation of assets was

substantial. She worked full time for all but three years of the parties' marriage,

enabling Ted to finish his undergraduate degree and attend and graduate from law

school. Her efforts also assisted him in managing the couple's Vermillion

properties. Carleen's employment ended only after the parties' agreed that she

would stay home with the children. This shift did not lessen her contributions to

the marital estate. Instead, as this Court has repeatedly concluded, the duties of

mother and homemaker "constitute a valuable contribution to marital property."

Billion, 1996 SD 101, ¶ 30, 553 NW2d at 233 (quoting Johnson v. Johnson, 471

NW2d 156, 160 (SD 1991)).

[¶22.] In contrast, despite a law degree and a real estate license, Ted

maintained formal employment for approximately one year of the parties' ten-year

marriage. His contributions were made through the management of the rental

properties. (However, Ted's mother testified she was significantly involved in the

management of the properties since 2001.) Despite the fact both parties have

similar earning potential due to their advanced degrees, Ted has been and remains

chronically under-employed. At trial, Ted testified that he currently works for his

brother renovating buildings, receives no income and lives with him rent free. He

estimated the value of the compensation received from his brother at $10 to $12 per

hour. Ted testified that he could not pay Carleen the $1,300 per month rental

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income from the Vermillion properties because the expenses for the properties had

increased and thus the net income was now only $650 per month. This was not

established by the evidence at trial and the court found him in contempt.

[¶23.] Carleen and the three children were left in a precarious situation as a

result of the divorce. As Ted and Carleen were living in a furnished home belonging

to Ted's parents at the time of the divorce, her subsequent eviction left her with no

home or furniture and uncertain support from Ted. Her daycare expenses alone for

three children exceeded $840 per month. From this set of facts, the trial court

determined that, notwithstanding Carleen's higher income, an unbalanced property

division was necessary to provide adequate assets and a reliable source of support

for Carleen and the children. This type of analysis is not entirely unprecedented.

For example, in Morrison v. Morrison, we concluded that "the trial court was

justified in awarding [the] appellee a substantial share of the assets to put her in a

stable financial condition" in part because of "appellant's unreliability in repaying a

loan from the appellee and his failure to maintain child support payments." 323

NW2d 877, 879 (SD 1982).

[¶24.] In addition to the aforementioned factors, courts are also permitted to

consider a party's intentional depletion of a marital asset when making an equitable

division of property. See, e.g., Johnson, 471 NW2d at 161 (finding that if a

"husband fraudulently dissipated marital assets, they should be included in the

marital estate and charged against him"). The trial court, in the present case,

concluded that the mechanic's liens filed by Ted's mother were not filed in good

faith and were initiated to deprive Carleen of any equity in the Vermillion

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properties. The court ordered Ted to pay the legal fees incurred in the defense of

the lien claims and to assume any debt owed to his mother. Ted alleges that the

mechanic's liens against the Vermillion properties were improperly considered and

that the order was improper.

[¶25.] The trial court based its finding of fraud largely upon the testimony of

Ted and his mother. "Trial courts are [] required to determine the credibility of

witnesses that testify." Grode v. Grode, 1996 SD 15 ¶ 21, 543 NW2d 795, 801

(internal citation omitted). The trial court had the opportunity to judge the

credibility of those before it and found Ted and his mother not credible. This

finding is afforded due regard and will not be interfered with on appeal. Id. The

trial court noted that Ted, despite holding a law degree, made no answer to the suit

and testified that, although the parties were both named as defendants, he thought

Carleen could answer for him as well. The court found that he acquiesced in the

filing of the liens by his mother to deprive Carleen of any equity in the properties

and thereby perpetrated a fraud upon the court. The court considered the filing of

the liens to be a "deliberate attempt to make an end run around an equitable

division of property in this divorce case." The court also found that the mechanic's

liens had little likelihood of prevailing at trial given that they were not timely filed

and that the alleged agreement between Ted and his mother for the payment of a

management fee and taxes was not made in writing. The trial court did not render

judgment on the validity of the liens but rather, after determining the liens were

brought in bad faith, issued orders to protect Carleen's equity in the property. Such

consideration is within the ambit of a trial court charged with dividing the marital

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estate in an equitable manner. See, e.g., Pennock v. Pennock, 356 NW2d 913, 915

(SD 1984)(noting that a party's transfer of properties "appear suspect in the way

that they were" made, in part because they were concluded "shortly before the

divorce trial[,] made with inadequate documentation[, and] were transfers to blood

relatives").

[¶26.] The trial court was faced with determining what was equitable under

these unique circumstances. In light of Carleen's substantial contributions, Ted's

inconsistent support and his attempt to deplete the Vermillion properties' value, we

cannot conclude that the division of property was inequitable. The trial court's

division of property is affirmed.

Child Support

[¶27.] "The statutory scheme in SDCL Chapter 25-7 governs child support

calculations" and sets forth a procedure "wherein the initial step is to determine the

current net income of the parties and scheduled support amount." Kauth v.

Bartlett, 2008 SD 20, ¶¶ 11, 13, 746 NW2d 747, 751. Only after this step is

completed may a deviation, under SDCL 25-7-6.2, enter into the child support

obligation computation. Id. ¶ 12. This "procedure for child support calculation is

mandatory." Hollinsworth v. Hollinsworth, 2008 SD 102, ¶ 15, 757 NW2d 422, 427

n6 (citing Kauth, 2008 SD 20, ¶ 13, 746 NW2d at 751).

[¶28.] Ted argues that the appropriate procedure was not followed. Carleen

submitted a proposed child support calculation imputing Ted's yearly wages at

$42,000, which produced a base support obligation of $777.38. With additions for

health insurance and daycare expenses, she requested monthly support in the

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amount of $1,215.89. The trial court noted Ted's education and prior employment

at $38,000 per year and set his support at $1,000 per month without performing a

calculation based on his actual earnings. Carleen's income was calculated without

consideration of income received from the rentals.

[¶29.] In Kauth, the obligor voluntarily took a lower paying job and the

referee utilized his previous wages when calculating child support. Kauth, 2008 SD

20, ¶ 2, 746 NW2d at 749. In that case, we noted that the language of South

Dakota's statutory scheme governing child support calculations "does not authorize

automatically imputing a higher income when someone voluntarily takes a lower

paying job." Id. ¶ 11. The only statute which addresses imputing income to an

obligor is SDCL 25-7-6.4, which merely creates a rebuttable presumption that a

parent is capable of being employed at minimum wage." Id. (emphasis in original).

[¶30.] A proper application of the statutes in this case requires the trial court

to calculate Ted's monthly child support based on his actual earnings. The parties'

net monthly income is then combined to determine the appropriate support

obligation. Only after these calculations have been performed may the trial court

consider any deviation requested by the parties pursuant to SDCL 25-7-6.10.

[¶31.] Ted filed his notice of appeal on June 17, 2008. On June 16, 2008,

Carleen filed a motion for an order establishing custody, visitation and child

support pending appeal. A hearing on the motion was held on August 4, 2008, and

the trial court entered an order again setting child support at $1,000 and

authorizing the defendant to have his child support directly reviewed by filing a

petition for modification without showing any change in circumstances. Ted

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petitioned for a modification of the child support order and the matter was heard by

a referee. Ted filed a motion with this Court, pursuant to SDCL 15-26A-56 to

supplement the record on appeal to include the report issued by the referee which

adjusted Ted's child support.

[¶32.] "An appeal from a judgment or order strips the trial court's jurisdiction

over the subject matter of the judgment or order except as to certain trivial

matters." Reaser v. Reaser, 2004 SD 116, ¶ 28, 688 NW2d 429, 437 (citations

omitted). Trial courts are "restrained from entering any order that would change or

modify the judgment on appeal or have the effect of interfering with review of the

judgment." Id. Therefore, the trial court improperly referred the matter to a

referee who, in the present case, did not have jurisdiction to consider Ted's child

support obligation during the pendency of the appeal. 1

[¶33.] The trial court, when calculating Ted's child support, failed to follow

the procedures mandated by statute and articulated by this Court. Therefore, the

award of child support is reversed and remanded for recalculation in compliance

with the child support guidelines and consideration of any deviations requested by

the parties. Accordingly, Ted's motion to supplement the record is denied.

Contempt

[¶34.] The trial court found that Ted had willfully and contumaciously

disobeyed its order to pay interim support in the amount of $1,300 per month and

found him in contempt. Ted alleges that the trial court failed to consider whether

1. If a change in circumstances occurred that necessitated review of a child
support order which was the subject of an appeal, a party could move this
Court for an order of partial remand to have that issue returned to the trial
court for consideration.
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he had the actual ability to comply with the order and requests that the finding of

contempt be vacated.

[¶35.] The four elements of contempt are (1) existence of an order; (2)

knowledge of the order; (3) ability to comply with the order; and (4) willful or

contumacious disobedience of the order. Johnson, 451 NW2d at 295 (citing

Thomerson v. Thomerson, 387 NW2d 509 (SD 1986); Hanisch v. Hanisch, 273 NW2d

188 (SD 1979)). A party cannot be held in contempt if he or she did not have the

ability to pay in compliance with a court's order. Mundlein v. Mundlein, 2004 SD

25, ¶ 7, 676 NW2d 819, 822 (quoting Johnson, 451 NW2d at 295). However, "[w]hen

the defense is inability to pay, the burden shifts to the defendant to establish his

inability to comply with the court's order." Johnson, 451 NW2d at 295 (citations

omitted). This requires a complete and detailed financial position statement for the

court's review. Lampert v. Lampert, 388 NW2d 899, 903 (SD 1986). "Self serving

testimony alone is insufficient and corroboration is necessary to establish a defense

that a party cannot pay child support." Sazama v. State ex rel. Muilenberg, 2007

SD 17, ¶ 20, 729 NW2d 335, 343 (citations omitted).

[¶36.] In August 2007, Carleen and her counsel filed a motion to compel the

production of information regarding the rental receipts and expenditures. A

hearing was held on September 24, 2007, at which the court ordered Ted to provide

by October 8, 2007, a full accounting of the rental income received and expenditures

of monies from the rental income. The accounting was not produced and on October

31, 2007, Carleen filed a second motion seeking to hold Ted in contempt. At a

hearing held on December 10, 2007, Ted again agreed to provide the accounting

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within two weeks. At the March 6, 2008, trial, Ted introduced Exhibit K, a three-

page handwritten document listing partial expense and income information for

January through March. This exhibit and his testimony was the only proof offered

regarding his alleged inability to comply, which the trial court did not find credible.

Because he "failed to provide the trial court with a complete detailed financial

position, his ability or inability to pay is impossible to determine." Lampert, 388

NW2d at 903. Ted's contention that he could not pay the support as ordered was

simply unsupported by the evidence. Therefore, the trial court did not err when it

concluded that Ted was in willful and contumacious disobedience of the order and

the finding of contempt is affirmed.

Attorney's Fees

[¶37.] Both parties have petitioned the court for an award of attorney's fees

generated as a result of this appeal. Ted's request for attorney's fees is denied.

Carleen is awarded two-thirds of her requested fees in the amount of $3,183.00.

[¶38.] GILBERTSON, Chief Justice, and KONENKAMP and ZINTER,

Justices, and SABERS, Retired Justice, concur.

[¶39.] KERN, Circuit Judge, for MEIERHENRY, Justice, disqualified.

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