No. 83-333
IN THE SUPREME COURT OF THE STATE OF MONTANA
1934
IN RE THE MARRIAGE OF
RICHARD LAMBERT WAGNER,
Petitioner and Respondent,
and
PEARL F WAGNER,
Respondent and Appellant.
APPEAL FROM: District Court of the Seventeenth Judicial District,
In and for the County of Valley,
The Honorable Leonard H. Langen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
David L. Nieisen, Glasgow, Montana
For Respondent :
Gallagher, Archambeault & Knierim; Matthew W. Knierim,
Glasgow, Montana
Submitted on Briefs: December 8, 1983
Decided: March 13, 1984
Filed:
Mr. Justice Frank B. Morrison, Jr. delivered the Opinion of
the Court.
This is an appeal from the final judgment entered in the
District Court of the Seventeenth Judicial District, Valley
County on February 18, 1983 distributing marital assets. No
issue is taken with the granting of the decree of dissolution
or the awarding custody of the one minor child to the
petitioner. Appellant challenges only the disposition of the
marital estate.
FACTS :
The parties were married on August 17, 1971. On
December 17, 1980 the husband filed for dissolution of
marriage. The trial court entered a temporary order on
January 23, 1981, which ordered. that the respondent, Pearl
Wagner, be awarded temporary maintenance of $400 per month
during the pendency of the action. Dissolution of the
marriage was granted orally at a hearing on September 21,
1981 by the trial court sitting without a jury. The final
decree of dissolution was entered on January 27, 1982.
Shortly thereafter, husband petitioned the court claiming
that he was not financially capable of continuing temporary
maintenance payments to wife. On May 6, 1982, the trial
court ordered the temporary maintenance terminated based on
the husband's inability to provide. The final disposition of
marita.1 assets was entered an February 18, 1983.
Both husband and wife entered into the marriage with
substantial personal assets. Prior to the marriage the
husband owned real estate consisting of a 2280 acre ranch
owned by the Wagner family for three generations with a 1971.
appraised value of $236,000. Wife brought no real property
into the marriage. Just prior to the marriage and shortly
thereafter, wife sold certain cattle and contributed the
proceeds of approximately $72,440 to the joint property of
the parties. During the course of the marriage, the parties
accumulated considerable personal property and a small amount
of real estate, which consisted of the "Scott Place," 640
acres, and "Porcupine" grazing rights. At the time of the
final distribution of the marital estate the trial court
found that no equity existed in the "P~rcupine~~
grazing
rights as the indebtedness equaled the value of the rights
and furthermore, the grazing rights were forfeited due to
husband's inability to pay the annual 1982 grazing fees. The
Scott Place was purchased on a contract for deed in 1979 for
$64,000. The only equity in real estate acquired after the
divorce was the sum of two principal payments made in 1979
and 1980 on the "Scott Place" in the total amount of $25,600.
During the course of the nine year marriage while the
parties lived together they were equal partners in the
ranching operation. Both are and were competent, experienced
and resourceful ranchers. Undisputed testimony reveals that
the wife contributed to operating the ranch not only as a
housewife, but also as an active worker in the fields and
with the cattle. During the husband's illness in 1980 with
cancer, the wife was responsible for even more ranch tasks
previously shared with her husband.
Early in the marriage the parties began breeding "exotic
cattle." The Wagners extended a large financial commitment
to establish themselves in this market. However by 1974 the
price and demand for "exotic cattle" dropped drastically and
subsequently the entire cattle market fell. The diminution
of cattle market values together with rising operating costs
created personal financial difficulties for the parties.
The December 1981 separation was acrimonious and the
husband and wife were unable to reach a mutually acceptable
agreement on any issue. The trial court directed the parties
to summarize their contentions regarding the division of
marital property in a pre-trial memorandum. Contentions of
the parties varied widely on nearly every asset value. Since
the husband and wife were unable to agree, the trial court on
September 9, 1982, ordered a certified public accountant to
serve as a Special Master of the proceedings, to assist the
trial judge in defining the parties' contentions concerning
the property. Originally, the CPA was ordered to prepare his
Master's Report on the basis of the December 18, 1980,
separation date. Early in October 1982 the parties agreed
that the financial statements should reflect financial status
at or near the time of trial so that the court would be aware
of any changes in the parties' financial condition during the
period from the separation, December 18, 1980 to the time of
the trial. The final Master's Report included financial
statements showing the net worth of the parties as of October
31, 1982.
The Master's Report indicated that the only area of
agreement was the amount of the parties' liabilities. At the
time of the marriage, husband had an indebtedness of about
$5,000 on the family ranch. The wife entered the marriage
with no debts. During the course of the marriage the parties
accumulated a total indebtedness as of December 18, 1980 of
approximately $672,000. The wife did most of the banking for
the ranch. She was personally obligated on operating loans
with Treasure State Bank for operating loans. However
through negotiation and court orders the wife was no longer
liable for any ranch obligations at the time of final
disposition of the marital estate.
Upon the separation of the parties on December 18, 1980
the financial status of each party took divergent courses.
The wife established herself in a new ranching operation
without assistance from the husband other than monies
previously awarded her by the trial court. At the time of
the separation, the wife retained her mineral interest which
she inherited from her mother during the marriage and she
also retained ownership of certain livestock from the marital
estate. With this basis and loans from her family, the wife
purchased several real properties, including the Gartside
property for $50,000 and the Redd property for $41,000. At
the time of the final disposition of marital assets the wife
planned to acquire an additional 140 acres as evidenced by
her earnest payment of $3,500. According to the trial
court's findings at final distribution of assets the only
indebtedness the wife had was the obligations she incurred in
connection with establishing the new cattle operation.
The husband's financial status continued to deteriorate
from separation to final disposition. A line of three
operating loans held by Treasure State Bank of Glasgow,
Montana were maintained for expenses to run the ranch. These
loans accounted for $126,000 of the total $672,000 debt
service encumbering the Wagner ranch. After numerous
hearings and agreements negotiated by the parties, a.11 of the
livestock (except those cattle and horses retained by the
wife) were sold early in 1981. The total amount received for
the sale of these cattle was approximately $347,418. The
husband applied a portion of these proceeds to reduction of
$126,000 in operating loans. The husband did not raise any
cattle or farm any crops during 1981 and 1982. While the
husband was liquidating ranch livestock and ceasing all
income-generating ranch operations he increased the operating
1-oans. In January, 1981, the husband borrowed $16,775.27 as
operating loan; in February of 1981, he borrowed an
additional $70,756.93; and, in March, 1981, he borrowed
$21,131.88. During March of 1981, the husband received
reimbursement from the Agricultural Stabilization
Conservation Service in an amount of nearly $17,000. These
funds were not applied against the operating loans held by
Treasure State Bank. Additionally, the husband received a
seismograph payment in the sum of $3,000 in the spring of
1981 which he did not use to reduce the operating loans.
Sometime late in 1980 or early in 1981 the husband borrowed
$8,000 against a life insurance policy owned by the husband
which insured the life of the wife. None of this money was
applied against the operating loans with Treasure State Bank.
The husband made 1981 and 1982 annual installment payments on
the "Scott Place" in the total amount of $25,600. In 1982
the husband's credit was "frozen" pending final distribution
of marital property. Husband borrowed the 1982 payment on
the "Scott Place'' utilizing his brother's co-signature on a
loan from Treasure State Bank. Husband's liabilities on
October 31, 1982 were $641,000 making his net worth $171,000
as compared to his net worth of $313,724 at time of marriage.
The appellant makes the following challenges to the
District Court's final disposition of marital assets on
February 18, 1983:
1. The trial court erred by using the Master Report
date of October 31, 1982 instead of the date of separation,
December 18, 1980 for the date of valuation of assets and
determination of parties net worth.
2. The trial court failed to equitably divide the
marital assets.
3. The $800 per month in back separate maintenance
temporarily ordered by the court on January 9, 1981 was
improperly modified.
4. The findings of the trial court do not support the
division of marital property.
The multiplicity of legal proceedings separated by
extended periods of time develope an unusual set of facts.
After consideration of the unique circumstances presented by
this case we find the challenge to the proper date of asset
valuation to be dispositive.
A review of the record indicates that the District Court
acted conscientiously to protect the marital estate and to
equita.bly apportion it according to the rights of both
parties. This was no easy task in the crossfire of divorce
hostilities. In the findings of fact the trial court stated
that the husband "is sometimes inclined toward exaggeration
which results in what might be called unintentiona.1
misstatements of fact" and the wife "has the same propensity
toward a.ccuracy and preciseness in her testimony as does the
petitioner. " (Husband) .
In this conflict the District Court found the following:
" (5) That since the disputed issues of material
facts which are set forth in the Masters Report can
only be resolved by accepting the testimony of
either the petitioner or the respondent the court
finds that it will lead to injustice and error for
the court to attempt to accurately determine the
net worth of the parties and the net worth of the
ma.rita1 estate in dollars and cents and then
through a process of mathematical computation to
attempt to determine with preciseness each party's
share of the marital estate. Therefore the court
accepts and adopts the Masters Report in its
present form and will not attempt to resolve all of
the issues of fact therein presented.
" (8) The total net worth of petitioner and
respondent when they entered into the marriage on
August 17, 1971, was as follows:
$313,724 - net worth of petitioner
$118,303 - net worth of respondent
$432,027 - total joint net worth of parties
" (18) The court finds that from August 17, 1971,
the date of the marriage until October 31, 1982,
the net worth of the petitioner was reduced from
$313,724 to $171,000 on October 31, 1982. This was
a reduction of 53.64%.
"The court finds that the net worth of respondent
dropped from $118,303 on the date of the marriage
to $59,600 on October 31, 1982, which was a drop of
50.37%.
"The joint net worth of the parties as of the date
of their marriage was $432,027 and as of October
31, 1982, was reduced to $230,600, a reduction of
53.37%.
" (25) Because of the great variance in the
contentions of each of the parties and for the
reasons set forth in Findings of Fact No. 3, 4 and
5, the court is unable to make any precise Findings
of Fact with reference to dollar amounts on
mathematical computations regarding dollar amounts.
However the court can find with reasonable
certainty that the parties have already equitably
divided the marital property and that it is fair
and equitable that each party shall maintain and
possess the property presently in his/her
possession and each party shall be responsible for
any indebtedness presently owing upon the property
presently in his/her possession."
The primary issue regarding the proper date of
evaluation of marital. assets and net worth of the parties'
has been specifically addressed by this court:
"A proper disposition of marital property in a
dissolution proceeding requires a finding of the
net worth of the parties at or near the time of the
dissolution. Hamilton v. Hamilton (1980),
Mont . , 607 P.2d 102, 37 St.Rep. 247; Vivian v.
Vivian (1978), Mont .
, 583 P.2d 1072, 35
St.Rep. 1359; Kramer v. Kramer (1978), 177 Mont.
61, 580 P.2d 439; Downs v. Downs (1976), 170 Mont.
150, 551 P.2d 1025. The basic reason for the rule
is obvious; however, it is equally apparent that
the application of the rule is dependent upon the
kinds of marital assets under consideration. - The
time - proper valuation cannot - - -to any
- for be tied
single event - - dissolution process.
in the The
filing of a petition, trial of the matter, or even
the granting of the decree of dissolution do not
control the proper point of evaluation by the
District Court. (emphasis added)
"The exercise of discretion & the District Court
is necessary whTn determining - worth of marital
- the
assets which fluctuate in value. For example, the
value of a particular-comrnon stock may change
drastically during the course of a dissolution
while the value of the family home or other
personal property remains stable. Under such
circumstances selection - - single evaluation
of a
point for determininq net worth - - parties
of the
could create -an inequitable disposition."
(emphasis added) Lippert v. Lippert (1981),
Mont . , 627 P.2d 1206, 38 St.Rep. 625, 628.
The instant case epitomizes this court's prior
observation that: "Under such circumstances selection of a
single evaluation point for determining net worth of the
parties could create an inequitable disposition." The trial
judge adhered to the rationale that "The time for proper
valuation cannot be tied to any single event in the
dissolution process" and selected a valuation date of October
31, 1982, closer to the final. disposition of the marital
assets on February 18, 1983 than to the date of dissolution.
Section 40-4-202 (1) provides guidelines for
apportionment of marital property:
"Division of property. (1) In a proceeding for
dissolution of a marriage, legal separation, or
division of property following a decree of
dissolution of marriage or legal separation by a
court which lacked personal jurisdiction over the
absent spouse or lacked jurisdiction to divide the
property, the court, without regard to marital
misconduct, shall, and in a proceeding for legal
separation may, 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 the
husband or wife or both."
The statute does not mandate a specific time period within
which marital assets should be accounted for. The logical
time period is the duration of the marriage. To include in
the valuation of the marital estate any accumulation of
financial wealth or, conversely, the increase in financial
liabilities of either spouse subsequent to the termination of
the "marital relationship" may effectuate an injustice and
frustrate the intended purpose of division of martial
property. Stated differently, to consider for distribution
those assets acquired by one spouse after the martia.1
relationship was terminated, might unjustly award a
"windfall" to the dilatory spouse who did not work to
accumulate those post-marital assets and penalize the
diligent spouse for sound business judgment. The present
case is an excellent example of such an inequitable outcome.
Using October 31, 1982 as date of valuation of assets the
District Court found :
"However the court can find with reasonable
certainty that the parties have already equitably
divided the marital property and that it is fair
and equitable that each party shall maintain and
possess the property presently in his/her
possession and each party shall be responsible for
any indebtedness presently owing upon the property
presently in his/her possession."
The District Court erroneously determined that 'I. . .
the parties have already equitably divided the marital
property . . ."
The record is very clear rega.rding what property and
funds each party received on December 18, 1980 when they
separated and how each, independent of the other, decided to
develop those marital assets. The wife left the family
ranch with: (1) no debts; (2) a certain number of cattle and
horses; and, (3) a mineral interest which she inherited from
her mother during the marriage. At the same time, the
husband retained ownership of the 2280 acre operative cattle
ranch, complete with livestock, equipment and modern
machinery. The husband remained responsible for the entire
debt service on the ranch. Between the separation, December
3-8, 1980 a.nd the date of dissolution, January 27, 1982 the
wife, aggressively established herself in a new and
completely different cattle operation. Admittedly, the wife
had $400 per month from,the husband in temporary maintenance
payments, but the record reveals that a major portion of the
capital necessary to fund her real estate purchases was
generated on her own initiative through livestock sales,
mineral lease payments, family and commercial loans. Between
the separation and dissolution of marriage the husband: (1)
terminated the ranch operation; (2) liquidated the livestock;
and, (3) increased the opera.ting loans encumbering the ranch.
The wife did not participate, even as a decision maker, in
the husba-nd's increase in financial liabilities and the
husband's only contribution of the wife's acquisition of real
estate was the court-ordered tempora.ry maintenance payments.
Based upon the unique facts of this case, neither the
husband's increased financial obligation, nor the wife's real
estate and livestock purchases should legitimately be
denominated "marital assets" for two reasons: (1) both were
acquired after the marital relationship was irretrievably
broken; and, more importantly, (2) the disparity of the
parties' business acumen resulted in a change of either's
financial status after the separation so that selection of
the later date would create an unjust distribution.
This Court has generally accepted the date of formal
lega-1 dissolution of the marriage as the date terminating the
marital relationship. The Court also recognizes that unique
circumstances of marital relationships can modify this
generally-accepted date of valuation of assets. The instant
case presents a factual situation which merits deviating from
the general rule. During the interim periods while the
parties argued over their contentions concerning property
division, the wife accumulated personal wealth and the
husband increased operating loans against the ranch. When
the court finally resolved the dispute over two years after
the parties separated and the marital relationship was
terminated, the financial status of each party had
significantly changed. due to their individual initiatives.
Under the circumstances of this case the date of valuation of
marital assets should have been the date of separation when,
in fact, the marriage was irretrievably broken and
individual business practices had not. yet altered the
financial status quo of the parties.
Taking all of the factors into consideration as mandated
by 40-4-202 (1983), MCA, the trial court should have
determined what portion of the marital estate was rightfully
due the wife. It was within the authority of the District
Court to deny the wife's request to sell the family ranch and
pay the wife her portion of the marital assets in cash.
However, in lieu of a sale of the ranch property, the
District Court may structure an alternative payment to
achieve the intended equitable distribution of the marital
estate between the husband and wife.
In summary, the District Court's selection of October
31, 1982 as date of valuation of marital assets effected an
inequitable disposition of the marital estate. By using the
October 1982 date of valuation, the District Court
essentially rewarded the husband for encumbering the family
ranch and penalized the wife for her ambitious effort after
the broken marriage to negotiate her own independent
financial security. Therefore, we find the District Court
abused its discretion in failing to evaluate the marital
assets as of the date of separation, which under these
unusual circumstances, was the appropriate date of valuation.
The appellant's issues regarding inequitable division of
marital property and the improper termination of temporary
maintenance payments need not be addressed. The order of the
District Court is vacated, and this cause remanded for
further proceedings to determine an appropriate division of
the marital estate as of the date of separation.
We concur:
-
Chief ~ u s t i c e ~
Mr. Justice L.C. Gulbrandson dissenting.
I respectfully dissent.
This Court recently stated in Holston v. Holston
(Mont. 1983), 668 P.2d 1048, 1050, 40 St.Rep. 1435, 1436:
"The standard for reviewing the property
division in a dissolution decree is well
settled in Montana. The apportionment
made by the district court will not be
disturbed on review unless there has been
a clear abuse of discretion as manifested
by a substantially inequitable division
.......................... l t i n g-----
o f marital assets resu in a
substantial injustice. (Citations
omitted.) Abuse of discretion is further
indicated by a trial court's arbitrary
action without employment of
conscientious judgment or in excess of
the bounds of reason resulting in
substantial injustice. (Citations
omitted.)" (Emphasis added.)
At the pre-tr ial conference, both parties agreed that
the special master should determine the financial condition
of each party as of the date of final judgment. Obviously,
such information was intended for consideration by the judge
in evaluating the parties' respective abilities to pay or
need for additional funds.
The trial judge's findings indicate that he considered
all financial aspects of the ranching operation, tax
considerations, the prior distributions of property to the
wife, her improving financial situation, the health status
of both parties and the husband's custody obligation of the
son.
In my view, the trial judge did not commit a "clear
abuse of discretion as manifested by a substantially
inequitable division of marital assets resulting in a
substantial injustice."
I would affirm the judgment of the trial court.