No. 87-519
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
IN RE THE MARRIAGE OF:
.
FARRELL C STEWART,
Petitioner, Appellant, and
Cross/Respondent
and
ROBERT B. STEWART,
Respondent, Respondent, and
Cross/Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District
In and for the County of Yellowstone
The Honorable Robert Holmstrom, Judge presiding
COUNSEL OF RECORD:
For Appellant:
Virginia A. Bryan; Bryan Law Firm, Billings, Montana
For Respondent:
Frances M. Calton and Calvin A. Calton;
Calton, Hamman, Calton and Wolff, Billings, Montana
Submitted On Briefs: March 31, 1988
Decided: May 9, 1988
Filed: " nv 9 - 1988
&r2fL *,-Clerk
4 ---
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Petitioner Farrell Stewart appeals the September 25,
1987, decree of the Thirteenth Judicial District, Yellowstone
County, dividing the marital estate. We affirm.
Farrell Stewart raises two issues for our review:
1. Did the District Court abuse its discretion in
ordering that Farrell Stewart participate in $32,823 of
marital debts?
2. Did the District Court abuse its discretion in
awarding a $32,000 promissory note to Robert Stewart?
Respondent Robert Stewart cross-appeals and raises two
additional issues:
3. Did the District Court abuse its discretion in
determining the net worth of the marital estate?
4. Did the District Court abuse its discretion in
distributing Farrell Stewart's inheritance to her?
Farrell Stewart and Robert Stewart were married in
Minneapolis, Minnesota, in 1958. Farrell was twenty-two and
Robert was twenty-six. Four children were born of the Stew-
art marriage, all of whom have reached the age of majority.
Farrell filed for dissolution in June of 1986.
Both Farrell and Robert have college degrees. Farrell
has worked as a part-time journalist at Eastern Montana
College since 1971. In 1986 she earned approximately $10,000
from her job and received approximately $7,500 in investment
income.
Robert has worked as a stockbroker during most of the
marriage. His income has fluctuated. In 1981 and 1982 he
earned approximately $50,000 per year, but after 1983 his
income dropped sharply. Robert's net income in 1986 was
approximately $2,500.
Issue 1. S32,823 debt.
In the final two years of the marriage, Robert received
$32,823 in loans from various sources. The District Court
concluded that the loans were marital debts:
[Tlhere was no evidence to suggest that
the Respondent spent the money, repre-
sented by the various notes, upon any-
thing but living and business expenses.
It was clear from the testimony that
much of the parties' difficulties cen-
tered around the way they handled their
finances throughout their married life
and it was clear that the Respondent
had, in the three or four years preced-
ing the parties' dissolution, sustained
a substantial decrease in earnings. He
borrowed the money to try to keep his
business afloat and to pay household
expenses. In the Court's view, it was
therefore equitable for the Petitioner
to participate in those debts.
Section 40-4-202 (I), MCA, states: "The court shall
also consider the contribution or dissipation of value of the
respective estates . . ." Farrell contends that Robert
dissipated the money through "reckless borrowing and spending
habits.'' Farrell asserts that she knew nothing about the
loans. Farrell concludes that the District Court erred by
failing to find dissipation.
A District Court has far-reaching discretion in divid-
ing the marital property. Our standard of review is that the
District Court's judgment, when based upon substantial credi-
ble evidence, will not be altered unless a clear abuse of
discretion is shown. Marriage of Watson (Mont. 1987), 739
In prior marital cases, this Court has stated that the
standard of review was whether the District Court, in the
exercise of its discretion, acted arbitrarily without employ-
ment of conscientious judgment or exceeded the bounds of
reason. For the guidance of the bench and bar, we specifi-
cally reject this phraseology for our standard of review in
marital cases and adopt the standard of review set forth in
Watson, supra. In re Marriage of Hall (Mont. 1987), 740 P.2d
684, 686-687, 44 St.Rep. 1321, 1324.
In this case, Robert borrowed the money in small incre-
ments to pay household bills and meet costs of running his
office. Farrell freely accepted the benefits of these loans
while the parties were still living together. Farrell's
unsupported allegations do not create a presumption that
Robert dissipated the marital estate. Any finding of dissi-
pation must be supported by substantial evidence. In Re the
Marriage of Merry (Mont. 1984), 689 P.2d 1250, 1256, 41
St.Rep. 2009, 2017. Farrell supplied no such evidence and
failed to meet her burden of proof.
The District Court specifically looked at the nature
and purpose of the loans and found no dissipation. The court
had ample opportunity to review the evidence and observe the
testimony of the parties. We hold that the District Court
properly considered the loans under the guidelines of Watson
and equitably distributed the $32,823 of marital debts.
Issue 2. $32,000 promissory note.
In 1984, Robert withdrew approximately $83,000 from his
retirement plan. As a result of the early withdrawal, the
Stewarts' joint tax liability exceeded $32,000. In September
1985, Farrell loaned Robert $32,000 to pay the Internal
Revenue Service. Farrell insisted that Robert sign a promis-
sory note for the amount.
The District Court found that the $83,000 was used for
the parties' living expenses and Robert's business expenses.
The District Court specifically noted the criteria of
5 40-4-202, MCA, regarding the parties' occupations, sources
and amounts of income, and earning capacity. The Court then
stated that "the setting over of the note to the Respondent
was an equitable distribution." Farrell contends that the
District Court improperly absolved Robert of his legal obli-
gation to repay the $32,000 to her.
In analyzing this issue, we note that a husband and
wife may legally contract with each other. Section 40-2-301,
MCA. Furthermore, "contracts between married parties, if
- - equitable, are enforceable contracts if they do not
fair and
conflict with the laws and public policy of this State."
(Emphasis added.) In Re the Marriage of Feisthamel (Mont.
1987), 739 P.2d 474, 477, 44 St.Rep. 1117, 1120.
In the instant case, however, the enforceability of the
$32,000 contract is subject to equitable distribution of the
marital estate. Farrell received the benefits of the $83,000
while the marriage was in force and while living with Robert.
The $32,000 loan helped relieve Farrell of the joint tax
liability she incurred as an income-earning spouse.
In a proceeding for dissolution, property belonging to
either of the parties may be apportioned between them equita-
bly. Section 40-4-202(1), MCA. The District Court removed
the inequitable burden of repayment from Robert. "The court
is not required to distribute equally but rather to consider
the criteria set forth in 5 40-4-202, MCA, to make an equita-
ble distribution." In Re the Marriage of Edwards (Mont.
1985), 699 P.2d 67, 70, 42 St.Rep. 593, 596. We hold that
the District Court duly considered the purpose of the note
and properly awarded the note to Robert.
Issue 3. Net worth.
Robert contends that the trial court distributed the
marital estate without making a specific finding of net worth
and therefore abused its discretion.
We disagree. As we stated in In Re the Marriage of
Metcalf (1979), 183 Mont. 266, 271, 598 P.2d 1140, 1142, a
trial court must consider the parties' assets and liabilities
before making a distribution. Our review of the record
reveals that the District Court listed the Stewarts' assets
and liabilities and arrived at the net worth figure of
$154,358.78 in Finding of Fact V. We hold that the court
properly determined the net worth of the marital estate.
Issue 4. Farrell's inheritance.
In 1985, Farrell received an inheritance of approxi-
mately $110,000. She did not disclose the amount of the
inheritance to Robert. Farrell invested the inheritance
separately and maintained sole control over the funds.
The District Court found that Robert "has not made any
contribution to the maintenance of the said inheritance."
The court concluded that the assets directly traceable to the
wife's inheritance should be set over to Farrell. Robert
contends that the court should have divided the inheritance
equally.
We review this issue under the guidelines of
5 40-4-202(1), MCA, which states that the court may "equita-
bly apportion between the parties the property and assets
belonging to either or both, however and whenever acquired
. . ." (Emphasis added.) Section 40-4-202, MCA, is a flexi-
ble statute which vests wide discretion in the District
Court. "There is no specific rule concerning how an inherit-
ed asset is to be treated when marital property is divided."
In Re the Marriage of Martin (Mont. 1985), 705 P.2d 1114,
1116, 42 St.Rep. 1376, 1379.
In the instant case, Farrell's inheritance arrived on
the eve of dissolution. The inheritance was not comingled
into the marital estate. Robert did not contribute to the
investment or maintenance of the inherited assets. "If none
of the value of the property is a product of contribution
from the marital effort, the District Court can justifiably
find that the non-acquiring spouse has no interest in the
property. " In Re the Marriage of Herron ( 1 9 8 0 ) , 1 8 6 Mont.
3 9 6 , 4 0 4 , 6 0 8 P.2d 9 7 , 1 0 1 .
The District Court assessed the inheritance within the
context of assets acquired during the marriage. We hold that
the District Court properly distributed the inheritance to
Farrell.
Af firmed.
We concur: