No. 91-583
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
IN RE THE MARRIAGE OF
MARK LOPEZ,
:?.as . . z , - , -
Petitioner and Appellant,
- -
and
LAURI LOPEZ, D
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Joel G. Roth, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
E. Lee LeVeque, Conklin, Nybo, LeVeque & Murphy,
Great Falls, Montana
For Respondent:
Daniel L. Falcon, Matteucci, Falcon & Squires, Great
Falls, Montana
Submitted on Briefs: July 30, 1992
Decided: October 29, 1992
Filed:
I
Clerk
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Appellant Mark Lopez appeals from the findings of fact,
conclusions of law, and decree of dissolution entered by the
~istrictCourt of the ~ighth
~udicialDistrict, Cascade County. At
issue is the District Court's valuation and distribution of the
marital estate. We affirm.
We phrase the issues to be considered as follows:
1. Was the District Court's valuation of appellant's
interest in Century Financial Senrices, Inc., and the Century Court
Partnership clearly erroneous?
2. Did the District Court abuse its discretion in finding
that a school loan taken out by respondent after the separation,
but prior to the dissolution, was a marital debt to be considered
in the valuation and distribution of the marital assets?
3. Was the District Court clearly erroneous in finding that
a bank account of $2,577.13 was an asset of the marital estate?
4. Was it an abuse of discretion for the District Court to
admit into evidence respondent's Exhibit D, a report prepared by
respondent's expert witness?
Appellant Mark Lopez and respondent Lauri Lopez were married
on June 18, 1977, in Cascade County, Montana. Two minor children
were born during the marriage. The children were ages nine and
seven at the time of the dissolution. The parties separated in
April 1990, and Mark filed a petition for dissolution on May 24,
1990.
At the time of the parties' marriage, Mark was employed as a
service station attendant. Approximately three years after their
marriage, Mark began selling insurance for an insurance company in
Great Falls. The ~istrictCourt found that during the marriage
Mark excelled as an insurance salesman. Mark left the insurance
company he had been working for, and in the fall of 1987, along
with three other individuals, formed Century Financial Services,
Inc. (CFS). CFS is primarily involved in the sale of life, health,
and disability insurance. Mark is the only employee of CFS and
owns 30 percent of the stock.
In the spring of 1989, Mark and the other three shareholders
in CFS, formed the Century Court Partnership (partnership) . The
only asset of the partnership is a commercial building in Great
Falls which houses CFSrsoffice. Mark has a 25 percent interest in
the partnership. The commercial building was purchased for
$231,000, with Mark's 25 percent interest costing him an initial
investment of $7500.
Prior to the marriage, Lauri had been a student at the
University of Montana. Immediately prior to the marriage, Lauri
returned to Great Falls and obtained an associate degree in
criminal justice from the College of Great Falls. Lauri worked
full time until the spring of 1990 when her employment was
terminated through no fault of her own. Following her termination,
Lauri unsuccessfully sought employment. Lauri is currently in
college working toward a degree in special education. After the
separation, but prior to the dissolution, Lauri obtained a student
loan in the amount of $4000 to enable her to continue her
education.
The bench trial in this matter began on March 29, 1991, and
concluded on April 2, 1991. On June 17, 1991, the court entered
the final decree of dissolution. From the findings of fact,
conclusions of law, and decree of dissolution entered by the
District Court, Mark brought this appeal. Mark alleges that the
~istrict
Court's findings regarding the valuation of several assets
of the marital estate were clearly erroneous and must be reversed.
The parties stipulation prior to trial regarding child custody,
child support, and visitation was adopted by the District Court in
the final decree of dissolution and is not at issue in this appeal.
I
Was the District Court's valuation of appellant's interest in
his insurance business and the Century Court Partnership clearly
erroneous?
Mark attacks the findings, conclusions, and decree entered by
the District Court as they relate to the valuation and distribution
of the marital estate. In the past, district court decisions
concerning the division of the marital estate have been reviewed by
this court under an abuse of discretion standard. This Court's
standard of review in these cases has been recently clarified. The
factual findings of the district court relating to the division of
marital property will be reviewed using the clearly erroneous
standard. In re Marriage of Sacry (Mont. 1992), 833 P.2d 1035, 49
St. Rep. 452; Rule 52 (a) M.R. Civ.P. Concerning this Court's review
of conclusions of law made by a lower court "[wle are not bound by
the lower court's conclusions and remain free to reach our own."
Schaub v. Vita ~ i c h
Dairy (l989), 236 Mont. 389, 391, 770 P.2d 522,
523. The basis for simply determining if the lower court's
conclusions of law are correct is that there is no discretion in
determining a question of law. The lower court either correctly or
incorrectly applies the law. Steer, Inc. v. Department of Revenue
(1990), 245 Mont. 470, 803 P.2d 601.
The courts are obligated to fashion a distribution which is
equitable to each party under the circumstances. In re Marriage of
Jones (1987), 229 Mont. 128, 745 P.2d 350; 5 40-4-202, MCA.
Working in equity, the courts must seek a fair distribution of the
marital property using reasonable judgment and relying on common
sense. Reaching this equitable distribution will at times require
the court to engage in discretionary action which cannot be
accurately categorized as either a finding of fact or a conclusion
of law. These discretionary judgments made by the trial court are
presumed to be correct and will not be disturbed on appeal absent
an abuse of discretion by the lower court. Meridian Minerals Co.
v. Nicor Minerals, Inc. (1987), 228 Mont. 274, 742 P.2d 456.
Mark's first issue concerns the District Court's valuation of
his interest in his insurance business and the Century Court
Partnership. The District Court found that Mark's interest in his
business was $100,240, and his interest in the partnership was
$17,000.
We will first review the ~istrictCourt's valuation of Mark's
interest in his insurance business. The court's valuation of
$100,240 was based on goodwill, the only asset of the business.
Mark concedes that the value of goodwill in a business is to be
considered a part of the marital estate and may properly be
distributed between the parties. In re Marriage of Arrotta (1990),
244 Mont. 508, 797 P.2d 940. It is the District Court's valuation
of the goodwill in this instance which is disputed by Mark.
Lauri presented testimony at trial from Jack Stevens, a
certified public accountant. Mr. Stevens was asked to prepare a
valuation of Mark's business. In preparing the valuation, Mr.
Stevens relied on various authorities and information, most of
which he included in a written report. This report, respondentls
Exhibit D, was introduced into evidence at trial over Mark's
objection. The method used by Mr. Stevens to calculate the value
of goodwill in this case is similar to the method approved of by
this Court in In re Marriage of Hull (1986), 219 Mont. 480, 712
P.2d 1317. The method used by Mr. Stevens requires the
capitalization of the income generated by the business over and
above what the individual would have earned as a salaried employee
without the business. These excess earnings or discretionary cash,
when capitalized using the appropriate formulas, result in a
valuation for goodwill. As the amount of excess earnings
increases, so will the value of goodwill. Using this method, Mr.
Stevens calculated the value of goodwill in Markqs business at
$102,240.
Mark does not take issue with the method employed by Mr.
Stevens in determining the value of goodwill. Mark argues that the
wrong numbers were used in the formula, resulting in an exaggerated
value for goodwill. Mark called Marshall Bertsch, an accountant,
to testify. Mr. Bertsch was asked to use the same formula, but was
asked to use a higher number for what Mark's salary would have been
without his business. Mr. Bertsch arrived at a value of $37,039.60
for goodwill in the business. Additionally, Mark called two
associates in the insurance industry who testified that the value
of goodwill in the business was very little or nothing.
In a dispute over the value of property in a marriage
dissolution, the District Court may assign any value that is within
the range of values presented into evidence. In re Marriage of
Kramer Mont. In this instance the
- (1987), 229 476, 747 P.2d 8 6 5 .
1
District Court, after weighing all the evidence and the credibility
of the witnesses, found the value of the goodwill in the business
to be $100,240. This value was within the range of figures
presented. The finding of the District Court as to the value of
the business in not clearly erroneous.
Mark also disputes the District Court's valuation of his
interest in the partnership. Mark had a 25 percent interest in a
partnership which owned as its sole asset a commercial building
located in Great Falls. The building was purchased in 1988 for
approximately $231,000. Mark's share of the initial investment in
the building was $7500. At the time of trial, the outstanding loan
balance on the building was $207,000.
No evidence was presented by Mark concerning the fair market
value of the building at the time of trial. When asked on direct
examination, Mark answered that he did not know the fair market
value of the building. However, evidence was presented that the
partnership agreement provided that in the event of the death of a
partner the value of the building would be considered to be
$275,000. The District Court adopted this figure, subtracted the
outstanding balance on the loan, and determined that the
partnership equity in the building was $68,000. Mark's 25 percent
interest in the building was valued at $17,000. The District
Court's valuation of Mark's interest in the partnership was not
clearly erroneous.
I1
Did the District Court abuse its discretion in finding that a
school loan taken out by Lauri after the separation, but prior to
the dissolution, was a marital debt to be considered in the
valuation and distribution of the marital estate?
Following the parties' separation, Lauri's employment was
terminated through no fault of her own. When she was unable to
find other employment, Lauri decided to go back to school. In
order to do so, she took out a student loan in the amount of $4000
prior to the time of dissolution. The District Court considered
this debt in determining the net marital estate. Mark argues that
the debt should not have been included.
The well-settled rule in Montana is that absent unique
circumstances, the marital estate should be valued at or near the
time of dissolution. In re Marriage of Swanson (1986), 220 Mont.
490, 716 P.2d 219. However, the appropriate time for valuing the
marital estate cannot always be tied to some specific time or event
in the dissolution process and the District Court must exercise
discretion in determining the proper time for valuation. In re
~arriageof Wagner (1984), 208 Mont. 369, 679 P.2d 753. In some
instances, a valuation at or near the time of dissolution may
effectuate an injustice because of the nature of the assets or the
course of conduct by the parties. In re Marriage of Gebhardt
(1989), 240 Mont. 165, 783 P.2d 400. The unique circumstances
found in the Gebhardt case requiring valuation at a time other than
the time of dissolution, are not present in this case. The
District Court did not abuse its discretion by including Lauri's
student loan debt in the marital estate.
I11
Was the District Court clearly erroneous in finding that a
bank account of $2,577.13 was an asset of the marital estate?
The District Court included in the net marital estate
$2,577.13 that Mark had in a checking account. Mark testified at
trial that following the separation the parties decided to equally
divide certain assets and that the $2,577.13 represented his half.
On appeal, Mark contends that the amount should deducted from the
net assets of the estate, or that an equivalent amount should be
charged to the wife. While the record regarding this matter is
less than enlightening, it appears that Lauri testified at trial
that the $2,577.13 in question was earned during the marriage and
that she did not receive an equivalent amount of money. The
evidence was conflicting as to whether an equal division of some
assets occurred following the separation. In light of the District
Court's opportunity to observe and judge the credibility of the
witnesses, we cannot say that the court's determination in this
matter was clearly erroneous.
IV
Was it an abuse of discretion for the District Court to admit
into evidence respondent's Exhibit D, a report prepared by
respondent's expert witness?
Rulings on the admissibility of evidence are within the
discretion of the district court. Cooper v. Rosston (1988), 232
Mont. 186, 756 P.2d 1125. Absent an abuse of discretion, this
Court will not reverse a district court's ruling on the
admissibility of evidence. CooDer, 756 P.2d at 1127. However, an
abuse of discretion by a district court in allowing into evidence
that which properly should have been excluded is not always grounds
for reversal. In order for the abuse of discretion to warrant a
reversal, it must be so significant so as to materially affect the
substantial rights of the complaining party. Rule 61, M.R.Civ.P.:
Zeke's Distributing Co. v. Brown-Forman Corp. (1989), 239 Mont.
272, 779 P.2d 908.
Mark alleges that much of the material in respondent's
Exhibit D, which was admitted into evidence over objection, is
inadmissible hearsay and materially affected his substantial
rights. Lauri's expert testified concerning much of the material
which was contained in the r e p o r t . While some of t h e material in
t h e report may have been inadmissible hearsay, t h e r e is no evidence
showing that the admission of the report materially affected Mark's
substantial rights. There has been no showing that t h e District
Court relied on any inadmissible material or that Mark was
prejudiced in any way.
Af finned.
We concur: