Marriage of Jackson , 2017 MT 78N ( 2017 )

04/04/2017
DA 15-0573
Case Number: DA 15-0573
IN THE SUPREME COURT OF THE STATE OF MONTANA
2017 MT 78N
IN RE THE MARRIAGE OF:
GREGORY A. JACKSON,
Petitioner and Appellant,
v.
CATHRYN J. (KIT) JACKSON,
Respondent and Appellee.
APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DR-09-624
Honorable Ed McLean, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Michael Sol, Terry L. Wolfe, Sol & Wolfe Law Firm, PLLP, Missoula,
Montana
For Appellee:
David B. Cotner, Datsopoulos, MacDonald & Lind, Missoula, Montana
Submitted on Briefs: February 8, 2017
Decided: April 4, 2017
Filed:
__________________________________________
Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating
Rules, this case is decided by memorandum opinion and shall not be cited and does not
serve as precedent. Its case title, cause number, and disposition shall be included in this
Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana
Reports.
¶2 Gregory Jackson (Greg) appeals the District Court’s Findings of Fact and
Conclusions of Law regarding the distribution of marital property arising from the
dissolution of his marriage to Cathryn Jackson (Kit).1 Greg raises four issues on appeal
that we restate as follows:
1. Whether the District Court erred when it divided the marital estate pursuant to
§ 40-4-202, MCA.
2. Whether the District Court abused its discretion when it rejected the Standing
Master’s Findings and Conclusions regarding the valuations of businesses
included in the marital estate.
3. Whether the District Court erred by including Greg’s premarital property in
its analysis of the marital estate pursuant to § 40-4-202, MCA.
4. Whether the District Court erred in rejecting joint tax returns as dispositive
evidence of ownership percentages in its analysis of the marital estate
pursuant to § 40-4-202, MCA.
¶3 We affirm the District Court’s Findings of Fact, Conclusions of Law, and Decree
of Dissolution.
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Although Greg’s Reply Brief was not timely received, we did consider it as part of his appeal.
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¶4 Greg and Kit married December 31, 1991, in Helena, Montana, when they were 47
and 38, respectively. On the day the dissolution was entered, Kit was 62 and Greg was
71. Kit was in good health, but Greg’s had deteriorated somewhat. This was a second
marriage for both Greg and Kit and no children came from it. Neither Kit nor Greg had
many assets when they married, but neither did they have many debts. Notably, Greg had
recently retired from the State of Montana, and so brought his PERS retirement fund into
the marriage. After they married, he added Kit to his health insurance policy as she was
finishing school at Carroll College and he was working for a company in Washington.
¶5 Once she graduated in 1992, Kit worked a variety of jobs in the healthcare field,
with varying degrees of success. Her experiences included time as an EMT, cardiac
charge nurse, and working in pediatric oncology and in a neo-natal ICU. She also
worked in home health and multiple hospice businesses. Meanwhile, from 1990-1995,
Greg worked full-time for Ritter Construction. Greg and Kit both earned about $40,000
per year at this time. In 1995, Kit received a job offer in Utah, a state where Greg had no
employment opportunities. Nevertheless, he agreed to move with her and he eventually
found work. While he worked there as a full-time traffic engineer, Greg’s salary
improved to $70,000 per year. He continued with this salary and position until his and
Kit’s fortunes substantially improved.
¶6 The couple’s fortunes improved when Greg and Kit formed Hospice for Utah
(HFU). Greg and Kit differ in their memories of how HFU started, particularly in terms
of Greg’s role and contribution. Although Greg recalls having to convince Kit to start the
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business, he had no medical credentials and no involvement in the medical side of the
business. His roles were more supportive and ancillary, running errands, delivering,
cleaning and assembling equipment, picking up prescriptions, installing software, and
projecting expenditures and income. Much of what Greg did for the company in its
formative period was done in his spare time, as he continued to work at his full-time job.
Greg also studied regulations and attended conferences and trainings on issues pertinent
to running a hospice business. Kit testified too, that he was emotionally supportive and
wanted very much for her to make the business successful. Eventually, Greg was able to
move back to Montana, receiving periodic funds from the company, but retaining no
active role in HFU. He never returned to work at the HFU Utah offices after moving to
Montana, and CPAs assumed his previous responsibilities for the cost reports.
¶7 Kit, on the other hand, made substantially greater contributions to HFU. She hired
employees, negotiated contracts, and wrote the policy and procedure manual, all in
addition to caring for the patients; Kit was the only registered nurse on staff when HFU
began. Nonetheless, she managed to establish a large network of critical physician
referrals throughout Utah. Additionally, HFU employees sought her guidance and
assistance whenever problems with the business arose. Her daily involvement and
availability was instrumental in HFU’s success. Prior to HFU’s beginning, and after it
formed, Kit trained in end of life care, adult acute care, hospice training, and hospice
administrative training. HFU received its hospice business license in December of 1997.
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¶8 HFU prospered very quickly. As HFU became profitable, it garnered buyout
offers from competitors. Around 2000, the Jacksons declined an offer from Odyssey
Corporation of $2 million for HFU. Odyssey tendered another offer of $4.5 million in
2002, which Greg wanted to accept. The deal fell through though, as Kit refused to sell.
Their disagreement over the sale to Odyssey signaled the beginning of their marriage’s
deterioration. Ultimately, however, Kit and Greg agreed to sell a portion of their interest
in HFU to the employees, using an Employee Stock Ownership Program (ESOP). Kit
agreed to the ESOP in an effort to assuage Greg. There were two sales under the ESOP,
each for 31%. The first sale netted over $1 million, while the second brought $1.4
million. The Jacksons retained the remaining 38% as a minority interest in HFU.
¶9 The Jacksons moved to Missoula, Montana, in 2002, not long after Greg had heart
surgery. In Missoula, Kit began a similar hospice business, Hospice of Missoula (HOM),
after she was approached by and met with several medical providers. Greg was not
involved in Kit’s meetings with these providers. Kit started HOM while she continued to
run HFU. Kit’s involvement in HOM mirrored that of HFU—educating employees,
negotiating contracts, and generally managing the business. Her devotion to both
businesses necessitated her dividing her time between Missoula and Utah, spending two
weeks at a time at each location, even though HFU was at that point staffed by competent
management. To facilitate her extended stays in Utah, Kit purchased a home, which
HFU then rented from her. Despite the length of his heart surgery convalescence, Greg’s
involvement in HOM likewise tracked the support role he had assumed for HFU,
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assembling furniture, wiring phones, and researching software for Medicare billing. His
limited involvement stemmed in part from Kit’s knowledge that he was ready to retire,
but he remained available to assist Kit and HOM staff, however they might need him. At
trial, witnesses testified that Kit’s contributions were essential to the success of HOM and
that it would fail without her leadership. Greg called no witnesses to verify his
contributions to HOM.
¶10 Greg filed a Petition seeking dissolution of the marriage on August 24, 2009. The
District Court referred the case to Standing Master Susan Leaphart on November 25,
2009. After trial, Standing Master Leaphart entered proposed Findings of Fact and
Conclusions of Law on May 31, 2012. Kit and Greg both objected to the Standing
Master’s proposed findings. The matter then went before the Honorable District Court
Judge Edward McLean, who held numerous status conferences and hearings. After these
proceedings, the District Court entered its own Findings of Fact, Conclusions of Law and
Decree of Dissolution on April 30, 2015. Greg filed a Motion to Alter and Amend the
District Court’s Findings of Fact, Conclusions of Law on June 23, 2015, to which the
District Court did not respond and so was deemed denied. Greg timely filed an appeal to
this Court on September 18, 2015.
¶11 The District Court made findings that contradicted the findings of the Special
Master. The District Court reallocated the marital estate; struck the Standing Master’s
order that HFU be forced to pay Greg a salary; determined that the Standing Master’s
valuation of HOM was clearly erroneous; and ordered Kit to purchase Greg’s shares in
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HFU for $400,000, with five years of additional payments. A district court is empowered
to reject the findings of a Standing Master when those findings are clearly erroneous.
Anderson v. Deafenbaugh, 2014 MT 215, ¶¶ 15-19, 376 Mont. 212, 331 P.3d 835. In
turn, we review a district court’s factual findings in a division of marital property for
clear error, while its conclusions of law are reviewed for correctness. In re Marriage of
Funk, 2012 MT 14, ¶ 6, 363 Mont. 352, 270 P.3d 39. “A finding of fact is clearly
erroneous if it is not supported by substantial evidence, if the court misapprehended the
effect of the evidence or if, upon reviewing the record, this Court is left with the definite
and firm conviction that the district court made a mistake.” In re L.H., 2007 MT 70,
¶ 13, 336 Mont. 405, 154 P.3d 622.
¶12 Although Greg objects to the unequal reallocation of the estate, his objection is
misplaced as the District Court is tasked under § 40-4-202, MCA, with an equitable
division, not an equal division. In re Marriage of Parker, 2013 MT 194, ¶ 47, 371 Mont.
74, 305 P.3d 816; In re Marriage of Garner, 239 Mont. 485, 488, 781 P.2d 1125, 1127
(1989). Under the provisions of § 40-4-202, MCA, the District Court is vested with
broad discretion to formulate an equitable division of marital property under the
circumstances that reflects the parties’ relative contributions to the marital estate. In re
Marriage of Bartsch, 2007 MT 136, ¶¶ 9, 19-20, 337 Mont. 386, 162 P.3d 72. Equity,
not equality guides that discretion. Marriage of Garner, 239 Mont. at 488, 781 P.2d at
1127.
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¶13 We note at the outset of our discussion that Greg’s first and second issues, whether
the District Court erred in its division of marital property, and whether the District Court
erred by rejecting the Standing Master’s valuation of HOM, are intertwined and
appropriate for concurrent discussion. Here, in a marital estate valued at more than $7
million, the District Court awarded Greg $3.2 million, or 45.7% of the net marital estate,
and Kit $3.8 million, or 54.3% of the net marital estate. Greg’s apportionment from the
District Court differs by approximately $100,000 from that of the Standing Master. The
difference arises in large part from the District Court’s finding that the Standing Master
misapprehended the weight of Greg’s expert testimony when valuing HOM. Unlike the
Special Master, the District Court noted that Greg’s expert failed to account for a
necessary salary adjustment if Kit were to leave or be bought out of the business, failed to
appropriately account for the risk inherent in the business, failed to consider the impact of
the Affordable Care Act’s passage on the business, and failed to consider the length of
stay of patients, which is critical to a hospice business’s cash flow. Thus, Greg’s expert
overvalued the worth of HOM and consequently inflated the net value of the marital
estate. The District Court found the Standing Master clearly erred by accepting Greg’s
expert valuation over Kit’s, who did account for all of those factors. The District Court
further concluded, as did the Standing Master, that unrefuted evidence of Kit’s greater
contributions to the businesses merited a proportionally greater share of their value, and
awarded Kit the more substantial share of the estate. We agree with the District Court
that Kit’s more substantial involvement in the hospice businesses merited a greater share
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of their value, and that the Special Master clearly erred by accepting Greg’s expert
valuation testimony over Kit’s.
¶14 Further, the District Court struck the Standing Master’s conclusion that HFU
should continue paying Greg a salary. The Standing Master concluded Greg should
continue to receive compensation as an officer in HFU—$7,000 per month. Greg was
not an employee of the corporation, however, and performed no services for it at the time
of dissolution. HFU is owned primarily by the ESOP and was not a party to these
proceedings. As such, the District Court found the Standing Master clearly erred by
issuing such an order as the Court did not have personal jurisdiction over HFU. The
District Court further found that to award Greg a greater portion of the remaining assets
in order to compensate him for this stricken revenue would improperly punish Kit for the
Standing Master’s error. We agree with the District Court that the Standing Master
clearly erred by ordering HFU to pay Greg a salary when he was not an officer and
performed no services for HFU. Additionally, we agree with the District Court’s
conclusion that the Standing Master lacked personal jurisdiction over HFU and thus
could not effectuate such an order, even if it was not in error. Further, we find the
District Court’s determination that Kit would be unfairly impacted if other marital assets
were to be redistributed to compensate Greg for this lost revenue constitutes an equitable
division of marital property that was not clearly erroneous.
¶15 The District Court’s conclusion that Kit should purchase Greg’s shares of HFU for
$400,000, with five years of additional payments, was also not clearly erroneous. To
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mitigate the prolonged dispute between the parties over the valuation of HFU, the District
Court ordered a buyout: Kit was to tender an offer to buy Greg’s shares in HFU for any
amount she chose. Reciprocally, Greg could refuse her tender offer and opt instead to
buy Kit’s shares for the same amount. This proposition was a structured sale orchestrated
by the District Court to which neither Greg nor Kit objected and was designed to alleviate
Greg’s concern that the Standing Master’s order had “stranded” his investment in HFU.
We find this structured sale was an equitable means to resolve Greg’s concerns. The
District Court did not clearly err in ordering it.
¶16 Greg’s third issue, whether his premarital property was properly included in the
District Court’s analysis and division of the marital estate constitutes an issue of
well-settled law in Montana since we decided Funk. In Funk, we concluded that
§ 40-4-202, MCA, obligates the District Court to equitably apportion all assets of either
or both spouses, regardless of by whom and when acquired. The District Court’s
equitable distribution of this property is subject to the factors enumerated in § 40-4-202,
MCA, and the unique factors of each case. Funk, ¶ 19. Here, the record shows Greg
received an unequal, but equitable distribution that accurately reflected his contribution to
the marriage in accordance with the factors of § 40-4-202, MCA. Indeed, the District
Court specifically noted that Greg had provided nonmonetary contributions to the
business, including giving emotional support and encouragement to Kit when the
ventures began. The District Court also found he had contributed in supportive, ancillary
roles such as preparing expense reports. Accordingly, we conclude the District Court did
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not err when it made findings pertinent to § 40-4-202, MCA, and included Greg’s
premarital property when analyzing and dividing the marital estate in compliance with
Funk.
¶17 Resolution of Greg’s final issue of whether a married couple’s tax returns
constitute dispositive evidence of an ownership agreement between the parties in a
marriage dissolution again turns on compliance with our holding in Funk and the intent of
§ 40-4-202, MCA. Greg argues that the District Court’s distribution ignored the fact that
he and Kit each owned half of HFU and HOM, as evidenced by their tax returns and
equal distributions over the years. The District Court, however, is tasked with an
equitable division of all marital property, including shares of ownership in a business.
Under the statute, the court is to “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 husband or wife or both.” Funk, ¶ 17. This directive
applies to all assets between the parties. Funk, ¶ 19. We find our holding in Funk
dispositive. Under Funk and § 40-4-202, MCA, property acquired during a marriage is
not divided and awarded upon the marriage’s dissolution based on who holds legal title to
the property. The marital property is to be equitably distributed, regardless of ownership
form. Thus, whether the couple’s tax return reflects an established form of ownership is
inapposite. Greg’s objections to the contrary do not conform with § 40-4-202, MCA, and
Funk.
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¶18 We affirm the District Court’s Findings of Fact, Conclusions of Law, and Decree
of Dissolution.
¶19 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of
our Internal Operating Rules, which provides for memorandum opinions. In the opinion
of the Court, the case presents a question controlled by settled law or by the clear
application of relevant standards of review.
/S/ LAURIE McKINNON
We concur:
/S/ MICHAEL E WHEAT
/S/ DIRK M. SANDEFUR
/S/ JAMES JEREMIAH SHEA
/S/ BETH BAKER
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