In Re the Marriage of Clark , 381 Mont. 50 ( 2015 )

September 8 2015
DA 14-0614
Case Number: DA 14-0614
IN THE SUPREME COURT OF THE STATE OF MONTANA
2015 MT 263
IN RE THE MARRIAGE OF:
NANCY R. CLARK,
Petitioner and Appellee,
and
GORDON A. CLARK,
Respondent and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DR 12-531
Honorable Mary Jane Knisely, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Stephen C. Mackey, Towe, Ball, Mackey, Sommerfeld & Turner,
P.L.L.P., Billings, Montana
For Appellee:
Jill Deann LaRance, LaRance & Syth, P.C., Billings, Montana
Submitted on Briefs: August 5, 2015
Decided: September 8, 2015
Filed:
__________________________________________
Clerk
Justice Beth Baker delivered the Opinion of the Court.
¶1 The Thirteenth Judicial District Court, Yellowstone County, entered a final
dissolution decree in the marriage of Gordon A. Clark and Nancy R. Clark.1 Gordon
appeals, raising the following issues:
1. Whether the District Court abused its discretion in ordering Gordon to make an
equalization payment within 120 days or be forced to sell or transfer the ranch.
2. Whether the District Court abused its discretion in failing to consider tax
liabilities associated with selling the ranch.
3. Whether the District Court erred in its valuation of the ranch.
¶2 We affirm on the first and third issues, but reverse and remand on the second
issue.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 Gordon and Nancy married in 1996 and separated in 2012 with no children born to
the marriage. Nancy entered the marriage with property on the Stillwater River near
Absarokee, Montana (“the river house”) and Gordon entered the marriage with property
near Acton, Montana (“the ranch”). The parties put both properties under joint title upon
their marriage. Both parties are currently in their sixties and Nancy has a number of
health issues.
¶4 After the parties separated, Nancy filed a motion for temporary maintenance. The
District Court ordered Gordon to pay $2,800 in temporary maintenance per month
beginning in November 2012 and continuing until final resolution unless the river house
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As part of the dissolution, Nancy was restored to her former name, Nancy R. Thorn.
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sold first. Gordon made payments from November 2012 through February 2013 but then
stopped. Gordon also stopped making mortgage payments on the ranch in early 2012,
sending that property into foreclosure. The parties sold 160 acres of the ranch to a
neighbor for $800 per acre and used the proceeds to bring the mortgage current in early
2013. Gordon again stopped making mortgage payments on the ranch, however, sending
it into foreclosure for a second time in July 2013.
¶5 The river house was sold in early 2013. After Gordon stopped paying temporary
maintenance, the District Court allowed Nancy to draw her temporary maintenance from
the river house proceeds. At the time of the final decree, the District Court estimated that
$289,681.23 remained in proceeds from the river house’s sale.
¶6 The ranch’s value was a major issue at trial. The parties each employed experts to
testify about the property’s value. Gordon’s expert valued the ranch at $1,172,513.
Nancy’s expert valued the property at $2,667,940. Gordon also indicated at trial that he
would not sell the ranch for $1,172,513, but would consider selling it for $2.4 million.
Neither party presented evidence on the tax implications of selling the ranch.
¶7 The District Court valued the ranch at $2.45 million and valued the totality of the
marital estate at approximately $2.6 million. In its distribution of the marital estate, the
court awarded the ranch and its associated debt to Gordon. The District Court found that
the ranch “does not provide a substantial amount of income to [Gordon].” The Court
awarded $955,297.96 or approximately 37% of the estate to Nancy, including requiring
Gordon to make an equalization payment of $650,000 to Nancy within 120 days from the
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date of the order. The court specified that if Gordon did not make such a payment in the
allotted time, the ranch was to be sold “as quickly as possible” and the equalization
payment drawn from proceeds of the sale. The court also specified that if Gordon did not
cooperate with the sale of the ranch, the property would transfer solely into Nancy’s
name so that she could handle its sale.
¶8 After the dissolution decree was entered, Gordon filed a motion under M. R. Civ.
P. 52 for the District Court to amend its findings of fact and conclusions of law, and
under M. R. Civ. P. 59 for amendment of judgment and a new trial.2 The District Court
denied the motion without explanation. Gordon appeals.3
STANDARDS OF REVIEW
¶9 We generally review a district court’s valuation and distribution of a marital estate
for an abuse of discretion. In re Marriage of Thorner, 2008 MT 270, ¶ 21, 345 Mont.
194, 190 P.3d 1063. Although the parties dispute the standard of review to apply to
Gordon’s appeal considering he provided notice of appeal only from the District Court’s
denial of post-trial motions, we consistently have applied an abuse of discretion standard
to post-trial motions on discretionary dissolution matters. In re Marriage of Anderson,
2013 MT 238, ¶ 13, 371 Mont. 321, 307 P.3d 313; In re Marriage of Johnson, 2011 MT
255, ¶ 12, 362 Mont. 236, 262 P.3d 1105; In re Marriage of Schoenthal, 2005 MT 24,
2
Before the District Court, the parties disputed whether Gordon’s motion for a new trial was
timely brought under M. R. Civ. P. 59(b)’s twenty-eight day time limit and whether M. R. Civ.
P. 58(1)’s separate document requirement applies. On appeal, however, Nancy has apparently
abandoned her argument that Gordon’s post-trial motion was untimely.
3
Gordon filed for bankruptcy while this appeal was pending, but later agreed to voluntary
dismissal and the bankruptcy case was closed.
4
¶ 9, 326 Mont. 15, 106 P.3d 1162. Further, we review findings of fact to determine
whether they are clearly erroneous. M. R. Civ. P. 52(a)(6); In re Marriage of Patton,
2015 MT 7, ¶ 18, 378 Mont. 22, 340 P.3d 1242.
DISCUSSION
¶10 1. Whether the District Court abused its discretion in ordering Gordon to make an
equalization payment within 120 days or be forced to sell or transfer the ranch.
¶11 The District Court ordered Gordon to make an equalization payment of $650,000
to Nancy within 120 days of its June 17, 2014 dissolution order or else have the marital
ranch placed on the market and sold “as quickly as possible” with the net proceeds of the
sale applied toward the equalization payment. Gordon argues that this was an abuse of
discretion.
¶12 Section 40-4-202(1), MCA, requires a district court to “equitably apportion” a
marital estate upon dissolution. A district court has broad discretion in apportioning the
estate, Patton, ¶ 46, but the discretion has limits. For instance, a district court abuses its
discretion when it apportions more property to a party than is found in the marital estate.
In re Marriage of Dennison, 2006 MT 56, ¶ 22, 331 Mont. 315, 132 P.3d 535. Relatedly,
we have expressed concern about a monetary distribution award that is larger than the
liquid assets of the party ordered to pay and that requires immediate payment. Such an
award may be an abuse of discretion depending on the particular circumstances of a case.
Compare In re Marriage of Schwartz, 2013 MT 145, ¶¶ 34-36, 370 Mont. 294, 308 P.3d
949 (remanding for the district court to enter a deferred payment plan where an up-front
equalization payment would require the husband to sell his business and would
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undermine his future ability to earn an income), with In re Marriage of Westland, 257
Mont. 169, 172, 848 P.2d 492, 494 (1993) (upholding a district court’s order requiring an
up-front payment from the husband where future payments were not assured or secured
and the husband potentially could transfer assets or enter bankruptcy to the wife’s
detriment). As we explained in Schwartz:
It is not error per se to make an award greater than the payor’s liquid assets,
if the payor can sell or refinance property to meet the obligation. Such an
award is not ideal, however, for there are various disadvantages to
compelling sale in the divorce case. Most importantly, sale requires
payment of capital gains costs, commissions, and other expenses, and
property often fails to earn full value when sold under the pressure of
divorce. Because of these disadvantages, an immediate monetary award
which exceeds the value of the payor’s liquid assets is a remedy of last
rather than first resort. A better option would be division in kind (if division
can be accomplished without violating the rule against co-ownership), or a
monetary award deferred over sufficient time for liquid funds to be
accumulated without sale. If the payor cannot reasonably sell assets or
borrow liquid funds to pay an immediate monetary award, the making of
such an award is error.
Schwartz, ¶ 34 (quoting Brett R. Turner, 3 Equitable Distribution of Property § 9.9,
31-33 (3d ed. 2005)).
¶13 Gordon employs the above quote to argue that the District Court’s order requiring
an immediate equalization payment or sale of the ranch was error. What Schwartz makes
clear, however, is that whether the structure of an equalization payment is error depends
on the particular circumstances of a case. Schwartz, ¶ 34 (“In the right circumstances, a
deferred monetary award may be preferable to an ordered sale of asset . . . .”). To that
end, Nancy argues that the District Court’s order specifying a 120-day timeline for the
equalization payment and consequences of failing to comply was justified in this case
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because of Gordon’s lack of cooperation throughout the dissolution proceedings. We
agree that the District Court’s equalization order was not an abuse of discretion.
¶14 As mentioned, Gordon ceased temporary maintenance payments while this case
was pending and twice allowed the ranch to slip into foreclosure. Additionally, Nancy is
without work and suffering medical issues, and Gordon already has attempted to
discharge debts through bankruptcy once in recent years. Further, the evidence showed
that a partial sale of the ranch property had occurred previously to satisfy debt. Given
these facts, the District Court acted within its sound discretion to order an up-front
equalization payment and to incentivize Gordon’s cooperation by specifying
consequences for failing to make the payment within the specified time, including the
forced sale of the ranch or its transfer to Nancy for sale. See Westland, 257 Mont. at 172,
848 P.2d at 494.
¶15 2. Whether the District Court abused its discretion in failing to consider tax
liabilities associated with selling the ranch.
¶16 Under § 40-4-202(1), MCA, a district court equitably apportioning an estate must
take into account “liabilities,” among other factors. In In re Marriage of Beck, 193 Mont.
166, 631 P.2d 282 (1981), we held that where a property distribution ordered by a court
includes a taxable event precipitating a concrete and immediate tax liability, such tax
liability should be considered by the court before entering its final judgment. Beck, 193
Mont. at 172, 631 P.2d at 285. The failure to consider the tax consequences of such a
“concrete and immediate” event is an abuse of discretion. In re Marriage of Thorner,
2008 MT 270, ¶¶ 42-47, 345 Mont. 194, 190 P.3d 1063.
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¶17 Gordon argues that the District Court abused its discretion by failing to consider
the tax consequences of selling the ranch. The District Court’s dissolution decree does
not reference any liabilities associated with selling the ranch. Nancy argues, however,
that no such consideration was necessary in this case because the consequences were
speculative rather than concrete and immediate.
¶18 Determining whether a tax event is the concrete and immediate result of a
distribution order requires examining the context around the distribution order. To find
that a taxable event is concrete and immediate, we have not demanded that the
distribution order specifically direct the very event that triggers taxation. See Thorner,
¶ 45 (“We note that the decree does not require that $31,595 be withdrawn from Julie’s
retirement account. Still there is no doubt that the District Court’s decree required a
distribution to Ron of this amount as a part of the parties’ retirement assets.”); In re
Marriage of Lee, 249 Mont. 516, 517-19, 816 P.2d 1076, 1076-78 (tracing the necessity
of liquidating assets constituting a taxable event to the District Court’s distribution
order). But, viewing the surrounding circumstances, we have demanded that the
distribution order at least reasonably appear to trigger a taxable event. See In re
Marriage of Haberkern, 2004 MT 29, ¶¶ 16-19, 319 Mont. 393, 85 P.3d 743 (concluding
that a husband’s testimony that assets he was distributed may eventually be taxed did not
establish a concrete and immediate tax liability); In re Marriage of DeBuff, 2002 MT
159, ¶¶ 48-49, 310 Mont. 382, 50 P.3d 1070 (concluding that a concrete and immediate
tax liability was not triggered by order where husband agreed he had “a variety of other
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[non-taxed] options available” to provide funds necessary to satisfy equalization payment
obligation); In re Marriage of Turbes, 234 Mont. 152, 159-60, 762 P.2d 237, 241-42
(1988) (concluding that the event triggering any tax liability, which itself was theoretical,
was an accord and satisfaction that occurred before the District Court’s order).
¶19 In this case, both the surrounding circumstances and the order itself implicate a
significant taxable event. The District Court ordered Gordon to make a $650,000
equalization payment to Nancy. The only asset worth that amount in Gordon’s
possession is the ranch. The District Court ordered that, if the equalization payment was
not made within 120 days, the ranch be sold “as quickly as possible” to satisfy Gordon’s
equalization obligation. Although Nancy argues that Gordon could find funds to pay his
obligation by refinancing or mortgaging instead of selling the ranch, she does not suggest
how Gordon would be able to obtain quickly such a substantial loan in light of his
undisputed lack of substantial income and the recent foreclosure actions. Nancy also
argues that a portion of the ranch—instead of the entire ranch—could be sold to finance
the equalization payment, but a taxable event presumably will occur with any sale of the
property sufficient to raise $650,000. The District Court’s order makes a substantial sale
of ranch property concrete and immediate.
¶20 Nancy further argues that, even if a tax event is a concrete and immediate result of
the District Court’s order, Gordon failed to present evidence of the tax that would befall
him upon selling the ranch and thus waived the argument. Nancy cites In re Marriage of
Taylor, 257 Mont. 122, 848 P.2d 478 (1993), and Turbes as support. In Taylor, we
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rejected a husband’s argument that a district court erred by not taking into account all of
his company’s liabilities because (1) “no evidence was introduced at trial relating to a
concrete and immediate tax liability,” (2) the husband introduced no evidence that he
would “have to sell his stock in order to pay any cash award,” and (3) the court did not
order him to sell his stock. Taylor, 257 Mont. at 127, 848 P.2d at 481. In Turbes, we
stated that a wife “failed to produce adequate evidence at the hearing upon which the
court could make a determination of the existence of tax consequences,” where the wife
offered only an “unsubstantiated belief”—conflicting with other evidence—that she
“theoretical[ly]” would incur a tax liability. Turbes, 234 Mont. at 159-60, 762 P.2d at
241-42.
¶21 In contrast to Turbes and Taylor, there is a concrete and immediate tax event
contemplated on the face of the District Court’s order in this case. The District Court’s
short timeline for the equalization payment effectively renders selling the ranch the only
reasonable option to make the payment. Further, the District Court specifically ordered
that the ranch be sold if the payment is not made within the timeline. Finally, the record
suggests that the first mention of a possible sale of the ranch appeared the day before trial
in Nancy’s proposed findings and conclusions. The 120-day deadline was imposed sua
sponte by the court in its final decree. After the District Court ordered the ranch sold if
Gordon did not make the equalization payment within that time period, Gordon filed a
post-trial motion bringing his liabilities argument to the District Court’s attention. In the
unusual and particular circumstances of this case, we hold that Gordon did not waive his
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right to raise his tax argument on appeal. Once raised in Gordon’s post-trial motion, the
District Court abused its discretion by failing to consider the tax liabilities associated
with selling the ranch.
¶22 3. Whether the District Court erred in its valuation of the ranch.
¶23 Gordon argues that the District Court’s valuation of the ranch at $2.45 million is
not supported by the record. A District Court may adopt any valuation of marital
property that is reasonable in light of the evidence. In re Marriage of Meeks, 276 Mont.
237, 242-43, 915 P.3d 831, 834-35 (1996).
¶24 The District Court chose a valuation that was between Gordon’s proposed
$1,172,513 valuation and Nancy’s proposed $2,667,940 valuation. The court justified its
choice by “considering comparable properties as well as the whole Ranch property and
all of the improvements made thereon,” and Gordon’s testimony that he would consider
selling the property for $2.4 million. The court reduced Nancy’s proposed valuation by
approximately $217,000 because of “the insufficient support in the record and the
speculation that dividing the ranch parcels would increase the value.” Gordon takes issue
with this explanation, arguing that the amount of the reduction does not match the court’s
rejection of the view of Nancy’s expert on the potential for subdividing the ranch.
However, based on the record on appeal—including the bases for the proposed
valuations, the price at which the parties sold a portion of the ranch during dissolution
proceedings, and Gordon’s admission about the price at which he would consider selling
the property—the District Court’s valuation is supported by substantial evidence.
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Because there is conflicting evidence, it was within the District Court’s province to weigh
the evidence, determine the credibility of witnesses, and value the ranch accordingly. See
Koppen v. Bolich, 2003 MT 313, ¶ 42, 318 Mont. 240, 79 P.3d 1100.
CONCLUSION
¶25 We affirm the District Court’s valuation of the ranch and the structure of its
equalization payment order. We reverse the final property distribution because it fails to
consider tax liabilities associated with selling the ranch and those liabilities potentially
affect an equitable apportionment of the estate. We remand for further consideration of
such tax liabilities and entry of an amended property distribution order.
/S/ BETH BAKER
We concur:
/S/ MIKE McGRATH
/S/ PATRICIA COTTER
/S/ MICHAEL E WHEAT
/S/ JIM RICE
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