Gerving v. Gerving , 2020 ND 116 ( 2020 )

Filed 6/2/20 by Clerk of Supreme Court
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2020 ND 116
Ben Gerving, Plaintiff and Appellee
v.
Janet Gerving, Defendant and Appellant
and
State of North Dakota, Statutory Real Party in Interest
No. 20190253
Appeal from the District Court of Oliver County, South Central Judicial
District, the Honorable John W. Grinsteiner, Judge.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Opinion of the Court by McEvers, Justice.
Justin D. Hager, Bismarck, ND, for plaintiff and appellee.
Erica J. Shively (argued) and Christopher E. Rausch (appeared), Bismarck,
ND, for defendant and appellant.
Gerving v. Gerving
No. 20190253
McEvers, Justice.
[¶1] Janet Gerving appeals from a judgment granting Ben Gerving a divorce
and distributing their marital property. Janet Gerving argues the district
court’s property distribution is clearly erroneous because it is not equitable and
the court did not adequately explain the substantial disparity. We affirm in
part, reverse in part, and remand.
I
[¶2] Ben and Janet Gerving were married in 2004 and have two minor
children together. In November 2017, Ben Gerving sued for divorce.
[¶3] In January 2019, the parties filed a partial settlement agreement. The
parties agreed Ben Gerving would have primary residential responsibility for
the children and Janet Gerving would have parenting time. They agreed to a
parenting time schedule, decision making responsibility, and to reserve the
issue of child support. The district court adopted the parties’ partial settlement
agreement and entered a partial judgment incorporating the terms of the
agreement.
[¶4] In May 2019, a bench trial was held on the remaining issues, including
distribution of the marital estate and spousal support. The district court found
the length of the marriage would support an equal property division, but other
factors had to be weighed, including that Ben Gerving acquired the real
property and farm prior to the marriage, that he lived and worked on the farm
his entire life, and that he did most of the work on the farm. The court
concluded Ben Gerving should be awarded the family farm, homestead,
equipment, animals, and the accompanying debt. The court ordered Ben
Gerving was required to split the net proceeds of any future sale of the land
with Janet Gerving. The court ordered Ben Gerving to pay Janet Gerving
$6,000 per year until Janet Gerving is 65 years old to offset the award of the
farming operation, and awarded each party their separate retirement and
bank accounts. The court ordered neither party would be awarded spousal
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support and each party was responsible for their own attorney’s fees. The court
also ordered Janet Gerving to pay $507 per month in child support. Judgment
was entered.
II
[¶5] Janet Gerving argues the district court’s property distribution is clearly
erroneous because it is not equitable and the evidence does not support the
court’s findings.
[¶6] The district court’s property distribution will not be reversed on appeal
unless the court’s findings are clearly erroneous. Brew v. Brew, 2017 ND 242,
¶ 13, 903 N.W.2d 72. A finding of fact is clearly erroneous if it is induced by
an erroneous view of the law, there is no evidence to support it, or if after
viewing all of the evidence, we are left with a definite and firm conviction a
mistake has been made. Id.
[¶7] When a divorce is granted, the district court is required to make an
equitable distribution of the parties’ property and debts. N.D.C.C. § 14-05-
24(1). The court must start with the presumption that all property held by
either party, jointly or individually, is considered marital property. Lee v. Lee,
2019 ND 142, ¶ 12, 927 N.W.2d 104. All property held by either party must be
included in the marital estate. Lessard v. Johnson, 2019 ND 301, ¶ 21, 936
N.W.2d 528. The court must determine the value of the entire marital estate
and then apply the Ruff-Fischer guidelines to make an equitable distribution.
Allmon v. Allmon, 2017 ND 122, ¶ 7, 894 N.W.2d 869; Lessard, at ¶ 21. The
Ruff-Fischer guidelines include:
The respective ages of the parties, their earning ability, the
duration of the marriage and conduct of the parties during the
marriage, their station in life, the circumstances and necessities of
each, their health and physical condition, their financial
circumstances as shown by the property owned at the time, its
value at the time, its income-producing capacity, if any, whether
accumulated before or after the marriage, and such other matters
as may be material.
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Lessard, at ¶ 21 (quoting Tuhy v. Tuhy, 2018 ND 53, ¶ 10, 907 N.W.2d 351).
The court is not required to make findings about each Ruff-Fischer factor, but
it must explain the rationale for its decision. Wagner v. Wagner, 2007 ND 101,
¶ 10, 733 N.W.2d 593. The court’s property distribution does not need to be
equal to be equitable, but the court must explain a substantial disparity.
Lessard, at ¶ 21.
[¶8] “North Dakota law does not mandate a set formula or method to
determine how marital property is to be divided; rather, the division is based
on the particular circumstances of each case.” Wagner, 2007 ND 101, ¶ 11, 733
N.W.2d 593 (quoting Holden v. Holden, 2007 ND 29, ¶ 10, 728 N.W.2d 312). A
long-term marriage generally supports an equal property division. Lessard,
2019 ND 301, ¶ 21, 936 N.W.2d 528. “While the origin of property must be
considered, there is no requirement to set property aside for a spouse who
brings property into a marriage.” Lee, 2019 ND 142, ¶ 12, 927 N.W.2d 104.
We have recognized liquidation of an ongoing farming operation is generally a
last resort, and the distribution of farm assets to one spouse with an offsetting
monetary award to the other spouse may be upheld. Wagner, at ¶ 11.
[¶9] The district court adopted the parties’ final Rule 8.3 property and debt
listing as a full list of the parties’ assets and debts and found the parties have
$1,850,000 in assets, $264,000 in debts, with a net marital estate worth
$1,586,000. The court made findings about the Ruff-Fischer factors to divide
the martial estate. The court found both parties are 49 years old and have a
high school education, and neither party has any physical limitations that
would hinder their ability to earn a living. The court found the parties own
and operate a farm and Ben Gerving inherited the farming operation and real
property prior to the marriage. The court found the parties have cattle and
smaller animals and crop and pastureland, and both parties worked together
on the farm but Janet Gerving did less work in the last few years. The court
found the farm supported the family early in the marriage, but Ben Gerving
was ill in 2007 and was unable to work, the illness caused the parties to sell
their milk cows in 2007 and begin renting out some or most of the land, Ben
Gerving began working off the farm after his health recovered, and Janet
Gerving began working off the farm in 2008. The court found the parties
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currently rent out the land, work some cattle, and plant crops or hay for animal
feed, but the farming operation is operating at a loss according to the tax
returns. The court found the parties’ high net worth was mostly due to the
land value, the parties are cash poor and live paycheck to paycheck, the parties
rent out three parcels of land and use the rent to make the spring loan
payment, and the parties use the proceeds from the cattle sales to make the
fall loan payment. The court found both parties testified they do not want to
sell the farm and would like to pass it on to their children, and Ben Gerving
testified he wanted to continue farming. The court found the parties will have
a similar station in life post-divorce because their current employment income
is similar and neither party has any unusual circumstances or necessities.
[¶10] The district court found the length of the marriage supported an equal
division, but other factors had to be considered, including that Ben Gerving
acquired the land prior to the marriage, he lived and worked on the farm his
entire life, and he did most of the work on the farm. The court found Janet
Gerving’s contribution to the farm did not grow or expand the farming
operation. The court awarded Ben Gerving most of the parties’ property,
including all of the real property, the farm equipment and animals, the
accompanying debt, and some vehicles. The court explained:
According to the testimony and evidence this appears to be the only
way the family farm will survive. Any division would likely be the
final straw. In addition, it was the wish of the parties that the
property not be sold if possible and for it [to] pass to the children.
Based on its current income producing capabilities, this award
only becomes a windfall if the farmland is sold. As a protection
against such, should any of the land need to be sold or if Ben elects
to sell any of the land, all net proceeds from the sale would then be
split equally with Janet. The small income producing capabilities,
animals, and equipment of the farm will be offset with a yearly
payment to Janet by Ben. Should the sale of land become
necessary the yearly payment can be revisited and adjusted
accordingly.
The court ordered Ben Gerving pay Janet Gerving $6,000 per year until her
65th birthday to offset the award of the farming operation, and the court
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retained jurisdiction of the payment to allow the payment to be revisited if Ben
Gerving sells any of the land. The court explained:
This yearly payment, which effectively offsets Janet’s child
support obligation, along with the unequal award of retirement
accounts serves as the equitable division of the potential farming
proceeds. Janet is receiving $96,000 in payments over the next
sixteen (16) years and approximately $67,500 more in retirement,
amounting to an award of $163,500 to offset the farming operation
award to Ben.
Each party was awarded their personal possessions, retirement accounts, and
individual credit card debt.
[¶11] This was a long-term marriage, which produced two children, and there
was evidence both parties contributed to the marriage and the farming
operation. Evidence established both parties have full time jobs off the farm
and both parties have worked on and contributed to the farming operation.
Evidence established Ben Gerving has worked for the county full time since
2007 and his gross monthly income from the job is approximately $3,794.
Evidence established Janet Gerving worked full time outside the home as a
CNA, her gross monthly income is $2,862, and her employment provided
health insurance for the family. Ben Gerving testified Janet Gerving did some
work on the farm including the bookkeeping, milking the cows until 2007 when
they got rid of the milk cows, feeding and helping with the small animals, and
occasionally feeding the large animals. Both parties testified it was Janet
Gerving’s job to take care of the small animals on a daily basis. Ben Gerving
testified he was sick and hospitalized for four months in 2007, he was unable
to work during that time, and Janet Gerving managed the farm and cared for
the animals while he was sick. Janet Gerving testified she did the day-to-day
chores around the farm while Ben Gerving was sick. The court found Ben
Gerving acquired the land before the marriage. However, Janet Gerving also
contributed to the property. She testified that they put a new house on the
property in 2006 and they both paid for the house.
[¶12] Janet Gerving received a net property award of approximately $163,500
and Ben Gerving received the remainder of the property and debt, for a net
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award of approximately $1,422,500. Ben Gerving was awarded approximately
ninety percent of the marital estate, including all of the parties’ real property
and all of the assets related to the farming operation. Although this Court has
recognized the importance of preserving the viability of a family farming
operation, we have said it should not result in a windfall for one spouse.
Linrud v. Linrud, 552 N.W.2d 342, 346 (N.D. 1996). The district court
reasoned its distribution would only become a windfall if the real property was
sold, and to ensure that does not occur the court ordered Ben Gerving to split
all net proceeds from any future sale of the property equally with Janet
Gerving and the yearly payment could be adjusted if a land sale became
necessary. However, the court cannot retain jurisdiction to modify a final
property distribution. See Jacobs-Raak v. Raak, 2020 ND 107, ¶ 10; Keita v.
Keita, 2012 ND 234, ¶ 28, 823 N.W.2d 726. The court erred by attempting to
retain jurisdiction to ensure the distribution remained equitable.
[¶13] Evidence exists in the record that both parties contributed to the farming
operation. Janet Gerving contributed to the farm and family by working full
time off the farm, providing medical insurance, and by working on the farm.
Ben Gerving was awarded ninety percent of the parties’ assets, including all of
the real property and any assets related to the farming operation. We conclude
the property distribution is not equitable.
[¶14] This Court has previously reversed similar property distributions. In
Wagner v. Wagner, 2007 ND 101, ¶¶ 1, 7, 733 N.W.2d 593, this Court reversed
a property distribution in which the net marital estate was worth $332,500,
the wife received a property award of $12,000 and spousal support of $200 per
month for two years, and the husband received the remainder of the marital
assets and all marital debts. The district court explained its distribution by
finding the wife was “entitled to little of the assets” because she contributed
little to the accumulation of the assets. Id. at ¶ 15. This Court acknowledged
the district court was attempting to preserve farm property, but concluded:
Although we have generally said that liquidation of an
ongoing farming operation is a last resort in dividing marital
assets, we are not confronted here with an ongoing farming
operation, but instead the primary use of the land is as rental
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property. Here, the district court was laboring to maintain the
farm assets intact despite the lack of an ongoing farming operation
and, in effect, was removing the property from consideration of an
equitable distribution.
Id. at ¶ 16. This Court concluded the district court erred in limiting the
property distribution to the wife based on the husband’s limited income and by
failing to consider liquidation of the farm assets. Id. at ¶ 17.
[¶15] Similarly, in this case it is clear the district court was attempting to
keep the farming operation viable and respect the parties’ desire to keep the
real property available for the parties’ children, but there are other ways it can
be accomplished with an equitable distribution and without limiting the
distribution to Janet Gerving based on what Ben Gerving can afford to pay.
Most of the parties’ land is being used as rental property. Evidence established
the farm is made up of four parcels of land, Ben Gerving testified that he uses
the land to plant grain and make hay for the animals, that he rents out
cropland in three of the parcels, and that the rent is used to pay on the loan
from the bank. Ben Gerving testified he would not have any problem with
whatever the court does with the land, including giving some to Janet Gerving,
as long as it is saved for their children. He testified there was one parcel of
land he could do without and keep the farm operational. Janet Gerving
testified she did not have any plans to sell the land if it was awarded to her.
She also testified that she understood that she may receive some of the debt if
she is awarded some of the land, she would rent the land out, and she was
willing to rent it to Ben Gerving if he needed it for the farming operation.
[¶16] On this record, we are left with a definite and firm conviction a mistake
has been made, and we conclude the district court’s property distribution is
clearly erroneous. We reverse and remand for the court to make an equitable
property division.
III
[¶17] Janet Gerving argues the district court erred by failing to find Ben
Gerving committed economic misconduct. She alleges Ben Gerving sold cattle
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under his sisters’ names and the sisters returned the money from the sales to
him which allowed him to hide the income.
[¶18] “Economic misconduct is misconduct that results in a wasted asset or in
the reduction of the net marital estate.” Weigel v. Weigel, 2015 ND 270, ¶ 22,
871 N.W.2d 810 (quoting Hoverson v. Hoverson, 2001 ND 124, ¶ 24, 629 N.W.2d
573). Economic fault or financial misconduct are factors that may be
considered in distributing marital property. Id. A court’s findings about
economic fault are findings of fact, subject to the clearly erroneous standard of
review. Conzemius v. Conzemius, 2014 ND 5, ¶ 22, 841 N.W.2d 716.
[¶19] The district court found Ben Gerving acknowledged selling cattle under
other people’s names, he explained he owed his sister money for her help with
expenses or for equipment she purchased for the farm, he gave his sister the
cattle in exchange for her help, and he admitted that some of the proceeds were
given back to him but they were used for farm expenses. The court found Ben
Gerving testified Janet Gerving was aware this was how they operated and she
did not have a problem with it when she was living on the farm. The court
found:
During Janet’s testimony she acknowledged handling the
books and taxes for the farm the years she lived there. She
questioned some of the sales of cattle/calves, especially since the
separation, but seemed to stop short of accusing Ben of hiding
cattle sale proceeds. It would appear from the testimony and
evidence that Ben is struggling with handling the finances and bill
paying since the separation. While there are questions about some
of the finances, the Court doesn’t find any evidence of intentional
misconduct; instead the questions seemed to be caused more from
lack of records and lack of money management skills rather than
misconduct.
[¶20] Ben Gerving testified he gave some cattle to his sister because he
borrowed money from her to pay the land taxes, they used the same practice
in the past, and it did not bother Janet Gerving. There was evidence Ben
Gerving used the proceeds he received from selling cattle in other people’s
names to pay bills and other farm expenses. Evidence supports the court’s
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findings. The court’s finding that there was no evidence of economic
misconduct is not clearly erroneous.
IV
[¶21] We affirm the judgment in part, reverse in part, and remand.
[¶22] Lisa Fair McEvers
Gerald W. VandeWalle
Jerod E. Tufte
Daniel J. Crothers
Jon J. Jensen, C.J.
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