Muthukan and Easterbrook , 306 Or. App. 579 ( 2020 )

579
Argued and submitted September 5, 2019, reversed and remanded
September 23, 2020
In the Matter of the Marriage of
Wanphen MUTHUKAN,
Petitioner-Respondent,
and
Paul Clarkson EASTERBROOK,
Respondent-Appellant,
and
CROWN T. COMPANIES, LLC;
Crown T. Offices, LLC; Crown T Ranch Land, LLC;
Crown T. Ranch, LLC; Pen Shine Diner, Inc.;
John Does 1 through 10, Representing any Additional
Business Entities Owned by Respondent Easterbrook or
of which Respondent Easterbrook is Registered Agent,
President, Owner, Member, or Secretary,
Respondents-Appellants.
Douglas County Circuit Court
15DR05158; A164538
475 P3d 459
Husband appeals a judgment of dissolution, assigning error to the property
division. He specifically assigns error to the trial court’s award to wife of a com-
mercial property in Roseburg, Oregon, that the parties refer to as “Hughwood.”
Husband contends that he has rebutted the presumption of wife’s equal contri-
bution to the acquisition of Hughwood and that the court therefore abused its
discretion in awarding the property to wife. Held: Because it is not possible to tell
whether the trial court applied the presumption of wife’s equal contribution to the
acquisition of Hughwood, it is not possible to determine whether the trial court’s
“just and proper” distribution of the assets was within the court’s discretion.
Reversed and remanded.
Ann Marie Simmons, Judge.
Steve C. Baldwin argued the cause and filed the briefs
for appellants.
George W. Kelly argued the cause and filed the brief for
respondent.
580 Muthukan and Easterbrook
Before Armstrong, Presiding Judge, and Tookey, Judge,
and Aoyagi, Judge.
ARMSTRONG, P. J.
Reversed and remanded.
Cite as 306 Or App 579 (2020) 581
ARMSTRONG, P. J.
Husband appeals a judgment of dissolution, assign-
ing error to the property division, specifically, to the trial
court’s award to wife of a commercial property in Roseburg,
Oregon, that the parties refer to as “Hughwood.” Husband
contends that he has rebutted the presumption of wife’s
equal contribution to the acquisition of Hughwood and
that the court therefore abused its discretion in awarding
the property to wife. We conclude that it is not possible to
determine whether the court applied the presumption of
equal contribution to the acquisition of marital assets and
that, therefore, we cannot review whether the trial court’s
judgment is within its range of discretion permitted for a
just and proper division of assets. We therefore reverse and
remand the property division for reconsideration.
The parties met in 1997, when husband was work-
ing in Thailand, and began living together. The parties
were married in December 1999 and separated in 2015. At
the time of trial, husband was 73 and wife was 54. They
have one son together, born in 2000. Husband came into the
marriage with an asset valued at $3.4 million, consisting of
a ranch in California. Wife did not have any assets when the
parties married.
During the first five years of their marriage, hus-
band’s work required foreign travel of long duration, and
wife traveled with him to job locations in Canada, Indonesia,
Mexico, and South Africa. She set up and managed the fam-
ily home at each location and was the primary caregiver for
the parties’ son.
In 2004, husband retired from his employment.
In that same year, husband sold the California ranch and,
in a like-kind exchange under Internal Revenue Code
section 1031, 26 USC § 1031, husband bought a 700-acre
cattle ranch in Douglas County for $1.25 million and the
Hughwood property in Roseburg for $900,000. With the
remaining funds, husband purchased cattle and equipment
for the ranch. Both the ranch and Hughwood are held by
limited liability companies owned by husband.
The parties lived together on the ranch and raised
their son there until 2012, when wife moved out. Husband
582 Muthukan and Easterbrook
managed the parties’ finances and worked the ranch. Wife
managed the marital home and contributed significant
labor to the ongoing operations of the ranch, including run-
ning heavy equipment, eradicating blackberries, moving
irrigation lines, and tending to the cattle.
After wife moved from the marital home, the par-
ties did not live together but, wife continued to do work on
the ranch through 2015 and also occasionally returned to
the marital residence. The ranch earned a net income of
$126,000 in 2014 and $8,340 in 2015. The trial court was
persuaded by wife’s expert that the ranch has a value of
$1,774,800.
Hughwood is a commercial building with leased
office space. Husband acquired Hughwood in 2004 as part
of the section 1031 exchange, and he owns it through an
LLC. He testified that income from the ranch would fluctu-
ate and that he purchased Hughwood as a source of steady
income. Hughwood had a net income of $59,000 in 2014 and
$55,000 in 2015. Husband testified that he managed the
property without any assistance from wife. Hughwood did
not appreciate in value during the marriage. The trial court
was persuaded that, at the time of dissolution, Hughwood
had a value of $832,000.
There were other assets. The trial court placed a
value of approximately $470,000 on the ranch’s cattle, equip-
ment, and personal property. In 2013, husband purchased
a commercial property in Winston, Oregon, that the par-
ties intended wife would run as a diner or donut shop and
that the court valued at $99,240. Husband owned retire-
ment accounts valued at approximately $165,000. Wife held
interests in several small properties in Thailand to which
the court assigned a value of $20,500. Husband set up vari-
ous bank accounts for the LLCs on one of which wife was a
signatory.
The parties’ income consisted of commercial rent
from Hughwood, husband’s Social Security, income from
the sale of cattle, pasture rent, rent from a fire camp on the
ranch property, and a drought payment from the federal
government. The parties had no debt, with the exception of
Cite as 306 Or App 579 (2020) 583
husband’s recently incurred credit card debt and potential
liability for several years of unpaid income taxes. During
the marriage, at wife’s request, husband made wire trans-
fers of approximately $349,000 to Thailand for the purchase
of real property by wife and in support of wife’s family there.
The dispute on appeal concerns the trial court’s
treatment of Hughwood. We thus offer this summary of the
rules pertaining to the distribution of an asset at dissolu-
tion. The court’s division of property is governed by ORS
107.105, which provides, as relevant:
“(1) Whenever the court renders a judgment of marital
annulment, dissolution or separation, the court may pro-
vide in the judgment:
“* * * * *
“(f) For the division or other disposition between the
parties of the real or personal property, or both, of either or
both of the parties as may be just and proper in all the cir-
cumstances. In determining the division of property under
this paragraph, the following apply:
“* * * * *
“(C) Except as provided in subparagraph (D) of this
paragraph, there is a rebuttable presumption that both
parties have contributed equally to the acquisition of prop-
erty during the marriage, whether such property is jointly
or separately held.”
In Kunze and Kunze, 337 Or 122, 135, 92 P3d 100 (2004), the
court construed ORS 107.105(1)(f) to distinguish between
property brought into the marriage and marital assets—
that is, assets acquired during the marriage. In distribut-
ing property acquired before the marriage on dissolution of
the marriage, the court is to consider only what is “just and
proper in all the circumstances.” Id. As to property acquired
during the marriage, there is a presumption that the parties
contributed equally to its acquisition, ORS 107.105(1)(f)(C),
which weighs in favor of an equal division of the property
at dissolution. See Haguewood and Haguewood, 292 Or 197,
206, 638 P2d 1135 (1981) (presumption of equal contribution
suggests equal division appropriate if division based upon
presumption).
584 Muthukan and Easterbrook
A party may overcome the presumption of equal con-
tribution by proving that the other spouse’s efforts during
the marriage did not contribute equally to the acquisition
of the disputed marital asset. Kunze, 337 Or at 134-35. In
assessing whether the presumption has been overcome, the
court considers a spouse’s economic and noneconomic contri-
butions, including the contributions of a spouse as a home-
maker. ORS 107.105(1)(f) (court shall consider contribution
of spouse as homemaker). Id. A rebuttal of the presumption
may justify a division of the marital assets on less than an
equal basis. Staveland and Fisher, 366 Or 49, 57, 455 P3d
510 (2019). If the presumption is rebutted, then the court
decides how to distribute that marital asset without regard
to any presumption and, instead, considers only what is
“just and proper in all the circumstances,” considering the
parties’ proven contributions to the asset. Id. When a party
has proved that a marital asset was acquired free of any
contributions from the other spouse, absent other consider-
ations, it is “just and proper” to award that marital asset
to the party who has overcome the statutory presumption.
Kunze, 337 Or at 135-36.
Husband contended at trial that Hughwood, the
ranch, and his retirement accounts were separately owned
premarital assets that should not be treated as marital
property. In the alternative, if the properties were deter-
mined to be marital assets, husband contended that he
had overcome any presumption of equal contribution by
wife to their acquisition. Husband testified that he never
intended for wife to have an ownership interest in those
assets and that the parties had an agreement to that
effect. Instead, husband testified, he agreed to purchase
property for wife in Thailand.1 Husband requested that
the ranch and Hughwood be awarded to him without any
interest to wife and that wife be awarded her Thailand
properties.
Wife asserted that the ranch and Hughwood were
acquired during the marriage, that all of the properties
were marital assets, and that the presumption of equal
1
Husband testified, “it was an agreement that we had all along that what I
had before was mine and that I would buy her properties in, in Thailand.”
Cite as 306 Or App 579 (2020) 585
contribution to their acquisition had not been overcome. She
requested that the ranch be partitioned equally between the
parties. She requested the sale of Hughwood and an equal
division of the proceeds.
The trial court’s otherwise thorough letter opin-
ion is rather cryptic in its application of the methodology
described in Kunze. The court did not explicitly address
whether the ranch and Hughwood were marital assets or
premarital assets. Rather, the court said, “even if the assets
were acquired as a result of a 1031 exchange of other assets
acquired prior to the marriage, wife is entitled to a division
of at least some of the assets.” Nor, if the properties were
marital assets, did the court explicitly determine whether
husband had overcome the presumption of equal contribu-
tion. Rather, the court said that “[e]ven if this court were
not to apply a statutory presumption, it is clear that wife
contributed substantial labor to the ranch’s operation.” The
court then made a division of assets that the court deter-
mined was just and proper.
In determining what was just and proper, the court
noted wife’s significant contributions of labor towards the
ongoing ranch operations and the significant commingling
of all the assets, through the intermingling of funds from
the various corporate accounts into the family’s finances.
The court determined that the retirement accounts were
husband’s premarital assets and awarded them to husband.
The court rejected husband’s suggestion that wife should be
“awarded” the value of $349,000 for the transfers of funds
by husband to Thailand for the purchase of property and
support of wife’s family there, explaining that records were
inadequate to establish that value for the Thailand proper-
ties. The court attributed a value of $20,500 to the Thailand
properties. The court rejected wife’s contention that the
ranch was amenable to a partition between the parties. The
court reasoned that, in light of husband’s separate acquisi-
tion of the ranch through a section 1031 exchange involving
premarital assets, and husband’s contribution of his sepa-
rate retirement funds to the ranch’s operations, it was just
and proper that husband be awarded the ranch, along with
its machinery and livestock.
586 Muthukan and Easterbrook
In light of its award of the ranch solely to husband,
and in recognition of wife’s contributions to the operation of
the ranch, the court determined that “it is proper and just”
that Hughwood and the Winston property be awarded to
wife. The court observed that the Winston property, which
wife hoped to develop as a donut shop, could also be a source
of income for wife.
Thus, the trial court’s division of real estate and
ranch equipment and livestock between the parties was val-
ued at $951,740 for wife and $2,247,225 for husband. The
court divided equally an account of $9,394.92 held in con-
nection with Hughwood. To balance the award of the ranch
to husband, the court awarded wife an equalizing judgment
of $500,000, bringing the property division between the
parties close to equal, with $1,456,386 awarded to wife and
$1,747,225 to husband.
The court explained that the property division
favored husband but reasoned that it was nonetheless just
and proper, in light of husband’s contribution of premari-
tal assets to the acquisition of the properties. Wife did not
request, and the court did not make, an award of spousal
support to wife, concluding that most of the parties’ income
had derived from their properties and that a division of
property was a better means of providing support for wife.
Husband assigns error to the trial court’s award of
Hughwood to wife. Husband acknowledged at oral argument
that Hughwood was acquired during the marriage and is
therefore a marital asset. See Kunze, 337 Or at 133 (Real or
personal property acquired by either spouse, or both, during
a marriage is a “marital asset.”). He contends, however,
that he rebutted the presumption of equal contribution with
respect to Hughwood and that, in light of that, the prop-
erty should have been awarded to him. See id. at 135-36.
Husband asserts, therefore, that the trial court abused its
discretion in awarding the property to wife under a just and
proper division of assets.
More specifically, husband contends that, although
it is likely that the court did so, it is not possible to deter-
mine from the trial court’s letter opinion whether the court
found that the statutory presumption had been rebutted;
Cite as 306 Or App 579 (2020) 587
husband contends that the evidence requires the conclusion
that it has been overcome. Additionally, husband contends,
assuming that the court found that the presumption had
been overcome, it is not possible to determine whether the
court engaged in the proper analysis in concluding, based
on the mere intermingling of funds from Hughwood in the
family’s finances, that inclusion of Hughwood in the prop-
erty division and the award of that property to wife was
equitable, especially given husband’s intention and the par-
ties’ agreement to keep their properties separate. See Lind
and Lind, 207 Or App 56, 67, 139 P3d 1032 (2006) (whether
commingling requires division of a separately owned asset
depends to a large extent on the owner’s intent).
We agree with husband that the trial court’s
analysis of the preliminary determinations required by
Kunze is opaque. The evidence is certainly sufficient to
establish that husband has overcome the presumption of
equal contribution of the ranch and Hughwood, and wife
concedes as much with respect to Hughwood. That deter-
mination would then allow the court to divide the assets in
the manner that it determines in its discretion is “just and
proper,” without regard to any presumption. Staveland, 366
Or at 57. But as we recently said in Sauter and Sauter, 293
Or App 748, 752, 429 P3d 1034 (2018),
“[W]hen a trial court makes a discretionary decision, ‘the
record must reflect a proper exercise of that discretion.’
[Olson and Olson, 218 Or App 1, 15, 178 P3d 272 (2008)].
The court’s explanation need not be lengthy or complex, but
‘it must comport with the applicable legal framework and
describe the basic reasons for the decision.’ Id.”
It is not possible to tell from the court’s letter opinion
whether it determined that husband had overcome the pre-
sumption of equal contribution with respect to the ranch and
Hughwood, or, if so, to what extent the court’s division of
assets depended on that determination. The former is a fac-
tual determination to be made by the trial court in the first
instance. See Staveland, 366 Or at 58 (whether presumption
of equal contribution has been overcome is a factual deter-
mination). Indeed, contrary to the idea that the court implic-
itly found the presumption to have been overcome, there are
aspects of the court’s letter opinion that lead us to conclude
588 Muthukan and Easterbrook
that the court in fact found that the presumption applied,
which would be a stretch on this record. For example, the
court’s statement that “[e]ven if this court were not to apply
a statutory presumption, it is clear that wife contributed
substantial labor to the ranch’s operation,” suggests that the
court assumed that the presumption of equal contribution
was applicable. Similarly, the court’s explanation as to why
it did not make an equal division of assets suggests that the
court believed that it was dividing the property under the
presumption. But, because the court did not make an explicit
finding, we cannot be certain. And whether the presump-
tion applies, although a preliminary determination, could
have a significant effect on the ultimate property division.
If the presumption is applied, absent other considerations,
the presumed preliminary appropriate division would be
equal. Kunze, 337 Or at 134. That is essentially the division
that the court made here. If the presumption is overcome,
the presumed preliminary appropriate division would be to
award both the ranch and Hughwood to husband. Kunze,
337 Or at 135 (when a party has proved that a marital asset
was acquired free of any contributions from the other spouse,
absent other considerations, it is “just and proper” to award
that marital asset separately to the party who has overcome
the statutory presumption). Only after that determination
does the court determine a just and proper division, consid-
ering all of the marital property. Id. at 135-36.
On remand, the court will have an opportunity to
make an explicit determination as to whether husband has
overcome the presumption of equal contribution to acquisi-
tion of the Hughwood property and, based on that determi-
nation, reconsider its just and proper division of the marital
property.
Reversed and remanded.