Brush and Brush , 319 Or. App. 1 ( 2022 )

1
Argued and submitted February 10, 2020; judgment modified to remove
equalizing judgment in favor of husband, otherwise affirmed April 13, 2022
In the Matter of the Marriage of
Theresa Marie BRUSH,
Petitioner-Appellant,
and
Patrick Jay BRUSH,
Respondent-Respondent,
and
Melissa Ann BRUSH,
Adult Child.
Clackamas County Circuit Court
DR09100365; A169333
509 P3d 124
In this domestic relations case, wife appeals from a general judgment of dis-
solution, arguing that the trial court erred in awarding to husband $125,000 of
wife’s inheritance as an equalizing payment. This case is before us again follow-
ing our remand of the original property division on grounds that the trial court
had not applied to the presumption of equal contribution the statutory exception
for gifted property. On remand, the trial court made the same property division
of wife’s inheritance that it had made in the original dissolution judgment. Wife
appeals that ruling. Held: The trial court abused its discretion by misapplying
the statutory and equitable factors in its division of the property. Under a proper
application of those factors, the law required awarding to wife her entire sepa-
rate inheritance.
Judgment modified to remove equalizing judgment in favor of husband;
otherwise affirmed.
Katherine E. Weber, Judge.
George W. Kelly argued the cause and filed the briefs for
appellant.
Kevin L. Kelly argued the cause and filed the brief for
respondent.
Before Ortega, Presiding Judge, and Shorr, Judge, and
James, Judge.
2 Brush and Brush
ORTEGA, P. J.
Judgment modified to remove equalizing judgment in
favor of husband; otherwise affirmed.
Cite as 319 Or App 1 (2022) 3
ORTEGA, P. J.
In this domestic relations case, wife appeals from a
general judgment of dissolution, arguing that the trial court
erred in awarding to husband $125,000 of wife’s inheritance
as an equalizing payment. This case is before us again
following our remand of the original property division on
grounds that the trial court had not applied to the presump-
tion of equal contribution the statutory exception for gifted
property in ORS 107.105(1)(f)(D). Brush and Brush, 279 Or
App 25, 377 P3d 620 (2016). On remand, the trial court made
the same property division of wife’s inheritance that it had
made in the original dissolution judgment. We now conclude
that the trial court abused its discretion by misapplying the
statutory and equitable factors in its division of the prop-
erty. We further conclude that, under a proper application of
those factors, the law requires awarding to wife her entire
separate inheritance. Accordingly, we modify the judgment
to remove the equalizing judgment to husband and other-
wise affirm.
We decline wife’s request that we take de novo
review, because this is not an exceptional case warranting
such review. ORAP 5.40(8)(c) - (d). Because we decline to
review the facts de novo, we “review the trial court’s deter-
mination of a ‘just and proper’ property division for an abuse
of discretion. In doing so, we are bound by the trial court’s
express and implicit factual findings if they are supported
by any evidence in the record.” Morgan and Morgan, 269 Or
App 156, 161, 344 P3d 81, rev den, 357 Or 595 (2015).
We begin with the background facts, which we sum-
marized in our prior decision:
“The parties married in 1982, had six children during the
marriage, and separated in September 2009. At the time
of the dissolution trial, wife was 47 years old and husband
was 50 years old. In 2007, wife inherited from her father
assets that were worth about $450,000 at the time of the
dissolution trial. As relevant to this appeal, her father’s will
devised ‘the residue of my estate in equal shares to my two
daughters.’ Accordingly, the will did not mention husband.
Wife kept the inheritance property separate from the mar-
ital estate, in part to protect it from husband’s creditors.
At the time of trial, wife was earning $2,284 per month
4 Brush and Brush
and husband was earning between $5,000 and $6,000 per
month. During the course of the marriage, however, hus-
band had engaged in a number of failed business ventures.”
Brush, 279 Or App at 27-28.
As relevant in this appeal, we also provide the fol-
lowing facts from the record. Husband filed for bankruptcy
in January 2009, which was dismissed in 2011 when he
did not meet his repayment plan. Husband and wife sep-
arated in September 2009, and wife moved out of the fam-
ily home. Since that time, the parties have not provided
any financial assistance to each other. Wife petitioned for
dissolution in October 2009, and the dissolution trial took
place on four days between January and December 2011.
Husband stopped paying the mortgage on the family home
sometime in 2009, which was in his name only, and wife
made no financial contributions. Ultimately the home was
lost to foreclosure in 2011, during the pendency of the dis-
solution. The home was in fair to poor condition when it
was appraised in the fall of 2010—including not having a
working well—and, as such, would not have qualified for a
loan. The parties’ respective appraisals of the home were
$230,000 and $255,000, which resulted in a negative equity
of between $36,000 and $61,000 from two mortgages and
a tax lien for unpaid real property taxes. After foreclosure
of the home in 2011, husband still had an outstanding loan
related to the house of $74,652. Wife did not use any money
from her inheritance to assist husband in his bankruptcy or
to prevent foreclosure on the home.
The parties had limited assets, apart from wife’s
inheritance, but husband had significant debts, primarily
from his failed business ventures and the outstanding debt
from the family home. The court determined that the debts
were marital debts and divided them equally, making each
party responsible for one half of the total listed debts of over
$160,000 in the judgment. In its ruling, the court found that
wife had kept her inheritance separate—specifically taking
steps, such as keeping the accounts and tax returns separate,
to protect it from the foreclosure, husband’s bankruptcy, and
any additional business ventures of husband—and that wife’s
father’s donative intent was that his inheritance would be
Cite as 319 Or App 1 (2022) 5
shared by his two daughters. However, the court found that
wife had not rebutted the presumption of equal contribution,
because “it [was] not clear that the [daughters’] husbands
would be precluded from the benefits” of the inheritance. The
court further determined that it would not impose spousal
support and instead would “order that the lion’s share of the
retirement[1] remain with [w]ife so that she can continue to
have the ability to make income to support herself, given
that [h]usband does definitely have a higher ability to earn
income.” The court also ordered wife to pay an equalizing
judgment of $125,000 from the inheritance to husband.
In the first appeal, wife asserted that the trial
court incorrectly awarded husband part of her inheritance,
because the trial court improperly applied a presumption of
equal contribution to her inheritance, which she held sepa-
rately. Brush, 279 Or App at 28. We agreed with that conten-
tion, concluding that the trial court should have applied the
version of ORS 107.105(1)(f) that became effective January 1,
2012, which removed separately held property acquired by
inheritance from the presumption of equal contribution.
Id. at 33-34. We vacated and remanded the property division
for the trial court to reconsider it in light of the amended
version of ORS 107.105(1)(f) and “to adjust the property divi-
sion appropriately.” Id. at 34.
On remand, the parties did not present any new evi-
dence, but made arguments to the court about the property
division. Both parties explicitly asked the court to recon-
sider only the equalizing judgment and to not disturb any-
thing else in the prior property division. The court also spe-
cifically clarified with the parties that they did not want the
court to go back through the property division and assign
any missing values to determine if the division was approx-
imately 50/50.
After taking the matter under advisement, the court
issued a letter opinion that reinstated the prior property
division with the equalizing judgment. The court stated:
1
It is unclear from the court’s opinion to what “retirement” the court was
referring. However, during argument, wife’s counsel repeatedly referred to wife’s
inheritance as her retirement, because she had no other source of retirement
income and the bulk of that inheritance was in the form of retirement accounts.
6 Brush and Brush
“The evidence was clear that Wife acquired her inheri-
tance and held it separately continuously from the time it
was received. Wife’s inheritance is not subject to the pre-
sumption of equal contribution—the legal presumption is
that Wife will keep the entire inheritance. The resulting
question is whether it is just and proper in the property
distribution for the court to award the asset in its entirety
to Wife as her separate property, or whether other consid-
erations require a different result.
“The parties were fraught with financial struggles
throughout their marriage, and Husband’s poor finan-
cial decisions consistently brought debt upon the family.
Husband believed that the inheritance would be an asset
for the parties’ retirement—a benefit that they would both
be able to enjoy.
“Upon receipt of the inheritance, Wife refused to use any
portion for the benefit of the family. The family’s financial
situation continued to worsen, resulting in Husband filing
for bankruptcy and foreclosure proceedings on the family
home. This was in part due to Husband’s history of finan-
cial mistakes, and in part due to Wife’s decision not to use
any portion of her inheritance to ‘bail out’ this large asset.
The home was eventually lost through foreclosure through
the combined action of Husband and inaction of Wife.
“It is just and proper for both of the parties to share
in the ups and downs of their finances throughout their
marriage. Wife’s choice to hold her inheritance completely
separate had direct negative ramifications on the mari-
tal estate, and caused substantial harm to the family’s
finances. For Wife to leave the marriage with the entirety
of her retirement as her separate asset would result in an
unfair and disparate property distribution and would not
be just and proper.
“The court’s previous property division will remain.”
The court entered a general judgment of dissolution that
included the findings from the letter opinion and awarded
husband an equalizing judgment of $125,000.2
2
The general judgment after remand, as did the original judgment, awarded
to husband either a $100,000 money judgment or $125,000 from the retirement
accounts that wife received as a part of her inheritance, with the additional
$25,000 to cover taxes for the lump sum payment.
Cite as 319 Or App 1 (2022) 7
On appeal, wife argues that the trial court erred
in its application of the “just and proper” considerations, as
set out in Kunze and Kunze, 337 Or 122, 135, 92 P3d 100
(2004). She argues that the court, instead of applying the
correct equitable considerations, imposed the equalizing
judgment because wife chose to keep separate from the mar-
ital estate her separately acquired inheritance. The circular
logic employed by the trial court, wife asserts, was an abuse
of discretion as was its decision to not change its prior deci-
sion, although the presumptions about how the court was
required to treat wife’s inheritance had been reversed.
Husband argues that we cannot disturb the trial
court’s discretionary division because the court adhered to
the correct methodology under Kunze and reached a decision
within the range of legally permissible outcomes. Husband
further argues that various equitable considerations support
the court’s order, including the relative financial position of
the parties in the divorce after taking into account the mar-
ital debts, that wife refused to use any of her inheritance to
preserve the marital home as a marital asset, the achieve-
ment of self-sufficiency for each spouse, and the length of
the marriage.
Under ORS 107.105(1)(f), the trial court’s prop-
erty division in the dissolution judgment must be “just and
proper in all the circumstances.” A trial court’s “just and
proper” division of marital property requires consideration
of both the statutory factors in ORS 107.105(1)(f) and equita-
ble factors. Kunze, 337 Or at 132. We review the trial court’s
“just and proper” property division for an abuse of discre-
tion. Morgan, 269 Or App at 161. “Generally, there is a range
of reasonableness for a division of property, and this court
will not modify a trial court’s award falling within that
range.” Sauter and Sauter, 293 Or App 748, 752, 429 P3d
1034 (2018) (citing Brown and Brown, 259 Or App 618, 627,
315 P3d 422 (2013), rev den, 355 Or 142 (2014)). However,
“[r]elying on a mistaken legal premise when exercising dis-
cretion is error, regardless of whether the trial court would
have had discretion to reach the same result based on a cor-
rect understanding of the law.” Anderson v. Sullivan, 311
Or App 406, 413, 492 P3d 118, rev den, 368 Or 702 (2021);
see also State v. Romero (A138124), 236 Or App 640, 643-44,
8 Brush and Brush
237 P3d 894 (2010) (when an exercise of discretion by a trial
court proceeds from a mistaken legal premise, its decision
does not fall within the range of legally correct choices and
does not produce a permissible, legally correct outcome, and
thus, it is an abuse of discretion).
Here, the statutory factor that the court was
required to apply to wife’s inheritance is the one that we
identified in Brush. That is, the court was required to not
apply the presumption of equal contribution that otherwise
applies to property acquired during the marriage. ORS
107.105(1)(f)(C), (D).3 In its ruling, the court correctly stated
that factor and found that wife had kept her inheritance
separate from the marital estate, and thus, “the legal pre-
sumption is that Wife will keep the entire inheritance.” See
Kunze, 337 Or at 135 (when 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 [of equal contribution]”). Thus, the
issue in this case is whether the court correctly applied equi-
table considerations when it required wife to pay husband
an equalizing judgment from her inheritance as part of the
court’s “just and proper” division of property.
3
ORS 107.105(1)(f) provides, in part:
“Whenever the court renders a judgment of marital annulment, dissolu-
tion or separation, the court may provide 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 circumstances. 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 property during the marriage, whether such property is jointly
or separately held.
“(D)(i) Property acquired by gift to one party during the marriage and
separately held by that party on a continuing basis from the time of receipt is
not subject to a presumption of equal contribution under subparagraph (C) of
this paragraph.
“(ii) For purposes of this subparagraph, ‘property acquired by gift’ means
property acquired by one party through gift, devise, bequest, operation of
law, beneficiary designation or inheritance.”
Cite as 319 Or App 1 (2022) 9
Because the parties’ arguments primarily center on
what Kunze requires in applying equitable considerations,
we begin there. In Kunze, the court stated that, “to pro-
mote consistency and predictability in dissolution decrees,
this court has examined the objectives underlying ORS
107.105(1)(f) and has identified equitable considerations
that, along with the statutory factors, guide the court in
achieving its task under that statute.” 337 Or at 132 (citing
Haguewood and Haguewood, 292 Or 197, 201-04, 638 P2d
1135 (1981)). The inquiry into the “just and proper” division
“concerns the equity of the property division in view of all
the circumstances of the parties,” and “takes into account
the social and financial objectives of the dissolution, as well
as any other considerations that bear upon the question of
what division of the marital property is equitable.” Id. at
135. The court identified equitable considerations “to include
the preservation of assets; the achievement of economic self-
sufficiency for both spouses; the particular needs of the par-
ties and their children; and * * * the extent to which a party
has integrated a separately acquired asset into the common
financial affairs of the marital partnership though commin-
gling.” Id. at 136.
Here, the court’s identified reasoning for the equal-
izing judgment out of wife’s inheritance was that wife
refused to use that inheritance for the benefit of the marital
estate, instead keeping it separate and protecting it from
husband’s creditors. In particular, the court pointed out
that wife refused to save the family home from foreclosure
during the pendency of the dissolution proceedings. The
home, however, was in poor condition and had significant
negative equity; contrary to the court’s characterization,
it was not a large asset to the marital estate. We also dis-
agree that equity favored awarding husband part of wife’s
separate inheritance because wife refused to “bail out” the
house from foreclosure during the dissolution proceedings.
The foreclosure removed significant debt from the mari-
tal estate, and the debt that remained from the house was
divided equally between husband and wife.
More importantly, the court’s reasoning is not a
proper application of statutory and equitable factors, as
required by Kunze. The court’s reasoning placed wife in a
10 Brush and Brush
Catch-22 with regard to her separate inheritance. The court
stated that, because wife refused to use that separate prop-
erty to “bail out” the marital estate, it is just and proper
to require her to pay an equalizing judgment to husband
from that separate property. However, if wife had used her
separate inheritance to “bail out” the marital estate—that
is, if she did not continuously hold that property separate—
she might not have been entitled to the exception in ORS
107.105(1)(f)(D) to the presumption of equal contribution,
and, at the least, would have commingled her inheritance
with the marital estate to create an equitable basis on
which to distribute some portion of that inheritance to hus-
band.4 See, e.g., Kunze, 337 Or at 140 (commingling occurs
when parties’ shared financial decisions are made in reli-
ance on the separate asset without consideration of whether
it was separately acquired); Finear and Finear, 240 Or App
755, 765-67, 247 P3d 1238 (2011), rev dismissed, 351 Or 580(2012) (commingling occurred, and weighed in favor of allo-
cating some of the husband’s inheritance to wife, where the
husband used separate inheritance and trust funds as his
financial contribution to the marital partnership, despite his
expressed intent through actions and words to maintain it as
his separate property). In short, the court applied, under the
guise of equitable considerations, a presumption that wife’s
inheritance was subject to division with husband, which is
contrary to the statutory directive in ORS 107.105(1)(f)(D)
that the court was required to apply on remand.
In so concluding, we reject husband’s argument that
the trial court was applying the Kunze factor of preservation
of assets when it discussed the family home. Preservation
of assets refers to an effort to keep an asset whole when
4
We note that we reject any argument by husband that wife had commingled
her inheritance with the joint marital finances because it is contrary to the trial
court’s findings. The trial court found that wife had kept her inheritance sepa-
rate from the marital estate since she acquired it, taking several steps to protect
it from husband’s debts. The trial court also found that wife had refused to use
the inheritance to improve the financial position of the family or for the benefit
of the marital estate. See Kunze, 337 Or at 142 (“[I]n deciding whether the court
should include a separately acquired asset in the property division because of
commingling, the court’s inquiry properly focuses upon whether a spouse demon-
strated an intent to retain that spouse’s separately acquired asset as separate
property or whether, instead, that spouse intended for that property to become
the joint property of the marital estate.”).
Cite as 319 Or App 1 (2022) 11
making a “just and proper” division, if dividing the asset
would dissipate its value. That consideration is necessarily
one that applies to the asset that is being divided, which
here would be wife’s inheritance, not some other asset that
has already been lost. See Finear, 240 Or App at 767 (award-
ing real property to the spouse that can preserve it); see also
Boyd and Boyd, 226 Or App 292, 300, 203 P3d 312 (2009)
(“[W]here the bulk of the estate is composed of few principal
assets, we strive to keep the assets whole if dividing them
‘would unnecessarily dissipate [their] value.’ ” (Quoting
Haguewood, 292 Or at 208.)). To the extent the court believed
it was applying that factor, it abused its discretion because
its action was a misapplication of the factor.
We also reject husband’s argument that the court
was applying the Kunze factor of economic self-sufficiency.
The court did not identify that factor or explain how that
factor weighed into its decision to award a portion of wife’s
inheritance to husband. Rather, in the original ruling,
before the first appeal, the court determined that the factor
of economic self-sufficiency required that the wife keep the
“lion’s share” of her inheritance “so that she can continue
to have the ability to make income to support herself, given
that [h]usband does definitely have a higher ability to earn
income.” Under the court’s findings, the equitable consider-
ation of economic self-sufficiency is not a factor that could
support the court’s decision to award husband a portion of
wife’s inheritance.
The remaining consideration identified by the court
was the length of the marriage and that, as a result, hus-
band and wife should share equally in all financial ups
and downs. Length of the marriage alone, however, is not
an equitable consideration identified by Kunze as a basis on
which to award separate property to the other spouse in the
“just and proper” property division. Although Kunze con-
templates that a court may apply considerations other than
the ones explicitly listed in that case, Kunze does state that
those considerations must, nonetheless, be directed at meet-
ing the objectives of ORS 107.105(1)(f) to promote consistency
and predictability in dissolution decrees. 337 Or at 132. In
the circumstances of a separate inheritance that qualifies
for the exception in ORS 107.105(1)(f)(D), it would, again,
12 Brush and Brush
render that provision meaningless if courts proceed on the
opposite presumption—that a qualifying inheritance is sub-
ject to division—based solely on the length of the marriage.
The length of the marriage alone tells us little, if anything,
about whether the social and financial objectives of ORS
107.105(1)(f) are being met in a particular property division.
Rather, the factors identified by Kunze are ones that look
at specific social and financial objectives—preservation of
assets, economic self-sufficiency of the parties, and meeting
the particular needs of the parties and their children—and
whether the equities favor distributing a portion of sep-
arately held property to the other spouse due to how the
parties treated that property in their joint finances. Those
social and financial considerations surely are informed by
the length of the marriage, but the length of the marriage
alone is not a sufficient consideration. See Van Winkel and
Van Winkel, 289 Or App 805, 814, 412 P3d 243, rev den, 363
Or 224 (2018) (discussing that the length of the marriage
was not a determining factor; rather, the issue was whether
the parties’ financial arrangement, which included wife’s
separate real property, was commingled); Boyd, 226 Or App
at 300 (recognizing that in a long-term marriage the par-
ties should separate on as equal terms as possible, but con-
cluding that wife’s separate property should not have been
considered part of the marital estate because excluding it
resulted in an equitable division and there were no other
considerations that supported including it). Here, the court
did not identify any equitable considerations that properly
applied the required methodology in Kunze to support the
court’s discretionary decision to award a portion of wife’s
inheritance to husband; thus, the court abused its discretion.
Under the correct methodology set out in Kunze, the
trial court did not have discretion to do anything other than
to award to wife her entire inheritance as her separate prop-
erty. As the trial court found, wife took steps to keep her
inheritance separate from the marital estate to ensure that
it was protected from husband’s creditors. Husband made no
contributions toward obtaining or managing the inherited
assets, the inheritance was not commingled into the finan-
cial affairs of the couple, and husband’s earning capacity is
significantly higher than wife’s. Also, the court divided the
Cite as 319 Or App 1 (2022) 13
debts, which were in husband’s name only, equally between
husband and wife. To award part of wife’s inheritance to
husband would have the effect of wife shouldering more of
that debt than husband, despite her specific intent to pro-
tect her separate inheritance from those debts. Accordingly,
we modify the judgment to remove the equalizing judgment
to husband.
Judgment modified to remove equalizing judgment
in favor of husband; otherwise affirmed.