Marriage of Dahm , 333 Mont. 453 ( 2006 )

No.04-572
IN THE SUPREME COURT OF THE STATE OF MONTANA
2006 MT 230
IN RE THE MARRIAGE OF
MARTHA J. DAHM,
Petitioner and Respondent,
and
STEPHEN G. DAHM,
Respondent and Appellant.
APPEAL FROM: The District Court of the Nineteenth Judicial District,
In and For the County of Lincoln, Cause DR-2003-98,
Honorable Michael C. Prezeau, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Scott B. Spencer, Attorney at Law, Libby, Montana
For Respondent:
Amy N. Guth, Attorney at Law, Libby, Montana
Submitted on Briefs: November 16, 2005
Decided: September 13, 2006
Filed:
__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.
¶1 Stephen G. Dahm (Stephen) appeals from the findings of fact, conclusions of law,
and decree of dissolution entered by the Nineteenth Judicial District Court, Lincoln
County, excluding from the marital estate certain real property deeded to Martha J. Dahm
(Martha) and ordering that Stephen pay a $54,232 equalization payment to Martha. We
affirm in part, reverse in part, and remand.
¶2 We address the following issues on appeal:
¶3 1. Whether the District Court erred in concluding deeded property was solely a
gift to Martha from her parents, and, therefore, not included in the marital estate.
¶4 2. Whether the District Court erred in concluding that Stephen did not contribute
to the gifted property’s preservation or appreciation during the marriage.
¶5 3. Whether the District Court erred in ordering Stephen to pay an equalization
payment of $54,232 to Martha, a sum that represented the entire difference between the
values of assets awarded to Stephen and Martha from the marital estate.
FACTUAL AND PROCEDURAL BACKGROUND
¶6 Stephen and Martha were married on May 28, 1983, but had been together since
approximately 1979, and had lived together since 1982. Stephen and Martha had three
children during their marriage and separated in March 2004.
¶7 In March of 1981, Martha’s parents, Fred and June Clark, prepared a warranty
deed transferring certain real property (Eureka property) to Martha. The property,
consisting of 17.5 acres of raw land near the Canadian border, north of Eureka, had been
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in Martha’s family for several generations and Martha had spent time there as a child.
Martha’s parents deeded the property to Martha Clark, Martha’s maiden name, and the
property remained under that name throughout the twenty-year marriage. Although
Martha’s parents had signed the deed in March of 1981, approximately two years before
Stephen and Martha were married, the deed was not actually recorded until April 8, 1983,
slightly less than two months before their wedding.
¶8 On September 17, 2003, Martha petitioned the court to dissolve her marriage with
Stephen. After trial, the District Court entered its findings of fact, conclusions of law,
and decree of dissolution, finding the Eureka property had been deeded to Martha by her
parents with the intent that it be a gift solely to Martha.
¶9 Consequently, the District Court held the property was Martha’s exclusively, and
it was not included in the marital estate. In so holding, the court noted the conflicting
evidence on the issue—that the property had been titled solely in Martha’s name since
receipt from her parents, but that Martha referred to the property as a wedding gift after
the parties’ marriage—and held that neither fact was necessarily determinative. Taxes on
the property were paid from joint funds since their marriage, but the taxes were minimal,
ranging in amounts from a low of $47 to a high of $268.22. Furthermore, while the
Eureka property had dramatically increased in value since the marriage, the court found
the increase was attributed to real estate market forces and not to improvements made by
either party.
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¶10 The court also found that Stephen brought certain real property, located in the
State of Washington (Washington property), into the marriage. Stephen continued to
individually own the property throughout the course of the marriage, but Martha and
Stephen retired approximately $2,000 to $5,000 in debt owed against the property. This
property was also deemed to be pre-marital property by the court, and, as such, not part
of the marital estate. The court, in determining that both properties would remain the
individual assets of the respective recipients, held that Stephen’s monetary contribution,
paid from the parties’ joint funds, toward the Eureka property taxes was offset by
Martha’s contribution toward the retirement of debt on Stephen’s Washington property.
¶11 In considering the contributions to the marital estate, the court found that, while
Stephen earned more income, Martha had worked during much of the marriage and was
the primary caregiver for the children. The court determined that the parties’ respective
contributions to the marital estate were essentially equal, and that it was appropriate for
the estate to be equally divided between them.
¶12 As such, the court awarded Stephen and Martha real and personal property valued
at $299,545 and $243,813 respectively, but, after giving Stephen a $1,500 credit for debt
Martha had charged on his credit card after the separation, ordered Stephen to pay an
equalization payment of $54,232 to Martha. This amount represented the difference
between the values of the properties awarded to each party and was intended to equalize
the distribution of the estate. Stephen was given until January 1, 2005, to make the
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equalization payment, with the payment being secured by a lien on the family home,
which had been awarded to Stephen.
¶13 On July 14, 2004, Stephen filed his notice of appeal challenging the District
Court’s exclusion of the Eureka property from the marital estate and the calculation of the
equalization payment. On July 19, 2004, he filed a motion in the District Court to stay
the equalization payment but failed to post a supersedeas bond, and, as a result, the court
denied the motion. Stephen did not make the equalization payment by January 1, 2005.
Martha offers, and Stephen does not deny, that on April 7, 2005, Martha caused the
family home to be sold to satisfy the equalization payment.
¶14 On April 14, 2005, Martha moved to dismiss the appeal on the grounds that the
matter was moot, and this Court denied the motion on May 4, 2005.
STANDARD OF REVIEW
¶15 We review a district court’s findings of fact regarding a division of marital assets
to determine whether the findings are clearly erroneous. In re Marriage of Gerhart, 2003
MT 292, ¶ 15, 318 Mont. 94, ¶ 15, 78 P.3d 1219, ¶ 15. “A finding is clearly erroneous if
it is not supported by substantial evidence, if the district court misapprehended the effect
of the evidence, or if our review of the record convinces us that the district court made a
mistake.” In re Marriage of Steinbeisser, 2002 MT 309, ¶ 17, 313 Mont. 74, ¶ 17, 60
P.3d 441, ¶ 17. Absent clearly erroneous findings, this Court will affirm a district court’s
division of property unless we identify an abuse of discretion. Gerhart, ¶ 16. The test
for abuse of discretion in a dissolution proceeding is “whether the district court acted
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arbitrarily without employment of conscientious judgment” or whether the district court
“exceeded the bounds of reason resulting in substantial injustice.” In re Marriage of
Engen, 1998 MT 153, ¶ 26, 289 Mont. 299, ¶ 26, 961 P.2d 738, ¶ 26.
¶16 Lastly, the standard of review of a district court’s conclusions of law is whether
the conclusions are correct. In re Marriage of Pfeifer, 1998 MT 228, ¶ 9, 291 Mont. 23,
¶ 9, 965 P.2d 895, ¶ 9.
DISCUSSION
¶17 Whether the District Court erred in concluding deeded property was solely a
gift to Martha from her parents, and, therefore, not included in the marital estate.
¶18 Stephen argues that the District Court erred in determining that the Eureka
property was conveyed as a gift solely to Martha in 1981, when the deed was not actually
recorded until April 8, 1983, slightly less than two months before their wedding. He
contends the date of the deed is not determinative of when real property is considered
conveyed, but, rather, “[a] grant takes effect so as to vest the interest intended to be
transferred only upon its delivery by the grantor.” Section 70-1-508, MCA. Therefore,
Stephen reasons that while Martha’s parents kept possession of the deed, there was no
gift, and that the delivery of the deed to Martha only shortly before the marriage indicates
the property was a marital gift from Martha’s parents to both Stephen and Martha. He
argues that Martha’s reference in the wedding gift book that the property was a wedding
gift and a wedding card from June with Martha’s handwritten acknowledgement that the
Eureka property was a gift from her parents is clear evidence of a mutual gift.
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¶19 In response, Martha argues that Stephen’s argument is specious, because whether
the Eureka property was given to her two years or six weeks prior to marriage does not
change the legal conclusion that Martha acquired the property by gift in her maiden name
prior to marrying Stephen and it remained in her maiden name throughout the twenty-
year marriage. She reasons the property was gifted to her from her parents based on the
sentimental significance of the property, as she had visited the property numerous times
as a child and it had been owned by her family for several generations. Moreover, she
maintains her parents gifted the property without intending it to be a gift to Stephen.
Accordingly, Martha contends the court did not clearly err in entering findings in support
of her version of the facts.
¶20 Section 40-4-202, MCA, requires special consideration of property “acquired prior
to the marriage” or “acquired by gift.” The District Court was required to determine
whether the Eureka property was such property in order to determine how to properly
distribute the property. In so doing, the district court judge is charged with listening to
and weighing the evidence presented. In re Marriage of Grende, 2004 MT 36, ¶ 27, 320
Mont. 38, ¶ 27, 85 P.3d 788, ¶ 27. “The judge must determine the credibility of each
witness based upon his or her demeanor, temperament, attitude, and candor, among other
things.” In re Marriage of Horton, 2004 MT 353, ¶ 11, 324 Mont. 382, ¶ 11, 102 P.3d
1276, ¶ 11.
¶21 The District Court noted the Eureka property was deeded to Martha by her parents
on March 13, 1981, approximately two years prior to the parties being married, and
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believed her testimony that the property was intended as a gift only to Martha. While
Stephen contends Martha’s testimony at trial was not credible and was in contrast to
Martha’s acknowledgement of the property as a wedding gift, “when substantial credible
evidence supports the findings and judgment, we will not alter a district court’s marital
property division absent an abuse of discretion.” In re Marriage of Binsfield, 269 Mont.
336, 343, 888 P.2d 889, 893 (1995). The District Court had the opportunity to determine
Martha’s credibility as a witness, and, for these reasons, this Court defers to the District
Court’s discretion in matters of evidence, weight, and credibility, particularly when
conflicting evidence is presented. Grende, ¶ 27.
¶22 The record contains evidence of generational ownership of the property, testimony
about Martha’s numerous childhood visits, along with Martha’s testimony that her
parents had discussed giving the property to her well before her marriage to Stephen.
This is substantial evidence in support of the court’s findings.
¶23 We conclude that the court’s finding that the Eureka property was Martha’s
separate gifted property was not clearly erroneous.
¶24 Whether the District Court erred in concluding that Stephen did not
contribute to the gifted property’s preservation or appreciation during the
marriage.
¶25 Stephen contends the appreciation of the Eureka property needs to be included in
the marital estate, even if the property is considered a pre-marital gift to Martha, because
he and Martha paid the taxes on the property for twenty years from their marital assets.
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Stephen argues that payment of the taxes was a sufficient contribution, because the taxes
were over $200 for many years and the taxes for a twelve-year period came to $2400.
¶26 Martha responds that both parties agree that Stephen’s only contribution to the
Eureka property was the payment of property taxes from joint funds, and further, the debt
on Stephen’s Washington property was also retired with joint funds. Therefore, Martha
contends the court correctly found that Stephen’s contributions to her gifted property was
offset by her contributions to his pre-marital property, and, as a result, each party should
take their respective pre-marital property.
¶27 Section 40-4-202, MCA, governs the distribution of pre-acquired or gifted
property in a marital dissolution. It provides that, when dividing property acquired prior
to the marriage, the court shall consider those contributions of the other spouse to the
marriage, including the extent to which such contributions have facilitated the
maintenance of this property. Section 40-4-202(1)(a) through (c), MCA. Furthermore,
we have previously construed § 40-4-202, MCA, to mean that, regardless of which party
holds title, pre-acquired or gifted property need not be included in the marital estate
unless the non-acquiring spouse contributed to its preservation or appreciation. In re
Marriage of Rolf, 2000 MT 361, ¶ 46, 303 Mont. 349, ¶ 46, 16 P.3d 345, ¶ 46 (citing
Engen, ¶ 29.) We have held that the non-acquiring spouse is entitled to an equitable
share of the appreciated or preserved value which is attributable to his or her efforts. In
re Marriage of Foster, 2004 MT 326, ¶ 11, 324 Mont. 114, ¶ 11, 102 P.3d 16, ¶ 11 (citing
Engen, ¶ 29). However, “a non-acquiring spouse is not entitled to a share of the increase
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in premarital property when the property’s appreciation is due simply to market factors.”
Steinbeisser, ¶ 47.
¶28 In concluding that Stephen was not entitled to any portion of Martha’s pre-marital
Eureka property, the District Court had to essentially find that he “made no contribution
equitably justifying apportionment of that property.” Marriage of Turner, 206 Mont.
292, 295, 670 P.2d 568, 570 (1983). Although the property had substantially increased in
value during the marriage, it is clear that the increase was not due to the efforts of either
party. 1 Neither spouse made improvements to the land, nor made any sort of sacrifice or
contribution to preserve or increase the value of the property. Martha testified that there
have been no improvements made to the property in the last fifty-two years. The District
Court found that the increase in value “has been due solely to real estate market forces.”
As such, Stephen is not entitled to a share of this appreciation merely by being a spouse
to the property owner.
¶29 Moreover, the record shows Stephen’s payment of property taxes was minimal. In
2003, for instance, property taxes for the year were less than $50. The task of the District
Court was to determine the extent to which these payments facilitated the preservation or
appreciation of the pre-acquired property. In re Marriage of Herrera, 2004 MT 40, ¶ 25,
320 Mont. 71, ¶ 25, 85 P.3d 781, ¶ 25. Stephen’s small monetary payments were paid
from the parties’ joint funds, and the District Court found that these payments were offset
1
Testimony indicated that the property was worth little at the time the parties
married, but was valued near $200,000 at the time of dissolution. The District Court’s
finding simply indicated that the property “has dramatically increased in value” over the
term of the marriage.
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by Martha’s contributions towards the retirement of debt owed against Stephen’s pre-
marital Washington property, and were inadequate to justify a division of the appreciated
value of the Eureka property.
¶30 Upon review of the record, we conclude that the District Court’s findings are
supported by substantial evidence and are not clearly erroneous. We further conclude the
District Court did not abuse its discretion by denying Stephen a share of the appreciated
value of the Eureka property, Martha’s pre-marital asset.
¶31 Whether the District Court erred in ordering Stephen to pay an equalization
payment of $54,232 to Martha, a sum that represented the entire difference between
the values of assets awarded to Stephen and Martha from the marital estate.
¶32 Stephen contends the District Court improperly calculated the property
equalization payment when it ordered him to pay to Martha the full difference between
the value of his and Martha’s distributions. Stephen maintains the court clearly intended
to award each party 50 percent of the marital estate and that the equalization payment
should have been 50 percent of the difference between their shares, but that a math error
caused Martha to be awarded a double equalization payment of $54,232. He contends
that this error failed to equalize the estate and instead awarded Martha $54,232 more than
he received. He contends the correct amount of the payment should be $27,116.
¶33 Martha maintains the District Court properly calculated the equalization payment
based upon the values proved at trial. Moreover, Martha argues Stephen failed to request
reconsideration of the decree to correct the alleged mistake pursuant to M. R. Civ. P.
60(b), and instead allowed the decree to be satisfied by failing to post a supersedeas
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bond, thus forcing the District Court to deny the requested stay of equalization payment.
Additionally, Martha asserts this issue is moot because on April 7, 2005, she caused the
family home 2 to be sold to satisfy payment, and Stephen failed to intervene in the sale.
¶34 Our review of the record convinces us that the District Court intended to equalize
the marital distribution, but in calculating the equalization payment, erroneously awarded
Martha $27,116 more than necessary to equalize the distribution. We are thus left with
the question of whether effective relief can be granted to Stephen following sale of the
house and payment of the equalization obligation.
¶35 “In deciding whether a case is moot, we determine whether this Court can fashion
effective relief.” Graveyard Creek Ranch, Inc. v. Bell, 2005 MT 172, ¶ 12, 327 Mont.
491, ¶ 12, 116 P.3d 779, ¶ 12 (quoting Turner v. Mountain Eng’g & Constr., Inc., 276
Mont. 55, 61, 915 P.2d 799, 803 (1996)). In Turner, the appellants allowed a foreclosure
sale to proceed, did not stay the proceedings, and did not post a supersedeas bond.
Turner, 276 Mont. at 63, 915 P.2d at 804. This Court held “[t]he appellants’ status as
lien creditors who did not post a supersedeas bond or stay the proceedings at the District
Court pending appeal, along with the fact no surplus was recovered at the foreclosure
sale, make it impossible for this Court to grant effective relief.” Turner, 276 Mont. at 63,
915 P.2d at 804.
2
Stephen was awarded the family home in the dissolution proceeding, but was
ordered to execute and deliver to Martha’s attorney a lien in favor of Martha on the
property in the amount of $54,232. If Stephen failed to pay the sum of $54,232 to Martha
by January 1, 2005, Martha was authorized to institute foreclosure proceedings on the
property to collect the equalization payment.
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¶36 Turner distinguished our holding in Martin Dev. Co. v. Keeney Const. Co., 216
Mont. 212, 703 P.2d 143 (1985). In Martin, the appellant likewise had not posted a
supersedeas bond, but instead paid the contested money judgment. On appeal, the
respondent argued that the payment had rendered the appeal moot. This Court disagreed,
stating the case involved “a simple money judgment . . . . No [real] property changed
hands pursuant to the judgment nor are there third party interests involved. There is no
reason why this Court cannot grant effective relief.” Martin, 216 Mont. at 220, 703 P.2d
at 148. Thus, two factors, third party interests and the absence of property over which to
grant relief, acted in Turner to place the matter beyond the effective reach of this Court.
In contrast, those factors were not present in Martin, and, thus, we concluded that
effective relief could still be granted, because third party interests would not be disturbed
and only the return of money by the respondent was required. Martin, 216 Mont. at 220,
703 P.2d at 128. Similarly, in Graveyard, ¶ 13, we compared our holdings in Turner and
Martin and concluded that the facts in Graveyard (“relevant property has changed hands
and third-party interests, in fact multiple third-party interests, are involved,” Graveyard,
¶ 14) were closer to Turner than to Martin, requiring a conclusion that the matter was
moot. Graveyard, ¶¶ 14-15. We noted that the situation there did not permit us to
“merely reverse the $ 500,000 money judgment below.” Graveyard, ¶ 15.
¶37 However, the case here is more like Martin than Turner. Stephen was unable to
stay the sale and subsequently failed to make the equalization payment by the time
ordered. This resulted in Martha conducting, and Stephen failing to intervene in, a
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foreclosure proceeding to liquidate the home granted to Stephen, which resulted in
payment of the equalization amount. Although the house itself has been sold and
changed hands, perhaps to a third party, yet, unlike Turner, effective relief here only
requires a return of excess proceeds which Martha received from the sale. No disruption
of the possession of real property or to the interests of third parties is required. As in
Martin, effective relief only requires correction of an error in the judgment—here, a
judgment that divided the marital estate between the parties before the Court. Regardless
of whether the property is in the form of cash or real estate, distribution of the marital
estate as between the parties is before us and remains subject to this Court’s order. Were
we to affirm the District Court’s order regarding the equalization payment, Martha would
receive an inappropriate windfall of $27,116. Under these circumstances, we conclude
that the appeal is not moot.
¶38 We conclude the District Court clearly intended to divide the marital estate
equally, but made a miscalculation of the amount of the equalization payment.
Therefore, the equalization payment of $54,232 is reversed and this matter is remanded
for entry of an amended judgment ordering an equalization payment from Stephen in the
amount of $27,116.
¶39 Affirmed in part, reversed in part and remanded for proceedings consistent with
this Opinion.
/S/ JIM RICE
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We concur:
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
/S/ PATRICIA COTTER
/S/ JOHN WARNER
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