In Re the Marriage of Kostelnik

September 29 2015
DA 14-0675
Case Number: DA 14-0675
IN THE SUPREME COURT OF THE STATE OF MONTANA
2015 MT 283
IN RE THE MARRIAGE OF:
JACKIE J. KOSTELNIK,
Petitioner and Appellee,
and
DANIEL J. KOSTELNIK,
Respondent and Appellant.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and For the County of Gallatin, Cause No. DR 11-331B
Honorable John C. Brown, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Daniel J. Kostelnik, self-represented, Missoula, Montana
For Appellee:
Christopher J. Gillette, The Law Office of Christopher J. Gillette, PC,
Bozeman, Montana
Submitted on Briefs: September 2, 2015
Decided: September 29, 2015
Filed:
__________________________________________
Clerk
Justice Beth Baker delivered the Opinion of the Court.
¶1 Daniel Kostelnik appeals the Order of the Eighteenth Judicial District Court,
Gallatin County, adopting the Standing Master’s findings of fact, conclusions of law, and
final decree dissolving Daniel’s marriage to Jackie Kostelnik. Daniel challenges the
District Court’s distribution of the marital estate. We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 Daniel and Jackie married in 1983 and have one adult child. They resided
together in Belgrade, Montana, from 1986 until 2003. At the time of trial, Daniel was 49
years old and Jackie was 56. Daniel claims that the parties separated in March 2007,
while Jackie claims that the parties essentially separated in 2003 when Daniel moved to
Missoula for graduate school. Jackie filed a petition for legal separation in August 2011
and Daniel’s answer requested the court to enter a decree of dissolution. The Standing
Master held a two-day trial on October 30 and 31, 2012.
¶3 The evidence showed that Daniel worked at a sawmill in Belgrade beginning in
1985 and he earned over $30,000 a year from 1996-2003. After the mill closed in 2003,
Daniel began work on a master’s degree at the University of Montana in Missoula. A
federal retraining program paid for his schooling and he was unemployed during this
time. He completed his master’s degree in 2010 after spending a short time at the marital
home in Belgrade during 2006-2007. Daniel currently resides in Missoula and has been
unable to find work in his field. He works as a handyman for an elderly woman but is not
employed full time. Daniel was in good health at the time of trial.
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¶4 Jackie was born with cerebral palsy and has a learning disability. Although she
earned a college degree, she was a homemaker for the majority of the marriage. Jackie is
ineligible for Social Security Disability benefits because she has not met the minimum
work credit requirement—from 1989 through 2001 she reported $0 in taxed Social
Security earnings, and the most she earned during the marriage was $6,973 in 1983. In
the late 1980s, Jackie took a tainted dietary supplement which resulted in
eosinophilia-myalgia syndrome (“EMS”), an incurable neurological condition. She has
ongoing symptoms due to her EMS, including but not limited to: impairment of brain
function, memory loss, aphasia, fatigue, and frequent falls. The frequency and intensity
of the symptoms are unpredictable, making it difficult to determine Jackie’s future
medical costs.
¶5 Jackie and Daniel sued the tainted dietary supplement manufacturer in 1992. In
1995, the parties agreed to a structured settlement that amounted to $500,000 after
attorney’s fees. The only written evidence of how the settlement proceeds were
disbursed is a settlement disbursement letter from the lawyer who represented the
Kostelniks. Neither the settlement agreement nor the disbursal letter addressed the extent
to which the settlement was meant to cover Jackie’s medical care or compensate for loss
of income or pain and suffering. The disbursement letter indicated that $297,584 was
disbursed solely to Jackie and included a $10,000 consortium award to their then-minor
son. The remaining $202,416 was disbursed in the form of the “Kostelnik Annuity” and
included a $25,000 consortium award to Daniel.
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¶6 The tax-free payments under the Kostelnik Annuity were structured as follows:
$35,000 per year for five years from 2004-2008; $50,000 in September 2010; $75,000 in
September 2015; $100,000 in September 2020; and $35,000 per year from 2021-2040.
The payees of the annuity are listed as “Jackie and Daniel Kostelnik, or all to the
survivor.” At the time of trial, a total of $875,000 was to be disbursed from the annuity
over 26 years.
¶7 After receiving the $297,584 lump sum settlement payment, Jackie placed
$100,000 into a Certificate of Deposit (“CD”) with First Security Bank under her name.
At the time of trial, the First Security Bank CD had accrued $9,000 in interest. Jackie
established a number of other CDs, none of which had funds remaining for distribution at
the time of trial. Jackie used the remainder of the lump sum settlement payment to pay
outstanding bills, pay living expenses, make home improvements, tithe to religious and
educational organizations and individuals, purchase a van for her transportation, and pay
off the mortgage on the marital home.
¶8 Besides the settlement proceeds, the parties’ principal marital asset was a home in
Belgrade that they purchased in 1986. The home was financed through the Federal
Housing Authority and the parties paid a subsidized monthly mortgage during the
marriage. Jackie paid off the mortgage balance of $53,952.80 in February 1995 with the
settlement proceeds. She lived in the home at the time of trial. Daniel maintained the
home and landscaping during the marriage and also made improvements to the home.
His employment income alone kept the mortgage current until 1995. At trial, the parties
stipulated to an appraised value of $100,000 for the home.
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¶9 The structured payments from the annuity began in 2004 and were issued in both
parties’ names and initially deposited into the parties’ joint checking account. The
Standing Master found that Daniel received his $25,000 consortium award from the first
annuity payment. Jackie kept subsequent annuity payments in a separate account. At the
time of trial, all of the annuity payments from 2004-2008 had been spent and were not
available for distribution.
¶10 The parties produced a number of other financial disclosures at trial. Daniel
accrued over $160,000 in various retirement accounts during the marriage. He also had
206 shares of Louisiana-Pacific stock valued at $1,973 at the time of trial. The parties
owned four vehicles; each was valued under $3,000 and all but one were titled solely in
Daniel’s name. Jackie listed furniture and electronics valued at $1,000 and Daniel listed
firearms and tools valued at approximately $5,000 and $2,000, respectively. Finally,
Daniel disclosed nearly $30,000 in outstanding debt, while Jackie did not list any
outstanding debts.
¶11 After reviewing both parties’ circumstances, the Standing Master apportioned the
marital estate in a detailed 29-page Report with findings of fact, conclusions of law, and a
Decree of Dissolution. The Standing Master concluded that the total value of the parties’
personal property, vehicles, retirement accounts, stock, and marital home was $328,755.
The Standing Master determined that these assets were accumulated jointly during the
marriage and should be equitably apportioned. The Standing Master awarded assets to
Daniel with a total value of $225,501; therefore, the Report ordered him to pay Jackie an
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equalization amount of $61,123. The Standing Master awarded the marital home to
Jackie, ordering that Daniel was entitled to an equal share of the home’s value.
¶12 The Standing Master concluded that the remaining settlement proceeds—including
the First Security Bank CD—should be awarded solely to Jackie. In awarding the
settlement proceeds to Jackie, the Standing Master determined that Daniel was
underemployed but able to work, while Jackie would incur ongoing medical expenses
and was unable to maintain employment. Moreover, the Standing Master considered the
allocation of the settlement proceeds as an alternative to awarding Jackie spousal
maintenance. The Standing Master determined that it was Jackie’s personal injury claim
that resulted in the vast majority of the settlement proceeds and that the parties did not
treat the proceeds as joint assets. The remaining settlement proceeds’ total value
amounted to $984,000.
¶13 The Standing Master concluded that each party should be responsible for any
debts incurred in their name since March 2007. Finally, the Standing Master denied
Daniel’s request for spousal maintenance and denied both parties’ request for attorney’s
fees.
¶14 Daniel filed objections to the Standing Master’s Report. In August 2014, the
District Court held a hearing considering Daniel’s objections. The court did not consider
any additional evidence at the hearing. The court concluded in a September 2014 order
that the Standing Master’s Report was not clearly erroneous and therefore affirmed and
adopted the Report in its entirety. Daniel appeals.
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STANDARDS OF REVIEW
¶15 Two standards of review are relevant in cases involving both a standing master
and the district court: the standard the district court applies to the master’s report and the
standard we apply to the district court’s decision. In re Parenting of G.J.A., 2014 MT
215, ¶ 11, 376 Mont. 212, 331 P.3d 835. This Court reviews a district court’s decisions
de novo to determine whether it applied the correct standard of review to a standing
master’s findings of fact and conclusions of law. In re Marriage of Patton, 2015 MT 7,
¶ 17, 378 Mont. 22, 340 P.3d 1242. A district court reviews a standing master’s findings
of fact for clear error, Patton, ¶ 24, and its conclusions of law to determine if they are
correct, Patton, ¶ 43.
¶16 We review a district court’s marital property division to determine whether the
findings of fact on which the distribution is based are clearly erroneous. Patton, ¶ 18. 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. Patton, ¶ 18. We review a district court’s
conclusions of law to determine if they are correct. Patton, ¶ 18. Absent clearly
erroneous findings, we will affirm a district court’s property division unless we identify
an abuse of discretion. In re Marriage of Funk, 2012 MT 14, ¶ 6, 363 Mont. 352, 270
P.3d 39.
DISCUSSION
¶17 On appeal, Daniel argues that the apportionment of the remaining settlement
proceeds—the bulk of the marital estate—to Jackie was not fair and equitable.
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¶18 Section 40-4-202, MCA, governs marital estate distribution. It requires the court
to “equitably apportion between the parties the property and assets belonging to either or
both, however and whenever acquired and whether the title to the property and assets is
in the name of the husband or wife or both.” Section 40-4-202(1), MCA. That is,
“everything owned jointly or by either party must be equitably apportioned . . . regardless
of when or how it was acquired.” Funk, ¶ 13 (emphasis in original). In equitably
apportioning the marital estate, the court must consider the following factors:
[T]he duration of the marriage and prior marriage of either party, the age,
health, station, occupation, amount and sources of income, vocational
skills, employability, estate, liabilities, and needs of each of the parties,
custodial provisions, whether the apportionment is in lieu of or in addition
to maintenance, and the opportunity of each for future acquisition of capital
assets and income.
Section 40-4-202(1), MCA. It is well-settled that an equitable apportionment “does not
require a 50/50 distribution of the marital estate.” In re Marriage of McNellis, 267 Mont.
492, 501, 885 P.2d 412, 418 (1994). As such, § 40-4-202, MCA, “vests a trial court with
far-reaching discretion to fashion a fair distribution of the marital property using
reasonable judgment and relying on common sense.” In re Marriage of Harper, 1999
MT 321, ¶ 36, 297 Mont. 290, 994 P.2d 1 (internal quotations and citations omitted).
¶19 Daniel first argues that both he and Jackie were parties to the settlement and that
the Kostelnik Annuity proceeds are the result of investments they purchased and held
jointly for their needs. Daniel contends that the Standing Master therefore erred by not
apportioning some of the settlement proceeds to him. Daniel next claims that the
Standing Master inconsistently analyzed and applied the source of the various assets in
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apportioning them. He argues that if Funk applies, all of the parties’ assets—including
the settlement funds—are subject to equitable apportionment regardless of the source.
Conversely, he argues, if the source of funds controls, then all of the retirement accounts
and half of the bank accounts and house should have been apportioned to him. Daniel
further argues that Jackie is capable of finding employment and that the Standing Master
did not sufficiently consider the evidence concerning Daniel’s employment
circumstances.
¶20 As the Standing Master’s Report notes, under Funk and § 40-4-202, MCA, the
source of the property or assets does not affect their equitable apportionment. The
Standing Master made factual findings from which she determined how the settlement
proceeds and the Kostelnik Annuity should be distributed. Although the Standing Master
concluded that the settlement proceeds were not treated as a joint asset by the parties, our
review of the record indicates that the Standing Master did not ground her apportionment
on this conclusion. Rather, the Standing Master concluded that it was fair and equitable
to award Jackie all remaining proceeds.
¶21 The Standing Master made detailed factual findings on both parties’ financial,
employment, and medical circumstances. Based upon these findings, the Standing
Master concluded that Daniel was more educated than Jackie and had “a greater history
of gainful and higher income employment.” Moreover, the Standing Master determined
that Jackie’s substantial health issues limited her employment opportunities and required
“approximately $700-900 per month” in medical expenses. The Standing Master
determined that if the proceeds were divided as proposed by Daniel, then Jackie “would
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not have sufficient property to provide for her reasonable needs and would not be able to
be self-supporting through appropriate employment.”
¶22 As the District Court observed, the record shows that the Standing Master gave
due consideration to both parties’ testimony regarding employment potential and wrote
thorough factual findings supporting the ultimate marital estate apportionment.
Moreover, contrary to Daniel’s argument, equitable apportionment does not require an
equal distribution of the marital estate. McNellis, 267 Mont. at 501, 885 P.2d at 418.
The Standing Master did award Daniel an equal interest in the marital home and observed
that he still is the beneficiary on the Kostelnik Annuity should he survive Jackie.
¶23 The record shows that the Standing Master used reasonable judgment in
fashioning a fair distribution of the marital estate. Our own review of the record
convinces us that the Standing Master’s findings are supported by substantial evidence
and that the Standing Master did not misapprehend the effect of the evidence. We
conclude that the District Court appropriately reviewed the entire record and correctly
applied the relevant standard of review to the Standing Master’s findings of fact and
conclusions of law.
CONCLUSION
¶24 The District Court did not err in reviewing and adopting the Standing Master’s
marital estate division. Accordingly, we affirm.
/S/ BETH BAKER
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We concur:
/S/ MIKE McGRATH
/S/ LAURIE McKINNON
/S/ PATRICIA COTTER
/S/ JAMES JEREMIAH SHEA
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