454 P.3d 1092 (Idaho 2019), 45277, Papin v. Papin

Docket Nº45277
Citation454 P.3d 1092, 166 Idaho 9
Opinion JudgeMOELLER, Justice
Party NameVeronika O. PAPIN, Plaintiff-Respondent, v. Jerry A. PAPIN, Defendant-Appellant.
AttorneySmith Woolf Anderson & Wilkinson, PLLC, Idaho Falls, for Appellant. Marty Anderson argued. Parsons Behle & Latimer, Idaho Falls, for Respondent. John E. Cutler argued.
Judge PanelChief Justice BURDICK, and Justices BRODY, BEVAN and STEGNER concur.
Case DateDecember 20, 2019
CourtSupreme Court of Idaho

Page 1092

454 P.3d 1092 (Idaho 2019)

166 Idaho 9

Veronika O. PAPIN, Plaintiff-Respondent,

v.

Jerry A. PAPIN, Defendant-Appellant.

No. 45277

Supreme Court of Idaho, Pocatello

December 20, 2019

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Appeal from the District Court of the Seventh Judicial District of the State of Idaho, Bonneville County. Dane H. Watkins, Jr., District Judge.

The decision of the district court is affirmed in part and reversed in part and remanded for further proceedings.

Smith Woolf Anderson & Wilkinson, PLLC, Idaho Falls, for Appellant. Marty Anderson argued.

Parsons Behle & Latimer, Idaho Falls, for Respondent. John E. Cutler argued.

OPINION

MOELLER, Justice

This is an appeal originating from a complex divorce between Jerry and Veronika Papin. Jerry appeals from the Bonneville County district court’s decision, which affirmed in part the judgment of the magistrate court dividing the marital estate. On appeal, Jerry argues that the district court erred in affirming several of the magistrate court’s rulings, including: (1) its holding that the marriage settlement agreement was invalid; (2) its holding that the community was entitled to reimbursement for the funds expended towards the mortgage and property taxes on Jerry’s separate property home; (3) its characterization of certain property as

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either separate or community; (4) its valuation of certain property; (5) its award of spousal maintenance to Veronika; and (6) its award of attorney fees to Veronika. For the reasons stated below, we affirm in part, reverse in part, and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

Jerry and Veronika were married on June 3, 2003, when they were thirty-seven and twenty-nine years old, respectively. Throughout the marriage, the parties resided in Jerry’s separate property home in Idaho Falls, Idaho. The parties have one child together, J.P., born on April 11, 2010.

Veronika was born in the Czech Republic and moved to Idaho Falls in 2003 after having visited a few times. Czech is Veronika’s first language, but she understands four other languages, including English. While married to Jerry, Veronika worked part time at an art gallery in Idaho Falls making minimum wage.

Jerry was born in the United States and has lived in Idaho Falls since 1986. After leaving the Navy in 1991, Jerry began his career as an investment manager. Jerry affiliated his business with IDS Financial Services Inc. (IDS Financial), becoming an independent contractor with the firm. In 1995, IDS Financial changed its name to American Express Financial Advisors (American Express), and in 2005, American Express changed its name to Ameriprise Financial Services, Inc. (Ameriprise). Following the name change, Ameriprise updated its tax policy, thereby allowing Ameriprise affiliated investment managers, such as Jerry, to have their own distinct tax identity. In response, Jerry created Jerry Papin Support Services, LLC (JPSS).

On August 31, 2011, Jerry sold his "Business and Assets" to Brinton Webb, another Ameriprise affiliated investment manager. Jerry and Webb executed an Agreement for Purchase and Sale of the Ameriprise Franchise of Jerry A. Papin, Jr. (Purchase and Sale Agreement) to document the terms of the sale to Webb.1 The Purchase and Sale Agreement provided that Jerry would sell to Webb his "Business and Assets, as they exist," for $504,000. The "Assets" included Jerry’s "client base," which consisted of approximately 250 clients with approximately $45,000,000 in total assets under management (AUM).

On the same day, Jerry and Webb executed the Amendment to the Agreement for Purchase and Sale of Practice (the Amendment). The Amendment explained that Jerry could "solicit clients of the Business ... to move some or all of their accounts from [Webb’s] Ameriprise [business] to [Jerry]’s new Industry business." The parties agreed that Jerry would limit the amount of AUM leaving Webb’s Ameriprise business to no more than $12,500,000. Should Jerry procure more than that, he would have to reduce the purchase price by five percent for each increment of $1,000,000 in excess of $12,500,000.

The very next day, Jerry executed an operating agreement with Melissa Davis, forming Straight Line Investment Group, LLC (Straight Line), a Nevada corporation. Jerry and Melissa each owned a fifty percent interest in Straight Line. One month later, Jerry amended the Certificate of Organization for JPSS, changing the name to Straight Line Investment Group, LLC (Straight Line (Idaho)).

On November 16, 2011, Jerry informed Webb that he would be transferring $16,900,000 in AUM— i.e., $4,400,000 above the permitted $12,500,000— to his new business, Straight Line. As a result, Jerry reduced the purchase price of $504,000 by twenty five percent. Accordingly, Webb was only required to pay Jerry $378,000 for the sale of the business.

Two years later, Jerry prepared a document entitled: A Covenant Affirming the Separate Business Property of Melissa Davis and Jerry A. Papin, Jr. (the Covenant). The Covenant provides in part:

Straight Line Investment Group, LLC, a business formed under the laws of the state of Nevada, as an evolution and continuation of the Investment management and financial advisory business, established in 1991, previously owned by Jerry A. Papin,

Page 1100 Jr. exclusively, was contemplated, designed and has thereafter operated as [Jerry and Melissa’s] separate property in proportion to their respective ownership interests.

The Covenant further provides that the spouses of Jerry and Melissa affirm that Straight Line "has been and remains the separate property of [Jerry and Melissa]"; that the spouses do not have and never will have "any lawful right or claim to the intellectual or real property, revenue, proceeds, set-asides, investments, equity or any other thing of value of [Straight Line]"; and that the spouses forever disclaim and waive "all rights, title, and interest which may be vested in either or both of us by virtue of our respective marriages to the Partners in and to all revenues, proceeds, property, assets and other things of value of [Straight Line]" and "any subsequent finding by a jurisdictional authority of any community property or other joint interest." Melissa’s husband, Adam Davis, signed the Covenant on October 24, 2013, and Veronika signed the Covenant on November 4, 2013. Neither Jerry nor Melissa signed the Covenant.

On August 13, 2014, after more than eleven years of marriage, Veronika filed for divorce on the grounds of extreme cruelty or, in the alternative, on the grounds of irreconcilable differences. Jerry requested that the magistrate court grant the divorce on the grounds of adultery or, in the alternative, on the grounds of irreconcilable differences.

Veronika challenged the validity of the Covenant by moving for summary judgment. Veronika argued that the Covenant is not a "binding or valid premarital agreement pursuant to I.C. § 32-916, et seq. and in accordance with leading Idaho case law." In response, Jerry filed a cross-motion for summary judgment, arguing that the Covenant is a "valid post marital agreement" and Veronika is not entitled to claim any interest in Jerry’s separate property business. The magistrate court granted summary judgment in favor of Veronika, holding that the Covenant was not a valid marriage settlement agreement because (1) it was signed by only one spouse when Idaho Code section 32-917 requires both spouse’s signatures and (2) it is unconscionable. The court also held that the Covenant was not an "instrument of conveyance" because there was no specific language of conveyance as required by Idaho Code section 32-906(2). Finally, the court held that the Covenant was not a valid agreement as between Veronika and Adam, i.e., the signatories, for lack of consideration.

Trial commenced on July 1, 2015, and on October 19, 2015, the magistrate court entered its Memorandum Decision. Relevant to this appeal, the court made the following findings: (1) neither party met their burden of proving fault grounds for divorce; (2) community funds were used to pay down the mortgage and property taxes on Jerry’s separate property home in the amount of $70,000 and $13,797.80, respectively; (3) the proceeds from the sale of the business are presumed to be community property because Jerry could not trace his separate property; (4) Straight Line is community property because it was started during the marriage; (5) the MPCU joint checking account and all investment accounts are community property because the accounts consist of either the proceeds from the sale of Jerry’s business or community income; (6) Veronika is entitled to an award of temporary spousal maintenance; and (7) Veronika is entitled to two-thirds of her requested attorney fees.

Veronika filed a motion for attorney fees and costs, requesting $89,202.57 in attorney fees and $9,787.94 in costs. The magistrate court issued its Memorandum Decision Re: Attorney’s Fees, awarding Veronika all of her costs and part of her fees. As for costs, the court awarded Veronika $1,714.19 as costs as a matter of right and $8,073.75 as discretionary costs. As for attorney fees, the court reduced the requested amount by $5,447.50 based on Jerry’s objections to which Veronika failed to respond. The court also reduced the amount by $48,372.60 for payments already received from community funds. Finally, the court reduced the amount by one-third, or $15,056.80, because Veronika only prevailed in part. Accordingly,...

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