Johnson v. Johnson

• Decision Date: 20 June 2007
• Docket Number: No. 24023.,24023.
• Citation: 734 N.W.2d 801,2007 SD 56
• Parties: Lois F. JOHNSON, Plaintiff and Appellant, v. Leonard P. JOHNSON, Defendant and Appellee.
• Court: South Dakota Supreme Court

734 N.W.2d 801

2007 SD 56

Lois F. JOHNSON, Plaintiff and Appellant, v. Leonard P. JOHNSON, Defendant and Appellee.

No. 24023.

Supreme Court of South Dakota.

Argued March 21, 2006.

Decided June 20, 2007.

Victoria M. Duehr of Bangs, McCullen, Butler, Foye & Simmons, LLP Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.

Gregory T. Brewers Richard A. Johnson of Strange, Farrell & Johnson Sioux Falls, South Dakota, Attorneys for defendant and appellee.

GILBERTSON, Chief Justice.

[¶ 1.] Lois F. Johnson appeals the property division in a judgment and decree of divorce from Leonard P. Johnson (Pete). We reverse and remand.

FACTS AND PROCEDURE

[¶ 2.] Lois and Pete were married on October 20, 1972 and divorced on November 9, 2005 after thirty-three years of marriage. Both agreed to waive all claims to alimony or other spousal support, and all their children are adults, so there are no issues of child custody, child support or visitation. The issues on appeal solely concern the court's division and valuation of certain property.

[¶ 3.] Lois was born on February 1, 1947, and is in good health. She was working at the Department of Veteran's Affairs when she married Pete and had been working there for seven years before the marriage. She took a six-year leave of absence for the birth and early rearing of their children but returned and continues to work there presently. She intends to remain with the Department of Veteran's Affairs for at least four more years. Lois currently earns about $45,000 a year with annual raises of about three percent. She was also involved with the farming operation, especially during her six-year leave of absence.

[¶ 4.] Pete was at the time of marriage, and still is today, a self-employed farmer and livestock producer. He was born on February 26, 1940, and is seven years older than Lois. Pete has had both of his shoulders replaced due to an automobile accident and deterioration caused by a lifetime of work on the farm. At the time of the divorce, the residual effects of the automobile accident have apparently all but vanished; however, it was related to the trial court that Pete suffered neck and back pain and continuous headaches as a result of the accident. Pete was also injured from an accident on the farm when a tailgate of a farm vehicle hit him on the head. However, the jolt seemed to rectify some of the neck and back issues he was suffering from as a result of the automobile accident.

[¶ 5.] The farm income has fluctuated over the last five years, but there appears to be no great disparity between Lois and Pete in their present day ability to earn an income except that Pete's income depends upon good weather, reasonable expenses and a favorable market. Pete also currently receives social security benefits of $851.20 per month. As an employee of the Department of Veteran's Affairs, Lois enrolled in the Civil Service Retirement System (CSRS), which is a defined benefit retirement program. By opting to participate in the CSRS, Lois cannot collect social security benefits.

[¶ 6.] On January 9, 1997, during the marriage, Pete and Lois were involved in an automobile accident. Pete sustained injuries to his neck and shoulders as a result of the accident. They both brought suit against the tort-feasor, and the jury returned a verdict for nearly $900,000. The jury partitioned $106,500 for Lois's loss of consortium claim and the balance for Pete's personal injuries. Pete and Lois executed a post-verdict settlement stipulation, agreeing to reduce the verdict to approximately $800,000. This resulted in a net payment of $480,786.93 to Pete and Lois. With this money, they paid off the mortgage on the farm ($168,055) and interest on the 2000 operating loan ($3,989.28), provided gifts to their children and others ($28,160), invested in an Edward Jones account ($200,000) and bought cattle ($38,000).

[¶ 7.] As part of the divorce, Lois and Pete entered into a stipulation concerning the farm operation for the year 2005. Under the agreement, the operating loan for 2005 would be Pete's obligation and not considered marital debt. In turn, Lois agreed not to claim the 2005 crop or increase in cattle as assets of the marriage. Thus, they agreed to use early 2005 as the point in time for final valuation of the marital assets. The 2004 operating loan was paid off on January 14, 2005.

[¶ 8.] Lois and Pete each hired a separate appraiser to determine the value of the farm assets, exclusive of the real estate. They agreed on the value of the real estate as $1,213,000. Lois retained Roger Peterson, a certified agricultural personal property appraiser, to appraise the livestock, feed and machinery. Peterson's appraisal took place on December 18, 2004. Peterson collected feed samples and tested its quality in order to establish its value and contacted several dealers, referenced a farm guide book, and used his personal knowledge to appraise the machinery. Peterson arrived at a total value of $557,108. Pete retained Tom Souvignier to appraise the livestock, feed and machinery. He inspected and valued the property at $340,359 on March 28, 2005.

[¶ 9.] The court used the valuations provided by Souvignier, despite the fact that his valuation did not occur until more than two months after the 2004 operating loan was paid off. Although the court recognized that both experts were well-qualified, the court reasoned that Souvignier possessed a current up-to-date knowledge of prices given his work conducting actual sales and presiding over auctions on a regular basis.

[¶ 10.] Each also hired an expert to determine the present day value of Lois' CSRS benefits. Lois retained Bridget VanHove Wenande, who arrived at a value of $315,000, and Pete hired Eide Bailly, who calculated a present day value of $354,000. The difference between these opinions was directly related to the discount rates for the deferral and payment period. Wenande also calculated the present day value of Pete's social security benefits. She used the same method as she did to arrive at the present day value for Lois' CSRS benefits and used the $851.20 per month benefits Pete was currently receiving in social security to arrive at an amount of $115,000. The court acknowledged that both experts hired to figure the present day value of the CSRS benefits were well qualified, yet accepted the value presented by Pete's expert, Eide Bailly.

[¶ 11.] Lois claims Pete dissipated the marital estate by spending $3,301 on gifts for his girlfriend. Lois offered evidence of a ring, pendant, flowers and clothing purchased for the girlfriend and trips they allegedly took together. However, the court held Lois made no showing as to what amount of travel expenses were attributable to one person alone, and Pete testified that the ring purchased was for him, not a girlfriend. The court found sufficient evidence to attribute $567 as gifts for Pete's girlfriend.

[¶ 12.] The trial court used the analytical approach to divide the personal injury award. Using this approach, the court looked to see if the award was replacing some marital asset, such as awards for medical treatment, future medical treatment, out-of-pocket expenses and loss of future income. If so, these were considered replacement amounts that should be distributed as marital assets. The portion of the award set aside for physical injuries, pain and suffering and loss of consortium, however, were considered personal awards to Pete and Lois. The personal awards were denoted separate property and diminished the marital estate.

[¶ 13.] The court concluded 50% of the verdict was for Pete, 11% for Lois and 39% was marital. However, the court determined only $321,954 was traceable to the proceeds of the settlement award. The remaining amount was either commingled, spent, untraceable or otherwise appropriately distributed equally. Thus, $160,977 of the personal injury settlement was deducted from Pete's estate as his separate property and $35,415 was deducted from Lois's estate as her separate property.

[¶ 14.] Despite Lois' argument that Pete's social security benefits should be offset against her CSRS benefits, the court decided not to offset Pete's social security benefits because the present day value of such benefits had not been adequately proven. Instead, the court included the full value of Lois' CSRS benefits without making any equitable adjustment to account for the fact that Pete receives and will continue to receive social security benefits.

[¶ 15.] Finally, the trial court granted Lois a net estate of $506,687¹ and Pete a net estate of $1,349,784,² leaving a difference of $843,097. The court determined that Pete should pay Lois $300,000 in order to balance the equitable distribution of the marital assets.³ After the equalizing payment, the net division was 43% to Lois and 57% to Pete.

[¶ 16.] Lois appeals, raising five issues:

1. Whether the trial court abused its discretion when it did not offset Pete's social security benefits against Lois' CSRS benefits.

2. Whether the trial court erred when it distributed portions of the personal injury settlement as separate property instead of including the entire award in the marital estate.

3. Whether the trial court's valuations of the checking accounts, Lois' CSRS, and livestock, feed and machinery were clearly erroneous.

4. Whether the trial court erred when it credited Pete $357.00 for gifts to his girlfriend.

5. Whether the trial court's net property division was an abuse of discretion.

STANDARD OF REVIEW

`The valuation of property involved in a divorce proceeding will not be overturned unless it is clearly erroneous.' Priebe v. Priebe, 1996 SD 136, ¶ 8, 556 N.W.2d 78, 80. `Our standard of review of a trial court's property division is that of an abuse of discretion.' Grode v. Grode, 1996 SD 15, ¶ 6, 543 N.W.2d 795, 799. `The term "abuse of discretion" refers to a discretion exercised to an end or purpose not justified by,...