Adams v. Adams, 20140259.

• Decision Date: 04 May 2015
• Docket Number: No. 20140259.,20140259.
• Citation: 863 N.W.2d 232
• Parties: John Duane ADAMS, Plaintiff and Appellee v. Sandra Kathleen ADAMS, Defendant and Appellant.
• Court: North Dakota Supreme Court

863 N.W.2d 232

John Duane ADAMS, Plaintiff and Appellee

v.Sandra Kathleen ADAMS, Defendant and Appellant.

No. 20140259.

Supreme Court of North Dakota.

May 4, 2015.

James R. Brothers, Fargo, N.D., for plaintiff and appellee.

Joshua M. Benson (argued) and Kathleen M. Newman (on brief), Minneapolis, MN, for defendant and appellant.

Jerilynn Brantner Adams (appeared), Fargo, N.D., for defendant and appellant.

Opinion

SANDSTROM, Justice.

[¶ 1] Sandra Adams appeals from an amended supplemental judgment dividing the marital estate between her and John Adams. On appeal, Sandra Adams argues the district court's property division was not equitable, because the court erred in not applying discounts to the values of properties awarded to her. She also argues the court erred in applying a two percent interest rate to a payment from John Adams equalizing the court's property division. We affirm.

I

[¶ 2] Sandra Adams and John Adams were married in 1971. John Adams sued her for divorce in 2011. The district court entered a partial judgment granting the parties a divorce in April 2013, and an October 2013 trial was held on property division and other issues.

[¶ 3] Over the course of the marriage, the parties built a substantial and complex marital estate, consisting primarily of ownership in businesses that own residential and commercial real estate. Many of the businesses are interrelated and interdependent. Because of the complexities of the businesses, the district court found it was difficult to divide the entities in distributing the marital property. The court also found factors weighing against liquidation of the businesses, and it was in “the best interest of both parties to keep the interconnected and interdependent business entities together, and operating as going concerns.” The court found John Adams had the most knowledge and involvement in the businesses, and awarded them to him. Sandra Adams was awarded assets that could be separated from the business entities.

[¶ 4] AKA Hotel Ventures (“AKA”) and Adams Investment Limited Partnership (“Adams Investment LP”) are examples of interrelated entities. AKA owns the Radisson Hotel (“Radisson”) in Fargo. The Radisson consists of 13 floors of an 18–story building, the Radisson Tower. Adams Investment LP is a holding company owning a majority of the parties' marital assets, including 99 percent of AKA and the 15th and 16th floors of the Radisson Tower (“two floors”). Adams Investment LP loaned money to AKA to fund renovations to the Radisson, which left $12,000,000 payable by AKA to Adams Investment LP. Sandra Adams was active in the management of the Radisson. The district court found the Radisson and the two floors could be separated from AKA and Adams Investment LP and awarded the Radisson and the two floors to Sandra Adams.

[¶ 5] Before trial, the parties stipulated to the appointment of Dianna Kindseth, a neutral appraiser, to itemize and value the marital assets, including the numerous business entities owned by the parties. Real estate appraisers were also retained by Kindseth and by the parties individually. In valuing the businesses, Kindseth and other appraisers prepared detailed valuation reports describing the valuation method used, information about each business, and the information reviewed to determine the fair market value of each business.

[¶ 6] The value of the Radisson was disputed; Sandra Adams valued it at $7,750,000, and John Adams valued it at $12,000,000. The district court valued the Radisson at $10,000,000. The court valued the two floors at $2,750,000, which was not disputed. The Radisson was subject to a mortgage of $3,250,000. Sandra Adams was awarded the Radisson subject to the mortgage, but was not responsible to pay the $12,000,000 due from AKA to Adams Investment LP.

[¶ 7] Another dispute between the parties was whether discounts for lack of marketability or lack of control should be applied in valuing the various business entities owned by the parties. Sandra Adams argued no discounts should be applied, and John Adams argued the district court should adopt Kindseth's recommendations regarding discounts. In determining the fair market value of each entity, Kindseth applied a discount for lack of marketability or lack of control if she concluded a discount was appropriate on the basis of her overall evaluation of each entity. If a discount was applied in valuing an entity, the valuation report included a detailed discount appraisal report explaining the discount. Kindseth applied an eight percent discount for lack of marketability to the value of Adams Investment LP. She did not apply a discount to the value of AKA, because it had a negative net asset value. The district court adopted Kindseth's recommendations, explaining:

As part of her engagement, Kindseth was specifically instructed to consider whether discounts were appropriate. If so, she was also asked to set the appropriate rates. In the various reports, Kindseth provides a detailed analysis supporting her conclusions as to discounts. In each instance, this reasoning appears to be sound. The specific discounts suggested are all relatively modest. Therefore, the court-appointed neutral's recommendations as to discounts will be adopted and followed.

[¶ 8] The parties agreed to an equal division of property. Using the valuation reports prepared by Kindseth and the other appraisers, the district court valued the marital estate at $46,483,507. Sandra Adams was awarded property valued at $16,375,087, including the Radisson, the two floors, and two undeveloped properties in Fargo.

[¶ 9] In valuing and dividing the marital estate, the district court applied Kindseth's recommended discounts to the business entities. The district court applied the recommended discounts to the values of the two undeveloped properties awarded to Sandra Adams. The court did not apply a discount to the values of the Radisson and the two floors.

[¶ 10] To equalize the division of property, Sandra Adams was awarded an equalization payment of $6,866,666 from John Adams, payable over five and a half years at two percent interest. At trial, neither party presented evidence on appropriate payment terms if an equalization payment was awarded. In his post-trial brief, John Adams argued an equalization payment should be paid within approximately six years at the applicable Federal rate, which was 1.72 percent. Sandra Adams argued an equalization payment should be paid within five years at the state judgment interest rate, which was 6.5 percent. In awarding the equalization payment, the district court stated:

The parties agree that John does not have the present capacity to borrow or pay this amount. It will need to be paid over time. Moreover, the terms need to be realistic and reasonable. A requirement that John pay more than he can likely afford through the normal course of business would not be in the best interest of either party. The goal is to keep the business operations intact, viable and productive. Should John be forced to sell off parts in order to make payments, both parties are likely to come up short in the end. For the same reason, the interest rate must be reasonable.

The court decided John Adams' payment plan was the most reasonable and realistic, and also decided “[i]n the current economy, a 2% interest rate is appropriate.”

[¶ 11] After the district court entered its supplemental judgment, Sandra Adams moved for amended findings and a new trial, arguing the court erred in applying a two percent interest rate to the equalization payment. The district court amended the supplemental judgment by correcting some oversights, but the court did not alter the two percent interest rate on the equalization payment. At the hearing on the motion, the court further discussed the two percent rate applied to the equalization payment:

[I]f you've got cash that you want to put in a very safe and conservative investment these days, 2 percent is about what you're going to get. And, again, that was just a small part of the realities that drove my decision, but the bigger part was just what's practical and what's reasonable and what's fair and what's equitable.

[¶ 12] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27–05–06. Sandra Adams' appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28–27–01.

II

[¶ 13] Sandra Adams argues the district court erred in its application of discounts when valuing the property awarded to her. When a divorce is granted, the district court makes an equitable distribution of the parties' property and debts. N.D.C.C. § 14–05–24(1). This Court reviews a district court's distribution of marital property as a finding of fact, and will not reverse unless the findings are clearly erroneous. McCarthy v. McCarthy, 2014 ND 234, ¶ 8, 856 N.W.2d 762. “A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all the evidence, we are left with a definite and firm conviction a mistake has been made.” Id. (quoting Hoverson v. Hoverson, 2013 ND 48, ¶ 8, 828 N.W.2d 510). We view the evidence in the light most favorable to the findings, and the district court's factual findings are presumptively correct. McCarthy, at ¶ 8. Valuations of marital property within the range of the evidence presented are not clearly erroneous. Dvorak v. Dvorak, 2005 ND 66, ¶ 20, 693 N.W.2d 646. A choice between two permissible views of the evidence is not clearly erroneous if the district court's findings are based either on physical or documentary evidence, or inferences from other facts, or on credibility determinations. Fox v. Fox, 2001 ND 88, ¶ 14, 626 N.W.2d 660.

[¶ 14] Sandra Adams argues the district court erred in failing to apply discounts to the values of the Radisson and the two floors in awarding those assets to her. She argues discounts were...