Farmer v. Farmer

• Citation: 948 N.W.2d 29
• Decision Date: 12 August 2020
• Docket Number: #28721
• Parties: James W. FARMER, Plaintiff and Appellant, v. Lori A. FARMER, n/k/a Lori A. Lieberman, Defendant and Appellee.
• Court: Supreme Court of South Dakota

948 N.W.2d 29

James W. FARMER, Plaintiff and Appellant,

v.Lori A. FARMER, n/k/a Lori A. Lieberman, Defendant and Appellee.

#28721

Supreme Court of South Dakota.

CONSIDERED ON BRIEFS JANUARY 13, 2020

OPINION FILED August 12, 2020

Rehearing Denied September 24, 2020

JAY C. SHULTZ, Rapid City, South Dakota, Attorney for plaintiff and appellant.

PATRICIA A. MEYERS, Rapid City, South Dakota, Attorney for defendant and appellee.

DEVANEY, Justice

[¶1.] In 2016, Lori Farmer filed a motion in circuit court for an order to show cause why James Farmer should not be held in contempt for his failure to follow the terms and conditions of the parties’ property settlement agreement, which was incorporated within their 2014 judgment and decree of divorce. The court held an initial evidentiary hearing on the motion on October 27, 2016 and held numerous hearings thereafter related to continued disputes between the parties. The court held a final evidentiary hearing in January 2018, and in August 2018, issued a judgment and order holding James in contempt and finding that he owes Lori $331,184.81. To satisfy this debt and purge himself of contempt, the court ordered that James convey to Lori his membership interests in certain entities and his ownership interest in certain properties. The court also ordered that James pay Lori's attorney fees. James appeals, and we affirm.

Factual and Procedural Background

[¶2.] James and Lori married in 1984 and divorced in January 2014. During their marriage, the couple had purchased a significant amount of undeveloped land in the Black Hills and formed multiple legal entities to develop and sell the land. The companies included: Red Canyon Rim Company (RCRC), The Rim, LLC (The Rim), Lakota Lake Camp, LLC (Lakota Lake), and Iron Mountain Trading Company, LLC (IMTC). In his individual capacity, James formed a land management company—Red Canyon Company (RCC)—to provide marketing and property management services to the above companies. James and Lori also built a cabin on 60 acres of land (cabin property) and used Lori's Equity Institutional simplified employee pension plan to acquire an additional 40-acre parcel (Equity 40-acre parcel).

[¶3.] At the time of the divorce, James and Lori had not yet sold all the land owned by their companies, but they desired to continue their plan to sell the properties and share equally in the proceeds of future sales. The parties executed a "stipulation for property settlement agreement" (Agreement) in January 2014 governing the division, management, and sale of their remaining properties. The Agreement also defined how the parties’ debts were to be paid or divided. The circuit court incorporated the Agreement into the judgment and decree of divorce.

[¶4.] In July 2016, Lori filed a motion to enforce the judgment and decree of divorce and requested an order to show cause why James should not be held in contempt. Lori asserted, among other things, that James violated the terms of the Agreement as follows: (1) by not first paying their joint debt with the proceeds of land sales prior to paying other expenses or making any distributions; (2) by diluting Lori's membership interest in Lakota Lake through a "cash call" and not equally dividing the distributions from Lakota Lake land sale proceeds; (3) by exceeding the agreed cap on expense limits; and (4) by overpaying his management fees. Lori further alleged that James refused to give her access to the companies’ financial records. She requested that the court order an accounting and require James to turn over monthly bookkeeping to an accounting firm.

[¶5.] The circuit court held an evidentiary hearing on the contempt motion on October 27, 2016 and after considering the parties’ post-hearing briefs, the court entered findings of fact and conclusions of law on May 1, 2017. The court's findings identified the properties remaining at the time of the hearing, which included the cabin property, the Equity 40-acre parcel, 10 acres owned by RCRC, 2 tracts owned by Lakota Lake, and 1 parcel owned by IMTC. The court also noted several debts related to the land and cabin for which the parties were personally liable. The court then identified the specific terms of the parties’ Agreement that James had violated, found that he had the ability to comply with its terms, and found that his violations were willful and contumacious.

[¶6.] In its May 2017 ruling, the court ordered James to give Lori equal access to the cabin and pay Lori $60,678 as her equal distribution of the proceeds from the sale of a Lakota Lake tract within 90 days of the entry of the court's order. The court further ordered James to refrain from selling or disposing of property in violation of the Agreement and to provide information to an accounting firm for the purpose of determining the amount of increased expense caused by James's management of the companies.

[¶7.] Over the next several months, the parties returned to court frequently and usually in response to Lori's request to require James to comply with the terms of the Agreement and the court's orders. For example, the parties returned to court when James attempted to sell the cabin and tracts owned by Lakota Lake, The Rim, and IMTC by auction without first obtaining, as required by the Agreement, Lori's consent as to sale price, details, and timing of the sale. While the court allowed James to attempt to sell the Lakota Lake tracts and the IMTC parcel at auction, it ordered the parties to mediate their remaining disputes.

[¶8.] After mediation failed and the auction did not occur, the court held multiple additional hearings on motions filed by Lori related to James's continuing actions in violation of the court's orders. As a result of these hearings, the parties agreed to the entry of a restraining order freezing the cabin account as well as the accounts for Lakota Lake, RCRC, and IMTC and prohibiting the "transfers or transactions ... without the written consent of the other party[.]" James also agreed that the cabin could be listed for sale and that he would produce or release account information related to the intercompany transfers, including information related to his management company, RCC. Finally, the parties agreed to a further evidentiary hearing to resolve the pending contempt order and the division of the remaining land assets. The court entered a written order on October 11, nunc pro tunc September 15, 2017, reflective of its oral rulings during the August 3, September 5, and September 15 hearings.

[¶9.] On October 10, 2017, James's counsel obtained permission to withdraw, asserting that James had failed to abide by the attorney fee agreement and that "the attorney client relationship has deteriorated to the point where [counsel] can no longer effectively represent [James]." James ultimately hired new counsel, and the parties scheduled a two-day evidentiary hearing in November 2017 on the contempt issue and division of property. Prior to the evidentiary hearing, Lori submitted proposed findings of fact and conclusions of law, and James submitted a written response in which he proposed a specific division of the remaining real estate, including the real estate owned by the various legal entities.

[¶10.] The evidentiary hearing was rescheduled and held in January 2018. There is no transcript in the record from this three-day hearing. However, it is apparent from the exhibits in the record that Lori presented expert testimony on the valuation of the remaining land assets and property. The record also contains an exhibit offered by James at the hearing relating a proposed division of the remaining land assets.¹ This exhibit contains a series of emails in October and November 2017 between James and First Western Bank in which James explained to his banker that he and Lori had been in court for over a year "in an attempt to settle all remaining issues" and that their focus was "on splitting [their] properties such that [they] each have 100% ownership for half of the remaining land assets." James also indicated that if the parties could not come to their own agreement, the court would "make the split" of the land assets for the parties.

[¶11.] Following the January 2018 hearing, Lori submitted proposed findings of fact and conclusions of law, including a division of "the real property that remains." James also submitted proposed findings and conclusions, but he did not include a specific division of property or object to Lori's proposed property division.

[¶12.] On April 19, 2018, the circuit court issued findings of fact and conclusions of law to which James objected, arguing for the first time (and contrary to his pretrial request that the court divide the property) that the court was without authority to divide assets owned by other legal entities. In response, Lori filed a motion for the appointment of a receiver to take possession of the membership interests owned by James in Lakota Lake and IMTC and "take the actions necessary to liquidate and distribute [James's] membership interest in those entities in satisfaction of the Judgment owed to [Lori]." James objected to the appointment of a receiver.

[¶13.] Lori also filed a proposed judgment dividing the remaining land assets consistent with the court's findings and conclusions. James objected, arguing that Lori's proposed judgment violated the prohibition against modifying a division of property in a divorce decree. He also argued that the court did not have jurisdiction or authority to order him to execute and deliver documents that directly or indirectly transferred title to real property owned by LLCs that are not a party to the divorce action. James further asserted (for the first time) that the LLCs are indispensable parties who must be joined in these proceedings in order to transfer such property. In his view, Lori's only remedy in this case would be a money judgment with the right to execute upon the judgment "just like any other judgment...