Arnold v. Sullivan

• Decision Date: 09 February 2010
• Docket Number: No. DA 09-0349.,DA 09-0349.
• Citation: 2010 MT 30,355 Mont. 177,226 P.3d 594
• Parties: Robert ARNOLD, Petitioner and Appellant,v.Terri SULLIVAN, Defendant and Appellee.
• Court: Montana Supreme Court

355 Mont. 177

226 P.3d 594

2010 MT 30

Robert ARNOLD, Petitioner and Appellant,v.Terri SULLIVAN, Defendant and Appellee.

No. DA 09-0349.

Supreme Court of Montana.

Submitted on Briefs Jan. 7, 2010.

Decided Feb. 9, 2010.

COPYRIGHT MATERIAL OMITTED

For Appellant: R. Stan Peeler, Peeler Law Office, Bozeman, Montana.

For Appellee: James D. McKenna, McKenna Law Office, P.C., Bozeman, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Appellant Robert W. Arnold (Bob) filed a petition for dissolution of marriage in the Eighteenth Judicial District Court, Gallatin County, asserting a common law marriage with Appellee Terri J. Sullivan (Terri). Bob also filed a second action against Terri, seeking an accounting, dissolution and distribution of their partnership business and alleging fraud and unjust enrichment. The District Court consolidated these cases and, after an initial hearing, determined that the parties were common law married and had entered into a partnership. Following trial, the District Court dissolved the marriage, ordered the partnership terminated, and determined the accounting and distribution of marital and partnership assets, income, debts and liabilities. Bob appeals the District Court's distribution of property. We reverse and remand for further proceedings.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 2 Bob and Terri married in 1986, in Butte, and have one child together, Kelly, in addition to their children from previous marriages. During the marriage, Bob and Terri started an antiques business, called Brass and Wood Antiques, in Bozeman. During their years in marriage and in business, Terri handled all of the marital and business finances. Terri maintained a personal bank account and a business bank account, from which she paid all of the parties' bills and expenses. Terri managed the retail aspects of the business, while Bob oversaw the acquisition and refinishing aspects, including management of the refinishing staff. Bob did not have a banking account, and when he needed money, he would take money out of the business's cash register, a practice which Terri knew about and approved.

¶ 3 Prior to the marriage, Terri had purchased what became the marital home in Bozeman. Bob and Terri refinanced the home after getting married. In August 1988, Bob and Terri purchased a warehouse building (Warehouse) in Bozeman so that their children would have a place to work on their cars. They leased the land on which the Warehouse sat from Burlington Northern Railroad. In July 1991, Bob and Terri entered into a purchase agreement for the “Stardust Condominium,” a building which housed their storefront antiques business. The purchase agreement identified both Bob and Terri as buyers, and Bob paid the $10,000 down payment from the sale of bonds owned by him and his mother.

¶ 4 In August 1991, before purchase of the Stardust Condominium was finalized, Bob and Terri divorced. Bob was awarded sole ownership of the Warehouse, while Terri was awarded the marital home and the antiques business and inventory. Terri likewise was made liable for the mortgage on the home and for most of the business debt. In October 1991, Terri finalized the condominium purchase with another person, Anne Bates. Despite contributing the $10,000 down payment, Bob was not listed as an owner of the property. There was no written agreement between Bob and Terri regarding the property, and the property settlement agreement did not mention the Stardust Condominium or Bob's down payment.

¶ 5 About two months after their divorce, Bob and Terri recommenced joint management of Brass and Wood Antiques in the same manner as prior to their divorce. Terri operated the retail portion of the business, while Bob managed acquisitions and refinishing. Terri continued to handle the personal and business finances. Bob and Terri again relied solely on Brass and Wood Antiques for their livelihood. The business continued to pay for Bob's living expenses, and Bob did not receive a set wage, continuing to take spending money from the cash register as needed.

¶ 6 In 1992, Bob and Terri jointly financed the purchase of the real property on which the Warehouse sat. Despite the joint financing, the property was titled solely in Bob's name. Bob and Terri used the Warehouse to store and refinish business inventory. The purchase debt was subsequently paid off with funds generated by the business.

¶ 7 In 1994, Bob and Terri closed Brass and Wood Antiques as a storefront business, marketing instead at antique shows. They rented out their space in the Stardust Condominium to another business, and deposited the rents into Terri's account for payment of business and personal expenses, including the mortgage payments on the home. Later that year, Bob moved back into the home, which was occupied by Terri and their daughter. The mortgage payments continued to be paid from business proceeds and rental income until the mortgage was paid off in November 2001. The property remained in Terri's name.

¶ 8 In January 1997, the parties sold the Stardust Condominium property and purchased what they referred to as the “Four-Plex” property in Bozeman. The sale and purchase of these properties were configured as a “1031 exchange” for tax purposes. In order to effectuate the 1031 exchange, the excess proceeds from the transaction had to be used to purchase other real property. Thus, Terri “purchased” the Warehouse from Bob for $92,000. The transaction closing statement indicated that Bob was owed $8,800. Terri testified that she saw the closing agent hand Bob a check, but Bob testified that he never received any money, and would have given it to Terri for their mutual finances if he had. After the 1031 exchange, both the Four-Plex and the Warehouse were titled in Terri's name.

¶ 9 In May 1998, Terri started another storefront antiques business in Bozeman with a friend, Gena Stansbury, called Downtown Antiques. Terri and Gena maintained separate inventories and profits, but shared overhead costs. Bob again acquired and refinished inventory for this business, and advertised the business on the side of his vehicle. He did not receive a wage or salary, but the family and business expenses continued to be paid from the business and rental proceeds.

¶ 10 From September 1999 until January 2003, Bob was employed as a mail carrier in Bozeman and West Yellowstone. He worked from 30 to 35 hours per week, and deposited his paychecks into a checking account solely in his name at Yellowstone Basin Bank in West Yellowstone. Bob took the job to pay for a pickup truck to be used in the business. In addition to his postal job, Bob continued to work in the antiques business. He left the postal job in 2003 and testified that he then worked substantially more hours in the antiques business.

¶ 11 Bob and Terri separated permanently in September 2004, at which point Bob stopped working in the business. Terri began a relationship with William Buckmaster and, in January 2005, Buckmaster became a partner with Terri in the business. They subsequently married. Bob filed for dissolution of marriage in February 2005, asserting a common law marriage. He also filed a separate proceeding, alleging fraud and unjust enrichment by Terri, and seeking an accounting, dissolution and distribution of their partnership business. The District Court consolidated the cases.

¶ 12 After a hearing in April 2007, the District Court determined that the parties were married by common law. While the parties disputed virtually every aspect of the antiques businesses and their real property purchases, the District Court concluded that Bob and Terri were partners in the antiques businesses, each contributing to the partnership in varying amounts of time, effort, skill and money. The District Court found that Bob had continued the same business practices as he had prior to the 1991 divorce, contributed financially to the purchase of the Stardust Condominium, and transferred title of the Warehouse to Terri in order to effectuate the 1031 exchange. The court found that both Bob and Terri worked in and promoted their various business efforts, shared in the business profits, and had commingled their assets and debts within and for the business. Following trial in July 2008, the District Court dissolved the marriage, ordered the partnership terminated, and determined the accounting and distribution of marital and partnership assets, income, debts and liabilities. The parties did not advance arguments regarding the fraud and unjust enrichment claims during trial, the District Court did not rule upon those claims, and they are not at issue on appeal.

¶ 13 The District Court awarded Terri the marital home, 75% of the Four-Plex property, the Downtown Antiques business, and 50% of the antiques inventory stored at the Warehouse. Regarding the Downtown Antiques inventory, the District Court awarded half to Terri's husband, William Buckmaster. Of the remaining half of that inventory, the District Court awarded approximately 60% to Terri and approximately 40% to Bob, pursuant to a formula it adopted. Bob was also awarded the Warehouse building and land, 50% of the antiques inventory in the Warehouse, and 25% of the Four-Plex property.

¶ 14 We state the dispositive issues as follows:

¶ 15 1. Did the District Court err by determining the value of the business inventory and in distributing the inventory?

¶ 16 2. Did the District Court err by awarding Terri the entirety of the marital residence?

STANDARDS OF REVIEW

¶ 17 We review the division of marital property by a district court to determine whether the findings upon which the district court relied are clearly erroneous. In re Marriage of Clark, 2003 MT 168, ¶ 7, 316 Mont. 327, 71 P.3d 1228 (citing In re Marriage of Davis, 1999 MT 218, ¶ 20, 295 Mont. 546, 986 P.2d 408); In re Marriage of Bartsch, 2007 MT 136, ¶ 9, 337 Mont. 386, 162 P.3d 72 (citing In re Marriage of Horton, 2004 MT 353, ¶ 7, 324...