Baruch v. Clark

• Citation: 302 P.3d 357,154 Idaho 732
• Decision Date: 31 May 2013
• Docket Number: No. 39224.,39224.
• Court: United States State Supreme Court of Idaho
• Parties: Amy S. BARUCH, Plaintiff–Respondent, v. William P. CLARK, Defendant–Appellant.

154 Idaho 732

302 P.3d 357

Amy S. BARUCH, Plaintiff–Respondent,

v.William P. CLARK, Defendant–Appellant.

No. 39224.

Supreme Court of Idaho, Boise, April 2013 Term.

May 31, 2013.

Cosho Humphrey, LLP, Boise, attorneys for Appellant.

Bevis, Thiry & Schindele, PA, Boise, attorneys for Respondent.

W. JONES, Justice.

I. NATURE OF THE CASE

This is an appeal from a judgment of the magistrate court concerning the division of certain property pursuant to the divorce between Appellant, Bill Clark ("Bill"), and Amy Baruch ("Amy"). Bill appealed the magistrate court's decision to the district court, which affirmed the magistrate's decision. Bill appeals to this Court.

II. FACTUAL AND PROCEDURAL BACKGROUND

Bill Clark and Amy Baruch were married on December 1, 2000. Amy filed for divorce on January 28, 2009. Prior to entering the marriage, Bill and Amy had significant personal and real property. Amy separately owned a home in Boise, which sold just prior to her marriage to Bill. Amy received $108,047 from the sale of her separate home. Meanwhile, Bill owned a home in Boise as his separate property. That home was ultimately conveyed to the community when it was refinanced in 2001 and 2002. The $108,047 proceeds from the sale of Amy's separate home were used to purchase a community vacation home in McCall ("McCall cabin").¹

Before and during the marriage, Bill was self-employed in the real estate development business. His primary income was from his company, Clark Development, LLC. In addition to Clark Development, Bill developed property through various other business entities. These entities included Veltex Building, LLC² , which was formed to acquire the site on which BED Investments, LLC,³ would build and develop a residential and office condominium complex ("Veltex building"). Though Bill acquired an interest in these entities before the marriage, it is unclear when precisely he acquired his interests.⁴ Bill maintains that the planning for the Veltex building was completed before his marriage to Amy in 2000. At the time of marriage, Bill owned neither the site on which the Veltex building was built nor the building itself; rather, he owned an interest in the various entities that owned the property. Ground was broken for the Veltex building sometime after September 2002, and the Veltex building was completed in 2004.

Bill only received two distributions related to the Veltex building, and both distributions were received during the marriage. In October 2005, BED Investments received $260,800 from the sale of units in the Veltex building. Bill had an IRA before entering the marriage ("Schwab 3714"). Both separate and community funds were deposited into Schwab 3714. The magistrate court found Schwab 3714 to be "Bill's Working Account."⁵ The distributions from the Veltex building were deposited into the Schwab 3714 account. In February 2007, Veltex deposited another $342,149 into the Schwab 3714 account on Bill's behalf.

On March 28, 2007, Bill and Amy purchased a condominium in Ketchum, Idaho ("Ketchum condominium"). The condominium was purchased for $975,000. During closing, the parties submitted checks in the amount of $30,000 and $175,539 as a down payment. Bill claims that the down payment on the condominium was paid using his separate funds that were proceeds from the February 7, 2007, Veltex distribution in the amount of $342,149 ("Veltex distribution"). Amy claims that she and Bill anticipated using the proceeds from the sale of the McCall cabin to pay down the loan on the Ketchum condominium. In September 2007, the McCall cabin was sold and the proceeds of $231,682 from the sale were deposited into Schwab 3714. Amy was unable to adequately trace the proceeds of her separate Boise home, which was used to purchase the McCall cabin; therefore, the proceeds from her home were treated as community property.

At the time of the marriage, Bill owned an IRA through Charles Schwab, account number ending in 3713 ("Schwab 3713"). At the time of marriage, the account was valued at $386,636. At the time of trial, the account was valued at $354,350. During the marriage, the community made contributions to Schwab 3713 totaling $207,313. In 2005, Bill effected a transfer from Schwab 3713 in the amount of $100,000. This money was transferred to Pensco Trust⁶ , which invested money into Pearson Partners⁷ , an entity in which Bill was a partner, for purposes of building a subdivision in McCall. In 2007, Bill received a distribution from Schwab 3713 in the amount of $1,495. In 2008, Bill effected another transfer from Schwab 3713 in the amount of $150,000. This money was transferred to Pensco Trust, which invested in Meyer Clark, LLC⁸ , which loaned money to Crescent Rim, LLC. This money appears to have been used for additional collateral on a project with which Bill was involved. Amy did not agree to advancing funds to the Crescent Rim project. In 2009 after the divorce began, Bill took a distribution of $34,611 from Schwab 3713, of which $28,000 was invested in Pearson Partners to pay down a loan. In addition to the self-directed IRA at Pensco Trust, Bill also had a self-directed IRA with Sterling Trust, which he also used as a conduit to pass money from the Schwab 3713 account into his various projects. At the time of marriage, Amy had a 401(k) with a balance of $74,776. At the time of divorce, through community contributions, the value of the 401(k) increased to $479,274.

On January 28, 2009, Amy filed for divorce. The trial in this matter took place on March 31, 2010; April 1, 2010; and April 2, 2010. On July 26, 2010, the magistrate court issued its Findings of Fact and Conclusions of Law. The Decree of Divorce was entered on August 10, 2010. The magistrate court concluded that the Schwab 3713 and Schwab 3714 accounts were community property because the complex series of withdrawals in and out of these accounts, combined with community contributions, made it unable to track whether the transfers or the market affected the value of the accounts. The magistrate court also rejected Bill's claim for reimbursement of funds drawn from Schwab 3714 to make the down payment on the Ketchum condominium. The magistrate court found that the money from Schwab 3714 originated from the Veltex building, which the magistrate court found to be community income. Thus, it found the funds drawn from Schwab 3714 to pay the down payment on the Ketchum condominium were community funds and that Bill was not entitled to reimbursement. But assuming the funds were actually separate, the magistrate court found that Bill failed to adequately trace the separate property.

On August 16, 2010, Bill filed a Motion to Alter or Amend Findings of Fact and Conclusions of Law. After a hearing held on September 13, 2010, the magistrate court issued the Judgment and Order Re: Motion to Alter or Amend Findings of Fact and Conclusions of Law and Judgment on September 21, 2010. That judgment denied Bill's motion to alter or amend the judgment beyond making slight clerical corrections. On September 24, 2010, the magistrate court reissued the same order merely correcting the title.

On November 4, 2010, Bill filed a Notice of Appeal. On August 25, 2011, the district court entered a Memorandum Decision and Order affirming the magistrate court. On September 28, 2011, Bill filed a Notice of Appeal to this Court.

III. ISSUES ON APPEAL

1. Whether the district court erred in affirming the different methods of valuation the magistrate court used in valuing and distributing Amy's 401(k) and the Schwab 3713 account.

2. Whether the court properly characterized the Veltex distribution as income presumptively belonging to the community.

3. Whether Amy is entitled to attorney fees on appeal.

IV. STANDARD OF REVIEW

When this Court reviews a decision rendered by a district court acting in its appellate capacity, it considers the decision of the district court. Dunagan v. Dunagan, 147 Idaho 599, 601, 213 P.3d 384, 386 (2009) ; Losser v. Bradstreet, 145 Idaho 670, 672, 183 P.3d 758, 760 (2008). This Court exercises free review of the legal issues analyzed by the district court acting in its appellate capacity. Carter v. Zollinger, 146 Idaho 842, 844, 203 P.3d 1241, 1243 (2009).

Division of community property in a divorce action is squarely within the discretion of the trial court. Review of a lower court's exercise of discretion is conducted under a three-tiered inquiry: (1) whether the lower court rightly perceived the issue as one of discretion; (2) whether the court acted within the outer boundaries of such discretion and consistently with any legal standards applicable to specific choices; and (3) whether the court reached its decision by an exercise of reason.

Dunagan, 147 Idaho at 601, 213 P.3d at 386 (internal citations omitted).

V. ANALYSIS

A. The district court did not err in affirming the different methods the magistrate court used to value and divide Amy's 401(k) and the Schwab 3713 account.

Bill argues that the district court erred in affirming the magistrate court's characterization of Schwab 3713 as community property. Bill maintains that the district court should have awarded Bill and Amy each the value of their respective retirement accounts as of the date of marriage as their separate property. Since the value of Schwab 3713 at the time of divorce was less than it was at the time of marriage, Bill claims he should have been awarded the entire value of the account as his separate property. Bill further challenged the conclusions of both the district and magistrate courts that he consented to the treatment of Amy's 401(k) as her separate property. Ultimately, Bill asserts that Schwab 3713 should have been classified as his separate property because the magistrate court classified the value of Amy's 401(k) at the time of marriage as separate property; thus, it should have done so here.

Amy argues that Bill's contentions that he is entitled to the value of Schwab 3713 as of the date of...