Dunn v. Dunn

• Decision Date: 20 November 1990
• Docket Number: No. 880611-CA,880611-CA
• Citation: 802 P.2d 1314
• Parties: Connie T. DUNN, Plaintiff and Appellant, v. Harold K. DUNN, an individual, and Harold K. Dunn, M.D., P.C., a Utah professional corporation, Defendants and Appellees.
• Court: Utah Court of Appeals

Page 1314

802 P.2d 1314

Connie T. DUNN, Plaintiff and Appellant, v. Harold K. DUNN, an individual, and Harold K. Dunn, M.D P.C., a Utah professional corporation, Defendants and Appellees.

No. 880611-CA.

Court of Appeals of Utah.

Nov. 20, 1990.

Patricia A. O'Rorke (argued), Berman & O'Rorke, Salt Lake City, for plaintiff and appellant.

Clark W. Sessions (argued), Dean C. Andreasen, Sessions & Moore, Salt Lake City, for defendants and appellees.

Before BILLINGS, GARFF and ORME, JJ.

OPINION

GARFF, Judge:

Appellant Connie T. Dunn appeals the trial court's distribution of the marital estate in this divorce action. We affirm in part, reverse in part, and remand in part.

The parties were married on December 17, 1977 and divorced on September 20, 1988. At the time of the marriage, Mrs. Dunn was twenty-six years old, and had previously been married but had no children. She held an associate degree from Stevens Henager Business School and worked full time as a medical secretary, earning about $14,000 per year. Dr. Dunn, at the time of marriage, was thirty-nine years old, had previously been married for seventeen years, and had two children. He was an associate professor at the University of Utah School of Medicine, and practiced orthopedic surgery at the University's Division of Orthopedic Services and at Shriners Hospital.

During the marriage, Dr. Dunn worked sixty to seventy hours per week to advance his extremely successful medical career. He was promoted to full professor in 1980 and became chair of the University's Department of Orthopedics in 1981. He continued to practice orthopedic surgery, incorporating his practice in 1981. He served as a visiting professor at numerous institutions and published many articles on orthopedic surgical techniques and devices. He served in committee and officer positions in the American Academy of Orthopedic Surgeons, and was invited to join the prestigious twelve-member American Board of Orthopedic Surgery. He spent approximately two weekends per month traveling in connection with his professional activities. Dr. Dunn's income increased during the marriage from $71,381 in 1977 to $357,889 in 1987. His current financial statement indicated that he made $403,345.82 per year in gross income and $280,661.99 in net income.

During the marriage, Mrs. Dunn devoted herself to supporting her husband's career. Eighteen months into the marriage, she resigned from her secretarial position so she would have time to travel with Dr. Dunn, perform secretarial and bookkeeping duties for him, entertain his professional and business associates, run errands for him, manage the household accounts and run the house. She also coordinated the construction of a large house the couple built in 1984.

Dr. Dunn brought $423,000 worth of property into the marriage, some of which remained identifiable throughout the marriage, some was augmented, some was traded, some was sold, and some was commingled. The property included a condominium worth $22,493; a 278-acre ranch in Idaho worth $230,340; a 1974 Porsche worth $8,700; an airplane worth $26,000; an established medical practice; and benefits from three retirement plans, along with accrued interest on the premarital portion of each plan. In contrast, in material terms, Mrs. Dunn brought an automobile worth $2,100 into the marriage.

During the marriage, Dr. Dunn, together with an associate, designed surgical instruments for the implantation of artificial knees, marketed by Zimmer, Inc. On December 1, 1985, Dr. Dunn executed a license agreement with Zimmer which provided fixed royalty payments in exchange for a license to use and sell those surgical instruments. These royalty payments totaled $375,000 between 1986 and 1990, $243,750 of which remained to be paid at the time of trial. No provision in this royalty agreement required Dr. Dunn to perform any personal services. Dr. Dunn also had a contract with Zimmer involving a hip device, and he consulted with Zimmer from time to time involving spinal devices. Unlike the knee royalty agreement, the hip royalty agreement required Dr. Dunn to consult, to present workshops, and to perform other similar personal services for Zimmer. In 1987, he traveled twenty-eight days in connection with both the knee and hip contracts.

No children were born of the marriage. Mrs. Dunn wanted to adopt, but Dr. Dunn, who already had children from a previous marriage, did not want to adopt, and he vetoed the idea. The marriage ended when Dr. Dunn initiated a relationship with another woman, told his wife he no longer loved her and moved out of the home.

After the separation, the then thirty-seven year old Mrs. Dunn enrolled at the University of Utah. By the time of trial, she had attended the university full time for eighteen months, was working toward a bachelor's degree in commercial recreation and tourism, and hoped to earn an M.B.A.

The first issue on appeal is whether the trial court abused its discretion in excluding from the marital estate the professional corporation, the royalties from the artificial knee contract, and the premarital portion of the retirement contract, in addition to all interest accrued on that portion. The second issue on appeal is whether the trial court abused its discretion in approving a two-to-one division in favor of Dr. Dunn on the remainder of the marital estate based on the court's finding that Mrs. Dunn made no significant contributions to her husband's career and prodigious earnings.

STANDARD OF REVIEW

"In a divorce proceeding, 'determining and assigning values to marital property is a matter for the trial court and this court will not disturb those determinations absent a showing of clear abuse of discretion.' " Sorensen v. Sorensen, 769 P.2d 820, 823 (Utah Ct.App.1989), cert. granted, 779 P.2d 688 (Utah 1989), (quoting Talley v. Talley, 739 P.2d 83, 84 (Utah Ct.App.1987)). To permit appellate review of the property distribution, the distribution must be based upon adequate factual findings and must be in accordance with the standards set by this state's appellate courts. Haumont v. Haumont, 793 P.2d 421, 424 (Utah Ct.App.1990); Munns v. Munns, 790 P.2d 116, 118 (Utah Ct.App.1990). We will not disturb a trial court's findings unless they are clearly erroneous, that is, against the clear weight of evidence, or unless we reach a definite and firm conviction that a mistake has been made. Weston v. Weston, 773 P.2d 408, 410 (Utah Ct.App.1989); Rothe v. Rothe, 787 P.2d 534, 535-36 (Utah Ct.App.1990); Utah R.Civ.P. 52(a).

A. The Professional Corporation

Marital property is ordinarily all property acquired during marriage and it "encompasses all of the assets of every nature possessed by the parties, whenever obtained and from whatever source derived." Gardner v. Gardner, 748 P.2d 1076, 1079 (Utah 1988) (quoting Englert v. Englert, 576 P.2d 1274, 1276 (Utah 1978)). In Sorensen v. Sorensen, 769 P.2d 820 (Utah Ct.App.1989), we affirmed the trial court's conclusion that the accounts receivable, tangible assets, and goodwill of a professional practice were includable in the marital estate, to the extent they were accumulated during the marriage, in a situation where the husband began his dental practice six years before the marriage began. Id. at 832.

Mrs. Dunn's position is more conservative than the prevailing view in Sorensen in that she does not assert an interest in her husband's ongoing practice. Rather, Mrs. Dunn asserts an interest in the tangible assets of a corporation that was established during the marriage. ¹

In Lee v. Lee, 744 P.2d 1378 (Utah Ct.App.1987), we considered a nine year marriage during which the husband established a corporation. The wife contributed some bookkeeping. More significant were her domestic contributions which freed her husband to participate full time in running the business. We held in Lee that the wife was entitled to her full equitable share of the corporation because of the parties' joint efforts in establishing and maintaining the corporation. Id. at 1380-81.

Here, Mrs. Dunn argues, and we agree, that the trial court abused its discretion by characterizing Dr. Dunn's professional corporation as a nonmarital asset. The corporation was founded and its assets accrued during the marriage and she performed bookkeeping and secretarial services without pay for the corporation. Thus, the corporation was founded and operated through the joint efforts and joint sacrifices of the parties. In addition, because Dr. Dunn chose to work sixty to seventy hours per week, he left Mrs. Dunn with the sole responsibility of running the household and managing the household accounts. Further, she was left without his companionship and domestic contributions during those hours. While she was not his partner in the business of orthopedic surgery, she was his partner in the "business" of marriage and her efforts were necessary contributions to the growth of his practice and the business. As such, she is entitled to her fair share in any marital assets derived from their joint efforts in that endeavor. Lee, 744 P.2d at 1380-81.

The lower court found that the "net tangible assets are not marital assets and are not subject to division in this action." Other than this assertion, the court gave no reason for this finding and we can find no support for it in the record. We therefore reverse and remand for an equitable, which in this case means equal, distribution of the net tangible assets of the professional corporation.

B. Royalty Rights

This court recently affirmed that the right to future income is a marital asset where that right is derived from efforts or products produced during the marriage, even in cases where that right cannot be easily valued. Moon v. Moon, 790 P.2d 52, 56-57 (Utah Ct.App.1990) (right to use sculpture molds is a marital asset); see also Sorensen, 769 P.2d at 827; Woodward v. Woodward, 656 P.2d 431, 432-33 (Utah 1982).

Dr. Dunn argues that...