Elman v. Elman

• Decision Date: 21 March 2002
• Docket Number: No. 20010145-CA.,20010145-CA.
• Citation: 45 P.3d 176,2002 UT App 83
• Parties: Gail Lynne ELMAN, Respondent and Appellant, v. Stanley C. ELMAN, Petitioner and Appellee.
• Court: Utah Court of Appeals

45 P.3d 176

2002 UT App 83

Gail Lynne ELMAN, Respondent and Appellant, v. Stanley C. ELMAN, Petitioner and Appellee.

No. 20010145-CA.

Court of Appeals of Utah.

March 21, 2002.

Ellen Maycock, Kruse Landa & Maycock, Salt Lake City, for Petitioner.

Bert L. Dart, Dart, Adamsondonovan & Hansen, Salt Lake City, for Respondent.

Before JACKSON, P.J., and BILLINGS, Associate P.J., and ORME, J.

OPINION

BILLINGS, Associate Presiding Judge:

¶ 1 Stanley C. Elman (Husband) appeals from a decree of divorce. He maintains the trial court erred in the property division. Gail Lynne Elman (Wife) cross appeals the property division and seeks attorney fees on appeal. We affirm and remand for a determination of reasonable attorney fees due Wife on appeal.

BACKGROUND

¶ 2 After thirteen years of marriage, Wife filed for divorce. Following a trial, the trial court determined the marital estate had a net value of $3,421,045. The court awarded each party assets valued at approximately one-half of that amount.

¶ 3 Prior to the marriage, Husband acquired interests in four family real estate partnerships. At the time of the marriage, Husband's father managed the partnerships, assisted by a property management firm. Husband was employed as a commercial property manager for Transamerica Realty (Transamerica) in California. Wife also worked in property management until late 1991 or early 1992, when the parties jointly decided she would not work outside of the home.

¶ 4 In 1993, the parties moved to Park City, Utah. Husband maintained his employment with Transamerica and regularly commuted to California. Although no longer employed, Wife actively managed the parties' marital property. She secured the land for, and was in charge of, building the parties' Park City home. The home increased in value from $685,000 to over $1,000,000 at the time of trial. Additionally, Wife located, sold, and traded other marital properties. In particular, she was involved in the acquisition of a Montana ranch, which increased in value by approximately $422,000 at the time of trial; a Park City lot that sold for a $30,000 profit; and a lot, valued at $895,000, which she traded for a lot in the Colony at the Canyons (Colony Lot), valued at $1,200,000 at the time of trial.

¶ 5 After Husband's father died in 1995, Husband managed the partnerships, assisted with daily management by the property management firm. In January 1998, Husband assumed plenary management of the partnerships and left his Transamerica employment where he had been earning approximately $87,000 a year. The partnerships' holdings are extensive, requiring Husband to devote a substantial amount of his time to their management.¹ In 1999, Husband earned over $300,000 from the partnerships. ¶ 6 Throughout the marriage, Husband maintained separate accounts for the partnerships. In 1998, he transferred one-third of the Elman Ltd. partnership to Wife. At trial, the parties stipulated that this one-third interest was marital property.

¶ 7 Husband's partnership interests substantially appreciated in value during the marriage. At trial, Wife sought a share of that appreciation. The trial court determined that the partnership interests were premarital property. The court also determined that Husband had not commingled the partnership assets and Wife had not directly enhanced or protected the assets in a meaningful way. However, the trial court found that Wife was a very active partner in managing and enhancing the parties' marital property, particularly during the latter years, when Husband's management of the partnerships substantially increased. The court further found Wife freed Husband to manage the partnerships because of the responsibilities she assumed. Thus, the court concluded Wife was entitled to a small share of marital appreciation derived from their joint, although distinct, efforts.

¶ 8 In calculating the marital appreciation, the trial court began with the appreciation on Husband's partnership interests during the marriage, $4,556,215. The trial court subtracted a reasonable return, as calculated by Wife's expert, and prorated the remaining appreciation, based on the years of Husband's most active partnership management. The court allowed one year for the two years of Husband's overall management following his father's death, and one year each for the two years of plenary management, for a total of three years over the parties' thirteen year marriage, resulting in $504,069 in marital appreciation.² The trial court awarded Wife marital property offsetting the marital appreciation and awarded Husband his partnership interests free of any claim by Wife.

¶ 9 At the time of trial, the parties' Park City home had first and second mortgages. Additionally, a trust deed created a $250,000 lien (the Elman Trust Loan). In 1998 or 1999, in conjunction with the sale of their California home, the parties paid $50,000 to reduce the principal of the Elman Trust Loan. No other principal payments have been made. The trust deed note bears interest at a rate of 9% per annum. At trial, Husband asserted that with interest, the amount due the Elman Trust is $423,000.

¶ 10 In 1997, over two years prior to filing for divorce, Wife filed for bankruptcy. Husband helped Wife complete the bankruptcy schedules. The schedules list the Elman Trust Loan as a secured obligation.³

¶ 11 At trial, Wife testified that after she filed for bankruptcy, she asked Husband if they could afford to buy the Colony Lot to build a new home and Husband responded that the Elman Trust Loan was a gift. Husband denied making this statement. Husband did not list the Elman Trust Loan as a debt on financial statements until Wife filed for bankruptcy.

¶ 12 The trial court found the Park City home had a value of $1,000,000. The court then subtracted the first and second mortgages and a 6% sales commission, but not the Elman Trust Loan, leaving a net equity of $320,293.

¶ 13 Prior to trial, Husband disclosed an interest in a defined benefit pension plan (the Plan). Husband, his mother, and his sister have interests in the Plan. The parties stipulated that the present value of Husband's interest is $345,000. ¶ 14 At trial, Wife's expert testified that the Plan is administered by Elman Properties, Inc. (the Corporation), which has assets worth approximately $2,000,000. The expert further testified that the Plan may be overfunded. After Husband testified that he owns a 50% interest in the Corporation, Wife asserted she was entitled to an equal share of Husband's stock in the Corporation.

¶ 15 In the property division, the trial court awarded Wife $345,000 in property offsetting the present value of Husband's interest in the Plan. The trial court refused to award Wife any interest in the Corporation, finding there was no persuasive evidence as to the value of the Corporation beyond the Plan.

ISSUES AND STANDARDS OF REVIEW

¶ 16 Husband argues: (1) The trial court erred in determining that a portion of the appreciation on his premarital partnership interests is marital property subject to equitable division; (2) the evidence does not support the trial court's finding as to the amount of appreciation on Husband's partnership interests; and (3) the trial court erred in not charging the Park City home equity with the Elman Trust Loan. In her cross appeal Wife argues the trial court erred in refusing to award her an equal share of Husband's interest in the Corporation.

¶ 17 "A trial court has considerable discretion concerning property [division] in a divorce proceeding, thus its actions enjoy a presumption of validity." Schaumberg v. Schaumberg, 875 P.2d 598, 602 (Utah Ct. App.1994). We disturb a trial court's property division and valuation "only when there is `a misunderstanding or misapplication of the law resulting in substantial and prejudicial error, the evidence clearly preponderates against the findings, or such a serious inequity has resulted as to manifest a clear abuse of discretion.'" Id. (quoting Noble v. Noble, 761 P.2d 1369, 1373 (Utah 1988)).

ANALYSIS

I. Appreciation on Premarital Property

A. Propriety of Award

¶ 18 Husband argues the trial court erred in awarding Wife a portion of the appreciation on Husband's partnership interests. In distributing property in divorce proceedings, trial courts are first required to properly categorize the parties' property as marital or separate. See, e.g., Kelley v. Kelley, 2000 UT App 236, ¶ 24, 9 P.3d 171. Generally, trial courts are also required to award premarital property, and appreciation on that property, to the spouse who brought the property into the marriage. See Dunn v. Dunn, 802 P.2d 1314, 1320 (Utah Ct.App. 1990); see also Mortensen v. Mortensen, 760 P.2d 304, 308 (Utah 1988).

¶ 19 However, separate property is not "totally beyond [a] court's reach in an equitable property division." Burt v. Burt, 799 P.2d 1166, 1169 (Utah Ct.App.1990). The court may award the separate property of one spouse to the other spouse in "'extraordinary situations where equity so demands.'" Id. (quoting Mortensen, 760 P.2d at 308); see also Rappleye v. Rappleye, 855 P.2d 260, 263 (Utah Ct.App.1993) ("`Exceptions to this general rule include whether ... the distribution achieves a fair, just, and equitable result.'" (quoting Dunn, 802 P.2d at 1320)).

¶ 20 In the present case, the trial court properly categorized Husband's partnership interests as separate property. The court then determined that Husband had not commingled the partnership assets and Wife had not directly enhanced their value.⁴ However, the trial court found that Wife was very active in managing the marital property, particularly during the latter years, when Husband's role in managing the partnership assets consumed his full-time attention. The court further found Wife freed Husband to engage in activities benefitting his premarital property because of the unusual responsibilities she assumed. Thus, the court concluded...