Heggen v. Heggen

• Decision Date: 01 March 1990
• Docket Number: No. 890054,890054
• Citation: 452 N.W.2d 96
• Parties: Patricia Ellen HEGGEN, Plaintiff, Appellant and Cross-Appellee, v. John Peter HEGGEN, Defendant, Appellee and Cross-Appellant. Civ.
• Court: North Dakota Supreme Court

Page 96

452 N.W.2d 96

Patricia Ellen HEGGEN, Plaintiff, Appellant and Cross-Appellee, v. John Peter HEGGEN, Defendant, Appellee and Cross-Appellant.

Civ. No. 890054.

Supreme Court of North Dakota.

March 1, 1990.

Harms Law Office, Williston, for plaintiff and appellant; argued by Robert W. Harms.

Zuger Law Offices, Bismarck, for defendant and appellee; argued by William E. McKechnie.

LEVINE, Justice.

Patricia Heggen appeals from a divorce judgment, challenging the trial court's division of marital property and award of child support. John Heggen cross-appeals, seeking a reversal of the award of custody to Patricia of the couple's two youngest children. We affirm as to custody and child support but reverse the property division and remand.

Patricia Heggen and John Heggen were married in July 1965 and are the parents of four children. During their marriage, the couple acquired a substantial marital estate along with accompanying debt. In addition to a farm operation, the Heggens own Heggen Equipment, Inc., a business comprised of three related businesses: a new and used car dealership, a farm implement dealership, and a machine shop, all located in Watford City.

After twenty-two years of marriage, Patricia and John separated in July 1987. Following a three-day trial, judgment was entered awarding Patricia a divorce and dividing the marital property. The trial court awarded custody of the two youngest children, ages 10 and 8, to Patricia and ordered John to pay child support of $240 per month for each child.

At the outset we note, as the trial judge did: "A significant problem facing the court in this action was the failure of the parties to jointly prepare a Rule 8.3 Listing of Property and Debts. The failure to comply with this rule causes untoward confusion and results in misleading the court as to asset and debt claims as well as costs and value contentions. Thus, there may be some inexactness in the property and debt division."

Rule 8.3, NDROC, requires parties in a contested divorce to jointly prepare a complete listing of their property and debts. Glass v. Glass, 344 N.W.2d 677, 678 (N.D.1984); Freitag v. Freitag, 318 N.W.2d 760, 762 (N.D.1982). The purpose of the rule is to assist the trial court in its division of marital property by having the parties provide the court with a list of mutually agreed-to values or, if no agreement is reached, separately stated values. Although there is no explicit sanction for noncompliance specified by the rule, at the very least, if, at the time of trial, Rule 8.3 has not been complied with, the trial court should declare a recess until the parties have prepared the joint listing. Freitag, supra. A trial court may properly require compliance with Rule 8.3 as a condition precedent to a contested divorce hearing. See NDROC 8.3. Cf. Rustand v. Rustand, 379 N.W.2d 806, 809 (N.D.1986) [suggesting compliance with Rule 8.3 would also be advantageous in a default divorce].

I. PROPERTY DIVISION

Patricia argues that the trial court erred in its valuation of some property, calculated some debt twice, and failed to include assets in the marital estate. Specifically, she points to the Heggen Equipment, Inc., real estate, valued at $40,000, and Heggen Equipment, Inc., valued at minus $55,108. She also complains of the omissions from the marital estate of a $40,000 debt owed to John by the corporation, drought payments of $36,713 and $19,200 in liquid assets. We consider each of these alleged errors in turn.

The trial court did not make a specific finding of the net value of the marital estate. It did, however, list the values of the property awarded to each party and the amount of debt awarded to each party to reach "net totals" for each party. From these findings, it appears that the trial court valued the gross marital estate at $889,027, with debts of $745,264, leaving a net value of $143,763. See Branson v. Branson, 411 N.W.2d 395, 397 (N.D.1987).

By the trial court's reckoning, John received property worth $823,345 and the responsibility to repay debts totaling $744,264, for a net total award of $79,081. Patricia was awarded property valued at $65,682 and made responsible for $1,000 of debt, for a net award of $64,682. Thus, John received about fifty-five percent of the net estate to Patricia's forty-five percent. Patricia contends that if all marital property were correctly valued, her receipt of only $64,842 worth of property is clearly inequitable. We agree.

As we have stated on many occasions, a property division need not be equal to be equitable, but a substantial disparity should be explained. Volk v. Volk, 404 N.W.2d 495, 497 (N.D.1987). Further, a division of marital property is viewed as a finding of fact subject to the clearly erroneous standard of Rule 52(a), NDRCivP. Bader v. Bader, 448 N.W.2d 187, 188 (N.D.1989). Under that standard, we reverse only if there is no evidence to support a finding or if, upon a review of the entire evidence, we are left with a definite and firm conviction that a mistake has been made. Lippert v. Lippert, 353 N.W.2d 333, 335 (N.D.1984).

A. Heggen Equipment Real Estate

The trial court valued the Heggen Equipment real estate, consisting of some 11.38 acres containing several buildings, at $40,000. ¹ The only support in the record for that valuation is the testimony of John Heggen and David Brendsel, a vice-president at First International Bank.

In ascribing a $40,000 value to the property, John testified that in his opinion, the Heggen Equipment real estate is "only worth what you can dump it for at auction."

An owner of property may testify as to the value of his own property. Meyer v. Hansen, 373 N.W.2d 392, 397 (N.D.1985). However, an owner's opinion of value is insufficient to support a value determination by the factfinder if it is given without a valid basis or is based upon improper facts or analysis. Jim's Hot Shot Serv. v. Continental West. Ins. Co., 353 N.W.2d 279, 282 (N.D.1984). Ordinarily, fair market value, not "liquidation value," is the proper method of valuing property in a divorce. Liddle v. Liddle, 140 Wis.2d 132, 410 N.W.2d 196, 199 (Wis.Ct.App.1987); Corliss v. Corliss, 107 Wis.2d 338, 320 N.W.2d 219, 222 (Wis.Ct.App.1982). Fair market value is the price a buyer is willing to pay and the seller is willing to accept under circumstances that do not amount to coercion. Mike Golden, Inc., v. Tenneco Oil Co., 450 N.W.2d 716 (N.D.1990).

John's opinion of the value of the property as the price it would bring "dumped at auction" is based on improper facts and analysis because it is based on liquidation value rather than fair market value. While liquidation value, rather than fair market value, may be appropriate under certain circumstances involving distressed conditions, there is no evidence that the property in question was threatened by foreclosure or other market stress. ²

Brendsel's opinion was also based upon liquidation value. Although at one point Brendsel referred to fair market value, he testified that $40,000 is a "liquidation value" for the real estate, buildings and fixtures. He explained that he based his $40,000 valuation on recent foreclosure sales by the Small Business Administration of similar commercial buildings in Rugby, Bottineau and Carrington. Thus, Brendsel's testimony, as well as John's, focused on coerced sales at which the seller accepts a "depressed price" and takes a "beating on the market." Foreclosure sales, because of the coercive circumstances surrounding them, should not be used to establish fair market value. It is clear from both John and Brendsel's testimony that, in placing a valuation of $40,000 on the Heggen Equipment, Inc., property, neither had in mind a sale by a willing seller to a willing buyer. Therefore, their testimony did not establish the property's fair market value. Consequently, the trial court's finding of $40,000 value is unsupported by the evidence and is clearly erroneous.

There was other evidence of value of the Heggen Equipment property. Patricia valued the property at $259,000, a figure supported by a tax assessment which identified the "true and full value" of the property as $259,000 and the assessed value at $129,500. There was also testimony that just ten months before the trial, Brendsel's bank appraised the property at $350,000 and loaned John and Patricia approximately $150,000 secured by a mortgage on the property. However, on remand the trial court is free to receive additional evidence of fair market value.

B. Heggen Equipment, Inc.

Patricia also contends that the trial court erred by determining, in effect, that the value of Heggen Equipment, Inc., was a negative $55,108. She asserts that the trial court achieved this unintended result by overlooking the fact that the value of the stock awarded to John, set by the trial court at $284,900, should have been a net value and not, as the trial court treated it, a gross value. She contends that when the trial court included the $284,900 value in the total marital estate but then proceeded to offset it with associated corporate debt, the effect was to deduct the corporate debt twice in arriving at the net marital estate. She does not dispute that there is $340,008 in corporate debt but she asserts that all the estimates of corporate value given at trial were net values, values which accounted for the debt of the corporation.

In asserting that the trial court found a negative value of $55,108 for the corporation, Patricia overlooks the fact that the trial court also included in its valuation of the marital estate, $93,060 in liquid corporate assets. Adding this figure to the stock valuation of $284,900, yields a value of $377,960 for the corporation. Nevertheless, if Patricia is correct in her assertion that the stock valuation is a net value, the court's twice counting the corporate debt would reduce the value of the corporate assets to $37,952. We agree that this finding is not...