In re Marriage of Lundstrom and Scholz

• Decision Date: 14 December 2010
• Docket Number: No. DA 10-0211.,DA 10-0211.
• Citation: 245 P.3d 25,2010 MT 261,358 Mont. 318
• Parties: In re the MARRIAGE OF Jill M. LUNDSTROM, Petitioner and Appellee, and Dieter SCHOLZ, Respondent and Appellant.
• Court: Montana Supreme Court

245 P.3d 25 358 Mont. 318 2010 MT 261 In re the MARRIAGE OF Jill M. LUNDSTROM, Petitioner and Appellee, and Dieter SCHOLZ, Respondent and Appellant. No. DA 10-0211. Supreme Court of Montana. Submitted on Briefs Oct. 27, 2010. Decided Dec. 14, 2010.

For Appellant: Quentin M. Rhoades and Robert D. Erickson; Sullivan, Tabaracci & Rhoades, P.C., Missoula, Montana.

For Appellee: Timothy G. Goen, Attorney at Law, Thompson Falls, Montana.

Justice MICHAEL E. WHEAT delivered the Opinion of the Court.

¶ 1 The Twentieth Judicial District Court, Sanders County, entered a decree dissolving the marriage of Dieter Scholz (Scholz) and Jill Lundstrom (Lundstrom) and distributing their marital estate. Scholz appeals. We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion.

¶ 2 The present appeal marks the third occasion this Court has been involved in this divorce case. See In re Marriage of Lundstrom, 2007 MT 304, 340 Mont. 83, 172 P.3d 588 [ hereinafter Lundstrom I ]; In re Marriage of Lundstrom, 2009 MT 400, 353 Mont. 436, 221 P.3d 1178 [ hereinafter Lundstrom II ]. Only the facts relevant to this appeal follow.

¶ 3 Scholz and Lundstrom were married on September 12, 2004. Before their marriage, Lundstrom purchased two properties from Scholz. First, on November 24, 2003, Lundstrom purchased a 77 acre parcel from Scholz, upon which Scholz's ice-making business was located, for $565,000. The proceeds used for the purchase were from the sale of property Lundstrom owned in California, thus the transaction qualified for federal taxpurposes as a Section 1031 like-kind exchange. Lundstrom paid $322,643.33 to Scholz at closing, and executed a promissory note in the amount of $242,356.67, plus interest on the unpaid principal of 5.5% per annum. This property is also encumbered by another mortgage in the amount of $90,000, plus interest on the unpaid principal of 10% per annum, held by Claude I. Burlingame, Daniel Parks, and Carla Parks. This 77 acre parcel is titled in Lundstrom's name only. Second, on July 6, 2004, Lundstrom purchased a home and 7 acre parcel from Scholz for $325,000. Bank of America holds a promissory note on this property in the amount of $238,000. This property is titled in Lundstrom's name only.

¶ 4 The parties separated in October of 2005, and Lundstrom petitioned for divorce in March 2006. The divorce proceedings weremarred by continuous discovery disputes, numerous attorney substitutions by both parties, motions for sanctions, and two appeals to this Court. As we said previously, this case has been "an odyssey of proceedings." Lundstrom II, ¶ 3.

¶ 5 After remand in Lundstrom II, the District Court entered its Findings of Fact, Conclusions of Law, and Decree on March 29, 2010. The District Court found that the property transactions discussed above were premarital, thus the properties were not part of the marital estate, and awarded the properties to Lundstrom. In awarding the properties to Lundstrom, the District Court found that Lundstrom was solely responsible for the $238,000 debt on the 7 acre parcel. Then, it found Lundstrom owed nothing to Scholz on the $242,356.67 promissory note on the 77 acre parcel because Scholz used the proceeds to pay a debt to the Small Business Administration (SBA). Scholz appeals.

¶ 6 We restate the issues on appeal as follows:

¶ 7 Issue One: Did the District Court err in allowing certain evidence at the bench trial?

¶ 8 Issue Two: Did the District Court err in determining that both the 7 acre and 77 acre properties were not part of the marital estate?

¶ 9 Issue Three: Did the District Court err in determining that Lundstrom owes Scholz nothing on the $242,356.67 promissory note on the 77 acre property?

STANDARD OF REVIEW

¶ 10 Evidentiary rulings are reviewed for an abuse of discretion. Nelson v. Nelson, 2005 MT 263, ¶ 31, 329 Mont. 85, 122 P.3d 1196. Absent a showing of an abuse of discretion, we will not overturn a district court's decision. Id.

¶ 11 In a dissolution proceeding, we review a district court's findings of fact to determine whether they are clearly erroneous. In re Marriage of Crilly, 2005 MT 311, ¶ 10, 329 Mont. 479, 124 P.3d 1151. A finding of fact is clearly erroneous if it is not supported by substantial evidence, the district court misapprehended the effect of the evidence, or our review of the record convinces us that the district court made a mistake. Id. Absent clearly erroneous findings, we will affirm a district court's division of property unless there was an abuse of discretion. Id. A district court abuses its discretion if it acts arbitrarily without conscientious judgment or exceeds the bounds of reason, resulting in substantial injustice. Id.

DISCUSSION

¶ 12 Issue One: Did the District Court err in allowing certain evidence at the bench trial?

¶ 13 Scholz contends that the District Court erred when, contrary to its previous order, it allowed Lundstrom to enter evidence that was not disclosed in discovery, and allowed an expert to testify about the value of the two properties. Scholz contends this was "trial by surprise."

¶ 14 The District Court did not abuse its discretion when it admitted evidence and testimony at the bench trial. We remanded in Lundstrom II specifically for "reconsideration of appropriate sanctions and an equitable distribution of the marital estate." Lundstrom II, ¶ 21. We found that "the District Court's findings of fact underlying the distribution of the marital estate [were]clearly erroneous because they [were] not based on substantial evidence in the record" because the District Court had simply adopted Scholz's proposed distribution as a sanction for Lundstrom's violations of court orders. Id. at ¶ 20. The District Court did not comply with § 40-4-202, MCA, and the case was remanded for the District Court to make the appropriate findings of fact and to equitably distribute the parties' marital estate.

¶ 15 Consistent with Lundstrom II, the District Court held a bench trial at which the parties could submit evidence as to how the parties' assets, liabilities, and personal property should be equitably distributed. That the District Court would receive evidence should not have been a surprise to Scholz, given our ruling in Lundstrom II. Further, consistent with Lundstrom II, the District Court reconsidered the previous sanctions against Lundstrom, namely that she could not submit into evidence anything not revealed during discovery. The District Court stated, "[n]either party has played by the rules. This court ordered both parties to file their proposals four years ago and neither one of you have done it. So you've thrown discovery and deadlines and any sanctions for violation of that out the window." Based upon the record before the Court and the history of this case, the District Court did not abuse its wide discretion when it allowed Lundstrom to submit evidence and expert testimony at the bench trial.

¶ 16 Issue Two: Did the District Court err in determining that both the 7 acre and 77 acre properties were not part of the marital estate?

¶ 17 Scholz argues that the District Court abused its discretion when it determined that both the 7 acre and 77 acre parcels were Lundstrom's premarital property because the District Court ignored the substantial contributions Scholz made to the properties after the sales and disregarded the nature of the transaction regarding the 77acre parcel.

¶ 18 In a dissolution proceeding, the District Court shall "equitably apportion between the parties the property and assets belonging to either or both, however and whenever acquired and whether the title thereto is in the name of the husband or wife or both," considering all the circumstances of a particular marriage. Section 40-4-202(1), MCA; Arnold v. Sullivan, 2010 MT 30, ¶ 23, 355 Mont. 177, 226 P.3d 594. For property acquired before the marriage, the district court shall consider the contributions of the other spouse. Section 40-4-202(1), MCA. This means that, regardless of who holds title, assets belonging to a spouse prior to the marriage are not part of the marital estate unless the non-acquiring spouse contributed to the preservation, maintenance, or increase in value of that property. Arnold, ¶ 28. If the non-acquiring spouse contributes to the property's preservation, maintenance, or appreciation, the district court should award the non-acquiring spouse his or her equitable share of that preserved, maintained, or appreciated value attributable to his or her efforts. Id. However, the non-acquiring spouse is not entitled to his or her equitable share of the property's increased value when the appreciation was due simply to market factors. Id.

¶ 19 The District Court found both the 7 acre and 77 acre properties were Lundstrom's premarital property, and found that Scholz made no substantial contributions to either property after selling them to Lundstrom. Therefore, the two properties were not part of the marital estate.

¶ 20 Regarding the 7 acre property and home,...