IN RE MARRIAGE OF FRANKE v. Franke

• Citation: 2004 WI 8,674 N.W.2d 832,268 Wis.2d 360
• Decision Date: 06 February 2004
• Docket Number: No. 01-3316.,01-3316.
• Parties: IN RE the MARRIAGE OF: Kathryn Jalas FRANKE, Petitioner-Respondent-Cross-Appellant, v. Martin T. FRANKE, Respondent-Appellant-Cross-Respondent.
• Court: United States State Supreme Court of Wisconsin

268 Wis.2d 360

2004 WI 8

674 N.W.2d 832

IN RE the MARRIAGE OF: Kathryn Jalas FRANKE, Petitioner-Respondent-Cross-Appellant, v. Martin T. FRANKE, Respondent-Appellant-Cross-Respondent.

No. 01-3316.

Supreme Court of Wisconsin.

Oral argument September 16, 2003.

Decided February 6, 2004.

For the respondent-appellant-cross-respondent there were briefs (in the court of appeals) by David E. Jarvis and Quarles & Brady LLP, Milwaukee, and oral argument by David E. Jarvis.

For the petitioner-respondent-cross-appellant there was a brief by Colleen Wentworth Jones, Rod W. Rogahn and Rogahn Law Offices, Delafield, and oral argument by Colleen Wentworth Jones.

¶ 1. SHIRLEY S. ABRAHAMSON, C.J.

This case comes before the court on certification by the court of appeals, pursuant to Wis. Stat. § (Rule) 809.61 (2001-2002).¹ The circuit court for Washington County, Leo F. Schlaefer and Patrick J. Faragher, Judges, entered orders opening the divorce judgment under Wis. Stat. § 806.07 and modifying provisions of the divorce judgment relating to property division and child support. The circuit court awarded an increase in the amount Mr. Franke was to contribute toward Ms. Franke's attorney fees, but not as much as Ms. Franke wanted. The circuit court refused to change the provision in the divorce judgment setting each party's share of the 1995 income tax liability.² ¶ 2. Four issues of law are presented:

(1) May a circuit court open the property division provisions of a divorce judgment under Wis. Stat. § 806.07 even though the divorce judgment incorporated an arbitral award that had been confirmed by the circuit court?

(2) Assuming that a circuit court may relieve a party from property division provisions of such a divorce judgment under Wis. Stat. § 806.07, did the circuit court erroneously exercise its discretion in opening this judgment?

(3) When Wis. Stat. § 806.07 is used to relieve a party from property division provisions of such a divorce judgment, is the relevant date of valuation of assets the date of the closing of the arbitration record or the date of the divorce?

(4) If a circuit court may relieve a party from property division provisions of such a judgment, did the circuit court erroneously exercise its discretion in modifying the judgment to increase Ms. Franke's share of the property division, to increase the Mr. Franke's child support payments, and to increase Mr. Franke's contribution toward his former wife's attorney fees incurred after the divorce judgment; in refusing to modify the allocation of the 1995 income tax liability; and in refusing to require Mr. Franke to contribute additional sums toward his former wife's attorney fees incurred after the divorce judgment?

¶ 3. We answer the questions posed as follows:

(1) A circuit court may relieve a party from property division provisions of a divorce judgment under Wis. Stat. § 806.07 even though the divorce judgment incorporates a confirmed arbitral award.

(2) The circuit court did not erroneously exercise its discretion under § 806.07 in opening the property division provisions of the divorce judgment.

(3) Arbitration may constitute, but does not as a matter of law constitute, a special exception requiring property to be valued as of the date of the closing of the arbitration record instead of the date of divorce.

(4) The circuit court did not erroneously exercise its discretion in modifying the divorce judgment to increase Ms. Franke's share of the property division and Mr. Franke's contribution toward his former wife's attorney fees incurred after the divorce judgment. The circuit court did not erroneously exercise its discretion in refusing to modify the divorce judgment to reallocate the 1995 income tax liability between the parties. The circuit court (Judge Faragher) did not erroneously exercise its discretion in refusing to require Mr. Franke to contribute additional sums toward his former wife's postjudgment attorney fees. The circuit court erroneously exercised its discretion in increasing Mr. Franke's child support payments.

¶ 4. Accordingly, we affirm the orders of the circuit court revising the divorce judgment to increase Ms. Franke's share of the property division and Mr. Franke's contribution toward his former wife's postjudgment attorney fees. The orders of the circuit court refusing to award Ms. Franke additional postjudgment attorney fees and refusing to modify the allocation of the 1995 income tax liability are also affirmed. The circuit court's order modifying child support is reversed and remanded to the circuit court for further consideration not inconsistent with this opinion.

I

¶ 5. This divorce proceeding occupied the attention of the courts and an arbitrator for several years. We set forth an abbreviated version of those facts relevant to deciding the issues presented. Additional facts appear later in the opinion.

¶ 6. The Frankes married on December 29, 1989. Less than four years later, on July 26, 1993, Ms. Franke filed a petition for divorce. During the divorce proceedings the circuit court ordered the parties to mediate their disputes, but these efforts were unsuccessful and broke down in October of 1994.

¶ 7. From 1994 to 1996, various attempts to complete the proceedings were made, culminating in the parties' decision in April 1996 to agree to have all disputes in their divorce resolved by binding arbitration.

¶ 8. Between July and October of 1996, the parties participated in several arbitration hearings. After the last hearing in October 1996, the arbitrator requested additional documents, the homestead was being sold, and various "housekeeping details" needed attention. In the summer of 1997 Mr. Franke filed an updated financial disclosure statement with the arbitrator that ostensibly reflected the value of his assets as of October 1996. Mr. Franke's work involved the buying, selling, and consolidation of communication assets, making financial calculations particularly complex.

¶ 9. The arbitrator issued a final award on April 16, 1998. On June 9, 1998, on Ms. Franke's motion, the circuit court confirmed the arbitrator's award and ordered that a divorce judgment be entered in conformity with the award. In accordance with the confirmation order, the arbitral award was incorporated by reference into the final judgment of divorce filed and dated July 13, 1998 and made the judgment of the court. The arbitral award determined property division, child support, each party's liability for 1995 income taxes, and the sum Mr. Franke was to contribute toward Ms. Franke's attorney fees incurred during the divorce proceedings.

¶ 10. Just over nine months later, on April 15, 1999, Mr. Franke filed a motion seeking to hold Ms. Franke in contempt for failing to sign and return the parties' joint income tax return as required by the arbitral award and judgment. On May 26, 1999, Ms. Franke responded with a motion to open the June 9, 1998 divorce judgment pursuant to Wis. Stat. §§ 806.07(1)(a), (b), (c), and (h), and 767.32 (relating to modification of child support), alleging, in part, that Mr. Franke had failed to disclose certain assets and provided erroneous valuations of other assets. Ms. Franke requested that the circuit court revise portions of the divorce judgment relating to property division and child support to reflect what she asserted was the true value of the assets. She also requested that the circuit court reconsider her share of income tax liability for 1995 and award her additional attorney fees.

¶ 11. The circuit court opened the divorce judgment and, after hearings, entered a decision and order dated July 27, 2000. The order increased Mr. Franke's child support payments from $2,300 to $3,000 per month and increased by $5,000 Mr. Franke's payment toward his former wife's attorney fees incurred after the divorce judgment.

¶ 12. The order refused to modify each party's share of the 1995 income tax liability.

¶ 13. The order increased Ms. Franke's share of the property, requiring Mr. Franke to pay Ms. Franke $25,000 as a one-half share of a $50,000 loan Mr. Franke made to All City Communication Company, Inc., and an additional $28,457.22 as her share of Mr. Franke's revalued interest in the stock of All City.

¶ 14. Further, on the basis of the circuit court's conclusion that Mr. Franke had not been forthcoming about his various assets, the circuit court ordered additional discovery of Mr. Franke's financial records covering the period of time between the close of the arbitration record and the entry of the divorce judgment.

¶ 15. After Judge Schlaefer's retirement, the circuit court issued an order stating that the relevant valuation date of the Frankes' property was the close of the arbitration record, that it would not award Ms. Franke additional attorney fees for postjudgment proceedings, and that it would not revisit any of the earlier orders of the circuit court.

¶ 16. The parties appealed and cross-appealed, and the court of appeals certified the case to this court.

II

¶ 17. The first question presented is whether a circuit court may open the property division provisions of a divorce judgment under Wis. Stat. § 806.07 when the divorce judgment incorporated a confirmed arbitral award.³

¶ 18. To answer this question, we must examine the interplay among the following:

A. Wis. Stat. § 806.07, governing opening judgments;

B. Wis. Stat. § (Rule) 802.12(3)(c), governing binding arbitration in certain family law actions, along with chapter 788 governing arbitration; and

C. Wis. Stat. § 767.255(3)(L), imposing responsibilities on a circuit court in determining property division in a divorce judgment.

A

¶ 19. Wisconsin Stat. § 806.07 allows a circuit court, on motion, to relieve a party from a judgment, order, or stipulation upon such terms as are just and for one of the eight reasons enumerated in § 806.07.⁴

¶ 20. The purpose of Wis. Stat. § 806.07 is to "achieve a balance between fairness in the...