In re Marriage of Herrera, 02-649.

• Citation: 85 P.3d 781,2004 MT 40,320 Mont. 71
• Decision Date: 24 February 2004
• Docket Number: No. 02-649.,02-649.
• Parties: In re the MARRIAGE OF Teresa Lee HERRERA, Petitioner, Respondent and Cross-Appellant, and Richard Alex Herrera, Respondent and Appellant.
• Court: United States State Supreme Court of Montana

85 P.3d 781

2004 MT 40

320 Mont. 71

In re the MARRIAGE OF Teresa Lee HERRERA, Petitioner, Respondent and Cross-Appellant, and

Richard Alex Herrera, Respondent and Appellant.

No. 02-649.

Supreme Court of Montana.

Submitted on Briefs March 13, 2003.

Decided February 24, 2004.

For Appellant: John L. Hollow, Helena, Montana.

For Respondent: Ronald F. Waterman, Gough, Shanahan, Johnson and Waterman, Helena, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Teresa Herrera (Teresa) petitioned for dissolution of her marriage to Richard Herrera (Richard) in the First Judicial District Court, Lewis and Clark County. Following a non-jury trial, the District Court entered Findings of Fact, Conclusions of Law, and Decree of Dissolution, dissolving the parties' marriage, distributing the couple's property, setting child support obligations, and approving the shared parenting plan. Richard appeals, and Teresa cross-appeals, from the District Court's property distribution. Teresa additionally cross-appeals from the court's failure to award attorney fees. We affirm in part, reverse in part, and remand.

¶ 2 The parties raise the following issues on appeal:

¶ 3 1. Did the District Court err in awarding Teresa one-half of the equity in the family home when a substantial portion of the funds to construct the home came from Richard's inherited or gifted monies?

¶ 4 2. Did the District Court err by including the entire value of Richard's Merrill Lynch retirement account and a 1992 Ford pickup in the marital estate when the equity in these properties represented gifted or inherited funds?

¶ 5 3. Did the District Court err in excluding Richard's fractional interest in his family's properties in Broadwater County and a cabin near Canyon Ferry Lake from the marital estate?

¶ 6 4. Did the District Court err in not awarding Teresa attorney fees?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 7 Richard and Teresa were married August 8, 1987, in Helena, Montana. About a year and a half prior to the marriage, Richard had inherited in excess of $50,000 in gold and silver from his father. On the day before the parties' wedding, Richard purchased a condominium in Seattle, Washington, using money that had been gifted to him from his father as a down payment. After the wedding, Richard and Teresa moved to Seattle, where Richard worked as a mechanical engineer for Boeing and Teresa sought employment. Teresa eventually gained work as a receptionist at a nearby shopping mall and then shortly thereafter as a receptionist for Boeing. The parties thereafter sold the condominium and, using the sale proceeds, purchased another home in the Seattle area.

¶ 8 In 1993, shortly after the birth of their second child, Richard and Teresa returned to Helena. For the next two years, they lived with Richard's mother while they constructed a home on a lot that Richard, along with his mother and four siblings, had inherited from Richard's father in 1986. In October 1994, Richard's family deeded the property to Richard and Teresa, based upon an oral promise to pay $15,000 for the lot, which was subsequently never paid. By the time of trial, the lot was valued at $51,000.

¶ 9 In financing the construction of the Helena residence, Richard and Teresa used the money they received from the sale of their Seattle residence, approximately $25,000, as well as $30,000 from a Workers' Compensation settlement which Richard received as a result of work-related injuries in the early part of 1996. Richard also contributed a portion of his gold inheritance, between $30,000 and $40,000, as well as $20,000 which had been gifted to him by his godmother.

¶ 10 For her part, Teresa contributed approximately $10,000 to the construction of the Helena residence—funds from her retirement account at Boeing—and acted as the primary caretaker for the parties' minor children. Teresa also shared in a mortgage on the family residence, which was originally $65,000.

¶ 11 In 1995, after moving into the Helena residence, Richard and Teresa had their third child. Shortly thereafter, Teresa obtained employment at a local physical fitness center, working part-time in the center's daycare facility. As she did so, she continued to care for the parties' three minor children, who accompanied Teresa at work. Teresa maintained her employment at the fitness center for the duration of the parties' marriage, and, at the time of trial, was working full-time as the center's bookkeeper.

¶ 12 Richard also maintained employment throughout the marriage. After returning to Helena, Richard worked briefly for State Farm Insurance Company before obtaining a sales position at a local car dealership, where he worked for approximately one year. Richard thereafter went to work for Allstate Insurance Company as a claims representative, where he continued to work up through the time of trial.

¶ 13 In conjunction with his past employment, Richard held a Merrill Lynch retirement account, which was valued at approximately $23,255 at the time of trial. Although the account represented retirement contributions Richard accrued during his employment with Boeing, the account was funded, in principle part, by a $14,000 gift from Richard's godmother.

¶ 14 Richard also owned a fractional interest in several parcels of real property. In 1995, Richard purchased a one-half interest in a lot located in Broadwater County for $1,250, again using a portion of the gold he inherited from his father. The only expense associated with this property was the payment of taxes, which were minimal, and which Teresa helped to pay. At trial, the parties agreed the lot was worth $7,500.

¶ 15 Additionally, Richard held a one-fifth interest in a cabin located near Canyon Ferry Lake, which he and his four siblings had inherited from Richard's parents. Throughout the marriage, Richard and Teresa shared the use of the cabin with Richard's siblings, and paid a proportionate part of the expenses associated with the cabin. At trial, the parties agreed the cabin was worth a total of approximately $60,000.

¶ 16 In June 2000, Richard and Teresa separated. The following month, Teresa petitioned for dissolution of marriage in district court. At trial, the parties agreed to a shared parenting schedule. However, they disputed the division of assets, many of which Richard considered as non-marital, or as being acquired with his inherited and gifted funds.

¶ 17 On March 26, 2002, the District Court issued its Findings of Fact, Conclusions of Law, and Decree of Dissolution, concluding that all of the monies acquired during the marriage, regardless of source, were commingled and used for the parties' mutual benefit, and that Teresa's non-monetary contributions as a homemaker equaled the value of Richard's inherited and gifted contributions to the family residence. As such, the court divided the parties' marital property almost equally, and awarded Teresa one-half of the equity in the family home, or $93,000. The court additionally concluded that Richard's Merrill Lynch account and 1992 Ford pickup, acquired primarily with inherited funds, were marital assets, and awarded each of these items to Richard. However, the court excluded Richard's interests in the Broadwater property and Canyon Ferry cabin from the marital estate, reasoning that these properties were not titled in Teresa's name, and had been kept separate from the parties' other marital assets. Both parties appeal from the District Court's distribution of property, and Teresa additionally appeals from the court's failure to rule on her request for attorney fees.

STANDARD OF REVIEW

¶ 18 The standard of review of a district court's division of marital property is whether the district court's findings of fact are clearly erroneous and whether the court correctly applied the law. In re Marriage of Foreman, 1999 MT 89, ¶ 14, 294 Mont. 181, ¶ 14, 979 P.2d 193, ¶ 14. A finding is clearly erroneous if it is not supported by substantial evidence, if the district court misapprehended the effect of the evidence, or if our review of the record convinces us the district court made a mistake. In re Marriage of Deist, 2003 MT 263, ¶ 14, 317 Mont. 427, ¶ 14, 77 P.3d 525, ¶ 14. Where substantial credible evidence supports the court's findings and judgment, this Court will not alter the district court's decision unless there is an abuse of discretion. In re Marriage of Griffin (1996), 275 Mont. 37, 43, 909 P.2d 707, 710-11. The test for abuse of discretion in a dissolution proceeding is "whether the district court acted arbitrarily without employment of conscientious judgment" or whether the district court "exceeded the bounds of reason resulting in substantial injustice." In re Marriage of Engen, 1998 MT 153, ¶ 26, 289 Mont. 299, ¶ 26, 961 P.2d 738, ¶ 26.

DISCUSSION

¶ 19 Did the District Court err in awarding Teresa one-half of the equity in the family home when a substantial portion of the funds to construct the home came from Richard's inherited or gifted monies?

¶ 20 Richard challenges the District Court's equal division of the equity in the parties' marital residence, arguing that the court erred in applying the provisions of § 40-4-202, MCA (1999), which controls distribution of a marital estate. He maintains that it is well established that a non-acquiring spouse is entitled only to share in the appreciated or preserved value of pre-acquired or inherited property which is attributable to his or her efforts. Richard contends that, because more than half of the equity in the marital residence was funded by his gifts and inheritances, the District Court erred in awarding Teresa half of the equity in this asset. In response, Teresa maintains that her non-monetary contributions as a homemaker facilitated the maintenance and appreciation of the marital residence, and that, consequently, she is entitled to half of the equity.

¶ 21 Section 40-4-202, MCA, provides, in relevant part:

In a proceeding for

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