In re Marriage of Hayes

Citation60 P.3d 431,2002 MT 281,312 Mont. 440
Decision Date10 December 2002
Docket NumberNo. 02-019.,02-019.
PartiesIn re the MARRIAGE OF Patrick B. HAYES, Petitioner and Respondent, and Eileen A. Hayes, Respondent and Appellant.
CourtUnited States State Supreme Court of Montana

Dennis E. Lind and Cynthia L. Cate, Datsopoulos, MacDonald & Lind, Missoula, Montana, For Appellant.

Shelly F. Brander, Kaufman, Vidal & Hileman, Kalispell, Montana, For Respondent.

Justice W. WILLIAM LEAPHART delivered the Opinion of the Court.

¶ 1 The Petitioner, Eileen Hayes, n/k/a Eileen Larkin, appeals from an Order issued by the District Court for the Fourth Judicial District in Missoula County which distributed the marital estate between her and the Respondent, Patrick Hayes. We affirm.

¶ 2 The following issues are presented on appeal:

1. Did the District Court err by not determining the net worth of the marital estate prior to its distribution?

2. Did the District Court err by not considering the tax consequences arising from the court-ordered sale of marital properties?

3. Did the District Court err by not including Patrick's disability income in the marital estate or by not considering the disability income in determining whether or not to award maintenance to Eileen?

Factual and Procedural Background

¶ 3 Eileen and Patrick were married in Houston, Texas, on January 22, 1982, and have two children from the marriage. Both received their chiropractic degrees; however, Eileen practiced for only one year because of a knee injury. In 1984, the parties moved to Colorado and opened a chiropractic clinic where Patrick practiced as a chiropractor and Eileen handled the administrative responsibilities. The clinic flourished; in 1989 Patrick had 20,000 patient visits. Patrick and Eileen were equal shareholders in the clinic. In 1989, the parties acquired full ownership of the office complex in which the clinic was located.

¶ 4 The parties acquired various other assets, including an upscale home, an 80-acre ranch, a cabin, a motor home, and several vehicles. In addition, the couple purchased a deluxe tax-free disability insurance policy with all available future income options and riders to protect the parties' substantial income from the clinic should Patrick become disabled. ¶ 5 In 1990, after suffering unexplained weight loss, heartburn and fatigue, Patrick was diagnosed with Gastroesophageal Reflex Disease. Patrick discontinued working as a chiropractor at that time and began receiving private disability benefits. Patrick also applied for and was awarded workers' compensation benefits from the State of Colorado. Patrick's health continued to deteriorate. In 1992, Patrick was diagnosed with a terminal condition known as Scleroderma, a progressive vascular autoimmune disease which will shorten his life span. Although Patrick's anticipated life expectancy is unknown, one of Patrick's treating physicians testified that 80 percent of white males do not live ten years past their diagnosis date. Patrick underwent esophagus surgery and continues to receive periodic treatment related to the disease. Patrick currently receives approximately $12,000 per month in tax-free disability insurance benefits.

¶ 6 In 1990, Eileen and Patrick moved to Montana to further their education. Both Patrick and Eileen enrolled at the University of Montana and obtained their bachelor's degrees. Eileen is currently attending law school at the University of Montana where she will receive her juris doctorate in 2003. After they moved to Montana, the parties purchased property on Reserve Street in Missoula and built a business complex known as the "Towne Court" for the purpose of relocating Eileen's quilting business. Eileen was responsible for managing and operating the store.

¶ 7 The couple separated in the fall of 1998. Patrick subsequently filed a Petition for Dissolution of Marriage with the Montana Fourth Judicial District Court on April 28, 1999. Following two unsuccessful settlement conferences, the parties proceeded to a bench trial in June 2001.

¶ 8 The District Court issued its Findings of Fact, Conclusions of Law, and Order on July 19, 2001. The District Court awarded Eileen her retirement account, personal stocks and bonds, and a 1996 Aerostar. The value of the assets awarded to Eileen total approximately $55,000. Eileen was also awarded the $500,000 life insurance policy on Patrick with a cash out value of $25,500. The District Court denied her request for maintenance.

¶ 9 The District Court awarded Patrick his retirement account, property on Lake Inez, a motor home, two vehicles, various recreational and sporting goods, and a bank account. The value of the assets awarded to Patrick total approximately $157,000. The District Court also awarded Patrick the entirety of his disability and social security benefits totaling approximately $13,500 per month.

¶ 10 To address the disproportionate distribution of the estate, the court ordered the immediate sale of various assets, including the Towne Court property, the office complex in Colorado, and certain life insurance policies. The Order also provided that, in the event the parties could not agree on a reasonable sales price for the properties, the District Court would set a price which would be reduced 5 percent monthly until they sold. The court ordered that the net proceeds from the sale of these assets be placed into an account and applied against the marital estate's debts. According to the District Court's order, after the marital debts were satisfied, Eileen was to receive a $100,000 cash payment "as partial adjustment for the property distributed to Patrick." Eileen then would receive three-quarters of the remaining marital estate and Patrick would receive one-quarter.

¶ 11 Thereafter, Eileen filed a motion for clarification and to alter or amend the judgment in which she requested the following: temporary family support pending sale of the marital property; that Patrick continue to be responsible for the marital credit card debt; that the court set forth a procedure for the sale of the property; and that Patrick pay the taxes on the Towne Court. The District Court issued an order on September 6, 2001, in response to Eileen's motion, denying her request for temporary family support and addressing her other requests.

¶ 12 Subsequently, Eileen filed a timely notice of appeal with respect to the District Court's Findings of Fact, Conclusions of Law, and Order and its September 6, 2001, Order in response to her motion for clarification and to alter or amend judgment.

Discussion

¶ 13 The distribution of marital property in a dissolution proceeding is governed by § 40-4-202, MCA. Under this statute, a district court is vested with broad discretion to distribute the marital estate in a manner which is equitable to both parties. Marriage of Lee (1997), 282 Mont. 410, 421, 938 P.2d 650, 657. In dividing a marital estate, the district court must reach an equitable distribution, not necessarily an equal distribution. Marriage of Walls (1996), 278 Mont. 413, 416, 925 P.2d 483, 485. We review a district court's division of marital property to determine whether the findings on which it relied are clearly erroneous. Marriage of DeBuff, 2002 MT 159, ¶ 14, 310 Mont. 382, ¶ 14, 50 P.3d 1070, ¶ 14; Marriage of Engen, 1998 MT 153, ¶ 26, 289 Mont. 299, ¶ 26, 961 P.2d 738, ¶ 26. If the findings are not clearly erroneous, we will affirm the distribution of property unless the district court abused its discretion. Marriage of Engen, ¶ 26. The standard for abuse of discretion in a dissolution proceeding is whether the trial court acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in substantial injustice. Marriage of Engen, ¶ 26.

Issue 1

¶ 14 Did the District Court err by not determining the net worth of the marital estate?

¶ 15 Eileen argues that the District Court erred by not establishing the marital estate's net worth thereby abusing its discretion. In support of her argument, Eileen cites Marriage of Dirnberger (1989), 237 Mont. 398, 773 P.2d 330, in which we ruled that a district court's failure to make a specific finding as to liabilities, thereby precluding a determination of net worth, was an abuse of discretion. Dirnberger, 237 Mont. at 402, 773 P.2d at 332. We vacated the property division in that case and remanded it for a redetermination.

¶ 16 Patrick points out that several cases since Dirnberger have held that a specific finding of net worth is not mandatory if the findings as a whole are sufficient to determine the equitable nature of the division. In Marriage of Harkin, 2000 MT 105, 299 Mont. 298, 999 P.2d 969, we concluded that a district court did not abuse its discretion by not making a specific finding of fact regarding the total assets and liabilities of the marital estate, and that "a net valuation by the district court ... is not always mandatory." Harkin, ¶ 31 (quoting Marriage of Walls (1996), 278 Mont. 413, 417, 925 P.2d 483, 485). In determining whether a finding of net worth is necessary, we have stated that "the test is whether the findings as a whole are sufficient to determine the net worth and to decide whether the distribution is equitable." Harkin, ¶ 31; Walls, 278 Mont. at 417, 925 P.2d at 485 (quoting Marriage of Stephenson (1989), 237 Mont. 157, 160, 772 P.2d 846, 848).

¶ 17 Applying the test mentioned above, this Court must first determine whether the findings as a whole are sufficient to determine the net worth of the marital estate. Naturally, until the marital properties ordered sold are sold, it is impossible to calculate the net value of the marital estate; however, the District Court's inability to calculate the exact net worth does not render its distribution of the marital estate inequitable. Except for the properties it ordered the parties to sell, the District Court made specific...

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