In re Morgan

• Decision Date: 11 February 2015
• Docket Number: A151840.,10DO0805DS
• Citation: 269 Or.App. 156,344 P.3d 81
• Parties: In the Matter of the MARRIAGE OF Precious Angelene MORGAN, Petitioner–Appellant, and Matthew John Morgan, Respondent–Respondent.
• Court: Oregon Court of Appeals

269 Or.App. 156

344 P.3d 81

In the Matter of the MARRIAGE OF Precious Angelene MORGAN, Petitioner–Appellant and Matthew John Morgan, Respondent–Respondent.

10DO0805DS

A151840.

Court of Appeals of Oregon.

Argued and Submitted March 13, 2014.

Decided Feb. 11, 2015.

George W. Kelly, Eugene, argued the cause and filed the briefs for appellant.

Russell Lipetzky, Salem, argued the cause and filed the brief for respondent.

Before DUNCAN, Presiding Judge, and LAGESEN, Judge, and FLYNN, Judge.^*

Opinion

FLYNN, J.

Wife appeals a judgment of dissolution, challenging the trial court's division of the parties' property, spousal support award to her, and determination of child support. She contends that the property division was inequitable because the trial court based its decision on erroneous findings of fact and awarded husband too great a share of the parties' marital property. She asks that we exercise our discretion under ORS 19.415(3)(b) to review the property division de novo. Wife also contends that the spousal support award was inequitable because the trial court erred in calculating husband's future income. Finally, she contends that the child support determination was erroneous as a matter of law because the court erred in calculating the presumed income of both parties.

For the reasons explained below, we review the trial court's property division and spousal support award for abuse of discretion and conclude that the court did not abuse its discretion. The trial court's calculation of the child support obligation, however, fails to take into account the court's finding regarding wife's disability at the time of trial. Therefore, we remand for the trial court to recalculate the child support obligation.

BACKGROUND

Before addressing wife's request that we exercise our discretion to review the property division de novo, we describe the pertinent findings that wife does not challenge.¹ The parties married in October 2000 without a pre-nuptial agreement and separated in 2009. They have one minor child together. At the time of trial, in 2012, wife was 43 years of age and husband was 44 years of age. Neither was employed.

At the time the parties married, wife's employment history consisted primarily of waitressing, and husband worked for a trailer-manufacturing business owned by his father. The business consisted of two entities—Morgan Built, Inc., and Morgan Built Holdings, LLC. In 2002, husband's father gave husband a majority interest in Morgan Built, Inc., and a minority interest in Morgan Built Holdings, LLC, which owned the property on which Morgan Built, Inc., operated. When husband's father died in 2005, husband inherited the rest of the stock in Morgan Built, Inc., and became the sole member in Morgan Built Holdings, LLC. Husband's income from those business entities was the primary source for payment of family expenses throughout the marriage. In 2008, the business ceased operations and began to liquidate its assets.

In 2009, Morgan Built, Inc., was formally dissolved, and Morgan Built Holdings, LLC, purchased the Vintage Apartments, a mixed-use property in Seattle, Washington. The purchase price of $3,200,000 was funded with money from liquidated business assets plus a promissory note signed by both husband and wife. Husband had been making interest-only payments on the note and relying on proceeds from the apartments of approximately $11,000 per month as his sole source of income. At the time of trial, the fair market value of the Vintage Apartments was approximately $3,000,000 with approximately $850,000 still owed on the note.

The trial court awarded husband and wife joint custody of their child and ordered husband to pay child support in an amount based on findings that husband would have income of $11,000 per month and wife would have income from full-time, minimum-wage work. The court ordered that husband pay transitional support to wife in the amount of $3,000 per month for a period of three years and spousal maintenance in the amount of $1,000 for an additional five years. In its property division, the trial court awarded wife several assets including the family house, which had equity of approximately $85,000, and a 2004 Volvo worth $5,190. Assets awarded to husband included the Vintage Apartments, which had equity of more than two million dollars, a guitar collection worth $48,520, a 2009 BMW worth $21,558, and a 2000 Dodge pickup worth $1,789. The court also ordered that husband pay to wife an equalizing money judgment in the amount of $150,000. Husband assumed responsibility for the mortgage on the Vintage Apartments, and wife assumed responsibility for the mortgage on the family house. Each party also assumed responsibility for any debt he or she incurred following the date of separation.

PROPERTY DIVISION

Wife argues that the court's award of the Vintage Apartments entirely to husband without a larger equalizing judgment was error. Unless we are convinced to exercise our discretion to review the property division “anew upon the record,” ORS 19.415(3)(b),² we review the determination for abuse of discretion. Morton and Morton, 252 Or.App. 525, 539, 287 P.3d 1227 (2012). As set out above, wife asks that we exercise our discretion to review the property division de novo. We exercise that discretion sparingly and only in exceptional cases. ORAP 5.40(8)(c) ; State v. S.N.R., 260 Or.App. 728, 733, 320 P.3d 569 (2014).

Here, wife contends that we should exercise de novo review of the trial court's property division because its award of the Vintage Apartments exclusively to husband and without a larger equalizing judgment relied on factual findings that are “just plain wrong.” We carefully consider wife's arguments because, as we observed in S.N.R., a lower court's reliance on a crucial finding that “does not comport with the evidence in the record” can be a reason to exercise our discretion to review de novo. 260 Or.App. at 733, 320 P.3d 569 ; see also Hanscam and Hanscam, 247 Or.App. 207, 219, 268 P.3d 715 (2011).

As pertinent to this inquiry, the trial court reasoned:

“While the goal of ‘economic self-sufficiency’ is worthwhile, it cannot be achieved in this case without selling the proverbial ‘golden goose’ because the only other asset of consequence is the family home which has an equity of approximately $85,000. A common option—an equalizing judgment—is also unrealistic because the current income stream from the apartments does not accurately reflect the cost of doing business (Husband is making interest only payments on the mortgage and has not set aside adequate reserves to resolve several existing maintenance needs); therefore, to increase the amount of the mortgage (assuming that option is available) to pay a judgment in the amount sought by Wife would appear to only * * * postpone the inevitable. * * *

“ * * * [T]he negative consequences of the liquidation of the Vintage Apartments far outweigh the equities that favor Wife's position. Although the record does not contain the information needed to calculate the tax consequences or closing costs of a sale with precision, the evidence is that both factors would reduce the net proceeds substantially before Wife received her equal share. Thus, the asset would be lost, and Wife would receive a significant portion of [Husband's father's] estate—clearly in violation of [Husband's father's] testamentary intent. While Wife may be entitled to a monetary judgment in a lesser sum, it is not ‘just and proper’ to award an amount that would compel the sale of the Vintage Apartments.”

Wife first challenges the finding that “substantial” tax liability and closing costs would result from a sale of the Vintage Apartments. She also, relatedly, asserts that the trial court wrongly found that a larger equalizing judgment would compel husband to sell the Vintage Apartments. The trial court's findings that closing costs would reduce the proceeds from a sale of the property and that a larger equalizing judgment could force the sale of the property are permissible inferences from the evidence, and we reject wife's challenge to those findings without further discussion.

There is also some evidence that a sale of the apartments would result in a significant taxable event. The evidence establishes that equity in the Vintage Apartments ranged from $2,085 to $2.155 million at the time of trial. The key dispute between the parties' experts was the extent to which income from a sale of the property would be treated as ordinary income—which would be taxable—or as capital gain—which would not be taxable due to complexities of the tax code that are not necessary to explain in this opinion. The trial court credited the testimony of husband's expert that a substantial amount of sale proceeds would be taxable as ordinary income and listed that concern as one of the reasons for its property distribution.

On appeal, wife cites legal authority that she contends clearly demonstrates husband's expert was wrong and, thus, that the trial court's finding was wrong. See IRC § 1250 (2012) (explaining circumstance under which proceeds from the sale of depreciable realty can be treated as “ordinary income” subject to tax). In the trial court, however, wife did not cite any legal authority addressing the issue of tax consequences from a sale of the Vintage Apartments. Rather, the key finding disputed by wife—the tax consequences of a forced sale—was presented to the trial court as merely a choice between conflicting expert testimony, and the testimony of husband's expert provided some support for the trial court's finding. Accordingly, even if we accept wife's explanation that the finding contradicts governing tax law, the factual mistake is a product of the manner in which wife litigated the issue below. We are not persuaded that this is an exceptional case in which we should exercise our discretion to review de novo. See ORAP 5.40(8)(d).³ We, thus, review the trial court's determination of a “just and...