Josephson v. Josephson

• Citation: 115 Idaho 1142,772 P.2d 1236
• Decision Date: 25 April 1989
• Docket Number: No. 17001,17001
• Parties: Ella JOSEPHSON, Plaintiff-Appellant, v. Lynn JOSEPHSON, Defendant-Respondent.
• Court: Court of Appeals of Idaho

Page 1236

772 P.2d 1236

115 Idaho 1142

Ella JOSEPHSON, Plaintiff-Appellant, v. Lynn JOSEPHSON, Defendant-Respondent.

No. 17001.

Court of Appeals of Idaho.

April 25, 1989.

[115 Idaho 1143] Stanley W. Welsh of Clemons, Cosho & Humphrey, Boise, for plaintiff-appellant.

[115 Idaho 1144] John K. Gatchel, Payette, for defendant-respondent.

SUBSTITUTE OPINION

The Court's prior opinion, dated October 17, 1988, is hereby withdrawn.

SWANSTROM, Judge.

This appeal concerns the classification, valuation and distribution of property in a decree of divorce between Ella and Lynn Josephson. Ella Josephson has appealed from the district court's decision which affirmed the magistrate's findings and conclusions. The issues are: whether a savings account owned by Lynn retained its character as separate property; whether the community is entitled to reimbursement for improvements made to Lynn's separate property; whether the common stock of two closely held corporations was correctly classified, valued and divided; whether the community has any right to the retained earnings of one of the closely held corporations; and whether the parties' attorney fees are community debts. We affirm in part, vacate in part and remand the case with directions.

On April 27, 1964, Ella and Lynn Josephson married. Twenty-one years later, they stipulated that each be granted a decree of divorce from the other on the ground of irreconcilable differences. The decree of divorce was filed on September 24, 1985. A trial was later held before the magistrate for the purposes of classifying and dividing the parties' property. The magistrate's findings regarding the parties' property are summarized in parts of this opinion according to their related issues.

We begin our discussion of the issues by setting forth the standard of review. On appeal from a decision of the district court reviewing a magistrate's findings and conclusions, we will treat the district court as an intermediate appellate court and we will independently review the magistrate's findings. Matter of the Estate of Bradley, 107 Idaho 860, 693 P.2d 1062 (Ct.App.1984). Further applicable standards of review depend on whether the issue presented is one of law, fact or discretion.

The classification of property in a divorce proceeding involves questions of law and fact. We review the trial record to determine whether there is substantial and competent evidence to support the findings of fact, and whether the magistrate correctly applied the law to the facts as found. See Gardner v. Gardner, 107 Idaho 660, 691 P.2d 1275 (Ct.App.1984). The division of community property is a question of discretion, guided by statutory and case law. Donndelinger v. Donndelinger, 107 Idaho 431, 690 P.2d 366 (Ct.App.1984).

A preliminary question to be resolved is whether the magistrate was required to cite legal authority and articulate the legal basis for his findings and conclusions. Ella insists that the magistrate was under such duty and that his failure to fulfill it resulted in a faulty decision. We disagree. A trial judge's general duty is to make findings of fact and reach conclusions of law from those facts. I.R.C.P. 52(a). Furthermore, where a trial judge is required to exercise his discretion, he should set forth the reasons for the result achieved in his decision. See Donndelinger v. Donndelinger, supra. Of course, a trial judge may cite authority and identify legal rules and principles for his conclusions or reasons, but there is no requirement that he must do so. Nor is there any law which states that a failure to cite authority renders faulty a trial judge's decision. We strongly encourage trial judges to articulate the legal basis of their decisions. When the basis of a decision is unclear, and appellate review is thereby hindered, the appellate court may be prompted to remand the case for clarification. However, we believe such a step is unnecessary in this case.

Savings Account

Lynn owned a savings account that as of November 19, 1984, had a balance of $2,423. It is agreed that this savings account was started with Lynn's separate property. Evidence at trial showed that from November 1984 to December 1985 some community funds had been deposited in the account and some community debts were paid out of the account. At the time of divorce on September 24, 1985, the account had a balance of $11,400. At the time of trial for property division, January 2, 1986, the account had a balance of $2,290. Ella contends the commingling of separate and community funds in Lynn's savings account rendered tracing of the separate funds impossible, thus, the funds in the account are community property. Moreover, Ella argues that she is entitled to one-half of the balance in the account as of the date of the divorce. The magistrate concluded that because the $2,290 balance in the account at the time of trial was less than the beginning balance, the funds in the account remained the separate property of Lynn. The magistrate gave no explanation why he focused on the trial date rather than the date of divorce in determining the value and nature of the account. The district court held that the magistrate's findings were supported by substantial, competent evidence. We disagree.

Where the parties have commingled their separate and community funds in a bank account, and treat them as one fund, it all becomes community property. Gapsch v. Gapsch, 76 Idaho 44, 277 P.2d 278 (1954). The commingling doctrine is a special application of the general presumption that all property acquired during the marriage is community property. Houska v. Houska, 95 Idaho 568, 512 P.2d 1317 (1973). The party who asserts that the property is separate has the burden of persuasion, and must prove the property is separate with reasonable certainty and particularity. Id. This may be accomplished through evidence of tracing or accounting. See Evans v. Evans, 92 Idaho 911, 453 P.2d 560 (1969).

The evidence produced at trial showed a commingling of separate and community funds in Lynn's savings account. The evidence does not disclose the nature or purpose of all of the deposits or withdrawals, i.e., whether they were separate or community. The evidence shows some community funds, including bonuses paid to Lynn, were deposited into the account and funds were withdrawn to pay community debts such as taxes and living expenses. The evidence also shows that some funds were withdrawn for expenditure on the parties' principal residence, which residence, as we note later in this opinion, was Lynn's separate property. There was no evidence showing that the separate and community funds in the account were treated as distinct and apart. To the contrary, the funds in the account appear to have been regarded by Lynn as one. The burden of persuasion was on Lynn to prove that his separate funds were identifiable and traceable.

In cases involving allegedly commingled property, the courts have recognized an accounting method which treats expenditures for community purposes as having been made from community funds and expenditures for separate purposes as having been made from separate funds. E.g., Mix v. Mix, 14 Cal.3d 604, 122 Cal.Rptr. 79, 536 P.2d 479 (1975); Barrington v. Barrington, 290 S.W.2d 297 (Tex.Civ.App.1956). See also Houska v. Houska, supra, and Evans v. Evans, supra (both cases recognizing that if community expenditures during the marriage equal or exceed community income, any additional purchases or acquisitions necessarily are separate property).

When utilizing this accounting method, a court compares the aggregate community deposits and withdrawals for community expenditures. If the expenditures exceed the deposits, there is no community interest in the residual funds. If the deposits exceed the expenditures, the net amount reflects a community interest in any residual funds. In the event separate property is used for community expenditure, reimbursement may be sought from the community unless a gift to the community was intended. Here, Lynn has made no contention that he is entitled to any reimbursement from the community because separate funds were taken from the account to pay community debts.

We remand the case for more particularized findings as to the purpose of the withdrawals and for a further determination as to whether the aggregate community withdrawals equalled or exceeded the community deposits. If the magistrate finds that they did, the residual balance in the account may again be characterized as separate property. If not, the balance may be comprised of some community and some separate funds. A division can be made accordingly. But if the evidence is inadequate to make such a determination, then the magistrate should hold that Lynn has not carried his ultimate burden of proving the existence of separate property and should conclude that the balance of the account is community property due to commingling.

The character of community or separate property ordinarily should be determined at the time of divorce. Here, we note that the magistrate considered evidence of bank account transactions during a period extending beyond the divorce. However, in this case, if post-divorce expenditures from the account were made by Lynn entirely for the purpose of paying outstanding community debts, then he would be entitled to credit for those payments in the final property division. Thus, the "bottom line" would be the same as if the accounting period were extended beyond the divorce to the time of trial on property division issues.

Separate Property Residence

At the time the parties were married, Lynn owned a home in Payette, Idaho. This home became Lynn's and Ella's permanent residence. During the marriage several improvements were made to the home. Lynn's basis in the home was approximately $114,000. The home had an appraised value, after improvements, of $103,000. Ella does not dispute the separate property character of Lynn's...