Malmquist v. Malmquist
| Citation | 792 P.2d 372,106 Nev. 231 |
| Decision Date | 24 April 1990 |
| Docket Number | No. 19173,19173 |
| Parties | Kenneth W. MALMQUIST, Appellant, v. Nancy MALMQUIST, Respondent. |
| Court | Supreme Court of Nevada |
McDonald and Petroni, Reno, for respondent.
Kenneth W. Malmquist appeals a judgment and decree of divorce dividing his and his ex-wife Nancy Malmquist's community property. While the district court made a reasonable division of the parties' residence, we reverse the district court's determination of the separate and community property interests in the residence because the court did not utilize the more appropriate apportionment method set forth in In re Marriage of Moore, 28 Cal.3d 366, 168 Cal.Rptr. 662, 618 P.2d 208 (1980). We adopt a slightly modified version of the Moore apportionment. We cannot establish the parties' final interests in the residence at this time because the residence has been set aside for the benefit of the children and will not actually be divided until some time in the future. Nevertheless, we offer some examples as guidance on how our modified Moore formulae would apply if the residence were to be divided at the present time. Although we do not believe this opinion will require any readjustment of the initial property division, we remand this case to allow the district court to make this determination. We affirm the district court's determination that Kenneth failed to meet his burden of tracing the $37,007 used for home improvements to his separate property. We further take this opportunity to clarify the proper mode of apportionment at divorce of improvements to real property. Finally, we affirm the district court's judgment and decree of divorce in all other respects.
Kenneth and Nancy were married on December 12, 1970. Kenneth was a practicing family physician, and Nancy was a dental hygienist. Nancy worked for approximately two years after the marriage. After the couple's first child was born, Nancy did not work during the marriage. The parties had three children during their seventeen-year marriage: Andrew, Nicholas and Casey, aged fifteen, nine and eight respectively at the time of trial. The couple separated in or around March 1986. In June 1986, Nancy filed for divorce.
In June 1967, before he married Nancy, Kenneth had purchased a residence on Wedekind Road with his former spouse, Delores Malmquist. The purchase price was $36,500. Kenneth made a $2,500 down payment and financed the remaining $34,000 by mortgage. By the time he married Nancy, Kenneth already had made mortgage payments which reduced the mortgage The district court found the market value of the Wedekind Road residence at the time of divorce to be $215,000. Of that value, the court concluded that 7.5% was Kenneth's premarital separate property, and 74.5% was community property. The court classified the entire remaining 18% interest as Kenneth's post-marital separate property because the court awarded temporary possession of the house to Nancy and the children. Specifically, the court imposed a constructive trust on the Wedekind Road residence for the benefit of the children. The court ordered Kenneth to make all mortgage payments and to pay for maintenance, repairs and utilities on the residence, until the youngest child reaches the age of majority or Nancy consents to a sale of the house. The court further ordered Kenneth to pay the statutory maximum in child support.
principal by an additional $1,037. In total, then, Kenneth had paid $3,537 towards the purchase price by the time he married Nancy. In October 1970, Kenneth and Delores were divorced. Pursuant to a property settlement agreement, Kenneth paid Delores $4,200 for her interest in the home. During their marriage, Nancy and Kenneth made community property payments on the mortgage which further reduced the mortgage principal. Although the exact amount of principal reduction attributable to these community property payments is somewhat unclear, it appears that these payments reduced the principal by approximately $14,463. Accordingly, as the district court found, the outstanding unpaid loan balance remaining at the time of divorce was $18,500.
During their marriage, the Malmquists also made improvements to the Wedekind Road residence. The improvements cost $62,707 and consisted of a kitchen remodeling and green house addition. Of the improvements, the $25,000 spent on the kitchen is conceded to be community property. The remaining $37,707 spent on the greenhouse came from a joint checking account in Nancy's and Kenneth's names. The district court found that Nancy and Kenneth had commingled both community and Kenneth's separate property funds in the joint account. At trial, Kenneth attempted to persuade the court that the source of the $37,707 was the proceeds from the sale of an "I Street" apartment building owned by Kenneth as his separate property. Soon after Kenneth's counsel began his attempts to trace the source of the money used to pay for the greenhouse improvements, the parties entered into a stipulation in order to speed up the process of documenting the many transactions involving the account. The following exchange occurred in connection with the stipulation:
MS. McDONALD [for Nancy]: Maybe I can stipulate that the I Street was in the name of the partnership. That none of the wives were in that. That when it was sold, the check was payable to Ken and Nancy Malmquist. And that from that account, the greenhouse was built.
Maybe we can stipulate to that and cut through a whole lot.
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MR. FREITAG [for Kenneth]: I have no objection, Your Honor. I will accept the stipulation, if I can restate it real quickly, and it will save a lot of time, that I Street property was Sparks Medical and Dental Investments partnership. That the payments that came out were made out to the husband and wife.
MS. McDONALD: They were made payable to Ken and Nancy Malmquist....
MR. FREITAG: And that they were deposited into this particular account.
MS. McDONALD: Yes.
MR. FREITAG: And from those deposits, the amount of $37,707.00 was spent on the greenhouse.
MS. McDONALD: Yes, I would stipulate.
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THE COURT: And that these sums, $37,707 and some $5,000 was paid out of the account, that a check also was deposited After this exchange, Kenneth's counsel discontinued his efforts to trace the transactions and proceeded to a different area of inquiry. The district court later held that, despite the stipulation, Kenneth had failed to establish that the funds used to purchase the greenhouse were Kenneth's separate property. Thus, the court classified the greenhouse as community property.
from the I Street property or partnership sale ... ?
At trial, Kenneth also testified regarding an equity credit line debt in the amount of $71,054.23. Kenneth testified that he incurred some of this debt on behalf of the community and some of the debt for his personal expenses after the couple's separation. The court ordered Kenneth to pay this entire debt. Finally, the district court classified Kenneth's entire medical practice as community property and awarded the practice entirely to Kenneth. The court valued the practice at $32,765, of which $25,000 was business good will; the remainder was accounts receivable, equipment and cash.
On appeal, Kenneth contends that the district court erred by: (1) failing to use the method announced in Moore, supra, in determining the parties' respective interests in the Wedekind road residence; (2) classifying the greenhouse improvement as community property in disregard of the stipulation quoted above; (3) ordering Kenneth to pay the entire equity credit line debt; (4) ordering Kenneth both to pay the maximum level of child support and to continue to pay the mortgage on the residence which was set aside for the childrens' benefit; and (5) failing to utilize the proper method of apportioning the business good will in his medical practice. We address each of Kenneth's contentions in sequence.
Both parties agree that the community and separate property interests are entitled to reimbursement to the extent that those interests actually contributed toward reduction of the principal on the mortgage for the Wedekind Road residence. Additionally, this court has recognized that the community is entitled to a pro rata ownership share in property which community funds have helped to acquire. Robison v. Robison, 100 Nev. 668, 670, 691 P.2d 451, 454 (1984). The question presented by Kenneth's appeal is precisely how to apportion the community and separate property shares in the appreciation of a separate property residence obtained with a separate property loan prior to marriage. Although we understand and respect the district court's approach to apportionment of these interests, we hereby adopt, with one modification, the mode of apportionment set forth in In re Marriage of Moore, 28 Cal.3d 366, 168 Cal.Rptr. 662, 618 P.2d 208 (1980).
Without a presumptive approach to this apportionment problem, persons similarly situated may receive unequal distributions in different cases. We have full confidence that the district judges of this state can reach equitable distributions in particular cases. No matter how fair the result in individual cases, however, the aggregate result becomes unfair when similarly situated persons receive disparate returns on their home investments. We further note that the presumptive approach for apportionment of home equity adopted here in no way abrogates the rule of just and equitable distribution, which we recently enunciated in McNabney v. McNabney, 105 Nev. 652, 782 P.2d 1291 (1989). The modified Moore formulae simply establish the community interest in a residence. McNabney, in turn, governs how the court may actually divide that community...
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