Marriage of Kunze

• Decision Date: 17 June 2004
• Docket Number: SC S49796,CA A112487,CC DO99-1014
• Citation: 92 P.3d 100,337 Or. 122
• Parties: In the Matter of the MARRIAGE OF David Henry KUNZE, Respondent on Review, and Nola Maxine Kunze, Petitioner on Review.
• Court: Oregon Supreme Court

92 P.3d 100

337 Or. 122

In the Matter of the MARRIAGE OF David Henry KUNZE, Respondent on Review, and

Nola Maxine Kunze, Petitioner on Review.

(CC DO99-1014, CA A112487, SC S49796).

Supreme Court of Oregon.

Argued and Submitted September 10, 2003.

Decided June 17, 2004.

Donald O. Tarlow, of Brown, Tarlow & Bridges, PC, Newberg, argued the cause and filed the briefs for petitioner on review.

William J. Howe, III, of Gervurtz, Menashe, Larson & Howe, PC, Portland, argued the cause for respondent on review. With him on the brief was Robin J. Wright.

Before, CARSON, Chief Justice, and DURHAM, De MUNIZ, BALMER, and KISTLER, JJ.¹

CARSON, C.J.

At issue in this marital dissolution action is whether a "just and proper" division of property under ORS 107.105(1)(f) (1997), set out post, requires the inclusion of assets that wife had acquired separately from husband because wife integrated those assets into the parties' joint financial affairs through commingling.² The trial court excluded certain assets from the property division after determining that wife had proved that husband had not contributed to them. The Court of Appeals modified the property division as to two of the disputed assets, concluding that, although wife's separate funds had purchased those assets, wife had failed to rebut the presumption of equal contribution by husband under ORS 107.105(1)(f) because wife had treated those assets as shared assets of the marital partnership. Kunze and Kunze, 181 Or.App. 606, 47 P.3d 489 (2002). We allowed wife's petition for review. For the reasons that follow, we modify the decision of the Court of Appeals in part and, as modified, affirm it.

I. FACTS AND PROCEDURAL BACKGROUND

In reviewing a decision of the Court of Appeals that is an appeal from a judgment in a case constituting a suit in equity under common law, ORS 19.415(3), this court may review de novo or may limit its review to questions of law. ORS 19.415(4); see also Massee and Massee, 328 Or. 195, 197, 970 P.2d 1203 (1999) (stating same under former ORS 19.125(4) (1995), renumbered as ORS 19.415(4) (1997)). Because our resolution of this case is fact-dependent, and because we rely upon equitable considerations that the Court of Appeals did not discuss, we elect to review the record de novo. See State ex rel SOSCF v. Stillman, 333 Or. 135, 138, 36 P.3d 490 (2001) (stating same approach under analogous circumstances).

Husband and wife married in 1980. At the time of the marriage, wife was 29 years old and had a master's degree in speech pathology. Husband was 22 years old and had attended some college, but did not have a college degree. Wife brought into the marriage two contiguous parcels of real property in Portland,³ each of which included a residence (the "Germantown Road property" and the "Schoolhouse property"). Wife also brought into the marriage 400 acres of farm property in North Dakota. Husband had no assets of significant value when the parties married.

During the initial years of the marriage, both parties worked full time, although wife earned considerably more than husband did. The parties lived at the Germantown Road property and rented out the Schoolhouse property. Although wife did not place husband's name on the titles to either of those properties, wife deposited the rental income from the Schoolhouse property into the parties' joint bank account, and the parties paid expenses related to both properties from their joint account.

In 1983, wife's aunt, Johnson, died. Johnson, a California resident, and wife had enjoyed a close relationship over the years. In her will, Johnson devised to wife, among other things, a duplex residence (the "California duplex") and a commercial property (the "National City property"), both located in California. Johnson also named wife as a copersonal representative of her estate. Because Johnson's estate was complex and largely illiquid, the parties moved to California in 1984 to allow wife to perform more easily her administrative duties related to the estate. During the year that the parties resided in California, wife received unemployment compensation for two months and then worked on a part-time basis, while she also carried out her responsibilities for the estate. Husband worked for some of that year, and the parties additionally relied upon wife's savings and rental income from both the Germantown Road property and the Schoolhouse property to pay family expenses.

In 1985, wife received the California duplex and the National City property in a partial distribution from Johnson's estate. Wife sold the California duplex that year for $450,000. Wife used the buyer's cash down payment of $125,000 to pay off an encumbrance against the property and to pay costs associated with its sale. Wife received the $325,000 balance of the sale price in a promissory note and trust deed that she held in her name alone. From 1985 to 1992, wife received monthly payments on that note, which she regularly deposited into the parties' joint bank account.

At the time of its distribution to wife in 1985, the National City property was subject to a triple-net lease to a commercial tenant that expired in December 1999. The lease provided automatic rent increases at five-year intervals, with the rent set at $1,300 per month in 1985 and at $2,551 per month by 1999. Because the lease placed responsibility for the property maintenance, insurance, and taxes with the tenant, the property required little attention from the parties. Although wife never deeded an interest in the National City property to husband, she regularly deposited the lease payments from that property into the parties' joint bank account.

In 1985, the parties moved from California to North Dakota to allow husband to pursue a bachelor's degree in construction management. The parties used funds that wife had received from Johnson's estate to purchase a residence in North Dakota jointly. During the next five years, husband was a student and earned no employment income, but he made improvements on the family residence during weekends and school holidays. Wife worked full time and also performed all duties relating to the two Oregon rental properties. The parties paid family expenses and financed husband's education with wife's earnings, the note payments from sale of the California duplex, the lease payments from the National City property, and the rental income from the Oregon properties.

In August 1990, the parties' daughter was born. Shortly thereafter, the parties moved back to Oregon to live. The parties planned that wife would remain at home with their child and that husband would find work in the construction field. After returning to Oregon, husband completed his graduation requirements, and, in spring 1991, he obtained his bachelor's degree. From 1991 to 1993, husband worked with his father and brother in a fence-building business, earning $11,865 in 1991, $5,215 in 1992, and $4,300 in 1993. From the time that he left that business in 1993 until the time of trial in August 2000, husband did not earn any further employment income.

After they had returned to Oregon, the parties sold their residence in North Dakota. In 1991, the parties used those proceeds as a down payment to purchase an undeveloped parcel of property near Newberg, upon which they had a new family home built (the "Calkins Lane property"). In 1992, the balance of the note from the sale of the California duplex, approximately $315,000, was paid to wife in full. Approximately $170,000 of those proceeds was used to purchase a fourplex residential property in Beaverton (the "Chaps Court property"), to which the parties jointly held title in tenancy by the entirety. The remainder of the proceeds was used to pay capital gains taxes, to pay off the encumbrance on the Germantown Road and Schoolhouse properties, and to upgrade the home that the parties were having built on the Calkins Lane property. In 1992, the parties also started a small cattle operation at the Calkins Lane property to retain that property's tax deferral for farm use.⁴

In December 1993, husband was injured seriously when he fell from a ladder while performing maintenance work on the Schoolhouse property. For the next 18 months, wife alone cared for the parties' child, attended to husband, and managed the Calkins Lane and investment properties. In 1995, after husband had recovered, the parties purchased three lots⁵ in Newberg with the intent that husband would build homes on those lots to gain experience in construction management. To secure financing for the purchase of one of those lots, wife deeded to husband a joint ownership interest in the Germantown Road property. Rather than have husband build the homes himself, the parties ultimately hired a general contractor to build homes on two of the lots, and the parties sold the third lot without making improvements. The parties lost money on the overall project.

In 1997, wife began working outside the home on a part-time basis. That year, wife also sold the Schoolhouse property. The proceeds from the sale of that property were deposited into a joint account (the "PIMCO account") and were used in part for family expenses.

In 1999, husband filed for dissolution of the marriage. At the time of trial in 2000, wife was 49 years old and was earning approximately $38,000 per year as a school speech pathologist. She resided at the Calkins Lane property with the parties' daughter. Husband was 42 years old and was unemployed. He lived in one of the fourplex units at the Chaps Court property. The parties stipulated that wife would have custody of the parties' then-10-year-old daughter, subject to husband's parenting time, and the trial court set husband's child support obligation at $350 per month. Neither party sought spousal support.

At trial, the primary issue was the appropriate division of the marital property. The testimony at trial revealed that, throughout the...