Marriage of Schwien, Matter of

• Decision Date: 09 October 1992
• Docket Number: No. 67098,67098
• Citation: 839 P.2d 541,17 Kan.App.2d 498
• Parties: In the Matter of the MARRIAGE OF Ellen D. SCHWIEN, Appellee, and James W. Schwien, Appellant.
• Court: Kansas Court of Appeals

Page 541

839 P.2d 541

17 Kan.App.2d 498

In the Matter of the MARRIAGE OF Ellen D. SCHWIEN, Appellee and James W. Schwien, Appellant.

No. 67098.

Court of Appeals of Kansas.

Oct. 9, 1992.

Syllabus by the Court

1. A trial court is not required to credit either spouse with the entry value of property brought into the marriage or acquired by gift during the marriage before the remaining net worth of the parties is divided.

2. Unless and until guidelines are adopted by the Kansas Supreme Court of required application throughout the state it is not an abuse of discretion for a trial court to refuse to restore nonmarital property to either spouse or to give direct credit for gifts acquired during the term of the marriage.

3. The trial court has discretion to value the marital estate at the time of separation, at the time the divorce petition is filed, at the time of the divorce hearing, or as the facts in each case dictate. When the time of valuation becomes an issue in a contested case, the trial court at the pretrial conference should set the valuation date.

4. Trial court findings concerning the value of property in excess of the evidence offered by either party and ordering a cash payment with no substantial evidentiary basis to do so constitute an abuse of discretion which is reversible error.

5. When findings are not made by the trial court showing the Kansas Child Support Guidelines established by Kansas Supreme Court Administrative Order No. 75 (1991 Kan.Ct.R.Annot. 63) have been followed, the award of child support must be reversed. In re Marriage of Schletzbaum, 15 Kan.App.2d 504, Syl. p 4, 809 P.2d 1251 (1991).

Jack N. Stewart of Hampton, Royce, Engleman & Nelson, Salina, for appellant.

Michael S. Holland, Russell, for appellee.

Before LARSON, P.J., and ELLIOTT and PIERRON, JJ.

LARSON, Presiding Judge:

James W. Schwien appeals the judgment of the trial court in this divorce action, contending (1) abuse of discretion in not allowing credit to each party for the value of nonmarital property brought into the marriage or received by gift; (2) abuse of discretion in the division of the parties' marital property; and (3) abuse of discretion in ordering him to pay $800 per month child support.

The issues of interest in this case involve an attempt to require credit to be given to each party for the value of nonmarital property brought into the marriage and a ruling as to when assets must be valued, but it is necessary for our decision to set forth in detail the facts related to this failed marriage.

The marriage of Ellen and James Schwien in 1978 united a young man starting a farming business with a school teacher. The marriage resulted in the birth of two children, J.W.S. and R.C.S., currently ages 10 and 8.

At the time of the marriage, James owned a remainder interest in 240 acres of rural real estate, livestock, equipment, and the right to occupy a residence rent-free for 10 years resulting from the repair and improvement of the property. Ellen had $2,000 in a certificate of deposit and a bond.

James worked for his father and commenced farming independently in 1980, utilizing his father's fuel and equipment for three years during which time Ellen worked part-time and assisted James.

In November of 1983, James and Ellen entered into an agreement with James' father, mother, brother, and sister-in-law that created Schwien Farms Partnership of which James and Ellen each owned a one-sixth interest. Ellen assisted with the partnership bookkeeping. James and Ellen rented land and farmed independently of the partnership as well.

Unfortunately, the marital relationship soured, and on July 11, 1989, Ellen filed for divorce. Ellen moved from the farm to a residence in Russell and worked when she could as a paraprofessional in the school system.

The trial was held on July 23, 1990. James and Ellen each presented evidence concerning the values of their one-third interest in Schwien Farms Partnership, assets and liabilities of their independent farming operation, household goods, vehicles, stocks, commodities, investments, and bank accounts. James valued all marital property as of the date the parties separated. Ellen's evidence provided a partnership valuation as of December 31, 1989, and the remaining marital estate as of the date of trial.

The parties agreed with the appraisal of Don Haberer that the Schwien Farms Partnership machinery had a value of $200,275, but as to most other assets and liabilities, the testimony and contentions of the parties were divergent.

Ellen testified that James' remainder interest in the 240 acres of rural real estate was worth $24,800. She claimed no interest in the property and proposed it be set aside to James in the property division. James presented no evidence as to the value of his remainder interest in this property.

James testified that prior to the marriage he owned livestock and equipment worth $10,100; that the prepaid lease under which the couple could live rent free for 10 years was valued at $15,195; that during the marriage he and Ellen had received cash gifts from his parents totalling $3,000; and both had received gifts of fuel and use of equipment valued at $26,637 from his parents during the years 1980 through 1983 to start their separate farming operation. The trial court allowed this testimony over Ellen's objection and James requested credit in the amount of $54,932 for this nonmarital property in the division of assets.

Ellen did not request credit be given to her for premarital assets in the property division.

Testimony showed Ellen received stock, money market accounts, investments, and bank accounts worth approximately $30,000 on July 11, 1989. Ellen used $7,852 to purchase household items necessary for the Russell home and $503 per month to pay monthly expenses. The assets remaining were worth $16,214 at the time of trial. Ellen had received no temporary maintenance, but James was paying her $800 per month child support at the time of trial.

James owned livestock at the time of separation, which he opined was worth $49,550 while Ellen's testimony showed a value of $52,450. He testified his shop equipment was worth $615 while she claimed it to be worth $3,415. Likewise, he claimed livestock equipment valued at $350, which she valued at $750.

Both agreed that James individually owned grain on hand worth approximately $3,100. Ellen included on an exhibit, which was admitted without objection, hay owned by the parties valued at $12,000. James now claims on appeal that this hay does not exist.

Testimony showed James held patronage refunds worth approximately $4,100, that he had a pickup worth $2,000, cycles worth $500, and that Ellen had a 1983 Chevrolet Caprice in her possession worth $3,500. The parties disagreed concerning the value of household items. James claimed they were worth $6,800 of which Ellen was claimed to have taken $5,600 in value. Ellen claimed the items were worth $3,000 and that they had been evenly divided.

The largest bone of contention was over the value of a one-third interest in the Schwien Farms Partnership. Ellen's partnership valuation expert was a certified public accountant who opined the one-third interest had a $77,201 value by capitalizing the partnership's assumed cash flow. The value was computed by taking an average cash flow of $89,437 before debt reduction, deducting an assumed and fictitious salary of $24,000 (although evidence showed the partnership paid no salaries and the annual withdrawal to all partners was in the area of $60,000 annually) and capitalizing $65,437 over seven years at 11.5% interest. The resulting figure was increased by the year end cash balance and value of the co-operative patronage accounts and then reduced by the indebtedness of the partnership plus a further reduction for deferred federal and state income tax because the equipment had been depreciated substantially below its market value.

The validity of this valuation is questionable because it is based on an assumed salary which, if lowered, results in a higher valuation and, if increased, results in a lower valuation. There was no substantial competent evidence as to the basis for the usage of the assumed salary.

The valuation of Schwien Farms Partnership was further complicated because of the failure of its 1989 wheat crop. The partnership had followed a practice of selling the previous years' crops in a subsequent year. It was paid approximately $66,000 in crop insurance and government deficiency payments in 1989, but the partnership was not required to report these amounts for 1989 income tax purposes because this represented what would normally have been 1990 crop sales.

James' certified public accountant valued the Schwien Farms Partnership as of the date of separation of the parties on July 11, 1989. He utilized the liquidated value of the assets. He used $200,275 as the value of the farm equipment, assumed a disposition cost of 6%, added bank accounts of $13,832, grain on hand of $56,914, and 50% of the patronage accounts, or $10,967, for total assets of $269,971. From this amount, he reduced the notes payable of $74,000, accounts payable of $18,079, and accrued interest expense of $8,266, for total partnership liabilities of $100,345. This resulted in a net worth of the partnership of $169,626, of which James' and Ellen's one-third share was testified to be $56,542 before application of deferred tax liability on appreciation, which was computed to be $21,385, for a net realizable value of the one-third interest in the partnership of $35,157.

Cross-examination of James showed that he had deposited almost $40,000 in his personal account in the first six months of 1990. This appeared to have come from distributions from Schwien Farms Partnership and the sale of his separately held assets. He further testified he had on hand 8,511 bushels of wheat at the time of trial as a result of the 1990 harvest, and...