Schwartz v. Harris

• Decision Date: 09 July 2013
• Docket Number: No. DA 12–0381.,DA 12–0381.
• Citation: 308 P.3d 949,370 Mont. 294
• Parties: In re the Marriage of Jean SCHWARTZ, Petitioner and Appellee, v. Gregory Ely HARRIS, Respondent and Appellant.
• Court: Montana Supreme Court

370 Mont. 294

308 P.3d 949

In re the Marriage of Jean SCHWARTZ, Petitioner and Appellee,

v.Gregory Ely HARRIS, Respondent and Appellant.

No. DA 12–0381.

Supreme Court of Montana.

Submitted on Briefs March 27, 2013.

Decided May 30, 2013.

Rehearing Denied July 9, 2013.

For Appellant: David F. Stufft; Attorney at Law; Kalispell, Montana.

For Appellee: Katherine P. Maxwell; Maxwell Law, PLLC; Kalispell, Montana.

Justice JIM RICE delivered the Opinion of the Court.

[370 Mont. 295]¶ 1 The marriage of Gregory Harris (Greg) and Jean Schwartz, formerly known as Jean Harris (Jean), was dissolved by decree of the Eleventh Judicial District Court, which also divided the marital estate. On appeal, Greg challenges various aspects of the property division, including the selection of valuation dates, the identification and valuation of marital property, the division of assets, and the adjustments made in making the division, including an approximately $1.259 million equalization amount awarded to Jean. We affirm in part, reverse in part, and remand for further proceedings.

¶ 2 We restate and address the following issues: ¹

¶ 3 1. Did the District Court err by valuing the estate as of 2009 instead of 2002, when the parties separated?

¶ 4 2. Did the District Court err in its valuation of the Grizzly Security businesses?

¶ 5 3. Did the District Court err by failing to award Greg an offset credit for the $400, 000 paid to Jean between 2002 and 2009?

¶ 6 4. Did the District Court err by ordering that Greg pay a $1.259 million equalization payment to Jean without providing a method of payment?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 7 Greg and Jean were married in October 1988. Greg has ownership interests in Grizzly Security Armored Express, Inc. and related businesses, including Grizzly Security Alarms, Inc. and Grizzly Security ShredEx, Inc. (collectively “Grizzly Security businesses”). Greg is the sole owner of Grizzly Security Armored Express and owns one-half oF grizzlY securitY shrEdex and one-third oF grizzlY securitY alarms. the Grizzly Security businesses are formed as subchapter S corporations and all of Greg's income from the businesses is directly taxable to Greg. In 1995, Greg sustained a head injury when he was assaulted while on work duty. This event has caused Greg memory loss and severe headaches. Jean and Greg have four children, three of whom are adults.

¶ 8 In June 2002, Jean filed for dissolution of the marriage. She entered into a contract to purchase a home later that year, and acquired the home in March 2003. Greg agreed to make the mortgage, tax, and insurance payments on Jean's behalf, and the mortgage was placed in his name alone. In December 2002, the District Court issued its Findings of Fact, Conclusions of Law and Order (Temporary Support Order). The Temporary Support Order required Greg to pay $2,000 to Jean per month in temporary family support in addition to paying for Jean's vehicle expenses, medical insurance for Jean and the children, and the children's extracurricular and medical costs. The Temporary Support Order did not reference Greg's commitment to pay the mortgage payments and costs on Jean's home.

¶ 9 A trial was ultimately conducted on September 20 and 21, 2010, and February 22, 2011. Jean testified that she participated in operating the Grizzly Security businesses during the marriage. She also stated that she and Greg had lived apart since 2002 and that Greg pays the mortgage on her home. Jean testified that Greg managed Jean's rental properties and provided Jean with other financial support, that she provided non-monetary support to Greg, and the parties had almost daily phone contact. She explained that she and Greg traveled together to the children's sporting events, vacationed together, and gave the children joint Christmas and birthday gifts.

¶ 10 David Smith, one of Jean's experts, presented a complete appraisal for the Grizzly Security businesses as of December 31, 2009, using an income-based approach. Mr. Smith opined that Greg's share of the fair market value of the businesses was $2,584,700. James Kelley, a real estate expert, presented appraisal values for the parties' real property based on appraisals conducted in November 2009 and April 2010.

[370 Mont. 297]¶ 11 Greg testified that the Grizzly Security businesses have become less viable since the early 2000s and were losing some of its contracts. Greg also explained details about his personal and business debt and his inability to secure additional financing. Greg's accountant testified and the District Court admitted Greg's personal tax returns from 2001 through 2008 and tax returns for Grizzly Security from 2001 through 2009. Greg's business valuation expert, Todd Gardner, presented appraisals for the personal property of the Grizzly Security businesses for 2002 and 2010 using an asset appraisal method. Mr. Gardner said the appraisal value for the personal property of Grizzly Security Armored Express was $48,250 for 2002. Mr. Gardner testified that the total value of the personal property for Grizzly Security Armored Express, Grizzly Security Alarms, and Grizzly Security ShredEx in 2010 was $376,945.

¶ 12 The District Court entered the Findings of Fact, Conclusions of Law and Decree (Decree) on March 8, 2012. The Decree divided the marital assets, which included the parties' real property and the Grizzly Security businesses. The District Court used the 2009 income-based appraisal for the Grizzly Security businesses presented by Mr. Smith. The District Court granted the business interests to Greg and awarded Jean an equalization payment in the amount of $1,259,903. With regard to the actual distribution of assets, the District Court's Decree simply stated “[t]he parties shall cooperate and assist in the transfer of titles and possession necessary to accomplish the distribution set forth herein.”

¶ 13 The day after the Decree was entered, Jean attempted to execute on the judgment against Greg. The clerk of court initially entered the writ of execution but later voided it because Jean had not waited 14 days as required by M.R. Civ. P. 62(a). Greg moved the District Court for a stay of judgment pending appeal, asserting by reference to bank letters declining to offer financing that he was unable to finance the equalization payment he was ordered to pay to Jean. No further writs of execution were issued before this appeal.

¶ 14 Greg filed a notice of appeal to this Court and also filed for bankruptcy in the United States Bankruptcy Court for the District of Montana. On November 15, 2012, the United States Bankruptcy Court entered an order modifying the automatic stay and permitting the parties to seek final determination of this appeal.

STANDARD OF REVIEW

¶ 15 “We review family law cases for valuation and allocation of marital property to determine whether the District Court's findings are clearly erroneous.” In re Marriage of Baide, 2004 MT 260, ¶ 7, 323 Mont. 104, 99 P.3d 178. A finding is clearly erroneous if it is not supported by substantial evidence, if the district court misapprehended the effect of the evidence, or if our review of the record convinces us that the district court made a mistake. In re Marriage of Williams, 2009 MT 282, ¶ 14, 352 Mont. 198, 217 P.3d 67( Williams I ). If the findings are not clearly erroneous, we will affirm the division absent an abuse of discretion. Williams I, ¶ 14. “A district court abuses its discretion if it acts arbitrarily without conscientious judgment or exceeds the bounds of reason, resulting in substantial injustice.” In re Marriage of Alexander, 2011 MT 1, ¶ 11, 359 Mont. 89, 246 P.3d 712;see also Williams I, ¶ 14. We review a district court's conclusions of law for correctness. Williams I, ¶ 14.

DISCUSSION

¶ 16 1. Did the District Court err by valuing the estate as of 2009 instead of 2002, when the parties separated?

¶ 17 Greg argues that the District Court should have valued the marital property as of 2002, when the parties separated, rather than 2009. He notes that Jean filed the petition for dissolution in 2002, and both parties agreed that the marriage was irretrievably broken at that time. Greg asserts that he and Jean separated their assets and debts in 2002, and have since filed separate tax returns, lived in separate homes, and made separate financial decisions. Jean answers that the District Court did not err in using the 2009 valuation date because she and Greg “continued to act as a married couple in many respects both publicly and privately.” Jean explains that Greg continued to manage Jean's rental properties, provided Jean with financial support, and that the parties continued to spend time together and had almost daily phone contact.

¶ 18 As a general rule, “the value of the marital estate should be determined at or near the time of dissolution.” In re Marriage of Swanson, 220 Mont. 490, 495, 716 P.2d 219, 222 (1986). “Generally, valuing the property near the time of dissolution results in equitable apportionment, but unique circumstances may call for valuation at a different time.” Alexander, ¶ 16 (citing In re Marriage of Geror, 2000 MT 60, ¶ 14, 299 Mont. 33, 996 P.2d 381). However, we have stated that equitable apportionment is more important than “designating the moment” at which the court should value marital property. Alexander, ¶ 18. Further, we have concluded that “the date of separation can be used as the appraisal date when one spouse accrued significant wealth and the other accrued significant debts after the parties had separated but before formal dissolution.” In re Marriage of Williams, 2011 MT 63, ¶ 26, 360 Mont. 46, 250 P.3d 850( Williams II ). We have affirmed a district court's use of the date of separation where the parties “began managing their finances separately and eventually lived separately” from that time. In re Marriage of Thorner, 2008 MT 270, ¶ 37, 345 Mont. 194, 190 P.3d 1063;see also In re Marriage of Tipton, 2010...