Sherry v. Sherry

• Decision Date: 23 May 1985
• Docket Number: No. 14838,14838
• Citation: 108 Idaho 645,701 P.2d 265
• Parties: Bill L. SHERRY, Plaintiff-Appellant-Cross Respondent, v. Sharon SHERRY, Defendant-Respondent-Cross Appellant.
• Court: Idaho Court of Appeals

Page 265

701 P.2d 265

108 Idaho 645

Bill L. SHERRY, Plaintiff-Appellant-Cross Respondent, v. Sharon SHERRY, Defendant-Respondent-Cross Appellant.

No. 14838.

Court of Appeals of Idaho.

May 23, 1985.

John Ohman and Christine Burdick, Cox & Ohman, Idaho Falls, for plaintiff-appellant-cross respondent.

Roger B. Wright, Voshell & Wright, Idaho Falls, for defendant-respondent-cross appellant.

WALTERS, Chief Judge.

This is an appeal and cross appeal by both the husband and the wife in a divorce action. They each seek review of the division and distribution of property made by the district court. The judge awarded to the wife a community interest in a family corporation, even though the husband's and wife's interests in the corporation had been sold prior to the divorce proceedings. The court also confirmed certain real property to the wife as her separate property and concluded that the community had no interest in that property. The husband appeals those decisions, and also seeks a reduction in the amount of child support he was ordered to pay. In her cross appeal, the wife contends the court improperly treated her pension fund as community property and improperly denied her request for attorney fees. We affirm in part, vacate in part, and remand.

Bill and Sharon Sherry were married in 1955. In 1973, the Sherrys incorporated a wood working business, called Rocky Mountain Mill Work, Inc. (Rocky Mountain). Bill Sherry was a full time employee and the chief executive officer of the corporation. In 1975, the Sherrys sold all the outstanding shares of Rocky Mountain's stock, which totaled 1000 shares, to another employee of Rocky Mountain. Thereafter, Mr. Sherry was not active in the corporation until 1977, when the Sherrys purchased 510 shares of stock, a controlling interest, in Rocky Mountain. Mr. Sherry was rehired by Rocky Mountain and again became the chief executive officer. Sometime in the fall of 1981, before he filed a divorce complaint, Mr. Sherry sold the 510 shares to Craig Sherry, the Sherrys' son and who also was an employee of Rocky Mountain. Bill Sherry continued as an employee and operating officer of the corporation. The separate real property at issue was inherited by Mrs. Sherry in 1976.

The contested findings of fact and conclusions of law were entered by the district court in an amended divorce decree filed in October, 1982. The judge awarded to Mrs. Sherry a community property interest in Rocky Mountain, even though the Sherrys no longer owned stock in that corporation. Without making specific findings regarding fraud, the court simply stated in a finding of fact that the "said sale or transfer is not to be recognized as against any community interest defendant may have in the corporation." In order that the wife might receive compensation for her interest in Rocky Mountain, the court awarded to her a one-half interest in fifty-one percent of the corporation's accounts receivable. In the event the accounts receivable were inadequate or were uncollected, Mrs. Sherry received a lien in the residence awarded to Mr. Sherry, which lien was "instituted presently." The judge also confirmed the wife's inherited property to her as separate property, and found no community interest in the property. Mr. Sherry was ordered to pay $300 per month child support to Mrs. Sherry for the two minor children in her custody.

A procedural issue, argued by both parties, concerns a motion made by the husband to reduce the amount of child support payments. After he filed his notice of appeal from the judgment entered in the district court (which included notice that he was appealing the child support award), the husband filed a motion with the district court to reduce the level of support payments. The motion was assigned to the magistrate division, but one magistrate judge declined, on jurisdictional grounds, to hear the motion. The district court then ordered the magistrate division to resolve the jurisdiction issue, and thereafter another magistrate judge considered the husband's motion. The new magistrate also declined to hear the case, concluding that the magistrate division lacked authority to modify the district court order while an appeal from that order was pending in the appellate courts. Thereafter, on stipulation of the parties, the magistrate acted as a special master to make findings of fact. Based on the magistrate's findings, the district court declined to modify the child support award. The husband contends the magistrate improperly declined to exercise jurisdiction to hear his motion to reduce the child support payments. He also insists the findings do not support the decision to maintain the level of support payments. Mrs. Sherry urges that the magistrate correctly decided not to exercise jurisdiction and that the findings amply support the decision to refuse modification of the support payments.

1. Distribution of the Rocky Mountain stock.

Whether a sale of a community asset is fraudulent as to one member of the community so as to be disregarded in a divorce proceeding involves a question of fact and a question of law. The factual determination concerns the events surrounding the sale of the property; the question of law is a determination whether the events surrounding the sale constitute a level of fraud sufficient to disregard the sale for purposes of a property distribution. Idaho Rule of Civil Procedure 52(a) obligates the trial court to "find the facts specially and state separately its conclusions of law thereon...." Our task in this case is to determine whether the findings of fact are supported by substantial evidence in the record and whether the findings of fact support the conclusions of law. See Fahrenwald v. LaBonte, 103 Idaho 751, 653 P.2d 806 (Ct.App.1982). In the event the findings of fact are lacking for purposes of appeal, we may disregard the inadequacy only if the record is clear and yields an obvious answer to the relevant factual question. See Pope v. Intermountain Gas Co., 103 Idaho 217, 646 P.2d 988 (1982).

As previously noted, the district court made no factual findings regarding the sale of the stock. Thus, we are faced with a bare conclusion that the sale should be disregarded for property distribution purposes. Nor does the record yield an obvious answer to the factual question. The record does not clearly indicate that the sale of stock was intended to prevent distribution of the shares in the divorce proceeding or that the value received for the stock was grossly inadequate. The little evidence presented regarding the stock's value was disputed. Because there are no findings of fact to support the court's conclusion, we must vacate the decision to disregard the sale of Rocky Mountain stock and remand for entry of factual determinations. See Donndelinger v. Donndelinger, 107 Idaho 431, 690 P.2d 366 (Ct.App.1984).

In the event the facts justify a conclusion that the stock sale should be set aside, Mrs. Sherry is entitled to an award of her share of the community interest in the Rocky Mountain stock. Absent a finding that the corporate status of the business should be disregarded, she is not entitled to an award of corporate assets. See Duke v. Duke, 605 S.W.2d 408 (Tex.Civ.App.1980) (corporate identity should not be disregarded in property distribution absent a showing of a sham, fraud, or injustice to the non-employee spouse). Instead, assuming a community interest in the Rocky Mountain shares, the wife is entitled to one-half of the shares or to one-half the value of the shares at the time of the divorce, see Simplot v. Simplot, 96 Idaho 239, 526 P.2d 844 (1974), when--as in this case--the court seeks to divide the community estate substantially equally. Donndelinger v. Donndelinger, supra. If the court makes an award for the value of the stock rather than dividing the stock between the parties, "it is essential that the trial court make an accurate determination of the market values of the [stock] prior to making an award." (Emphasis supplied). Simplot v. Simplot, 96 Idaho at 245, 526 P.2d at 850. Thus, on remand, the district court must determine the market value of the stock as of the date of the divorce. The court may award one-half of the community interest in the stock to the wife and may secure payment of the award with a lien on property awarded to the husband. However, where no facts are in evidence to justify disregarding the corporate entity, the district court may not make a direct award of a portion of the corporation's accounts receivable.

2. The separate real property.

We find no error in the court's conclusion that the wife's separate real property contained no component of community property. Generally, property acquired by either spouse during marriage is community property. I.C. § 32-906. An exception to the general rule is property acquired by bequest, devise, or descent. I.C. § 32-903. Neither party disputes the separate character of the residence inherited by Mrs. Sherry, but Mr. Sherry believes the property's value was enhanced through efforts of the community. When community labor or funds enhance the value of separate property, the amount of the enhancement is community property for which the community is entitled to reimbursement. Martsch v. Martsch, 103 Idaho 142, 645 P.2d 882 (1982). The measure of reimbursement is the increase in value of the property attributable to the community contribution, not the amount or value of the community contribution. Id. The party seeking reimbursement to the community carries the burden of proving that the community expenditures have enhanced the value of the separate property, and the amount of the enhancement. Suter v. Suter, 97 Idaho 461, 546 P.2d 1169 (1976).

After Mrs. Sherry acquired the property, it was used by her as rental property. Sherry family members and friends did some repair and remodeling work to make the dwelling rentable. Nonetheless, no evidence was presented at trial...