Smith v. Smith

• Decision Date: 05 October 2020
• Docket Number: Docket No. 46832
• Court: Idaho Supreme Court
• Parties: Charlie M. SMITH, Petitioner-Respondent, v. Ballard SMITH, Respondent-Appellant.

167 Idaho 568

473 P.3d 837

Charlie M. SMITH, Petitioner-Respondent,

v.Ballard SMITH, Respondent-Appellant.

Docket No. 46832

Supreme Court of Idaho, Boise, August 2020 Term.

Opinion Filed: October 5, 2020

Derek A. Pica, PLLC, Boise, for appellant. Derek A. Pica argued.

Cosho Humphrey, LLP, Boise, for respondent. Stanley Welsh argued.

BRODY, Justice.

This appeal involves a challenge to subject matter jurisdiction in connection with a petition to modify an order in a divorce proceeding. In 2005, Ballard Smith (Husband) and Charlie Smith (Wife) stipulated to a final divorce order (2005 Order) that required the parties to sell real property located in Salt Lake City, Utah (Salt Lake Property) and allocate the net proceeds to both parties on an equal basis. In subsequent orders, Husband was tasked with marketing and selling the Salt Lake Property. Without Wife's knowledge, Husband moved the Salt Lake Property in and out of various business entities and unilaterally sold a six-acre portion of the Salt Lake Property. After the majority of the Salt Lake Property remained unsold for nearly a decade, Wife petitioned the magistrate court to modify its prior order, requesting that the magistrate court: (1) direct that the Salt Lake Property be appraised and that Husband pay her one-half the appraised value, or (2) in the alternative, appoint a receiver to sell the Salt Lake Property and divide the net proceeds equally. Husband opposed the petition, in large part, by arguing that the magistrate court never had subject matter jurisdiction over the Salt Lake Property when it entered its original final divorce order. The magistrate court granted Wife's petition to modify and appointed a receiver to handle all matters relating to the Salt Lake Property. Additionally, the magistrate court ordered Husband to pay Wife one-half of the net proceeds from the sale of the six-acre portion of the Salt Lake Property and awarded Wife attorney fees pursuant to Idaho Code section 12-121. Husband appealed to the district court. The district court affirmed the magistrate court and awarded Wife attorney fees for her intermediate appeal. Husband timely appealed to this Court. We affirm the district court's decision.

I. FACTUAL AND PROCEDURAL BACKGROUND

Husband and Wife were married in 1988. In 2003, after fifteen years of marriage, the parties divorced. Now, seventeen years after their divorce, the parties continue to dispute the sale and disposition of the Salt Lake Property. The Salt Lake Property comprises 54 acres of industrial land upon which two radio towers are located. Prior to the parties' marriage, Husband owned stock in a California corporation, Sun Mountain Broadcasting, Inc. (SMB). SMB acquired title to the Salt Lake Property in 1985.

Acting as the sole member of SMB's board of directors, Husband dissolved SMB on January 2, 1996. The certification of dissolution filed with the California Secretary of State provided that the affairs of SMB had been completely wound up. The certificate of dissolution further provided that "[SMB's] known debts and liabilities have actually been paid," and "[SMB's] known assets have been distributed to the persons entitled thereto."

The parties stipulated to a final order dividing their assets and liabilities in 2005.

According to the 2005 Order's property and debt schedule, the Salt Lake Property was to be "sold as soon as reasonably possible" and the net proceeds of the sale were to be split equally between the parties. The property and debt schedule also identified the Salt Lake Property as community property, and described the property as owned by B&C Realty, LLC (B&C). B&C is an Idaho limited liability company that was organized by the parties to hold real property, including the Salt Lake Property, on December 27, 1995. Husband and Wife were the sole members of B&C. The 2005 Order was not appealed.

Although B&C was administratively dissolved on March 11, 2005, it was reinstated on November 17, 2006. Upon reinstatement, B&C's annual report removed Wife's name as a member and added Husband's new wife, Loree R. Smith, as a member.

Subsequent to the 2005 Order, it was discovered that SMB still held recorded title to the Salt Lake Property. The magistrate court held a hearing on the matter in 2007 to address the SMB stock as an omitted asset that had not been divided in the 2005 Order. The magistrate court entered an order (2007 Order) addressing the omission of the SMB stock. The 2007 Order, in accordance with Husband and Wife's stipulation and agreement, required Husband—the only SMB shareholder—to deed the Salt Lake Property from SMB to B&C so that the property could be sold and the proceeds could be equally divided between the parties:

2. SUN MOUNTAIN BROADCASTING, INC.: The parties stipulate and agree that [SMB] is an omitted asset which was not divided pursuant to this [c]ourt's June 28, 2005 Final Order. With respect to this omitted asset, the parties agree that it should be equally divided. Further, the parties stipulate and agree as follows:

a. [Husband] shall cause the [Salt Lake Property], currently deeded in the name of [SMB], to be transferred to [B&C].

b. [B&C] shall set up an account in which all rents due and owing on the Sale Lake [P]roperty shall be deposited.

c. [B&C] is to be dissolved, all of its assets sold and the proceeds from any such sale shall be split equally between [Wife] and [Husband].

d. [B&C] shall use the rents deposited into the [B&C] account to pay all property taxes due and owing on the Salt Lake [P]roperty. If the rents deposited into the [B&C] account are not sufficient to pay the property taxes, each party shall be responsible and pay for one-half of said deficiency.

e. [Wife] shall be responsible for "spearheading" the sale of the Salt Lake [P]roperty and the dissolution of [B&C]. [Wife] shall obtain an appraisal for the purpose of selling the Salt Lake [P]roperty and negotiate the lease with Clear Channel.

The 2007 Order was not appealed.

About nine months after the 2007 Order was entered, Husband executed a warranty deed transferring 48 acres of the Salt Lake Property from SMB to B&C. Approximately six acres of the Salt Lake Property remained with SMB. Husband testified that the six acres were environmentally contaminated. Because buyers were concerned about liability associated with the contamination, he deeded the non-contaminated portion of the Salt Lake Property to B&C to make the property more marketable.

In 2008, a motion for contempt brought the parties back before the magistrate court regarding the Salt Lake Property. The magistrate court entered a new order (2008 Order) modifying the 2007 Order, placing Husband in charge of marketing, selling, and leasing the Salt Lake Property. The relevant portion of the 2008 Order provided:

3. That the [2007 Order] filed on May 14, 2007 shall be modified as follows:

a. [Husband] shall be the sole person in charge of handling all matters pertaining to the marketing, sale[,] and leasing of the real property located in Salt Lake which was formerly in the name of [SMB] hereinafter [Salt Lake Property].

The 2008 Order also required Husband to provide Wife with information about new real estate listing agreements and any substantive expenses relating to the sale of the Salt Lake Property. The 2008 Order was not appealed.

Husband subsequently violated both the 2007 Order and the 2008 Order. On May 19, 2011, in violation of the 2007 Order, Husband executed a warranty deed conveying all 54 acres of the Salt Lake Property to S&R Realty, LLC (S&R Idaho), an Idaho limited liability company. Husband later dissolved S&R Idaho and formed S&R Realty, LLC (S&R Utah), a Utah limited liability company. On August 30, 2012, Husband transferred all 54 acres of the Salt Lake Property from S&R Idaho to S&R Utah. Husband never discussed transferring the Salt Lake Property from B&C to S&R Idaho or S&R Utah with Wife.

On March 14, 2013, without notifying Wife, Husband recorded five instruments in Salt Lake County that impacted the ownership of the Salt Lake Property. The magistrate court's findings of fact summarized the five instruments as follows:

a. A deed regarding all or a portion of what had been omitted in the first deed transferring the [Salt Lake] Property to B&C in 2007. This deed transferred six acres to BZW Investments, L.P., a Utah Limited Partnership [(BZW)].

i. [Husband] made this transfer, retained 100% of the net proceeds, and this transaction does not reflect the existence of any other [SMB] shareholders. A broker, Charlie Davis (hereinafter, "Mr. Davis") was paid $8,000.00 as a sales commission.

ii. No other individuals were notified of [Husband's] intent to sell the six acres. None of the sale proceeds were provided to any third parties.

b. Two deeds that accomplished a lot line adjustment. The first Special Warranty Deed, executed by BZW in favor of BZW, joined the [six] acres [Husband] had transferred to BZW with an adjoining lot already owned by BZW. The other deed, signed by [Husband], was a Special Warranty Deed executed by S&R [Utah] in favor of S&R [Utah].

c. Another deed of trust in favor of S&R [Utah], encumbered the BZW property and secured a $149,250.00 note.

d. The fifth deed of trust was executed in favor of Mr. Davis and encumbered the remaining 48 acres held in S&R [Utah].

Essentially, Husband unilaterally sold six acres of the Salt Lake Property, the same six acres he previously stated were contaminated, to BZW for $224,250. Husband used $106,923.23 of the BZW sale proceeds to pay delinquent property taxes on the Salt Lake Property for the years 2008 through 2012. Wife did not receive any part of the BZW sale proceeds.

The Salt Lake Property was leased to Clear Channel, generating a monthly income since at least 2006. Despite the provision in the 2007 Order requiring the Salt Lake Property's rental income be deposited into B&C's designated account, no rental income has ever been deposited in that account. Husband reported the Salt...