Smith v. Smith

• Decision Date: 08 December 1998
• Docket Number: No. WD,WD
• Citation: 985 S.W.2d 836
• Parties: Marie SMITH, Appellant, v. Bill SMITH, Respondent. 53468.
• Court: Missouri Court of Appeals

Page 836

985 S.W.2d 836

Marie SMITH, Appellant, v. Bill SMITH, Respondent.

No. WD 53468.

Missouri Court of Appeals Western District.

Dec. 8, 1998.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Feb. 2, 1999.

Application for Transfer Denied March 23, 1999.

Barton S. Blond, Jill C. Allison, Kansas City, Missouri, for appellant.

James T. Cook, Kansas City, Missouri, for respondent.

Before BRECKENRIDGE, P.J., LOWENSTEIN and SPINDEN, JJ.

BRECKENRIDGE, J.

Marie Smith (Wife) appeals from the trial court's order dissolving her marriage to Bill Smith (Husband). On appeal, Wife contends that the trial court erred in four respects. First, Wife contends that the trial court erred by overruling her objection to the master's first amended report because the master failed to use the date of trial as the valuation date for the marital property and the property's value had changed significantly by the time of trial. Second, Wife alleges that the trial court erred by failing to consider the economic circumstances of the parties at the time the division of property was to become effective because the parties' economic circumstances had changed significantly since the hearings before the master. As her third point on appeal, Wife premises error on the trial court's decision to overrule her objection to the master's first amended report because Husband failed to meet his burden of proving that a condominium was his separate property. Finally, Wife contends that the trial court erred by finding that a $77,300 portion of a $101,751.18 debt owed to Husband and Wife by their business was Husband's non-marital property.

The judgment of the trial court is affirmed in part and reversed in part and remanded.

Factual and Procedural Background

Husband and Wife were married on September 8, 1972. At the time they were married, Husband was employed at Oppenheimer Industries and Wife was employed by Hallmark Cards, Inc. During the parties' spare time, they sold antiques at a booth at a flea market in the Waldo neighborhood of Kansas City, Missouri. In 1973, Husband and Wife started a sole proprietorship, called The Smith Company, to sell gifts, decorative items and antiques. ¹ In 1982, Husband and Wife purchased a building in their individual names and rented it to The Smith Company. As the business grew, the parties determined to put all of their efforts into The Smith Company. As a result, Wife quit her job with Hallmark in 1982 to devote her full time efforts and work to The Smith Company. Wife invested all of her profit sharing and pension benefits from Hallmark into The Smith Company. Husband quit his job at Oppenheimer Industries in 1989 to work full-time with The Smith Company.

During the operation of The Smith Company, Husband was primarily responsible for the financial aspects of the business while Wife worked as a designer and decorator and was responsible for developing a fairly exclusive and prestigious client base. By all accounts, The Smith Company became a highly successful and respected antique dealer in the Kansas City area with numerous wealthy clients. Shortly after Husband quit his job at Oppenheimer Industries and began working full-time at The Smith Company, the parties began experiencing marital difficulties. After nearly twenty years of marriage the parties separated on March 7, 1991 when Wife filed her petition for dissolution of marriage. No children were born of the marriage.

In January of 1992, Wife moved out of the marital residence, left her employment at The Smith Company and resigned as an officer and director of the parties' business. At this time, Husband took sole control and possession of The Smith Company and barred Wife from entering the premises. Wife used $20,000 in funds she withdrew from The Smith Company's bank account to open her own account and to finance the development of her new business, MLB Designs, Inc., which she formed in February of 1992.

In May of 1992, the trial court appointed a master pursuant to Rule 86.01 to examine the issues of the case and make a report to the trial court recommending disposition of these issues. Among the issues the master was to address included the valuation of the marital and non-marital property as well as the property's marital or non-marital status, an equitable division of the property at issue and the determination of the appropriate attorney fees and court costs. The master conducted evidentiary hearings on July 1, 2, 6, 7 and 30, 1992; August 5 and 12, 1992; and September 11, 1992.

During the hearings before the master, the parties agreed to the values of several items of property. Specifically, Husband and Wife orally agreed that the marital residence had a fair market value of $212,000, that the commercial real estate was worth $330,000 with a $130,000 mortgage and that the Mercedes driven by Wife was worth approximately $15,000. The parties also presented testimony concerning numerous other issues regarding marital property before the master. The master filed a report and recommendations with the trial court on March 29, 1993. After both Husband and Wife filed objections to the master's report, the trial court referred the matter back to the master for reconsideration of the valuation of The Smith Company and MLB Designs, Inc., as well as adjustments in the distribution of assets required by any changes in valuation. The master heard additional evidence during a hearing on January 11, 1994, and filed a first amended report on January 27, 1994.

In his first amended report, the master included findings of fact, conclusions of law and proposed orders. First, the master recommended that a condominium Husband had purchased since the previous hearing be awarded to Husband as his separate property because the master found that there was "uncontroverted evidence that such condominium was purchased with non-marital funds...." In addition, the master noted that Husband and Wife had stipulated to the values of the marital residence and commercial real estate. The master recommended awarding the marital residence to Wife and making her accountable for paying the mortgage encumbering that property. Furthermore, the master recommended setting aside the commercial real estate to Husband, who would assume the mortgage on the property. The master also recommended that Wife receive the Mercedes as her sole and separate property pursuant to the parties' agreement, and that the value of the Mercedes for purposes of the property division was $15,000. Finally, the master found that $77,300 of the $101,751.18 debt owed to the parties by The Smith Company was Husband's separate property, and the remaining balance of the indebtedness was to be split by Husband and Wife equally.

Judge C. William Kramer entered an interlocutory decree dissolving the marriage on October 25, 1994. In addition to ordering the marriage dissolved, the trial court adopted the findings of the master with regard to the valuation and disposition of the residential and commercial real estate. The court noted, however, that since the filing of the master's first amended report, the marital residence had sold for $181,225.72. The court awarded the proceeds from the sale of the marital residence to Wife, and set aside the commercial real estate to Husband. The trial court also ratified the liquidation of The Smith Company due to the company's inability to repay three promissory notes to Bank IV, who had filed a petition for damages and foreclosure against Husband, Wife, and The Smith Company. The court stated that it would undertake further proceedings relating to the remaining assets not specifically referenced in the order. The only assets specifically referenced in the order were the marital residence and the commercial real estate. The trial court also ordered the preparation of the transcript of the proceedings before the master, as the court believed that the filing of the transcript might be a prerequisite to the court's ability to enter a valid order based upon the master's report.

The ten-volume transcript of the master's hearing was filed in September of 1995. In May of 1996, the parties argued their exceptions to the master's report to Judge J.D. Williamson. In its order overruling the parties' exceptions, the trial court determined that, pursuant to the interlocutory decree of dissolution of marriage, it needed to hold a hearing to effectuate a final disposition of the assets. The court advised the parties that it would not "review issues previously determined or adjudicated by the Court or Master."

In July of 1996, a hearing was held before Judge Williamson. At the hearing, both Husband and Wife testified. The trial court would not receive evidence regarding items addressed in the master's report or the interlocutory order, but it did allow Wife to make an offer of proof. On September 6, 1996, Judge Williamson entered a final order of judgment and decree of dissolution. In its order, the trial court made several findings. In numerous respects, the trial court accepted and incorporated the master's first amended report. The trial court held that Husband and Wife had stipulated to the value of the marital residence and the value of the commercial real estate during the first hearing before the master. Because it found that the parties entered into these stipulations of their own free will, the trial court held that they remained valid and binding in the cause. As a result, the trial court did not hear any additional evidence as to the value of those items of property as of the time of the trial. Furthermore, the trial court accepted the master's recommendations for dividing the marital property, including awarding the condominium to Husband as his separate property.

In other respects, however, the trial court's judgment decree of dissolution deviated from the master's first amended report. The trial court found that since the master's report the value of ...