Walstad v. Walstad

• Citation: 2013 ND 176,837 N.W.2d 911
• Decision Date: 11 October 2013
• Docket Number: No. 20130023.,20130023.
• Parties: Catherine L. WALSTAD, Plaintiff and Appellant. v. Richard H. WALSTAD, Defendant and Appellee.
• Court: United States State Supreme Court of North Dakota

837 N.W.2d 911

2013 ND 176

Catherine L. WALSTAD, Plaintiff and Appellant.

v.Richard H. WALSTAD, Defendant and Appellee.

No. 20130023.

Supreme Court of North Dakota.

Oct. 11, 2013.

Dan D. Plambeck (argued) and Randolph E. Stefanson (on brief), Moorhead, MN, for plaintiff and appellant.

James R. Brothers, Fargo, ND, for defendant and appellee.

KAPSNER, Justice.

[¶ 1] Catherine Walstad appeals from a district court memorandum opinion and order reaffirming its previous judgment requiring Richard Walstad to pay her $37,222.90 to equalize a property distribution after he intentionally concealed marital assets during the parties' 1994 divorce. Because we conclude the district court did not follow our mandate on remand, the district court's property distribution is clearly erroneous, and the district court abused its discretion in not awarding attorney fees, we reverse and remand.

I

[¶ 2] As reported in Walstad v. Walstad, 2012 ND 204, 821 N.W.2d 770 (“Walstad I ”), Catherine and Richard Walstad were divorced in 1994 after entering a stipulated property settlement stating “[b]oth parties agree that each has made a full disclosure to the other of all assets and liabilities.” The settlement was incorporated into a 1994 divorce judgment that equally divided the parties' marital property, including their interest in a business, Cook Sign Company.

[¶ 3] In 2009, Catherine Walstad sued Richard Walstad, alleging she had recently learned that Richard Walstad hid marital assets before the entry of the divorce judgment. Specifically, she alleged Richard Walstad paid two employees of Cook Sign Company more than $100,000 in bonuses with the understanding the employees would return the bonus money to him after the divorce. Catherine Walstad alleged Richard Walstad's failure to disclose the inappropriate bonus payments resulted in a reduction in the value of the business for the parties' marital property valuation and a reduction in her share of marital property under the divorce judgment. She asked the district court to exercise its equitable powers and grant her relief from the 1994 divorce judgment.

[¶ 4] In 2010, Catherine Walstad moved to amend her complaint to assert a claim for punitive damages, and the district court denied her motion. After a bench trial, the district court awarded Catherine Walstad $37,222.90, finding Richard Walstad “wrongfully concealed” $50,000 from her during the divorce proceedings in a “scheme” and “concocted ... [a] plan to hide assets from [her].” The court found Richard Walstad inappropriately paid a total of $50,000 in bonuses to the two employees in 1993, which should have been paid to him and included in the parties' marital estate. Based on the parties' applicable tax bracket, the court decided Richard Walstad would have received about $35,000 after taxes and Catherine Walstad was entitled to half that amount, or $17,500. The court also awarded Catherine Walstad prejudgment interest at seven percent and costs and disbursements of $174.90, for a total award of $37,222.90.

[¶ 5] Catherine Walstad appealed to this Court, arguing the district court abused its discretion in denying her motion to amend her complaint for punitive damages. Walstad I, 2012 ND 204, ¶ 1, 821 N.W.2d 770. We noted that:

Although Catherine Walstad presents her argument in the context of a motion to amend her complaint to include a claim for punitive damages, her argument raises questions about the procedure for raising issues about fraudulent concealment of marital property in a divorce proceeding and the efficacy of a subsequent claim for punitive damages under N.D.C.C. § 32–03.2–11(1) for the fraudulent concealment.

Walstad I, at ¶ 8. After a review of our caselaw, procedural rules, and legislative history, we concluded punitive damages were not available in this context because “the procedure in N.D.R.Civ.P. 60(b), [N.D.C.C. § 14–05–24(3) ] and an independent action in equity provide the established method[s] for addressing issues about a claimed fraudulent concealment of marital property during an earlier divorce proceeding.” Walstad I, at ¶ 18. We remanded, however, because “the district court essentially divided the concealed property equally, and we [were] unable to discern from the court's decision whether it considered application of economic fault or misconduct in the redistribution of property in the context of the independent action in equity.” Id. at ¶ 19.

[¶ 6] On remand, the district court reaffirmed its original judgment awarding Catherine Walstad $37,222.90, noting:

The Court, considering [Catherine Walstad's] claim as an independent action in equity, and taking into account economic fault or misconduct, as well as the Ruff–Fischer guidelines, concludes that [Catherine Walstad] should be entitled to one-half of the $35,000.00 or $17,500.00, together with the seven percent interest. Since this is the amount the original Judgment required [Richard Walstad] to pay to [Catherine Walstad], no further Judgment need be entered in this matter.

[¶ 7] Catherine Walstad appeals.

II

[¶ 8] Catherine Walstad argues the “District Court did not carry into effect the Supreme Court's mandate according to its terms.”

[¶ 9] On remand, district courts must follow the mandate rule. Investors Title Ins. Co. v. Herzig, 2013 ND 13, ¶ 10, 826 N.W.2d 310 (citing State v. Burckhard, 1999 ND 64, ¶ 7, 592 N.W.2d 523). “The mandate rule, a more specific application of law of the case, requires the trial court to follow pronouncements of an appellate court on legal issues in subsequent proceedings of the case and to carry the [appellate court's] mandate into effect according to its terms.” Carlson v. Workforce Safety & Ins., 2012 ND 203, ¶ 16, 821 N.W.2d 760 (quotation omitted). This Court “retain[s] the authority to decide whether the district court scrupulously and fully carried out our mandate's terms.” Burckhard, at ¶ 7 (quoting United States v. Bartsh, 69 F.3d 864, 866 (8th Cir.1995)).

[¶ 10] In remanding the underlying case to the district court, this Court said:

Catherine Walstad's action stated Richard Walstad's fraud constituted grounds for an independent action in equity to obtain relief from the divorce judgment. In an independent action in equity to enjoin performance or otherwise grant relief from a blatantly unjust divorce judgment, however, a court has broad equitable powers to enjoin enforcement or otherwise grant relief from the earlier divorce judgment. We conclude that authority includes using the established Ruff–Fischer guidelines for property distribution, including consideration of economic fault and misconduct in distributing marital property. Here the district court essentially divided the concealed property equally, and we are unable to discern from the court's decision whether it considered application of economic fault or misconduct in the redistribution of property in the context of the independent action in equity. We therefore conclude a remand is appropriate for the court to apply the correct law in the context of this independent action in equity.

Walstad I, 2012 ND 204, ¶ 19, 821 N.W.2d 770 (internal citations omitted).

[¶ 11] In Walstad I, we remanded because we could not “discern from the court's decision whether it considered application of economic fault or misconduct in the redistribution of property in the context of the independent action in equity.” Walstad I, 2012 ND 204, ¶ 19, 821 N.W.2d 770. Thus, to determine if the district court followed our mandate, we must evaluate the district court's property distribution in the context of an independent action in equity.

III

[¶ 12] Catherine Walstad argues the “District Court's failure to adjust the property division based on Richard [Walstad's] misconduct was clearly erroneous.”

[¶ 13] Under N.D.C.C. § 14–05–24(1), a district court must “make an equitable distribution of the property and debts of the parties.” “A district court's distribution of marital property is treated as a finding of fact, which we review under the clearly erroneous standard.” Hoverson v. Hoverson, 2013 ND 48, ¶ 8, 828 N.W.2d 510 (citing Wold v. Wold, 2008 ND 14, ¶ 6, 744 N.W.2d 541). “A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all the evidence, we are left with a definite and firm conviction a mistake has been made.” Hoverson, at ¶ 8 (citing Lynnes v. Lynnes, 2008 ND 71, ¶ 12, 747 N.W.2d 93).

[¶ 14] In the original trial, the district court made findings of fact considering Richard Walstad's economic fault or misconduct and the impact of the concealed money. The district court found that Richard Walstad concealed $50,000 from Catherine Walstad in the 1994 divorce:

2. During the pendency of the divorce, [Richard Walstad] concocted a plan to hide assets from [Catherine Walstad], which involved Cook Sign Company, a business owned by the parties and two of Cook Signs Company's employees, Bernie Dardis and Steve Fliflet, wherein those individuals would receive extra bonuses and would repay that money back to [Richard Walstad] after the divorce was concluded....

....

4. If [Richard Walstad] had received the $50,000 in bonus money as opposed to paying that money to Dardis and Fliflet, those monies, would have been marital assets, subject to division between the parties. The Walstads were in a tax bracket so that [Richard Walstad] would have only netted approximately $35,000 from that $50,000 bonus. Therefore, [Catherine Walstad] is entitled to one-half share of that amount, or $17,500.

[¶ 15] Though the district court made findings of economic fault or misconduct, the court's award of $37,222.90 to Catherine Walstad in the original judgment did not consider economic fault or misconduct. At the status conference on remand, the court explained why it did not consider Richard Walstad's economic fault or misconduct: “[T]here was an agreement between you people, as...