MARRIAGE OF BUXBAUM
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NO. 84-44 IN THE SUPREME COURT OF THE STATE OF MONTANA 1984 IN RE THE MARRIAGE OF BONITA KAY BUXBAUM, Petitioner and Respondent, -vsADAM LEROY RUXBAUM, Respondent and Appellant. APPEAL FROM: District Court of the Seventh Judicial District, In and for the County of Dawson, The Honorable M. James Sorte, Judge presiding. COUNSEL OF RECORD: For Appellant: R. W. Heineman argued, Wibaux, Montana For Respondent: Cox & Simonton; Marvin L. Howe argued, Glendive, Montana For Amicus Curiae: Huntley & Ea.kin; Ira Eakin argued for Adam Buxbaum, Baker, Montana Submitted: September 21, 1984 Decided: December 6 , 1984 < : ; , , ,) ! i ~1..1 . +:;,:* 1 9 j -., \ .! ' Filed: Clerk Mr. Justice John C. Court. Sheehy delivered the Opinion of the Adam Leroy Ruxbaum appeals from a decree of dissolution of marriage in the District Court, Seventh Judicial District, in and for Dawson County, with respect to the distribution of the marital estate. The wife, Bonita Kay Buxbaum cross-appeals. The pa-rties were married. in 1964 and their marriage was dissol-ved in 1983. During the marriage, they ranched near Glendive, Montana. She was 17 years old when she married; he was 21 years old. At the time of the dissolution, they were 37 and 41 years old respectively. They have two sons, a 20 year old and. 16 year old living with his mother at the time of the dissolution. Her health is normal; he has had cancer of his arm. The wife quit high school her senior year to marry. From 1964 to 1975, she worked as a homemaker and on the . ranch. began In 1975, in addition to her home and ranch work, she working as a secretary at Glendive to help maintain the family. is approximately $8,400. worked with his father. a parochial school in Her current net income Early in the marriage the husband In 1972, the ranch was incorporated and the son took over primary responsibility. He contributed to the corporation a ].ease agreement on over 3,000 acres. He continues to farm the lease, keeping two-thirds of the profit and returning one-third to the lessor. His father contributed ranchland and equipment to the corporation. incorporation, the following stock wa.s issued: Husband's father Husband's mother Husband & wife Total 45 shares 41. shares 14 shares 1-00 At Husband's father died in 1976. Prior to his death, the father and his spouse each reissued four additional shares of stock to the husband and wife. The father bequeathed six shares to his spouse and 3 5 shares to a testamentary trust. . for the wife's benefit. The ownership of the corporation now is: Trust Husband.' s mother Husband & wife Total 35 shares 43 sha.res 22 shares 100 The date-of-death value on December 1-1, 1 9 7 6 was $3,000 per share. The father's trust allocated all of the trust income to the husband's mother, who is living. At her death, the 3 5 shares are to he distributed 8 5 % to Adam, ( 2 9 . 7 5 shares) and 15% to Ad-am's sisters ( 5 . 2 5 shares). The trust principal has generated no income because the corporation has never paid a dividend. The husband, as trustee, has the power to invade the principal of the trust for his mother's benefit but has never done so. Financial statements prepared to obtain a loan by the parties, and submitted by the wife as evidence of net worth, showed the following: Corporation's Net Worth The District Court used Husband ' s Net Worth the appraised value of the corporate assets, rather than the financial statements, as evidence of net worth. The appraised value of the real estate was determined by the husband's expert witness. husband appraised the value of the personal property. The resulting figures are: The Real Property Personal Property Total Corpora.tion Value Less: Corporate Debt to PCA Miscellaneous Corporation Debts Wages due Husba.ndtsMother Net Va-Lue No ($58,000) ($22,000) ($13,200) $242,900 value was assigned by the court to leasehold, calves, growing crops, feed the 3,000 on hand acre or other miscel~laneousassets. The District Court included in the marital estate the husband's remainder interest in the trust of 29.75 shares and also included the 22 jointly-held. shares for a total of 51.75 shares. On the basis of the appraised value of the 51.75 shares, the District Court. awarded to the wife $70,850, plus a 1979 automobile. The court ordered the husband to pay one-sixth of the sum now and the remainder over 5 yea.rs. These are the issues on appeal: 1) Should the remainder interest in a trust be incl.ud.ed in a marital estate? 2 Must a minority interest in a corporation be discounted? 3) May a District Court order a corporation to be dissolved in the event of nonpayment of a property settlement? 4) Is the wife entitled. to one-half of the shares of the corporation received from the husband's parents as a gift during the marriage? 5) Is the child support excessive? 6) Is the maintenance excessive? 7) Should attorney's fees be awarded? The wife for her part contends that the marital estate was undervalued because the District Court used the appraisal and not the book value of the corporation. WAS THE HUSBAND'S REMAINDER PROPERLY INCLUDED IN THE 1) MARITAL ESTATE AND HOW SHOULD IT BE VALUED? The husband contends that the remainder interest in the father's testamentary trust estate should not be included in (1) it is a mere the marital estate for two reasons: expectancy, without any enforceable rights; (2) our holding in Hill v. Hill (1982), 1-97 Mont. 451, 643 P.2d 582 should not apply because Hill involved a future interest in a Life estate which was not subject t o divestment. . The wife responds that it is within the District Court's discretion to distribute such property; that section 40-4-202, MCA, requires future acquisitions of estates to be considered; and the husband has already benefited from his future interests in this stock by using the same as collateral. Both parties agree that the husband's right to receive the shares of stock from the testamentary trust after the death of his mother is a vested future interest subject to defeasance. In Hill, supra, the husband's remainder interest in a life estate was included in the marital estate. The mother in Hill had the full control, use and possession of the property, and the income therefrom during her lifetime, but the son's remainder interest was not subject to divestment. It was true, however, that in Hill, the son could predeceased have the mother. Nonetheless, remainder interest was included in the marital estate. his In Goodmundson v. Goodmundson (Mont. 19821, 655 ~ . 2 d 509, 39 St.Rep. 2295, a ranch dissolution of marriage case, we stated: "Under section 40-4-202, MCA, the District Court must consider future acquisition of assets. The husband's expectation of a sizeable inheritance is therefore a valid consideration in the equitable distribution of marital property." 655 P.2d at 512. The District Court in the case at bar assigned a current value to the remainder interest and the husband contends that a more accurate value would be the discounted present value of such future interest. remainder interest is Yet the current value of the being used as collateral corporation for the purpose of obtaining loans. by the The court realistically looked at the circumstances and used a proper value based on the underlying assets of the trust. Always to be has remembered District Court property divisions and in far-reaching its these cases discretion in is a resolving judgment will not be unless a clear abuse of discretion is shown. that altered In Re Yarriage of Kaasa (1979), 181 Mont. 18, 22, 591 P.2d 111-0,1112, 1113; In Re Marriage of Kramer (1978), 177 Mant. 61, 580 P.2d 439. The test for reviewing a District Court's discretion is: Did the District Court, in the exercise of its discretion act arbitrarily without employment of conscientious judgment, or exceed the bounds of reason in view of all the circumstances? In Re the Marriage of Aanerson (1979), 183 Mont. 229, 234, 598 P.2d 1120, 1123. 2) WAS THE MARITAL ESTATE OVERVALUED RECAUSE THE DISTRICT COURT CID NOT DISCOUNT THE CORPORATE STOCK TO REFLECT A MINORITY INTEREST? The husband argues that his minority corporation stock should be discounted to reflect a minority shareholder's lack of control. over the corporation; that federal cases have discounted minority stock values for estate tax purposes and that we have approved of discounting minority stock in In Re Marriage of Jorgenson (1979), 180 Mont. 294, 300, 301, 590 P.2d 606, 610. The wife responds on this issue that because of their use of all the corporate stock in financing, Adam, as a. fact, controls the corporati.on regardless of its stock ownership a.nd the District Court has wi.de discretion in these matters. This is not a situation where the minority stock should . be discounted to determine j ts value. will apply when Discounting usually the market value of the stock is being estimated and there really is no market to rely on. In this case, the value of the corporation was arrived at by the market value of the underlyinq assets. It would be inconsistent to discount the minority share of the value of the corporate assets in this case. 3) IS THE DISTRICT COURT ORDER FOR ENFORCEDIENT AN ER-ROR TO THE EXTENT IT AFFECTS THE FAMILY CORPORATION? The District Court ordered the husband to pay the wife $70,850 in six installments, one within a month of judgment, and then annua1.l.yfor five years. The order goes on to say: "If the Respondent fails to exercise his option to purchase the Petitioner's interest, the corporation will be dissolved and the property of the corporation will be sold on the market for cash at a price agreeable to the Parties. If no buyers are received, the property shall be sold at a public sale within three (31 months from the date of Judgment." The husband contends that the corporation was not a party and therefore the court had no jurisdiction over its property; that section 35-1-921, MCA, controls the court's power to liquidate corporations and is not applicable in this case; and that the co-owners of the stock in the corporation were not joined as parties in this suit and would have to be ioined in a suit for partition or dissolution of the corporation. The wife contends that the District Court was merely attempting to give her a means of securing her judgment, relying on Burleigh v. Burleigh (Mont. 1982), 650 P.2d 753, 39 St.Rep. 1538. The power of a court to dissolve a corporation is found in section 35-1-921, MCA. dissolution of a The statute does not include corporation for nonpayment of obligations by one of the corporation stockholders. marital. However, a court does have the power to secure a marital settlement by qranting a security interest in stock or such further security arrangements as the court may find necessary in order to enforce its decree. See Burleigh, supra. Jn this case, the court also distributed a corporzte car to the wife. the 1979 The District Court had no way of knowing that car belonged to the corporation because the inventory of corporate property submitted by the husband did not include the automobile. With respect to this issue, we find it necessary to remand the cause for the District Court to make new provisions for the enforcement and security of the wife's property division. Although a corporate asset in the form of an automobile should not be distributed to the wife, the decree of dissolution should be revised to provide 2 vehicle for the wife since the District Court found that the wife needs a vehicle. 4) DID THE DISTRICT COURT ERR ONE-HALF OF THE VALUE OF THE T_N AWARDING TO THE WIFF SHARES RECEIVED FROM THE HUSBAND ' S PARENTS? Here the husband contends that the shares were a gift from his parents and that the law in Montana is that a spouse is entitled to receive one-half of the increase of value from the date of the gift, but not one-half of the gift itself. In support, he cites In Re Marriage of Herron (1980), 186 396, 608 P.2d Mont. divorcing husband homemaker. 97. Herron is not applicable. The there was a physician, the wife was a The disputed property was a cabin on Flathead Lake, acquired with funds received from the wife's father. In Herron, the court noted distinguishable. Brown that a ranching situation is We cited with approval, In Re ~arriageof (1.978), 179 Mont. 417, 587 P.2d 361, where we found that the wife had acquired a vested interest in the ranch property regardless of its source by virtue of her 1.4 years as a mother, housewife and part-time ranch hand. The District Court determined that the wife's interest i.n the ranch property was earned by her contributions as a homemaker. 5) IS CHILD SUPPORT OF $400 PER MONTH UNTTI, OCTOBER 1.988 , EXCESSIVE? The husband contends that the lower court ignored his financial resources in setting child support at $400 per month. Section 40-4-204(5), MCA, makes financial resources of the husband a relevant factor. The findings of fact indicate here that the jud.ge was aware of the husband's financial resources. discretion. There is no indication of abuse of IS THE $ 2 0 0 MAINTENANCE TO THE WIFE UNTIL OCTOBER 1988, 6) EXCESSIVE? Bere again, maintenance the court considered the criteria for listed in section 40-4-203, MCA, and did not abuse its discretion. 7) IS THE AWARD OF ATTORNEY FEES REVERSTBLE ERROR? Section 40-4-110, MCA, allows reasonable attorney fees if both parties' financial resources are considered. In this case, the wife was awarded attorney fees of $1,576. findings indicate financial resources. the judge considered both parties' There was, however, no hearing determine the reasonableness of the fees. The to On that point, since the case is also being remanded for other reasons, the reasonableness of the attorney fees should be considered by In Re Marriage of Aanenson (1979), 183 Mont. 229, the court. 598 P.2d 1120. We find no error in the award of attorney fees to the wife. 8 THE WIFE CONTENDS THAT THE MARITAL ESTATE WAS UNDERVALUED. The wife makes three arguments: 1) The District Court used the appraised value of current real. estate instead of the corporate hook value. The 3,000 acre lease, the calves, grains and other assets were omitted using appraised value. 2) The District Court gave no reasons for finding appraised values of property to be more accurate estimates of the parties' net worth than book value. 3) loan that was considered by the expenses to produce unearned income. A portion of the PCA court was for current By including the loan, but excluding the crops and calves, the wife is required to absorb the expenses of income which she will never receive. The husband responds to the wjfe's a-rguments that the crop failed, the worthless; that calves were during the lost, and dissolution the lease was proceedings the corporation borrowed more money and if unearned income were included, the loan must also be included and, further that unrealized income is speculative. In Krum v. Krum (Mont. 1980), 614 P.2d 525, 37 St.Rep. 1291, this Court upheld the District Court's exclusion of "the proceeds from the operating loan noncapital expenses rel-ationship to . . ... [tlhese used largely for expenses have no d.etermination of marital assets when the farm proceeds are excluded.." Krum at 527 and 528. The District Court could have excluded the opera.ting portion of the PCA loan but it is within its discretion to include it. This decision operated against the wife, hut the judge also made decisions that operated in her favor. future trust interest could have For example, the been discounted for valuation yet there the wife argues in favor of judicial discretion. The wife also contends that the District Court should be reversed because it omitted the lease and other a.ssets and because certain bi1.l.sa-mounting to $22,000 and wages to the husband's mother for $13,200 were disputed. In Larson v. Larson (Mont. 19821, 649 P.2d 1351., 1354, 39 St.Rep. 1628, a case relied on by the wife in connection with this issue, we said: "Item-by-item fi.ndi.nqsare not required in property division cases, but findings nevert-heless must be sufficiently adequate to ensure that this Court need not succumb to speculation while assessing the conscientiousness or reasonableness of the District Court's judgment." The findings of fact entered by the court acknowledge the items the wife questions. The District Court did not abuse its discretion in adopting the husband's values. The decree of dissol.ution of the District Court is affirmed, except that the cause is remanded for further proceedings in the District Court with respect to the following items: 1. respecting The court shall remove from the decree language sale of the corporate assets to enforce the husba.ndlsobligations und-er the decree of dissolution, but the court may adopt other means of enforcing the terms of its judgment; 2. The court shall make other provisions for an automobile for the wife; 3. The court shall conduct a hearing on the reasonableness of the attorney fees awarded to the wife. . .-. . .- ". We Concur: %A -Justice L ? ~ & ~ Chidf sI Mr. Justice L. C. Gulbrandson, deeming himself disqualified, did not participate in this decision.
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