STANDARD OF LIVING FOR MAINTENANCE IS STANDARD DURING MARRIAGE/ NO PROBLEM EXCLUDING TESTIMONY OF SPOUSAL ABUSE

Equitable division of the marital estate and maintenance were the issues in this case. The case turned on the failure of the District Court to rule on wife's post trial motions, ignoring wife's contribution to the marriage as a homemaker and wife's entitlement to maintenance.

This was a 14 year marriage between veterinarian and homemaker. No children. Million dollar estate with only $55,000 in debt. Most of the assets were husband’s premarital property. Wife made significant contributions to the maintenance of husband’s premarital property. Husband is retired. Wife moved out, earned little income and obtained subsidized housing. She received a small maintenance award over 6 months, $11,000 of her medical bills paid by her husband in lieu of maintenance and some property. She received a net worth of $99,000. He received $995,000. Wife suffered from physical ailments and PTSD. She offered testimony about physical abuse from husband, but that testimony not admitted, although she was allowed to testify as to her physical limitations.

District Court referred to standing master who issued findings. Wife objected. Post trial, wife diagnosed with breast cancer. Filed Rule 59 motion before the District Court to take the new development into account in deciding maintenance issue. District Court refused to take additional evidence and simply did not rule on wife's post trial motion for maintenance.

Wife appeals. Reversed.

• Procedurally, the District Court was wrong to rule that it could not accept new evidence following the issuance of the standing master report. The District Court never ruled at all on wife's post trial motions. That was error:
• “¶39 We have previously held that in certain circumstances, when a court does not exercise its discretion in a matter, this itself constitutes an abuse of discretion."
• If notice of appeal filed before disposition of Rule 59 motion is given legal effect on the date the district court denies the motion, or if the court never rules, on the date it is deemed denied.
• The filing of a notice of appeal does not deprive the district court of authority to rule on Rule 59 motion.

• Standing master erred by finding that wife’s homemaker contributions did not matter as much because husband was retired.

“¶49 The Standing Master erred in her assertion that Gail's and Bill's respective stages of life "lessened Gail's contribution" to the marital estate. Nothing in Funk or Tummarello supports the premise that one party's stage of life "necessarily lessen[s]" the other party's contributions to the marital estate. Gail made significant contributions to the maintenance of Bill's premarital property as a homemaker, and her contributions to the property continued after Bill's retirement. The Standing Master erred in weighing the factors of § 40-4-202(1), MCA, in regards to Gail's nonmonetary contributions to the marriage as a homemaker.”

• Standing master erred by not awarding significant maintenance:
• While the master listed several factors that led to a conclusion that the wife could not support herself, master failed to award maintenance.
• The master used the wife’s current budget, a dramatically reduced standard of living, as a reasonable budget for her. Should have used the standard of living established during the marriage.
• The master ordered husband to pay $5,000 of her $30,000 in legal fees and $11,430 of her medical bills “in lieu of maintenance.” This did not fix the problem of her inability to support herself.
• The in lieu of maintenance award can be property, but it must be income producing property:

“¶53 Our statutes and case law do not support the Standing Master's conclusion that Bill's payment of a portion of Gail's debt was appropriate in lieu of maintenance payments. Gail was unable to meet her needs independently, especially given the standard of living established during her marriage. Section 40-4-203(2), MCA. The finding that Gail's monthly expenses were $805 was based on her rent while living in subsidized housing, not the standard of living established during the marriage. Furthermore, a payment of debt is not "income-producing property" which would help Gail meet her own needs in the future. In re Marriage of Tow, 229 Mont. at 486, 748 P.2d at 441.”

• However, the Supreme Court affirmed the standing master's refusal to allow wife to testify that the husband was the cause of her physical disabilities. Maintenance awards must be determined without regard to marital misconduct. The Standing master refused evidence of husband’s abuse, but allowed evidence of wife’s physical and emotional limitations. That is not reversible error, the Supreme Court ruled. However, it cited the In Re Fenzau distinction:

¶58 "The maintenance order must be in amounts and for periods of time that the court considers just, without regard to marital misconduct." Section 40-4-203(2), MCA (emphasis added). However, "a distinction exists between awarding a larger portion of the marital estate in order to penalize marital misconduct, and, on the other hand, considering the medical and financial consequences of marital abuse in the allocation of the marital estate." In re Fenzau, 2002 MT 197, ¶ 26, 311 Mont. 163, 54 P.3d 43.

Patton v. Patton, 2015 MT 7

COMPLEX TAX CONSEQUENCES SUBJECT TO LATER DO-OVER AFTER IRS RULES?

Missoula divorce involving a single corporation owning a grocery business and a ranch. Long term marriage with three grown children. The most significant issue was taxation. Wife claimed that the ranch could be transferred tax free to a subsidiary corporation, then to her tax free. 

Corporation was a C Corporation until 2010 when S Corporation elected, but with 10 year period of potential tax exposure. Wife's expert testified that an IRS regulated Divisive Reorganization (D Reorg) procedure could be used. Husband owned the corporation 100%. Under IRC 1041 the final transfer to wife of the new subsidiary corporation with the ranch assets only would be tax free. 

Trial Court accepted the Wife's expert opinion, despite contradicting testimony from Husband's corporate accountant that the D Reorg was impossible under tax law, and would result in a $272,000 estimated tax liability that was not taken into account by the trial court. 

The trial court issued an order in response to Husband's motion to amend that said a "... private letter ruling" would now be appropriate and alternative proposals to mitigate tax consequences considered if there is an adverse ruling from the IRS." Husband appeals on various valuation issues, but primarily on the tax issue. Husband argues the trial court failed to specify how or when alternative proposals would be "considered". 

The Supreme Court affirmed. The Supreme Court stated that if there was an adverse letter ruling or the IRS rejected the D Reorg, "Jim could then explore other options, including moving to modify the judgment." Paragraph 26. The Supreme Court did not say how long Husband had to figure this out or what the ultimate result would be. 

They state that the Husband could file a motion to amend the judgment later after a definitive ruling by the IRS to adjust the distribution of the marital estate to incorporate tax consequences. That itself is rife with problems, however. For example, if there is a substantial tax consequence, what valuation date should one use for determining the ultimate distribution to be equitable. If there are intervening valuation changes in the ranch, or the business does poorly – what then? Also, will there be an issue about whether the Husband (who opposes this D Reorg) has done an effective job of presenting this to the IRS when he is on the record stating it cannot be done? Interesting.

Edwards v. Edwards 2015 MT 9

PARENT WITH MAJOR DEPRESSIVE DISORDER AWARDED PRIMARY CARE

Parenting Plans: Impact of Major Depressive Disorder

Child Support: How to Modify CSED Final Temporary Order Within Pending Divorce

Equitable Division: Occupancy of Ranch Awarded Primary Custodian During Children’s Minority, Then Sell

Facts. Mom and dad were married 16 years and have 3 children. Mom has major depressive disorder and receives SSDI. One of the children has severe seizure syndrome requiring full time parenting. Mom applies to CSED shortly after petition is filed. CSED issues proposed order including findings about each parent's income. Dad does not ask for a hearing. Consequently, CSED enters a “final temporary” order. The trial court found income numbers substantially different from the CSED order. Trial court awarded mom primary care of children and adopted the CSED child support order. The trial court awarded mom exclusive use of their ranch property until the youngest child graduates from high school. Then the ranch property was to be sold and proceeds divided equally.

Parenting Plan Affirmed. There was ample evidence that mom was excellent parent, despite her disorder. Good quotation: "Moreover, the Social Security Administration's determination that an impairment prevents a person from working in a full-time job does not necessarily mean the person is incapable of parenting her children as the primary custodian.” Pesanti @ ¶12.

Child Support Reversed: The trial court did not address the income disparities between the testimony at trial and the CSED order. It should have. Because the trial court’s income numbers would produce a different child support award, the trial court either had to adopt the Guideline amount or explain by clear and convincing evidence the variance. In the course of its ruling, the Supreme Court articulated the path to modifying a CSED “final temporary” child support award at the final trial of a divorce proceeding: “… a party to a dissolution action who desires to modify a temporary support order entered by CSED under § 40-5-225(3) has a clear path. Once a temporary order is proposed, the party may seek administrative review within CSED before the order is entered as final. Admin. R. M. 37.62.949(2), 37.62.951(1). Once a final order is entered, the party may seek further modification by the court in its final decree of dissolution, provided that CSED has notice and the opportunity to participate in the proceeding. Sections 40-5-202(5)(a), -225(12), MCA.” Pesanti @ ¶25.

Equitable Division. Dad did not appeal the exclusive use award.

Pesanti v. Pesanti 2014 MT 324

"Trigger" the Horse not listed. Equitable not equal. Judges get to decide credibility.

John and Dana lived together in Grass Range for 2 1/2 years, then broke up. They bought things during their cohabitation and co-mingled some, but not all of their money.

John sued Dana for return of property and for a TRO after she left. During a preliminary hearing, the trial court allowed Dana the use of the 2001 pickup and a horse trailer to assist her move to Billings and to allow her to work as a horse trainer.

Later, during the final hearing, the parties disputed the value of their joint account at the time of their breakup, the value of assets, and the condition of the pickup before Dana had use of it for the 6 months between the initial hearing and final hearing. John appealed claiming he got far less than Dana. Dana pointed out that there was a lot more money in their joint account one week before separation than John claimed (which remained with John) and that John had failed to list his horse "Trigger" as an asset.

The Montana Supreme Court affirmed in a noncite opinion. Citing Marriage of Harris, 2006 MT 63, the Court noted that "equitable" does not necessarily mean "equal". Citing Hood v. Hood, 2012 MT 158 at paragraph 42, the Court noted that trial judges are in the best position to decide the credibility of witnesses, decide what weight to give such testimony and to decide what is equitable under the circumstances -- and the the Supreme Court will not simply substitute its judgment for that of the trial judge.