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COURT OF APPEALS DECISION DATED AND RELEASED MARCH 4, 1997 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 96-1126-FT
STATE
OF WISCONSIN IN
COURT OF APPEALS
DISTRICT III
IN RE THE MARRIAGE OF:
VICKY L. STELLFLUE,
Petitioner-Respondent,
v.
LLOYD C. STELLFLUE,
Respondent-Appellant.
APPEAL from a judgment
of the circuit court for Trempealeau County:
DANE F. MOREY, Judge. Affirmed
in part; reversed in part and cause remanded.
Before Cane, P.J.,
LaRocque and Myse, JJ.
PER CURIAM. Lloyd Stellflue appeals the property
division of the divorce judgment concerning his former wife, Vicky Stellflue.[1] After fourteen years of marriage and on the
basis of hardship, the trial court included in the marital estate some farm
real estate given Lloyd and his brother, Donald, shortly before the divorce by
their parents and uncle. During the
marriage and before the gifts, Lloyd operated these farms through a partnership
with his brother, in addition to other farms they had purchased. After the gifts, Lloyd and Donald owned
these in a form of co-ownership, as joint tenants and tenants in common. The partnership did not own the gifted farms
at any time. The trial court judge who
conducted the trial left the bench without issuing a decision. A second judge decided all issues, including
any factual issues, after reviewing the trial transcripts and trial exhibits,
without taking any additional testimony.
On appeal, Lloyd makes
two basic arguments: (1) the trial
court wrongly included the gifted real estate in the marital estate; and (2)
the trial court wrongly adjusted Lloyd's personal and partnership debts downward
and his personal and partnership assets upward, contrary to the evidence at
trial. On the second issue, Lloyd makes
several assertions. He claims that the
brothers' transactions with the partnership had the effect of reducing his net
worth. He claims that Donald and his
parents, not the partnership, owned various pieces of farm equipment improperly
included in the marital estate. He
claims that the trial court improperly ignored liabilities owing to his
parents. He also claims that the trial
court miscounted assets and liabilities.
Because the trial court reasonably exercised its discretion to include
the gifted property but appears to have double-counted some assets, we affirm
the judgment in part, reverse it in part, and remand the matter to the trial
court for further proceedings.
Although most divorces
do not warrant the division of gifted property, trial courts may include such
property if a hardship exists. Popp
v. Popp, 146 Wis.2d 778, 791, 432 N.W.2d 600, 604 (Ct. App. 1988). Hardship is a discretionary finding, Asbeck
v. Asbeck, 116 Wis.2d 289, 295, 342 N.W.2d 750, 753 (Ct. App. 1983),
and we will affirm such a finding if there is a reasonable basis for it. Id. A hardship determination must be made in light of the facts and
history of the case and relative financial circumstances of the parties before
and after the divorce. Popp,
146 Wis.2d at 792, 432 N.W.2d at 605.
The hardship exception means privation, not a hardship claimant's mere
desire to continue an existing lifestyle, Doerr v. Doerr, 189
Wis.2d 112, 124, 525 N.W.2d 745, 750 (Ct. App. 1994), or the absence of other
dividable marital assets. Popp,
146 Wis.2d at 792, 432 N.W.2d at 605.
It rests not on fairness or equitable principles, but on privation
principles. See id.
at 792, 432 N.W.2d at 604-05. It is a
somewhat indefinite concept that includes consideration of many factors beyond
the financial needs of hardship claimants.
See Asbeck, 116 Wis.2d at 295, 342 N.W.2d at
753. It is a case-by-case inquiry, id.
at 296, 342 N.W.2d at 754, and the law presumes no hardship. See Hughes v. Hughes,
148 Wis.2d 167, 173, 434 N.W.2d 813, 815 (Ct. App. 1988). We recognize the no-hardship presumption
takes on special importance concerning gifted family business property. Courts have exhibited caution before using
the hardship exception to invade gifted family business property. See, e.g., Popp, 146
Wis.2d at 790-93, 432 N.W.2d at 603-05.
The legislature has made hardship invasion the exception, not the
rule. See Asbeck,
116 Wis.2d at 291, 342 N.W.2d at 752.
Division of gifted,
nonmarital property is not a one-sided inquiry into the economic needs of the
hardship claimant. See Asbeck,
116 Wis.2d at 295, 342 N.W.2d at 753.
Such economic needs function as a threshold factor that, once reached,
permit courts to consider other factors.
For example, courts in nearby jurisdictions have considered the factors
relevant to division of marital property, such as the length of the marriage, Roel
v. Roel, 406 N.W.2d 619, 622 (Minn. App. 1987), and the length of time
the property was in marriage. See
3 Rutkin, Family Law & Practice §
37.06, at 37-110 (1995). Other relevant
factors are each spouse's other property, id., and the intent of
the donor, Vanderpol v. Vanderpol, 529 N.W.2d 603, 605 (Iowa App.
1994), especially if a close relationship existed between the donor and
donee. Liebich v. Liebich,
547 N.W.2d 844, 850 (Iowa App. 1996).
Each spouse's contribution toward the gifted property is another
factor. Martens v. Martens,
406 N.W.2d 819, 822 (Iowa App. 1987).
The availability of maintenance is relevant. See Girard v. Girard, 521 S.W.2d 714, 718-19
(Tex. Civ. App. 1975); Burt v. Burt, 799 P.2d 1166, 1169 (Utah
App. 1990). Some courts have concluded
that a severe disparity between the spouses' economic conditions must exist to
apportion gifted property. Reynolds
v. Reynolds, 498 N.W.2d 266, 271 (Minn. App. 1993).
After reviewing the
record, we uphold the hardship determination.
The trial court made a discretionary decision, Asbeck, 116
Wis.2d at 295, 342 N.W.2d at 753, and reasonably exercised its discretion. Vicky had few assets and virtually no
earning power. At the same time, she
had nominal income and increased living expenses. On the other hand, Lloyd displayed no ability or inclination to
pay Vicky maintenance. He claimed that
the farm partnership did not provide him sufficient financial resources to pay
Vicky maintenance. He claimed a
negative net worth from his nongifted assets.
Faced with this state of affairs, the trial court had nothing but
Lloyd's interest in the gifted farm property to apply toward Vicky's financial
needs. Under these circumstances, where
the trial court needed to make a financial allowance for Vicky other than maintenance,
the trial court could rationally include the gifted farm property in the
marital estate on the basis of hardship.
Also, we conclude that
the trial court had sufficient grounds to reject Lloyd and Donald's claims
concerning Lloyd's net worth. It is for
the trial court as the fact finder, not the appellate court, to weigh the
evidence and credibility of the witnesses.
See § 805.17(2), Stats. The brothers made various allegations on how
their personal dealings with the partnership entity reduced Lloyd's net worth,
either by increasing Lloyd's personal liabilities to Donald and the
partnership, by increasing the partnership's debt to Donald, by reducing
Lloyd's equity interest in the partnership, or by increasing Donald's equity
interest. The brothers were not
specific on many aspects of these transactions. Rather, they claimed in a general way that Lloyd owed either
Donald or the partnership for Lloyd's borrowings from the partnership and for
Lloyd's disproportionate partnership distributions. They also claimed that Lloyd owed either Donald or the
partnership for Donald's loans to the partnership or Donald's disproportionate
equity contributions to the partnership.
The brothers further claimed that Donald individually owned several
pieces of farm equipment used in the farm operations, with neither Lloyd nor
the partnership having any ownership interest.
Last, Lloyd claimed that his parents, not himself, Donald, or the
partnership, owned some of the equipment used in the farm operations.
Although these net worth
claims involved substantial sums, Lloyd produced little or no documentation to
support them. He relied on his and
Donald's testimony. For example, Lloyd
and Donald testified that Lloyd took more funds out of the partnership than
Donald, either in the form of loans or distributions, and then spent these
funds to support Vicky and their child.
The brothers also testified that Donald, who is single, invested his
smaller partnership distributions in the farm equipment Lloyd sought to exclude
from the marital estate. In essence, Donald
testified that he used partnership funds, in a broader sense, to buy the
equipment. He stated he took the
distributions from a checking account owned jointly by Lloyd, Donald, their
mother, and the partnership. Under the
Uniform Partnership Act, however, a presumption arose that this equipment was
partnership property, from the fact that Donald used partnership funds to buy
the equipment and then used the equipment in the partnership operations. See Estate of Schaefer,
72 Wis.2d 600, 605, 611, 241 N.W.2d 607, 609-10, 612 (1976); § 178.05(2), Stats.
The trial court could reasonably conclude that the brothers' evidence
failed to rebut this presumption. They
had no business records to verify the equipment's ownership. They offered only their own testimony, which
the trial court had the right to reject.
In addition,
partnerships must keep books and records sufficient to render partners complete
and accurate accounts; those with inadequate records face adverse presumptions
and have doubts resolved against them. See
Wilson v. Moline, 47 N.W.2d 865, 867 (Minn. 1951); Guntle
v. Barnett, 871 P.2d 627, 633 (Wash. App. 1994); 2 Bromberg & Ribstein, Partnership §
6.05, at 6:53-54 (1994); § 178.16, Stats. This rule applies to Vicky's imputed marital
partnership interest. Here, the
brothers' poor record-keeping resolved doubts against their claims on equipment
ownership, partnership advances, partnership distributions, partnership equity
contributions, and partnership liabilities.
Further, the brothers asked acceptance of large scale claims without
documentation. This stood in stark
contrast to the extensive documentation they supplied for each small scale $50
disbursement the partnership made to Vicky.
If litigants produce no evidence where litigants normally would, the
trial court may infer that the true facts are the exact opposite of those
asserted. See Booth v.
Frankenstein, 209 Wis. 362, 370, 245 N.W. 191, 193-94 (1932). In sum, the trial court, as the fact finder,
could reject all Lloyd's net worth claims, including the claim of equipment
ownership by the parents.
The trial court also had
a sufficient basis to disregard the promissory note Lloyd and Donald had issued
to their father in March 1978. First,
despite the note's written terms, the evidence permitted the inference that the
parents would never demand payment. In
practice, neither the payors nor the payees seem to have carried the notes on
their books at their face value. For
example, Lloyd, Donald, and their parents had all failed to disclose the note
on various occasions on their respective financial statements. They had sought loans and other financial
assistance without disclosing the note either as an asset on the parents'
financial application or as a liability on the brothers'. This divergence between the terms of the
note and its practical treatment by the parties permitted the trial court to
discount the note from its face value to its probable fair market value, see
Schorer v. Schorer, 177 Wis.2d 387, 399, 501 N.W.2d 916, 920 (Ct.
App. 1993), and to set its fair market value at zero, with a corresponding zero
liability for Lloyd, Donald, and the marital estate. See also Wright v. Wright, 469 A.2d 803,
809-10 (Del. Fam. Ct. 1983).
Second, the trial court
had no obligation to treat the parents' probable forgiveness of this note to
constitute gifted property, exempt from the property division. The promissory note financed the farm
operations, and Lloyd's partnership interest in these operations was part of
the marital estate. This use of the
note merged and commingled the liability created by the note with the marital
estate and rendered any forgiveness of such debt a marital forgiveness, in
which Vicky had a marital interest.
However, the trial court erroneously disregarded the second $20,000
promissory note that the brothers had issued to their mother in August
1992. The evidence showed that the
brothers issued the note to their mother as evidence of indebtedness for money
their mother loaned them to purchase some farm land. Their mother obtained the money by cashing in her certificate of
deposit at the local bank. The trial
court included the land purchased with the money in the marital estate. Inasmuch as the farm property purchased with
the money was part of the marital estate, the liability associated with the
purchase was also part of the marital estate.
The trial court had no basis to include the farm land in the marital
estate but exclude the debt incurred to purchase the farm land.
Last, Lloyd argues that
the trial court ignored various debts, including consumer debts, which Lloyd's
reply brief sets at about $3,400 (consumer debt $1,743, Visa $1,306.55 and
hospital bill $359). Lloyd also claims
that the trial court overvalued the marital estate by about $10,900. Lloyd states that 1.78 acres of the
nongifted Erickson farm, valued at $1,700, actually belongs to his brother, not
him. Lloyd also claims that the trial
court double-counted a trailer home valued at $9,200 after already valuing it
as part of the Erickson farm appraisal.
The record is unclear as to why the trial court ignored these debts or
why it included the 1.78 acres and again the trailer home. It appears that the trial court
double-counted the trailer and improperly included his brother's 1.78 acre
parcel. See Peerenboom v.
Peerenboom, 147 Wis.2d 547, 552, 433 N.W.2d 282, 284 (Ct. App.
1988). Here, however, the overvaluation
appears to have been only fifty percent, by virtue of the fact that the trial
court assigned only one-half the property's overcounted value to Lloyd as a
one-half co-owner of the real estate.
The net overvaluation approximated $5,500. Because we cannot tell from the record whether the $3,400 of
debts should be disregarded or why the court included the trailer home and the
1.78 acre parcel, the trial court on remand should revisit these issues.
We therefore affirm the
trial court's award based on hardship, but reverse and remand the property
division for reexamination consistent with this opinion.
By the Court.—Judgment
affirmed in part; reversed in part; and cause remanded for proceedings
consistent with this opinion. No costs
to either party.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.