Barrett v. Barrett

232 P.3d 799, 149 Idaho 21, 2010 Ida. LEXIS 71

• Court: Idaho Supreme Court
• Decided: April 23, 2010
• Docket: 35763
• Status: Published

Opinions

HORTON, Justice.

This is an appeal from the district court’s decision on appeal from the magistrate court. In this appeal, we are asked to determine the character of property located in Etna, Wyoming (the Etna property) and disputed in the divorce proceedings between Gregory Barrett (Greg) and Ann Marie Barrett (Ann). The Etna property was originally Ann’s separate property. During the marriage, in connection with refinancing the Etna property, Ann executed a quitclaim deed to Ann and Greg as tenants by the entirety. The magistrate judge found that the language of the quitclaim deed was clear, that Ann’s testimony regarding her intent in signing the deed was therefore inadmissible and concluded that the Etna property was transmuted to community property. On appeal, the district court held that trial judges have leeway to consider additional evidence in the context of refinancing and remanded for the magistrate judge to determine whether Greg met his burden in showing that transmutation had occurred. Greg timely appealed. We affirm the decision of the district court.

I. FACTUAL AND PROCEDURAL BACKGROUND

Prior to her marriage to Greg, Ann was married to Kevin Spencer. They divorced in 1996 and, as part of the divorce settlement, Arm was awarded the Etna Property now in dispute. In 1997, Ann and Greg were married in Idaho Falls. At the time of the marriage, Ann owed $123,961 on a debt secured by the Etna property and, until 1999, made monthly payments toward the debt from her separate checking account. In 1999, Ann sold approximately 2.5 acres of the property to pay off the debt on the Etna property. As the magistrate judge explained,

[t]o close on that sale, Ann had to pay off the existing mortgage debt____ To pay that debt, she and Gregory borrowed $34,512 from the Bank of Star Valley (BSV), giving a promissory note that they both signed. Ann also signed a quitclaim deed conveying the remaining Etna acreage to “Ann Barrett and Gregory Barrett, Wife and Husband as Tenants by the Entireties,” and then she and Gregory signed a new mortgage in favor of BSV, pledging the property to secure repayment of the $34,512 loan.

The quitclaim deed was one of a number of documents related to the sale and refinancing. At trial, Ann testified that she would not have signed the quitclaim deed had she understood that she was giving Gregory a one-half interest in the property. From the time of the refinancing until 2003, Ann made payments on the BSV debt from a separate checking account. In 2003, Ann and Greg opened a joint checking account and Ann made payments on the debt from that checking account. At the time of the divorce trial, the debt was reduced to $22,881.

On August 29, 2005, Greg filed for divorce and, on September 14, 2005, Ann filed a counterclaim for divorce. Originally, Ann requested an unequal distribution of the community property; she later abandoned this request. Later in 2005, Ann sold two additional acres of the Etna property, the proceeds of which were placed in her attorney’s trust account. The divorce trial, involving questions of the grounds for divorce, custody and child support, division of property and debt, and Ann’s request for attorney fees, took place from June 18-22, 2007. On July 3, 2007, the magistrate judge entered a decree of divorce, effective nunc pro tunc June 22, 2007. On August 30, 2007, the trial court decided the issues relating to the grounds for the divorce and child custody and support. On September 11, 2007, the magistrate judge entered Findings of Fact and Conclusions of Law on Property and Debt Division and Attorneys Fees. The appeal before this Court presents only the question of the character of the Etna property.

The magistrate judge found the quitclaim deed to be clear and unambiguous. Accordingly, although there was testimony during the trial regarding the execution of the quitclaim deed, the trial judge did not consider Ann’s testimony, finding it to be inadmissible parol evidence. Rather, the trial court ruled that Ann’s execution of the quitclaim deed transmuted the Etna property into community property.

Ann appealed to the district court. The district court ruled that “courts are granted much broader leeway in considering parol evidence in situations where an otherwise unambiguous document is part of a refinancing situation____ In such situations, the intentions of the parties are rarely clear simply from reading a document prepared by a third party.” The district court found that the magistrate judge should have considered parol evidence and remanded the case for further proceedings.¹ Greg timely appealed.

II. STANDARD OF REVIEW

On an appeal from a case in which the district court acts in an appellate capacity with regard to a decision of the magistrate judge, this Court reviews the record of the magistrate, affirming or reversing the decision of the district court. Johnson v. Johnson, 147 Idaho 912, 915-16, 216 P.3d 1284, 1287-88 (2009). This Court exercises free review over conclusions of law. Bliss v. Bliss, 127 Idaho 170, 172, 898 P.2d 1081, 1083 (1995). Division of property is a factual question, left to the sound discretion of the trial judge. Id. “Appellate courts ... are not permitted to substitute their own view of the evidence for that of the trial court, or to make credibility determinations.” Nelson v. Nelson, 144 Idaho 710, 713, 170 P.3d 375, 378 (2007) (citing McGriff v. McGriff, 140 Idaho 642, 645, 99 P.3d 111, 114 (2004)). The relevant inquiry in determining an abuse of discretion “is whether the trial court (1) correetly perceived the issue as one of discretion; (2) acted within the outer boundaries of its discretion and consistently with the legal standards applicable to the choices before it; and (3) reached its decision by an exercise of reason.” Hopper v. Hopper, 144 Idaho 624, 626, 167 P.3d 761, 763 (2007).

III. ANALYSIS

In deciding this appeal, we consider only Idaho law, as neither party has argued that Wyoming law should apply in determining the character of the Etna property.²

A. Evidence beyond a deed is admissible to show or disprove transmutation.

The trial court in a divorce proceeding is charged with identifying and assigning the parties’ interest in the community property. 1.C. § 32-712 (“In case of divorce by the decree of a court of competent jurisdiction, the community property and the homestead must be assigned____”). Idaho Code § 32-713 reiterates this obligation: “[t]he court, in rendering a decree of divorce, must make such order for the disposition of the community property____” As it is undisputed that the Etna property was Ann’s separate property at the time of the parties’ marriage, the inquiry is whether the character of that property changed during the marriage.

The determination whether property has been transmuted, from separate to community property or vice versa, is, as we have long stated, a question of intent. Hoskinson v. Hoskinson, 139 Idaho 448, 459, 80 P.3d 1049, 1060 (2003); Suchan v. Suchan, 106 Idaho 654, 664, 682 P.2d 607, 617 (1984); In re Bogert’s Estate, 96 Idaho 522, 526, 531 P.2d 1167, 1171 (1975); see also Ustick v. Ustick, 104 Idaho 215, 222, 657 P.2d 1083, 1090 (Ct.App.1983); Griffin v. Griffin, 102 Idaho 858, 861, 642 P.2d 949, 952 (Ct.App.1982). The party asserting transmutation must prove the claim by clear and convincing evidence.

[W]here it is asserted ... that a spouse intended to transmute property or to make a gift, the burden is on the party urging the assertion to prove the intent in question by clear and convincing evidence. Concomitantly, because the question of whether a “clear and convincing” burden of proof has been met is a question for the trier of facts to decide in the first instance, the determination of the trial judge-that a claim was not shown by clear and convincing evidence-is entitled to great weight on appeal.

Hoskinson, 139 Idaho at 459, 80 P.3d at 1060 (quoting Ustick, 104 Idaho at 222, 657 P.2d at 1090).

In this case, the magistrate judge considered this Court’s decisions in Hall v. Hall, 116 Idaho 483, 777 P.2d 255 (1989) and Bliss v. Bliss, 127 Idaho 170, 898 P.2d 1081 (1995), and held that “the [quitclaim] deed shows no ambiguity, and the court finds that it transmuted the Etna real estate from separate property to community property.” Although the trial court’s interpretation of Hall and Bliss is understandable, we conclude that the language of a deed executed in the course of refinancing does not conclusively determine the character of property for purposes of a divorce action. Rather, the intention of the party or parties executing the deed is dispositive. Thus, neither I.C. § 55-606 nor the statute of frauds governs because the pertinent question is not the effectiveness of the deed. Although the trial judge, as the finder of fact, may consider a deed as evidence in determining intent, it is not the only evidence available to a judge considering the question of transmutation.

This Court has previously allowed courts to look to a variety of factors in determining the character of property. In Hoskinson, while recognizing that marriage settlement contracts require formalities, the Court felt free to look to additional testimony to ascertain the intent of the parties. 139 Idaho at 459-60, 80 P.3d at 1060-61. Similarly, in Winn v. Winn, 105 Idaho 811, 673 P.2d 411 (1983), involving a property purchase concluded some months after the marriage using separate property of the husband, the Court considered a variety of factors to be considered in the absence of the parties’ “actual, articulated intent”: (1) whether the community was liable for payment on the loan; (2) the source of the payments toward the loan; (3) the basis of credit upon which the lender relied in making the loan; (4) the nature of the down payment; (5) the names on the deed; and (6) who signed the documents of indebtedness. Id. at 814-15, 673 P.2d at 414-15. This Court explained:

[t]he presence or absence of any or all of the above listed factors is relevant in determining the character of the credit by which a loan is obtained. None is conclusive. We deliberately refrain from selecting one item as dispositive. Such an approach is too rigid in light of our ultimate purpose of determining the likely intent of the spouses and in consideration of the highly individualistic and often complex fact situations presented.

Id. at 815, 673 P.2d at 415. The fact that Winn involved the purchase of new property rather than the question of whether existing property was transmuted does not change the analysis here. Winn was clear in its holding that evidence beyond the deed itself could be introduced to determine the character of property even where that determination might differ from the language of the deed.

We recognize that some of our cases have employed language that would suggest the opposite conclusion. In Hall v. Hall, this Court stated that “[w]here the language of a deed is plain and unambiguous, the intention of the parties must be determined from the deed itself, and parol evidence is not admissible to show intent.” 116 Idaho at 484, 777 P.2d at 256; see also Dunagan v. Dunagan, 147 Idaho 599, 603, 213 P.3d 384, 388 (2009); Bliss, 127 Idaho at 174, 898 P.2d at 1085. However, these statements have obscured decisions that are otherwise consistent with the rule expressed today.

In Dunagan, there was no challenge on appeal to this Court from the determination that the execution of a quitclaim deed in favor of husband and wife during refinancing transmuted the wife’s separate property. On appeal, the primary question presented to this Court was whether a substantially equal distribution of the community property was appropriate. Thus, the Court’s statement that “courts do not have discretion under I.C. § 32-712(1) to consider compelling reasons to alter the terms of a deed that is plain on its face” was dictum. Dunagan, 147 Idaho at 603, 213 P.3d at 388.

In Bliss, the husband executed a quitclaim deed to his wife in order to prevent the Internal Revenue Service (IRS) from attaching the property to satisfy a previous tax liability. 127 Idaho at 171-72, 898 P.2d at 1082-83. This Court upheld the determination that the property was the wife’s separate property. The reasoning behind this decision is clear: in order to avoid seizure of the property by the IRS, husband intended to convey the property to wife. Indeed, a contrary result would have placed the Court in a position of not only condoning, but facilitating tax evasion. Because “a court of equity will not knowingly aid in the furtherance of an illegal transaction,” the husband’s testimony was properly excluded. Stearns v. Williams, 72 Idaho 276, 290, 240 P.2d 833, 842 (1952).

Finally, Hall is distinguishable on two separate grounds. First, Hall concerned a deed from a third party (the husband’s grandmother), and therefore takes it outside the question of the character of property established within the marriage. Hall, 116 Idaho at 483-84, 777 P.2d at 255-56. Second, Hall is notable for its fractured decision. Of the five justices, Justices Huntley and Johnson voted to exclude parol evidence, while Justice Bistline concurred, finding that clear and convincing evidence had not been presented. Chief Justice Bakes dissented and would have remanded for additional factual findings, and Justice Shepard did not participate due to his untimely death. Id. at 484, 495, 777 P.2d at 256, 267. This Court has previously stated that, “where the third vote necessary to pronounce a decision is by a justice who concurs in the result only, the rationale contained in the opinion is not a decision of the Court and is not controlling in other cases.” Osick v. Pub. Employee Ret. Sys. of Idaho, 122 Idaho 457, 460, 835 P.2d 1268, 1271 (1992).³

Although this Court possesses authority to revise the disposition of community property on appeal, I.C. § 32-714, the determination whether property has been transmuted is a question of fact turning on intent. In making this factual determination, trial courts are free to consider all relevant evidence regarding that intent. We therefore affirm the district court’s decision to remand the case to the magistrate judge for consideration of additional evidence.

In light of this decision, we do not reach the question of whether Ann would be entitled to an unequal division of the community property under I.C. § 32-712(1)(a). In the event that the magistrate judge determines that the Etna property is community property, he should further decide whether that determination constitutes compelling circumstances warranting an unequal division of community property. Dunagan, 147 Idaho at 603, 213 P.3d at 388.

Greg has asked this Court to decide whether he met his burden of proof to show a transmutation. We decline to do so. As noted, this is a factual question of intent. “It is not the function of this Court to make findings of fact.” Walter v. Potlatch Forests, Inc., 94 Idaho 738, 740, 497 P.2d 1039, 1041 (1972).

B. We do not award attorney fees to Ann.

Ann has requested attorney fees under I.C. § 12-121. Under this provision, attorney fees may be awarded only if the appeal was brought or defended frivolously, unreasonably, or without foundation. Cole v. Esquibel, 145 Idaho 652, 656, 182 P.3d 709, 713 (2008). In light of this Court’s earlier decisions which suggested that deeds are to be given conclusive effect, we conclude that Greg did not unreasonably pursue this appeal. We therefore decline to award attorney fees.

IV. CONCLUSION

We hold that trial courts may consider evidence beyond an unambiguous deed when deciding claims of transmutation of property. We therefore affirm the decision of the district court. We deny Ann’s request for attorney fees but award costs to her as the prevailing party on appeal.

Chief Justice EISMANN and Justice BURDICK concur.

1 . Following the district court's decision, on September 17, 2008, the magistrate judge entered Additional Findings of Fact & Conclusions of Law Following Remand. As a result of the appeal to this Court, on November 5, 2008, the magistrate judge withdrew those findings. We have not considered those additional findings on this appeal.

2 . We apply Idaho law based on the principle that it is the burden of a party relying on foreign law to both plead and prove the application of that law. I.R.C.P. 44(d).

3 . We note that Chief Justice Bakes subsequently questioned the continuing validity of Hall in his special concurrence in Treasure Valley Bank v. Butcher, which allowed parol evidence in characterizing a deed of trust. 117 Idaho 974, 979, 793 P.2d 206, 211 (1990) (Bakes, C.J., concurring).