Marriage of Jackson

2017 MT 78N

• Court: Montana Supreme Court
• Decided: April 4, 2017
• Docket: 15-0573
• Status: Published

Opinion

04/04/2017

DA 15-0573 Case Number: DA 15-0573

IN THE SUPREME COURT OF THE STATE OF MONTANA 2017 MT 78N

IN RE THE MARRIAGE OF:

GREGORY A. JACKSON,

Petitioner and Appellant,

v.

CATHRYN J. (KIT) JACKSON,

Respondent and Appellee.

APPEAL FROM: District Court of the Fourth Judicial District, In and For the County of Missoula, Cause No. DR-09-624 Honorable Ed McLean, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Michael Sol, Terry L. Wolfe, Sol & Wolfe Law Firm, PLLP, Missoula, Montana

For Appellee:

David B. Cotner, Datsopoulos, MacDonald & Lind, Missoula, Montana

Submitted on Briefs: February 8, 2017

Decided: April 4, 2017

Filed:

__________________________________________ Clerk Justice Laurie McKinnon delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating

Rules, this case is decided by memorandum opinion and shall not be cited and does not

serve as precedent. Its case title, cause number, and disposition shall be included in this

Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana

Reports.

¶2 Gregory Jackson (Greg) appeals the District Court’s Findings of Fact and

Conclusions of Law regarding the distribution of marital property arising from the

dissolution of his marriage to Cathryn Jackson (Kit).1 Greg raises four issues on appeal

that we restate as follows:

1. Whether the District Court erred when it divided the marital estate pursuant to § 40-4-202, MCA.

2. Whether the District Court abused its discretion when it rejected the Standing Master’s Findings and Conclusions regarding the valuations of businesses included in the marital estate.

3. Whether the District Court erred by including Greg’s premarital property in its analysis of the marital estate pursuant to § 40-4-202, MCA.

4. Whether the District Court erred in rejecting joint tax returns as dispositive evidence of ownership percentages in its analysis of the marital estate pursuant to § 40-4-202, MCA.

¶3 We affirm the District Court’s Findings of Fact, Conclusions of Law, and Decree

of Dissolution.

1 Although Greg’s Reply Brief was not timely received, we did consider it as part of his appeal. 2 ¶4 Greg and Kit married December 31, 1991, in Helena, Montana, when they were 47

and 38, respectively. On the day the dissolution was entered, Kit was 62 and Greg was

71. Kit was in good health, but Greg’s had deteriorated somewhat. This was a second

marriage for both Greg and Kit and no children came from it. Neither Kit nor Greg had

many assets when they married, but neither did they have many debts. Notably, Greg had

recently retired from the State of Montana, and so brought his PERS retirement fund into

the marriage. After they married, he added Kit to his health insurance policy as she was

finishing school at Carroll College and he was working for a company in Washington.

¶5 Once she graduated in 1992, Kit worked a variety of jobs in the healthcare field,

with varying degrees of success. Her experiences included time as an EMT, cardiac

charge nurse, and working in pediatric oncology and in a neo-natal ICU. She also

worked in home health and multiple hospice businesses. Meanwhile, from 1990-1995,

Greg worked full-time for Ritter Construction. Greg and Kit both earned about $40,000

per year at this time. In 1995, Kit received a job offer in Utah, a state where Greg had no

employment opportunities. Nevertheless, he agreed to move with her and he eventually

found work. While he worked there as a full-time traffic engineer, Greg’s salary

improved to $70,000 per year. He continued with this salary and position until his and

Kit’s fortunes substantially improved.

¶6 The couple’s fortunes improved when Greg and Kit formed Hospice for Utah

(HFU). Greg and Kit differ in their memories of how HFU started, particularly in terms

of Greg’s role and contribution. Although Greg recalls having to convince Kit to start the 3 business, he had no medical credentials and no involvement in the medical side of the

business. His roles were more supportive and ancillary, running errands, delivering,

cleaning and assembling equipment, picking up prescriptions, installing software, and

projecting expenditures and income. Much of what Greg did for the company in its

formative period was done in his spare time, as he continued to work at his full-time job.

Greg also studied regulations and attended conferences and trainings on issues pertinent

to running a hospice business. Kit testified too, that he was emotionally supportive and

wanted very much for her to make the business successful. Eventually, Greg was able to

move back to Montana, receiving periodic funds from the company, but retaining no

active role in HFU. He never returned to work at the HFU Utah offices after moving to

Montana, and CPAs assumed his previous responsibilities for the cost reports.

¶7 Kit, on the other hand, made substantially greater contributions to HFU. She hired

employees, negotiated contracts, and wrote the policy and procedure manual, all in

addition to caring for the patients; Kit was the only registered nurse on staff when HFU

began. Nonetheless, she managed to establish a large network of critical physician

referrals throughout Utah. Additionally, HFU employees sought her guidance and

assistance whenever problems with the business arose. Her daily involvement and

availability was instrumental in HFU’s success. Prior to HFU’s beginning, and after it

formed, Kit trained in end of life care, adult acute care, hospice training, and hospice

administrative training. HFU received its hospice business license in December of 1997.

4 ¶8 HFU prospered very quickly. As HFU became profitable, it garnered buyout

offers from competitors. Around 2000, the Jacksons declined an offer from Odyssey

Corporation of $2 million for HFU. Odyssey tendered another offer of $4.5 million in

2002, which Greg wanted to accept. The deal fell through though, as Kit refused to sell.

Their disagreement over the sale to Odyssey signaled the beginning of their marriage’s

deterioration. Ultimately, however, Kit and Greg agreed to sell a portion of their interest

in HFU to the employees, using an Employee Stock Ownership Program (ESOP). Kit

agreed to the ESOP in an effort to assuage Greg. There were two sales under the ESOP,

each for 31%. The first sale netted over $1 million, while the second brought $1.4

million. The Jacksons retained the remaining 38% as a minority interest in HFU.

¶9 The Jacksons moved to Missoula, Montana, in 2002, not long after Greg had heart

surgery. In Missoula, Kit began a similar hospice business, Hospice of Missoula (HOM),

after she was approached by and met with several medical providers. Greg was not

involved in Kit’s meetings with these providers. Kit started HOM while she continued to

run HFU. Kit’s involvement in HOM mirrored that of HFU—educating employees,

negotiating contracts, and generally managing the business. Her devotion to both

businesses necessitated her dividing her time between Missoula and Utah, spending two

weeks at a time at each location, even though HFU was at that point staffed by competent

management. To facilitate her extended stays in Utah, Kit purchased a home, which

HFU then rented from her. Despite the length of his heart surgery convalescence, Greg’s

involvement in HOM likewise tracked the support role he had assumed for HFU, 5 assembling furniture, wiring phones, and researching software for Medicare billing. His

limited involvement stemmed in part from Kit’s knowledge that he was ready to retire,

but he remained available to assist Kit and HOM staff, however they might need him. At

trial, witnesses testified that Kit’s contributions were essential to the success of HOM and

that it would fail without her leadership. Greg called no witnesses to verify his

contributions to HOM.

¶10 Greg filed a Petition seeking dissolution of the marriage on August 24, 2009. The

District Court referred the case to Standing Master Susan Leaphart on November 25,

2009. After trial, Standing Master Leaphart entered proposed Findings of Fact and

Conclusions of Law on May 31, 2012. Kit and Greg both objected to the Standing

Master’s proposed findings. The matter then went before the Honorable District Court

Judge Edward McLean, who held numerous status conferences and hearings. After these

proceedings, the District Court entered its own Findings of Fact, Conclusions of Law and

Decree of Dissolution on April 30, 2015. Greg filed a Motion to Alter and Amend the

District Court’s Findings of Fact, Conclusions of Law on June 23, 2015, to which the

District Court did not respond and so was deemed denied. Greg timely filed an appeal to

this Court on September 18, 2015.

¶11 The District Court made findings that contradicted the findings of the Special

Master. The District Court reallocated the marital estate; struck the Standing Master’s

order that HFU be forced to pay Greg a salary; determined that the Standing Master’s

valuation of HOM was clearly erroneous; and ordered Kit to purchase Greg’s shares in 6 HFU for $400,000, with five years of additional payments. A district court is empowered

to reject the findings of a Standing Master when those findings are clearly erroneous.

Anderson v. Deafenbaugh, 2014 MT 215, ¶¶ 15-19, 376 Mont. 212, 331 P.3d 835. In

turn, we review a district court’s factual findings in a division of marital property for

clear error, while its conclusions of law are reviewed for correctness. In re Marriage of

Funk, 2012 MT 14, ¶ 6, 363 Mont. 352, 270 P.3d 39. “A finding of fact is clearly

erroneous if it is not supported by substantial evidence, if the court misapprehended the

effect of the evidence or if, upon reviewing the record, this Court is left with the definite

and firm conviction that the district court made a mistake.” In re L.H., 2007 MT 70,

¶ 13, 336 Mont. 405, 154 P.3d 622.

¶12 Although Greg objects to the unequal reallocation of the estate, his objection is

misplaced as the District Court is tasked under § 40-4-202, MCA, with an equitable

division, not an equal division. In re Marriage of Parker, 2013 MT 194, ¶ 47, 371 Mont.

74, 305 P.3d 816; In re Marriage of Garner, 239 Mont. 485, 488, 781 P.2d 1125, 1127

(1989). Under the provisions of § 40-4-202, MCA, the District Court is vested with

broad discretion to formulate an equitable division of marital property under the

circumstances that reflects the parties’ relative contributions to the marital estate. In re

Marriage of Bartsch, 2007 MT 136, ¶¶ 9, 19-20, 337 Mont. 386, 162 P.3d 72. Equity,

not equality guides that discretion. Marriage of Garner, 239 Mont. at 488, 781 P.2d at

1127.

7 ¶13 We note at the outset of our discussion that Greg’s first and second issues, whether

the District Court erred in its division of marital property, and whether the District Court

erred by rejecting the Standing Master’s valuation of HOM, are intertwined and

appropriate for concurrent discussion. Here, in a marital estate valued at more than $7

million, the District Court awarded Greg $3.2 million, or 45.7% of the net marital estate,

and Kit $3.8 million, or 54.3% of the net marital estate. Greg’s apportionment from the

District Court differs by approximately $100,000 from that of the Standing Master. The

difference arises in large part from the District Court’s finding that the Standing Master

misapprehended the weight of Greg’s expert testimony when valuing HOM. Unlike the

Special Master, the District Court noted that Greg’s expert failed to account for a

necessary salary adjustment if Kit were to leave or be bought out of the business, failed to

appropriately account for the risk inherent in the business, failed to consider the impact of

the Affordable Care Act’s passage on the business, and failed to consider the length of

stay of patients, which is critical to a hospice business’s cash flow. Thus, Greg’s expert

overvalued the worth of HOM and consequently inflated the net value of the marital

estate. The District Court found the Standing Master clearly erred by accepting Greg’s

expert valuation over Kit’s, who did account for all of those factors. The District Court

further concluded, as did the Standing Master, that unrefuted evidence of Kit’s greater

contributions to the businesses merited a proportionally greater share of their value, and

awarded Kit the more substantial share of the estate. We agree with the District Court

that Kit’s more substantial involvement in the hospice businesses merited a greater share 8 of their value, and that the Special Master clearly erred by accepting Greg’s expert

valuation testimony over Kit’s.

¶14 Further, the District Court struck the Standing Master’s conclusion that HFU

should continue paying Greg a salary. The Standing Master concluded Greg should

continue to receive compensation as an officer in HFU—$7,000 per month. Greg was

not an employee of the corporation, however, and performed no services for it at the time

of dissolution. HFU is owned primarily by the ESOP and was not a party to these

proceedings. As such, the District Court found the Standing Master clearly erred by

issuing such an order as the Court did not have personal jurisdiction over HFU. The

District Court further found that to award Greg a greater portion of the remaining assets

in order to compensate him for this stricken revenue would improperly punish Kit for the

Standing Master’s error. We agree with the District Court that the Standing Master

clearly erred by ordering HFU to pay Greg a salary when he was not an officer and

performed no services for HFU. Additionally, we agree with the District Court’s

conclusion that the Standing Master lacked personal jurisdiction over HFU and thus

could not effectuate such an order, even if it was not in error. Further, we find the

District Court’s determination that Kit would be unfairly impacted if other marital assets

were to be redistributed to compensate Greg for this lost revenue constitutes an equitable

division of marital property that was not clearly erroneous.

¶15 The District Court’s conclusion that Kit should purchase Greg’s shares of HFU for

$400,000, with five years of additional payments, was also not clearly erroneous. To 9 mitigate the prolonged dispute between the parties over the valuation of HFU, the District

Court ordered a buyout: Kit was to tender an offer to buy Greg’s shares in HFU for any

amount she chose. Reciprocally, Greg could refuse her tender offer and opt instead to

buy Kit’s shares for the same amount. This proposition was a structured sale orchestrated

by the District Court to which neither Greg nor Kit objected and was designed to alleviate

Greg’s concern that the Standing Master’s order had “stranded” his investment in HFU.

We find this structured sale was an equitable means to resolve Greg’s concerns. The

District Court did not clearly err in ordering it.

¶16 Greg’s third issue, whether his premarital property was properly included in the

District Court’s analysis and division of the marital estate constitutes an issue of

well-settled law in Montana since we decided Funk. In Funk, we concluded that

§ 40-4-202, MCA, obligates the District Court to equitably apportion all assets of either

or both spouses, regardless of by whom and when acquired. The District Court’s

equitable distribution of this property is subject to the factors enumerated in § 40-4-202,

MCA, and the unique factors of each case. Funk, ¶ 19. Here, the record shows Greg

received an unequal, but equitable distribution that accurately reflected his contribution to

the marriage in accordance with the factors of § 40-4-202, MCA. Indeed, the District

Court specifically noted that Greg had provided nonmonetary contributions to the

business, including giving emotional support and encouragement to Kit when the

ventures began. The District Court also found he had contributed in supportive, ancillary

roles such as preparing expense reports. Accordingly, we conclude the District Court did 10 not err when it made findings pertinent to § 40-4-202, MCA, and included Greg’s

premarital property when analyzing and dividing the marital estate in compliance with

Funk.

¶17 Resolution of Greg’s final issue of whether a married couple’s tax returns

constitute dispositive evidence of an ownership agreement between the parties in a

marriage dissolution again turns on compliance with our holding in Funk and the intent of

§ 40-4-202, MCA. Greg argues that the District Court’s distribution ignored the fact that

he and Kit each owned half of HFU and HOM, as evidenced by their tax returns and

equal distributions over the years. The District Court, however, is tasked with an

equitable division of all marital property, including shares of ownership in a business.

Under the statute, the court is to “equitably apportion between the parties the property

and assets belonging to either or both, however and whenever acquired and whether the

title thereto is in the name of husband or wife or both.” Funk, ¶ 17. This directive

applies to all assets between the parties. Funk, ¶ 19. We find our holding in Funk

dispositive. Under Funk and § 40-4-202, MCA, property acquired during a marriage is

not divided and awarded upon the marriage’s dissolution based on who holds legal title to

the property. The marital property is to be equitably distributed, regardless of ownership

form. Thus, whether the couple’s tax return reflects an established form of ownership is

inapposite. Greg’s objections to the contrary do not conform with § 40-4-202, MCA, and

11 ¶18 We affirm the District Court’s Findings of Fact, Conclusions of Law, and Decree

¶19 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of

our Internal Operating Rules, which provides for memorandum opinions. In the opinion

of the Court, the case presents a question controlled by settled law or by the clear

application of relevant standards of review.

/S/ LAURIE McKINNON

We concur:

/S/ MICHAEL E WHEAT /S/ DIRK M. SANDEFUR /S/ JAMES JEREMIAH SHEA /S/ BETH BAKER