No. 94-177

IN THE SUPREME COURT OF THE STATE OF MONTANA

1994

IN RE THE MARRIAGE OF

CATHERINE A. McNELLIS,

Petitioner and Respondent,

and

ROBERT F. McNELLIS,

Respondent and Appellant.

APPEAL FROM: District Court of the First Judicial District,

In and for the County of Lewis and Clark,

The Honorable Jeffrey Sherlock, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Thomas F. Dowling, Dowling Law Firm,

Helena, Montana

For Respondent:

John Hollow, Attorney at Law,

Helena, Montana

Submitted on Briefs: August 25, 1994

Decided: November 21, 1994
Justice William E. Hunt, Sr., delivered the opinion of the Court.

Robert (Bob) McNellis appeals the judgment of the First

Judicial District Court, Lewis and Clark County, dissolving the

parties' marriage and distributing the marital estate. We affirm.

The issues on appeal are:

1 . Did the District Court properly estop Bob from changing

his position at trial regarding the value of the recycling machine

investment?

2 . Was the District Court's valuation of the marital assets

clearly erroneous?

3 . Was the District Court's distribution of the marital

estate clearly erroneous?

Bob and Cathy were married on December 29, 1967, in Fort Knox,

Kentucky. About two years later, the couple moved from Kentucky to

Indiana, where Bob worked for Corning Glassworks and obtained a

masters degree in management. Bob was subsequently transferred to

Pennsylvania. During these early years of the marriage, Cathy

taught both high school and grade school, substitute taught, and

worked as an office manager. In 1975, Bob left Corning Glassworks,

and the couple moved to Helena where Bob obtained employment with

the Federal Reserve Bank.

Three children were born of the marriage. During the

marriage, Cathy did most of the housecleaning and cooking and was

the primary caretaker of the children. She also attended classes

at Carroll College, and received a degree in accounting in 1983.

After a nine year absence from the work force, she returned to work

2
part-time as an accountant/office manager. By 1986 or 1987, her

part-time job evolved into a full-time position. At the time of

the petition for dissolution, she earned an annual salary of

$39,600.

Bob's employment with the Federal Reserve Bank ended in 1989.

During his employment with the bank, Bob invested money in both a

Federal Reserve Thrift Plan and a Retirement Plan. At the time of

the petition for dissolution, the Retirement Plan was worth

$76,720, and the Thrift Plan was worth about $103,000, less an

outstanding loan balance of about $13,000.

After his discharge from the bank, Bob worked as a consultant

for Independent Bank Service Corporation and as an adjunct

professor of economics at Carroll College. During his semester at

Carroll College, Bob developed a plan for a private business

venture called Advanced Industrial Concepts and Coating (AIC).

AIC consists of two separate entities: a corporation (AIC,

Inc.) and a partnership (AIC Properties). AIC, Inc., deals with

the actual coating of products. AIC Properties deals with the

acquisition and maintenance of the property on which AIC, Inc., is

located. Cathy and Bob brought in Gary and Kathy Dagel, and in

June 1990, the four became stockholders of AIC, Inc., and partners

in AIC Properties. Each couple contributed cash or property in the

amount of $45,000 as start-up capital. According to Bob's

testimony, the finances of the partnership and the corporation were

not carefully separated, and frequently intermingled.

3
Cathy and Bob borrowed $34,000 from the Thrift Plan and loaned

that amount to AIC, Inc., to put toward the purchase of the

Steffick Building located on North Main Street in Helena. The

partnership obtained a mortgage and acquired the building. At the

time of the hearing, an outstanding balance of approximately

$186,000 remained on the building loan.

In September 1991, Bob signed a five year lease agreement with

Dwayne Anderson, owner of Recycle Technologies of Billings, for a

recycling machine known as a "cash can." Bob paid $30,000 for the

lease. The cash can is shaped like a large soda can and typically

is set up in parking lots of busy supermarkets. People insert

recyclable aluminum cans into the machine which electronically

keeps track of the weight of the cans and then pays out a certain

amount of money according to the weight. In theory, the operator

of the cash can generates income from the subsequent sale of the

aluminum cans to a central recycling facility. According to

Anderson's testimony, the plan was for Bob to recover his initial

investment of $30,000, plus additional profits, over the term of

the five year lease.

In April 1992, the Daqels gave notice that they were

withdrawing from AIC, Inc., and AIC Properties. The McNellises and

the Daqels entered into arbitration in November 1993. They reached

an agreement whereby Bob would pay them $55,000 for their one-half

interest, provided that Bob could obtain financing on or before

February 9, 1994. The agreement provided that if Bob could not

raise the money to buy the Daqels out, the Daqels would be allowed

4
to sell AIC, including the Steffick Building, and retain their

one-half of the proceeds. If they had to sell the building, the

agreementprovidedthatthe initial asking price would be $334,000,

and if it did not sell, the asking price could be incrementally

reduced, but in no event less than $300,000. The agreement further

provided that the proceeds of the sale would be used to pay off the

mortgage, to cover any realtor's commission and title insurance,

and to repay the balance of the Thrift Plan loan owed to the

McNellises.

Cathy petitioned for dissolution of the marriage on

December 11, 1992. The District Court heard the matter on

November 24, 1993. At the hearing, both parties testified to the

value of the marital assets and debts. At issue on appeal is the

value of three particular items--Recycle Technology, AIC

Properties, and the Federal Reserve Thrift Plan--and the final

division of the marital estate.

The District Court issued findings of fact, conclusions of

law, and order on January 7, 1994, and entered judgment on

January 18, 1994, distributing the marital assets and debts as

follows:

Assets

Cathy

(1) Residence $117,500

(2) Condominium

Contract for Sale 11,000

(3) Recycle Technology

(4) Household goods 7700

(5) 1988 Buick 3500

(6) 1984 Ford 1000

(7) 1987 Oldsmobile

$30,000

1500

5
(8)

(9)

(10)

(11)

(12)

(13)

(14)

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Federal Reserve

Thrift Plan 90,344

Galusha Retirement 18,366

Prudential Life

Insurance Policy

Federal Reserve

Retirement

AIC, Inc.

AIC Properties

AIC Loan

6136

76,720

0

81,000

13,430

Total Assets $255,546 $202,650

Percent of Total 56% 44%

Debts

Mortgage on

Residence

Post-separation

Credit Card debt

Property Taxes

Valley Bank debt

AIC credit line

Bank America debt

First Bank debt

Pre-separation

Credit Card debt

Total Debts

Percent of Total

NET DISTRIBUTION

PERCENT OF TOTAL

82,000

4392

1000

8100

? ?

? ?

6500

1958

$ 87,392 $ 16,558

84% 16%

=============================

$168,154 $186,092

47% 53%

On January 28, 1994, Bob moved the District Court to amend its

findings and conclusions. The District Court denied the motion.

Bob filed notice of appeal on April 11, 1994.

ISSUE 1

Did the District Court properly estop Bob from changing his

position at trial regarding the value of the recycling machine

investment?
When this Court reviews a district court's conclusions of law,

we are not bound by the district court's conclusions and are free

to reach our own. In re Marriage of Danelson (1992), 253 Mont.

310, 317, 833 P.2d 215, 219. Our determination on appeal is simply

whether the district court correctly or incorrectly applied the

law. Danelson, 833 P.2d at 220 (citing Steer, Inc. v. Dept. of

Revenue (1990), 245 Mont. 470, 803 P.2d 601).

The record reveals that on November 22, 1993, two days before

the hearing, Bob filed supplemental answers to Cathy's first set of

combined discovery requests. Interrogatory No. 26 instructed Bob

to Ut[l]ist the items that you believe comprise the marital estate,

assigning values to each item and stating the basis therefore in

each case." Among the list of marital assets, Bob included the

Recycle Technologies cash can investment and assigned a value of

$30,000 to it. Bob also placed a value of $30,000 on the cash can

investment on two other occasions: On May 17, 1993, in Attachment

No. 5 to his answer to Cathy's first set of combined discovery

requests; and on July 30, 1993, in his supplemental answers.

When Bob took the stand at the hearing, however, he testified

that the value of the cash can was only $3000. He stated, "[w]e're

not going to get [$]30,000 out of it so I would take it for $3,000

and try to chase it down, see if I couldn't work something out of

it." Bob also called Dwayne Anderson, owner of Recycle

Technologies, to testify to the value of the cash can investment.

Anderson stated that, if the equipment were sold as scrap metal,

its salvage value "could be $2500.1' However, Anderson stated that

7
this "would be a bad idea." Furthermore, Anderson testified that,

although no profit had been made from the venture, "being the

eternal optimist, I would like to think there is prospect of

[profit] at some point." Prior to Anderson's testimony as to the

value of the investment, Cathy's attorney objected, stating that

"[iIf the intent of his testimony is to establish a value, [Bob is]

precluded by his own admissions . . . in which he signed answers to

interrogatories stating the value of this investment was $30,000."

In its findings of fact and conclusions of law, the District

Court concluded that "Bob is judicially estopped from changing the

valuation of [the cash can investment] some two days after filing

his interrogatory with the Court," and placed a value of $30,000 on

the cash can investment. We agree.

"Under well established concepts of law, a party cannot take

one position during pretrial discovery and then change his position

at the time of trial or on appeal." Montana Rail Link v. Byard

(19931, 260 Mont. 331, 343, 860 P.2d 121, 128; Plouffe v.

Burlington Northern, Inc. (1986) t 224 Mont. 467, 474, 730 P.2d

1148, 1153. Section 26-l-601(1), MCA, provides that the following

is a conclusive presumption:

[T]he truth of a declaration . . . of a party, as against

that party in any litigation arising out of such

declaration . . . whenever he has, by such declaration

. . . intentionally led another to believe a particular

thing true and to act upon such belief.

In Bvard, this Court upheld the hearing examiner's decision to

exclude testimony which Montana Rail Link (MRL) sought to introduce

but which contradicted MRL'S pretrial answers to Byard's

8
interrogatory requests. At no time prior to trial did MRL seek to

modify its answer or indicate in any way that it would present

contrary testimony. Likewise, at no time prior to trial in the

instant case did Bob seek to modify the stated value of $30,000,

nor did he indicate prior to trial that he would present testimony

contrary to his pretrial position. Although the District Court,

sitting without a jury, allowed Bob and Dwayne Anderson to testify

contrary to Bob's pretrial answers, it correctly refused to

consider that testimony in determining the cash can's value and

correctly concluded that Bob was estopped from changing his

position at trial.

ISSUE 2

Was the District Court's valuation of the marital assets

clearly erroneous?

In addition to the valuation of the cash can investment, Bob

attacks the District Court's valuation of AIC Properties at $81,000

and the Federal Reserve Thrift Plan at $90,344. Citing In re

Marriage of Hall (1987), 228 Mont. 36, 740 P.2d 684, Bob asserts

that the proper

standard of review of distribution and valuation of

marital property is that the Supreme Court will reverse

a District Court only upon a showing that the District

Court has acted arbitrarily or has committed a clear

abuse of discretion, resulting in either instance in

substantial injustice.

In 1992, however, this Court changed its standard of review

regarding a district court's findings of fact in the division of

marital estates from an abuse of discretion standard to a clearly

9
erroneous standard. In re Marriage of Sacry (1992), 253 Mont. 378,

381, 833 P.2d 1035, 1037; In re Marriage of Danelson (1992), 253

Mont. 310, 317, 833 P.2d 215, 219; In re Marriage of Taylor (1993),

257 Mont. 122, 125-26, 848 P.2d 478, 480. Therefore, we review the

district court's findings of fact to determine whether those

findings are clearly erroneous. Danelson, 833 P.2d at 219; Taylor,

848 P.2d at 480.

This Court has established several principles by which we

review a district court's valuation of marital property. It is

well settled law that "[w]hen there is a dispute over property in

a marriage dissolution, the district court may assign any value

that is within the range of values presented into evidence.*'

Tavlor, 848 P.2d at 481 (citing In re Marriage of Kramer (1987),

229 Mont. 476, 747 P.2d 865). Wowever, if the values are widely

conflicting, then the district court must state its reasons for

determining a certain value." Tavlor, 848 P.2d at 481 (citing In

re Marriage of Glass (1985), 215 Mont. 248, 697 P.2d 96).

Recycle Technoloqies Cash Can Investment

As discussed under Issue 1, the District Court properly

estopped Bob from changing his position as to the value of the cash

can investment at trial. In its findings of fact and conclusions

of law, the District Court clearly set forth its reasons for

rejecting Bob's proposed valuation of the cash can and for placing

a value of $30,000 on it. We conclude that the District Court's

valuation of the cash can investment was proper.

10
AIC Properties

Bob asserts that the District Court incorrectly valued AIC

Properties at $81,000. He argues on appeal that, in arbitration

proceedings between the McNellises and the Dagels, "an arms length

value of $55,000.00 was arrived at as the value of the Dagel

one-half interest . . .'I and based on that "arms length" settlement, the McNellises' one-half interest for the purposes of marital

property distribution is also $55,000. At trial, Bob also

testified, after extensive calculations, that the McNellises' share

was worth "between 38,500 and 54,000, 54,190, to be exact."

The District Court succinctly summarized the positions of the

parties and made the following finding of fact:

This partnership owns the building in which AIC, Inc.,

operates. . . . The building has been appraised at

$334,300 . . . . Parts of the building are used by AIC

in its industrial coating business, and other parts are

leased out to other tenants. The rent paid by the

tenants makes the mortgage payment due on the property.

. . . .

The parties owe $185,000 to the Small Business

Administration on the building. Further . . . AIC

Properties owes about $13,000 to Bob. Catherine feels

that the AIC Properties Partnership should be valued at

$81,000. This takes the appraised value of the building

($334,300) and subtracts from it the SBA loan of

$185,000, the $13,000 owed to Bob, and the $55,000 owed

to the Dagels. Bob, on the other hand, contends that AIC

is worth on $55,000. He makes his calculations by taking

the increase in value of the building over its book

value, which totals $81,000. He then adds in the

parties['] investment of $29,000 to come up with

$110,000. Bob would then subtract the debt owed to the

Dagels ($55,000), to come up with the $55,000 figure.

The Court, however, finds that this approach ignores the

market value of the building. Therefore, the Court

values AIC Properties at $81,000.

11
We conclude that the District Court set forth sufficient reasons

for adopting Cathy's valuation of AIC Properties, and therefore,

the value of $81,000 is not clearly erroneous.

Federal Reserve Thrift Plan and AIC Debt

Bob states that the District Court set aside all of the Thrift

Plan to Cathy and valued it at $90,344. He contends that when the

AIC loan is added back to the Thrift Plan, it will total $103,000,

and therefore, the District Court incorrectly valued the Thrift

Plan. The District Court distributed the Thrift Plan as follows:

Pursuant to Petitioner's Exhibit 7, the current balance

that the parties have in the thrift plan is $90,344.

There is a $13,430 loan against this account that is

being paid by AIC. The Court values the thrift plan at

$90,344 and awards it to Catherine. The loan payments

from AIC of $13,430 shall be Bob's.

If the remaining balance of the loan is added to the current

balance of the Thrift Plan, the total would be $103,774; however,

the District Court clearly severed the loan from the Thrift Plan,

divided the total $103,744 into one unit of $90,344 and one unit of

$13,430, and awarded these units respectively to Cathy and Bob.

Bob's contention that the $13,430 debt that AIC owes the McNellises

"is not an 'asset' and is in fact a liability which Bob must pay to

himself" is entirely without merit. The debt is not personally

owed by Bob; it is owed by AIC Properties, a separate legal entity.

The District Court's award severs the loan from the Thrift Plan,

and when AIC repays the loan, those payments will go to Bob, and

not to Cathy. We conclude that the District Court's valuation of

the Thrift Plan was proper.

12
ISSUE 3

Was the District Court's distribution of the marital estate

clearly erroneous?

"Our review of marital property divisions is whether the

district court's findings of fact are clearly erroneous." In re

Marriage of Nordberg (Mont. 1994), 877 P.2d 987, 991 St. Rep. 531;

In re Marriage of Davies (Mont. 1994), 51 St. Rep. 929. "If

substantial credible evidence supports the court's findings and

judgment, this Court will uphold the district court's decision

unless there is an abuse of discretion." Nordberq, 877 P.2d at

991. Substantial evidence is defined as "evidence that a

reasonable mind might accept as adequate to support a conclusion:

it consists of more than a mere scintilla of evidence but may be

somewhat less than a preponderance." Davies, 51 St. Rep. at 932

(citing Barrettv. Asarco Inc. (1990), 245 Mont. 196, 200, 799 P.2d

1078, 1080).

Distribution of a marital estate is determined by the

guidelines in 5 40-4-202(l), MCA, which provides in part:

In a proceeding for dissolution of marriage . . . the

court, without regard to marital misconduct, shall . . .

finally 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 the husband or wife or both.

It is a well-settled rule that an equitable distribution does not

require a 50/50 distribution of the marital estate. Davies, 51

St. Rep. at 933; Nordberq, 877 P.2d at 992; In re Marriage of

Bowman (1987), 226 Mont. 99, 734 P.2d 197.

13
Bob argues that the District Court "gave complete credence to

Cathy's testimony regarding value of the Marital Estate and adopted

her Proposed Findings of Facts and Conclusions." The record does

not support this contention. The District Court rejected Cathy's

proposed findings and conclusions regarding child support and

ordered Bob to pay an amount substantially less than her request.

The District Court also rejected Cathy's proposed valuation of the

family residence. An examination of the findings and conclusions,

reveals that the District Court carefully considered the evidence

and testimony presented and made a reasoned valuation and

distribution of each asset and liability. We conclude that the

District Court's determinations are supported by substantial

credible evidence and are not clearly erroneous.

Bob further argues that the District Court erroneously "set

aside to Cathy nearly all of the assets having a hard cash value."

This clearly is not the case, particularly with respect to Bob's

award of the Federal Reserve Retirement Plan and AIC Properties.

Moreover, while the District Court awarded Bob roughly 44 percent

of the total assets of the marital estate, the District Court

distributed to him only 16 percent of the total marital debt. We

conclude that the District Court's distribution of the marital

estate is not clearly erroneous.

Affirmed.

14
We concur:

Justices

15
Justice Terry N. Trieweiler specially concurring. 

I with the ma j orityl s conclusions and reasoning in 

their discussian of Issues 2 and 3 

I specially concur with the majority's holding under Issue 1, 

but disagree with the legal rationale for that holding. 

I do not agree that Bob was precluded by judicial estoppel 

from offering testimony at trial which contradicted statements that 

he made prior to ti. I: especially disagree that he was 

precluded from doing so by 5 26-1-601(1), MCA, which I conclude is 

inapplicable to the facts of this case. 

However, the basis for Bob's appeal from the District Court's 

valuation of his recycling machine investment is that there was no 

evidence to support the value arrived at by the District Court. I 

disagree. 

Pursuant to Rule 801 (d) (1) (A) , M.R. Evid., prior inconsistent 

statements of a witness are admissible as substantive evidence. See 

Rule 801(d), Commission Comment. In this case, Bob's supplemental 

answer to Interrogatory No. 26, which was filed with the District 

Court prior to trial, was a prior statement inconsistent with his 

trial testimony and provided sufficient substantive evidence to 

support the District Court's finding that Bob's lease with Recycle