NO. 93-241

IN THE SUPREME COURT OF THE STATE OF MONTANA

1994

IN RE THE MARRIAGE OF

JEFF M. SMITH, JR.,

Petitioner

and

LISA SMITH,

Respondent

and Appellant,

and Respondent.

APPEAL FROM: District Court of the Fourth Judicial District,

In and for the County of Missoula,

The Honorable Jack L. Green, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Don C. St.

Worden,

Peter and Linda Osorio St. Peter,

Thane & Haines, Missoula, Montana

For Respondent:

Paulette C. Ferguson and Lori Ballinger,

Attorneys at Law, Missoula, Montana

Submitted on Briefs: March 10, 1994

Filed: fj:,R 2 4 1994~ Decided: March 24, 1994

:
Justice William E. Hunt, Sr., delivered the opinion of the Court.

Petitioner/appellant, Jeff Smith, appeals from a final decree

of dissolution from the Fourth Judicial District Court, Missoula

County, ordering the establishment of a trust fund for the minor

child and child support, reassigning custodianship of another trust

account for the minor child, evaluating the marital estate, and

awarding cash, monthly maintenance, and attorney fees to

respondent, Lisa Smith.

We affirm in part, reverse in part, and remand for further

proceedings in accordance with the provisions of this opinion.

Appellant raises the following issues on appeal:

1 . Did the District Court err when it ordered Jeff to

establish a $200,000 trust account for the parties' minor child?

2 . Did the District Court err when it ordered the minor

child's trust account to be set up under the joint control of

petitioner and respondent?

3 . Did the District Court erroneously evaluate the marital

estate?

4 . Did the District Court err when it awarded Lisa $500,000

in cash?

5 . Did the District Court err when it awarded Lisa $1250 in

monthly maintenance in addition to $500,000 in cash?

6 . Did the District Court err when it awarded Lisa $1250 in

monthly child support?

7 . Did the District Court abuse its discretion when it

ordered Jeff to pay Lisa's attorney fees?

2
The parties married on June 21, 1986, at Buckingham, Virginia.

It was Jeff's third marriage, and Lisa's second. Jeff is 34 years

old and Lisa is 31. The parties have lived in Missoula since 1989.

One child was born the issue of the marriage. The parties

separated in February 1991 when the child was six months old. Lisa

has provided the day-to-day care for the child. Jeff is frequently

out of the Missoula area on trips, and during the separation he did

not visit the child on a regular basis. Lisa testified that the

reasonable monthly expenses for her and the child are approximately

$2500.

Jeff is a high school graduate. He attended college, but did

not receive a degree. He attended outdoorsman school and is a

certified dive master, a multi-engine rated pilot, and a licensed

hot rod driver. Jeff has worked in Montana as a trapper, started

a video business, and has been an entrepreneur. He inherited

$1,696,164 in distributions from his mother's estate, approximately

$2.1 million dollars in insurance proceeds, and expects to receive

approximately $6 million more from her estate.

Lisa is a high school graduate who also attended outdoorsman

school and one adult education class each in art and photography.

She has worked as a food preparer in a small cafe, as a farm hand

on Jeff's family horse farm in Virginia, and for a short time as a

trapper. She aided her husband in the beginning of a video

business and in a communications business. She has been a

homemaker and a full-time mother of the parties' minor child. In

3
addition, she was a hostess for Jeff's business clients in their

Jeff testified that he had intended to set up a trust fund for

the child by purchasing an annuity, and that he had already

researched the cost of the annuity. Also, prior to her death,

Jeff's mother gifted $20,000 to the parties' minor child in the

form of a check delivered to Montana, naming Jeff as the custodian

of that account. Thereafter, Jeff borrowed $15,000 of the gift for

his business, Underwater Fantaseas. Jeff maintained that the money

had been invested, but the record does not reveal that he has

protected the investment. Further, Jeff testified that he planned

to sell one-half of the stock in the corporation to his companion

for $1000.

ISSUE 1

Did the District Court err when it ordered Jeff to establish

a $200,000 trust account for the parties' minor child?

The District Court ordered Jeff to fund a $200,000 trust for

the minor child by the purchase of an annuity. We have held that

"there is an abuse of discretion where the court adopts a proposed

trust that is beyond the authority of the court to order." In re

Marriage of Alt (1989), 218 Mont. 327, 334-35, 708 P.2d 258, 262.

In a dissolution proceeding, § 40-4-202(2), MCA, governs whether a

district court may set aside a portion of the marital estate in a

trust for the benefit of the parties' children. Section

40-4-202(2), MCA, provides:
The court may protect and promote the best interests of

the children by setting aside a portion of the jointly

and separately held estates of the parties in a separate

fund or trust for the sunnort, maintenance, education,

and oeneral welfare of anv minor, dependent, or

incompetent children of the parties. [Emphasis added].

Here, the court exceeded the authority granted in

5 40-4-202(2), MCA, to set up a trust. The record does not

establish that the trust was needed for support, maintenance,

education, and general welfare of the parties' minor child until he

reached majority. In fact, in addition to a $200,000 trust

account, the court awarded Lisa $1250 per month in child support

which, Lisa had stated, was the amount of monthly expenses

necessary to support the child.

The District Court abused its discretion when it ordered Jeff

to establish a $200,000 trust for the minor child, and we reverse

on this issue.

ISSUE 2

Did the District Court err when it ordered the minor child's

trust account to be set up under the joint control of petitioner

and respondent?

The gift to the parties' minor child from Jeff's mother was

deposited by Jeff in a separate account and subsequently invested

by Jeff in some of his enterprises. Apparently because there was

joint custody of the parties' minor child, the court directed the

account be established with both Lisa and Jeff as custodians of the

fund. In the decree of dissolution, the court ordered:

The petitioner shall immediately return the $20,000 plus

interest he borrowed from the minor child. The money

5
shall be deposited in a savings account in a reputable,

secure financial institution. Both parties shall be

trustee for the money and the money shall not be borrowed

by either party. Prior to the time the child reaches the

age of majority, the money [can] be used for educational

or unusual expenses for the minor child.

We conclude that this order of the court will protect the

interest of the minor ~child. We affirm on this issue.

ISSUE 3

Did the District Court erroneously evaluate the marital

estate?

The District Court found that all assets acquired during the

marriage should be included in an equitable distribution of the

marital estate. The District Court failed to identify or describe

the assets acquired during the marriage, or assign values to them,

and failed to consider the contingent liabilities associated with

those assets. We hold that this was an abuse of discretion.

Marriage of Dirnberger (1989), 237 Mont. 398, 401-02, 773 P.2d 330,

332. The court also abused its discretion for failure to follow

the provisions of § 40-4-202, MCA.

We reverse the District Court on this issue and remand for a

determination of the value of the estate in accordance with

§ 40-4-202, MCA.

ISSUE 4

Did the District Court err when it awarded Lisa $500,000 in

cash?

In April 1991, several months after the parties separated,

Jeff's mother died leaving him $2.1 million in life insurance

proceeds and over $7.6 million in inheritances.

6
The District Court found that Jeff's prior-acquired, gifted,

vested inheritance properties and property acquired during the

marriage should be included in the marital estate and subject to an

equitable division of assets and liabilities. The court then

apportioned $500,000 to Lisa as a cash settlement.

While in a dissolution proceeding the trial court has

far-reaching discretion in making a determination as to whether an

asset is included in the marital estate and in making the final

property division, it still must comply with the statute governing

division of property. Becker v. Becker (1985), 218 Mont. 229, 232,

707 P.2d 526, 528. Section 40-4-202, MCA, controls the division of

property in a proceeding for dissolution, and provides in pertinent

part:

(1) . . . the court . . . shall . . . finally equitably

apportion between the parties the property and assets

belonging to either or both . . . . In dividins nronerty

acuuired nrior to the marriase: nrooertv acauired by

oift, beouest, devise, or descent . . . the court shall

consider those contributions of the other spouse to the

marriage, including:

(a) the nonmonetary contribution of a homemaker:

(b) the extent to which such contributions have

facilitated the maintenance of this property; and

(cl whether or not the property division serves as

an alternative to maintenance arrangements. [Emphasis

added].

Recently, we held that an inheritance received by one spouse

during the parties' separation, but before a decree of dissolution,

could be included in the marital estate. Marriage of Isaak v.

Smith (1993), 257 Mont. 176, 848 P.2d 1014. In Isaak, we vacated

the property distribution ordered by the district court that had

excluded from the marital estate some of the property devised to

7
the husband by his father's will. The father built a home for the

parties on a 21-acre parcel of land. The land and home were still

in the father's estate at the time of his death. The parties'

marriage was dissolved over seven months after the father died

while the probate on the father's estate was still open. The

district court found that the father had intended a future gift of

the home to the couple and included it in the marital estate. The

court excluded from the marital estate the rest of the fathers'

estate that the husband inherited. We held that the district court

properly included the 21-acre parcel and home under § 40-4-202,

MCA, but should have included all of the inheritance property in

the marital estate. We reasoned that although the parties had

separated several months before the father's death, at which time

the husband's inheritance vested, the parties had attempted to

reconcile before and after the father's death. The husband moved

back into the home with the wife and the couple sought some marital

counseling. We concluded that the appropriate result was that, on

remand, the district court should include not only the 21-acre

parcel and the home, but the other inherited property in the

marital estate. However, we emphasized that the district court

should be guided by all the provisions of 5 40-4-202, MCA.

This case is distinguishable from Isaak in that, unlike the

couple in w, Jeff and Lisa had separated permanently before

Jeff's inheritance had vested. Regardless, we hold that the fact

that an acquiring spouse may receive an inheritance after

separation but prior to dissolution of the parties' marriage does

8
not, in and of itself, justify inclusion of the inheritance in the

marital estate. What is key in a separation situation is that the

district court apply the factors in 5 40-4-202, MCA, before

including inheritance property in the marital estate. The court

cannot distribute to the non-acquiring spouse property acquired

prior to the marriage or acquired by gift, bequest, devise, or

descent when there is no evidence that the spouse made any

contribution to those assets in any form.

Therefore, we overrule that portion of Isaak that allows a

district court to distribute inheritance property in the marital

estate without strict application of the factors set out in

5 40-4-202, MCA.

It is clear from the record here that Lisa had nothing to do

with the property to which Jeff became entitled after the

separation. The District Court should not have distributed in the

marital estate properties that Jeff received after the parties

separated, absent application of the factors in 5 40-4-202, MCA.

We hold that the court abused its discretion in including Jeff's

inherited property in the marital estate. We reverse the District

Court on this issue.

ISSUE 5

Did the District Court err when it awarded Lisa $1250 in

monthly maintenance in addition to $500,000 in cash?

For the reasons set forth in our holding in Issue 4, we

reverse the District Court's award of a $500,000 cash settlement

and remand on the issue of monthly maintenance for a determination

9
by the court on whether Lisa is entitled to maintenance, and if she

is, what is reasonable maintenance under g 40-4-203, MCA.

ISSUE 6

Did the District Court err when it awarded Lisa $1250 in

monthly child support?

Lisa testified that the total monthly expenses for her and the

child were $2500. The District Court found that Lisa was entitled

to $1250 in monthly child support for the minor child. We agree

with Jeff that the District Court is bound to determine an award of

child support pursuant to the factors set forth in § 40-4-204, MCA,

as well as the Uniform Child Support Guidelines. The record does

not reveal the basis for the support obligation under the

Guidelines or why application of the Guidelines would be unjust or

inappropriate. We hold that the District Court erred when it

awarded $1250 in monthly child support, and remand for a

redetermination of child support in accord with 5 40-4-204, MCA,

and the Guidelines.

We reverse and remand on this issue.

ISSUE 7

Did the District Court abuse its discretion when it ordered

Jeff to pay Lisa's attorney fees?

In a dissolution proceeding, "[t]he court from time to time,

after considering the financial resources of both parties, may

order a party to pay a reasonable amount for the cost to the other

party . . . .I' Section 40-4-110, MCA. Recently, we have restated

that the party receiving the award of attorney fees first must make

10
a showing of necessity. Marriage of Welch (1993), 257 Mont. 222,

228, 848 P.2d 500, 503. We reverse and remand on the issue of

attorney fees for a determination of whether or not there is a

necessity for the award of attorney fees.

We affirm in part, reverse in part, and remand for further

proceedings in accordance with the provisions of this opinion.

Justice

We concur:

Chief Justice

Justices

11
Justice Fred J. Weber concurs and dissents as follows.

I dissent from the conclusions and holding in Issue 4 and

concur in the balance of the issues in the majority opinion.

Under Issue 4, the issue is stated as Did the District Court

err when it awarded Lisa $500,000 in cash? The majority held that

the District Court should not have distributed to Lisa marital

estate properties which Jeff received after the parties separated,

absent application of the factors in $3 40-4-202, MCA. The

foundations for the holding of the Court are the following

statements in the majority opinion:

. . . The court cannot distribute to the non-acquiring

spouse property acquired prior to the marriage or

acquired by gift, bequest, devise, or descent when there

is no evidence that the spouse made any contribution to

those assets in any form.

Therefore, we overrule that portion of Isaak that

allows a district court to distribute inheritance

property in the marital estate without strict application

of the factors set out in 5 40-4-202, MCA.

In substance the majority reached the conclusion that because the

wife had not made any contribution to the specific asset received

after separation, she was not entitled to receive a share of such

assets. I disagree emphatically with that conclusion.

Following are the pertinent portions of § 40-4-202(l), MCA,

underscoring the beginning portion which was not included in the

majority opinion:

Division of property. (1) In a proceedino for dissolution

of a marriaqe, . . . the court, without reqard to marital

misconduct. shall . . . finallv equitably apportion

between the parties the pronertv and assets belonains to

either or both, however and whenever acquired and whether

the title thereto is in the name of the husband or wife

or both. . . . In dividing property acquired prior to the

marriage: property acquired by gift, bequest, devise, or

12
descent: property acquired in exchange for property

acquired before the marriage or in exchange for property

acquired by gift, bequest, devise, or descent: . . . the

court shall consider those contributions of the other

spouse to the marriage, including:

(a) the nonmonetary contribution of a homemaker;

(b) the extent to which such contributions have

facilitated the maintenance of this property; and

Cc) whether or not the property division serves as

an alternative to maintenance arrangements. [Emphasis

supplied.]

Section 40-4-202(l), MCA. The underscored portion states that the

court shall "equitably apportion 'I between the parties the property

belonging to either or both, however and whenever acquired and

whether titled to either one or both. Clearly that portion of the

statute affords no basis to suggest that property acquired by

descent or devise after separation is not to be equitably

apportioned between the parties.

In a similar manner, the following portion of § 40-4-202(l),

MCA, requires the court to "consider those contributions of the

other spouse to the marriage" and requires the court to consider

the nonmonetary contributions of Lisa in this case, the extent to

which such nonmonetary contributions have facilitated the

maintenance of this property, and finally whether the property

division serves as an alternative to maintenance. Of particular

import is the requirement that the court consider the nonmonetary

contribution of a homemaker. As above quoted, the majority has

concluded that there could not be distributed to Lisa property

acquired by Jeff by bequest, devise or descent where there is no

evidence that Lisa made any contribution to those assets in any

13
form. That is a significant reduction from the broad requirements

of the statute. Under the statute the court is required to

consider Lisa's contribution "to the marriage" including the

nonmonetary contribution on her part as a homemaker - those

contributions to the marriage and as a homemaker may have nothing

to do with contribution to the assets themselves but are still

required by statute to be considered. In addition, the statute

requires the court to consider whether the property division serves

as an alternative to maintenance arrangements for Lisa. The

majority has disregarded those other provisions of the statute.

The above quotation of the majority opinion stated the

majority has overruled that portion of Isaakthat allows a district

court to distribute inherited property without strict application

of the factors set out in 5 40-4-202, MCA. As I read Isaak there

is no portion of Isaak which allows the district court to

distribute inherited property without strict application of 5 40-4-

202, MCA. In fact Isaak states the following for the assistance of

the District Court on remand:

For the assistance of the District Court on remand,

we emphasize it must be guided by the provisions of 5 40-

4-202, MCA. The requirement of the court is that it

"finally, equitably apportion" the marital estate, and

this extends to inherited property as well as other

property. The statute requires the court to consider

such items as duration of marriage, health, occupation,

amount of income, and needs of the parties. The general

provisions of subparagraph (1) also require that the

court consider the relationship of apportionment to

maintenance and the opportunity of each for future

acquisitions of capital assets and income. As above

quoted, the statute also provides that in dividing

property acquired by devise or descent, the court shall

consider the contributions of the other spouse to the

marriage including:

(a) the nonmonetary contribution of a homemaker;

14
(b) the extent to which such contributions have

facilitated the maintenance of the property: and

Cc) whether or not the property division serves as

an alternative to maintenance arrangements.

Section 40-4-202(l), MCA. We emphasize that the District

Court should consider all appropriate provisions of 5 40-

4-202, MCA.

Isaak, 848 P.2d at 1017-18. As the reader will note, &%a-.&

emphasizes that the district court should consider all appropriate

provisions of 5 40-4-202, MCA. As a result, I don't find a basis

for overruling any portion of Isaak.

My particular concern is that the above quoted portion of the

majority opinion appears to require that a spouse must have made

contribution to the specific assets which constitute property

acquired prior to marriage or acquired by gift, bequest, devise or

descent--and if there has been no contribution to the specific

assets, there can be no distribution to the spouse. I conclude

that is in direct derogation of 3 40-4-202 (1) , MCA, and

incidentally is prohibited under u.

As I review the District Court's action in this case, I do not

conclude that it abused its discretion in including Jeff's

inherited property in the marital estate. I further conclude that

there are a number of reasons set forth under which the District

Court properly included that property, even in the absence of any

direct contribution to the property by Lisa.

I dissent from the majority’s holding on

1 5
Chief Justice J. A. Turnage:

I join in the concurring and dissenting opinion of Justice

16
March 24, 1994

CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States mail, prepaid, to the

following named:

Don C. St. Peter, Esq.

Linda Osorio St. Peter, Esq.

WORDEN, THANE & HAINES, P.C.

P.O. Box 4147

Missoula, MT 59806

Lori Ballmger

PAULETTE C. PBRGUSON

210 N. Higgins, Suite 302

Missoula, MT 59802

ED SMITH

CLFJRK OF THE SUPREME COURT