Opinion ID: 895932
Heading Depth: 1
Heading Rank: 3

Heading: Disentanglement

Text: [¶ 26] To reduce further conflict, litigation, and rancor between these former spouses, we conclude a corporate remedy should be implemented, if possible, to effectively complete their marital dissolution by disentangling their business connections. [¶ 27] In a divorce, the trial court must make an equitable distribution of the marital assets. NDCC 14-05-24. A trial court's property division is a finding of fact that will not be set aside unless it is clearly erroneous. Heley v. Heley, 506 N.W.2d at 718. A finding is clearly erroneous when this Court is left with a definite and firm conviction that a mistake has been made. Linrud v. Linrud, 552 N.W.2d 342, 345 (N.D.1996). Here, we are definitely and firmly convinced that it was a mistake to keep these former spouses together in a business relationship that will inevitably lead to more litigation. [¶ 28] After this divorce action began, Gene alleged Sheila was mismanaging their company. Sheila alleged Gene was wrongfully interfering in the business. Reacting to their contentions on its own motion in November 1995, the trial court appointed a receiver for both Gene's and Sheila's stock in Fisher Industries to protect the one major asset of the marriage pending the divorce decision. In doing so, the court found the file and the record exhibit substantial hostility between the parties in this action. [¶ 29] In appointing the receiver, the trial court denied a related motion by three of Gene and Sheila's four children, all adults who hold small percentages of Fisher Industries stock, to intervene for the purpose of opposing the appointment of a receiver. Fisher v. Fisher, 546 N.W.2d 354, 355 (N.D. 1996). Sheila and the three children had insisted appointing the receiver would obviously damage the value of Fisher Industries stock. Gene and the fourth child had supported appointment of the receiver and opposed the intervention. The three children appealed. Id. We affirmed the denial of intervention because under NDRCivP 24 the children's minority interests in a closely-held corporation did not include the right to intervene in a divorce action between the majority shareholders. Id. [¶ 30] Later, soon after the trial in this case, the receiver filed a Second Interim Report summarizing the effect of the marital conflict on Fisher Industries: The conflict between Gene Fisher and Sheila Fisher ... is, in the view of the Receiver, the corporation's most significant problem. The conflict ... is a power struggle in two respects: (1) it is apparent both Gene Fisher and Sheila Fisher have a desire to control Fisher Sand & Gravel, Co.; (2) it is also apparent Sheila Fisher and Gene Fisher have differing philosophies on how the company should be managed and operated. ... [B]oth indicated they would like to operate the company in his or her own manner and style. Neither has indicated a willingness to share the power base even to the extent it had been shared in the past. Sheila Fisher indicates sharing has not worked in the past. Gene[s] ... activity as a consultant has however resulted in the dismissal of key individuals in the South Dakota/Wyoming area and contributed to other poor employee morale. Gene Fisher expresses no desire to share the control of the company. This Receiver's report concluded: ... [T]hey will not work together at the same time. Gene Fisher's ideas and Sheila Fisher's ideas are incompatible. It appears to the Receiver that Gene Fisher and Sheila Fisher will not be able to work as co-managers or co-CEO. One or the other or some third party has to be in charge and have the freedom to run the company for the good of the company. [¶ 31] Their contentiousness is also depicted by the clerk's docket record that listed more than 500 separate items filed before trial began in this case on April 22, 1996. When the trial finished 12 days later on May 3, 1996, over 350 exhibits had been marked for evidence. The bitterness of this conflict calls for complete disentanglement of their business connections. [¶ 32] Other courts have generally avoided splitting stock in a closely held corporation between contentious divorcing spouses in a way that continues their conflicts in an ongoing business relationship. See Sonja A. Soehnel, Annotation, Divorce: Propriety of Property Distribution Leaving Both Parties with Substantial Ownership Interest in Same Business, 56 A.L.R.4th 862 (1987). One court explained why it was particularly inequitable to split closely held stock between divorcing spouses: Such a financial arrangement is intolerable ... and places the spouse without any real control over the closely held corporation at a distinct disadvantage to the spouse who runs the business. Robbins v. Robbins, 549 So.2d 1033, 1033-34 (Fla.Dist.Ct.App.1989) (citations omitted). The Utah Supreme Court reasoned in Argyle v. Argyle, 688 P.2d 468, 471 (Utah 1984): Wherever possible, this Court avoids division of marital stock between the parties because it forces them to be in a `close economic relationship which has every potential for further contention, friction, and litigation.' [¶ 33] We, too, prefer the kind of distribution of the marital estate that will disentangle the parties' financial affairs. Heggen v. Heggen, 541 N.W.2d 463, 465 (N.D.1996). Disentanglement allows one former spouse to operate the business without harmful interference by the other, and it reduces further conflict between them. Linrud, 552 N.W.2d at 346; Heley, 506 N.W.2d at 718. See also Martin v. Martin, 450 N.W.2d 768, 769-70 (N.D.1990); Linn v. Linn, 370 N.W.2d 536, 543 (N.D.1985); Graves v. Graves, 340 N.W.2d 903, 907 (N.D.1983). As Volk v. Volk, 404 N.W.2d 495, 499 (N.D.1987), held: [W]here a party has specifically requested that the property be separately distributed and there clearly exists illwill between the parties involved that militates against cooperation in disposal of the marital estate, the trial court should partition and distribute the marital property separately to each spouse. [¶ 34] Here, Gene and Sheila amply demonstrated, if not virtually agreed, they could not work together, and each effectively sought a complete separation from any continuing business relationship with the other. Disentanglement is preferred in this context.