Opinion ID: 2518323
Heading Depth: 2
Heading Rank: 3

Heading: parduhn's attack on the equitable distribution

Text: ¶ 23 We now review the equitable distribution itself, but we first pause to articulate the standards of review and other procedures applicable in equitable distribution cases. The parties have characterized their claims regarding the propriety of the equitable distribution as issues of either fact or law, which we review for clear error and correctness, respectively. RHN Corp. v. Veibell, 2004 UT 60, ¶ 35, 96 P.3d 935. An equitable distribution, however, is more than a collection of findings of fact and conclusions of law reviewable under their respective standards. When equitably distributing funds or property, a district court not only finds facts and enters legal conclusions, but also balances the relative significance of the facts and applicable law in order to achieve a fair and equitable result. This balancing requires the exercise of discretion. We will affirm a district court's exercise of that discretion unless the district court abused it. See Hughes v. Cafferty, 2004 UT 22, ¶ 20, 89 P.3d 148 (reviewing a district court's equitable award of attorney fees under an abuse of discretion standard). The abuse of discretion standard recognizes both the district court's ability to balance facts and craft equitable remedies and our hesitance to act as a Monday morning quarterback in such matters. ¶ 24 The standard of review applicable to findings of fact merits separate discussion. Not all findings of fact are created equal: some are ultimate findings of fact, upon which the resolution of a particular issue turns, while others are subsidiary facts supporting the ultimate findings. While we review both for clear error, RHN Corp., 2004 UT 60 at ¶ 35, 96 P.3d 935, we have recognized that findings of fact must show that the court's judgment or decree follows logically from, and is supported by, the evidence. The findings should be sufficiently detailed and include enough subsidiary facts to disclose the steps by which the ultimate conclusion on each factual issue was reached. Armed Forces Ins. Exch. v. Harrison, 2003 UT 14, ¶ 28, 70 P.3d 35 (internal quotations omitted). Because a finding of fact need only be supported by sufficient subsidiary facts to justify it, one erroneous subsidiary finding does not necessarily render the ultimate factual finding erroneous as well. ¶ 25 To successfully challenge an ultimate finding of fact, an appellant must first marshal all the evidence in support of the finding and then demonstrate that the evidence is legally insufficient to support the finding even when viewing it in a light most favorable to the court below. Chen v. Stewart, 2004 UT 82, ¶ 76, 100 P.3d 1177 (internal quotations omitted). An appellant must present, in comprehensive and fastidious order, every scrap of competent evidence introduced at trial which supports the very findings the appellant resists. Id. at ¶ 77 (internal quotations omitted). Moreover, an appellant may not simply review the evidence presented at trial, nor may she reargue the factual case [she] presented in the trial court. Id. If an appellant argues that no evidence supports a factual finding, the burden to marshal does not then shift to the appellee; rather, the appellee may prove that the appellant did not meet her marshaling burden by presenting a scintilla of evidence supporting the district court's finding. Wilson Supply, Inc. v. Fradan Mfg. Corp., 2002 UT 94, ¶ 22, 54 P.3d 1177. A challenge to an ultimate finding of fact is tantamount to a claim that there are insufficient subsidiary facts to support that finding. Accordingly, a challenge to a subsidiary finding is really a challenge to the ultimate finding it supports. A party challenging a subsidiary finding must therefore marshal evidence in support of the ultimate finding. ¶ 26 For convenience and clarity, we have grouped Parduhn's challenges to the equitable distribution into three categories, which we will address in turn. First, we examine Parduhn's challenge to the district court's finding of intent. Second, we address Parduhn's assertion that the district court erred when it declined to receive additional evidence before making its equitable distribution. Finally, we address the propriety of the equitable distribution as a whole.
¶ 27 The district court's equitable distribution turned on its factual finding that Parduhn and Buchi did not intend the insurance policy on Buchi's life to be partnership property and therefore did not intend that the proceeds from the policy would go to the partnership or to Parduhn as the surviving partner. Instead, the district court found that the partners intended that the deceased partner's heirs would receive the proceeds. In making this finding, the district court relied on a number of subsidiary facts, including the following: (1) both the partnership and its assets (but not the policies) were sold to Blackett Oil; (2) Parduhn and Buchi's business dealings, including the buy-sell agreement, evinced an intent to allow the deceased partner's heirs to receive the insurance proceeds; (3) Parduhn and Buchi put partnership assets to personal use and otherwise treated the partnership casually; and (4) had Buchi lived long enough for the partners to have conducted an accounting, each partner would have received his policy and could choose to continue or discontinue coverage without claim from the past partner. These findings collectively supported the district court's ultimate finding of intent, upon which it based its equitable distribution. ¶ 28 Parduhn lodges six challenges to the district court's finding of intent. First, he argues that the district court erroneously concluded that Blackett Oil purchased both the partnership and its assets. Second, he argues that there was no support in the trial record for the subsidiary finding that he and Buchi treated the partnership casually. Third, he argues that, because we held the buy-sell agreement unenforceable in Parduhn I, the district court erred in relying on it as evidence of the partners' intent. Fourth, he argues that the district court impermissibly effected a nontestamentary transfer of the insurance proceeds to the Buchi survivors. Fifth, he argues that the district court, prior to Parduhn I, incorrectly found that the partners had implicitly amended their buy-sell agreement in 1989, simply by purchasing more insurance, to raise the insurance coverage to $300,000 on Buchi's life, and that the district court on remand therefore erred in using the amended agreement to determine the partners' intent. [5] Finally, Parduhn attacks as mere speculation the district court's finding that the partners in an accounting ... would have ... divided [the insurance policies] fairly and equitably between the parties had Buchi lived longer. Parduhn's first two challenges are appropriately characterized as challenges to findings of fact. The remaining challenges raise issues of law. We address each challenge in turn.
¶ 29 Parduhn asserts that two of the district court's subsidiary factual findings are unsupported by any evidence in the record. Specifically, he argues that the district court improperly relied on the Buchi survivors' erroneous contention that Blackett Oil purchased the partnership and all its assets. He also argues that there is no basis in the trial record for the district court's finding that he and Buchi treated the partnership casually. We treat these arguments as claims that these subsidiary factual findings are clearly erroneous. See 438 Main St. v. Easy Heat, Inc., 2004 UT 72, ¶ 68, 99 P.3d 801 (noting that clearly erroneous findings are against the clear weight of the evidence). ¶ 30 As already noted, Parduhn's attacks on the district court's subsidiary findings are really attacks on the district court's ultimate finding of intent. To successfully challenge that ultimate finding, Parduhn should have marshaled all of the remaining evidence supporting it and then demonstrated why that evidence is legally insufficient to support [it] even when viewing it in a light most favorable to the court below. Chen, 2004 UT 82 at ¶ 76, 100 P.3d 1177 (internal quotations omitted). He has not done so. While he presents, in an addendum to his brief, most of the documents on which the district court relied in making its finding of intent, he does not explain why the district court erred in interpreting that evidence as it did. To appropriately marshal evidence, parties must provide a precisely focused summary of all the evidence supporting the findings they challenge. Id. at ¶ 77. This summary must correlate all particular items of evidence with the challenged findings and then convince us that the trial court erred in the assessment of that evidence to its findings. Id. Indeed, parties challenging factual findings must fully embrace the adversary's position and play devil's advocate. Harding v. Bell, 2002 UT 108, ¶ 19, 57 P.3d 1093 (internal quotations omitted). ¶ 31 Rather than meeting this high burden, Parduhn simply presents those facts that militate against the district court's finding of intenta strategy we have previously found to be insufficient. Chen, 2004 UT 82 at ¶ 78, 100 P.3d 1177. It does not matter that Parduhn's claim is that no evidence supports the subsidiary findings he challenges, see Wilson Supply, Inc., 2002 UT 94 at ¶ 22, 54 P.3d 1177, or that the district court ignored its promise to only consider evidence presented at trial. Even assuming the truth of those claims, the fact remains that Parduhn's challenge is ultimately to the district court's finding of intent, and he marshals none of the plenteous evidence supporting that finding. [6] ¶ 32 Our approach does not render subsidiary findings of fact unreviewable. To the contrary, were we to find so many subsidiary findings clearly erroneous that there were no longer sufficient subsidiary facts to support an ultimate factual finding, we would not hesitate to hold the ultimate factual finding clearly erroneous. However, marshaling evidence in support of the ultimate finding is a prerequisite to that analysis, and Parduhn failed to adequately comply with the marshaling requirement. We accordingly reject Parduhn's arguments regarding those two subsidiary findings of fact.
¶ 33 Parduhn's remaining challenges to the district court's finding of intent are appropriately characterized as legal challenges. First, Parduhn challenges the propriety of the district court's reliance on the terms of the buy-sell agreement in reaching its conclusion with respect to intent. Specifically, he argues that, because we held that agreement unenforceable in Parduhn I, the district court could not subsequently rely on it as an indication of the partners' intent. He suggests that allowing the agreement to serve as evidence of intent is tantamount to enforcing an unenforceable agreement. ¶ 34 We see no reason why a contract, valid or invalid, cannot act as an indicator of intent in an equitable distribution proceeding. Even if a written agreement is invalid for purposes of enforcement, it may still be considered as evidence of the intent behind the agreement. See Bennett Leasing Co. v. Ellison, 15 Utah 2d 72, 387 P.2d 246, 247 (1963) (looking to an invalid contract to determine the rental value of a car). Accordingly, regardless of a buy-sell agreement's enforceability, a district court may look to such an agreement to determine the parties' intent as to the distribution of insurance proceeds. Moreover, contrary to Parduhn's assertion, doing so is not the same as enforcing the agreement. ¶ 35 Parduhn next argues that the district court's reliance on the buy-sell agreement effected an impermissible nontestamentary transfer. He claims that, because there is no longer a buy-sell agreement, there is no longer an instrument capable of routing the insurance proceeds past Buchi's estate to the Buchi survivors. To support his argument, Parduhn cites Utah Code section 75-6-201 and interprets that provision to require that transfers bypassing a decedent's estate be effectuated by a written instrument. We disagree. Section 75-6-201 merely states that the probate code does not invalidate certain nontestamentary transfers. It does not invalidate other arrangements by negative implication. Utah Code Ann. § 75-6-201 editorial bd. cmt. (1993). Moreover, even assuming that section 75-6-201 requires a written instrument to effectuate a nontestamentary transfer, the underlying insurance policy on Buchi's life would suffice. Parduhn assumes that our conclusion in Parduhn I that he lacked an insurable interest, 2002 UT 93 at ¶ 16, 61 P.3d 982, rendered the insurance policy invalid. Section 31A-21-104, however, explicitly states that an insurance policy is not invalid because the policyholder lacks insurable interest; the district court merely distributes the proceeds equitably rather than awarding them to the designee. Utah Code Ann. § 31A-21-104(5) (emphasis added). In short, section 31A-21-104(5) explicitly authorizes nontestamentary equitable distributions to persons or entities not designated as policy beneficiaries. Accordingly, we hold that the district court's equitable distribution of the insurance proceeds was based on a proper nontestamentary instrument and was distributed in accordance with Utah law. ¶ 36 We find Parduhn's claim that the district court inappropriately speculated as to what the partners would do with the proceeds in an accounting similarly unpersuasive. We hold that a judge in an equitable proceeding may draw reasonable inferences with respect to the parties' likely course of action in a given situation. See, e.g., Miller v. Hall, 65 Cal.App.2d 200, 150 P.2d 287, 290 (1944) (speculating regarding what the partners of a dissolved partnership would have done in an accounting). ¶ 37 Because Parduhn failed to marshal the evidence supporting the district court's finding of intent, and because we reject Parduhn's legal challenges to that finding, we affirm the district court's finding of intent. We now consider Parduhn's remaining claims.
¶ 38 Parduhn argues that the district court improperly prevented him from presenting evidence at the equitable distribution hearing. According to Parduhn, the bifurcated trial that took place prior to our decision in Parduhn I did not encompass equitable issues. Because he did not anticipate the possibility of an equitable distribution at that time, Parduhn did not present evidence bearing on equitable considerations. Accordingly, he claims that the district court was obligated to consider the additional evidence he offered to introduce on remand. ¶ 39 We disagree. In cases of equity, we review a district court's factual findings for clear error, RHN Corp., 2004 UT 60 at ¶ 35, 96 P.3d 935, and accord significant deference to the court's balancing of the facts and equities, see Hughes, 2004 UT 22 at ¶ 20, 89 P.3d 148. Because we defer both to the district court's findings of fact and to its balancing of those facts, we will also defer to its conclusion that it had a sufficient factual basis for reaching an equitable distribution. Our mandate in Parduhn I did not require that the district court hold an additional evidentiary hearing, and we conclude that the district court acted within its discretion in declining to do so. [7] ¶ 40 We are similarly unpersuaded by Parduhn's contention that he could not have anticipated the possibility of an equitable distribution at the time of the original trial in this matter. Indeed, the district court's order of August 27, 2001, noted that [t]he parties agreed that the trial evidence factually would not be altered by the Buchi survivors' reliance on section 31A-21-104. We accordingly reject Parduhn's claim that the district court should have received and considered additional evidence before rendering its equitable distribution.
¶ 41 Parduhn attacks the equitable distribution as a whole by questioning the district court's balancing of facts and its alleged failure to consider other facts. He asks us to balance those facts de novo and to concoct a new equitable distribution in his favor. Because we have concluded that the facts found by the district court were not clearly erroneous, we need only determine whether the district court abused its discretion in balancing the facts and equities as it did. See Hughes, 2004 UT 22 at ¶ 20, 89 P.3d 148. We agree with the district court's focus on the partners' intent and find the equitable distribution fair in all respects. ¶ 42 Parduhn claims, however, that Buchi's wife should not be entitled to a portion of the proceeds because she has unclean hands. According to Parduhn, Buchi's wife breached the fiduciary duty she owes to Buchi's estate as its personal representative by failing to articulate the estate's claim to the proceeds. The doctrine of unclean hands is recognized in Utah, see Hancock v. Luke, 52 Utah 142, 173 P. 137, 150 (1918); Hone v. Hone, 2004 UT App 241, ¶ 6, 95 P.3d 1221, but we have never held it to be an absolute bar to recovery. Indeed, a district court's application of the unclean hands doctrine is reviewable only for abuse of discretion. See Hone, 2004 UT App 241 at ¶ 9, 95 P.3d 1221 (For this reason, we cannot say that the trial court abused its discretion in concluding that [the appellant] does not come with clean hands. (emphasis added)); see also McKeever v. Fiore, 78 Conn.App. 783, 829 A.2d 846, 852 (2003) (The application of the doctrine of unclean hands rests within the sound discretion of the trial court.). Here, Parduhn argued before the district court on remand that Buchi's wife had unclean hands because she had failed to articulate the estate's claim on the proceeds. Nevertheless, in rendering its equitable distribution, the district court noted that the estate was included in [t]he possible universe of recipients. It appears, then, that the district court considered Parduhn's unclean hands claim and rejected it. Given the district court's reasons for distributing the proceeds as it did, we cannot conclude that it abused its discretion in declining to invoke the unclean hands doctrine against Buchi's wife.