Opinion ID: 898260
Heading Depth: 2
Heading Rank: 1

Heading: Valuing the Business, Calculating the Net Marital Estate, and Dividing the Marital Property

Text: [¶12] A district court's decisions regarding the division of marital property are treated as findings of fact and may be reversed on appeal only if these findings are clearly erroneous. Heinz v. Heinz, 2001 ND 147, ¶ 6, 632 N.W.2d 443. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing the entirety of the evidence, this Court is left with a definite and firm conviction a mistake has been made. Id. (citations omitted). [¶13] Carrie Lynnes argues the district court erred in calculating the value of the marital estate, alleging the trial court erred in (1) valuing the parties' businesses; (2) failing to include the student loan debt as marital debt when calculating the net estate and characterizing it instead as premarital; (3) failing to include the debt to David and Carol Wood as marital debt in calculating the net estate; (4) failing to assign two small marital debts to either party; and (5) failing to specifically include the parties' attorney fees as marital debt in calculating the marital estate. [¶14] Marital property must be distributed equitably between the parties. Heinz, at ¶ 5. Although the division does not have to be equal, a substantial disparity must be explained. Lorenz v. Lorenz, 2007 ND 49, ¶ 6, 729 N.W.2d 692 (citation omitted). All of the assets of the marital estate, regardless of source, must be considered to ensure an equitable division of property. Horner v. Horner, 2004 ND 165, ¶ 9, 686 N.W.2d 131; Kautzman v. Kautzman, 1998 ND 192, ¶ 10, 585 N.W.2d 561. Assets accumulated after separation but prior to the divorce are included in the marital estate. Kautzman, at ¶ 10. After the district court has included all of the marital assets and debts, the district court must apply the Ruff-Fischer guidelines. Horner, at ¶ 9. The Ruff-Fischer guidelines require that the district court consider: the respective ages of the parties, their earning ability, the duration of the marriage and conduct of the parties during the marriage, their station in life, the circumstances and necessities of each, their health and physical condition, their financial circumstances as shown by the property owned at the time, its value at the time, its income-producing capacity, if any, whether accumulated before or after the marriage, and such other matters as may be material. E.g., Staley v. Staley, 2004 ND 195, ¶ 8, 688 N.W.2d 182. [¶15] Carrie Lynnes argues the district court incorrectly valued the parties' businesses, which ultimately led to an unfair division of the marital property. In this case, the district court appointed a Special Master, Leonard Sliwoski, to value the businesses. Sliwoski valued the parties' businesses as holding a total value of $59,000. Sliwoski also testified about his reasoning for his opinion as to the business values. Carrie Lynnes presented no independent witnesses to rebut Sliwoski's report. [¶16] The district court's valuation of property is a finding of fact which will be reversed on appeal only if it is clearly erroneous. Kluck v. Kluck, 1997 ND 41, ¶ 25, 561 N.W.2d 263. A district court's valuation of property is presumed correct, and the evidence presented must be viewed in the light most favorable to the district court's findings of fact. Korynta v. Korynta, 2006 ND 17, ¶ 13, 708 N.W.2d 895. It is the province of the district court to judge the credibility of witnesses and the evidence they introduce. Davis v. Davis, 458 N.W.2d 309, 315 (N.D. 1990). When the district court's valuation is within the range of evidence provided by the parties, the district court's valuation will not be set aside, unless this Court has a definite and firm conviction a mistake has been made. Young v. Young, 1998 ND 83, ¶ 4, 578 N.W.2d 111 (citing Hendrickson v. Hendrickson, 553 N.W.2d 215, 219-20 (N.D. 1996)). [¶17] Carrie Lynnes argues the values of the businesses are higher than the value assigned by the Special Master, which was adopted by the district court, because the contingent asset or liability of Lynnseth, Inc. actually increased the value of Dave's Welding. Sliwoski testified that the range of the contingent asset or contingent liability was between negative $27,893 and positive $63,288. Based upon that testimony, the district court found the value of Dave's Welding could actually be less than $56,000, but assigned $56,000 as the value in accordance with the opinions and testimony of Sliwoski. The district court assigned a value of $3,000 to Lynnes Welding and Training, and zero value to Lynnseth, Inc. based on the valuations and testimony of Sliwoski. Carrie Lynnes cross-examined Sliwoski, but did not present any valuations, reports, or testimony to contradict Sliwoski's opinions. Because the district court is responsible for assessing the credibility of witnesses, accepting the valuations given by Sliwoski was not improper. Further, because the values the district court assigned to the businesses fell within the range of values presented by the evidence, there is sufficient evidence to support the findings of the district court, and therefore the findings as to the values of the businesses are not clearly erroneous. [¶18] Carrie Lynnes next argues the district court improperly calculated the marital estate because the district court failed to include Carrie Lynnes's student loan debt, a debt owed to Carrie Lynnes's parents, a veterinarian bill, and a debt owed on a computer in the district court's initial calculations regarding the marital debt. The district court, on its marital assets and debt listings in both the findings of fact, conclusions of law, and order for judgment, and the amended judgment, did not include Carrie Lynnes's student loan debt in the amount of $4,165 in calculating the total marital debt. Instead, the district court deemed the debt premarital and did not include it in the marital debt calculation. We also note the district court failed to include a TransAm David Lynnes owned before the marriage, valued at $1,500, when the district court calculated the entire marital estate. Again, the district court excluded this asset from the total marital estate, calling it a premarital asset. [¶19] As to the small veterinarian and computer bill, the district court completely failed to assign the debts in its findings, though evidence of the existence of the debts had been submitted to the district court. The district court's failure to assign these two small debts, totaling $817, or to use them in calculating the net marital estate does not, by itself, constitute clear error. A relatively insignificant error in valuation of a marital asset will not, standing alone, constitute sufficient grounds for reversal of the judgment. Halvorson v. Halvorson, 482 N.W.2d 869, 872 (N.D. 1992) (citing Dick v. Dick, 414 N.W.2d 288, 291-92 (N.D. 1987)) (providing a de minimis and an insignificant error that does not justify reversal). In this case, however, more than these two debts were excluded when calculating the entire marital estate prior to analyzing the Ruff-Fischer guidelines. The district court failed to include a $1,500 asset, David Lynnes's TransAm, $4,165 in Carrie Lynnes's student loan debt, and $817 in two small debts. [¶20] The district court did consider and include the personal debt Carrie Lynnes owed to her parents; the debt is not excluded in the district court's mathematical worksheet and is discussed in its findings of fact. Because the district court contemplated the existence of the debt before it analyzed the Ruff-Fischer guidelines and may consider 'which of the parties has incurred particular debts, and the purposes for which those debts were incurred, in determining an equitable allocation of the responsibility for repayment,' assigning Carrie Lynnes the debt she owed to her parents was not clear error. Lorenz, 2007 ND 49, ¶ 13, 729 N.W.2d 692 (quoting Brandner v. Brandner, 2005 ND 111, ¶ 10, 698 N.W.2d 259). [¶21] According to the amended judgment, the assets awarded to Carrie Lynnes totaled $165,689, and the debt assigned to her was $117,173, leaving a net award of $48,515, not including the student loan debt of $4,165. David Lynnes was awarded assets valued at $119,221 and debt in the amount of $19,590, creating a net award of $99,631. The district court split equally a pension plan of $31,771. The district court noted the discrepancy between the awards and analyzed the Ruff-Fischer guidelines in distributing the property, but did so only after it failed to include all of the assets and debts held by David and Carrie Lynnes. Thus, this Court must ask whether omitting the student loan debt created a substantial exclusion, such that the district court misapplied the law in determining the net marital estate, and if this Court can fairly discern from the court's decision that the loan amounts were not included in the equitable adjustment because the court had already addressed the debt and why it allocated the loans to [the party who received the student loans]. Lorenz, 2007 ND 49, ¶ 10, 729 N.W.2d 692. [¶22] This Court has explained that [i]n dividing the marital estate, the trial court must determine the net marital worth by considering all property and debt accumulated by the parties and by using 'the elementary accounting equation of assets minus liabilities to determine the net worth of the marital property.' Brandner, at ¶ 10 (quoting Neidviecky v. Neidviecky, 2003 ND 29, ¶ 11, 657 N.W.2d 255) (emphasis in original). A district court must apply the correct law in determining and distributing the marital estate [because if ] . . . substantial amount of debts [are] excluded from the marital estate [], we cannot be sure the court would have reached the same result in allocating the assets and debts had it correctly included the [] debts as part of the marital estate before allocating the debts between the parties. Brandner, at ¶ 11 (citing Neidviecky, at ¶ 13). [¶23] Here, failure to consider the student loan debt of $4,165, along with the $1,500 TransAm as an asset, in the cumulative marital estate, creates a situation in which we cannot be sure the court would have reached the same result in allocating the assets and debts had it correctly included both the debt and asset. Brandner, at ¶ 11 (citing Neidviecky, at ¶ 13). When considering whether the excluded debt is substantial, the student loans and two small debts totaling $4,982 are small when viewed in light of the total debt accumulated by the parties. However, when the total excluded debt is viewed in light of the net assets awarded to Carrie Lynnes, the debt would reduce her net award by nearly ten percent, making the debt significant with regard to her net award. The district court did not directly address its reasons for failing to include the student loan debt in the net marital estate calculation. It is difficult to discern why the district court failed to include the debt; it merely deemed the debt premarital. See Lorenz, at ¶ 10 ([W]e can fairly discern from the court's decision that the loan amounts were not included in the equitable adjustment because the court had already addressed the debt and why it allocated the loans to [the student who received the loans].) Because the district court was not clear about its reasons for allocating the loans, we reverse the amended judgment insofar as it calculates the total marital estate and remand for determination of the distribution of the marital estate after a proper calculation of the total marital estate has been made.