Court Opinion

ID: 9526465
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:18:00.161845+00
Date Added: 2024-06-11T13:19:59.786710
License: Public Domain

CROTHERS, Justice,
dissenting.
[¶ 39] I respectfully dissent.
[¶ 40] Our question is whether the district court complied with this Court’s directions on remand. A closing paragraph in Walstad v. Walstad, 2012 ND 204, 821 N.W.2d 770, states: “Here the district court essentially divided the concealed property equally, and we are unable to discern from the court’s decision whether it considered application of economic fault or misconduct in the redistribution of property in the context of the independent action in equity. We therefore conclude a remand is appropriate for the court to apply the correct law in the context of this independent action in equity.” Id. at ¶ 19.
[¶ 41] The district court subsequently issued a memorandum opinion expressly stating it was “considering Plaintiffs claim as an independent action in equity.” Absent rejection of the district court’s representation, we must conclude the district court accepted Catherine Walstad’s lawsuit as an independent action in equity seeking relief from the original judgment. I would accept the district court’s representation. I would conclude the district court applied the correct law, as directed on remand.
[¶ 42] In Walstad I, we cited Hamilton v. Hamilton, 410 N.W.2d 508 (N.D.1987), as modern precedent recognizing an independent action in equity as means for revisiting a wrongfully obtained judgment.
2012 ND 204, ¶ 10, 821 N.W.2d 770. In Hamilton, this court explained:
“The ‘independent action’ label has, generally, been used in conjunction with the vacation or modification of judgment when discussing a separate action initiated outside and separate from any previous judgment and attempting to attack the merits of the prior decision. Such ‘independent actions’ are usually collateral attacks on a previous judgment and it is axiomatic that these actions are impermissible as a matter of law and cannot be entertained by the court. See, e.g., Gruebele v. Gruebele, 338 N.W.2d 805 (N.D.1983); Harchenko v. Harchenko, 77 N.D. 289, 43 N.W.2d 200 (1950).
“However, any general reference to an ‘independent action’ must be distinguished from an ‘independent action in equity to obtain relief from judgment.’ An ‘independent action in equity to obtain relief from judgment’ is a general recognition of the equitable powers of a court to entertain an independent action to enjoin the enforcement of, or otherwise procure relief from, a judgment on whatever basis chancery would afford relief. 7 Moore’s Federal Practice ¶ 60.12 (2d ed.1985). An independent action in equity to obtain relief from judgment is a separate legal claim and Rule 60(b), N.D.R.Civ.P., recognizes that ancillary equitable remedies for obtaining relief from judgment were not superseded by the provisions of the rule. 7 Moore’s Federal Practice ¶ 60.10 (2d ed.1985).
“The original jurisdiction of chancery to relieve a party from judgment was not impaired by the adoption of the procedural recognition in Rule 60(b), N.D.R.Civ.P. In fact, it was specifically ‘saved’ and preserves the court’s power to entertain such claims if previously recognized under ‘established doctrine.’ Advisory Committee Note to 1948 *922amendment of Rule 60(b), 5 F.R.D. 433, 479. This claim has historically been known simply as ‘an independent action in equity to obtain relief from judgment’ and is not an affirmative grant of power, nor does it operate to vacate or annul a judgment. The independent action in equity to obtain relief from judgment is a separate legal claim which merely permits continuation of whatever power the court would have had to entertain an independent action if Rule 60(b), N.D.R.Civ.P., had never been adopted, thereby denying a party who obtained judgment through fraud, misrepresentation, accident, or mistake the benefits of that judgment.”
410 N.W.2d at 513 n. 4.
[¶43] With this background provided to the district court, our direction on remand was, upon reopening the original judgment, for it to make equitable distribution of the concealed property. Walstad I, 2012 ND 204, ¶ 19, 821 N.W.2d 770. In Walstad I, we reminded the district court that that distribution should be made “using the established Rujf-Fischer guidelines for property distribution, including consideration of economic fault and misconduct in distributing marital property.” Id. Thus, the district court’s task was not to punish Richard Walstad’s misconduct. Rather, the district court was instructed to equitably distribute the asset as if included in the estate in the first instance, while remaining mindful that it had certain additional considerations in making that distribution due to Richard Walstad’s concealment.
[¶ 44] The parties in this case took widely disparate views of what constitutes equitable relief from the original judgment. Catherine Walstad argued for substantial redistribution of the marital estate. Richard Walstad concealed $50,000.00, but Catherine Walstad claimed $350,000.00, representing half the stipulated original value of Cook Sign Company. Richard Walstad argued for an award of $17,500.00, representing half the post-income tax value of the concealed money.
[¶ 45] On remand, the district court did as we directed by considering the Rujf-Fischer guidelines and Richard Walstad’s economic fault or misconduct. The district court explained in its memorandum opinion, “The Court, considering Plaintiffs claim as an independent action in equity, and taking into account economic fault or misconduct, as well as the Ruff-Fisher guidelines, concludes that Plaintiff should be entitled to one-half of the $35,000.00 or $17,500.00, together with the seven percent interest.” In making this ruling, the district court made these findings:
• The total marital estate was valued at $1,169,716.00;
• Catherine Walstad received $635,000.00 or 54.3 percent of the marital estate;
• Richard Walstad received $534,716.00 or 45.7 percent of the marital estate;
• Richard Walstad received Cook Sign Company as part of his distribution;
• Had the $50,000.00 cash from Cook Sign Company not been diverted to others, the sum would have been paid to Richard Walstad as a bonus;
• The post-tax value of $50,000.00 is $35,000.00;
• $35,000.00 represents less than 3 percent of the marital estate;
• The equities do not favor substantially redistributing the marital estate as urged by Catherine Walstad but instead favor splitting the value of the concealed asset plus 7 percent interest.
[¶ 46] I believe the district court complied with our directions on remand. The majority disagrees. Interestingly, the majority’s contrary conclusion is not driven *923by the district court’s failure to correctly apply the law. Rather, the majority reverses because of the district court’s result — it made the same financial award after remand as it made in the first post-judgment proceeding. See Majority opinion at ¶ 15 (“Though the district court made findings of economic fault or misconduct, the court’s award of $87,222.90 to Catherine Walstad in the original judgment did not consider economic fault or misconduct.”); ¶ 18 (“The district court’s original award of $87,222.90 to Catherine Walstad did not consider Richard Wal-stad’s economic fault or misconduct. After considering Richard Walstad’s economic fault or misconduct, in which the district court explicitly found Richard Walstad ‘concocted ... [a] plan to hide assets,’ the court awarded Catherine Walstad the same amount, determining ‘equity does not require this Court to award anymore to [Catherine Walstad] than the one-half of the $35,000.00 and the seven percent interest.’ ”).
[¶47] Clearly, the majority does not accept the same result before and after remand because Richard Walstad has not been penalized for his misconduct. However, the district court’s task on remand was not to punish Richard Walstad — it was to equitably distribute marital assets. That task is a finding of fact which we review under the clearly erroneous standard of review. Majority opinion at ¶ 13 (citing Hoverson v. Hoverson, 2013 ND 48, ¶ 8, 828 N.W.2d 510 (citing Wold v. Wold, 2008 ND 14, ¶ 6, 744 N.W.2d 541)). The parties had widely divergent arguments for redistribution. A district court does not clearly err by selecting one alternative for distribution over another. See Gibbon v. Gibbon, 1997 ND 210, ¶ 9, 569 N.W.2d 707 (“The trial court could have structured the payments in several different ways; however, the possibility of implementing a different method for the distribution is not enough to convince us the method used by the trial court is clearly erroneous. See Olson v. Olson, 445 N.W.2d 1 (N.D.1989) (possibility of different permissible divisions of marital property is not enough to establish error).”).
[¶ 48] Instead of adhering to our standard of review, the majority requires that Richard Walstad be punished for withholding the asset, notwithstanding the law of the case holding punitive damages are unavailable. Majority opinion at ¶ 5 (“After a review of our caselaw, procedural rules, and legislative history, we concluded punitive damages were not available in this context because ‘the procedure in N.D.R.Civ.P. 60(b), [N.D.C.C. § 14-05-24(3) ] and an independent action in equity provide the established method[s] for addressing issues about a claimed fraudulent concealment of marital property during an earlier divorce proceeding.’ Walstad I, [2012 ND 204, ¶ 18, 821 N.W.2d 770].”).
[¶49] This case is not about punishment, or at least it should not be. Upon divorce, marital estates are divided equitably. Walstad I, 2012 ND 204, ¶ 19, 821 N.W.2d 770; Bladow v. Bladow, 2003 ND 123, ¶ 5, 665 N.W.2d 724. “It is well-settled that a property division need not be equal to be equitable, but a substantial disparity must be explained.” Bladow, at ¶ 5. As noted in Walstad I, economic misconduct can be considered. Id. at ¶ 19. The majority does not explain how the district court is to implement the economic misconduct consideration. However, our precedent provides direction. This Court has held economic misconduct is an appropriate reason to restore diverted or wasted assets to the marital estate. See Halvorson v. Halvorson, 482 N.W.2d 869, 870-71 (N.D.1992) (including value of dissipated assets in husband’s award was appropriate method to equitably distribute property in light of his economic fault); Lee R. Russ, *924Annotation, Divorce-Dissipation of Assets, 41 A.L.R.4Ü1 416, §§ 3-4 (1985). Thus, the use of equitable property distribution in a divorce should not be used for overallocation of an asset to one former spouse as punishment for the other former spouse’s economic misconduct. Rather, reallocation remains an exercise in equitable distribution, and the majority cites no case allowing the application of a different formulation.
[¶ 50] Finally, the majority reverses and remands for an award of attorneys fees, effectively concluding as a matter of law that one who conceals marital assets must pay the other party’s attorneys fees. I respectfully dissent from that broad determination for reasons including that the majority fails to distinguish between awarding attorneys fees under N.D.C.C. § 14-05-23 and under a district court’s inherent power to sanction, and that under any legal measure the district court did not abuse its discretion because it could have determined Catherine Walstad’s claim was unreasonable.
[¶ 51] Explaining the difference between statutory attorneys fees and attorneys fees as a sanction, we stated:
“Under N.D.C.C. § 14-05-23, the primary standard governing an award of attorney fees in a divorce action is one spouse’s needs and the other spouse’s ability to pay. Under that statute, we have recognized that where a party’s actions have unreasonably increased the time spent on a case, attorney fees may be appropriate.
“A district court also has inherent authority to sanction a litigant for misconduct. ‘Sanctions must be reasonably proportionate to the misconduct.’ When sanctioning a party for misconduct, a district court should consider and make findings on the culpability or state of mind of the party against whom sanctions are being imposed, the prejudice to the moving party, the impact of the prejudice on the moving party’s ability to present or defend the party’s case, and the availability of less severe sanctions.
“A district court has discretion in awarding attorney fees as a sanction in divorce actions. An award of attorney fees as a sanction will not be disturbed on appeal unless the court abuses its discretion. A court abuses its discretion when it acts in an arbitrary, unreasonable, or unconscionable manner, when it misinterprets or misapplies the law, or when its decision is not the product of a rational mental process leading to a reasoned determination.”
Kelly v. Kelly, 2011 ND 167, ¶¶ 34-36, 806 N.W.2d 133 (quotation and citations omitted).
[¶ 52] Here, the majority is unclear whether the district court must award attorneys fees under the statute requiring a showing of need and ability to pay or under the court’s inherent authority to sanction, or both. Reference to “a different focus” in cases involving an independent action in equity suggests attorneys fees are required here as a sanction. Majority opinion at ¶ 31. However, we are left guessing because later in that same paragraph the majority mixes in the weighing exercise required to award attorneys fees under the statute, N.D.C.C. § 14-05-23. Majority opinion at ¶ 31 (“We conclude in the context of an independent action in equity for fraudulent concealment of marital assets, balancing one party’s ability to pay with the other’s need is secondary to considering whether the actions of one party unreasonably increased litigation cost.”). Thus, the basis for the majority’s action is unclear. Clear however is that the majority holds Catherine Walstad is entitled to attorneys fees as a matter of law “[b]ecause Richard Wal-*925stad’s concealment of marital assets is the sole reason for the litigation.” Id. at ¶ 33. See also id. at ¶ 32 (“Richard Walstad’s concealment of marital assets has not only unreasonably increased the time and financial expenditures on this case, it is the sole reason for the litigation.”).
[¶ 53] The district court did not explain why attorneys fees were not awarded. We could and probably should remand for an explanation. But the majority does not send the issue back for that reason; rather, they make clear “the district court abused its discretion in not awarding attorney fees, we reverse and remand for proceedings in accordance with this opinion.” Majority opinion at ¶ 34. On remand, the district court must award attorneys fees— albeit based on an unknown measurement.
[¶ 54] Attorneys fees awarded as a sanction — as these likely are intended to be — are subject to an abuse of discretion standard of review. The majority opinion recognizes this, stating:
“A district court’s award of attorney fees ‘will not be disturbed on appeal unless the appealing party establishes the court abused its discretion.’ Hoverson, 2013 ND 48, ¶ 24, 828 N.W.2d 510 (citation omitted). ‘A court abuses its discretion if it acts in an arbitrary, unreasonable, or unconscionable manner, its decision is not the product of a rational mental process leading to a reasoned determination, or it misinterprets or misapplies the law.’ Id. (citation and quotations omitted).”
Majority opinion at ¶ 29.
[¶ 55] Here, nothing allows me to conclude as a matter of law that the district court abused its discretion in not awarding attorneys fees. The district court was confronted with one party demanding $350,000.00 plus costs and attorneys fees because $50,000.00 was concealed. The other party argued for equal division of the concealed money. In an absolute sense, this proceeding would be unnecessary but for concealing the money. However, unlike the majority, I cannot say as a matter of law that Richard Walstad’s withholding the money was the “sole reason” for the litigation. Rather, the district court well could have concluded that Catherine Walstad’s position unreasonably increased the cost of litigation or that the parties both acted unreasonable at some stage of the case so that they should pay only their own attorneys fees. Therefore, based on these facts and on the law of the case requiring equitable distribution of the concealed asset, I cannot conclude the district court was arbitrary, unreasonable or unconscionable in not awarding attorneys fees to either party.
DANIEL J. CROTHERS