Steven Mark Orwig, Plaintiff, Appellee, and Cross-Appellant v. Mary Caroline Orwig, Defendant, Appellant, and Cross-Appellee; Orwig’s Livestock Supplements, Inc., Orwig’s Tubs International Inc., and MVP Transport, Inc., Plaintiffs and Appellees v. Mary C. “Marcy” Orwig, Defendant, Third-Party Plaintiff, Appellant, and Cross-Appellee v. Steven Orwig, Third-Party Defendant, Appellee, and Cross-Appellant
Nos. 20200123, 20200124
IN THE SUPREME COURT STATE OF NORTH DAKOTA
FEBRUARY 18, 2021
2021 ND 33
The Honorable Cherie L. Clark, Judge.
Appeal from the District Court of Dickey County, Southeast Judicial District. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Jonathan T. Garaas, Fargo, ND, for defendant, appellant, and cross-appellee, and defendant, third-party plaintiff, appellant, and cross-appellee Mary Caroline Orwig.
Nos. 20200123, 20200124
VandeWalle, Justice.
[¶1] Mary Orwig appealed and Steven Orwig cross-appealed from a divorce judgment distributing the parties’ property and awarding Mary Orwig spousal support. Mary Orwig argues the district court erred in determining the value of certain property, distributing the parties’ assets, and failing to award her permanent spousal support. Steven Orwig argues the court erred by ordering him to pay Mary Orwig’s attorney’s fees. We affirm the district court’s property division and spousal support award, reverse its attorney’s fees award, and remand.
I
[¶2] In September 2016, Steven Orwig sued Mary Orwig for divorce. They co-owned Orwig’s Livestock Supplements, Inc. (“OLS”); Orwigs Tubs International, Inc. (“OTI”); and MVP Transport, Inc. (collectively “Corporations”). Before the divorce action, the Corporations sued Mary Orwig, alleging she made unauthorized transactions on the Corporations’ behalf, including opening credit card accounts in the name of the Corрorations and using the credit cards for personal use. The Corporations also alleged Mary Orwig wrongfully detained and controlled their property. The Corporations requested the district court enjoin Mary Orwig from transacting business on behalf of the Corporations and remove her as an officer and director of the Corporations.
[¶3] The district court consolidated both lawsuits. The court granted a preliminary injunction against Mary Orwig prohibiting her from transacting business on behalf of the Corporations, and later ordered her to return corporate property in her possession. Steven Orwig moved for an order to sell the parties’ Arizona real property. Mary Orwig opposed the sale. The court ordered the sale of the Arizona property. The court later entered three contempt orders related to the orders to return corporate property and sale of the Arizona property. Mary Orwig appealed from the three contempt orders.
[¶4] After a court trial, the district court determined the Corporations’ monetary claims and Mary Orwig’s counterclаims would be addressed through the divorce. The court determined the value of the parties’ assets and debts and distributed the marital estate. The court found Mary Orwig committed marital waste, wasted corporate funds, diverted corporate and marital assets, expressed an intention to deplete the Corporations and destroy Steven Orwig, and abused her discretion and authority with respect to the Corporations and Steven Orwig as a shareholder. The court determined the value of the Corporations and awarded the Corporations to Steven Orwig, including an industrial site and manufacturing facility. Steven Orwig was also awarded the farmland and residential site and pasture. Steven Orwig received a net property award of $1,137,719.53, and Mary Orwig received a net property award of $1,090,720.71. The court found its property distribution was equitable considering Mary Orwig’s marital and corporate waste. The court awarded Mary Orwig $5,500 per month in spousal support starting in March 2020 and continuing until March 31, 2030. The court ordered Steven Orwig to pay $105,000 of Mary Orwig’s attorney’s fees. Judgment was entered.
II
[¶5] Mary Orwig claims the district court violated due process and tainted the proceedings by reviewing before the trial the file in this case and a file in a prior case that was dismissed. She contends the court cannot take judicial notice of the dismissed action, except for the act of dismissal.
[¶6] We review a district court’s decision to take judicial notice of evidence under an abuse of discretion standard. State v. Soucy, 2020 ND 119, ¶ 4, 943 N.W.2d 755; Opp v. Matzke, 1997 ND 32, ¶ 9, 559 N.W.2d 837. A court abuses its discretion when it acts in an arbitrary, unreasonable, or unconscionable manner, it misinterprets or misapplies the law, or if its decision is not the product of a rational mental process leading to a reasoned determination. Soucy, at ¶ 4.
[¶7] Under
[¶8] Prior to trial, the Corporations moved for the district court to take judicial notice of the Corporations’ prior action against Mary Orwig, which was dismissed without prejudice on the parties’ stipulation, and the Corporations’ current action against Mary Orwig that was consolidated with the divorce action. Mary Orwig had notice and an opportunity to respond to the motion. The court took judicial notice of what occurred in this case and the Corporations’ prior action against Mary Orwig.
[¶9] It was not error for the court to review the file in the current case before trial. Sеe State v. Cook, 2020 ND 69, ¶ 12, 940 N.W.2d 605 (stating a court does not need to take judicial notice of matters that are already in the record in that case and
III
[¶10] Mary Orwig argues the district court’s admission and consideration of the deposition of the Corporations’ general manager, Kathryn Petersen, was improper. She contends Petersen was available to testify at the time of trial and the deposition was not admissible under
[¶11] Steven Orwig testified Petersen is the Corporations’ general manager. Petersen’s testimony was taken by deposition in anticipation of her not being available to testify during the trial. During a pre-trial hearing, Mary Orwig acknowledged Petersen’s deposition was taken for use at trial. The trial was originally scheduled for August 19, 2019, but was continued to allow the parties to pursue settlement negotiations. On August 19, 2019, the district court stated it had not decided whether to allow the deposition, but indicated Petеrsen may be required to appear if she was available once the trial continued. The court ultimately allowed the deposition under
[¶12] The district court has discretion in admitting deposition testimony under
[¶13] Under
[¶14] Petersen’s deposition was offered by the Corporations and Petersen is the Corporations’ general manager. The Corporations asserted the deposition was taken for the purpose of marshalling the evidence supporting their claims. Steven Orwig also stated on the first day of trial that he was offering the deposition transcript to the extent he needed to offer it. The deposition was offered by the Corporations and was not offered by an “opposing party.”
[¶15] The Corporations argue the deposition was also admissible under
[¶16] Under
In the trial of a nonjury case, it is virtually impossible for a trial judge to commit reversible error by receiving incompetent evidence, whether objected to or not. An appellate court will not reverse a judgment in a nonjury case because of the admission of incompetent evidence, unless all of the competent evidеnce is insufficient to support the judgment or unless it affirmatively appears that the incompetent evidence induced the court to make an essential finding which would not otherwise have been made. . . . On the other hand, a trial judge who, in the trial of a nonjury case, attempts to make strict rulings on the admissibility of evidence, can easily get his decision reversed by excluding evidence which is objected to, but which, on review, the appellate court believes should have been admitted.
[¶17] Mary Orwig has not alleged any testimony from the deposition induced the court to make an essential finding which would not otherwise havе been made or explained how the admission of the deposition prejudiced her. We conclude any error in admitting the deposition was harmless.
IV
[¶18] Mary Orwig contends the district court erred by ordering disgorgement of her corporate stock and the compensation and rental income she was due from the Corporations as a penalty for perceived wrongdoing.
[¶19] When a corporation is a closely held corporation and both parties to the divorce proceeding own all of the corporation’s stock, we have said, “It is a waste of judicial, and the parties’, resourсes to initiate a separate action for equitable relief when this matter could have been resolved in the pending divorce action.” Grinaker v. Grinaker, 553 N.W.2d 200, 203 (N.D. 1996). We have held it is a mistake to keep former spouses together in a business relationship that will inevitably lead to more litigation. Fisher v. Fisher, 1997 ND 176, ¶ 27, 568 N.W.2d 728. We acknowledged 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.” Id. at ¶ 32. We have expressed a preference for a distribution of the marital estate that will disentangle the partiеs’ financial affairs. Id. at ¶ 33. We explained, “Disentanglement allows one former spouse to operate the business without harmful interference by the other, and it reduces further conflict between them.” Id.
[¶20] The Corporations requested the district court remove Mary Orwig as a director or officer under
V
[¶21] Mary Orwig argues the district court’s property valuations and distribution are clearly erroneous.
[¶22] A district court’s property valuations and division are findings of fact, which will not be reversed on appeal unless they are clearly erroneous. Wald v. Wald, 2020 ND 174, ¶¶ 11, 19, 947 N.W.2d 359. A finding of fact is clearly erroneous when it is induced by an erroneous view of the law, there is no evidence to support it, or, after reviewing the entire record, this Court is left with a definite and firm conviction a mistake has been made. Id. at ¶ 11. The district court’s valuations depend on the evidence the parties present, and we presume the court’s valuations are correct. Sims v. Sims, 2020 ND 110, ¶ 21, 943 N.W.2d 804. A court’s property valuation is not clearly erroneous if it is within the range of evidence presented. Wald, at ¶ 11. In an appeal after a bench trial, this Court will not second-guess a district court’s credibility determinations. Id. at ¶ 27.
A
[¶23] Mary Orwig argues the district court erred by failing to determine the value and to distribute the manufacturing facility and the 6.8 acres of land upon which it sits. She also argues the court’s $287,000 valuation for OLS and OTI is clearly erroneous. She claims the valuation is based on an income approach appraisal, which excluded real estate investments from the value of
[¶24] The district court found OLS and OTI together are worth $287,000 and the parties’ ownership interest in MVP is worth $64,000. The court found the Corporations’ accountants testified the Corporation’s tax return should not be the sole basis to value the businesses and would result in an unreliable valuation due to double counting, and Mary Orwig did not provide any credible conflicting evidence. The court stated it relied on appraisal reports completed by Steven Orwig’s witnesses, Jeff Berg and Shawn Stumphf, in valuing the martial property. The court found Berg appraised the farmland; an industrial site, which includes a manufacturing facility and land; residential site and pasture; and some vehicles. The court found Berg is an accredited appraiser; he used three different valuation methods to appraise the property; he was the only credible, qualified witness testifying to the value of the parties’ real property and vehicles; and Mary Orwig provided no credible evidence to contradict the valuations. The court found Stumphf conductеd the business valuations for the Corporations, which incorporated Berg’s valuations as to corporate and marital assets. The court explained its valuations of the Corporations were based on Stumphf’s valuations because Mary Orwig failed to provide evidence contradicting Stumphf’s valuations and Stumphf’s valuations were credible as to method.
[¶25] The evidence supports the district court’s findings. Berg testified he determined the farmland was worth $380,000, the industrial site with land and buildings and equipment was worth $1.5 million, and the residential site with the house and other buildings was worth $560,000. Berg testified about three approaches that can bе used to appraise property, and then explained how he determined the value of the property in this case. Stumphf testified that he was hired to do business valuations for OLS, OTI, and MVP and that he relied on Berg’s real estate and equipment appraisal report in making his appraisals of the businesses. He testified that he appraised OLS and OTI together because they are consolidated entities and cannot operate individually and that he concluded OLS and OTI have a value of $287,064. He
[¶26] The district court’s valuations of OLS and OTI, including the industrial site and manufacturing facility, were based on Berg and Stumphf’s appraisals. The court found Berg and Stumрhf’s appraisals were the only credible evidence of the value of the property and businesses and Mary Orwig did not present any conflicting evidence. The court determined the value of the industrial site property and manufacturing facility and included that property in the distribution. The court’s valuation of OLS and OTI was within the range of evidence, and the evidence supports the court’s findings.
B
[¶27] Mary Orwig contends the district court erred in determining R&J Orwig Inc. did not have any value. She claims it must have value because it produces $5,000-$9,000 in income annually. Steven Orwig argues the ownership interest has not yet vested, and his mother has given him money from R&J Orwig “out of the goodness of her heart.”
[¶28] The district court awarded Steven Orwig “the 5% ownership interest in the feed supplement business owned by members of the Orwig family.” The court found R&J Orwig is owned by Steven Orwig’s family. The court included it as a financial asset on the list of the parties’ assets and debts for distribution, but found it was worth $0.
[¶29] Steven Orwig testified he receives money from R&J Orwig, but the amount varies each year. He testified his mother owns the company and he believes he will receive an ownership interest in the company after his mother’s death, but he does not currently have an ownership interest in the company.
C
[¶30] Mary Orwig argues the district court should have included her and Steven Orwig’s unpaid salary and rental income from the Corporations in the property distribution.
[¶31] The district court found both parties were owed back salaries and rent from the Corporations, but Steven Orwig was owed more. The court found the amounts owed to Mary Orwig are far outweighed by the damages she caused the Corporations and the marital waste, therefore Mary Orwig was not owed any salary or rent and the issue was taken into consideration in the division of property and spousal support. The court considered the evidence about marital waste, Mary Orwig’s breach of duty to the Corpоrations and fraud, and made findings about a number of examples of waste and expenses the Corporations incurred as a result of Mary Orwig’s actions.
[¶32] Steven Orwig testified they were both owed about the same amount in rent and salary from the Corporations, the Corporations are having a hard time and it was decided the bills would get paid before Steven and Mary Orwig would be paid, and the damage Mary Orwig caused to the Corporations was more than what she was owed. Evidence supports the district court’s findings, and the court did not err by failing to include any unpaid salary or rental income in the property distribution.
D
[¶33] The evidenсe supports the district court’s findings. The court’s property valuations are within the range of evidence. We conclude the court’s property valuations and distribution are not clearly erroneous.
VI
[¶34] Mary Orwig argues the district court should have ordered permanent spousal support and the court erred in crediting her with non-existent income, including imputing $3,333 in potential gross monthly earnings and income from a horse business.
[¶35] A district court’s decision about spousal support is a finding of fact, which will not be reversed on appeal unless it is clearly erroneous. Tarver v. Tarver, 2019 ND 189, ¶ 15, 931 N.W.2d 187. In deciding whether to award spousal support, the court must сonsider the needs of the spouse seeking support and the ability of the other spouse to pay. Id. The court must also consider the Ruff-Fischer factors, including:
[T]he 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.
Id. (quoting Knudson v. Knudson, 2018 ND 199, ¶ 11, 916 N.W.2d 793).
[¶36] We have said permanent spousal support is appropriate when a spouse cannot be rehabilitated or to equalize the burdens of divorce. O’Keeffe v. O’Keeffe, 2020 ND 201, ¶ 11, 948 N.W.2d 848. Rehabilitative support is appropriate to restore a spouse to independent economic status or to equalize the burden of divorce by increasing the receiving spouse’s earning capacity. Id. There is a preference to award rehabilitative support when it is possible to restore a spouse to independent economic status or when the burden of the
[¶37] The district court made findings about each of the Ruff-Fischer factors. The court found the marriage was long-term, Steven Orwig has a much higher earning capacity, Mary Orwig has a college degree but may find it difficult to reenter the work force at 54 years old, Mary Orwig has the capacity to earn $40,000 a year with a college degree, and she will also be awarded a viable horse business. The court also found Mary Orwig has caused excessive marital and corporate waste and she increased the costs of the litigation. The court considered the parties’ monthly expenses and found Mary Orwig’s alleged monthly expenses were not credible and included expenses for the Arizona ranch that no longer exists and expenses for her horse business. The court found Mary Orwig’s monthly expenses are $8,957.68 and she has potential gross monthly earnings of $3,333, which causes a shortfall, but the horse business will also produce income. The court also considered Steven Orwig’s ability to pay, finding he has a much higher earning capacity, and he was awarded the Corporations and will be in a substantially better financial position. The court found Steven Orwig will receive rеntal income from the Corporations, and he will receive a greater distribution of the marital assets as well as marital debt. The court explained it took into consideration the length of the marriage, the parties’ ages, Steven Orwig’s much high earning capacity, Steven Orwig was awarded the Corporations and property, the parties’ monthly expenses, the parties’ health, Mary Orwig was assessed the marital waste related to the Arizona ranch, and the marital waste that was not assessed. The court awarded Mary Orwig $5,500 a month in spousal support for ten years and also noted the amount was increasеd by the cost of the medical insurance Steven Orwig was ordered to pay for Mary Orwig.
[¶38] Although Mary Orwig contends there was no evidence of any past, present, or future income from a horse business, evidence established Mary Orwig was attempting to sell horses. The court found the horses were worth $222,396, and awarded all of the horses to Mary Orwig. Evidence supports the court’s finding that Mary Orwig received income-earning horses. Under the
[¶39] The district court made the required findings, and the evidence supports the court’s findings. The court did nоt err in considering Mary Orwig’s earning ability or the income-producing capacity of property awarded to her. We conclude the court’s spousal support award is not clearly erroneous.
VII
[¶40] Steven Orwig argues the district court erred in ordering him to pay Mary Orwig’s attorney’s fees.
[¶41] The court may award attorney’s fees in a divorce action under
[¶42] Under
Steve is in a better financial position to pay the attorney’s fees associated with these proceedings. In making this determination, the Court has factored in marital waste Mary incurred by unnecessary legal expenses during both the corporate action and the divorce action. However, this is offset by the potential income Steve will receive from the Corporations in the future without Mary’s interference.
The court stated it was awarding the attorney’s fees “as adequately proven” and ordered Steven Orwig to pay $45,000 in Mary Orwig’s attorney’s fees for the Garaas Law Firm and $60,000 for Erica Chisholm, who previously represented Mary Orwig in the divorce proceedings.
[¶43] Steven Orwig contends the district court erred in awarding the attorney’s fees because Mary Orwig never provided any proof of her attorney’s fees. “An award of attorney fees must generally be supported by evidence upon which the court can determine the requested fees are reasonable and legitimate.” Allmon v. Allmon, 2017 ND 122, ¶ 26, 894 N.W.2d 869 (quoting Whitmire v. Whitmire, 1999 ND 56, ¶ 14, 591 N.W.2d 126). A trial court abuses its discretion by awarding attorney’s fees unsupported by proper documentation upon which the court can determine the reasonableness оr legitimacy of the requested fees. See Whitmire, at ¶ 15.
[¶44] Mary Orwig testified that $60,000 in attorney’s fees for Chisholm and $45,000 in attorney’s fees for the Garaas Law Firm were the correct amounts of her attorney’s fees. She also testified that she has never seen a bill or invoice from Chisholm and she does not have any documentation of the fees, but her bankruptcy attorney told her the amount was $60,000. The record does not include any billing statements for Mary Orwig’s requested attorney’s fees for Chisholm or the Garaas Law Firm or an affidavit describing the specific legal services performed or the amount of time spent performing the services.
[¶45] Althоugh the district court made findings about Mary Orwig’s financial situation and needs in connection with the spousal support award and Steven Orwig’s ability to pay, there was no evidence upon which the court could determine the reasonableness or legitimacy of the requested fees. See Whitmire, 1999 ND 56, ¶ 15. We conclude the district court abused its discretion by awarding attorney’s fees without proper documentation supporting the fees. On remand, the court may allow Mary Orwig to submit supporting documentation from which the court can determine the reasonableness or legitimacy of the requested fees.
VIII
[¶46] Steven Orwig asserts he should be awarded attorney’s fees for the proceedings before the district court under
[¶47] Section
[¶48] It is not clear from the record that Steven Orwig requested the district court awаrd him any attorney’s fees under
[¶49] This Court may award attorney’s fees under
IX
[¶50] We have considered the parties’ remaining issues and arguments and have determined they are either unnecessary to our decision or are without merit. We affirm the judgment in part, reverse in part, and remand.
[¶51] Jon J. Jensen, C.J.
Gerald W. VandeWalle
Lisa Fair McEvers
Jerod E. Tufte
Carol Ronning Kapsner, S.J.
[¶52] The Honorable Carol Ronning Kapsner, S.J., sitting in place of Crothers, J., disqualified.