*1 55,426 No.
Mary Appellant. Appellee, Reich, Reich, v. Dale Jane 545) P.2d
(680 Opinion filed 27, April 1984. Boone, Hays, argued Thomas C. appellant. the cause and was on the brief for Holland, Russell, argued Michael S. cause was on the brief for appellee. opinion The of the court was delivered J.; This is an appeal
Miller, order dividing an property parties following granting of a divorce. This action was commenced in district County by court of Russell plaintiff, Mary Reich, defendant, against Dale Jane Reich, divorce, seeking property, alimony, attorney division of fees, and A granted 1982, costs. divorce was on November grounds incompatibility, of mutual appeal and no was taken from that order. Both have since remarried. trial,
After a full the trial court divided the between parties, alimony fees, attorney denied or and taxed the costs journal entry wife. February The was filed on 1983, and it is from that appeals. order the husband Three issues are raised: Whether the court its abused discretion dividing property; whether court abused its discretion failing consequences division; to consider the tax of its and whether proposed findings wife’s concerning alimony division of erroneously were admitted evidence of compromise. requires
The first issue us to review the facts. Plaintiff and defendant married on 1954. couple started with little June nothing, acquired but years. substantial assets over the Much the wealth family consists ranch operations which the husband’s father during started 1930’s then gradually transferred to his paid land, son. Defendant for some of the land has by gift. Additionally, some other to him
the bulk came primarily a rancher and has been purchased. The husband been *2 cattleman; employed outside home. wife has not been disc, ruptured anticipates addi- and a hip an artificial She has surgery, and is unable to work. tional ranch, including the al- the entire trial court awarded The stock, cattle, machinery thereon, and all most-new home property, to the husband. The Colorado equipment, and a small parties, equally between the the mineral interests court divided portion only and that provision that the wife’s be for life with the revert to surface owner upon her death her judgment wife a in court awarded the the land. The trial cash, $200,000 $500,000, in balance of payable amount of $300,000 payable equal in annual installments of twelve each, February paid to have the first installment been unpaid percent per annum balance eight with interest at accruing judgment The made on that date. to have commenced awarded the wife upon the ranch. The trial court also a lien request trial court denied the wife’s residence in Colorado. The fees, alimony attorney taxed the her. costs to to the under property passing interests or may as decree be summarized follows: court’s TO THE WIFE: $500,000.00
Money judgment 85,000.00 Life estate in minerals 60,300.00 Pitkin, Colorado, property $645,300.00 value .................... Total values.) (The parties agreement foregoing as to the are WIFE’S HUSBAND’S VALUATION VALUATION THE HUSBAND: TO 125,750.00 192,170.00 $ $ Cattle Minerals 85.000.00 85.000.00 land Pasture 463.230.00 409.394.00 Crop land 276.877.00 276.877.00 improvements & Farmstead 109.101.00 132.750.00 Equipment 182.100.00 203.241.00 Colo., property Cup Tin 10.000.00 10.000.00 $1,198,222.00 $1,363,268.00 Gross value 50,000.00 50,000.00 current indebtedness Less $1,148,222.00 $1,313,268.00 Net Value share, minerals, parties will which the Disregarding the income-producing property received all of the husband —the net value ranch, machinery, cattle and feed. Total equipment, is, by party’s computation, well over a property either approximately half of that Plaintiff s million dollars. computation We have not included in our the interest amount. may years judgment, which accrue in future s or the may which income be earned or accrue to husband future years. guides property
The statute which the courts in the division of 60-1610(h). in divorce actions is K.S.A. That statute reads: “(b) (1) property. Financial matters. Division The decree shall divide the personal property parties, spouse prior real and of the whether owned either marriage, acquired spouse spouse’s right marriage either own after or acquired by efforts, spouses’ joint by: (A) kind; division (B) awarding part spouses to one of the *3 requiring pay just sum; proper (C) ordering the other to a and a sale of the property, prescribed by court, dividing proceeds under conditions the and the of making property the sale. In age the division of the court shall consider the of the parties; marriage; property parties; the duration of the the owned the their present earning capacities; time, acquisition and future the source and manner of property; family obligations; of ties and the allowance of maintenance or lack thereof; dissipation assets; and such other factors as the court considers necessary just property.” to make a and reasonable division of
The earlier forms of this statute have been held to vest the trial
court with
Bohl,
broad
In
557, 561,
discretion.
Bohl v.
232 Kan.
(1983),
by the trial
it
court then cannot be said that the trial court abused its discretion.’
Powell,
Stayton
Stayton,
nothing
case
defeat the trial
left for him. If this were the
it would
court’s
dividing
property equally.”
Mrs.
that a local bank had extended
presented
Reich
for the sum of
and that the
to her
letter of credit
bank
addition,
credit
to the defendant.
In
would extend similar
testimony that the defendant had sub-
had
court
before it
flow, including a net cash flow for the first nine
stantial cash
$70,000,
purchased
and that he had
than
months of 1981 of more
past
years
within
equipment
few
large amounts
new
money
do so. There
also evidence that
borrowing
without
years 1980 and
for the
1981 was not
defendant’s
taxable income
were in evidence
tax returns
and the trial
large, but defendant’s
figures
to examine
contained
opportunity
an
had
court
Upon
therein.
thorough
evidence,
examination of the
we are
not convinced that the defendant will
compelled
liquidate
be
payments
the ranch in order
required
to meet the
of him the
True,
trial court’s judgment.
may
borrow;
he
be
but
grounds
that is
setting
not
aside the trial
judgment.
court’s
Stayton
In
Stayton,
(1973),
by,
clearly against,
reason and evidence.
judicial
discretion is
arbitrary,
abused when
action
fanciful or
“Judicial
unreasonable,
way
which is
saying
another
only
that discretion is abused
where
adopted by
no reasonable man would take the view
the trial court. If
propriety
reasonable men could differ as to the
of the action taken
the trial
court then it
judicial
cannot be said that the trial court abused its discretion. All
may
discretion
only
thus be considered as exercisable
within the bounds of
justice
sense,
only
reason and
plainly
the broader
to be abused when it
overpasses those bounds.”
Next, we turn to the issue tax consequences. The defendant contends that the trial court failed to consider the tax conse- quences of its order. obviously prefer Defendant would a more wife, modest award to the permit one which would payment to be tax deductible to him. While the trial did specifically state on the taking record that it was into considera- tion provisions Code, the various of the Internal Revenue presented trial court was argument with much evidence *5 this case. We any proposed order in regarding aspects the tax of evidence. say ignored court that cannot that the trial it the trial court erred when Finally defendant contends pay willing was to the testify that she plaintiff the to permitted was not an in the ranch. This his interest defendant proposed of the s compromise but a statement of offer 60-452, relating to K.S.A. the property. of valuation and division compromise damage nonadmissibility offers to of evidence of was admissible. loss, evidence relevant and inapplicable. is The will to primary argument is that he Defendant’s judgment, and that the pay the liquidate the ranch in order to the wife as payments made the taxable to have trial court should prop- the as division of alimony, than taxable to husband rather ordering erty- judgment its in the trial court exercised The say that it abused its discre- payments specified, and we cannot which liquidation argument, matter is one of tion. The of forced trial court and not persuasive when made the payments are of whom the taxable here. The matter persuasive case, upon type the vary depending case will alimony an Here, but decreed trial court denied ordered. the discretion equitable property. We find no abuse of division of and no reversible error. judgment is affirmed. the C.J., making mari- dissenting: division
Schroeder, apply the failed to the most property in case trial court tal this 60-1610(b)(l), January effective K.S.A. recent amendment “dissipation give assets” 1983. It failed to consideration the the in property in divorce action accord- making in a division of my legislature. Accordingly, in of the ance with the admonition power of its opinion, abused exercise court is confisca- making an award to which discretion tory awarded to defendant. The portion of the forcing the termination effect of the decree results operations and means of livelihood. farming defendant’s appears opinion as written for On the surface the analyzed the record and decree are equitable just, when light awarded wife in satisfying in terms of property, and current consequences upon tax sale money charges borrowed to cash the event apparent. wife, decree become realities award to *6 stage for a cash award to the trial wife the of this matter when, day by was set the wife her trial and counsel on the before concerning alimony the property, on issues and division the Russell, Kansas, wife went the Bank in January to Home State on procured and a letter of credit which was introduced plaintiff into evidence as s 17. It simply Exhibit No. the states $750,000 opened bank has Mary a credit of favor Reich Jane sight upon whose drafts to that extent at the bank will be honored negotiated days if within seven signed by from date. It was president bank, vice important Harlan Dietz. What is to is place note the letter of credit at no states the duration of a loan magnitude, of this required, whether note will be what be, charge security will bank require for the loan.
The letter of credit was admitted prelim- into evidence after a inary by Dietz, foundation was Mr. established who testified briefly at very beginning trial. On cross-examination testify Mr. Dietz did not charged what interest would be either of to this magnitude, action on a loan this did he per calculate prime upon the interest annum based the bank’s rate (Based upon 13% at the time he testified. further discus- sion herein the qualify prime defendant would not as a rate borrower.)
The letter of credit in this case was support calculated to Proposed “Plaintiffs Findings Concerning Alimony Prop- erty.” clearly This was a misnomer. Counsel for the defendant objected strenuously being and attacked the as document “evi- compromise,” invading court, dence of province citing K.S.A. 60-452. This was document admitted the trial as January 18, 1983, “Plaintiff s day Exhibit No. 16” on commenced. The first document recites that the pay defendant $2,000 per month alimony plaintiff to the until death or remar- riage. The options document then submits two for the division of property. Under option, pay the first will the “Plaintiff defendant immediately $700,000 (Kansas Colorado), real for all estate cattle, machinery farm and mineral interests.” Under the second option, $250,000 pay plaintiff defendant would be January 20, 1983, $450,000 plus judgment before payable ten-year period annum, over a per at with interest 9% with the January plus made or before
first to be estate, interest; Kansas real is to be awarded all the defendant machinery cattle, equipment; plaintiff is be farm life; rights plaintiff is to of the mineral for awarded one-half Colorado, Pitkin, real estate and furniture awarded the be therein; her 1982 Pontiac Grand plaintiff is to be awarded party to Prix; incurred either is to all debts the defendant divorce; is petition plaintiff her the date filed furniture; be awarded awarded all household payment of her apply toward the sum of attorney fees. transcript the first abundantly of the record
It clear for division of option foregoing document *7 plaintiff adopt second. The to induce the court calculated disclosed, knew, that the ranch as the evidence at trial birth; it was most of in Kansas was the defendant’s home by at passed parents on to him his either without consideration or Farming a nominal sum. was defendant’s livelihood only farming was with business he knew. The defendant’s son son, farming with his wanted continue him and the defendant done, arrangement. The partnership in a he and his father had as son and their he did believe testified not defendant along plaintiff knew all ranch. The capable running the were of a part with the ranch for willingly that her husband would fact, party sell neither could settlement. He so testified. In cash place the home the land free and clear deed to all because 3, 1969, specifi- quarters, dated December consisting of three parents, cally rights in the defendant’s a reservation of set forth reading: E. Reich and Marie C. Reich HOWEVER unto the said “RESERVING Jacob survivorship right joint and not as tenants with
the survivor of them as tenants any occupy buildings common, right the residence and in and to live upon the West Half East Half in connection therewith situated situated 11, Range E/2) 22, Township (W/2 15.” of said Section years age at the time of mother was The defendant’s good health. and in by the defendant his conveying 640 acres
Another deed all was of minerals and his one-half parents parents reserved to deeds. subject mineral further made to two ruling which the trial court’s propriety Aside from the plaintiffs evidence, admitted 16 and 17 in Exhibits Nos.
options by carefully analyzed. submitted must be option require Satisfaction of a under either almost the immediate sale of the real and other farm dissipation assets as a result when the tax con- sequences upon calculated, given sale is and consideration is charges. current interest
Considering borrowing sug- money alternative of as gested by the option clearly letter of credit and the second will necessity disclose the sale. by
Recent efforts our Federal Reserve Board to control infla- tion have past escalated interest rates to levels in the decade far beyond rates by legislature. theretofore declared usurious our Actions appealed to this court where credit was extended persons banks to community the farm at the time this action was tried are charges. indicative of interest In First WaKeeney Bank Moden, 681 P.2d 11 (1984), $892,389, Modens were significant indebted portion of which was carried January note dated which maturity had a in months, date six bearing at interest 18%. remaining indebtedness was secured a note and mort- gage on the land with another bank. This was a foreclosure action by the bank because the Modens were unable to reduce the principal interest due periodic on the note at the six- past simply month renewals of the note. principal added amount when the note was loan renewed. *8 Bolan,
In Iola State Bank v.
235 Kan.
If a loan of was effectuated the Home State Bank Russell, Kansas, in accordance with the admit- letter credit 348 the bank case, it to assume in this is reasonable
ted into evidence months, note, maturing in six and of a require execution would require at doubt bank bearing No 18%. security to the bor- available of all the unencumbered pledge rower. $750,000 18% on an loan at
Assuming simple interest on $135,000 basis, inter- require payment of the loan would annual pay- semi-annually the interest Compounded per annum. est greater. ment would be much Mary their Reich from income of Dale and What was the Jane years 1980 holdings farming operations for the and
land Tax 1040 Individual Income joint Their federal form 1981? $23,131. adjusted gross income of an Return for 1980 discloses $22,739. Rents and discloses a loss Form 1040F for 1980 1040) income (Form total net royalties E discloses on Schedule (Form $33,206 capital Schedule D long-term gains net $21,180. 1040) of 1040 Individual year joint federal form
For $3,048. gross adjusted income discloses an Income Tax Return $35,015. Rents and discloses a loss of Form 1040F for 1981 1040) (Form total net income Royalties E discloses on Schedule (Form D $40,883. capital gains Schedule long-term Net readily apparent, it 1040) $21,049. returns make are These tax operations farming royalties, oil the income for profitable. were not dividing the did in its decree What the trial court $500,000 of the mineral give plus in cash one-half life, thereby giving her one- interests owned award. The to the cash royalty income addition half of decree also Colorado, property at Pitkin, valued gave her the $60,300. property given the wife was The total value of than taxes on virtually consequences to her other with no tax Cady, P.2d Cady v. it accrued. See income as (1978). holdings over to the defendant setting the ranch The decree satisfy the between alternatives to him choose two obligates land, pay One would be to sell plaintiff. judgment in favor of payments make the cash taxes, the balance to use all income unpaid balance due with 8% interest on they due as became The other would be alternative at intervals. owing annual *9 owing plaintiff. the due and to money, as it became the borrow ranching operations will farming the Under either choice terminate. ranching operations, despite farming and the
The income from $105,000 borrowing (which on includes a cash flow substantial best, if the 1982), particularly marginal at at the bank in *10 depending on the land appraised value of 60-65% of be secured which had to ability repay loan to individual’s mortgage. a first had testimony that his wife in his admitted
The defendant ranch, a settlement but he indicated rights in the years interest would force at 9% scattered over ten ranch would have serious ranch, a sale of the and that sale of him. consequences for tax the income testified in view of expert the defendant
An expenses, that, living operating after history the ranch debt service. money remaining for there was no money, renewal of the at each borrowed If the defendant principal. added to the the interest would be note due the bank it was insecure and result until the bank felt This would continue pledged for the loan. the collateral in foreclosure on voluntarily sell the land my Mr. Reich will opinion, In either of his means of livelihood that holdings and terminate his insolvency. through son, involuntarily to do so will be forced present state of eco- charges in the This so because confiscatory. exorbitant and affairs in this nation are nomic requires capital a vast that Farming ranching is a business that inflation in the record outlay produce Evidence income. years past ten establishes has escalated land values 100% in terms when viewed are unrealistic that these land values by the recognized situation has been capital. return This of estate taxes with assessment Congress Federal in connection farming. this in land was used upon the death of one whose is the use the IRS event, appraised authorized valuation value, determining the estate value land, its market government. payable taxes federal a decree a divorce unlikely any would enter It that court parties one of the deprived that involving urban dwellers action trial decree of the job. Yet the livelihood or of their means of evidence There is no precise this result. court here has appeal to show this presented this trial record of money judgment awarded pay the the defendant can liveli- means of terminating the defendant’s in this case without hood. 1982, 60-1610(h)(1) (L. legislature in 1982 amended K.S.A. with the judge dealing 9) 152, directing that the
ch. sec. financial matters divorce action take into “dissipation making consideration the of assets” in a division of parties’ property. January 1, This statute was made effective quoted in opinion and was the court’s verbatim. Here the granted divorce was alimony November the issues of January 18, 1983, division of were heard journalized February Therefore, 1983. assum- ing presently the statute as it applicable case, reads was to this granted the discretion trial court under the statute give that it dissipation due consideration of assets in making property. Bohl, a division of Bohl v. *11 (1983); Powell,
P.2d 1106
Powell v.
231 Kan.
Here the
grounds
incompati-
were divorced on the
of
bility. Therefore,
equal
Nearly
both were in
fault.
all of the land
holdings in this
parents
case came from the
of the defendant in
action,
the
and the trial
awarding
court after
one-half of the
royalties
income from
plaintiff proceeded
oil
to the
to decree a
property
division
completely
of
that failed
to take into consider-
dissipation
ation
resulting
the
assets
from its decree.
of
Where the
making
decree of a court in
property
division of
is
arbitrary
judgment
inequitable
it will be set
St.
aside.
Clair,
468, 499,
Clair v. St.
(1973).
the case is remanded the trial court with directions to conduct a on paying judgment Nancy alternative methods of the Bohl the amount of $964,716.50 special consequences, security with attention to tax interest and on unpaid jurisdiction purpose for the balance. This court retains of this case for the reviewing findings judgment of of the trial court. The the trial of affirmed as modified.” opinion In the the court said: “However, recognize acknowledge require we it and would be unfair to Mr. liquidate company proceeds
Bohl to his and turn the Mrs. with over to Bohl nothing goal left for him. If this were the it case would defeat the trial court’s of dividing property equally. the marital recognize validity appellant’s argument pertains “We as it to the method discharging stated, Nancy previously Bohl. As the amount of
352 However, judgment is well evidence and will be disturbed. within the judgment giving payment consideration the tax alternative methods of consequences case thereof further We find the should be deserve consideration. purpose receiving evidence the trial the limited remanded to court for findings giving making methods of consideration to tax alternative security consequences, unpaid 232 Kan. at for balance.” 565. have other done divorce cases on divisions
What states major comprise portion where and ranches farms property? adopt premise cases farm ranch Montana should kept operating, intact and and that the division of sale farm. In re a divorce should not force a ranch or 517, 523, Marriage Jacobson, v. 183 600 P.2d Mont. Jacobson 311, 314, (1979); Biegalke 172 564 Biegalke, 1183 v. Mont. P.2d Hunnewell, (1977); v. 160 Mont. Hunnewell (1972). P.2d 1198 Gomke, _ Mont. _,
In Gomke 627 P.2d 396-97 (1981) the court said: policy predominantly is a rural “That tied to the economic realities of a state Family-run part important ranches like Montana. farms and constitute an economy Many parents family way pass state’s of its of life. wish to farm continuity or ranch to their children before their death want to insure the of a family heritage. That if the understandable desire would be frustrated courts of family state were farms and a matter of to sell ranches as course in ‘equitable’ spouse order to effect an settlement who does not marriage wish to remain on the farm after a dissolution.” *12 stronger policy preserving family
Iowa courts have a of farm. previously recognized awarding “We have a trial court reasonableness of spouse operated fixing
farm to the it and in the awards and schedule of who farmer-spouse payments reaching equality spouse to the other so the without added.) (Emphasis Marriage might ownership retain farm.” In re of (Iowa 1981). Callenius, 510, 309 515 N.W.2d Andersen, 562, (Iowa 564 Marriage See also In re 243 N.W.2d of 911, (Iowa 1976); 225 913 Marriage Briggs, In re N.W.2d of 1975). property disparity approve Iowa courts will substantial despite goals equality principal asset of division stated of if the parties’ major is which was a source of farmland desirability this preserving asset livelihood because “the of
353
range
acceptable departure
approximate
widened the
equality
property
Marriage
Conley,
division.” In re
284
(Iowa
220,
1979).
N.W.2d
223
n
aIn
recent Nebraska case it was stated:
property
divided,
marriage,
an
“In
action for
should
dissolution
be
if
possible,
permit
in such manner as to
retain
husband to
the means for
payment
any judgment
Michal,
awarded to
wife.”
Michal v.
207 Neb.
(1981).
1. The down this case is 40% of cash award.
2. There no evidence to indicate a resource available for
sale other than the itself. ranch 3. payments The annual of cash are not deductible to the purposes
defendant for as they tax had ali- mony been awarded.
4. There no evidence to an indicate income is available payments. make the The land, defendant sell cannot machinery
cattle or destroying ability without his produce income.
5. After the initial the time in which relatively the balance in installments is short. 6. is receiving approximate an 50% share of virtually
the assets
though
tax
even
free
the bulk of the
gifts
came from
parents,
from the defendant’s
managed
defendant
and operated the business.
Considering
dissipation
of assets awarded the de-
fendant,
gets the
share.
lion’s
Cases in which this
consequences
court has discussed tax
of a
division
McCain,
in divorce cases are
v.
McCain
219
780, 784,
(1976);
Kan.
Almquist
P.2d 896
v. Almquist, 214
(1974);
Kan.
Drummond,
Kan.
Small,
It submitted the trial court abused the exercise power of its dividing of discretion its decree parties. I would remand the case to the trial with directions expert testimony to hear dissipa- directed toward the *13 (1) tion of resulting property, (2) assets of the sale real 354 borrowing the funds to charges necessitated intez'est modify the trial court plaintiff, and that money to the
an award of 391, Cook, P.2d 646 accordingly. See Cook the award the manner credit and my the letter of (1982). opinion, Proposed “Plaintiffs connection with which it was used by the Alimony offered Concerning Property,” Findings over by the trial court as an exhibit plaintiff and admitted objection, highly prejudicial to strenuous defendant’s of the case the upon direct reconsideration defendant. I would influence, impending mar- any, if what trial court ascertain Doonan, to the just prior M. riage to Wendall State Bank of upon the Home January hearing, had January 1983. credit was issued when letter of Russell remarried discloses brief filed the defendant Her new husband shortly hearing January 1983. after Equipment, Truck and president a director of Doonan Bend, can be taken Inc., notice Kansas. Great Judicial corporation this domestic report filings of corporate annual Secretary Kansas. of State of office of the notes royalty the With one-half of royalty is not included. income life, ability the the plaintiff for her going to the income service the indebtedness make sufficient income to defendant to money to make is borrowed impossible, be where alone would ques- in answer to a The defendant testified payments due. ranching operation could put by him his counsel that tion (this $96,000 year the decree pay per interest tab before plaintiff). royalty income to the awarding one-half of the borrowing the Analysis possible the defendant’s choice of money money award to plaintiff in satisfaction $50,000 on the Miller land goes as indebtedness her follows. must borne the defendant with consisting of 220 acres Additionally, in favor of payments thereon. interest in the imposed upon all the real estate ranch. lien subject defendant would be Any borrowing further $200,000 $225,000 make the prior plaintiff. A loan of lien of the $25,000 February due plus the first installment of down bearing interest and a note 18% probably be on the risk factor the intervals in view of renewable at six-month up the land hold- put The defendant cannot bank must assume. history the ranch is earning on ings mortgage, as a first royalty gone. income poor, particularly with one-half of $40,500. $225,000 would be Annual interest on the borrowed year on payable at the first Interest 8% $22,000. In addi- $275,000 yet due is in annual installments not exist- indebtedness tion the defendant must service due the Miller land ing payments land. Annual on on the Miller $8,000, interest and years will be for a total for the next nine annually $70,500. principal payable expert appraiser testified as an A Federal Land Bank director had inflated land values farm land in this case. He testified dropped trial had years, at time of past ten 100% rate of the effective peak. He testified about 30% from 13-13 Bank loan would be %% a Federal Land