Clarifying Economic Misconduct: Excluding Potential Income from Marital Estate

Introduction

Van Beek v. Van Beek, 2025 ND 96, is a Supreme Court of North Dakota decision handed down on May 22, 2025. The appeal arises from a two-day bench trial in Emmons County District Court in a contested divorce between Tami Van Beek (plaintiff/appellee) and Darrell Van Beek (defendant/appellant), with the State of North Dakota as a statutory real party in interest. Key issues on appeal included the valuation and distribution of the marital estate, exclusion of an insurance agent’s testimony, primary residential responsibility for the parties’ three children, calculation of child support (including in-kind income), and an award of attorney’s fees under the domestic violence statute.

Summary of the Judgment

Chief Justice Jensen, writing for a unanimous Court, affirmed the district court’s judgment in part, but reversed inclusion of $198,823 in “potential income” from rented land that Darrell chose not to farm. The Supreme Court held that while economic misconduct (dissipation of assets) can justify an unequal split of existing marital property, it cannot expand the marital estate by imputing hypothetical or unearned income. The case was remanded for:

Reallocation of the existing marital estate without including the $198,823.
Reconsideration of attorney’s fees and costs on appeal under N.D.C.C. § 14-09-29(4), with specific findings on financial hardship.

Analysis

Precedents Cited

Kitzan v. Kitzan (2023 ND 23): Established that property-division findings are reviewed for clear error and clarified the deference given to district courts on valuations and equitable splits.
Swanson v. Swanson (2019 ND 25): Affirmed that long-term marriages generally merit equal division, but no fixed formula is required.
Willprecht v. Willprecht (2020 ND 77): Adopted Ruff-Fischer guidelines for equitable distribution, including factors such as age, earning ability, marriage duration, and income-producing capacity.
Rebel v. Rebel (2016 ND 144): Emphasized preservation of viable family businesses (e.g., farms) and held liquidation is a last resort.
Halberg v. Halberg (2010 ND 20): Defined in-kind income and required its inclusion in gross income for child support.
N.D.C.C. § 14-09-06.2(1)(j): Created a rebuttable domestic violence presumption barring residential responsibility unless overcome by clear and convincing evidence.
N.D.C.C. § 14-09-29(4): Mandates award of fees and costs to the domestic-violence victim unless it causes undue financial hardship.

Legal Reasoning

1. Property Distribution & Valuation
The Court applied the clearly erroneous standard to the district court’s valuation and equitable division under N.D.C.C. § 14-05-24(1) and Ruff-Fischer factors. It held that valuing assets within the evidence range is permissible and that credibility determinations (e.g., accepting wife’s crop valuation over husband’s) are for the trial court.

2. Economic Misconduct vs. Marital Estate
North Dakota recognizes economic fault (dissipation of assets) as a Ruff-Fischer factor to justify unequal distribution, but prior case law did not allow increasing the overall marital estate by imputing “potential” income. The Supreme Court refused to extend economic misconduct principles to create or inflate assets in the marital pool, reversing the $198,823 inclusion.

3. Evidence & Witness Exclusion
An abuse-of-discretion standard applied to the trial court’s refusal to admit the husband’s undisclosed insurance agent. The Supreme Court found no preserved offer of proof and upheld exclusion.

4. Child Custody & Support
The Court affirmed the award of primary residential responsibility to Tami Van Beek under best-interest factors, including child maturity (factor i) and domestic violence (factor j). It upheld imputation of in-kind income under administrative rules for support calculations.

5. Attorney’s Fees
Under N.D.C.C. § 14-09-29(4), fees to the domestic-violence victim are mandatory absent undue hardship. The Court held the trial court must find whether paying appeal fees would impose financial hardship and remanded that question.

Impact

Clarifies that economic fault permits adjusting distribution but cannot fabricate new marital assets by imputing hypothetical income.
Reinforces strict preservation requirements (offer of proof) for excluding witnesses.
Affirms application of the domestic violence presumption and mandatory fee awards for victims, extending to appellate proceedings.
Confirms inclusion of in-kind benefits in child support calculations under North Dakota rules.
Gives guidance on best practices for trial courts: specify hardship findings when awarding fees and carefully distinguish asset distribution from asset creation.

Complex Concepts Simplified

Clearly Erroneous Standard – Appellate courts defer to trial courts’ factual findings unless no evidence supports them or they rest on legal error.
Ruff-Fischer Factors – A non-formulaic list of criteria (age, income capacity, health, conduct, etc.) guiding equitable property division.
Economic Misconduct/Dissipation – When a spouse wastes or improperly transfers marital assets, the court can charge that spouse’s share without enlarging the marital pool.
In-Kind Income – Non-cash benefits (debt forgiveness, free housing, personal labor credits) count as gross income for child support.
Domestic Violence Presumption – One serious or a pattern of domestic violence triggers a rebuttable presumption against awarding custody to the perpetrator.
Offer of Proof – A formal trial objection procedure requiring the party to explain what excluded testimony would show, preserving the issue for appeal.

Conclusion

Van Beek v. Van Beek refines North Dakota family law by holding that economic fault cannot be used to create or inflate the marital estate—only to adjust its distribution—and by reaffirming trial courts’ wide discretion in valuations, custody decisions, and fee awards. It underscores the importance of proper trial procedure (disclosure, offers of proof, hardship findings) and ensures that parties cannot monetize unearned potential income in divorce. This decision will guide future cases on equitable division, child support, and the interplay of misconduct with marital asset accounting.