Hutchins v. Hutchins

Justice Laurie McKinnon delivered the Opinion of the Court.

APPEAL FROM: District Court of the Fourth Judicial District, In and For the County of Missoula, Cause No. DR 15-96 Honorable Leslie Halligan, Presiding Judge COUNSEL OF RECORD: For Appellant: Richard A. Reep, Reep, Bell, Laird & Jasper, P.C., Missoula, Montana For Appellee: Evonne Smith Wells, Wells & McKittrick, P.C., Missoula, Montana Filed: /s/_________
Clerk Justice Laurie McKinnon delivered the Opinion of the Court. ¶1 Michele Hutchins (Michele) appeals from orders of the Fourth Judicial District Court, Missoula County, dissolving her marriage to Michael Hutchins (Michael). We affirm and restate the issues on appeal as:

1. Is the parties' premarital agreement enforceable?
2
. Did the District Court equitably apportion the marital estate?
3
. Did the District Court abuse its discretion by valuing some of the parties' assets at the time of separation?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Michael graduated from medical school in 1985 and later that year met Michele. Michael and Michele lived in Nevada and dated on-and-off for a few years. Michael worked as a physician for the State of Nevada and Michele worked as a graphic designer. The couple eventually moved in together. In 1990, Michael proposed to Michele and she accepted. During the parties' engagement, Michele left her job to undertake homemaker duties and oversee construction of the couple's new home. ¶3 On August 9, 1991, the parties executed a document entitled "Pre-Nuptial Agreement" (Premarital Agreement). Michael and Michele married on August 16, 1991, one week after they executed the Premarital Agreement. The couple lived in Las Vegas, where Michael worked as a physician and Michele as a homemaker. Michele earned her bachelor's degree in fine arts, became a certified Pilates instructor, and took photography classes. ¶4 In 2006, the parties moved to Montana. At that time, Michael retired from his position with the State of Nevada and began receiving monthly retirement distributions from his Nevada Public Employees Retirement System (Nevada PERS) account. Michael and Michele purchased land outside of Missoula, Michele oversaw construction of a new home, and Michael obtained new employment as a physician. Throughout their marriage, Michael worked as a physician earning substantial income, which allowed the parties to accumulate significant assets and enjoy an above-average standard of living. Michele worked as a homemaker and briefly as a Pilates instructor. ¶5 In April 2014, Michele announced she wanted a separation and eventually moved out of the marital home. In January 2015, Michele filed a petition for dissolution of marriage. As the dissolution proceeding progressed, Michele sought a declaratory ruling that the Premarital Agreement was unenforceable. The District Court denied Michele's request, ultimately concluding the agreement was enforceable. The case proceeded to a bench trial in January 2017, at which both parties presented evidence and proposed apportionments of the marital estate. The District Court issued its findings, conclusions, and order of dissolution in August 2017. Michele appeals the District Court's orders regarding the Premarital Agreement and the division of marital assets. Additional facts are supplied throughout the opinion as needed.

STANDARD OF REVIEW

¶6 The determination of which state's law to apply in a particular situation is a question of law that we review de novo. Masters Group Int'l, Inc. v. Comerica Bank, 2015 MT 192, 190 P.3d 1063. The test for an abuse of discretion is whether the district court acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in substantial injustice. Thorner, ¶ 21.

DISCUSSION

¶9 1. Is the parties' premarital agreement enforceable? ¶10 Michele asked the District Court to declare the Premarital Agreement unenforceable, while Michael sought to enforce the agreement. The District Court considered the parties' briefs, held a hearing at which both Michele and Michael testified, and ultimately enforced the Premarital Agreement. The Premarital Agreement contained a choice-of-law provision, so we must first determine which state's law governs.

A. Choice of Law ¶11 The Premarital Agreement's choice-of-law provision provided, "This agreement shall be interpreted and enforced in accordance with the laws of the State of Nevada in effect at the time of its execution." The District Court quoted the choice-of-law provision and concluded the Premarital Agreement "should be construed according to Nevada law, as provided in the document." However, the court further concluded Montana law also applied to the agreement's enforceability because the dissolution and division of assets was occurring in Montana. The court proceeded to apply Montana's statutes and case law to its analysis of the Premarital Agreement's enforceability. ¶12 Pursuant to the Uniform Premarital Agreement Act (UPAA), which both Montana and Nevada have adopted, parties to a premarital agreement may contract with respect to choice-of-law provision applied only to the agreement's enforceability, not to the division of assets). While the District Court erred in applying Montana law, the factual findings upon which it based its decision permit us to apply Nevada law to determine whether the Premarital Agreement is enforceable.

B. Enforceability of the Premarital Agreement under Nevada Law ¶14 Michael and Michele executed the Premarital Agreement on August 9, 1991, and married one week later on August 16, 1991. The agreement stated that the parties "agreed to retain a single attorney to draft this agreement and to advise them of their respective rights and obligations under law and the ways and manner in which this agreement might alter such rights and obligations." The agreement further provided that each party "understands that said counsel does not represent either of them individually." The agreement listed each party's separate property. Michael's list included sixteen investment accounts, an undeveloped parcel of real property, an antique vehicle, and personal items. Michele's list only included personal items; she did not own any investments or real estate. The agreement also provided that each party waived spousal maintenance claims in the event of divorce. ¶15 Michele and Michael recalled different versions of the events surrounding the compilation and execution of the Premarital Agreement, but the District Court resolved the factual dispute in favor of Michele's memory. Michele recalled that, on August 9, 1991, one week before their wedding date, Michael took her to a law office in Las Vegas where the couple met with attorneys she had never encountered before. The attorneys presented it is in writing and signed by both parties. Fick, 851 P.2d at 449 (citing Nev. Rev. Stat. § 123A.040). A premarital agreement may, among other things, eliminate spousal maintenance in the event of a divorce. Nev. Rev. Stat. § 123A.050(1)(d). The burden of proving the unenforceability of a premarital agreement is on the party challenging the agreement. Kantor, 8 P.3d at 830 (citing Nev. Rev. Stat. § 123A.080). "A premarital agreement is not enforceable if the party against whom enforcement is sought proves that":

In her original motion for declaratory judgment, Michele erred in reciting the dates and counting the days at issue, stating the parties signed the Premarital Agreement on August 9, 1991, "less than a week before their marriage" on "August 19, 1991." Subsequently, in its order enforcing the Premarital Agreement, the District Court stated the parties executed the agreement "nine days" before the scheduled wedding. We note the District Court erred by stating the parties executed the agreement "nine days" before the wedding because the parties executed the Premarital Agreement on August 9, 1991, and married seven days later, on August 16, 1991. We correct the District Court's finding to "one week" and analyze the agreement's enforceability based on that timeline.

Michael asserts that certain cases upon which Michele relies, specifically Sogg v. Nev. State Bank, 832 P.2d 781, 783-84 (Nev. 1992), and Fick, 851 P.2d at 449, are inapplicable to the Premarital Agreement's enforceability because they were not Nevada law "in effect" when the parties executed the agreement—Nevada enacted the UPAA in 1989, Michael and Michele executed the Premarital Agreement in 1991, and the Nevada Supreme Court subsequently decided Sogg and Fick.
A "judicial construction of a statute is an authoritative statement of what the statute meant before as well as after the decision of the case giving rise to that construction." K&P Homes v. Trust, 398 P.3d 292, 294 (Nev. 2017) (quoting Rivers v. Roadway Express, Inc., 511 U.S. 298, 31213, 114 S. Ct. 1510, 1519 (1994)). When a court "construes a statute, it is explaining its understanding of what the statute meant continuously since the date when it became law." K&P Homes, 398 P.3d at 294 (quoting Rivers, 511 U.S. at 313 n.12, 114 S. Ct. at 1519 n.12, and citing United States v. City of Tacoma, 332 F.3d 574, 580 (9th Cir. 2003) ("The theory of a judicial interpretation of a statute is that the interpretation gives the meaning of the statute from its inception, and does not merely give an interpretation to be used from the date of the decision.")). Accordingly, all Nevada cases interpreting the UPAA are applicable to the Premarital Agreement's enforceability, regardless of when the cases were decided.
Further, preUPAA common law deeming premarital agreements unenforceable if they are "unconscionable, obtained through fraud, misrepresentation, material nondisclosure or duress" and providing for a presumption of fraud in favor of a greatly disfavored party is not applicable to our analysis here because the UPAA superseded those common law rules. See Fick, 851 P.2d at 449 (quoting Buettner v. Buettner, 505 P.2d 600, 604 (Nev. 1973)); Sogg, 832 P.2d at 78384 (quoting the same).

(a) That party did not execute the agreement voluntarily;
(b) The agreement was unconscionable when it was executed; or
(c) Before execution of the agreement, that party:

(1) Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party;
(2) Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
(3) Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.

Nev. Rev. Stat. § 123A.080(1)(a)-(c). ¶17 Michele is the party challenging the Premarital Agreement and, accordingly, has the burden to prove its unenforceability. See Kantor, 8 P.3d at 830.

1. Voluntariness ¶18 Under Nev. Rev. Stat. § 123A.080(1)(a), a premarital agreement is unenforceable if the party against whom enforcement is sought proves she did not execute the agreement voluntarily. The Nevada Supreme Court has not yet addressed how to determine whether a party's execution was involuntary under the UPAA, but based on its pre-UPAA common law, we presume it would consider the following factors: whether the party claiming she did not voluntarily execute the agreement had ample opportunity to consult an attorney, whether the party was coerced into signing the agreement, whether the party possessed substantial business acumen, and whether the party was under time pressure to execute the agreement—e.g., if the premarital agreement was presented to her the day before or the morning of her wedding. See Fick, 851 P.2d at 449; Sogg, 832 P.2d at 784-85. ¶19 We construe Michele's argument under pre-UPAA Nevada common law as an argument that she did not voluntarily execute the agreement. We conclude, however, that Michele voluntarily executed the Premarital Agreement. Michele had the opportunity to consult her own attorney: if she declined to sign the agreement on August 9, 1991, she had a week to obtain independent counsel before the parties wed on August 16, 1991. There is no evidence that Michele was coerced into signing the agreement and, given that she was twenty-seven-years old and had previously held various jobs, Michele's age and background indicate she possessed substantial business acumen to understand the scope of the Premarital Agreement. Further, Michael presented the Premarital Agreement to Michele a full week before their scheduled wedding, meaning Michele was not under significant time pressure to render the agreement's execution involuntary. ¶20 Michele also argues that it was inappropriate for a single attorney to draft the Premarital Agreement. However, Nevada law does not require individual counsel for each party to a premarital agreement. The Premarital Agreement clearly provided that the attorney who drafted the agreement did not represent either party. Given the circumstances, we cannot find the agreement was involuntarily executed based on the fact that a single attorney drafted the agreement.

2. Unconscionability at Execution ¶21 Differing slightly from the UPAA, Nev. Rev. Stat. § 123A.080(1)(b) provides unconscionability at execution as a separate basis upon which to hold a premarital agreement unenforceable. A court determines the issue of unconscionability of a premarital agreement as a matter of law. Nev. Rev. Stat. § 123A.808(3). "A contract is unconscionable only when the clauses of that contract and the circumstances existing at the time of the execution of the contract are so one-sided as to oppress or unfairly surprise an innocent party." Bill Stremmel Motors, Inc. v. IDS Leasing Corp., 514 P.2d 654, 657 (Nev. 1973). ¶22 The clauses of the Premarital Agreement are not so one-sided as to oppress or unfairly surprise Michele. The Premarital Agreement was standard: it provided that each party would retain his or her separate property and eliminated the possibility of spousal support in the event of divorce. Those terms are not one-sided; the fact that Michael had more separate property than Michele does not render the agreement's clauses unconscionable towards her. Further, the circumstances existing at the time of the Premarital Agreement's execution were not so one-sided as to have oppressed or unfairly surprised Michele. As discussed above, the parties executed the agreement one week before their wedding and Michele, possessing sufficient business acumen to understand the legal significance of the document, freely executed the agreement. The Premarital Agreement was not unconscionable when executed.

C.f. § 40-2-608(1)(b), MCA (providing a premarital agreement is unenforceable if the agreement was unconscionable when executed and, before execution of the agreement, the party challenging the agreement (1) was not provided a fair and reasonable disclosure, (2) did not voluntarily and expressly waive disclosure rights, and (3) did not have or reasonably could not have had adequate knowledge of the other's property and financial obligations).

3. Fair and reasonable disclosure of the parties' property and financial obligations ¶23 Nev. Rev. Stat. § 123A.080(1)(c)(1) requires a party to provide a "fair and reasonable disclosure" of his property and financial obligations to his future spouse before executing a premarital agreement. While some states require a "full and fair" disclosure of assets, Nevada requires a "fair and reasonable" disclosure of assets. Nev. Rev. Stat. § 123A.080(1)(c)(1). Whether a disclosure of property and financial obligations is fair and reasonable depends on the circumstances of the case. Generally speaking, each party must have a clear enough picture of the other's property to understand the magnitude of the of Michael's remaining disclosures. Similarly, the fact that Michael did not value his investment accounts does not mean Michele could not have ascertained the full magnitude of Michael's assets from the list. Overall, Michael's disclosure provided Michele with a fair and reasonable disclosure of his property from which she should have been able to understand the magnitude of Michael's assets. See Fick, 851 P.2d at 449. We decline to declare the parties Premarital Agreement unenforceable based on Michael's failure to list the Nevada PERS account or provide investment account values. Michael appropriately provided Michele with a "fair and reasonable disclosure of property" as required by Nev. Rev. Stat. § 123A.080(1)(c)(1). ¶27 Michele did not prove that she did not execute the Premarital Agreement voluntarily, that the Premarital Agreement was unconscionable when executed, or that she was not provided a fair and reasonable disclosure of Michael's property and financial obligations before she executed the Premarital Agreement. See Nev. Rev. Stat. § 123A.080(1). Under Nevada law, the parties' Premarital Agreement is enforceable and we therefore conclude the District Court did not err in enforcing the agreement. ¶28 2. Did the District Court equitably apportion the marital estate? ¶29 Michele raises four issues on appeal relating to the District Court's apportionment of the marital estate. She argues the District Court failed to equitably apply § 40-4-202, MCA, in its division of assets; erred in its distribution of the Nevada PERS account; abused its discretion in its valuation of Michael's office suite; and abused its discretion by distributing the parties' dog, Skeeter, to Michael. We address each issue in turn.

See, e.g., Minn. Stat. § 519.11(1); N.J. Stat. § 37:2-38(c)(1); Blige v. Blige, 656 S.E.2d 822, 826 (Ga. 2008); Dematteo v. Dematteo, 762 N.E.2d 797, 806 (Mass. 2002).

Some states specifically require a disclosure to include an estimate of property value. See, e.g., Colo. Rev. Stat. § 14-2-309(4)(a) ("A party has adequate financial disclosure [if the party receives] a reasonably accurate description and good-faith estimate of value of the property . . . ."); Gross v. Gross, 464 N.E.2d 500, 506 (Ohio 1984) (requiring a full disclosure or full knowledge and understanding of the nature, value, and extent of each party's property); Randolph v. Randolph, 937 S.W.2d 815, 817 (Tenn. 1996) (requiring each party to make a full and fair disclosure of the nature, extent, and value of his property).

A. The District Court's application of § 40-4-202 , MCA ¶30 In a dissolution proceeding, the court must equitably divide the parties' property. Section 40-4-202(1), MCA. In making the apportionment, "the court shall consider the duration of the marriage and prior marriage of either party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties, custodial provisions, whether the apportionment is in lieu of or in addition to maintenance, and the opportunity of each for future acquisition of capital assets and income." Section 40-4-202(1), MCA. The court shall also consider "the contribution of a spouse as a homemaker." Section 40-4-202(1), MCA. The court must refer to and consider the § 40-4-202, MCA, factors in its findings and conclusions. In re Marriage of Funk, 2012 MT 14, ¶ 7, 363 Mont. 352, 270 P.3d 39 (citing In re Marriage of Collett, 190 Mont. 500, 504, 621 P.2d 1093, 1095 (1981)). ¶31 Section 40-4-202, MCA, "vests the district court with broad discretion to apportion the marital estate in a manner equitable to each party under the circumstances." Funk, ¶ 6. The statute requires an equitable, not necessarily equal, division of the marital estate. Spawn, ¶ 9. The court is "not required to award the parties property of precisely equal value." In re Marriage of David, 2009 MT 422, ¶ 21, 354 Mont. 44, 221 P.3d 1209 (citing In re Marriage of Payer, 2005 MT 89, ¶ 14, 326 Mont. 459, 110 P.3d 460). ¶32 Michele argues the District Court failed to correctly apply § 40-4-202, MCA, to its division of the marital estate, alleging two specific errors. First, Michele argues the District Court failed to account for the negative impact the foreclosure of the couple's marital home herself. . . . In contrast, Michael's future, including his retirement, are secured by current and future employment benefits, comprised of his retirement and various investment accounts, and ongoing employer paid benefits." Acknowledging that Michele had fewer resources upon which to support herself post-dissolution, the District Court apportioned Michele 75% of the Nevada PERS account to ensure Michele had consistent income of approximately $60,000 per year. The District Court concluded the distribution was "necessary to off-set [Michele's] lower wage-earning capacity." The District Court further noted Michele could seek employment if she chose to, which would provide her with additional annual income of $20,800 to $29,120. The court recognized the amount was "less than the estimated annual gross income of $121,344" Michele sought, but concluded the division was "reasonable and equitable" and would provide Michele "with ongoing income to meet her reasonable expenses." ¶38 The District Court also apportioned life insurance, additional retirement accounts, and significant amounts of personal property to Michele. The court determined its division provided Michele with sufficient income to be self-supporting and also provided her with additional assets for retirement purposes. We find the District Court conscientiously considered § 40-4-202(1), MCA's factors and did not abuse its broad discretion in equitably apportioning Michael and Michele's marital estate.

B. The District Court's distribution of the Nevada PERS account ¶39 The Nevada PERS account was the largest single asset in the marital estate. Michael started contributing to the retirement plan before the parties married and continued his would incur ongoing expenses to insure Michael's life and specifically apportioned Michele a greater portion of the marital estate to account for those costs. The District Court did not abuse its discretion by apportioning Michele a greater portion of the marital estate instead of specifically accounting for the cost of Michael's life insurance in its line-item distribution.

C. The District Court's valuation of Michael's office suite ¶48 Michael and his business partner each owned 50% of Internal Medicine of Missoula, LLC (IMM). IMM existed for the sole purpose of owning a medical office suite. IMM leased the office suite to Michael's employer, Providence Health and Services. At trial, Michael presented expert testimony regarding the office suite's value. The expert calculated the office suite's final estimated value as $760,000, with Michael's 50% share equaling $380,000. The expert obtained the $760,000 value after looking at the property floor plan, touring the property, and considering the prices of comparable properties. The expert further testified the office suite's cash-flow value, which took into account the actual value of IMM's lease with Providence Health and Services, was $1,115,214. He testified the cash-flow value was unusually high and an unreliable valuation considering some of the lease terms. The expert testified that, in his opinion, the office suite was not worth the full extent of its cash-flow value and was most appropriately valued at $760,000. ¶49 Michele did not provide her own expert valuation, but asked the District Court to value the office suite using the cash-flow value of $1,115,214. Michele argued federal law, specifically the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), and the Stark Law, 42 U.S.C. § 1395nn, required the District Court to use the $1,115,214 valuation. The District Court recognized Michele's argument, but found Michele failed to introduce any evidence or testimony regarding how the federal laws pertain to the office suite's valuation. Noting Michele's failure to provide any support for her valuation request, the court adopted the $760,000 valuation in its findings of fact. On appeal, Michele asserts the District Court erred by valuing the office suite at $760,000. She argues that, in order for the lease between IMM and Providence Health and Services to comply with federal law, the office suite's value must be $1,115,214. ¶50 A district court may adopt any reasonable valuation of property supported by the record. In re Marriage of Haberkern, 2004 MT 29, ¶ 13, 319 Mont. 393, 85 P.3d 743. A district court may assign any value to an item of property that is within the range of values offered into evidence. In re Marriage of Hochhalter, 2001 MT 268, ¶ 33, 307 Mont. 261, 37 P.3d 665; Edwards, ¶ 25 (reasoning that it is the province of the district court to weigh the evidence before it and emphasizing that we will not disturb a district court's valuation if there is evidence in the record to support its decision). ¶51 In this case, the District Court heard credible expert testimony regarding the office suite's value. The expert testified that, depending on the valuation method, the office suite's value ranged between $760,000 and $1,115,214, but that, in his opinion, $760,000 was the best estimate. The District Court valued the office suite at $760,000, which was within the range of values offered into evidence. The District Court's valuation was based on substantial credible evidence and we accordingly conclude the District Court did not abuse its discretion in its valuation. ¶52 As to Michele's argument that the District Court should have considered the federal laws, we note that it was the parties' responsibility to provide the District Court with competent evidence regarding property values. See Funk, ¶ 7. Michele did not present the District Court with sufficient evidence regarding how the laws applied to the lease between IMM and Providence Health and Services and how the laws required the District Court to adopt the cash-flow value of $1,115,214. Absent a sufficient record to review regarding the issue, we affirm the District Court's valuation of $760,000.

D. The District Court's distribution of the parties' dog, Skeeter, to Michael ¶53 Around the time they separated in 2014, Michael and Michele compiled a list in which they divided their personal property, including their horses, mules, and dogs. The couple had four dogs, including Skeeter and Sunny, brother-sister hunting dogs. The list provided that Michael would take Skeeter and Michele would take Sunny and the other two dogs. At trial, Michele indicated she wished to keep Skeeter, advocating it was better to keep Skeeter and Sunny together because they were bonded to one another and because Michael's work schedule would not allow him to properly care for Skeeter. Michael testified he enjoyed running and hunting with Skeeter and wanted him pursuant to the parties' original personal-property distribution. The District Court acknowledged Michele's concern about separating the dogs, but awarded Skeeter to Michael in what it viewed as the most equitable distribution. dissolution, instead of at the time of separation, because the vested account value reflected the amount of money available to Michael. ¶65 A review of the record clearly demonstrates that the District Court conscientiously considered each asset in the marital estate and determined the most equitable point at which to value it. The court did not act arbitrarily or exceed the bounds of reason by choosing to value some of the marital estate at the time of financial separation rather than at the time of dissolution because unique circumstances existed. We affirm its valuation.

CONCLUSION

¶66 The parties' Premarital Agreement is enforceable under Nevada law. The District Court did not abuse its broad discretion in its valuation or distribution of Michael and Michele's marital estate. We accordingly affirm the District Court's orders regarding the Premarital Agreement and the division of marital assets.

/S/ LAURIE McKINNON We concur: /S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
/S/ DIRK M. SANDEFUR Justice Beth Baker, concurring and dissenting. ¶67 I join the Court's Opinion except on Issue Three and on portions of Issue Two. ¶68 To begin, although I agree that the District Court generally did not abuse its discretion in distributing the marital estate, several of its conclusions raise concerns. I discretion. I would reverse for the court to apply the retirement account values at the time of dissolution and to reapportion the distribution to account for Michele's cost to secure her entitlement to the awarded value of the PERS account.

The District Court's 51.57% allocation to Michele gave her $59,725.49 more than Michael of the net marital estate value.

This arrangement was required by operation of § 40-4-121(3)(b), MCA. See Volk v. Goeser, 2016 MT 61, ¶ 23, 382 Mont. 382, 367 P.3d 378 ("The plain language of subsection (b) is quite broad, restraining both parties from unilaterally 'changing the beneficiaries of any . . . coverage . . . held for the benefit of a party.'" (quoting Briese, ¶ 25)). --------

/S/ BETH BAKER