Hanscam and Hanscam
Annotate this Case
Download PDF
FILED: December 14, 2011 IN THE COURT OF APPEALS OF THE STATE OF OREGON In the Matter of the Marriage of ADELE JANICE HANSCAM, Petitioner-Appellant, and CASEY HANSCAM, Third-Party Plaintiff, and STEVE EUGENE HANSCAM, Respondent-Respondent. Linn County Circuit Court 070754 A142420 Daniel R. Murphy, Judge. Argued and submitted on January 11, 2011. Edward L. Daniels argued the cause for appellant. With him on the briefs was Law Office of Daniels & Ivers. Gilbert B. Feibleman argued the cause for respondent. With him on the brief was Feibleman & Case, P.C. Before Haselton, Presiding Judge, and Armstrong, Judge, and Duncan, Judge. DUNCAN, J. Judgment modified to award wife an equalizing judgment of $541,906; otherwise affirmed. 1 1 DUNCAN, J. 2 Wife appeals from a general judgment dissolving the parties' marriage. She 3 challenges the trial court's division of the parties' property, in particular, a rental house 4 (the Cedar Street property); husband's accounting practice (the CPA practice); husband's 5 interest in a family partnership, Hanscam Properties Limited Partnership (HPLP); and a 6 1972 Porsche car. She argues that the court erred in (1) awarding husband his premarital 7 interest in the Cedar Street property as his separate property; (2) calculating the value of 8 the CPA practice and awarding husband his premarital interest in that asset as his 9 separate property; (3) awarding husband his interest in HPLP as his separate property; 10 and (4) awarding husband the total value of the Porsche. For the reasons explained 11 below, ___ Or App at ___ (slip op at 14), we exercise our discretion to review this case 12 de novo.1 On de novo review, we conclude that the trial court erred in its division of the 13 Cedar Street property, the CPA practice, and the Porsche. We modify the judgment 1 Wife asserts, incorrectly, that de novo review is required in this case, citing ORS 19.415. However, that statute was amended in 2009 to provide that de novo review in these types of cases is discretionary with the court; those amendments apply to appeals, such as this one, in which the notice of appeal was filed on or after June 4, 2009. Or Laws 2009, ch 231, ยงยง 2-3. ORS 19.415(3) now provides: "Upon an appeal in an equitable action or proceeding, review by the Court of Appeals shall be as follows: "* * * * * "(b) Upon an appeal in an equitable action or proceeding other than an appeal from a judgment in a proceeding for the termination of parental rights, the Court of Appeals, acting in its sole discretion, may try the cause anew upon the record or make one or more factual findings anew upon the record." 2 1 accordingly and otherwise affirm. 2 The parties met in 1984, began living together later that year, and were 3 married in April 1989. They separated in 2007, and a judgment of dissolution was 4 entered in June 2009, after 20 years of marriage. At the time, wife was 42 years old, 5 husband was 54, and the parties' two children were ages 19 and 16. 6 When the parties met, wife had just graduated from high school and was 7 working as a waitress. Husband had been working as an accountant in his father's 8 practice for several years. He owned a home--the Cedar Street property--which he had 9 purchased in 1980 for $36,500. Wife moved into the Cedar Street property in September 10 1984, and, with the exception of a nine-month period when wife lived in Portland to 11 attend school, the parties lived there together until they were married in April 1989. 12 Around the time the parties began living together, husband became a certified public 13 accountant (CPA) and was gifted a 25 percent interest in his father's CPA practice. In 14 1986, wife began attending community college. She first attended Linn-Benton 15 Community College; later she went to Portland Community College. She completed her 16 studies and received her license as a radiology technician in 1991. 17 Sometime before the parties were married in 1989, husband purchased the 18 Coulter Lane property, an approximately 15-acre farm, which became the parties' marital 19 residence.2 The Cedar Street property, meanwhile, became a rental, and it remained a 2 The court divided the value of that property equally between the parties; that division is not at issue on appeal. 3 1 rental throughout the parties' marriage. Husband continued to hold title to the Cedar 2 Street property in his name alone, but rental payments from the property were deposited 3 into an account held jointly by husband and wife. The parties used the money from that 4 account for maintenance and improvements to the property and to purchase other rental 5 properties.3 6 Husband worked as a CPA throughout the marriage and was the primary 7 income earner for the family.4 Most of the year husband worked approximately 40 hours 8 per week; during tax season, from approximately January 1 through April 15, he worked 9 an average of 60 to 65 hours per week. In 1989, shortly before the parties married, 10 husband's father retired and husband agreed to purchase the remaining 75 percent interest 11 in the CPA practice; that interest was paid for over the course of the parties' marriage. 12 Husband testified that he had no intention to discontinue working as a CPA. 13 Wife was primarily responsible for taking care of the Coulter Lane house 14 and property and, after the parties' children were born, taking care of them. At times, the 15 parties raised cattle or used part of their property as a tree farm, and wife helped in those 16 endeavors. In addition, from 1991 until 1998, wife worked approximately 20 hours per 17 week as a radiology technician. In 1998, the parties agreed that wife would quit working 3 In addition to the Cedar Street property, the parties owned two other rental properties at the time of dissolution. The trial court's division of those properties is not at issue on appeal. 4 At the time of the dissolution trial, husband's gross income from the CPA practice was estimated at approximately $11,000 per month. 4 1 altogether in order to take over management of their property rental business and help run 2 the CPA office, in addition to her responsibilities for caring for the Coulter Lane home 3 and property and the children.5 4 Wife's involvement in running the CPA office was minimal. She cleaned 5 the office on the weekends and purchased office supplies. She also, at least on one 6 occasion, painted the inside of the office. As the parties' children got older, cleaning the 7 office became their job; wife supervised them and also cleaned and maintained the 8 parking lot. She was paid by the CPA practice for those tasks.6 9 Wife's responsibility for managing the parties' rental property, including the 10 Cedar Street property, was more significant. Wife kept the Cedar Street property rented 11 and performed regular maintenance work. She also made improvements to the property, 12 such as new windows, new heaters, a garage door, and some electrical work. She hired 13 out "a couple jobs" but did most of the work herself. The Cedar Street property always 14 maintained a positive cash flow--that is, the cost of maintenance and improvements were 15 never more than the rental income. Wife testified that the parties kept their rental 16 properties for investment purposes and planned to use them as financial resources for 5 There was some disagreement between the parties over when wife would return to outside work; apparently, wife decided that she would not go back to work until their youngest child turned 16 although husband encouraged her to do so earlier. As the trial court found, and we agree, wife could not have worked full time and maintained her other responsibilities. Wife was unemployed at the time of the dissolution; the trial court estimated that she could earn $4,936 per month as a full-time radiology technician. 6 Although the record is not entirely clear, it appears that wife may have been paid $300 per month for the cleaning. 5 1 2 their retirement. When the parties first met, husband held a 16 percent interest in a family 3 partnership that had been formed by husband's parents in the 1970s to hold real property 4 for purposes of their retirement. In 1999, that partnership was converted to HPLP for tax 5 and estate-planning purposes. Husband received an additional five percent interest in 6 HPLP in 1999 and again in 2000 as gifts from his parents so that, at the time of 7 dissolution, husband owned a 26.38 percent interest in HPLP. Husband's father testified 8 that the gifts were intended to benefit husband only and that it was not his or his wife's 9 intent to transfer any interest in HPLP to any of their children's spouses. 10 HPLP owns several rental properties and parking lots. The other partners 11 are husband's father, his mother's estate, and his two sisters. Husband's father is the 12 controlling general partner, and he receives all of HPLP's after-tax income as his salary. 13 Husband and wife have never received any income from HPLP except as reimbursement 14 for their payment of taxes associated with the partnership's profits. As to the parties' 15 involvement in HPLP, from 2000 to 2006, wife acted as a rental manager for one of 16 HPLP's properties, a beach cottage in Yachats. She did so without compensation at first 17 but, after a brief period of time, was given a percentage of the rental income from the 18 property as payment for that work. Wife also performed some maintenance and repair 19 work on one of HPLP's other properties; she was paid for that work as well. In addition, 20 husband's CPA office was located on a property held by HPLP. As noted, wife was 21 responsible for cleaning that office and maintaining its parking lot (and was paid by the 6 1 CPA office for doing so). Other than those efforts, the record does not disclose any 2 further involvement by either party in HPLP. 3 When the parties met, husband also owned a 1972 Porsche car, which he 4 had purchased for $7,250. During the marriage, husband used $4,500 in marital funds to 5 make improvements to the car, and it was valued at $14,000 at the time of dissolution. 6 Wife testified that she drove the 1972 Porsche once during the marriage. 7 At trial, wife requested that all of the parties' property be divided equally. 8 Husband requested that his premarital equity in the Cedar Street property, his premarital 9 25 percent interest in the CPA practice, his interest in HPLP, and the full value of the 10 11 1972 Porsche be awarded to him as his separate property. Each party presented expert testimony as to the value of the CPA practice 12 using various standard methodologies. Wife's expert, Mason, provided valuations under 13 the income ($409,000), market ($439,000; $442,000), and adjusted net asset ($154,000) 14 approaches but, ultimately, relying primarily on the market approach and adding in his 15 personal "real world" experience, arrived at a fair market value for the practice of 16 $439,000. Mason's appraisal process did not include an on-site assessment of the 17 premises. Mason opined that the market approach is generally the most objective but 18 acknowledged that it had "significant drawbacks" in calculating the value of the CPA 19 practice because there was no "history of the comparable businesses prior to the year of 20 sale" and little or no information about "the individual market area, services provided, 21 market or clientele niche, client mix, or any other specific company risk factors." 7 1 One of the issues both experts confronted was the valuation of the goodwill 2 associated with the practice. Mason's valuation did not distinguish between personal and 3 enterprise goodwill, although Mason testified that personal goodwill was "factored out" 4 in his ultimate market-based valuation. He acknowledged, however, that that valuation 5 was premised on husband executing a noncompetition covenant. 6 Husband's expert, Allen, likewise offered income ($313,000) and net asset 7 ($202,000) valuations. Allen's appraisal included a visual tour of the facility, which, he 8 testified, was a "very standard practice." He stated that he was unable to calculate a value 9 based on a market analysis because the transaction databases for sales of CPA practices 10 provided insufficient information for him to be confident that the businesses sold were 11 indeed comparable to husband's practice. For example, Allen opined, he was unable to 12 identify from the transaction databases sales that had occurred in locations with 13 populations, like Sweet Home, of less than 10,000 people and low household incomes. 14 According to Allen, household income is a "key factor" in comparing CPA practices. 15 On the subject of goodwill, Allen indicated that any market value arrived at 16 "over and above the value of the hard assets" of a business was goodwill value and that it 17 was "very important" to distinguish between personal and enterprise goodwill because, 18 under Oregon law, the former is not a divisible marital asset but the latter is. In his 19 opinion, all of the goodwill associated with husband's CPA practice was personal 20 goodwill. He also opined that, "because of the need to have a non-compete agreement 21 and the owner having to transition clients in order to transfer that goodwill, that any value 8 1 of--any market base[d] approach in excess of an income approach would be purely 2 [personal] goodwill." Ultimately, Allen recommended using a fair market value of 3 $202,000 based on the asset approach. 4 5 The trial court was more persuaded by husband's expert's appraisal, observing: 6 7 8 9 10 11 12 13 "The Court was not impressed with the thoroughness of Mr. Mason as compared to the thoroughness of Mr. Allen. While a site visit to the business may not be essential, it seems to have been of value in this case and is additional evidence of the thorough approach taken by Mr. Allen. Mr. Allen in his opinion used less subjective criteria in his assessment whereas Mr. Mason used more subjective criteria. The more subjective the criteria, the more speculative it is and the less reliable as viewed by the Court." 14 The court concluded that it was appropriate to exclude personal goodwill from the 15 valuation of husband's practice; however, it rejected the idea, embodied in Allen's 16 proposed asset-based approach, that goodwill in its entirety must be ignored. Ultimately, 17 the court assessed the value of the practice at $313,000 ($55,000 of which was husband's 18 premarital ownership interest in the practice), which was consistent with Allen's income- 19 based approach. 20 In dividing the parties' property, the trial court credited husband with his 21 premarital interest in the Cedar Street property and in the CPA practice and divided the 22 appreciation in both properties that accrued during the marriage equally between the 23 parties. The court also equally divided the 75 percent interest in the CPA practice that 24 husband had acquired during the marriage. The court awarded husband the totality of his 9 1 interest in HPLP and the value of the 1972 Porsche as his separate property.7 2 On appeal, wife challenges the trial court's disposition of those four assets. 3 In particular, she argues that the court erred in (1) awarding husband the premarital 4 equity in the Cedar Street property ($36,500); (2) undervaluing the CPA practice and 5 awarding husband his premarital interest ($55,000) in that property; (3) awarding 6 husband the value of the interest that he had acquired in HPLP both before and during the 7 marriage ($161,400); (4) awarding husband the value of the 1972 Porsche ($14,000), 8 including the appreciation in value of that asset during the marriage ($6,750). 9 Before considering each of those arguments, we set out the relevant legal 10 principles. Property division at dissolution is governed by ORS 107.105(1)(f), which 11 provides, in part: 12 13 "(1) Whenever the court renders a judgment of marital annulment, dissolution or separation, the court may provide in the judgment: 14 "* * * * * 15 16 17 18 19 20 21 "(f) For the division or other disposition between the parties of the real or personal property, or both, of either or both of the parties as may be just and proper in all the circumstances. * * * The court shall consider the contribution of a spouse as a homemaker as a contribution to the acquisition of marital assets. There is a rebuttable presumption that both spouses have contributed equally to the acquisition of property during the marriage, whether such property is jointly or separately held. * * *." 7 The value of the parties' remaining assets, including the marital residence and the other rental properties, was divided equally between husband and wife. Because husband received more of the real property--specifically, the marital residence, the Cedar Street property, and one of the other rentals--than wife did (wife received one of the rentals), wife was awarded an equalizing judgment of $492,781. Wife was also awarded custody of the parties' minor child, child support, and transitional spousal support of $1,000 per month for four months. 10 1 Thus, under ORS 107.105(1)(f), assets acquired during the marriage are marital assets, to 2 which the presumption of equal contribution applies. Kunze and Kunze, 337 Or 122, 133, 3 92 P3d 100 (2004). Accordingly, when applying ORS 107.105(1)(f), we first determine 4 when the disputed asset was acquired. If the asset was acquired during the marriage, we 5 apply the statutory presumption, unless either party has rebutted it. Kunze, 337 Or at 134. 6 If the presumption of equal contribution is effectively rebutted, "then the court decides 7 how to distribute that marital asset without regard to any presumption and, instead, 8 considers only what is 'just and proper in all the circumstances,' including the proven 9 contributions of the parties to the asset. Massee [and Massee, 328 Or 195, 205, 970 P2d 10 11 1203 (1999)]." Kunze, 337 Or at 135. Property acquired by gift or inheritance during the marriage is a marital 12 asset, however, "[t]he presumption [of equal contribution] may be overcome * * * by a 13 finding that property was acquired by one spouse by gift or inheritance, uninfluenced by 14 the other spouse." Jenks and Jenks, 294 Or 236, 241, 656 P2d 286 (1982); see Finear 15 and Finear, 240 Or App 755, 762, 247 P3d 1238, rev allowed, 350 Or 716 (2011) (where 16 there was no evidence that the wife made any contribution or had any influence over the 17 acquisition of assets that the husband had inherited during the marriage the presumption 18 was overcome). When the statutory presumption is rebutted, "absent other 19 considerations, it is 'just and proper' to award that marital asset separately to the party 20 who has overcome the statutory presumption." Kunze, 337 Or at 135; see also Finear, 21 240 Or App at 763-64. 11 1 Assets acquired before marriage are not "marital assets" and, therefore, are 2 not subject to the presumption of equal contribution. However, those assets are 3 nonetheless considered marital property; as such, they are also subject to a division that is 4 "just and proper in all the circumstances." ORS 107.105(1)(f); Kunze, 337 Or at 139. 5 The "just and proper" inquiry focuses less upon the parties' respective contributions to the 6 asset and more on equitable considerations, including such factors as "the preservation of 7 assets; the achievement of economic self-sufficiency for both spouses; the particular 8 needs of the parties and their children; and * * * the extent to which a party has integrated 9 a separately acquired asset into the common financial affairs of the marital partnership 10 through commingling." Kunze, 337 Or at 135-36 (internal citations omitted). 11 Commingling can justify division of a separately acquired asset "when a spouse has so 12 integrated a separately acquired asset into the joint finances of the marital partnership that 13 it would be inequitable to award the asset to that spouse as separate property under a 'just 14 and proper' distribution of the parties' marital property." 8 Rudder and Rudder, 230 Or 15 App 437, 459, 217 P3d 183, rev den, 347 Or 365 (2009) (citing Kunze, 337 Or at 142); 16 see also ORS 107.105(1)(f). That determination, in turn, is largely dependent on intent, 17 that is, on 8 Commingling can also affect the proper division of a separately acquired asset if the asset "has been so commingled with the joint assets of the marriage that the court is precluded from identifying the source of the disputed asset 'with sufficient reliability to rebut the statutory presumption that both spouses have contributed equally to the disputed asset.'" Rudder and Rudder, 230 Or App 437, 459, 217 P3d 183, rev den, 347 Or 365 (2009) (quoting Kunze, 337 Or at 138). That is not the issue in this case. 12 1 2 3 4 5 6 7 8 9 10 11 12 "whether the spouse 'demonstrated an intent to retain that spouse's separately acquired asset as separate property or whether, instead, that spouse intended for that property to become the joint property of the marital estate.' Kunze, 337 Or at 142. That is so because, 'when a spouse has treated a separately acquired asset as a joint asset of the marital partnership, then the parties' shared financial decisions during the marriage have been made in reliance of that asset without consideration to whether it was separately or jointly acquired.' Id. at 140; Lind and Lind, 207 Or App 56, 67, 139 P3d 1032 (2006) ('Intent * * * depends not on what a spouse might privately contemplate or even publicly declare; it depends on how a spouse acts, that is, on what the spouse's "treatment" of the asset "demonstrate[s]."' (Emphasis and brackets in original.))." 13 Rudder, 230 Or App at 459-60 (omission in Rudder). Among the factors we consider in 14 assessing intent are "(1) whether the disputed property was jointly or separately held; (2) 15 whether the parties shared control over the disputed property; and (3) the degree of 16 reliance upon the disputed property as a joint asset." Kunze, 337 Or at 141. 17 Ultimately, the trial court's "determination as to what property division is 18 'just and proper in all the circumstances' is a matter of discretion." Id. at 136. We 19 examine the trial court's decision based on the pertinent statutory and equitable 20 considerations that ORS 107.105(1)(f) requires, and we will not disturb the trial court's 21 award unless we conclude that the court misapplied those factors. Id. (citing Haguewood 22 and Haguewood, 292 Or 197, 199-204, 638 P2d 1135 (1981)); see also Grossman and 23 Grossman, 338 Or 99, 107, 106 P3d 618 (2005) ("[I]n many cases a range of possible 24 property divisions likely would be just and proper[.]"). In other words, to be entitled to 25 deference on appeal, "a trial court's property award must reflect the exercise of discretion 26 under the correct methodology, and it must lie within the range of legally permissible 27 outcomes." Olson and Olson, 218 Or App 1, 16, 178 P3d 272 (2008). 13 1 With that framework in mind, we return to wife's arguments. As noted, 2 wife's only dispute regarding the division of both the Cedar Street property and husband's 3 CPA practice is as to the premarital value of those properties.9 The parties agree that 4 those values are not marital assets because they were acquired by husband before the 5 marriage; therefore, the question reduces to whether it was within the permissible range 6 of the court's discretion under a "just and proper" analysis to award them to husband. 7 That, in turn, depends primarily on commingling and other equitable considerations. As 8 just explained, the focus is on husband's demonstrated intent, specifically, whether 9 husband's actions reflect an intent to retain his interest in the property separately or to 10 have it become the "joint property of the marital estate." Kunze, 337 Or at 142. 11 We begin with the Cedar Street property. Wife challenges the trial court's 12 express factual finding that "[w]ife did not contribute anything to the acquisition, 13 maintenance or improvement of Cedar Street at any time before or during the marriage," 14 arguing that the evidence is to the contrary. We agree that the court's finding on wife's 15 contribution (or lack thereof) to the Cedar Street property does not comport with the 16 uncontroverted evidence in the record. Although the record reflects that wife did not 17 contribute financially to the property either before or during the marriage, as wife points 18 out, the undisputed evidence establishes that wife performed regular maintenance work 9 As mentioned, the appreciation in value of the properties during the marriage, as well as the portion of the CPA practice that husband purchased during the marriage, were treated as marital assets and divided equally between the parties; that division is not challenged on appeal. 14 1 on the property, made some improvements to it (either herself or by hiring the jobs out), 2 and was responsible for managing it as a rental during the parties' marriage. Thus, the 3 trial court's finding cannot be reconciled with the evidence in the record; for that reason, 4 we exercise our discretion to review de novo. See ORAP 5.40(8)(d)(ii) ("[w]hether the 5 trial court's decision comports * * * with uncontroverted evidence in the record" is a 6 relevant consideration in our decision to exercise discretion under ORS 19.415(3)); Frost 7 and Frost, 244 Or App 16, 22, 260 P3d 570 (2011) (applying ORAP 5.40(8)(d)(ii) in 8 exercising discretion to review de novo). In doing so, we make the alternate finding 9 above--viz., that wife contributed to the Cedar Street property during the marriage 10 11 through her labor in maintaining, improving, and managing the property. Wife also argues that the court misapplied the statutory and equitable 12 considerations under ORS 107.105(1)(f) because the Cedar Street property was entirely 13 integrated into the common financial affairs of the parties, the rental income from the 14 property was used for "the good of the family," and the asset was part of their retirement 15 plan. She contends that, although title to the property was in husband's name, husband 16 "was most willing to allow [w]ife to live there before they were married and to have 17 [w]ife totally manage and make repairs to the rental after they moved[.]" 18 In response, husband argues that he demonstrated his intent to keep the 19 Cedar Street property separate in that he never added wife's name to the title and the 20 rental income was placed into a separate bank account. He also contends that, because 21 the property was debt free, it was self-supporting, and that wife "did not greatly 15 1 contribute to [its] maintenance or improvement." In any event, husband argues, wife has 2 already been "over-compensated" for her minimal contribution in that the appreciation of 3 the property was equally divided between the parties. 4 The trial court found, and we agree, that (1) husband owned the Cedar 5 Street property outright before the parties were married; (2) the parties lived on the 6 property for just a few years and never during the marriage; (3) because all repairs and 7 improvements to the property were paid for from rental income, the marital estate did not 8 contribute to the property; and (4) unlike other property acquired by husband before the 9 marriage, the property has been held separately in husband's name throughout the course 10 11 of the marriage. Those findings lend some support to husband's argument that he did not 12 intend to commingle the Cedar Street property. First, the title remained in husband's 13 name only. See Kunze, 337 Or at 141-42 (how property is held--whether jointly or 14 separately--is relevant to whether the spouse intended to retain the property as his or her 15 separate property or make it a joint asset); Olson, 218 Or App at 12-13 (that the husband 16 placed the title of inherited property in his own name suggested limited commingling). 17 Next, the property was never used as the parties' marital home. See id. at 13 ("[U]nlike in 18 several cases where substantial commingling justified an equal division of the disputed 19 asset, here the parties did not reside on the property or otherwise occupy or intensely 20 develop it[.]"); Lind and Lind, 207 Or App 56, 68, 139 P3d 1032 (2006) (as the Supreme 21 Court indicated in Kunze, and this court has since reinforced, the "use of a separately 16 1 acquired house as a family home is powerful evidence (although certainly not dispositive) 2 of commingling"). Finally, no marital funds were used to acquire, maintain, or improve 3 the property. Cf. Rudder, 230 Or App at 461 (the husband's use of marital funds to pay 4 mortgage on the property indicated intent to make that separately acquired property a 5 joint marital asset); Lind, 207 Or App at 68 (payment of mortgage on the property from 6 the husband's employment income--itself a marital asset--factored in favor of equally 7 dividing the husband's premarital investment in the property under "just and proper" 8 analysis). 9 However, other considerations also bear on the question of intent, namely, 10 "whether the parties shared control over the disputed property" and "the degree of 11 reliance upon the disputed property as a joint asset." Kunze, 337 Or at 141. Those 12 factors weigh strongly in favor of wife's argument that husband intended to commingle 13 the asset with the parties' joint property. See Tsukamaki and Tsukamaki, 199 Or App 14 577, 585, 112 P3d 416 (2005) ("The various factors are alternative methods by which 15 assets can become commingled. For example, commingling can occur through joint 16 titling, through shared control, or through reliance on a separately titled property as a 17 joint asset."). It is undisputed that rental money from the Cedar Street property was 18 directed into a joint bank account from which the parties financed, in addition to repairs 19 and improvements on the Cedar Street property, the purchase of other rental properties. 20 Moreover, the parties intended to use the rental properties for their retirement. Thus, 21 much like when premarital property is used as a marital home, the Cedar Street property 17 1 in this case appears to have been fully committed to family uses. See Finear, 240 Or App 2 at 766 (the husband's use of his separately acquired inheritance/trust funds for family 3 purposes constituted evidence of commingling under a "just and proper" analysis); Lind, 4 207 Or App at 67-68 (key to intent is how a spouse acts with respect to separately 5 acquired asset, such as when "'a spouse who owned separate property commits it to 6 family uses, as when a house brought into the marriage becomes the family home'" 7 (quoting Leslie Joan Harris, Tracing, Spousal Gifts, and Rebuttable Presumptions: 8 Puzzles of Oregon Property Distribution Law, 83 Or L Rev 1291, 1300 (2004))). In 9 addition, wife exercised a significant degree of control over the Cedar Street property--it 10 was wife who managed the property as a rental and, in that capacity, either performed 11 repairs and improvements to the property herself or arranged to have them completed by 12 others. In our view, it is that factor--which the trial court misapprehended--that tips the 13 balance. 14 It is also what distinguishes this case from the Supreme Court's disposition 15 of a similar property in Kunze. In Kunze, the wife came into the marriage with several 16 parcels of real property, including the "Germantown Road property." 337 Or at 125. A 17 few years into the marriage, the wife inherited substantial additional real property assets. 18 Id. During the course of the parties' long marriage, several of those assets were sold or 19 converted into other assets. For example, and as pertinent to this discussion, the wife 20 inherited a duplex in California, which she later sold. She then used a portion of those 21 funds ($170,000) to purchase a fourplex--the "Chaps Court property". Id. at 127. On 18 1 appeal, the Supreme Court considered, inter alia, whether it was "just and proper" under 2 commingling principles for the parties to divide equally the premarital portion of the 3 Germantown Road property and the wife's $170,000 equity in the Chaps Court property. 4 Id. at 142-43.10 The court, on de novo review, chose not to disturb the trial court's ruling 5 that the wife was entitled to the premarital portion of the Germantown Road property as 6 her separate property, but concluded that the court had erred in separately awarding the 7 wife the value of her contribution to the Chaps Court property. Id. at 146-47. In arriving 8 at the former conclusion, the court noted that (1) the husband was added to the title of the 9 property only late in the marriage and only for the purposes of securing financing for 10 another project; (2) it was not used as the marital home, except for a few years at the 11 beginning of the marriage; and (3) although the husband, who was trained in 12 construction, had contributed his labor to the property, including repairs and 13 improvements, he had "received the benefit of that contribution from the division of the 14 appreciation of that property that had accrued during the marriage." Id. at 146. With 15 regard to the Chaps Court property, on the other hand, the court noted that the wife had 16 purchased it jointly with her husband and that, unlike with the Germantown Road 17 property, she had not introduced evidence demonstrating her intent to retain her 18 separately acquired equity in that property as her separate property. Id. at 146-47. 10 Although the latter was a jointly titled marital asset, the Supreme Court found that the wife had successfully rebutted the presumption that the husband had contributed equally to the disputed equity in that property, which had originated solely from her separate funds. 337 Or at 144-45. 19 1 There are some obvious parallels to be drawn between the Germantown 2 Road property in Kunze and the Cedar Street property at issue in the present dispute. 3 Indeed, in this case, husband never added wife's name to the title of the Cedar Street 4 property, nor did the parties ever use it as their marital residence. Moreover, as with the 5 Germantown Road property in Kunze, wife has received an equal share of the 6 appreciation of the property that accrued during the marriage. However, in Kunze, unlike 7 in this case, there is no suggestion that the husband exercised significant control over the 8 Germantown Road property or had any role in its management. Here, by contrast, wife 9 exercised significant control over the Cedar Street property, managing its rentals and 10 performing and arranging for its repairs and improvements throughout the length of the 11 marriage. It is also apparent that husband and wife made joint financial decisions with 12 respect to the property--such as using the rental income to purchase other rental 13 properties--without regard to whether it was separately or jointly titled. It is those 14 actions--absent from the record in Kunze--that demonstrate husband's intent to 15 commingle the Cedar Street property with the parties' joint property, such that "it would 16 be inequitable to award [it] to [husband] as separate property." Rudder, 230 Or App at 17 459. 18 For similar reasons, we also conclude that wife is entitled, under a just and 19 proper analysis, to share equally in the premarital portion of husband's CPA practice-- 20 that is, the 25 percent interest that husband was gifted by his father before the marriage. 21 In her argument respecting that property, wife asserts that the trial court 20 1 failed to follow the methodology of Kunze in awarding husband his premarital interest in 2 the practice; she further contends that a proper application of the methodology results in 3 an equal division of the asset. Husband disagrees, arguing that, although not explicit, the 4 court properly followed Kunze and that, because the CPA practice "has always remained 5 separate and wife did little to contribute to its success," the court acted within its 6 discretion in awarding the premarital value to husband. Husband also points out that wife 7 shared in husband's income from the CPA practice throughout the marriage and was 8 awarded half of the value of the 75 percent portion acquired during the marriage and half 9 of the appreciation that accrued during the marriage. Thus, in husband's view, it was just 10 11 and proper to award the premarital portion solely to husband. We agree with wife on both points. First, the trial court found that 12 13 14 15 16 "[w]ife's contribution to the premarital ownership of [h]usband in the CPA practice is zero. It is therefore equitable, based upon all considerations, that [h]usband receive the premarital ownership interest in the professional practice known as Steve Hanscam, CPA without consideration in the overall property division in this case." 17 Thus, it does not appear that the trial court considered and applied the methodology 18 prescribed in Kunze--in particular, whether husband's treatment of the separately acquired 19 asset demonstrated his intent for that asset to become a joint asset of the marital 20 partnership. Instead, the court appears to have focused solely on wife's lack of 21 contribution to the premarital portion of the asset in determining that it was equitable to 22 award it solely to husband. As we held in Olson, 23 24 "[i]n order to earn the measure of deference to which discretionary decisions are entitled on appeal, a trial court's property award must reflect 21 1 2 3 4 5 the exercise of discretion under the correct methodology, and it must lie within the range of legally permissible outcomes. If a decision fails in the former respect, our own analysis may produce a recalibrated, even if not dramatically different, award on appeal." 218 Or App at 16. 6 Second, we agree with wife that, under the correct methodology, it is just 7 and proper that she share in the premarital value of the CPA practice. Although the 8 practice was held solely in husband's name, and he managed it with little or no input from 9 wife,11 as previously discussed, "the degree of reliance on the disputed property as a joint 10 asset" of the marriage is also a relevant factor in determining whether a spouse has 11 demonstrated an intent to commingle the asset. Kunze, 337 Or at 141-42. It is that factor 12 that militates decisively in wife's favor. Husband and wife were married for 18 years 13 before they separated. During that time, wife took care of the children, the household 14 chores, the rental properties, and, to some degree, the farm, so that husband could focus 15 on working and building the CPA practice. We agree with the trial court's finding that, 16 between 1998 and 2007, "wife did not work anywhere because the parties agreed that she 17 would take over the rental business management, [husband's] office work and taking care 18 of the children and the home." Between January 1 and April 15 of every year, husband 19 worked long hours in the CPA practice; wife's efforts in taking care of the children, the 20 home, and the rental properties made that possible. 21 Moreover, it is undisputed that the parties relied on the CPA practice as the 11 As noted, wife did participate to some extent in its operation (e.g., cleaning and buying supplies). 22 1 primary source of the family's income. On that point, Finear is instructive. In Finear, 2 the husband inherited substantial assets during the marriage, established a trust with those 3 assets, and used inheritance/trust funds to purchase other property, including the "Lomas 4 Road property," which eventually became the parties' residence. 240 Or App at 758. 5 With the exception of a small monthly allowance that the husband gave the wife for her 6 personal needs, the husband maintained separate ownership and control over all of the 7 inheritance/trust property and made all of the financial decisions for the couple. Id. at 8 765. He also expressed his intention to keep the inherited/trust fund property separate. 9 We concluded that the husband had rebutted the presumption of equal contribution with 10 respect to the inheritance.12 Id. at 762. Nonetheless, in conducting the just and proper 11 analysis, we found that there were some cognizable aspects of commingling. 12 Emphasizing, again, that how a spouse acts with respect to the asset is determinative of 13 the spouse's intent to commingle, we noted that the husband had used inheritance/trust 14 funds for family purposes--relying on trust funds exclusively for the family's support and 15 using both principal and income to purchase and develop the family home. Id. at 765-66. 16 Acknowledging that, as the husband argued, a party's use of funds from a separately held 17 account does not necessarily convert the entire account into a marital asset, we 18 concluded: 12 We also agreed with the trial court that the appreciation of the Lomas Road property over the course of the marriage was a marital asset and that the husband had not rebutted the presumption of the wife's equal contribution to that asset. 240 Or App at 763. 23 1 2 3 4 5 6 7 "Here, however, the inheritance and husband's investment of labor and skill in its management were husband's contribution to the marital partnership. Both wife and husband were completely dependent on the inheritance/trust funds throughout the latter part of their marriage. We conclude that husband's reliance on the inheritance property as his financial contribution to the marital partnership is a form of commingling." Id. at 766.13 8 9 Here, too, husband and wife relied on the CPA practice as the primary source of the family's income throughout the marriage. Indeed, the parties agreed that 10 wife would forgo employment to take care of the parties' children, household, and rental 11 properties, which, in turn, allowed husband to focus on maintaining and improving the 12 practice. As in Finear, the CPA practice and husband's "investment of labor and skill in 13 its management were husband's contribution to the marital partnership," 240 Or App at 14 766, evidencing husband's intent to commingle that asset into the parties' joint finances. 15 In view of all the circumstances of the parties, we conclude that an equal division of the 16 CPA practice--including its premarital value--is just and proper. 17 We next must address wife's contention that the trial court erred in its 18 valuation of the CPA practice. That assignment of error requires little discussion. Wife's 19 primary argument--that the court erred in refusing to adopt her expert's fair market value 13 We ultimately held that the commingling of the inheritance/trust property for the purchase and development of the Lomas Road property and as the sole financial resources for the family weighed in favor of allocating some portion, but not all, of the original inheritance to the wife. 240 Or App at 766. Given that the wife was sharing in the appreciation of the Lomas Road property, which itself represented a significant portion of the inheritance/trust property, as well as other equitable considerations, we concluded that the trial court's division of the property was within its discretion. Id. at 768. 24 1 of $439,000 for the practice and instead accepting husband's expert's erroneous 2 definitions of personal goodwill and enterprise goodwill--is foreclosed by Slater and 3 Slater, 240 Or App 30, 245 P3d 676 (2010), rev den, 350 Or 408 (2011). In Slater, which 4 was decided after briefing was complete in this case, we explained that, for purposes of 5 valuation of a closely held business in the marital dissolution context, 6 7 8 9 10 11 12 13 14 "cognizable 'goodwill' refers to the value of a business over and above the value of its assets irrespective of the owner's or professional's continued personal services, or personality or reputation. Accordingly, where a business has no value above and beyond its assets absent the owner personally promising his or her services to accompany the sale of the business, there is no good will. At the same time, a closely held business may have goodwill value where the success or failure of that business does not rest entirely on the business owner's personal services, personality, or reputation." 15 Id. at 41 (internal quotation marks, brackets, and citations omitted). That rationale, we 16 stated, necessarily also compelled the conclusion that a business valuation may not 17 "properly be predicated on an assumption that, at the time of a putative sale, husband 18 would be bound by a noncompetition covenant, thus enhancing the value of the 19 business." Id. at 43. Here, wife's expert's valuation assumed the existence of just such a 20 hypothetical noncompetition agreement; thus, the trial court did not err in rejecting wife's 21 expert's valuation. We are also not persuaded, as wife contends, that the trial court failed 22 to value the enterprise goodwill of the CPA practice. The trial court explicitly rejected 23 husband's net asset approach, which excluded all goodwill, including enterprise goodwill. 24 25 To the extent that wife is also arguing that, in any event, the trial court should have used a market approach in calculating the value of the business, we reject 25 1 that contention as well. The record reflects that both experts recognized the difficulty in 2 evaluating the market for a CPA practice in a small community. Husband's expert 3 testified that neither party's database contained enough information regarding the 4 populations or the household income of the cities where other practices were sold to be 5 comparable. Even wife's expert indicated that he lacked information about the "history of 6 the comparable businesses prior to the year of sale" and "about the individual market 7 area, services provided, market or clientele niche, client mix, or any other specific 8 company risk factors." As noted, the court also found husband's expert's assessments to 9 be more thorough and less speculative than wife's. We agree. In short, we are not 10 persuaded that the trial court erred in valuing the CPA practice.14 11 We turn next to the parties' dispute over husband's interest in HPLP. The 12 trial court determined that husband's premarital interest was marital property to which the 13 presumption of joint contribution did not apply, that husband had rebutted the 14 presumption of equal contribution with regard to the interest in HPLP acquired by 15 husband during the marriage, and that it was just and equitable to award husband his 16 interest in HPLP as his separate property. As explained below, we see no reason, on de 17 novo review, to disturb that award. 14 In a memorandum of additional authorities, husband argues that, under Slater, the trial court's valuation of the practice should actually be reduced because husband's expert testified that all of the practice's goodwill was personal goodwill and, therefore, the trial court should have adopted his expert's lower, asset-based valuation. The problem with husband's argument is that husband did not cross-assign error to the court's valuation of the CPA practice; therefore, we do not address it. 26 1 We conclude, as did the trial court, that husband rebutted the presumption 2 of equal contribution with respect to the partnership interests that were gifted to husband 3 during the marriage. Husband's father testified that the shares of HPLP that he and his 4 wife gave to husband in 1999 and 2000 were intended for husband's benefit alone. 5 Further, wife presented no evidence that she contributed to the partnership such that it 6 influenced the making of the gift. That is sufficient to rebut the presumption of equal 7 contribution to the initial gifts. Jenks, 294 Or at 241; Olson, 218 Or App at 9-10. 8 9 The same result obtains with respect to the appreciation in HPLP that accrued during the marriage. The trial court found that neither party had directly 10 benefited from husband's ownership interest in HPLP or its predecessor partnership, nor 11 had either party made any significant contribution to the partnership. We agree. Any 12 appreciation in the property that occurred during the marriage was passive. Although that 13 is not necessarily determinative, see Owens-Koenig and Koenig, 194 Or App 573, 577, 14 95 P3d 1152, modified on recons, 195 Or App 734, 98 P3d 1143 (2004) ("[P]assive 15 appreciation of a separately held asset is not, itself, automatically separately held[.]"), in 16 this case, nothing husband did affected the value of his interest, and he had no control 17 over the partnership. Consequently, wife also did not contribute to the appreciation by 18 working as a homemaker so that husband could manage the asset. See Massee, 328 Or at 19 202-03 ("A homemaker spouse contributes to the acquisition of marital assets, because 20 the performance of domestic tasks by one spouse frees the other spouse to devote energy 21 and concentration to other tasks that may generate marital assets."); see also Kunze, 337 27 1 Or at 143 (presumption of equal contribution by the husband to appreciation during the 2 marriage of a property inherited by the wife successfully rebutted where the property 3 "required minimal attention from either of the parties" and the husband did not contend 4 that his contributions during the marriage affected that asset). 5 In this case, although wife performed some work on HPLP properties, she 6 was compensated for those efforts. See Owens-Koenig, 194 Or App at 581 (presumption 7 of equal contribution successfully rebutted where, among other considerations, the wife 8 demonstrated that the husband did not provide any "undercompensated service to the 9 marital estate" that would justify its application); see also Engle and Engle, 293 Or 207, 10 214-15, 646 P2d 20 (1982) (explaining purpose of presumption of equal contribution). In 11 other words, nothing wife did "directly or indirectly affected the entirely passive 12 appreciation of [the disputed] asset[]." Terhaar and Polance, 171 Or App 112, 115, 14 13 P3d 657 (2000), rev dismissed as improvidently allowed, 333 Or 596 (2002). 14 In Lind, the husband was given an investment portfolio by his parents 15 before he met his wife. 207 Or App at 58. We held that the husband successfully 16 rebutted the presumption of equal contribution to additions to the portfolio that he made 17 during the marriage. Id. at 63. The husband alone managed the investment portfolio, and 18 no interest was ever transferred to the wife. Moreover, all of the portfolio holdings that 19 the husband had acquired during the marriage were generated by the portfolio itself. 20 Thus, the wife did nothing to contribute to the original acquisition of the portfolio, nor 21 did she contribute to the acquisition of new shares during the marriage. Id. at 63-64. 28 1 Under those circumstances, we held, the presumption of equal contribution was 2 successfully rebutted. Id. at 64-65. We further concluded that, "because the new assets 3 were 'acquired free of any contributions from the other spouse,'" it was just and proper for 4 the entire asset to be treated as the husband's separate property. Id. at 65 (quoting Kunze, 5 337 Or at 135). 6 The same is true here. Wife did nothing to contribute to the original 7 acquisition of husband's interest in HPLP nor did she contribute anything of significance 8 to the appreciation in HPLP that accrued during the marriage. Thus, husband has 9 effectively rebutted the presumption of equal contribution to the marital portion of that 10 asset. Stice and Stice, 308 Or 316, 325-26, 779 P2d 1020 (1989) ("The presumption of 11 equal contribution to the acquisition of property during the marriage may be overcome by 12 a finding that * * * the other spouse has contributed neither economically nor otherwise 13 to the acquisition of the property in issue."). And, as in Lind, it is "just and proper" for 14 the entire asset to be awarded to husband as his separate property. "When a party has 15 proved that a marital asset was acquired free of any contributions from the other spouse * 16 * *, this court has determined that, absent other considerations, it is 'just and proper' to 17 award that marital asset separately to the party who has overcome the statutory 18 presumption." Kunze, 337 Or 134-36. Here, those "other considerations" support 19 treating the entire asset as husband's separate property. 20 21 Unlike the Cedar Street property and the CPA practice, husband did not commingle his interest in HPLP with the parties' other assets. He did not use it for family 29 1 purposes. Indeed, he could not have--other than being compensated for the tax effects of 2 the partnership's profits, husband received no income or benefit from his interests in 3 HPLP. There is no evidence that the parties made any financial decisions in anticipation 4 of benefiting from husband's interest in HPLP. In short, there was no demonstrated 5 reliance upon the disputed property interest as a joint asset. Nor did husband and wife 6 share control of the property. Rather, the evidence showed that management and control 7 of HPLP was held in the hands of husband's father, as the controlling general partner, and 8 that he alone received income from the partnership. There is no suggestion that wife was 9 not fairly compensated for the work she performed on behalf of HPLP properties. In 10 sum, we do not find any equitable considerations that would dictate treating any portion 11 of husband's interest in HPLP as a marital asset to be equally divided. Cf. Fields and 12 Fields, 234 Or App 451, 455-56, 228 P3d 614 (2010) (concluding that the wife failed to 13 rebut the presumption of the husband's equal contribution to the appreciation of the wife's 14 minority interest in a family business and that it was just and proper that the husband 15 share equally in that appreciation where the husband assisted in managing the business 16 without being fully compensated for this work, his stewardship contributed to the 17 increase in its value, the parties commingled their finances, the wife integrated her 18 interest in the business into the parties' joint finances, and the husband relied on those 19 separate assets in his financial planning). 20 Finally, we briefly address the court's disposition of the 1972 Porsche that 21 husband owned before the marriage. We agree with wife that the trial court erred in not 30 1 treating the appreciation of that asset as a marital asset. Massee, 328 Or at 206 (as a 2 general rule, appreciation of property during marriage is a marital asset subject to the 3 presumption of equal contribution). It is undisputed that husband used marital funds to 4 pay for improvements made to the 1972 Porsche during the marriage. Accordingly, we 5 conclude that he did not rebut the presumption that wife contributed to the increased 6 value in the automobile during the marriage and that it is just and proper for wife to 7 receive half of the appreciation of the 1972 Porsche. Husband, however, is entitled, 8 under the principles of commingling discussed above, to retain the premarital value of the 9 car--in particular, wife's name was not on the title, she did not exhibit any control over it, 10 11 and there is no evidence that the parties relied on it as a joint asset. In sum, we conclude that the court did not err in valuing the CPA practice 12 and that wife is entitled to share equally in the premarital value of that asset and the 13 Cedar Street property and in the marital appreciation of the 1972 Porsche. Accordingly, 14 we modify the judgment to increase the equalizing judgment payable to wife by $49,125 15 to $541,906; and otherwise affirm. 16 17 Judgment modified to award wife an equalizing judgment of $541,906; otherwise affirmed. 31
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
