Schmieding v. Schmieding

9 P.3d 52 (2000) 2000 MT 237 In re the Marriage of, Jennifer L. SCHMIEDING, Petitioner/Respondent, v. Peter SCHMIEDING, Respondent/Appellant. No. 99-579. Supreme Court of Montana. Submitted on Briefs February 24, 2000. Decided August 29, 2000. *53 Mark L. Guenther, Nash, Guenther & Zimmer, Bozeman, Montana, For Appellant. Edmund P. Sedivy, Jr., Sedivy, White & White, Bozeman, Montana, For Respondent. Justice WILLIAM E. HUNT, Sr. delivered the Opinion of the Court. ¶ 1 On May 28, 1997, Respondent, Jennifer Schmieding (Jennifer), petitioned the Eighteenth Judicial District Court, Gallatin County, for dissolution of her marriage to Appellant, Peter Schmieding (Peter). This matter proceeded to a four-day trial held from October 1, 1998, until October 8, 1998. On April 6, 1999, the District Court issued its Findings of Fact and Conclusions of Law equitably distributing the marital assets and liabilities, determining child support and maintenance, and awarding Jennifer her attorney fees and costs. Following a hearing, the District Court ordered Peter to reimburse Jennifer's attorney fees and costs totaling $26,561.88. On August 25, 1999, the District Court entered its Decree of Dissolution incorporating the amount of attorney fees and costs. Peter now appeals the award of attorney fees to Jennifer. We Affirm. ¶ 2 The only issue on appeal is: Did the District Court abuse its discretion in awarding petitioner her attorney fees and costs. FACTUAL BACKGROUND ¶ 3 At the time of trial, October 1, 1998, Jennifer and Peter had been married eighteen years. The parties' three teenage sons were ages 16, 16, and 12, Michael and Matthew being twins. Peter was age 42 and Jennifer was age 41. ¶ 4 During the marriage, Jennifer worked primarily as a homemaker, caring for and raising the parties' children and performing the many tasks of managing the household. In the initial months of the parties' marriage, before the twins were born, she assisted Peter in his dental practice as a receptionist and dental assistant. Other than that, she was not employed outside of the home until the winter of 1997-98, when she took seasonal employment at Big Sky as a ski patroller, where she earned $7.80 per hour. She earned $1,527.81 of gross pay in 1997, and earned $286.42 in 1998 before being injured. She will be earning $8.25 per hour for the winter season of 1998-99. The possibility exists for her to do summer work for Boyne USA at Big Sky. ¶ 5 Jennifer obtained a degree in Psychology from Michigan State University in 1980. She has never used the degree for any employment. She is also a certified emergency medical technician. She expects to be able to initially earn only minimum wages. She has no clerical skills. She has moderate opportunity in the future to acquire assets by her earnings and income. Her standard of living during the eighteen years of marriage was high. ¶ 6 Peter obtained a degree in Natural Science from John Hopkins University in 1978, and a D.M.D. (Dental) degree from the University of Florida in 1981. He operated a dental practice in Naples, Florida, from 1982-1996. From 1990 through 1995, Peter earned net profits between $220,000.00 and $257,576.00 per year. In addition to his dentistry profession, Peter also has construction skills and is a licensed contractor in the State of Florida. He has been a co-owner in a construction business in Florida, known as "Hardwood Building, Inc." He owns 50% of its outstanding stock. ¶ 7 In June 1996, he sold his dental practice in Florida, and the family moved to Big Sky, Montana. In 1996 he had gross receipts of $310,835.00, and a net profit of $177,862.00 from the Florida practice. He started a dental practice at Big Sky, Montana *54 in September 1996, working part-time and had $17,538.00 of gross receipts, but claimed a net loss of $27,633.00, due to start up expenses and depreciation. In 1997, he again worked part-time and had gross receipts of $77,559.31. ¶ 8 At the time of trial, Peter worked approximately two days per week at Big Sky. He anticipated expanding to Belgrade, so that he will have a full week of work. Considering the statistics of the earnings of dental practices in Montana, his age, working full-time as a median, Peter can reasonably be expected to earn at least $91,500.00 per year and this level of earnings can be expected up through age 65. He has the ability to acquire substantial assets by his earnings and income. His standard of living during the eighteen years of marriage was high. ¶ 9 Upon moving the family to Montana, in 1996, Peter sold his dental practice in Florida for $350,00.00 with $100,000.00 in cash and $250,000.00 on contract. The monthly payments of principal and interest on this contract total $3,896.55, and the contract balance as of the date of trial was $184,273.40. The parties sold their Florida home in 1996 for over $1.2 million, receiving net proceeds of $800,190.00. ¶ 10 On January 30, 1998, Peter sold his dental office building in Florida for $180,00.00, with $20,000.00 down and the balance of $160,000.00 plus interest at 8% per annum to be paid in monthly payments of $1,529.04, with a balloon payment of $126,710.57 to be paid on December 20, 2002. The balance owing on September 30, 1998, was $156,213.54. Peter purchased an office condominium for his dentistry office at Big Sky, on September 9, 1996, for $100,000.00, and acquired furniture and dental equipment for $31,000.00. ¶ 11 At the time of trial, the parties owned a house in Big Sky, Montana. This home listed for sale at $690,000.00 and is subject to a $197,188.45 mortgage. The monthly mortgage payment is $1,385.00. The house is currently rented for $1,300.00 a month. They also own a home in Bozeman, Montana. This house was purchased after the parties separated and is the primary residence of Jennifer and the three children. The house was purchased for $280,000.00. The balance owed as of September 1998, was $178,206.38, with a monthly payment of $1,243.22. Peter also purchased a lot at 390 Hayrake Lane, Bozeman, Montana, for $200,000.00. At the time of trial he was building a home on this lot, and he had expended as of June 15, 1998, the sum of $700,000.00 with the total expenditure expected to be $835,000.00. ¶ 12 Peter has a Keogh profit-sharing plan invested with Fidelity Investments, and as of January 31, 1998, the fund was valued at $411,006.00. At the time of trial it was valued at $179,363.76. Peter also has an IRA invested with Fidelity Investments and as of January 28, 1998, it had a value of $26,212.00. At trial its value was $26,313.14. ¶ 13 Jennifer also has a Keogh account and as of January 1, 1998, it was valued at $17,116.85. At trial its value was $18,694.23. Jennifer has an IRA invested with Fidelity, and as of January 28, 1998, its value was $22,832.14. At trial its value was $22,358.61. ¶ 14 The parties have an investment account with Brown & Company which has been invested by Peter in oil drilling sector stocks. On December 31, 1997, it was valued at $596,412.50. By February 27, 1998, the account had dropped to $442,378.00. In June Peter sold all of the stock except Varco International, Inc., and as of June 26, 1998, it was valued at $102,593.00. At trial its value was only $77,490.00. ¶ 15 The District Court thus found that on October 30, 1997, shortly after Jennifer filed for divorce, and prior to the purchase of the Hayrake lot, the parties had net assets of $2,675,979.00 with $1,247,552.00 being liquid. As a result of Peter's decision to build the Hayrake house, a huge drop in the market for oil exploration companies' stock, and substantial living expenses for two households, the parties' liquid assets had dropped to $77,490.00 at trial. ¶ 16 The parties also had an investment brokerage cash account valued at $160,193.44 as of January 8, 1998, the date of the pre-trial order. Its value as of September 1, 1998, one month before trial was only $356.78. Peter had withdrawn the balance *55 and deposited it into his personal bank account. ¶ 17 After the parties separated, Peter withdrew all the funds from their joint checking account and set up his own account. He deposited all of his incomes into his account. From these co-mingled funds, he paid his business expenses, personal expenses, mortgage payment for the Big Sky home, expenses for building the Hayrake home, and made monthly payments of $5,000.00 to Jennifer. As Peter claims that he has made no profits from his dentistry business at Big Sky, the monies paid to Jennifer were nothing more than a payment to her from her marital assets. As of July 31, 1998, Peter had $50,994.28 in his personal account. Peter testified at trial that he now had only $4,000.00 in the account. Jennifer also has her own account which had $3,000.00 in it at trial. ¶ 18 The District Court distributed the assets as it found them in October 1998, awarding Jennifer her home, Peter his office, and giving each of them one-half of the interest in the two homes, so that each was sharing in the risks of gains or losses if and when they sold. The District Court divided the Hardwood Building, Inc., the Brown & Company account, and Peter's Keogh account. The District Court was aware of Peter's intention to spend an additional $135,000.00 to finish the Hayrake house, and that by the date of the court's findings of facts and conclusions of law, there would likely be no money or liquid assets left. The only income producing property left was the Florida note from the sale of the office building awarded to Jennifer, and the Florida note for sale of the practice awarded to Peter. This would create $1,529.04 per month to Jennifer and $3,896.55 per month to Peter. ¶ 19 After distributing the marital assets, the District Court then looked at the issue of maintenance and child support. The court concluded that Jennifer required $8,836.25 per month for her and the children to maintain their standard of living. It then found that considering the income she can earn from assets awarded to her, plus imputed income to her of $1,300.00 a month, plus child support of $2,539.00, she would have a monthly household income for her and the three children of $5,368.00. The court then determined that Peter should pay to Jennifer maintenance of $3,000.00 per month until she remarries or is deceased, or when she receives her one-half share of the proceeds from the sale of the Big Sky home, the Hayrake home, and the Hardwood Building, Inc. business. ¶ 20 The District Court then considered Peter's financial situation and found that Peter would have monthly income of $7,625.00 from his practice and/or other investments, plus $3,896.55 from the sale of the Florida practice which totaled $11,521.55 per month. He claimed monthly personal expenses of $5,533.00. With maintenance of $3,000.00 per month and child support of $2,539.00, this leaves him with $449.00 per month undesignated. ¶ 21 Finally, the District Court, after having explored the financial conditions of the parties in detail found that Peter should reimburse Jennifer for her reasonable attorney fees and costs incurred, in an amount to be determined at a subsequent hearing. On June 17, 1999, a hearing was held. The District Court found that Peter should pay $26,561.88 for Jennifer's attorney fees and costs. The decree of dissolution of marriage was entered on August 25, 1999, thereafter, Peter filed notice of appeal stating that he was only appealing the court's order requiring him to pay Jennifer's attorney fees and costs. STANDARD OF REVIEW ¶ 22 An award of attorney fees under § 40-4-110, MCA, is within the sound discretion of the trial judge, and the trial judge's determination regarding attorney fees will not be disturbed absent an abuse of discretion. In re Marriage of Cole (1986), 224 Mont. 207, 216, 729 P.2d 1276, 1282. The test for an abuse of discretion is whether the trial judge acted arbitrarily without employment of conscientious judgment or has exceeded the bounds of reason resulting in substantial injustice. In re Marriage of Bell (1986), 220 Mont. 123, 126, 713 P.2d 552, 554. *56 DISCUSSION ¶ 23 Did the District Court abuse its discretion in awarding petitioner her attorney fees and costs? ¶ 24 Peter's argument that the District Court abused its discretion is two fold. First, that the award of attorney fees was not based on necessity. Second, because Jennifer did not list attorney fees in the pretrial order, the District Court erred in allowing evidence on the issue of attorney fees. ¶ 25 Section 40-4-110, MCA, provides that after considering the financial resources of both parties a district court may order a party to pay the other party's reasonable attorney fees for maintaining and defending specified dissolution, custody, and child support proceedings. This is to ensure that both parties have timely and equitable access to marital financial resources for costs incurred before, during, and after these types of legal proceedings. Section 40-4-110(2), MCA. We use a three-prong approach to deciding whether an award of attorney fees was appropriate pursuant to § 40-4-110, MCA. An award of attorney fees must be: (1) based on necessity; (2) reasonable; and (3) based on competent evidence. Pfeifer v. Pfeifer (1997), 282 Mont. 461, 466, 938 P.2d 684, 687. Here, Peter addresses only the requirement of a finding of necessity. He does not contest the reasonableness of the amount or that evidence in support of the fees was competent. ¶ 26 A finding of necessity must be supported by factual findings. Pfeifer, 282 Mont. at 466, 938 P.2d at 688 (district court abused its discretion by summarily concluding that necessity existed without making any factual findings to support this contention); In re Marriage of Gingerich (1994), 269 Mont. 161, 168, 887 P.2d 714, 718 (no necessity where the record does not contain evidence to support a finding of necessity); In re Marriage of Smith (1994), 264 Mont. 306, 313, 871 P.2d 884, 888 (remanded on the issue of attorney fees for a determination of whether the awarded party can make a showing of necessity). Peter argues that the court erred by not setting forth in more detail its reasons why he should pay Jennifer's attorney fees. When reviewing the sufficiency of findings of fact, however, we review the findings as a whole, rather than isolate on a single finding. Marriage of Bell, 220 Mont. at 127, 713 P.2d at 554. Facts that we have traditionally considered in determining necessity are: (1) the requesting party's inability to pay her own attorney fees; (2) the other party's ability to pay attorney fees; and (3) the relative financial positions of the parties. ¶ 27 First, the requesting party must demonstrate an inability to pay her own attorney fees. In re Marriage of Walls (1996), 278 Mont. 413, 420, 925 P.2d 483, 487 (wife was not allowed attorney fees because the district court found that she had the financial ability to pay her own fees); In re Marriage of Spence (1993), 257 Mont. 188, 196, 849 P.2d 161, 166 (district court's denial of attorney fees was correct because the wife had a sufficient cash award to pay her attorney fees); Marriage of Cole, 224 Mont. at 216, 729 P.2d at 1282 (district court properly awarded the wife attorney fees where it found she was without means to pay her attorney fees). ¶ 28 Peter argues that Jennifer was awarded sufficient assets to pay her own attorney fees. Jennifer's estimated earnings are $16,632.00 a year. The District Court calculated that Jennifer was left $468.00 per month short once all her income was compared to her estimated expenses for her and the three children. This calculation does not consider outstanding attorney fees. From these findings, it can be reasonably concluded that Jennifer has an inadequate ability to pay her attorney fees. ¶ 29 Second, a district court should consider the other party's ability to pay an award of attorney fees. In re Marriage of Zander (1993), 262 Mont. 215, 227, 864 P.2d 1225, 1233 (it is proper to hold each party responsible for his own attorney fees when neither is better able to pay); In re Marriage of Welch (1993), 257 Mont. 222, 227, 848 P.2d 500, 503 (denial of attorney fees was affirmed where the wife failed to demonstrate the husband's ability to pay her attorney *57 fees); Burris v. Burris (1993), 258 Mont. 265, 272, 852 P.2d 616, 620 (district court did not abuse its discretion in awarding the wife her attorney fees upon a determination that the husband could reasonably afford to pay them). ¶ 30 Peter makes no attempt to argue that he cannot afford to pay Jennifer's attorney fees. Not only did he receive approximately $19,898.00 more in marital assets than Jennifer, he has an extra $449.00 a month after his expenses are balanced against his income. Peter has an estimated earning potential of $91,500.00 a year. From these findings, it is reasonable to conclude that Peter can absorb Jennifer's attorney fees. ¶ 31 Third, a district court should consider the relative financial positions of the parties in deciding necessity. In re Marriage of Forsman (1987), 229 Mont. 411, 416, 747 P.2d 861, 864 (the fact that the husband was in a much better economic situation than the wife was a compelling reason to award her attorney fees); In re Marriage of Roullier (1987), 229 Mont. 348, 360, 746 P.2d 1081, 1088 (was not an abuse of discretion to award the wife her attorney fees where the husband's cash flow levels were more adequate to pay); In re Marriage of Manus (1987), 225 Mont. 457, 465, 733 P.2d 1275, 1280 (was not an abuse of discretion to award the wife her attorney fees where the husband had substantially higher earnings); Carr v. Carr (1983), 205 Mont. 269, 272, 667 P.2d 425, 427 (was not an abuse of discretion to award the wife her attorney fees where the husband had a greater earning potential with a much larger salary and the wife was in poor health). ¶ 32 Peter attempts to distinguish this situation from the facts in Carr, Roullier, and Manus. He argues that the size of the marital estate, Jennifer's good health, her college education, and her better employment set this situation substantially apart from the facts of Carr. He argues that Roullier is distinguishable because the financial gap in Roullier is allegedly greater. He argues that the size of the marital assets awarded in Manus distinguishes that case. ¶ 33 We are unconvinced. Peter misses that the salient fact in the abovementioned cases is that one of the parties was in a substantial better financial position than the other. The District Court found Peter's yearly earnings to be $91,500.00. It found Jennifer's to be $16,632.00. Peter's annual earnings being more than five times greater than Jennifer's. The District Court found that while Peter has the ability to acquire substantial assets, Jennifer does not. Further, even when maintenance and child support are included, Jennifer still is short $468.00 a month in meeting her expenses. Peter has an extra $449.00 past his monthly expenses. Peter will also be relieved from paying maintenance once Jennifer receives one-half of the proceeds from the sale of the Big Sky home, the Hayrake home, and the Hardwood Building, Inc., business. This will result in an even bigger disparity between the parties. As in Forsman, Peter's economic situation being much better than Jennifer's is a compelling reason to award Jennifer her attorney fees. ¶ 34 As a whole, the District Court's findings adequately support its award of attorney fees. While it would be better practice for a district court to better delineate its factual reasons for awarding one party its attorney fees, we find that Peter has failed to meet his burden of establishing that the District Court abused its discretion. ¶ 35 Lastly, we will address Peter's contention that the District Court errs in awarding attorney fees when they were not listed in the pretrial order. During the second day of trial Jennifer offered copies of her attorney fee bills. Over Peter's objection, the District Court allowed the pretrial order to be amended on the issue of attorney fees. At that stage of the trial, the Judge was not deciding whether reimbursement was appropriate. Rather, the Judge was simply allowing the issue to be considered in his quest for equity. ¶ 36 Peter argues that Jennifer made no showing of manifest injustice as required by Rule 16(e) M.R.Civ.P., to modify the pleadings. The pertinent part of this rule states "[t]he order following a final pretrial conference shall be modified only to prevent manifest injustice." Rule 16(e) M.R.Civ.P. Peter *58 cites Naftco Leasing Ltd. v. Finalco, Inc. (1992), 254 Mont. 89, 835 P.2d 728, in support of his argument. ¶ 37 Naftco, however, is not based on § 40-4-110, MCA, nor is it a dissolution of marriage action. Further, the facts of Naftco are distinguishable from the case at bar. In Naftco, no attorney fees evidence was presented during trial, thus the trial court did not have the opportunity to consider amending the pleadings. Here, Jennifer entered evidence of her attorney fees at trial. ¶ 38 Peter's argument further misses its mark because Rule 16(e) M.R.Civ.P., should be read together with Rule 15(b) M.R.Civ.P. This rule states: If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice the party in maintaining the party's action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence. While Peter objected, he failed to claim any prejudice. He also did not seek a continuance to enable him to meet Jennifer's attorney fees evidence. The purposes of pretrial orders are to simplify the issues, permit the parties to prepare for trial and to prevent unfair surprise. In re Estate of Lande, 1999 MT 179, ¶ 26, 295 Mont. 277, ¶ 26, 983 P.2d 316, ¶ 26 (allowing an award of attorney fees that were not contained in the pretrial order because they were mandated to the winner by statute). If Peter suffered any prejudice because of this surprise he should have so stated and requested a continuance. ¶ 39 We have held that although it is good practice to plead attorney fees, § 40-4-110, MCA, does not require them to be. In re Marriage of Johnsrud (1977), 181 Mont. 544, 553, 572 P.2d 902, 907; In re Marriage of Taylor (1993), 257 Mont. 122, 129, 848 P.2d 478, 482. Section 40-4-110, MCA, gives the trial court the authority to order payment, "from time to time, after considering the financial resources of the parties." When the distribution of marital assets and liabilities, maintenance, and child support are issues left to a trial court, neither party has any way of knowing what will be ordered as to which party gets what of the financial resources. Therefore, it makes sense to leave the issue of attorney fees reimbursement until after the trial court makes its determination of the parties' financial resources. Peter has failed to meet his burden of demonstrating an abuse of discretion. ¶ 40 The District Court is affirmed. J.A. TURNAGE, C.J., JAMES C. NELSON, and TERRY N. TRIEWEILER, JJ., concur. Justice JIM REGNIER dissenting. ¶ 41 I respectfully dissent from the Court's opinion affirming an award of attorney fees and costs. ¶ 42 In Jennifer's petition for dissolution she requested an award of attorney fees and costs. However, in the pretrial order, she abandoned her claim for fees and costs and asserted that each party was able to pay their own fees and costs. The issues set forth in the pretrial order do not include a request for reimbursement of attorney fees and costs. ¶ 43 On the second day of trial, Jennifer changed course again and presented evidence for reimbursement of attorney fees. Peter objected on the grounds that any evidence regarding attorney fees and costs was beyond the issues set forth in the pretrial order. The court overruled the objection and amended the pretrial order sua sponte. ¶ 44 Rule 16(e), M.R.Civ.P. states in pertinent part that the pretrial order "shall be modified only to prevent manifest injustice." In my view, manifest injustice was not established given this procedural history and Jennifer should have been bound by her contentions set forth in the pretrial order. I think *59 the District Court abused its discretion in allowing Jennifer to present evidence on attorney fees and costs and then make an award based on this evidence. Justices KARLA M. GRAY and W. WILLIAM LEAPHART join in the foregoing dissent.