Jacobs-Raak v. Raak

888 N.W.2d 770

Danel JACOBS-RAAK, n/k/a Danel Jacobs, Plaintiff, Appellee and Cross-Appellant

v.Daniel RAAK, Defendant, Appellant and Cross-Appellee

No. 20150360

Supreme Court of North Dakota.

Filed December 20, 2016

Rodney E. Pagel, Bismarck, ND, for plaintiff, appellee and cross-appellant.

Arnold V. Fleck, Bismarck, ND, for defendant, appellant and cross-appellee.

VandeWalle, Chief Justice.

[¶ 1] Daniel Raak appealed and Danel Jacobs-Raak, now known as Danel Jacobs, cross-appealed from a divorce judgment distributing their marital property and ordering Raak to pay child support. Except with regard to the division of the mineral estate, we conclude the district court did not err as a matter of law, did not abuse its discretion, and its findings of fact are not clearly erroneous. We affirm in part, reverse in part and remand for an identical division of the mineral interest or, in the alternative, further explanation concerning the division of the mineral interest.

I

[¶ 2] Raak and Jacobs were divorced in October 2015 after a 15-year marriage. The district court awarded Raak a net marital property distribution of $436,234 and Jacobs a net marital property distribution of $499,051. The court awarded primary residential responsibility for the couple's three children to Jacobs and ordered Raak to pay $1,452 per month for child support effective September 1, 2015. The court denied Jacobs' requests that Raak pay her spousal support and her attorney fees.

II

[¶ 3] Both parties challenge the district court's valuation of certain items of marital property.

[¶ 4] Section 14–05–24(1), N.D.C.C., requires the district court in a divorce case to "make an equitable distribution of the property and debts of the parties." In Kostelecky v. Kostelecky , 2006 ND 120, ¶ 8, 714 N.W.2d 845, this Court explained:

The value a trial court places on marital property depends on the evidence presented by the parties. See Fox v. Fox , 2001 ND 88, ¶ 22, 626 N.W.2d 660. Because a trial court is in a far better position than an appellate court to observe demeanor and credibility of witnesses, we presume a trial court's property valuations are correct. See Hoverson v. Hoverson , 2001 ND 124, ¶ 13, 629 N.W.2d 573. We will not reverse a trial court's findings on valuation and division of marital property unless they are clearly erroneous. See Corbett v. Corbett , 2001 ND 113, ¶ 12, 628 N.W.2d 312. "A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, there is no evidence to support it, or if, although there is some evidence to support it, on the entire evidence the reviewing court is left with a definite and firm conviction a mistake has been made." Kautzman v. Kautzman , 1998 ND 192, ¶ 8, 585 N.W.2d 561. "A choice between two permissible views of the evidence is not clearly erroneous if the trial court's findings are based either on physical or documentary evidence, or inferences from other facts, or on credibility determinations." Hoverson , at ¶ 13.

(quoting Olson v. Olson , 2002 ND 30, ¶ 7, 639 N.W.2d 701 ). A property valuation within the range of evidence presented at trial is not clearly erroneous. See, e.g. , Hoverson v. Hoverson , 2013 ND 48, ¶ 11, 828 N.W.2d 510.

A

[¶ 5] Raak argues the district court erred in determining the value of his accounting business.

[¶ 6] Raak is a certified public accountant who in 2009 purchased an accounting firm in Bismarck for $300,000. Raak operated the business as Raak & Associates until November 1, 2014, when Raak merged Raak & Associates, the parties' major marital asset, into Capital Accounting Services, PC, without giving notice to Jacobs in violation of the restraining provisions on selling, encumbering, or dissipating marital assets contained in the divorce summons. Neither party obtained an appraisal of Raak's accounting business. At the divorce trial, the certified public accountant from whom Raak purchased the business in 2009 testified she and her accounting business broker calculated the sale price by using a formula of 125 percent of the prior year's gross receipts. She also testified a reduction for loss of client revenue should also be considered in the sale price. One of Raak's partners in Capital Accounting Services, PC, testified the multiplier rate had dropped to below 100 percent of the prior year's gross revenues at the time of trial because of the increase in the number of accounting businesses being sold in the area. Raak also presented a list of lost clients and claimed his client loss for the year before the merger totaled $87,170.

[¶ 7] The district court determined it had insufficient evidence to value the new accounting firm created after the merger, and decided to value Raak & Associates as of October 31, 2014. The court valued the business at 125 percent of the gross receipts for 2014. The court decreased that amount by $55,000 for lost client revenue rather than the $87,170 claimed by Raak because of "the low level of credibility the Court has for Daniel's testimony" based on his dissipation of assets after commencement of the divorce action and his testimony given during earlier divorce proceedings. The court further reduced the amount by the debt remaining to be paid for Raak & Associates and arrived at a $208,245 net value for the business.

[¶ 8] Raak argues the district court erred in using the 125 percent multiplier used when Raak purchased the business in 2009 from the former owner because there was "no evidence to support it was the current standard in the industry." Because the parties did not present an appraisal on the value of the business to the court, the court was therefore required to determine the value on the evidence before it. See Olson , 2002 ND 30, ¶ 7, 639 N.W.2d 701. Not only may an owner of property testify about its value, see Heggen v. Heggen , 452 N.W.2d 96, 99 (N.D. 1990), but the woman who sold the business to Raak was herself an accountant and Raak acquiesced in the sale using this method of valuation. Although Jacobs contends no deduction should be made for lost client revenue without considering potential new client revenue, the former owner acknowledged the value should be lower if clients leave and Raak, also an accountant, testified potential new clients are not considered in the sale price. Raak complains that the court should have deducted $87,170 instead of $55,000 for lost client revenue because there were no grounds to question his credibility. "In bench trials, the credibility of witnesses and the weight to be given their testimony are both exclusively functions of the trial court." Weber v. Weber , 512 N.W.2d 723, 727 (N.D. 1994). We conclude the court's valuation of Raak & Associates is within the range of the evidence presented and is not clearly erroneous.

B

[¶ 9] Raak argues the district court erred in placing a $12,580 value on a motorcycle awarded to him rather than his $9,000 valuation. However, Raak testified he would pay $12,000 for the motorcycle, Jacobs testified she would take the motorcycle at the $12,580 valuation she estimated, and Jacobs presented an exhibit indicating the suggested retail value of this type of motorcycle was in excess of the court's valuation. The court noted Raak "had custom work done on the bike after he bought it" and the evidence showed he "highly prizes his motorcycles" and "the bike is likely in excellent condition." We conclude the court's valuation of the motorcycle is not clearly erroneous.

[¶ 10] Raak claims the court erroneously valued jewelry at $1,000 instead of his estimate of $17,500. Jacobs valued the jewelry at $2,500 before trial. However, during trial both parties agreed to eliminate the value of the most expensive pieces of jewelry if Jacobs would give the parties' children those pieces when they reached adulthood. We conclude the valuation of the jewelry is not clearly erroneous.

C

[¶ 11] The parties argue about a one-third remainder interest which Jacobs shares with her two brothers in property owned by Jacobs' parents. This property includes mineral interests in Adams and Stark counties and surface real estate in Adams County. While the parties placed no value on the remainder interest in the minerals, the parties agreed to divide the mineral interests between them with their children ultimately receiving the mineral interests. They stipulated the value of the remainder interest in the surface real estate based on an appraisal was $275,000. The district court ordered the remainder interest in the minerals be divided equally, but that Raak's share be a life estate only with the minerals going to the children upon his death. The court awarded the remainder interest in the real property to Jacobs.

[¶ 12] Raak argues his remainder interest is worth less than Jacobs's remainder interest. Although the parties assigned no value to the minerals, it is disingenuous to believe mineral interests in Adams and Stark Counties, in the oil-producing Bakken formation in North Dakota, have little or no value or that a life estate in those minerals is valued the same as a fee simple absolute interest. Furthermore, if it was the intention of the parties that their children ultimately receive the minerals, the district court order, without explanation, assures that result with regard to Raak's interest in the minerals but not Jacobs. While the district court may appear to have adhered to the agreement of the parties in that presently each would receive an equal remainder interest in the minerals, it clearly did not do so by limiting Raak's interest to a life estate while awarding Jacobs a fee simple absolute in the minerals. Although there may be reason for the district court to allocate the minerals in the manner it did, that reason is not apparent in the court's decision. The parties agreed to an equal division of the mineral interests. Because that division is not equal, we reverse and direct the district court to order an identical division of the minerals or explain its...