Thorup v. Thorup

554 P.3d 329

2024 UT App 93

Mona THORUP, Appellee,

v.Marcus THORUP, Appellant.

No. 20220583-CA

Court of Appeals of Utah.

Filed July 5, 2024

Third District Court, Salt Lake Department, The Honorable Amy J. Oliver, Commissioner Joanna Sagers, No. 204906416

Jonathan G. Winn, Salt Lake City, Attorney for Appellant

Jenna Hatch, Attorney for Appellee

Judge Ryan M. Harris authored this Opinion, in which Judges Michele M. Christiansen Forster and John D. Luthy concurred.

Opinion

HARRIS, Judge:

¶1 In this case, we are asked to consider whether the district court properly allocated—as between a divorcing couple—the equity in the house in which the couple lived during their marriage. In particular, Marcus Thorup challenges the court’s determination that substantial portions of the value of the house, which was originally his separate property, became commingled into the marital estate. We find merit in many of Marcus’s arguments, and therefore reverse the court’s equity allocation order and remand the case for further proceedings.

BACKGROUND

¶2 Marcus and Mona Thorup married in 1986.¹ Eleven years later, in 1997, they moved into a new house (the House) built— at the apparent cost of $445,000—by Marcus’s father’s construction company. For the next seven years, the House was titled in the name of Marcus’s father’s company, and Marcus and Mona lived there rent-free. During some of this time, Marcus and Mona obtained a homeowners insurance policy that listed both of them as "owners" of the House, even though that was not actually the case. And for a year or so around 1997, Mona’s mother lived in a separate apartment on the property, and she paid Marcus and Mona some $13,000 that went toward the costs associated with building the separate apartment.

¶3 In May 2004, Marcus’s father (through his company) "gifted" the House to Marcus "as an inheritance." Thereafter, title to the House was in Marcus’s name; Mona was never placed on title. In December 2004, Marcus used the House as collateral for a $150,000 loan. Marcus later testified that the proceeds from the loan were not spent on the House but, instead, were spent on marital matters, such as medical bills, credit card bills, some other unspecified "investments," and a payment on the couple’s "cabin lot." Over the next ten years, the loan was fully repaid, entirely with marital funds.

¶4 Between 1997 and 2020, Marcus, Mona, and their children lived in and maintained the House. They also made some improvements to the House over that time. For purposes of this dispute, Marcus retained an expert who determined that the out-of-pocket cost of the family’s improvements had been $12,171, and that the family’s maintenance of and improvements to the House "contributed about $20,000 to its current value."

¶5 In 2020, Mona filed this divorce action and asked (among other things) that the House and all its equity be awarded to her. Marcus responded by filing a counterclaim in which he contended that the House was an "inheritance from his father" and was his "separate property." This dispute eventually worked its way to trial, and the parties agreed, by written stipulation, to resolve the issue by way of an "informal custody trial" before a domestic relations commissioner, a procedure usually limited to resolution of custody disputes and whose parameters are set forth in rule 4-904 of the Utah Code of Judicial Administration. Under this procedure, the parties agreed to "present[ ] their case[s]" to the commissioner, under oath, without questioning by attorneys. In addition to providing their own testimony, the parties agreed that they could each "present any documents they want[ed] the [c]ourt to consider" and that, "[a]fter the [c]ourt [had] heard from both parties," only then would attorneys be allowed "to make legal argument." In stipulating to this procedure, the parties agreed to "waive the normal question and answer manner of trial" and to "waive the rules of evidence," and they agreed that "[t]he other party [could] tell the [c]ourt anything he or she feels is relevant." The parties also waived their right to "challenge any of the documents or testimony that was considered" by the commissioner during the informal trial, and they agreed that "[t]he only issue on appeal [would] be whether the [c]ourt abused its discretion in reaching its findings and conclusions."

¶6 During the course of the informal trial—which took place over parts of two trial days—the commissioner heard from Marcus and Mona, who testified (largely through proffer by counsel) about the events described above. In addition, the parties by stipulation submitted sworn declarations and other similar documents from other witnesses, which evidence the commissioner accepted and considered. And the parties’ attorneys made extensive arguments, both in written briefs filed prior to the trial and in oral arguments made during the trial.

¶7 Mona took the position that, even if the House was originally Marcus’s separate property, "the separate property converted into marital property during the marriage."

She made two specific arguments in this regard, asserting both (a) that she had contributed to the value of the House through maintenance and improvements, and had thereby acquired an equitable interest in it, and (b) that the House had been commingled into the marital estate. Marcus, on the other hand, took the position that the House was, and always had been, his separate property, and that it had not been commingled into the marital estate. He acknowledged that "Mona may have a contribution claim" regarding the House, but he pointed to evidence indicating that the family’s contributions had increased the value of the House by only $20,000, and he argued that, at most, Mona was therefore entitled to only $10,000 of the House’s total value.

¶8 At the conclusion of the trial, and after hearing the arguments, the commissioner made an oral ruling, determining that much of the House’s value—$150,000 of its original value, plus all of its appreciation—had been commingled into the marital estate. As support for this determination, the commissioner noted that the marital estate had repaid the $150,000 loan that used the House as collateral, and reasoned that the loan indicated "that the family in essence bought that mortgage and paid it back." The commissioner also relied on the facts that, during the period before Marcus was gifted the House, the parties obtained homeowners insurance indicating that they were both owners of it and that Mona’s mother had paid $13,000 toward "the mother-in-law apartment being enhanced." And the commissioner found relevant the fact that Mona had been "responsible for maintaining" the House and its "landscaping." The commissioner also found—by averaging two appraisals—that the House was worth $312,500 in 2004 when it was gifted to Marcus and was worth $765,000 at the time of trial. The commissioner then concluded that Marcus should receive $162,500 ($312,500 minus $150,000) as his separate property, and that the parties would split the remaining $602,500 equally.

¶9 The commissioner’s oral ruling was later encapsulated in written findings of fact and conclusions of law and a decree of divorce, which documents were signed by the assigned district court judge.

ISSUES AND STANDARDS OF REVIEW

¶10 Marcus now appeals, and he challenges the specific portions of the commissioner’s ruling that concern allocation of the value of the House. In particular, he takes issue with the commissioner’s determination that much of the House’s value was commingled into the marital estate. And he challenges the finding that the House was worth $312,500 in 2004.

[1] ¶11 Mona asserts that, because this case comes to us from an "informal custody trial," the applicable standard of review is deferential and the scope of appeal is "steep and constricted." Mona is certainly correct that, when parties agree to resolve their issues through an informal trial, they waive their right to appeal certain evidentiary issues. See Utah R. Jud. Admin. 4-904(b)(7) (stating that parties may not appeal from an informal trial on "grounds that … rely upon the Utah Rules of Evidence"). In this case, Marcus and Mona agreed that they would "not be able to challenge any of the documents or testimony that was considered" during the proceeding, and neither party attempts to raise any evidentiary issues on appeal. But Mona is incorrect when she asserts that the appellate standards of review—on the issues that are appealable—are any different in appeals from informal trials than they are in other cases. The court’s ultimate ruling is appealable, see id. (stating that a "final order" from an informal trial "may be appealed on any grounds" other than grounds that "rely upon the Utah Rules of Evidence"), and will be reviewed under the same appellate standards of review that are applicable in appeals from formally tried cases.

¶12 Mona resists this conclusion by pointing to language in the parties’ stipulation stating that "[t]he only issue on appeal will be whether the [c]ourt abused its discretion in reaching its findings and conclusions." She argues therefrom that all issues in this appeal—regardless of the usual standards of review—must be reviewed for abuse of discretion. We disagree. The form the parties used to encapsulate their stipulation is a form that—in keeping with the usual usage of the informal trial procedure—is designed for custody cases. We thus interpret the form’s reference to the "abuse of discretion" standard as simply indicating that the court’s ultimate ruling regarding custody will be reviewed as per usual: for abuse of discretion. See Lobendahn v. Lobendahn, 2023 UT App 137, ¶ 18, 540 P.3d 727 ("We review custody determinations under an abuse of discretion standard, giving the district court broad discretion to make custody awards." (quotation simplified)). We do not interpret the form as indicating that—for issues that are...