Scherer v. Scherer

#27184-aff in pt, rev in pt & rem-GAS
2015 S.D. 32

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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ROBERT A. SCHERER, Plaintiff and Appellant,

v.

BETTY J. SCHERER, Defendant and Appellee.

****

APPEAL FROM THE CIRCUIT COURT OF
THE SECOND JUDICIAL CIRCUIT
MINNEHAHA COUNTY, SOUTH DAKOTA

****

THE HONORABLE PATRICIA C. RIEPEL
Judge

THE HONORABLE KATHLEEN CALDWELL
Retired Judge

****

STACY F. KOOISTRA
STEVEN J. MORGANS
SHARLA V. SVENNES of
Myers & Billion LLP
Sioux Falls, South Dakota Attorneys for plaintiff
and appellant.

GREGORY T. BREWERS of
Strange, Farrell, Johnson
& Brewers, PC
Sioux Falls, South Dakota Attorneys for defendant
and appellee.

****
CONSIDERED ON BRIEFS
ON MARCH 23, 2015
OPINION FILED 05/13/15
#27184

SEVERSON, Justice

[¶1.] Robert and Betty obtained a divorce on July 29, 2014. Robert appeals

the circuit court’s determination of marital assets, division of property, and alimony

award to Betty. He also appeals the court granting Betty a divorce on the grounds

of extreme cruelty. We reverse in part and remand.

Background

[¶2.] Robert Scherer and Betty Scherer met through mutual friends in 1997.

They began living together in 2000 and were married in 2002. At the time of the

divorce both Robert and Betty were 60 years old. This was Robert’s second

marriage. He has two adult children from the first marriage. Betty had two

previous marriages and has one adult son from her first marriage. When they

married, both parties were employed and each owned their own homes, which they

sold in order to buy a new home together. Betty worked as a licensed practical

nurse until 2005 when she was forced to retire and go on social security disability

due to repeated back injuries. Robert entered the marriage with what the court

characterized as a “fledgling business.” He also worked as a firefighter until his

retirement in 2005. At the time of the marriage, and thereafter, the parties agreed

to maintain separate bank accounts. The circuit court found that this was

primarily due to Robert wanting to keep his finances separate. They divided

financial responsibilities. Robert paid their house payment, utilities, and car

expenses, while Betty bought groceries, clothes, and items for inside and outside the

home.

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[¶3.] The main dispute in this divorce is the inclusion of three businesses—

Scherer Corrugating and Machine, Inc., Scherer Design Engineering, Inc., and

Scherer Properties, LLC—in the marital estate. The court found that Robert made

several financial transactions in the year before he separated from Betty, which

showed a pattern of trying to minimize the marital estate. Robert sold 50% of

Scherer Properties, LLC for $100,000 to his son in December of 2010. No appraisal

was done at the time of the sale. The appraised value at the time of the divorce was

$1,695,000. In January of 2011, Robert sold 40% of Scherer Corrugating and

Machine, Inc. to his son and one of his employees for $1,025,000 each. He

guaranteed a $500,000 loan for each of them, and the son and employee each gave

Robert a promissory note for the additional $525,000. At the time of the divorce,

Scherer Design and Scherer Corrugating had an appraised value of $2,673,000. The

court noted that “no credible evidence of the value of any property owned by either

party at the time of their marriage” was offered.

[¶4.] After including Robert’s remaining interests in the businesses in the

marital estate, the court found that the value of the net marital estate totaled

$5,081,715. It awarded Robert more than half of the marital estate, including the

businesses. In order to effect an equitable division, the court ordered him to pay

cash to Betty in the amount of $2,000,000. He was to pay the sum of $500,000

immediately and the balance at a rate of $250,000 per year on each September 30,

beginning in 2015, plus interest at 5.25% per annum until the balance was paid in

full. Further, the court awarded Betty monthly alimony of $10,000 per month until

her death or remarriage; the alimony was to continue as an obligation of Robert’s

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estate in the event he died before she did. The court granted a divorce to Betty on

the grounds of extreme cruelty. Robert appeals asserting that the court erred by:

(1) including premarital property in the marital estate, (2) granting Betty alimony

without considering the property division, (3) ordering the alimony as a continuing

obligation of Robert’s estate, (4) failing to consider that equity requires Robert

receive a greater share of the marital assets, and (5) granting Betty a divorce on the

grounds of extreme cruelty.

Standard of Review

[¶5.] “A trial court’s division of property will not be overturned by this

[C]ourt unless it appears the trial court abused its discretion.” Pellegrin v.

Pellegrin, 1998 S.D. 19, ¶ 10, 574 N.W.2d 644, 646. “‘Findings of fact are not set

aside unless this [C]ourt finds them to be clearly erroneous[.]’” Id. ¶ 9 (quoting

Osman v. Keating–Osman, 521 N.W.2d 655, 657 (S.D. 1994)).

Analysis

Property division

[¶6.] Robert contends that the court erred by including pre-marital property

in the marital estate. He explains that he and Betty maintained separate property,

such as the businesses, pursuant to their statutory right under SDCL 25-2-4. 1

Therefore, he argues the court improperly redefined the parties’ relationship when

it subjected these items to division. Robert’s position is contrary to our case law and

1. SDCL 25-2-4 provides: “Neither husband nor wife has any interest in the
property of the other, excepting their respective rights for support as
specifically provided by law, and except that neither can be excluded from the
other’s dwelling.”

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misconstrues the right to maintain separate property. “[O]utside the context of

divorce, support, and homestead, marriage does not vest in one spouse an interest

in the other’s separate property.” Niesche v. Wilkinson, 2013 S.D. 90, ¶ 18, 841

N.W.2d 250, 255 (emphasis added). “When a divorce is granted, the courts may

make an equitable division of the property belonging to either or both, whether the

title to such property is in the name of the husband or the wife. In making such

division of the property, the court shall have regard for equity and the

circumstances of the parties.” SDCL 25-4-44. “In a divorce, a court is dividing the

spouses’ property irrespective of their ownership interests.” Niesche, 2013 S.D. 90,

¶ 21, 841 N.W.2d at 256.

[¶7.] Robert asserts that the unique facts—the parties married at an older

age after previous marriages and deliberately maintained separate finances—

distinguish this case. However, “‘[t]his Court has consistently held that the trial

court has discretion in determining how to consider premarital assets and gifts

during marriage; [whether to include or exclude them from the marital estate].’”

Billion v. Billion, 1996 S.D. 101, ¶ 20, 553 N.W.2d 226, 232 (quoting Strickland v.

Strickland, 470 N.W.2d 832, 836 (S.D. 1991)). The court has discretion to exclude

premarital assets from the marital estate, but it is not required to do so

automatically.

[¶8.] Second, Robert asserts that Betty made de minimis contributions to

the acquisition and maintenance of Robert’s businesses, and they should, therefore,

be set aside as non-marital property. A circuit court should consider the following

factors when making a property division: “(1) the duration of the marriage; (2) the

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value of the property owned by the parties; (3) the ages of the parties; (4) the health

of the parties; (5) the competency of the parties to earn a living; (6) the contribution

of each party to the accumulation of the property; and (7) the income-producing

capacity of the parties’ assets.” Novak v. Novak, 2006 S.D. 34, ¶ 4, 713 N.W.2d 551,

552. Two conditions must be met before a court should set aside property as non-

marital. “Only in the case where one spouse has made no or de minimis

contributions to the acquisition or maintenance of an item of property and has no

need for support, should a court set it aside as ‘non-marital’ property.” Billion, 1996

S.D. 101, ¶ 21, 553 N.W.2d at 232.

[¶9.] Even if we assume Betty’s contributions to the acquisition or

maintenance of the businesses were de minimis, the circuit court found that Betty is

in need of support. Such a finding is not clearly erroneous. Betty has significant

health issues and experiences a lot of pain. She suffered a heart attack in 2005.

Further, she suffers from osteoarthritis that has a significant debilitating effect on

her hands, feet, and back, along with scoliosis of the spine that causes her to be

hunched over. A metal rod and 24 screws were placed in her back. She also has a

hyperthyroid condition. As a result, she is unable to work and has no income other

than social security disability benefits of $14,310 per year, of which $4,359 is

withheld for Medicare premiums. Therefore, the court did not abuse its discretion

by including the businesses in the marital estate.

Alimony

[¶10.] SDCL 25-4-41 grants the court discretion to “compel one party to make

such suitable allowance to the other party for support during the life of that other

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party or for a shorter period, as the court may deem just, having regard to the

circumstances of the parties represented; and the court may from time to time

modify its orders in these respects.” The circuit court should consider the following

factors when determining alimony: the parties’ (1) length of marriage; (2) earning

capacity; (3) financial condition after the property division; (4) age, health, and

physical condition; (5) station in life or social standing; (6) relative fault in the

termination of the marriage. Fausch v. Fausch, 2005 S.D. 63, ¶ 17, 697 N.W.2d 748,

755. We will not reverse a court’s decision regarding alimony absent an abuse of

discretion. Id. “A circuit court is required to consider the allocation of property and

spousal support together.” Terca v. Terca, 2008 S.D. 99, ¶ 28, 757 N.W.2d 319, 326.

“The symbiotic relationship between property division and spousal support requires

consideration of the two together, as an award of more assets can eliminate or

reduce the need for spousal support and vice versa.” Id. Therefore, “[t]he trial

court’s award of alimony and the division of property are considered together on

appeal to determine whether the trial court abused its discretion.” Krage v. Krage,

329 N.W.2d 878, 879 (S.D. 1983).

[¶11.] In this case, the court awarded Betty two million in cash along with

$10,000 monthly alimony to continue as an obligation of Robert’s estate in the event

that Betty does not remarry and lives longer than Robert. The record does not

reflect that the circuit court considered the allocation of property and spousal

support together. The court made no specific findings regarding Betty’s need for

alimony other than a general statement that Betty’s budget was $6,266 per month

and that she has a need for support because her expenses exceed her ability to pay

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them. At trial, Betty stated that an alimony payment would not be sufficient for

her needs absent the amount she sought from the property division. However, she

testified that if the court granted her requested property division, she did not need

alimony. The following colloquy occurred:

Counsel for Appellant: Okay what are you asking for there?
Betty: I am asking for $2,255,000.
Counsel: And on top of that, you’re asking for ten-thousand
dollars a month in alimony?
Betty: If I get the two million dollars, I don’t need the ten-
thousand dollars a month alimony.
Counsel: And if you get the $10,000 a month alimony, is it fair
to say then that you don’t need the 2,255,000?
Betty: No. That is not right. I still need the money.

“A party requesting such alimony ‘must establish that they have a need for support

and that their spouse has sufficient means and abilities to provide for part or all of

that need.’” Fausch, 2005 S.D. 63, ¶ 17, 697 N.W.2d at 755 (quoting Urban v.

Urban, 1998 S.D. 29, ¶ 7, 576 N.W.2d 873, 875). “[A]n alimony award is also based

upon the respective financial conditions of the parties after the property division . . .

.” Krage, 329 N.W.2d at 879 (emphasis added). The circuit court failed to consider

Betty’s admission that she would not need the alimony if granted the two million

dollars she sought from the property division, an amount that she ultimately

received from the division. In light of the property division and Betty’s admission,

the record does not support the court’s finding that Betty has demonstrated a need

for the amount of alimony granted in this case.

[¶12.] Further, Robert asserts that the court erred by granting alimony as an

ongoing obligation of his estate. We have previously stated that “[g]enerally, in the

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absence of an agreement between the spouses, the obligation to pay alimony ceases

on the death of the obligor spouse.” Lodde v. Lodde, 420 N.W.2d 20, 21 (S.D. 1988).

No such agreement existed between the parties in this case. However, as in Barton

v. Barton, “we need not determine whether a court may, under any factual

circumstances, extend an alimony obligation beyond the obligor’s death.” 2012 S.D.

44, ¶ 21, 815 N.W.2d 553, 559. In this case, the record does not reflect that Betty

has a “need for support beyond [Robert’s] death and thus, the court abused its

discretion in extending the alimony award beyond [Robert’s] death.” See id. ¶ 23.

Equity

[¶13.] Robert contends, in the alternative, that if we uphold the court’s

inclusion of the businesses in the marital estate, then the court erred by failing to

consider “equity and the circumstances of the parties[,]” according to SDCL 25-4-44.

He maintains that equity requires that he receive a greater share of the assets

because his contribution to the marital estate was substantially greater than

Betty’s contribution. As we have stated, we will not disturb the court’s decision

absent an abuse of discretion. Pellegrin, 1998 S.D. 19, ¶ 10, 574 N.W.2d at 646.

[¶14.] Contribution of the parties to the acquisition of marital assets is a

factor to be considered in dividing property, but it is not dispositive. Here, the court

properly considered all the factors when dividing the property. The parties were

married twelve years; no evidence existed as to the value of any property brought

into the marriage; they were each 60 years old at the time of the divorce; Betty

suffers serious health problems that impede her ability to earn an income; Robert

has some physical ailments but those do not limit his ability to work and earn an

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income; Robert earns substantial income while Betty receives only social security

disability; Robert developed the businesses while Betty worked until 2005, and

contributed to the home; and Robert would receive the only income producing asset.

In light of Robert’s work with the businesses, the court awarded him the businesses.

Further, even though the court found that he had tried to minimize the marital

estate by selling interests in the businesses, the court only included in the marital

estate the valuation of the interests which remained after the sales. Therefore, the

court did not abuse its discretion when it awarded Betty the sum of two million

dollars.

Extreme Cruelty

[¶15.] Robert contends that the circuit court erred by granting Betty a

divorce on the grounds of extreme cruelty. “Extreme cruelty is the infliction of

grievous bodily injury or grievous mental suffering upon the other, by one party to

the marriage.” SDCL 25-4-4. “In a marital setting, the definition of extreme cruelty

differs according to the personalities of the parties involved.” Rykhus v. Rykhus,

319 N.W.2d 167, 169 (S.D. 1982). “We must view the evidence in light of the full

context of the marriage and not in the narrow light of isolated incidents.” Id. The

court found that Robert was not available to Betty as a companion or housemate

due to his work schedule. Further, Betty testified that she felt betrayed by Robert

due to his admission to her of having sexual intercourse with her while she was

sleeping. This admission came after he was undressing her when he thought she

was asleep. Betty has serious health problems as outlined earlier in this opinion.

Supra ¶ 9. As a result, she had problems with the steps in the parties’ split-level

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home, but Robert liked the home and testified that Betty’s problems were from

having three dogs that needed to go out ten or more times each day. They often

argued about moving from the home. Both parties felt that they were not a priority

in each other’s life. The court also found that Robert would not reveal his financial

condition to Betty, insisted that their property be held separately, and engaged in a

pattern of trying to minimize the marital estate. Although the court found fault to

exist on both sides and that Robert was more at fault than Betty, the court’s

findings of fact on critical issues of fault largely recited what witnesses testified to

and lack a determination of which facts the court found were proven by a

preponderance of the evidence. Further, the conclusions of law are devoid of any

determination that extreme cruelty was proven from those facts. See SDCL 15-6-

52(a) (“In all actions tried upon the facts without a jury . . . the court shall . . . find

the facts specially and state separately its conclusions of law thereon . . . .”).

Accordingly, we reverse the circuit court’s grant of divorce on the grounds of

extreme cruelty.

Conclusion

[¶16.] The court properly exercised its discretion when making an equitable

division of the marital estate. However, it erred by failing to consider Betty’s need

for or an amount of alimony in light of the property division. Further, the court’s

findings and conclusions regarding the grounds of extreme cruelty are insufficient.

On remand, the court must consider the property division and alimony together to

determine if Betty has demonstrated a need for alimony, and it must determine

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whether extreme cruelty existed. We affirm in part, reverse in part, and remand for

further proceedings consistent with this opinion.

[¶17.] GILBERTSON, Chief Justice, and ZINTER, WILBUR and KERN,

Justices, concur.

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