IN THE NORTH DAKOTA SUPREME COURT
|Trista Marie Conzemius,|
|Supreme Court #20130125|
|and Cross- Appellee,||Cass County|
|Chad Thomas Conzemius,|
APPEAL FROM THE DISTRICT COURT,
CASS COUNTY, NORTH DAKOTA
EAST CENTRAL JUDICIAL DISTRICT
THE HONORABLE WICKHAM CORWIN, PRESIDING
APPELLANT'S REPLY BRIEF
|Gjesdahl Law, PC|
|Michael L. Gjesdahl|
|ND Attorney ID #04658|
|Insight Professional Offices|
|1375 21st Avenue N., Suite A|
|Fargo, ND 58102|
|Attorney for Appellant and Cross-Appellee|
|Table of Contents|
|Table of Authorities||ii|
|I. Tax Impact on Tax Deferred Retirement Accounts: We Can Do Better|
|II. The "Missing" $40,500: No Mystery at All|
|III. Trista's Attorney's Fees: No Abuse of Discretion|
|Table of Authorities|
|Dick v. Dick, supra, 414 N.W.2d at 291 (N.D. 1987)||2|
|Fischer v. Fischer, 1997 ND 176, 568 N.W.2d 728||1|
|Glass v. Glass, 344 N.W.2d 677, 679 (N.D. 1984)||3|
|Gronneberg v. Gronneberg, 412 N.W.2d 84 (N.D. 1987)||3|
|Heller v. Heller, 367 N.W.2d 179, 184 (N.D.1985)||7|
|Jondahl v. Jondahl, 344 N.W.2d 63, 73 (N.D.1984)||7|
|Kaiser v. Kaiser, 474 N.W.2d 63, 69-70 (N.D. 1991)||1, 2|
|Linrud v. Linrud, 1998 ND 55, 574 N.W.2d 875||1|
|MayPort Farmers Co-Op v. St. Hilaire Seed Co., Inc., 2012 ND 257, ¶ 8, 825 N.W.2d|
|Sommers v. Sommers, 2003 ND 77, 660 N.W.2d. 586||1|
|Wald v. Wald, 556 N.W.2d 291 (N.D. 1996)||1|
|Welder v. Welder, 520 N.W.2d 813 (N.D. 1994)||3|
|Brockman v. Brockman, 373 N.W.2d 664, 666 (Minn. App. 1985)||2|
|Day v. Day, 40 Ohio App.3d 155, 532 N.E.2d 201, 205-206 (1988)||3|
|Dodson v. Dodson, 955 P.2d 902, 909-910 (Alaska, 1998)||3|
|In re Marriage of Alexander, 87 Or. App. 259, 742 P.2d 63, 64 (1987)||3|
|Maurer v. Maurer, 607 N.W.2d 176, 183-184 (Minn. App. 2000)||2|
|Maurer v Maurer, 623 N.W.2d 604 (Minn. 2001)||2|
Tax Impact on Tax-Deferred Retirement Accounts:
We Can Do Better.
 The District Court clearly erred when it: (1) stated that, in this case, an equitable distribution meant an equal distribution; then (2) distributed the parties' net (after-tax) estate unequally. It did not meet its own stated goal. It did not distribute the estate "equally" when it awarded Trista a yet-to-be-taxed $151,925 TIAA CREFF account and, in turn, awarded Chad a yet-to-be-taxed $13,914 IRA account. The inequality resulted from its failure to recognize, or contend with, the certain, and disparate, tax liability attached to such assets.
 Chad responds with a string-cite and this Court's oft-repeated rule about speculative vs. certain tax consequences. Kaiser v. Kaiser, 474 N.W.2d 63, 69-70 (N.D. 1991)
 However, this Court has yet to apply the foregoing rule to tax-deferred retirement accounts. None of the cases upon which Chad relies, involve such assets. In Wald v. Wald, 556 N.W.2d 291 (N.D. 1996), Marion Wald contended the value of a home should have been reduced by potential capital gains. Linrud v. Linrud, 1998 ND 55, 574 N.W.2d 875, involved the potential tax effect related to liquidating farm land. Fischer v. Fischer, 1997 ND 176, 568 N.W.2d 728, discussed the foregoing rule, passingly, as part of the Court's remand of a stock-split issue. Lastly, in Sommers v. Sommers, 2003 ND 77, 660 N.W.2d. 586, this Court reminded the District Court of the foregoing rule in remanding a business liquidation issue.
 This Court actually borrowed the above-referenced rule from the Minnesota case of Brockman v. Brockman, 373 N.W.2d 664, 666 (Minn. App. 1985). Kaiser v. Kaiser, 474 N.W.2d. 63 (N.D. 1991)(re the tax effect of the sale of a small business). Brockman, involved the tax consequences of a pension liquidation. This Court should look to Minnesota' guidance once more to bring current its guidance about tax consequencesas those consequences relate specifically to tax-deferred retirement assets.
 In Maurer v Maurer, 623 N.W.2d 604 (Minn. 2001) , the District Court did reduce the value of tax-deferred retirement benefits by anticipated tax consequences. The Minnesota Court of Appeals reversed, "holding that the trial court's consideration of the 35% marginal tax rate was speculative because there was no evidence presented at trial that a taxable event was required by the dissolution or certain to occur shortly thereafter." Maurer v. Maurer, 607 N.W.2d 176, 183-184 (Minn. App. 2000).
 The Minnesota Supreme Court reversed, rejecting the absolute application of such rules to tax-deferred retirement assets. It recalled its previous cases that encouraged trial courts to consider future tax consequences to find equity when dividing estates. North Dakota case law agrees with this sentiment:
[A] properly informed trial court must take tax effects into account when it determines divorce transactions.
Dick v. Dick, supra, 414 N.W.2d at 291 (N.D. 1987).
A trial court should amend its property distribution if it concludes that an adverse tax consequence would result, which could be avoided by a different equitable allocation of property.
Gronneberg v. Gronneberg, 412 N.W.2d 84 (N.D. 1987).
 The Minnesota Supreme Court was also persuaded by expert testimony the District Court received that: (1) It was certain, not speculative, that the retirement assets would be taxed at some time; (2) business and personal financial statements are required to take such future tax consequences into account; and (3) professional standards and generally accepted accounting principles require that current tax rates be used to calculate such tax consequences. Maurer, Id., 605-606.
 Other sister states agree. Dodson v. Dodson, 955 P.2d 902, 909-910 (Alaska, 1998); Day v. Day, 40 Ohio App.3d 155, 532 N.E.2d 201, 205-206 (1988); In re Marriage of Alexander, 87 Or. App. 259, 742 P.2d 63, 64 (1987).
 North Dakota should follow suit. We know, with certainty, that the assets involved here will be taxed. The District Court here judicially noticed the U.S. tax tables [App. 205-226; T. 87-88]. It was, thus, aware of the low and high end of today's tax rates. Had the District Court reduced the Conzemius retirement accounts by a tax percentage within those two percentage ranges, Trista could not complain. However, when the District Court is presented with both a certain consequence and an easy calculating method, a 0% reduction represents clear error.
 "When one party receives property which is clearly worth less than the value ascribed to it by the trial court, a reviewing court cannot determine whether the resulting property distribution is equitable." Welder v. Welder, 520 N.W.2d 813 (N.D. 1994). Thus, this Court has previously shared another idea: "[W]e have long suggested under some circumstances the use of a formula to divide pensions that requires both parties "to share in the ultimate benefits and risks that are involved." Glass v. Glass, 344 N.W.2d 677, 679 (N.D. 1984). Of course, the most certain manner in which to share the benefits and/or risks with this particular uncertainty is to allocate untaxed retirement assets equally.
 At bottom, when it comes to applying our hard rule to untaxed retirement accounts, we can do betterthan doing nothing. Two easy methods would have helped the Court do actual equity. It could have applied current tax rates to determine the net value of untaxed retirement accounts. It could have allocated risk or benefit through an equal distribution of the untaxed accounts.
The "Missing" $40,500: No Mystery at All.
 The parties disputed what should happen to $40,500 in dividends Chad received from Schiele Mobility during the pendency of their divorce.
 What is not disputed is that Chad actually received three dividend payments during 2012, in the amounts of $12,000, $10,000, and $18,500. Trista proved this fact through Schiele Mobility's own internal documents [App. 343]. She also provided the Court Chad's own bank records, to show he'd received and deposited those dividends [Docket #141,#142, #143]. Chad acknowledged that he'd received those funds and that they were marital assets [T., 374]. Yet, on the Joint 8.3 Asset and Debt Statement, Trista identified the three distribution payments, while Chad refused to acknowledge they had any current value [App. 243].
 At trial, Chad attempted to explain why the dividends didn't have any current value. However, the best he could do was give loose answers to his attorney's leading questions. [T. 426-428].
 On cross-examination, Chad's explanations didn't stand up [T. 476-484]. He acknowledged that the records contained a gap in time: They didn't disclose deposits and credits from August to October 2012 [T. 477]. He didn't, in all instances, identify to whom checks were writtenor for what [T. 478-480]. In short, when confronted, Chad was unable to prove that the $40,500 had been used for any legitimate reason.
 For its part, the District Court found:
At least in 2012, it is undisputed that all the money went to Chad, leaving Trista with only the payments on the loan obtained to make the initial investment. This was not right and does require an adjustment. For these reasons, the 2012 distributions will be regarded as marital assets distributed to Chad, as Trista proposed (items 11, 12 & 13).
 Other than the comment that, "[t]his was not right," Trista finds the Court's reasoning curious, but its ultimate conclusion correct.
 Real assets were identified by sound evidence. Those real assets were then distributed. No clear error is to be found.
Trista's Attorney's Fees: No Abuse of Discretion.
 At trial, Trista provided evidence that she'd incurred approximately $60,000 in attorney's fees. She provided the Court copies of all the monthly bills she'd received [App. 428-467]. She provided the Court a summary of those bills [App. 468]. On the Rule 8.3 Asset and Debt Statement, Trista included a $37,800 loan from her parents to help pay those fees [App 251].
 The record documented Chad's failure to participate in this action for its first five months. In addition, Trista identified the following behaviors on Chad's part that caused delay and increased expense:
a. He insisted that the marital interest in Schiele Mobility was worth $30,000 until less than a week before trial then, at the last moment, changed his valuation by over $100,000 [App. 98, 135-136, 250]
b. He insisted Trista's condo had a fair market value of $165,000 until, less than a week before trial, reducing his position by $25,000, to $140,000 [App. 97, 143, 242].
c. He failed to provide Trista his bank and credit card records [T. 476-484].
d. He maintained primitive, if any, books for Wayne's Electric [App. 615, 643], virtually disabling Trista and/or the Court from discerning its fair market value, and requiring Trista to retain a forensic accountant to identify his true gross income.
e. He claimed in pleadings and testimony that his Wayne's Electric income was $50,000 a year [Docket #75] while concurrently identifying such income as $70,000 a year on a Personal Financial Statement [App. 368].
f. He lied, under oath, about his relationship with Tina Fonder [T. 332-336].
g. He persisted in a claim for equal residential responsibility despite its disfavored legal status and unsupportive facts.
h. He failed to disclose the receipt of $40,500 in Schiele Mobility distributions in his formal discovery responses [App. 132-169].
 Accordingly, Trista asked that Chad be required to reimburse her in the amount of $60,000. The Court responded:
an award of half the requested amount is appropriate. However, the loan from Trista's parents (item 153) should not be treated or regarded as a joint obligation.
The parties have comparable capacity to pay attorney's fees. Trista has borrowed most of her litigation costs from her parents. Chad has used marital assets to pay for at least a portion of his fees. Furthermore, the positions (valuations) initially taken by Chad were extreme, and his discovery responses were often lacking. All of this did significantly increase the cost of this litigation.
 Under N.D.C.C. § 140523, a district court has discretion to award attorney's fees in an action for divorce. Jondahl v. Jondahl, 344 N.W.2d 63, 73 (N.D.1984).
 A district court's decision will not be disturbed on appeal unless the appealing party establishes the court abused its discretion. Heller v. Heller, 367 N.W.2d 179, 184 (N.D.1985). "A court abuses its discretion if it acts in an arbitrary, unreasonable, or unconscionable manner, its decision is not the product of a rational mental process leading to a reasoned determination, or it misinterprets or misapplies the law." MayPort Farmers Co-Op v. St. Hilaire Seed Co., Inc.,2012 ND 257, ¶ 8, 825 N.W.2d 883 (quoting McGhee v. Mergenthal, 2007 ND 120, ¶ 9, 735 N.W.2d 867).
 In Jondahl, 344 N.W.2d at 73, this Court described relevant factors for awarding attorney's fees:
in determining the amount of attorney's fees to be paid by the opposing party, the trial court should consider the property owned by each party as a result of the property division, the relative income, whether the property is liquid or of fixed assets, and whether or not the actions of the parties unreasonably increased the time spent on the case.
 Here, the District Court shared sufficient reasoning and did not abuse its discretion.
 One of the District Court's clear errors was to mistakenly believe it divided the parties' estate equally. At least two elegantly simple methods were available to the Court to recognize a certain tax impact to the parties' tax-deferred retirement accounts. Instead, the Court made no effort at all to identify that impact. By failing to consider the certain and disparate tax liability attached to the retirement accounts awarded each party, the Court failed to meet its own, stated goal of an equal distribution.
 The Court committed no clear error in recognizing the existence of $40,500 in Schiele Mobility distributions to Chad and distributing them as part of the marital estate.
 The Court did not abuse its discretion in requiring Chad to pay Trista $30,000 in attorney's fees and costs.
|Dated: October 9, 2013.|
|Gjesdahl Law, P.C.|
|Michael L. Gjesdahl (ND ID #04658)|
|1375 21st Avenue N., Suite A|
|Fargo, ND 58102|
|Attorney for Appellant,|