Date: 02-11-2015

Case Style: In the Matter of the Marriage of Morgan

Case Number: 269 Or App 156

Judge: Flynn

Court: Oregon Court of Appeals on appeal from the Circuit Court, Douglas County

Plaintiff's Attorney: George W. Kelly argued the cause and filed the briefs for
appellant.

Defendant's Attorney: Russell Lipetzky argued the cause and filed the brief for
respondent.

Description: Wife appeals a judgment of dissolution, challenging
the trial court’s division of the parties’ property, spousal
support award to her, and determination of child support.
She contends that the property division was inequitable
because the trial court based its decision on erroneous findings
of fact and awarded husband too great a share of the
parties’ marital property. She asks that we exercise our discretion
under ORS 19.415(3)(b) to review the property division
de novo. Wife also contends that the spousal support
award was inequitable because the trial court erred in calculating
husband’s future income. Finally, she contends that
the child support determination was erroneous as a matter
of law because the court erred in calculating the presumed
income of both parties.
For the reasons explained below, we review the
trial court’s property division and spousal support award
for abuse of discretion and conclude that the court did not
abuse its discretion. The trial court’s calculation of the child
support obligation, however, fails to take into account the
court’s finding regarding wife’s disability at the time of trial.
Therefore, we remand for the trial court to recalculate the
child support obligation.
BACKGROUND
Before addressing wife’s request that we exercise
our discretion to review the property division de novo, we
describe the pertinent findings that wife does not challenge.
1 The parties married in October 2000 without a prenuptial
agreement and separated in 2009. They have one
minor child together. At the time of trial, in 2012, wife was
43 years of age and husband was 44 years of age. Neither
was employed.
1 ORAP 5.40(8)(b) provides:
“In those proceedings in which the Court of Appeals has discretion to
make one or more factual findings anew on the record and the appellant
seeks to have the court exercise that discretion, the appellant shall identify
with particularity the factual findings that the appellant seeks to have the
court find anew on the record and shall concisely state the reasons why the
court should do so.”
158 Morgan and Morgan
At the time the parties married, wife’s employment
history consisted primarily of waitressing, and husband
worked for a trailer-manufacturing business owned by his
father. The business consisted of two entities—Morgan Built,
Inc., and Morgan Built Holdings, LLC. In 2002, husband’s
father gave husband a majority interest in Morgan Built,
Inc., and a minority interest in Morgan Built Holdings, LLC,
which owned the property on which Morgan Built, Inc., operated.
When husband’s father died in 2005, husband inherited
the rest of the stock in Morgan Built, Inc., and became
the sole member in Morgan Built Holdings, LLC. Husband’s
income from those business entities was the primary source
for payment of family expenses throughout the marriage. In
2008, the business ceased operations and began to liquidate
its assets.
In 2009, Morgan Built, Inc., was formally dissolved,
and Morgan Built Holdings, LLC, purchased the Vintage
Apartments, a mixed-use property in Seattle, Washington.
The purchase price of $3,200,000 was funded with money
from liquidated business assets plus a promissory note
signed by both husband and wife. Husband had been making
interest-only payments on the note and relying on proceeds
from the apartments of approximately $11,000 per
month as his sole source of income. At the time of trial, the
fair market value of the Vintage Apartments was approximately
$3,000,000 with approximately $850,000 still owed
on the note.
The trial court awarded husband and wife joint custody
of their child and ordered husband to pay child support
in an amount based on findings that husband would have
income of $11,000 per month and wife would have income
from full-time, minimum-wage work. The court ordered
that husband pay transitional support to wife in the amount
of $3,000 per month for a period of three years and spousal
maintenance in the amount of $1,000 for an additional
five years. In its property division, the trial court awarded
wife several assets including the family house, which had
equity of approximately $85,000, and a 2004 Volvo worth
$5,190. Assets awarded to husband included the Vintage
Apartments, which had equity of more than two million dollars,
a guitar collection worth $48,520, a 2009 BMW worth
Cite as 269 Or App 156 (2015) 159
$21,558, and a 2000 Dodge pickup worth $1,789. The court
also ordered that husband pay to wife an equalizing money
judgment in the amount of $150,000. Husband assumed
responsibility for the mortgage on the Vintage Apartments,
and wife assumed responsibility for the mortgage on the
family house. Each party also assumed responsibility for
any debt he or she incurred following the date of separation.
PROPERTY DIVISION
Wife argues that the court’s award of the Vintage
Apartments entirely to husband without a larger equalizing
judgment was error. Unless we are convinced to exercise our
discretion to review the property division “anew upon the
record,” ORS 19.415(3)(b),2 we review the determination for
abuse of discretion. Morton and Morton, 252 Or App 525,
539, 287 P3d 1227 (2012). As set out above, wife asks that
we exercise our discretion to review the property division
de novo. We exercise that discretion sparingly and only in
exceptional cases. ORAP 5.40(8)(c); State v. S. N. R., 260 Or
App 728, 733, 320 P3d 569 (2014).
Here, wife contends that we should exercise de novo
review of the trial court’s property division because its
award of the Vintage Apartments exclusively to husband
and without a larger equalizing judgment relied on factual
findings that are “just plain wrong.” We carefully consider
wife’s arguments because, as we observed in S. N. R., a lower
court’s reliance on a crucial finding that “does not comport
with the evidence in the record” can be a reason to exercise
our discretion to review de novo. 260 Or App at 733; see also
Hanscam and Hanscam, 247 Or App 207, 219, 268 P3d 715
(2011).
As pertinent to this inquiry, the trial court reasoned:
“While the goal of ‘economic self-sufficiency’ is worthwhile,
it cannot be achieved in this case without selling
the proverbial ‘golden goose’ because the only other asset
of consequence is the family home which has an equity of
approximately $85,000. A common option—an equalizing
2 The 2009 legislature changed the scope of our review in most equitable
proceedings to make review “anew upon the record” a matter for the court’s discretion
in appeals filed after June 4, 2009. Or Laws 2009, ch 231, §§ 2, 3.
160 Morgan and Morgan
judgment—is also unrealistic because the current income
stream from the apartments does not accurately reflect
the cost of doing business (Husband is making interest
only payments on the mortgage and has not set aside adequate
reserves to resolve several existing maintenance
needs); therefore, to increase the amount of the mortgage
(assuming that option is available) to pay a judgment in the
amount sought by Wife would appear to only * * * postpone
the inevitable. * * *
“* * * [T]he negative consequences of the liquidation of
the Vintage Apartments far outweigh the equities that
favor Wife’s position. Although the record does not contain
the information needed to calculate the tax consequences
or closing costs of a sale with precision, the evidence is
that both factors would reduce the net proceeds substantially
before Wife received her equal share. Thus, the asset
would be lost, and Wife would receive a significant portion
of [Husband’s father’s] estate—clearly in violation of
[Husband’s father’s] testamentary intent. While Wife may
be entitled to a monetary judgment in a lesser sum, it is not
‘just and proper’ to award an amount that would compel
the sale of the Vintage Apartments.”
Wife first challenges the finding that “substantial” tax
liability and closing costs would result from a sale of the
Vintage Apartments. She also, relatedly, asserts that the
trial court wrongly found that a larger equalizing judgment
would compel husband to sell the Vintage Apartments. The
trial court’s findings that closing costs would reduce the proceeds
from a sale of the property and that a larger equalizing
judgment could force the sale of the property are permissible
inferences from the evidence, and we reject wife’s
challenge to those findings without further discussion.
There is also some evidence that a sale of the apartments
would result in a significant taxable event. The evidence
establishes that equity in the Vintage Apartments
ranged from $2.085 to $2.155 million at the time of trial.
The key dispute between the parties’ experts was the extent
to which income from a sale of the property would be treated
as ordinary income—which would be taxable—or as capital
gain—which would not be taxable due to complexities of the
tax code that are not necessary to explain in this opinion.
The trial court credited the testimony of husband’s expert
Cite as 269 Or App 156 (2015) 161
that a substantial amount of sale proceeds would be taxable
as ordinary income and listed that concern as one of the
reasons for its property distribution.
On appeal, wife cites legal authority that she contends
clearly demonstrates husband’s expert was wrong
and, thus, that the trial court’s finding was wrong. See IRC
§ 1250 (2012) (explaining circumstance under which proceeds
from the sale of depreciable realty can be treated as
“ordinary income” subject to tax). In the trial court, however,
wife did not cite any legal authority addressing the issue of
tax consequences from a sale of the Vintage Apartments.
Rather, the key finding disputed by wife—the tax consequences
of a forced sale—was presented to the trial court as
merely a choice between conflicting expert testimony, and
the testimony of husband’s expert provided some support
for the trial court’s finding. Accordingly, even if we accept
wife’s explanation that the finding contradicts governing
tax law, the factual mistake is a product of the manner in
which wife litigated the issue below. We are not persuaded
that this is an exceptional case in which we should exercise
our discretion to review de novo. See ORAP 5.40(8)(d).3 We,
thus, review the trial court’s determination of a “just and
proper” property division for an abuse of discretion. In doing
so, we are bound by the trial court’s express and implicit
factual findings if they are supported by any evidence in the
record. Sconce and Sweet, 249 Or App 152, 153, 274 P3d 303,
rev den, 352 Or 341 (2012).
ORS 107.105(1)(f) provides for the division of marital
property “as may be just and proper in all the circumstances.”
Determining what division is “just and proper”
involves consideration of several factors set out in ORS
107.105(1)(f) as well as equitable considerations that the
Supreme Court has instructed trial courts to consider in the
interest of promoting “consistency and predictability in dissolution
decrees[.]” Kunze and Kunze, 337 Or 122, 132, 92
3 ORAP 5.40(8)(d) sets out a nonexclusive list of considerations relevant to
our decision to exercise our discretion, including whether the trial court made
express factual findings or credibility findings; whether the trial court’s decision
comports with “uncontroverted” evidence or “express findings” supported by the
record; and whether the appellant alerted the trial court to the disputed factual
matter and its importance.
162 Morgan and Morgan
P3d 100 (2004) (citation omitted). Under the abuse of discretion
standard, we will not disturb factual findings that
“are supported by evidence in the record,” and “we will disturb
the court’s decision only if it misapplied the statutory
and equitable considerations required by ORS 107.105(1)(f).”
Christensen and Christensen, 253 Or App 634, 640-41, 292
P3d 568 (2012).
As the Supreme Court explained in Kunze, the
framework for arriving at a “just and proper” distribution of
property ordinarily should begin with determining whether
the asset was brought into the marriage or was acquired
during the marriage (a “marital asset”). 337 Or at 133-34.
There is a general presumption that both spouses contributed
equally to “marital assets” and that, “absent other considerations,
the ‘just and proper’ division” of those assets is
an equal division. Id. at 134; ORS 107.105(1)(f)(C). Wife,
however, does not dispute the trial court’s determinations
that the equity in the Vintage Apartments is represented
by the investment of husband’s inheritance and is not subject
to the presumption of equal contribution. See ORS
107.105(1)(f)(D)(i) (property acquired by gift to one party,
including inheritance, and separately held by that party is
not subject to the presumption of equal contribution).
In the absence of an applicable presumption, the
trial court must distribute the property according to what is
“ ‘just and proper’ under the circumstances.” Cf. Benson and
Benson, 263 Or App 554, 557, 328 P3d 819 (2014) (describing
process if presumption is rebutted). That determination
“concerns the equity of the property division in view of all
the circumstances of the parties.” Kunze, 337 Or at 135.
Appropriate equitable considerations include
“the social and financial objectives of the dissolution, as
well as * * * the preservation of assets; the achievement of
economic self-sufficiency for both spouses; the particular
needs of the parties and their children; and * * * the extent
to which a party has integrated a separately acquired asset
into the common financial affairs of the marital partnership
through commingling.”
Id. at 135-36 (citations omitted). If no evidence supports
those or other equity considerations, it is “just and proper”
Cite as 269 Or App 156 (2015) 163
to award a marital asset that was acquired “free of any contributions
from the other spouse” to the spouse who separately
acquired it. Id. at 135 (citing Pierson and Pierson, 294
Or 117, 123, 653 P2d 1258 (1982)).
Wife contends that the “commingling” consideration
cuts strongly in favor of an equal division of the equity
in Vintage Apartments and that the trial court abused its
discretion by focusing exclusively on the goal of “preserving
assets.” Wife relies on Finear and Finear, 240 Or App
755, 766-68, 247 P3d 1238 (2011), rev dismissed, 351 Or
580 (2012), in which we said that the husband’s reliance
on inherited property as the sole financial resource for
the family favored “allocating some portion of the original
inheritance to [the] wife.” (Emphasis added.) As wife correctly
points out, the trial court expressly found, “it is clear
that Husband ‘integrated’ his inheritance ‘into the common
financial affairs of the marital partnership through commingling’
in the same fashion as in [Finear]” and that the
inherited business “morphed into the income stream from
the Vintage Apartments which has provided financial support
for both parties since that time.”
Wife, however, reads too much into the trial court’s
finding and into our statement in Finear. In Finear the parties
were married 21 years and, after the husband received
a substantial inheritance, lived entirely off of the inheritance
and the income that it generated. The husband used
a substantial portion of his inheritance to purchase and
improve property that, by the time of trial, had increased
in value by approximately $900,000 over the original purchase
price. The trial court awarded the wife assets worth
$418,000 and awarded the husband the remainder of his
inherited assets, worth more than $1.4 million. Finear, 240
Or App at 759.
We explained that the husband’s demonstrated
intention to keep his inheritance as separate property
weighed “strongly against dividing the inheritance/trust
assets” but that the parties’ reliance on the inheritance as
their sole family income weighed in favor of allocating “some
portion of the original inheritance to [the] wife.” Id. at 765-
66. Ultimately, we held in Finear that the trial court’s award
164 Morgan and Morgan
to the wife of assets amounting to half of the increased property
value gave her “a significant portion of the inheritance/
trust property” and was “well within its discretion[.]” Id. at
768. We emphasized:
“ ‘[B]ecause it is an equitable consideration, commingling
is not an all or nothing proposition. Instead, commingling
falls along a spectrum. In some cases, a particular asset
may be commingled to such an extent that it would be inequitable
to divide it in any manner other than equally. In
other cases, an asset may be less commingled and therefore
subject to a split into unequal shares.’ ”
Id. at 765 (quoting Tsukamaki and Tsukamaki, 199 Or App
577, 586, 112 P3d 416 (2005) (citations omitted)).
As in Finear, the findings here describe husband’s
intention that his inherited business interest remain a separate
asset. Following his father’s death, husband remained
the sole stockholder of Morgan Built, Inc., and sole member
of Morgan Built Holdings, LLC, which owns the Vintage
Apartments. As both president and CEO of the corporation,
husband was in charge of the business decisions. He
conferred with wife only on “minor matters.” As in Finear,
those factors weigh against giving wife a share of the asset
purchased by husband’s inherited business, but the parties’
reliance on that inheritance as their source of income
weighs in favor of a property division that gives wife some
portion of husband’s inheritance. In Finear, the trial court
adequately addressed that consideration by awarding the
wife half of the gain in value from investment of the husband’s
inheritance. The parties here were married less than
half the time of the parties in Finear, and the investments
from husband’s inheritance lost rather than gained value
during the marriage.4 The equalizing judgment that husband
has been ordered to pay wife is effectively a portion of
what remains of his inheritance. Under the circumstances,
there is no basis for concluding that the trial court’s property
division constituted an abuse of discretion.
4 Although the apartments’ purchase was partly funded by the loan for which
husband and wife both signed, husband was assigned full responsibility for that
obligation, and his failure to make any payments toward principal means the
equity in the apartments comes entirely from the investment of Morgan Built
Holdings’ assets.
Cite as 269 Or App 156 (2015) 165
Moreover, we emphasized in Finear that “[a] just
and proper division of marital property concerns the equity
of the property division in view of all the circumstances of
the parties.” 240 Or App at 766 (citing Kunze, 337 Or at 135;
Gano-Ridge and Ridge, 211 Or App 393, 409, 155 P3d 84
(2007)). Here, the trial court was primarily concerned with
the circumstance that the apartments were “the proverbial
‘golden goose’ ” that allowed the parties to live on an income
stream significantly greater than either party could achieve
in the job market. Indeed, as explained below, the court set
both the spousal and child support awards based on the
$11,000 per month income stream from the apartments. It
was in this context that the court highlighted the need to
preserve the asset and not “award an amount that would
compel the sale of the Vintage Apartments.” See Haguewood
and Haguewood, 292 Or 197, 206-08, 638 P2d 1135 (1981)
(observing that providing for a “self-sufficient, post-dissolution
life apart” sometimes “cannot be well served by a simple
division of assets,” and that “we can expect no more golden
eggs if the decree kills the goose that lays them”; affirming
trial court’s award of the family business entirely to the
husband). Ultimately, as in Finear, “there is no basis for concluding
the trial court misapplied the statutory and equitable
considerations that ORS 107.105(1)(f) requires * * *.” 240
Or App at 768 (citing Kunze, 337 Or at 136). As the trial
court acknowledged, “reasonable minds will differ concerning
the equitable priorities herein,” and we are unwilling
to say that the court’s property division was an abuse of its
discretion.
SPOUSAL SUPPORT
As set out above, the trial court awarded wife
transitional spousal support of $3,000 per month for three
years and spousal maintenance of $1,000 per month for
an additional five years. Wife does not ask us to exercise
de novo review of this determination, but she contends that
the trial court abused its discretion because it treated husband’s
income as limited to $11,000 and because it “seems
to have downplayed or ignored” several of the factors that
ORS 107.105(1)(d) directs the court to consider in awarding
spousal support. We disagree.
166 Morgan and Morgan
ORS 107.105(1)(d) provides for awards of spousal
support in “an amount of money for a period of time as may
be just and equitable[.]” In reviewing that determination for
an abuse of discretion, we are bound by the trial court’s findings
of historical fact that are supported by any evidence in
the record, and we will disturb the trial court’s determination
of what constitutes a “just and equitable” amount only if
the court “misapplied the statutory and equitable considerations
required by ORS 107.105.” Berg and Berg, 250 Or App
1, 2, 279 P3d 286 (2012) (citing Kunze, 337 Or at 136).
We disagree with wife that the trial court’s spousal
support award assumed husband’s income would remain
limited to the apartment proceeds or that the court failed to
consider the “health of the parties” or the “standard of living
established during marriage.” The order indicates that
the court based its spousal support determination on wife’s
needs in the short and long term and that it considered the
required statutory factors, specifically that “the step-down
award is proper given Wife’s heightened need for support
during the initial period given her slow recovery from her
medical condition; however, given Wife’s age, an award of
indefinite support is not warranted.”
Wife argues that the amount and duration of the
spousal support award are not “in line” with awards we have
set as “just and equitable” in cases for which we exercised
de novo review. See Quant and Carrier, 234 Or App 336, 227
P3d 832, rev den, 348 Or 621 (2010); Gillis and Gillis, 234 Or
App 50, 227 P3d 809 (2010). Our role here, however, is not
to make our own determination of the “just and equitable”
amount of spousal support. The trial court appropriately
exercised its discretion in arriving at its determination of a
“just and equitable” amount of spousal support.
CHILD SUPPORT
The trial court ordered the parties’ child support
obligations to be based on income of $11,000 per month for
husband and minimum wage earnings for wife. Wife contends
that the determination as to her obligation is wrong
because it conflicts with the trial court’s finding that she
was unable to work through 2012. She also contends that
Cite as 269 Or App 156 (2015) 167
the determination as to husband is wrong because it fails
to take into account his potential income from employment.
We review whether the trial court correctly calculated
the parties’ incomes under the guidelines for legal error.
McMurchie and McMurchie, 256 Or App 712, 721, 304 P3d
751 (2013).
The Division of Child Support promulgates rules
pursuant to ORS 25.275(1) that establish a formula for
determining child support awards based on presumed
income. Id. at 715. After the dissolution trial, the Division of
Child Support significantly modified the rule defining how
presumed income is calculated for purposes of child support
awards. OAR 137-050-0715 (2012), amended by OAR 137-
050-0715 (2013). However, we review the presumed-income
calculations for legal error under the previous rule because
the trial court calculated child support in this case prior
to those amendments, which became effective on July 1,
2013. See OAR 137-050-0700 (2013) (“Any change to the
guidelines applies to all calculations prepared on or after
the effective date of the change. * * *.”) A parent’s presumed
income means “the actual or potential gross income of a
parent,” depending on the circumstances. OAR 137-050-
0715(1) (2012). For a parent who has a “verified disability,”
the presumed income is whatever actual income the parent
receives. OAR 137-050-0715(7)(b) (2012).
Wife’s first challenge to the court’s child support
calculation emphasizes the “verified disability” provision.
As set out above, the trial court set wife’s child support
obligation according to a potential income from full-time
minimum-wage employment. Wife argues that this conflicts
with the trial court’s express findings. Specifically, the
court’s order sets out:
“[T]he medical evidence supports a finding that Wife
suffers from the impingement of a nerve in the pelvic
region, and that she suffers pain and the impairment of
bodily functions as a result. * * * [T]he best evidence is that
Wife should be physically capable of employment in 2013.”
We interpret the trial court’s findings to mean that wife had
a “verified disability” through at least 2012, a determination
that required it to use her “actual income” to calculate
168 Morgan and Morgan
the child support obligation through at least 2012.5 See OAR
137-050-0715(7)(b) (2012). Therefore, we remand for a recalculation
of the child support obligation because the court’s
calculation is not consistent with its express findings.
Wife also argues that the trial court miscalculated
husband’s presumed income for purposes of child support.
She relies on McMurchie, in which we explained how—
under OAR 137-050-0715(7)(b) (July 2010)—trial courts
should evaluate the child support obligation of a parent who
is able to work but instead relies only on unearned actual
income. See 256 Or at 724-25. We decline to reach that
issue, however, because wife proposed a different interpretation
of the rule below and because our remand for recalculation
of wife’s obligation will require the trial court to
recalculate child support as to both parents6 “using the new
guidelines[,]” OAR 137-050-0700, which have significantly
altered the language we interpreted in McMurchie.

* * *

5 There is no express definition of “verified disability” in the child support
guidelines or in case law interpreting those guidelines. Given its plain meaning,
however, “verified” in this context means “authenticated by affidavit” or
“substantiated by competent proof.” Webster’s Third New Int’l Dictionary 2543
(unabridged ed 2002). The court’s emphasis that medical evidence substantiates
an “impairment of bodily functions” sufficient to prevent wife from performing
gainful work throughout 2012 amounts to a determination that wife had a “verified
disability” through that time.
6 See, e.g., State v. Nguyen, 268 Or App 789, 797, ___ P3d ___ (2015) (observing
that remand for recalculation of one parent’s support obligation would give trial
court an opportunity to revisit its determination of the other parent’s income).

Outcome: In summary, we hold that the trial court did not
abuse its discretion in its property division or determination
of spousal support. We do, however, conclude that the trial
court erred as a matter of law in calculating wife’s presumed
income for child support purposes.
Award of child support reversed and remanded for
recalculation; otherwise affirmed.

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