Hansen v. Hansen

#25071-rev & rem-JKM

2009 SD ___

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

* * * *

BRIAN R. HANSEN, Plaintiff and Appellee,

v.

SHEILA A. HANSEN, Defendant and Appellant.

* * * *

APPEAL FROM THE CIRCUIT COURT
OF THE FIFTH JUDICIAL CIRCUIT
SPINK COUNTY, SOUTH DAKOTA

* * * *

HONORABLE TONY L. PORTRA
Judge

* * * *

THOMAS P. TONNER of
Tonner, Tobin and King Attorneys for plaintiff
Aberdeen, South Dakota and appellee.

JEFF BURNS of
Churchill, Manolis, Freeman,
Kludt, Shelton & Burns Attorneys for defendant
Huron, South Dakota and appellant.

* * * *

CONSIDERED ON BRIEFS
ON AUGUST 24, 2009

OPINION FILED _______
#25071

MEIERHENRY, Justice

[¶1.] Sheila A. Hansen (Sheila) appeals from the circuit court’s property

division in her divorce from Brian R. Hansen (Brian). Sheila alleges the circuit

court erred by disregarding the life estate interest in the couple’s marital home

when determining the value of the property. We agree and reverse the circuit court.

FACTS

[¶2.] Sheila and Brian were married on June 18, 1988, in Redfield, South

Dakota. After marrying, the couple lived in a home originally owned by Wilbur and

Judy Masat. The Masats are Sheila’s parents. Sheila and Brian paid $50 per

month in rent to the Masats from 1988 until 2002. In 2002, Sheila’s parents deeded

the home to the couple as joint tenants so they could obtain a bank loan to make

improvements to the residence. This conveyance was a gift from the Masats to

Sheila and Brian. The Masats did, however, retain a life estate interest in the

property.

[¶3.] Sheila and Brian made significant improvements to the property after

the Masats conveyed it to them. These improvements included the addition of a

new kitchen, installation of a high efficiency propane boiler, the addition of a two

stall garage, new siding and insulation, new windows, and the removal and

reinstallation of hardwood floors. Both Sheila and Brian contributed their time and

labor in making these improvements.

[¶4.] Neither party presented evidence of the home’s value when it was

originally purchased or when it was gifted in 2002 prior to the improvements.

Brian’s expert witness, Sheryl Erickson, a real estate broker and real estate

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appraiser in the Redfield area, testified that the fair market value of the property as

of September 9, 2008, was $141,000. Erickson testified that she did not know what

effect a life estate would have on the property’s value because she had no prior

experience selling or valuing homes encumbered with such an interest. Sheila

presented evidence that the value of the marital interest in the home was

$35,967.69, which represented the value of the remainder interest. Sheila arrived

at this figure by applying a calculation table promulgated by the South Dakota

Department of Social Services for calculating the value of a life estate for indigent

long-term care eligibility. See South Dakota Administrative Rule 67:46; SDCL 28-6.

[¶5.] The circuit court determined that the couple’s marital interest in the

property was $141,000. 1 Sheila’s only issue on appeal is whether the circuit court’s

finding that the marital interest in the home was worth $141,000 was clearly

erroneous.

STANDARD OF REVIEW

[¶6.] On review, we do not overturn the circuit court’s findings of fact unless

such a determination was clearly erroneous. Id. Only if we are left with a “definite

and firm conviction that a mistake has been made” will we reverse a circuit court’s

1. The circuit court at the conclusion of the trial orally indicated it considered a
portion of the home’s value to have been gifted to Sheila. The circuit court
indicated it would exclude the gifted portion from the marital estate and
valued the gift at $51,000. Neither party offered evidence to support the
circuit court’s valuation of the gifted portion. Ultimately, the circuit court did
not include any finding as to a gifted portion or the $51,000 amount in its
written findings.

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findings of fact. Terca v. Terca, 2008 SD 99, ¶19, 757 NW2d 319, 324 (citing

Johnson v. Johnson, 451 NW2d 293, 295 (SD 1990)).

ANALYSIS

[¶7.] A property division analysis requires identifying marital property

subject to division. Terca, 2008 SD 99, ¶19, 757 NW2d at 324 (citing SDCL 25-4-

44)). In this case, the circuit court determined that the marital home was subject to

division in the divorce proceeding because of the length of the marriage, the

conveyance from the Masats as a joint tenancy, and the significant improvements to

the home made by both Sheila and Brian. See Muenster v. Muenster, 2009 SD 23,

¶16, 764 NW2d 712, 717 (“All property may be divided, regardless of its title or

origin” (quoting Christians v. Christians, 2001 SD 142, ¶13 n1, 637 NW2d 377, 381

n1)). However, the marital home was encumbered by Masats’ life estate interest.

Technically, Sheila and Brian only had a remainder interest in the property. Thus,

only the remainder interest held by Sheila and Brian was marital property subject

to division.

[¶8.] Sheila presented evidence that the Masats’ life estate affected the fair

market value of the remainder interest. Her calculation for the couple’s remainder

interest was based on an actuarial table used by the Department of Social Services.

See ARSD 67:46:05:08. The Department uses this table to assess an individual’s

ability to pay for long-term medical care services. Id. The Department considers a

life estate an available resource to help pay for a recipient’s medical care. 2 Based

2. ARSD 67:46:05:08 states in relevant part that:

(continued . . .)
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on a fair market value of $141,000, Sheila applied the Department’s actuarial table

to conclude that the value of the remainder interest in the property was $35,967.69.

[¶9.] The circuit court valued Sheila and Brian’s marital interest in the

home at $141,000 – the full fair market value of the home. The circuit court

rejected Sheila’s contention that the Masats’ life estate diminished the value of

their interest in the property. The circuit court’s determination that the value of

the home was unaffected by the life estate appeared to be based on Judy Masat’s

testimony that the Masats had no intention of removing their daughter from the

house or moving into it themselves.

[¶10.] We have previously noted the importance of valuing a remainder

interest in a divorce case. In Martin v. Martin, we said we would remand a case

when a circuit court fails to make a specific finding “regarding the value of

plaintiff’s [remainder] interest in [land].” 358 NW2d 793, 798 (SD 1984) (stating

that the interest in the land “certainly [] had some value”). We noted that the

plaintiff in Martin failed to provide evidence regarding the value of the property

“other than her own nebulous opinion regarding sales of other land in the area

__________________
(. . . continued)
A life estate is considered other real property and is considered a
resource to the individual applying for or receiving long-term care
services or medical assistance. The value of a life estate is calculated
by using the table contained in this section. If the individual has a life
estate, find the individual’s age on the table and multiply the
corresponding figure in the life estate column by the fair market value
of the property. The result is the value of the life estate and the
amount considered a resource to the individual. If the individual has a
remainder interest in the estate, use the applicable figure from the
remainder column to compute the value. [Table omitted.]

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several years earlier.” Id. In Martin, we affirmed the circuit court because the

court did not have any “competent evidence in addition to [the parties’] own

personal testimony regarding the value of the property.” Id.

[¶11.] In the present case, the realtor admitted she was not qualified to give

an opinion as to the value of the life estate or how it would affect the fair market

value of the home. Thus, her opinion on the fair market value of the home did not

take into account the encumbrance of the life estate. In contrast, Sheila did provide

the circuit court with evidence of the value of the home and the impact of a life

estate on its value. The competency of the actuarial table on which she relied was

not challenged. While the Department’s purpose for valuing a life estate is

admittedly different from dividing marital property, the circuit court gave no reason

for completely rejecting Sheila’s evidence on fair market value. Brian’s argument,

on the other hand, that Judy Masat did not intend to live on the property, has little,

if any, relevancy in assessing the fair market value of the life estate or remainder

interest. The Masats’ life estate exists until the Masats are both deceased and

could conceivably, be subject to the Masats’ current or future creditors. Likewise,

there remains the potential for Masats to exercise their interest in the property.

The record contains no competent evidence from which the circuit court could

conclude that the life estate had no value.

CONCLUSION

[¶12.] Consequently, the circuit court’s finding on the $141,000 value of the

remainder interest in the marital home was clearly erroneous. We are left with a

“definite and firm conviction that a mistake has been made” and reverse the circuit

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court on this issue. Terca, 2008 SD 99, ¶19, 757 NW2d at 324 (citing Johnson, 451

NW2d at 295). The case is remanded for the circuit court to determine the value of

Brian’s and Sheila’s remainder interest, taking into account the effect of the Masats’

life estate, and to reconsider the property division accordingly.

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