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Virginia L. Walters v. Lonnie Walters

March 9, 2011

VIRGINIA L. WALTERS, APPELLANT (PLAINTIFF),
v.
LONNIE WALTERS, APPELLEE (DEFENDANT).



Appeal from the District Court of Laramie County The Honorable Michael K. Davis, Judge

The opinion of the court was delivered by: Golden, Justice.

Before KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, JJ.

NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.

[¶1] The two appeals consolidated for decision in this opinion arise out of the divorce litigation between Virginia L. Walters (Mrs. Walters) and Lonnie Walters (Mr. Walters). In appeal No. S-09-0152, Mrs. Walters challenges the district court's property distribution set forth in the Judgment and Decree of Divorce filed on June 3, 2009. We affirm that judgment. In appeal No. S-10-0059, Mrs. Walters appeals from the district court's order filed on January 15, 2010, in the post-divorce proceeding that found her in civil contempt and imposed sanctions. We reverse that order.

APPEAL NO. S-09-0152

ISSUES

[¶2] Mrs. Walters presents this statement of the issues:

I. Did the district court abuse its discretion, commit serious procedural error and/or violate a principle of law by finding Ms. Walters in contempt?

II. Did the district court abuse its discretion by punishing Ms. Walters through its distribution of property?

III. Was the district court's division of marital property clearly erroneous, against the great weight of evidence, and/or otherwise not supported by substantial evidence?

Mr. Walters presents the issues in this way:

I. Whether the district court abused its discretion, committed a procedural error, or violated a principal of law by finding the appellant in contempt of court

II. Whether the district court's division of marital property was clearly erroneous, against the great weight of the evidence or otherwise not supported by substantial evidence

In her reply brief, Mrs. Walters responds with this issue statement:

Even if Appellant were properly found in civil contempt, the district court abused its discretion, committed a procedural error or violated a principal of law by not imposing a fine based on Appellee's actual loss.

FACTS AND PROCEEDINGS

[¶3] The parties married on May 5, 2006; Mrs. Walters filed her complaint for divorce on August 6, 2008; and Mr. Walters filed his answer and counterclaim on August 14, 2008. No children were born to the parties. The parties pursued discovery. The district court issued mutual restraining orders that prohibited the parties from expending marital assets, other than for daily living expenses, until further order of the court. The district court issued orders to show cause to both parties concerning alleged violations of those orders but opted to determine those alleged violations at the trial.

[¶4] The trial consumed three full days and an hour of a fourth day, from March 24 to April 1, 2009. The primary contested issue at trial was the distribution of the marital property, although the district court also determined whether Mrs. Walters had violated a mutual restraining order as mentioned above. The district court heard testimony from twelve witnesses and considered a substantial number of exhibits, including financial records and a real estate appraisal of the parties' Cheyenne property on Cox Road. The parties' respective counsel agreed that the district court's determination of the marital property distribution would turn on the credibility of the parties. As succinctly stated by Mrs. Walters' counsel in his closing argument, "this boils down to credibility. You're the trier of fact. You're the one who looks at the people in the eyes and sees their mannerisms, their rationale of the statements. And what makes up the credibility of a witness is an influx of information."

[¶5] The trial concluded on April 1, 2009; the district court issued its decision letter on April 15, 2009; and the district court filed the Judgment and Decree of Divorce, which incorporated by reference its decision letter, on June 3, 2009. In the decision letter, the district court explained its determination of the marital property distribution and its determination of Mrs. Walters' alleged violation of a mutual restraining order:

The determination of an equitable distribution of property is a more involved question. [Mr. Walters] operated Lonnie's Roustabout Service, LLC (LRS) in Kansas for over twenty years. The roustabout service was a Kansas limited liability company with [Mr. Walters] as the sole and controlling member. [Mrs. Walters] is also originally from Kansas, although she lived in Cheyenne at the time the parties developed what might loosely be described as a romantic relationship. Her testimony as to her earnings and occupation at the time of the marriage began was nebulous, and the Court gleaned from it only that she was trained as a paramedic and provided some form of home health care to an elderly woman living in Cheyenne.

The marriage occurred in 2006 after [Mr. Walters] asked [Mrs. Walters], whom he barely knew, to go to Hawaii with him for a vacation in January of that year. During the vacation he proposed, and she accepted. The marriage followed in May.

The story of the engagement and marriage grew more improbable as it developed. [Mr. Walters] had been quite successful in his business, and had acquired cash, real estate, and other assets. [Mrs. Walters] had around $100,000 in liquid assets, a 2004 Ford pickup, and lived in a rented mobile home. At some point before or after the marriage, depending upon whom one believes, [Mrs. Walters] became involved in [Mr. Walter's] business.

The business accounting of LRS did not adhere to standard practices. Rather than reimbursing himself for business expenses based on credit card receipts or cash payments, Mr. Walters would receive checks from the business which were deposited in a personal account or converted to cash. He does claim that he had receipts for appropriate expenses and provided them to his accountant, who would not expense any item not supported by a receipt for tax purposes. This was no doubt acceptable in a single-member LLC, since no owner was harmed, but it created a climate in which it became very difficult for the Court to analyze the transactions for purposes of the property division in this divorce action. For example, at one point Mr. Walters testified that he had written a check on the business account to Mrs. Walters before the marriage for around $3,000. The memo on the check was for mowing and painting. The logical conclusion one would draw is that LRS paid Virginia Walters for mowing and painting. However, Mr. Walters testified that he actually did the mowing and painting himself, and gave her the money to buy a wedding dress. This sort of improbable testimony about the accounting processes of LRS emanated from both parties and abounded throughout the trial.

The Court cannot shake the notion that each party may have invented a story, at least in part, to justify his or her claims with regard to the property settlement. We shall begin with Mrs. Walters. Funds in the amount of $50,000 were transferred from an account controlled by Lonnie Walters to Lonnie Walters by wire transfer, and the day after, were used by Mr. Walters to purchase a lot in Cheyenne on which a metal building was constructed and then razed, and on which a house was also constructed, as more fully discussed below. Mr. Walters' claims' concerning these funds are credible -- he contends that he provided the funds for the purchase of a lot that he and Mrs. Walters had looked at and agreed upon for purposes of building a marital home, and that at closing, while he was in Kansas, she simply omitted him from the title intentionally.

Mrs. Walters claims, on the other hand, that before the marriage Mr. Walters asked her to help get his roustabout service in shape to sell (including cleaning up the books), and promised to pay her $50,000 to do so, regardless of whether the business sold or not. Mrs. Walters has no experience to speak of in accounting and none in the roustabout business. There is nothing to corroborate this claim, and the Court rejects it.

The testimony indicated that Mrs. Walters eventually took control of the roustabout service books. She paid herself about $80,000 in expense reimbursement, which she placed in accounts to which only she and her children had access. She now claims that Mr. Walters promised to pay her between $80,000 and $100,000 per year for her services for the business (in which she performed some painting, mowing and minor bookkeeping services). She testified that these amounts were to be in addition to her wages, which amounted to about $25.00 per hour, in addition to $10 per hour for her teenage son, who was not even in Kansas, the only place he could have been working for LRS, at certain times that he was receiving paychecks. Remarkably, the amounts of the expense checks adds up to approximately the $80,000 to $100,000 per year she claims to have been promised. She and her accountant characterized these as draws against the business.

Virginia Walters never owned any interest in the roustabout service, and no check to her is characterized as a dividend or draw. She wrote these checks to herself after persuading Mr. Walters to let her sign checks on the business account. No logical reason for such compensation is evident based on the services she rendered or the prosperity of the business, and there is likewise no evidence which would indicate that Mr. Walters knew of the scope of these withdrawals. Testimony indicated that Mrs. Walters kept the checkbook and business records under lock and key. The Court arrives at the inevitable conclusion that Mrs. Walters simply looted the business and segregated those funds in anticipation of this divorce.

In addition, the record is clear that Mrs. Walters violated a court order in this case. The Court entered a mutual restraining order which would have prevented either party from expending substantial funds of the marital estate without a further order of the Court. Despite this order, Mrs. Walters used funds to build a home on the land described above after it was entered. She attempted to justify this action by claiming that the home had to be finished in order to protect the structure already in place from deterioration. Photographic evidence proved that the home had only a foundation, or at most a foundation and subfloor, at the time the order was entered, and that it was unnecessary to finish the structure to protect an investment in framing, etc. No explanation whatsoever was given for the purchase of furnishings and installation of fixtures in the structure. Mrs. Walters never asked the Court to authorize the expenditures. It has therefore been proven by clear and convincing evidence that Mrs. Walters willfully violated a court order and is in contempt of court. The Court will take this contempt into account in formulating its decree in this matter, and will reserve sanctions which may be imposed in the event of failure to comply with any of its conditions.

The record is also clear that Mrs. Walters hid assets and destroyed business records to prevent an accurate accounting of funds which she has taken. During the litigation, she closed accounts and a safe-deposit box in which property was to have been kept in an effort to make determination of the assets in her possession a moving target.

When the Court issued an order authorizing a gun safe on her property to be opened on short notice, she was found to be in possession of articles of property which she had denied having. It is well-settled that a party's bad-faith withholding, destruction, or alteration of a document or other physical evidence relevant to proof of an issue at trial gives rise to a presumption or inference that the evidence would have been unfavorable to the party responsible for its nonproduction, destruction, or alteration. Abraham v. Great Western Energy, LLC, 2004 WY 145, ¶20, 101 P.3d 446, 455-456 (Wyo. 2004).

For his part, Lonnie Walters claimed that Mrs. Walters took approximately $200,000 from a safe-deposit box located at a local bank. He explained in testimony that over the past 20 years, in good years, he would put $10,000 in an envelope and hide the envelopes in a wall safe at his home in Kansas. He claims that he brought 19 of these envelopes which had accumulated to Wyoming and put them in the safe deposit box, added another approximately thirteen thousand dollars, and then gave Mrs. Walters both keys to the box, effectively locking himself out, because he feared that he might lose the key.

Mr. Walters was unable to provide any corroboration of his claims concerning the $200,000. No witness was called to substantiate its existence, and communications between counsel and discovery in this case did not suggest that such a sum ever existed until the eve of trial. While it is not impossible that Mr. Walters could have owned cash in that amount, its existence was not proven, and the Court will not consider that amount in the property division. Nagging doubts do remain, given Mrs. Walters' other misconduct, that she may in fact have gotten away with that sum of money, but doubts do not amount to proof.

Finally, the Court must recognize that Virginia Walters is entitled to equitable portion of the marital earnings for the mercifully brief duration of this marriage. However, as the Supreme Court has observed, an equitable distribution is not necessarily equal, and an equitable distribution is in fact likely to be unequal. Moss v. Moss, 2007 WY 67, ¶4, 156P.3d 316, 318 (Wyo. 2007). That will certainly be true in this case, in which Mr. Walters had far more assets at the beginning of this brief marriage than Mrs. Walters, and in which the excellent earnings which LRS enjoyed were the fruit of his sustained effort over many years. The Court rejects the notion that Virginia Walters' efforts contributed substantially to these financial rewards. On the other hand, both parties each bear some responsibility for the murky environment in which the Court must construct a property division.

The division of property will be as follows:

7902 Cox Road. This property actually includes three components -- the land, the funds from a steel building that was taken down, and the house itself. The Court is convinced that Mr. Walters paid for the land from funds which he had accumulated, and is entitled to a credit for that expenditure. It is also clear that LRS paid for a metal building which was erected in the wrong location and which was later taken down. Wyoming Steel, the company which built the building and then removed it, paid $37,500 (less some damage to the steel) in settlement of claims against it for the allegedly faulty construction. Lonnie Walters will receive these funds, less any deductions made by Wyoming Steel to the building. In addition, Mr. Walters produced proof of payment for pouring of a concrete basement and foundation, and he is entitled to reimbursement for these funds.

Mrs. Walters was in possession of certain assets which she claims were used to purchase materials which went into the construction of the house itself, the foundation excluded, and she acted as the general contractor. While these funds were in part the result of deplorable efforts to conceal assets and to steal a march on Mr. Walters in direct violation of a court order, the Court reluctantly concludes that she is entitled to some of its value. It appears that the home was poorly designed and constructed, but it is valued by appraisal at $304,000. The division of the home will therefore be as follows:

a. Mrs. Walters will be entitled to possession of the home and contents except as specifically provided herein.

b. Mr. Walters will be entitled to reimbursement of ...


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