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Susan Christine Vierstra v. Michael George Vierstra

December 20, 2012


Appeal from the District Court of the Fifth Judicial District of the State of Idaho, Twin Falls County. Hon. Michael R. Crabtree, District Judge. Hon. Howard Smyser, Magistrate Judge.

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

2012 Opinion No. 149

Stephen Kenyon, Clerk

The decision of the district court is affirmed in part and reversed in part. The case is remanded to the district court with instructions to remand this case to the trial court for entry of an order consistent with this opinion.

This case arises from a divorce proceeding between Michael and Susan Vierstra. The magistrate court made a finding regarding the expected tax liability for 2009 when determining the value of the Vierstra family dairy. In its Judgment and Decree of Divorce, the magistrate court ordered the parties to adjust the valuations and equalizations according to the actual tax liability. After Susan objected to the form of the judgment, the magistrate court entered an Amended Judgment which did not alter the language regarding valuation of the dairy and the parties' obligation to adjust the valuations and equalizations. Because the actual tax liability for 2009 turned out to be much less than expected, Susan filed a motion seeking an adjustment of the equalization payment she was due. After receiving additional evidence, the magistrate court denied her motion. Susan then appealed from the Amended Judgment to the district court, asserting that the magistrate court erred in its valuation of the dairy and by denying her motion to adjust the equalization payment. The district court dismissed the appeal, holding that Susan had not timely appealed from the judgment that determined the value of the dairy and that the magistrate court lacked jurisdiction to entertain her motion to adjust. We affirm in part and reverse in part.


Susan and Michael were married in 1988. Susan filed for divorce from Michael in 2008. A trial was held over a five-day period in late 2009 and after receiving the parties' post-trial briefing, the magistrate judge issued his memorandum decision in early January, 2010. On January 25, 2010, the Judgment and Decree of Divorce (the Judgment) was filed. The family dairy operation was, by far, the largest community asset. As it was unclear to the magistrate court that either of the parties would be able secure the financing necessary to "buy out" the other spouse's interest in the dairy, the court determined that Susan would have the first option to receive the dairy in the distribution of community property and that if she received the dairy, she would be required to make an equalization payment to Michael. If Susan did not exercise that option or was unable to secure financing, Michael then had the option to receive the dairy and make an equalization payment to Susan. If neither party could secure the requisite financing, the dairy was to be sold and the net proceeds divided equally between the parties. Significantly, the trial court ordered that if either party received the dairy, then that party was required to pay 2009 taxes.

On February 8, 2010, Susan filed an Objection to the Form of the Judgment and Decree of Divorce (the Objection). On April 27, 2010, the magistrate court held a telephonic hearing on the Objection and effectively denied it, agreeing with Michael's attorney as to revisions that should be made to the language of the Judgment. On April 29, 2010, the trial court entered an Amended Judgment and Decree of Divorce (the Amended Judgment) that altered the Judgment by deleting unnecessary and repetitive provisions regarding child support and health insurance. The substance of these amendments is not pertinent to this appeal. The Amended Judgment retained the language of the Judgment with regard to the tax liability for the Vierstra dairy:

The court finds the tax consequence to be incurred by Vierstra Dairy in 2009 is as is shown on Exhibit 801(A). The Court finds that it is more likely than not that Vierstra Dairy will incur the tax consequence. The party who receives the dairy will timely pay said taxes to the State of Idaho and the Internal Revenue Service. If no tax consequence occurs, or if the tax consequence is different from that shown in Exhibit 801(A), the parties shall adjust the valuations and equalizations accordingly. If necessary, the parties can petition the court to address the adjustments. The court orders the parties to timely file tax returns and other filings concerning the Vierstra Dairy.

Exhibit 801A*fn1 reflected that the parties faced a tax liability of $1,006,000 for the dairy's operations. After Susan unsuccessfully attempted to exercise her option to receive the dairy, Michael successfully exercised his option.

On April 23, 2010, prior to the hearing on her Objection, Susan filed a motion asking the court to address the adjustments and equalizations (Motion to Adjust). This motion was based upon Susan's assertion that the parties paid a net sum of $85,036 in taxes for 2009, which was $920,964 less than the trial court had determined would be due. Consistent with the language of the judgment, Susan asked the court that Michael's equalization payment be increased by onehalf that sum - $460,482.

Over Susan's objection, on May 12, 2010, the magistrate court conducted an evidentiary hearing on the Motion to Adjust.*fn2 On the subject of taxes, the uncontroverted testimony was that for tax year 2009, the community incurred a tax liability of $85,172 to the IRS and was due a refund of $340 from the state tax commission.

Each party presented additional testimony from experts who had testified at the earlier trial. This testimony related to the $1,006,000 figure adopted by the court. Michael's expert testified that the $1,006,000 that he had previously testified would be owed was not the expected tax liability for 2009. Rather, it reflected the amount of tax that would have been incurred had the dairy ceased operations. Michael's expert further opined that he expected that the $1,006,000 would be paid to the IRS within three years. Susan's expert testified that the $1,006,000 figure was speculative, because dairy operations utilizing the cash method of accounting have the ability to manage each year's tax liability by prepaying expenses and deferring income. Susan's expert pointed to the Vierstra dairy's history of managing tax liability in this fashion as reflecting this tax avoidance strategy.

Although no testimony was elicited as to whether Michael would be able to secure financing if he were required to pay the additional equalization payment requested by Susan, the trial court expressed concern as to his ability to do so.*fn3 In apparent response to the court's concerns, Michael's attorney argued that it was unlikely that Michael would be able to secure financing if he were required to make the larger equalization payment and that if Michael were unable to obtain a loan the dairy would have to be sold, which would be financially detrimental to both of the parties.

The magistrate court then denied Susan's Motion to Adjust. The trial court's ruling appears to have been driven by the desire to preserve Michael's ability to secure financing, thus avoiding the sale of the dairy and preserving both parties' economic interests:

I've never thought, to be honest with you, that either party would be able to finance this. My guess was that it was going to up to a sale. That's after I heard the financial situations, how close we were on this, and I don't have these monies, but I think I can get that. It turns out that Mike Vierstra does have a chance to be able to finance this. The key ruling that I make today will determine, I suppose, whether that happens or not . . . I just don't [believe] that this thing [the tax liability] actually has a value of - of the One Million, so is it the Eighty Thousand or is it the One Million, because I have to pick one of the two and I honestly don't believe that either one of those numbers is what should be ordered by the Court, but that's the evidence I have been given. And so I'd say this folks. Based on the evidence, I think that the One Million better fits what's happening. I also think the parties are better protected by my ruling that way . I find that by the preponderance of the evidence, it's the One Million Dollars. I would also say this. By the choice I've made today, if I'm wrong on [sic] an appellate court will tell me and there will be Four Hundred Thousand Dollars more ordered down the road to be paid to Susan. If I'm right, then I made the right decision today and any appeals was [sic] wasted time. But the other thing that would happen is that if we sell it in today's market, I'm not too sure that either of these two people would serve by it. So if I'm wrong, I preserve Susan Vierstra's ability to get the sum- Four Hundred and Fifty thousand Dollars or - that she believes she is entitled to. If it goes out in the market today, they are going to incur that One Million Six- Six Thousand. It's - it's a guarantee because they're going to have to sell the dairy and - and so I am going to rule in essence in favor of Mike Vierstra, and the strangest of all things for me as a Judge, first time I've ever said this, I don't that [sic] either side gave me a number that I would play with on my own, but having to pick between the two, I'll pick the One Million, and I do that on the record I establish that I find that by a preponderance of the evidence that's what he's going to have on the business. It's more likely to be that than the Eighty Thousand. If I am dead wrong on this, the Court will tell me - and the ability to get the monies that I have missed out on are still available to Susan Vierstra, so I don't think I have killed her claim. It doesn't matter which way I went. This is going to be appealed, but I'd really believe if I had to pick between the two, I think the One Million is how I would make my business decision, not on the Eighty Thousand. That's the way I would look at it an [sic] so that is how I rule today.

The trial court entered a written order denying the Motion to Adjust on May 18, 2010 (the Post- Trial Order). On June 10, 2010, Susan appealed from the Amended Judgment and the Post-Trial Order. After receiving oral argument from the parties, the district court entered an order sua sponte, directing the parties to submit supplemental briefing as to whether the district court had jurisdiction to address the appeal from the Amended Judgment and whether the magistrate court had jurisdiction to entertain the Motion to Adjust. The district court determined that it lacked jurisdiction to consider the appeal from the Amended Judgment, which attacked the trial court's finding of the amount of the tax liability. The district court found that it had jurisdiction to consider Susan's appeal from the Post-Trial Order. The district court then determined that the magistrate court lacked jurisdiction to enter the Post-Trial Order regarding the tax liability. Based upon these conclusions, the district court dismissed the appeal. Susan timely appealed to this Court.


In reviewing an appeal from a decision of the district court acting in its appellate capacity, this Court directly reviews the district court decision to determine whether it committed error with regard to the issues presented on appeal. In re Daniel W., 145 Idaho 677, 679, 183 P.3d 765, 767 (2008) ...

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