Opinion
No. C1-02-534.
Filed November 26, 2002.
Appeal from the District Court, Ramsey County, File No. F400311.
Denis E. Grande, Joanne H. Turner, Mackall, Crounse Moore, PLC, (for respondent)
Dianne Wright, McCullough, Smith, Wright Kempe, P.A., (for appellant)
Considered and decided by Hudson, Presiding Judge, Peterson, Judge, and Anderson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
In this marital dissolution action, husband argues that the district court erred by: (a) using the incorrect date for valuation of stock options; (b) making a mathematical error in adjusting for husband's $7,000 advance from marital assets; (c) valuing certain marital assets on pre-tax basis; and (4) denying husband's motion for new trial based on newly discovered evidence. We affirm in part, reverse in part, and remand.
FACTS
Appellant Edward John Deviny (husband) and respondent Karen E. Deviny (wife) were divorced by judgment on May 2, 2001. Because of an administrative error, the filing date was changed to July 5, 2001. Husband was a long-time 3M employee and retired from 3M shortly after these dissolution proceedings. The marital assets included husband's 3M stock options (stock options) and a 3M 401(k) plan (401(k)), which consisted largely of 3M stock. Most of the marital assets were divided equally, but husband's stock options were nontransferable and could not be divided. In addition, husband received the home. As a result, the 401(k) was used as an "equalizer," with wife receiving a greater share of this asset. After the dissolution proceedings but prior to entry of the judgment, husband withdrew $7,000 from a mutual fund that was part of the marital assets to be divided equally.
Using the prehearing settlement conference date of October 25, 2000, as the valuation date, wife received $341,561 and husband received $166,567 from the 401(k). Wife was required to pay any tax attributable to her share.
The parties agreed to October 25, 2000, the date of the prehearing settlement conference, as the valuation date for the 401(k), but could not agree to the valuation date for the stock options. The trial court found that the day before trial, December 19, 2000, was the "fair and reasonable" valuation date for the stock options. Husband's expert presented evidence as to the probable tax consequences associated with the stock options. Specifically, husband's expert testified that husband would have to pay income taxes should he choose to exercise the options, and that he would probably be taxed at the capital-gains rate of 26 percent. No evidence was presented on the probable tax consequences associated with the 401(k) plan.
In its May 2, 2001, judgment, the trial court valued the stock options on an after-tax basis. The trial court valued the 401(k) plan on a pre-tax basis. Wife subsequently moved the court for amended findings of fact and conclusions of law, requesting that the trial court value the stock options at the gross value pre-tax, unless the court also used an after-tax value for the 401(k) plan. In its September 21, 2001, order, the trial court found that it would be unfair to treat the stock options and 401(k) assets differently, and reversed its earlier decision to use a net after-tax value for the stock options. This appeal followed.
DECISION I.
Husband argues that the trial court improperly valued his stock options when it chose the day before trial as the valuation date because, pursuant to the statutory presumption of Minn. Stat. § 518.58, subd. 1 (2000), the proper time to value the stock options is at the prehearing settlement conference. Alternatively, husband argues that because of market fluctuations, the trial court should have used a "moving average" valuation based on market value between the filing date of wife's dissolution petition (March 6, 2000), and the day before trial (December 19, 2000). In any case, husband contends the district court erred by using December 19, 2000 as the valuation date for the stock options. We disagree.
"The trial court's method of valuation `is to be affirmed if it has an acceptable basis in fact and principle even though this court may have taken a different approach.'" Balogh v. Balogh, 356 N.W.2d 307, 312 (Minn.App. 1984) (quoting Castonguay v. Castonguay, 306 N.W.2d 143, 147 (Minn. 1981)). This court will not reverse a trial court's asset valuation unless it is "clearly erroneous on the record as a whole." Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d 42, 44 (1975).
Minnesota law requires the district court to make a "just and equitable" division of marital property after considering all relevant factors. Minn. Stat. § 518.58, subd. 1 governs determination of the valuation date and provides, in relevant part:
The court shall value marital assets for purposes of division between the parties as of the day of the initially scheduled prehearing settlement conference, unless a different date is agreed upon by the parties, or unless the court makes specific findings that another date of valuation is fair and equitable.
Id. (emphasis added). A trial court enjoys broad discretion in setting the marital property valuation date. Grigsby v. Grigsby, 648 N.W.2d 716, 720 (Minn.App. 2002); Desrosier v. Desrosier, 551 N.W.2d 507, 510 (Minn.App. 1996).
The trial court recognized that the valuation date was relevant only to the stock options and the 401(k) "equalizer." The 401(k) could be divided, allowing the parties to share any gains or losses that occurred while the dissolution was pending. But husband's stock options were nontransferable and could not be divided equally between husband and wife so that each party shared earnings or losses. Only by using the later valuation date for the stock options could the district court cause the parties to also share losses or gains on the stock options. Thus, in an effort to be just and equitable, the district court valued the stock options when they were at their highest value — December 19, 2000, the day before trial.
The record indicates that the stock options increased in value from approximately $26,695 on October 25, 2000 to $81,676 by the date of trial, December 19, 2000.
Although Minn. Stat. § 518.58, subd. 1, provides a presumption that the prehearing settlement conference date is the proper valuation date, the statute specifically contemplates the use of multiple valuation dates. Here, the district court complied with the statute by making specific findings explaining why it chose December 19, 2000, as the valuation date. See, e.g., Grigsby, 648 N.W.2d at 720 (upholding trial date as proper valuation date where trial court made specific findings and explained its rationale). Because those findings are not clearly erroneous on this record, we conclude that the trial court acted within its discretion in selecting December 19, 2000, as the marital property valuation date for the stock options.
II.
Husband next argues that the trial court erred when it credited wife's award $7,000 and subtracted $7,000 from husband's award to reflect husband's $7,000 mutual fund advance prior to entry of decree. We agree.
While district courts have broad discretion in the valuation and distribution of assets, this discretion is not without limits; decisions on the division of assets must be supported by either comprehensive findings or clear documentary or testimonial evidence. Ronnkvist v. Ronnkvist, 331 N.W.2d 764, 766 (Minn. 1983). While it is desirable to equally divide marital assets of a long-term marriage, "mathematically equal division is never mandated by law * * * division need only be just and equitable." Varner v. Varner, 400 N.W.2d 117, 122 (Minn.App. 1987).
The mutual fund in question is among the equally-divisible marital assets and husband is entitled to half the advance, $3,500. While the trial court intended an equal distribution, crediting wife's award $7,000 resulted in a greater than 50% share of this marital asset. This was error. At oral argument, wife's attorney held a cashier's check from husband for $3,500 for wife's share of his mutual fund advance, but waited to cash it pending resolution of this appeal. One expeditious way to correct the mathematical error is for wife to accept the cashier's check in full payment for her share of this mutual fund, and for the trial court to amend the balance sheet in its decree to reflect wife's receipt and acceptance of these funds. We reverse and remand for correction consistent with this opinion.
III.
Husband next argues that the trial court erred by amending its original findings and valuing the stock options on a pre-tax basis, ignoring evidence that a tax liability was an absolute certainty regardless of when the stock options were exercised. We agree.
Generally, it is within the district court's discretion to consider the tax consequences of a distribution. O'Brien v. O'Brien, 343 N.W.2d 850, 854 (Minn. 1984). But the district court should not consider tax consequences when to do so amounts to speculation. Miller v. Miller, 352 N.W.2d 738, 744 (Minn. 1984).
Here, the trial court listed the value as the amount of taxes, $21,236 ($81,676 x 26%), rather than including the stock options in the marital estate at their after-tax value of $60,440, ($81,676 ($81,676 x 26%)). On July 19, 2001, wife moved to correct this mathematical error in the trial court's calculation of the value of the stock options. Prior to the hearing, wife amended her motion asking the court to value the 401(k) at the same tax rate as the stock options or, in the alternative, disregard the tax consequences of each asset. While no evidence of the probable tax consequences of the 401(k) was presented at trial, husband presented evidence, at trial, that the stock options would be taxed at the capital-gains rate of 26 percent. Reversing its earlier ruling, the trial court ruled that both the stock options and 401(k) should be treated equally, and accordingly re-valued the stock options on a pre-tax basis.
Because the trial court made its original findings based on evidence of probable tax consequences, we conclude the trial court abused its discretion when it disregarded this testimony, as well as its original findings, and re-valued the stock options on a pre-tax basis. We reverse and remand for the trial court to correct the balance sheet in its decree to reflect the after-tax value of the stock options as $60,440, which was its original finding in the May 2, 2001, judgment and decree.
IV.
Finally, husband argues that the trial court erred when it denied his motion for a new trial on the basis of newly discovered evidence. Husband claims that only after trial did he learn that, as a retiree, he would have to pay social security taxes when exercising his stock options. On the basis of this newly discovered evidence, husband moved to reduce the stock options' value to reflect his associated tax liability. The trial court denied husband's motion.
The district court has the discretion to grant a new trial, and we will not disturb the decision absent a clear abuse of that discretion. Halla Nursery, Inc. v. Baumann-Furrie Co., 454 N.W.2d 905, 910 (Minn. 1990). A new trial may be granted on all or part of the issues based on newly discovered material evidence, which with reasonable diligence could not have been found and produced at trial. Minn.R.Civ.P. 59.01(d).
The "newly discovered" social security tax information appears in husband's handbook, Management Stock Ownership Program, which husband produced during discovery. Husband admits he researched the consequences of retirement on his medical insurance, but claims he had no reason to believe retirement carried tax liability as he had exercised stock options prior to his retirement without such consequence. Husband's argument is unavailing. His research revealed that retirement may impact his medical insurance, a benefit he undoubtedly used prior to retirement. We are not persuaded by husband's claim that he could not have discovered the tax consequences of exercising his stock options before trial, especially since this information was readily available to him in his handbook. See LeMieux v. Bishop, 296 Minn. 372, 209 N.W.2d 379 (1973) (concluding manual not "newly discovered" evidence where available before trial).
Because the evidence regarding husband's social security tax liability could have been discovered and was in fact produced before trial, the trial court acted within its discretion when it denied husband's motion for a new trial.