Opinion
No. C9-00-1796.
Filed May 29, 2001
Appeal from the District Court, Wright County, File No. F1-98-2860.
Robert J. Hajek, (for appellant)
Geraldine Carlen Steen, (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
In this dissolution proceeding, appellant husband contends the district court erred as a matter of law by awarding respondent wife all of the marital property and part of husband's nonmarital property. He argues: (a) the district court failed to consider a capital-gains-tax burden when dividing the property; (b) wife's waiver of spousal maintenance precludes a disproportionately large property award in lieu of maintenance; and (c) the district court's finding of hardship under Minn. Stat. § 518.58, subd. 2 (2000) is unsupported by the record. Respondent alleges the district court erred in amending its conclusions of law to deny her motion for attorney fees. We affirm.
FACTS
Appellant Mark Johnson and respondent Terri Johnson were married in 1980. During their 19-year marriage, both parties contributed their time and energy to the operation of the family farm, some of which had been inherited by appellant and some of which they purchased together. The parties had three minor children.
The parties' marriage was dissolved on March 20, 2000. Under the decree, the parties have joint legal custody of all three children: respondent has primary physical custody of the two youngest children and appellant has primary physical custody of the oldest child. Appellant was ordered to pay child support of $105.50 per month until the oldest child (in his primary physical custody) is emancipated, when appellant's child support obligation will increase to $514.20 per month. No appeal has been taken on issues of child custody or support. Respondent waived any claim to spousal maintenance. However, respondent specifically requested that the court consider an award of additional property in lieu of maintenance.
The parties owned several parcels of land on which they had conducted farming activities. While the value of that land had increased significantly over the years of their marriage, the farming operation had not been profitable for several years.
In the initial decree of dissolution, the district court valued the marital property at $330,213.14 and appellant's nonmarital property at $1,227,254.86. The district court awarded respondent the equivalent of all of the parties' marital property (while certain marital assets were distributed to appellant, the district court required appellant to pay the equivalent value of those assets to respondent). In addition, the district court awarded respondent $125,000 from the nonmarital property of appellant and awarded respondent $10,000 in attorney fees and costs.
Appellant moved for amended findings. In its amended findings, the district court found that it had erred in calculating the value of appellant's nonmarital property, overstating it by $272,884. The district court corrected the valuation of appellant's nonmarital property to $954,370.86, reduced respondent's award from the nonmarital property to $110,000 and eliminated the award to respondent for attorney fees.
Appellant challenges the district court's decision to award respondent the entire marital property and to invade appellant's nonmarital property. Respondent challenges the district court's denial of her motion for attorney fees.
DECISION I.
When dividing property from a marriage, the district court has broad discretion. Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981). This court will not overturn the district court's decision regarding distribution of property upon dissolution of a marriage except for a clear abuse of discretion. Aaron v. Aaron, 281 N.W.2d 150, 152 (Minn. 1979).
As to marital property, Minn. Stat. § 518.58, subd. 1 (2000) requires the division to be "just and equitable" based on consideration of all the relevant factors. There is no requirement that property be divided equally, only that the distribution be equitable. Crosby v. Crosby, 587 N.W.2d 292, 297 (Minn.App. 1998), review denied (Minn. Feb. 18, 1999).
As to nonmarital property, Minn. Stat. § 518.58, subd. 2 (2000) authorizes the district court to award up to one-half to the spouse if it finds that such
spouse's resources or property, including the spouse's portion of the marital property * * * [is] so inadequate as to work an unfair hardship, considering all relevant circumstances.
Marital Property
In determining a "just and equitable" division of marital property, the district court is to consider
the length of the marriage, any prior marriage of a party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, needs, opportunity for future acquisition of capital assets, and income of each party. The court shall also consider the contribution of each in the acquisition, preservation, depreciation or appreciation in the amount or value of the marital property, as well as the contribution of a spouse as a homemaker. It shall be conclusively presumed that each spouse made a substantial contribution to the acquisition of income and property while they were living together as husband and wife.
Minn. Stat. § 518.58, subd. 1 (2000). The district court's amended findings demonstrate that it gave consideration to the appropriate factors:
Through the parties' marriage, [respondent] worked hand in hand with [appellant] in the operation of the parties' farming business and made significant contributions. The principal income for the family during the parties' relationship was generated by the family farm, and [respondent's] contributions throughout the parties' long-term marriage were significant in maintaining the farming business, especially the farm's milk production business during their marriage.
In consideration of those contributions, together with the length of the marriage, [respondent's] lack of significant earning history outside the arena of the parties' joint business venture, her current earning capacity in the job market, her lack of marketable skills, the opportunities she has foregone as a result of her contribution to the farming operation, her minimal financial resources from the parties' marital assets, and the length of time it will require her to obtain her college degree, and further, in consideration of [appellant's] substantial non-marital interests and in consideration of the fact that his non-marital assets have substantially increased during the parties' long marriage, it is appropriate that the Court balance the interests of the parties in its equitable division of the parties' marital property. [Respondent's] reasonable needs shall therefore be given priority and [respondent] should be awarded the equivalent of all of the marital assets of the parties as well as approximately $110,000 of the non-marital assets of [appellant].
These findings are supported by the evidence, and the resulting award of the equivalent of all marital property to respondent was not an abuse of discretion.
Nonmarital Property
In determining whether to invade nonmarital property, the court is to consider
the length of the marriage, any prior marriage of a party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, needs, and opportunity for future acquisition of capital assets and income of each party.
Minn. Stat. § 518.58, subd. 2 (2000). The district court must make specific findings of unfair hardship before it can apportion nonmarital property. Id. Here, the district court made such findings. After the lengthy findings referenced above, the court added:
[Appellant] will receive a total of $858,384.00, plus interest at nine percent, as a result of the sale of the 80 acres of farmland known as the "Stickney" property. [Appellant's] total non-marital assets amount to $954,370.86. This Court finds that the failure to award [respondent] a portion of the cash proceeds received as a result of the "Stickney" sale would work an unfair and undue hardship after the dissolution. This Court therefore, finds that it is appropriate to award to [respondent] $110,000 of [appellant's] non-marital assets. (Emphasis added.)
The district court further found:
[T]o avoid undue hardship on [respondent] following the dissolution, and in consideration of the fact that she is the primary physical custodian of two of the parties' children, is going to school part-time, and her reasonable monthly expenses exceed her net monthly earnings, the Court finds that it is fair, just and equitable to invade the non-marital portion of the proceeds of the [sale of appellant's property] in the amount of $110,000.
The district court's division of property awarded respondent property valued at $440,263.40 and awarded appellant property valued at $844,370.86. While the district court's award to respondent was generous, the district court's findings satisfy the statutory prerequisites for such an award and we conclude it was not an abuse of discretion.
Our review of precedent has not uncovered a case that is so factually similar as to be controlling authority. Generally, it can be said that a significant disparity in property between the parties is required to sustain a finding of unfair hardship necessary to apportion nonmarital property. Ward v. Ward, 453 N.W.2d 729, 733 (Minn.App. 1990) (evidence was insufficient to establish unfair hardship where husband's financial situation was more precarious than wife's), review denied (Minn. June 6, 1990). Here, without invading the appellant's nonmarital assets, respondent would receive property valued at $330,213.14 and appellant would receive property valued at $954,370.86. Since respondent's earnings do not cover her living expenses, and respondent has waived the spousal maintenance she would otherwise be entitled to, this disparity provides a sufficient evidentiary basis for a finding of unfair hardship.
In reaching this conclusion, we are guided somewhat by Frederiksen v. Frederiksen, 368 N.W.2d 769 (Minn.App. 1985), which similarly involved a long-term marriage of parties who operated a family farm. There, the husband's nonmarital property was valued at $265,248, while the parties' marital property was valued at only $56,198. Id. at 772. The court of appeals held that the district court did not abuse its discretion when it awarded the wife all of the marital property, $1,000 per month as spousal maintenance and $26,000 of the husband's nonmarital property. Id. at 775. Appellant would distinguish Frederiksen because the wife in that case suffered from serious emotional and physical disabilities. Id. at 772. While that fact was present in Frederiksen, it is not a prerequisite to the apportionment of nonmarital property. Under section 518.58, subdivision 2, the "health" of each party is only one of several factors to be considered in determining unfair hardship.
Appellant argues that this case is factually more similar to Erdahl v. Erdahl, 384 N.W.2d 566 (Minn.App. 1986). In Erdahl, the parties had been married for 32 years and spent the majority of their married life working together on the family farm. Id. at 567. The district court valued the marital property at about $175,000 and the husband's nonmarital property at about $330,000. Id. at 569. The district court awarded the wife 89% of the marital estate and permanent spousal maintenance of $500 per month, but declined to invade the nonmarital estate. Id. This court upheld the district court's property division, finding that it was not an abuse of discretion to refuse to invade nonmarital assets when the wife was receiving the majority of the marital assets and permanent maintenance. Id. at 570. The award of permanent maintenance recognized that the marital property apportioned to the wife was insufficient to provide for her reasonable needs. Id. at 569. In addition, some of the marital property awarded to the wife had income-producing potential. Id. Erdahl is, of course, distinguishable from this case. First, while it affirmed the district court's discretion to deny invasion of the nonmarital property, it did not suggest that such denial was required as a matter of law. Id. at 571. Second, it recognized that the district court had provided spousal maintenance to meet some of the wife's needs. Id. at 570. Here, respondent will not receive spousal maintenance to address her reasonable needs. Instead, her needs were addressed solely through the property division. This use of nonmarital property to provide for a spouse's reasonable needs is recognized by the statute, which directs the district court to consider both the "amount and sources of income" and the "opportunity for future acquisition of capital assets and income" when determining whether to invade nonmarital property. Minn. Stat. § 518.58, subd. 2. Given the unpredictability of appellant's income, the district court's decision to address respondent's needs by invading appellant's nonmarital property was a proper exercise of discretion.
Other Issues
Appellant raises two specific challenges to the district court's property division: that the district court failed to consider the capital-gains-tax consequences of the sale of one parcel and that respondent's waiver of spousal maintenance precluded the award of the entire marital property and a part of appellant's nonmarital property.
Tax consequences
Appellant argues that the district court erred, when valuing appellant's nonmarital property, by failing to consider the tax consequences of the sale of one of the parcels of land. That parcel, called the "Stickney property," abutted a busy highway and became valuable as commercial property. It was sold in 1998 by a purchase agreement under which appellant was to receive gross proceeds of $858,384, plus interest at nine percent per annum on the contract-for-deed balance, through December 19, 1999. Appellant presented testimony that the total capital-gains-tax liability resulting from that sale, due by December 31, 1999, was $213,465. In its amended findings, the district court valued this property at $703,016, representing the proceeds of $858,384 less amounts used to pay the mortgage on the homestead and various bills and taxes, pursuant to specific court orders. The district court did not deduct the $213,465 of capital-gains-taxes, nor did it add any interest income.
Courts have reversed a division of property where the district court failed to consider tax consequences. See, e.g., Aaron v. Aaron, 281 N.W.2d 150, 153-54 (Minn. 1979) (holding that where the sale of real estate "is required or is likely to occur within a short time after the dissolution," the district court should consider the tax consequences of that sale); Reynolds v. Reynolds, 498 N.W.2d 266, 271 (Minn.App. 1993) (holding that the district court abused its discretion in failing to consider capital-gains-taxes that husband would incur when he sold 13-unit apartment for purposes of property division).
Here, the district court did not address the tax consequences of the "Stickney" sale in its original order and did not reflect the tax liability in its valuation of appellant's nonmarital property. However, in its amended findings, the district court specifically addressed this issue, stating:
While the Court has considered that taxes may be incurred by the parties, the Court cannot make an ultimate determination of the taxes that each party will have to pay on assets received pursuant to the property division. It is likely that both [respondent] and [appellant] will have an obligation for some taxes. While it is likely that [appellant] will incur a greater tax burden than [respondent], the Court would note that [appellant] has a substantial source of income whereas [respondent] does not. Even if [appellant] pays all of the $213,465 in taxes he claims are or will be due on the Stickney sale, the distribution to the parties is appropriate and equitable.
Because the district court did consider the tax consequences, balanced the tax burden between both parties and did not include the interest income attributable to the Stickney sale, we conclude that the district court did not abuse its discretion.
Effect of wife's waiver of spousal maintenance
Appellant argues that because respondent waived any claim to spousal maintenance, the district court could not award a disproportionate share of marital
property to respondent in lieu of spousal maintenance and the district court was limited as to what it could consider in deciding whether a hardship exists for purposes of invading nonmarital property. Appellant cites no authority for this argument and we have found none.
Respondent waived spousal maintenance because appellant's income was unpredictable and any award of spousal maintenance would have been unreliable. In doing so, she did not waive any claims to the marital property or a portion of the nonmarital property. Indeed, she expressly reserved the right to request the award of property in lieu of maintenance, and, on the facts of this case, the district court saw fit the grant that request.
II.
Respondent argues that the district court abused its discretion in denying her motion for attorney fees and costs. The district court's discretion in awarding attorney fees is so broad that "a reviewing court rarely will reverse the trial court's determination." Reinke v. Reinke, 464 N.W.2d 513, 516 (Minn.App. 1990) (citation omitted).
The district court initially awarded respondent $10,000 in attorney fees and costs. After determining that it had overstated the value of appellant's nonmarital estate, the district court ultimately concluded that each party should pay their respective attorney fees and costs. On these facts, the denial of attorney fees does not appear to be an abuse of discretion.