Opinion
No. A03-1816.
Filed June 22, 2004.
Appeal from the District Court, Chisago County, File No. F0-02-1551.
Robert J. Hajek, Warchol, Berndt Hajek, P.A., (for appellant).
Steven A. Sicheneder, (for respondent).
This opinion will be unpublished and PRIVATE may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
On appeal from a judgment dissolving his marriage to respondent Cathy Renee Bentfield, appellant Joseph Kevin Bentfield argues that the district court erred in ruling that funds in a trust account were respondent's nonmarital property where she failed to show that those funds were the nonmarital principal she originally provided for the account, rather than either a marital addition to that principal or the result of marital effort to increase the value of the account. Because the district court did not err or abuse its discretion in awarding the corpus of the account, and any addition thereto, to respondent, we affirm.
DECISION
Whether property is marital or nonmarital is a legal question we review de novo. Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997). We defer to the district court's underlying findings of fact, however, and will set aside those findings only if they are clearly erroneous. Id.; Minn. R. Civ. P. 52.01.
In 1997, while the parties were married, respondent received an inheritance, established an account with the Heartland Trust Company, and deposited the inherited funds, totaling $599,005.44, into the Heartland Account. The parties did not add any funds to the Heartland account that had a marital source. Similarly, no funds that were appellant's nonmarital property were added to the account. Respondent, however, frequently withdrew funds from the Heartland Account to supplement the family's income. On December 31, 2002, the balance of the Heartland Account was $391,110.19. The record in this case is not well developed and the extent to which that $391,110.19 was its original corpus, amounts earned by the corpus, or some type of appreciation of the account, is unclear. On this record, however, all three types of funds can be treated as respondent's nonmarital property.
A. Corpus
Property acquired during marriage is presumed to be marital. Minn. Stat. § 518.54, subd. 5 (2002). Property is nonmarital, however, if it is "acquired as . . . [an] inheritance made by a third party to one but not to the other spouse." Minn. Stat. § 518.54, subd. 5(a) (2002). Here, it is undisputed that respondent's inheritance was nonmarital property. Therefore, any funds in the Heartland account representing its original corpus are respondent's nonmarital property.
B. Interest
Generally, interest earned on nonmarital assets is marital property. Gottsacker v. Gottsacker, 664 N.W.2d 848, 854 (Minn. 2003); Nardini v. Nardini, 414 N.W.2d 184, 194 (Minn. 1987). Where, however, the nonmarital assets are shown to have been kept separate from the marital estate and where there are no marital investment or entrepreneurial decisions made regarding the nonmarital assets, a district court may treat interest earned by the nonmarital assets as nonmarital property. See Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981) (holding savings account established, and bonds acquired, with nonmarital funds, as well as "their accretions during the marriage" were nonmarital property); White v. White, 521 N.W.2d 874, 879 (Minn.App. 1994) (ruling interest earned on annuity account to be nonmarital where the "interest cannot be attributed to efforts of the martial partnership"); Ranik v. Ranik, 383 N.W.2d 431, 435 (Minn.App. 1986) (affirming award of interest earned by separate account established with one spouse's nonmarital inheritance to inheriting spouse), review denied (Minn. May 22, 1986). Here, it is undisputed that the corpus of the Heartland account was kept separate from the marital estate. Also, the district court's finding that the parties did not expend any marital effort to increase the value of the Heartland Account is, on this record, not clearly erroneous. Therefore, it was not inappropriate for the district court to treat any amounts in the Heartland Account representing interest, as respondent's nonmarital property.
C. Appreciation
An increase in the value of a nonmarital asset is appreciation of the asset and can be divided into "active appreciation" and "passive appreciation." Gottsacker, 664 N.W.2d at 853. To the extent that the appreciation is the result of marital effort, it is "active appreciation" and marital in nature. Id., at 854. If the appreciation is not the result of marital effort, it is passive appreciation and remains nonmarital in nature. See id. at 853. Here, as noted, no marital effort was exerted to increase the value of the Heartland Account and no marital funds were deposited into that account. Therefore, the appreciation of the Heartland Account, if any, was not marital and could properly be awarded to respondent as nonmarital property.
D. Marital Property
Lastly, we note that even if some component of the Heartland Account was marital, we would not disturb the district court's property division. While marital property need not be divided equally, it must be divided equitably. Ruzic v. Ruzic, 281 N.W.2d 502, 505 (Minn. 1979); see Minn. Stat. § 518.58, subd. 1 (2002) (requiring equitable division of marital property). In making an equitable division of the marital property, the district court "shall base its findings on," among other things, "the contribution of each [spouse] in the acquisition, preservation, depreciation or appreciation in the amount or value of the marital property." Minn. Stat. § 518.58, subd. 1. Here, the record lacks any indication that appellant contributed to any earnings or appreciation of the Heartland Account. Thus, even if there is a marital component to the Heartland Account, the district court would not have acted inequitably in awarding that marital property to respondent.