Opinion
No. A05-1966.
Filed August 15, 2006.
Appeal from the District Court, Hennepin County, File No. Dc 280008.
Denis E. Grande, Mackall, Crounse Moore, Plc, (for respondent).
Linda R. Allen, Sarah Westcott Bashiri, Butler, Huson Allen, (for appellant).
Considered and decided by Wright, Presiding Judge; Shumaker, Judge; and Ross, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
In this marriage-dissolution matter, appellant challenges several conclusions of the district court. We affirm the district court's orders regarding the joint legal and physical custody of the parties' minor child, the federal child-dependency tax exemption, the deferred sale and valuation of the marital homestead, and the division of rental income. We reverse its order for reimbursement of property taxes. We also reverse its calculation of appellant's income, appellant's nonmarital interest in the marital homestead, and its decision to exclude one debt from the division of marital property and remand for reconsideration of these three issues and, if necessary, a recalculation of the parties' child-support obligations.
FACTS
Appellant Edward Chapin, a self-employed consultant, and respondent Mary Jane Chaignot, the owner and operator of a senior-care facility, were married in May 1979 and have three children. In 2002, Chaignot petitioned for dissolution of the marriage. At that time, the parties' youngest child was 13 years old; the older children were emancipated. Chapin and the child remained in the marital homestead, a duplex, of which one unit is rented to others. Chaignot moved into the basement of her senior-care facility.
In August 2003, after Chapin expressed concern about the child staying with Chaignot at the facility because of its patients, the district court permitted Chaignot to obtain financing of $60,000 for the purchase of another home, using the marital homestead as collateral. She then bought a home in Brooklyn Park.
In October 2003, an evaluator completed a custody and parenting-time evaluation. The evaluation stated that the parties had reached agreements for joint legal and physical custody of the minor child and holiday and vacation parenting-time schedules. It also reported that the parties would rely on religious counselors to improve their communication and interaction. The evaluator recommended a parenting-time schedule for Chaignot during the school year, when the child resided with Chapin, and a schedule for Chapin during the summer.
The parties went to trial in July 2004 before a family-court referee, who then issued findings and an order in November 2004. Both parties moved the district court for amended findings, and the court ordered the motions to be heard by the original referee. In April 2005, the referee denied the parties' requests with two exceptions irrelevant to the issues on appeal. Chaignot again requested review of the referee's findings, and the district court issued amended findings and an order in August 2005, then issued revised amended findings and an order two days later. Chapin now appeals from the revised amended findings and order.
DECISION
As a preliminary matter, Chapin argues that the district court, in reviewing the referee's findings, should have deferred to the referee's credibility determinations. But "[p]arties in family court matters are entitled to independent review by a family court judge," and the district court can adopt, modify, or reject the referee's findings. Thompson v. Thompson, 385 N.W.2d 55, 57 (Minn.App. 1986.) This court reviews the findings of the district court and will not overturn those findings unless they are clearly erroneous. See id. A finding is clearly erroneous if the appellate court is "left with the definite and firm conviction that a mistake has been made." Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987). We also review the record in the light most favorable to the district court's findings. Lossing v. Lossing, 403 N.W.2d 688, 690 (Minn.App. 1987).
1. Joint Physical Custody
Chapin argues that the parties are unable to cooperate and that the district court abused its discretion by awarding joint physical custody of their minor child. The district court has broad discretion to determine child custody. Durkin v. Hinich, 442 N.W.2d 148, 151 (Minn. 1989); Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). Our review is limited to determining whether the district court abused its discretion by making findings unsupported by the evidence or by improperly applying the law. See Pikula v. Pikula, 374 N.W.2d 705, 710 (Minn. 1985). The district court's findings will be sustained unless they are clearly erroneous. Id.
"Joint physical custody . . . is not a preferred arrangement." Wopata v. Wopata, 498 N.W.2d 478, 482 (Minn.App. 1993). A grant of joint physical custody must be made in the best interests of the child, and the district court is required to make specific findings if it awards joint physical custody over the objection of one of the parties. Minn. Stat. § 518.17, subd. 2 (2004); Frauenshuh v. Giese, 599 N.W.2d 153, 158-59 (Minn. 1999). Awarding joint physical custody is an abuse of discretion when the difficulties between the parents are so significant and pervasive as to preclude cooperation. Greenlaw v. Greenlaw, 396 N.W.2d 68, 74 (Minn.App. 1986). The law "leaves scant if any room for an appellate court to question the trial court's balancing of best-interests considerations." Vangsness v. Vangsness, 607 N.W.2d 468, 477 (Minn.App. 2000).
The district court made findings regarding the best-interests and joint-custody factors required by section 518.17. It found that the child preferred to live with both parents, that the parties have "equally intimate" relationships with the child, that both parents have stable residences, that each parent provides "ample and nearly equivalent love and affection," and that no reason exists "to believe that the parents cannot cooperate and ensure that they each will continue to have frequent and continuing contact with the child." Additionally, the district court found that the parents are "capable and willing to abide by court orders in their child's best interests"; that their desire to mediate disputes through a religious counselor is not "too cumbersome"; that the parties bring different but equally important skills, viewpoints, and values to their minor child; and that they have been cooperating on a parenting-time schedule.
The record supports these findings. The evaluator reported that the parties "reached many agreements including a holiday schedule, vacations and sharing legal and physical custody." Both parties indicated that they can cooperatively make major decisions regarding the child's religion and assured that the other party would have "frequent and continuing contact" with the child. The evaluator did not observe that either party interfered in the other's parenting time. Although the evaluator was concerned that Chaignot's "bitterness" towards Chapin might lead to a refusal to cooperate, the evaluator determined that the parties have the ability to cooperate and recommended a highly specific parenting-time schedule to overcome this potential for conflict. The evaluator further determined that the parties can cooperatively make major decisions about the child because of their shared religious and medical beliefs and that the parties have no conflict regarding the child's schooling and culture. The evaluator concluded that Chapin and Chaignot have "an ability to cooperate that supports sharing legal and physical custody."
The minor child also prefers to live with both parents. According to the evaluator, the child wants to live with Chapin during the school year but also wants to "spend lots of time" with Chaignot. In an in-camera proceeding before the referee, the child testified that he prefers to live with each of his parents. He also testified that each of the parties' homes is "good" and that he has adjusted to living in both places. Chaignot testified that she and Chapin have a contentious relationship and, at times, have difficulties in communicating but also testified that the relationship is not "that bad if you take away all the hassling phone calls of the pick up and drop off times." Because the record supports a finding that the parents have the ability to cooperate if they choose to do so regarding the child, and because the child prefers to live with both parents, the district court did not abuse its discretion by ordering joint physical custody. It is apparent that the parties' contentiousness is a matter of choice and reflects their unwillingness to set aside their differences for the benefit of raising a healthy and happy child.
Chapin contends that the evaluator's report should be ignored because the district court "mistakenly" relies on it. He contends that the parties "no longer support" the parenting-time agreement identified in the report because Chaignot requested deviations from the agreement for visitation. But this argument ignores the evaluator's overall impression that the parties could cooperatively raise the child despite their differences, evidence that supports the district court's award of joint physical custody.
Chapin also argues that awarding joint physical custody is an abuse of discretion because the evaluator believes that Chaignot will focus more on her "emotional connection with [the child] than on what is in [the child's] best interest in this area." But Chapin takes the evaluator's statement out of context. The evaluator's conclusion relates to the child's likely desire to spend less time with both parents as he grows older, not, as Chapin asserts, to Chaignot's intent to "maintain a selfish emotional tie to the minor child." The evaluator qualifies his belief with the term "in this area," which indicates that Chaignot will focus more on the mother-child relationship than on the child's desire for increasing independence. This opinion is not a reflection of an inability to parent, and it does not disqualify the evaluator's finding that the parties are able to cooperate regarding the child's best interests.
2. Child Support
a. Hortis/Valento Calculation
Chapin argues that the district court abused its discretion by awarding child support according to the Hortis/Valento formula. The district court calculated each parent's child-support obligation according to the statutory guidelines, reduced each obligation for the time that the child was with the other parent, offset the respective obligations, and ordered Chaignot to pay Chapin monthly support. Chapin's argument, however, is incorrectly premised on the conclusion that the district court abused its discretion by ordering joint physical custody. The district court did not abuse its discretion, and its use of the Hortis/Valento formula is correct. See Schlichting v. Paulus, 632 N.W.2d 790, 792-93 (Minn.App. 2001) (applying the Hortis/Valento formula when joint physical custody is awarded).
b. Chapin's Income
Chapin next argues that the district court erred by using his gross business receipts rather than his individual income-tax filings to determine his income. A determination of the amount of an obligor's income for purposes of child support is a finding of fact and will not be altered on appeal unless clearly erroneous. Ludwigson v. Ludwigson, 642 N.W.2d 441, 446 (Minn.App. 2002). "Income from self employment is equal to gross receipts minus ordinary and necessary expenses." Minn. Stat. § 518.551, subd. 5b(f) (2004). The district court has broad discretion to determine the income of a self-employed parent because "the opportunity for a self-employed person to support himself yet report a negligible net income is too well known to require exposition." Ferguson v. Ferguson, 357 N.W.2d 104, 108 (Minn.App. 1984). The district court may consider cash flow, particularly when the calculation of income is a "difficult task." Schelmeske v. Veit, 390 N.W.2d 309, 311 (Minn.App. 1986). The court can also consider a person's lifestyle when it is inconsistent with reported income and personal expenses. Johnson v. Fritz, 406 N.W.2d 614, 615-16 (Minn.App. 1987).
The district court calculated Chapin's income from deposits made into the checking account of his business, Morning River, noting that his reported expenses, including private-school tuition, college payments for the parties' older children, and attorney fees for this litigation, evidenced a lifestyle not accurately reflected in his individual tax filings. Chapin testified that his current monthly income was "close" to $3,300. But he also testified that he pays his monthly mortgage and personal expenses out of the Morning River account. Morning River is, in Chapin's words, a "small little shell company," and Chapin conducts no business activity through Morning River. He also testified that he deposited more than $93,000 into Morning River's bank account between April 2003 and October 2003. During his deposition, he was unable to identify the source of many of the deposits, with the exception of deposits for the homestead's monthly rental income. Chapin's 2003 individual tax filing shows an adjusted gross income of $53,000, and his profit-and-loss filing for his business shows gross receipts of only $65,000 and expenses totaling approximately $11,500. Chapin also testified in a deposition that he deposited money into Morning River's account and paid expenses from it because he "wanted to make sure that [Chaignot] had no way of getting into [his] personal account," and he knew that Chaignot could not access the Morning River account. This evidence supports the district court's finding that Chapin uses his corporate account for personal expenses and that his monthly income is not accurately reflected in his individual tax filings.
The district court found that gross deposits into the Morning River account were $115,404 for 2003 and $51,903 for the first half of 2004. Totaling these two figures and dividing by 18 months, the district court calculated Chapin's gross monthly income to be $9,294.84. It then increased his gross monthly income to $10,420, purportedly representing the portion of the homestead's gross monthly rental income that the court also awarded to Chapin. This increase, however, ignores Chapin's testimony that some of the deposits into the Morning River account were rental payments. These rental payments were included in the district court's original calculation of Chapin's gross monthly income; therefore, the addition of the portion of the gross rental income awarded to Chapin means that the district court twice counted the rental income in its calculation. Rather than adding Chapin's award, the district court should have subtracted Chaignot's rental-income award from Chapin's gross monthly income, as determined from his gross business receipts. The district court's finding is clearly erroneous, and we reverse and remand for a recalculation of Chapin's income. On remand, the district court should also recalculate the parties' child-support obligations.
It appears that the district court, when calculating the 2003 deposits into the Morning River account, erroneously included a deposit of $5,084.50 that was made on December 26, 2002, but appears on the January 7, 2003 statement. Additionally, our calculation of deposits made into the Morning River account between January 5, 2004, and June 7, 2004, reveals total deposits of $63,565. On remand, the district court should recalculate the gross deposits made into the Morning River account for the period between January 1, 2003, and June 7, 2004.
Chapin also complains that the district court did not account for self-employment taxes when it calculated his net income. The district court reduced Chapin's gross monthly income by 28%, which it found to be the proper tax deduction. In his prehearing statement, Chapin estimated his gross monthly income to be $3,230, and he deducted $858 for tax withholdings and FICA. This calculates to an overall tax deduction of 26.5%. The district court did not abuse its discretion using a 28% tax deduction.
Chapin further argues that the district court erred by not accounting for his business expenses when it determined his net monthly income. We agree. Self-employment income equals "gross receipts minus ordinary and necessary expenses." Minn. Stat. § 518.551, subd. 5b(f). The district court made no finding regarding Chapin's ordinary and necessary self-employment expenses, even though (1) his tax documents claimed business expenses and (2) the court reduced Chaignot's gross income by 75% for her claimed business expenses. The district court properly determined that the parties' individual tax filings were not reflective of their true incomes. And although the district court can, in its discretion, ignore expenses claimed on tax filings, its failure to make any finding regarding Chapin's business expenses prevents us from meaningfully reviewing this issue and results in a failure of factual support for the decision. See Davis v. Davis, 631 N.W.2d 822, 827-28 (Minn.App. 2001) (concluding that a child-support magistrate's failure to make any finding regarding the business expenses of a self-employed mother is clearly erroneous). The record contains evidence of expenses, but we can only guess why the district court chose to ignore this evidence and implicitly determine that Chapin had no expenses. The court may, in its discretion, determine that Chapin's expenses are neither ordinary nor necessary, or even that he has none, but it must make a finding that explains its reasons for not imputing any expenses. We affirm the district court's use of Chapin's gross receipts to determine his income, but we reverse and remand for additional findings regarding ordinary and necessary business expenses and for a recalculation of his net monthly income. In its discretion, the district court can reopen the record on remand.
c. Child-Dependency Tax Exemption
Chapin next argues that the federal child-dependency tax exemption, which the district court ordered that the parties alternate, should have been exclusively awarded to him because the child resides with Chapin more than Chaignot. Allocation of the exemption is within the district court's discretion. Ludwigson, 642 N.W.2d at 449. The Internal Revenue Code provides that the parent with primary custody of the minor child is entitled to claim the child as a dependent for tax purposes. Rogers v. Rogers, 622 N.W.2d 813, 823 (Minn. 2001) (citing 26 U.S.C. § 152(e)(1) (2000)). But "[t]he code does not preclude state district courts from allocating tax dependency exemptions to a noncustodial parent incident to the determination of child support and physical custody." Id. The district court properly awarded joint physical custody, and it did not abuse its discretion by awarding the tax exemption to both parties.
3. Division of Marital Property
Chapin makes several arguments that the district court abused its discretion when it divided the marital property. "District courts have broad discretion over the division of marital property and appellate courts will not alter a district court's property division absent a clear abuse of discretion or an erroneous application of the law." Sirek v. Sirek, 693 N.W.2d 896, 898 (Minn.App. 2005). A district court abuses its discretion if its findings are "against logic and the facts on record." Rutten, 347 N.W.2d at 50.
a. Deferred Sale of Marital Homestead
Rather than determining the value of the homestead, the district court ordered that it be sold after the minor child graduated from high school and the proceeds split between the parties. Chapin contends that this is an abuse of discretion. "Minnesota courts frequently have approved of awarding possession of the homestead to the custodial parent and postponing its sale until the children are emancipated." Goar v. Goar, 368 N.W.2d 348, 351 (Minn.App. 1985) (citations omitted). "Deferring the sale `operate[s] to encourage the continued occupancy of the homestead by the parties' minor children.'" Id. (quoting Kerr v. Kerr, 309 Minn. 124, 127, 243 N.W.2d 313, 315 (1976)) (alteration in original). The district court found that the home was the parties' only substantial asset, a finding that neither party disputes. Chapin submitted a comparative-market analysis, which listed the home's value between $515,000 and $600,000. Chaignot also submitted a comparative-market analysis projecting a sales price between $750,00 and $759,000. In the in-camera hearing before the referee, the child stated his desire to remain in the marital homestead. Given the parties' lack of substantial assets, the disparity between their valuations, and the child's wish to remain in the homestead, the district court did not abuse its discretion by ordering a deferred sale.
Chapin's view of the case law regarding the ordering of the sale of a homestead is misguided. Citing Goar, he argues that a deferred sale is appropriate when the homestead is the only substantial asset of the parties, neither party can afford to maintain it, and neither can pay the other party his or her share of the marital equity. Chapin contends that the district court abused its discretion because the decision to sell the homestead "was not based upon extraordinary circumstances." But Goar involved the immediate sale of a homestead. Goar, 368 N.W.2d at 351. This court concluded that the district court abused its discretion in Goar because it made no finding regarding the impact that an immediate sale would have on the parties and on the best interests of the minor children. Id. Here, however, the district court ordered the deferred sale of the homestead, which, because of the minor child's wish to remain in the homestead, also serves the child's best interests.
b. Rental Property
Chapin next argues that awarding Chaignot rental income derived from the marital homestead is an abuse of discretion. The district court determined that one-third of the gross rental income be reserved for expenses related to the rental unit and awarded each party one-half of the net rental income. Under its order, Chapin could request that Chaignot pay one-half of any additional expense, provided that it was documented and subject to an accounting. Because sale of the homestead was deferred until the emancipation of the parties' youngest child, the district court concluded that "the homestead and the rental income from the homestead remain marital property pursuant to Minn. Stat. § 518.54, subd. 5 — the future sale date being the valuation date of the property."
Rent collected from the homestead after dissolution proceedings commence is marital property under Minn. Stat. § 518.54, subd. 5. Wanglie v. Wanglie, 356 N.W.2d 850, 851-52 (Minn.App. 1984), review denied (Minn. Feb. 6, 1985). Chapin contends that the district court erred by including the rental income as income because "gross rent is not income as defined by Minn. Stat. § 518.551, subd. 5b(f)." Chapin's claim is misplaced. Section 518.551, subdivision 5b(f), sets forth only the method for determining income for self-employment purposes. The definition of "income," however, is contained in a different section and includes "any form of periodic payment to an individual." Minn. Stat. § 518.54, subd. 6 (2004). Rental income is clearly one form of a periodic payment that Chapin and Chaignot receive.
Chapin also claims that the district court "arbitrarily decid[ed] that one-third of the rent received each month would cover normal expenses." But the district court's order requires that Chaignot pay one-half of additional expenses related to the rental property. Therefore, the order covers all expenses related to the rental property and is not as static as Chapin argues.
Chapin further contends that he should receive all of the rental income because he was awarded "all right, title, and interest" in the marital homestead, as well as "sole responsibility for maintaining the property," and because rental income is the primary means of maintaining the homestead's mortgage. The district court, however, determined that rental income from the homestead remained marital property until the homestead was sold. The district court can select any date for valuation of marital property, provided it makes specific findings that the date is fair and equitable. Minn. Stat. § 518.58, subd. 1 (2004). Here, because of the disparity between the value estimates submitted by the parties, the district court found that the date of the sale of the homestead would accurately reveal its value. It also ordered that Chaignot, while receiving a portion of the rental income, would also be responsible for a portion of the expenses. From these facts we cannot conclude that this distribution was unfair and inequitable, and the district court did not abuse its discretion by awarding Chaignot one-half of the net rental income.
c. Chaignot's Residence
Chapin next argues that the district court abused its discretion by awarding Chaignot the equity in her Brooklyn Park residence, asserting that it was acquired while the parties were still married using the marital homestead as collateral and while he paid Chaignot maintenance. In August 2003, a referee granted Chaignot's request to obtain $60,000 from her portion of the marital homestead's equity to purchase her own home. Chaignot then obtained financing with that money, using her new home and the parties' marital homestead to secure the loan. The district court found that Chaignot purchased the Brooklyn Park residence in September 2003, after the parties' separation in June 2003, and concluded that the "most fair and equitable valuation date would be the date of the separation [making] this property non-marital."
"Whether property is marital or nonmarital is a question of law, but a reviewing court must defer to the trial court's underlying findings of fact." Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997). Property acquired after the valuation date is nonmarital. Minn. Stat. § 518.54, subd. 5. The district court has broad discretion in setting the valuation date for marital property. Desrosier v. Desrosier, 551 N.W.2d 507, 510 (Minn.App. 1996). The court is directed to value marital property at the time of the initially scheduled prehearing settlement conference but is free to select another valuation date that is "fair and equitable." Minn. Stat. § 518.58, subd. 1.
The record does not show that there was a prehearing settlement conference. Chaignot purchased the Brooklyn Park residence after the parties separated and, in part, because of complaints from Chapin that the parties' minor child did not want to stay with Chaignot at the senior-care facility. This court has held that it is not an abuse of discretion to set the valuation date as the date of separation when the parties do not hold a prehearing settlement conference. See Desrosier, 551 N.W.2d at 510. The district court did not abuse its discretion by using June 2003, the date of the parties' separation, as the valuation date. And because Chaignot purchased the Brooklyn Park home after the valuation date, it is nonmarital property. Therefore, the district court did not err by concluding that it is nonmarital.
d. Nonmarital Interests in Marital Homestead
The district court found that Chaignot provided $10,000 for the purchase of the homestead, which occurred before the parties married, and Chapin provided $3,300 in cash and a contract for deed worth $8,700. It determined that Chapin's $3,300 was a nonmarital contribution but that the contract for deed was paid off during the marriage and, therefore, was marital. Chapin argues that this determination of his nonmarital interest is unsupported by the evidence. We will affirm the district court's finding unless it is clearly erroneous. Thompson, 385 N.W.2d at 57.
At trial, Chaignot first testified that she could not remember how much money Chapin put down for the purchase of the homestead. When asked again, she responded that it was $12,000. On cross-examination, she testified that part of Chapin's down payment was a contract for deed but that she did not know whether the contract for deed was "part of the [$12,000] or outside the [$12,000]." In a deposition before trial, Chaignot stated that she did not know if Chapin's $12,000 contribution included a contract for deed. But she also said that she knew that Chapin was "short for the down payment" and that "there was also a contract for deed at the last minute" for either $6,700 or $8,700. Chapin argues that his entire $12,000 contribution is nonmarital. The 1977 purchase agreement for the marital homestead indicates that $22,000 was provided at closing, which included "$8,700.00 . . . by a contract for deed payable in monthly installments of $100.00 commencing on the 1st day of June 1977."
While the parties' testimony is conflicting, we review the record in the light most favorable to the district court's findings. Lossing, 403 N.W.2d at 690. We do not reweigh conflicting evidence on appeal. Vangsness, 607 N.W.2d at 475. Chaignot's testimony and the purchase agreement provide sufficient evidence to support the district court's finding that the contract for deed was worth $8,700. But the district court made no finding regarding the payments made on the contract for deed. Real or personal property acquired before marriage is nonmarital. Minn. Stat. § 518.54, subd. 5. Nonmarital property becomes marital if it is commingled with marital property and is not readily traceable. Olsen, 562 N.W.2d at 800. As stated in the purchase agreement, payments on the contract for deed commenced in June 1977, but the parties were not married until May 1979. The record shows that Chapin provided the contract for deed, and the purchase agreement contains only his name, not Chaignot's. The record contains no evidence that Chaignot and Chapin jointly made payments on the contract for deed before they married. In fact, Chaignot testified that she had no knowledge that the $12,000 provided by Chapin came from somewhere other than Chapin. The district court's assumption that the contract for deed was paid off with marital funds has no reasonable basis in the record and is erroneous, and we reverse its calculation regarding Chapin's nonmarital interest in the homestead. On remand, the district court can reopen the record to receive evidence regarding payments toward the contract for deed.
e. Present Dollar Value of Nonmarital Interests
Chapin further contends that the district court erred by failing to calculate the present dollar value of each party's nonmarital contribution to the homestead, a consequence of its decision to order a deferred sale. The district court determined that Chaignot's nonmarital contribution was 11.78% of the home's value and that Chapin's nonmarital contribution was 3.8%. The district court then ordered that a "credit to each party for an amount equal to their respective non-marital interests in the homestead" be subtracted from the gross proceeds of the homestead after its future sale. "The present value of a nonmarital asset used in the acquisition of marital property is the proportion the net equity or contribution at the time of acquisition bore to the value of the property at the time of purchase multiplied by the value of the property at the time of separation." Brown v. Brown, 316 N.W.2d 552, 553 (Minn. 1982). The district court determined that the value of the homestead would be determined upon a future sale, a decision that we have already concluded was within the court's discretion. Therefore, the district court's expression of the parties' nonmarital interests in terms of percentages rather than real-dollar amounts is not an abuse of its discretion.
f. Real-Estate Taxes
Chapin also argues that the district court abused its discretion by reimbursing Chaignot $6,500 paid during the marriage for real-estate taxes on Chapin's nonmarital property in northern Minnesota. We agree. Minnesota's dissolution statues are based on the principle of no-fault dissolution. Part of the purpose of a no-fault statutory scheme is to provide for dissolution of marriage that does not vindicate private rights or punish matrimonial wrongs. See, e.g., Lindh v. Surman, 742 A.2d 643, 646 n. 2 (Pa. 1999). Our courts broadly and liberally construe the dissolution statutes for the purpose of effecting an equitable property settlement between the parties. Janssen v. Janssen, 331 N.W.2d 752, 755 n. 2 (Minn. 1983). But we find no authority that gives a district court discretion to comb through the normal expenses paid during the marriage and reimburse one party for such expenses that may be necessary and related to the nonmarital property of the other.
This conclusion is supported by three features of our dissolution laws. First, the property-division statute requires "a just and equitable division of the marital property of the parties." Minn. Stat. § 518.58, subd. 1. "Marital property" is either real or personal property acquired by the parties during their marriage. Minn. Stat. § 518.54, subd. 5 (2004). To affirm the district court's discretion, we would need to read into these statutes a requirement that "marital property" includes reasonable and necessary expenses agreed to and paid by the parties during their marriage. When statutes are clear — as we believe these statutes to be — we construe them according to their plain and normal meaning. See Molloy v. Meier, 679 N.W.2d 711, 723 (Minn. 2004). It is the legislature's duty, not ours, to add a requirement to a statute that is not plainly there.
Second, even though the district court has discretion to divide the marital estate, Minnesota's marital-property statutes are based foremost on the doctrine of fair and equitable distribution. Equitable distribution recognizes each spouse's contribution to the acquisition of marital property. Ann B. Oldfather, Basic Property Disposition Rules, in Valuation and Distribution of Marital Property § 1.02 (Ann B. Oldfather et al. eds., 2006). But we do not view property taxes paid on nonmarital property as a contribution to the acquisition of marital property. Our statutory scheme strives to foster compromise and is not intended to encourage parties to a marriage to keep track of each and every expense related to nonmarital property in the hope of reimbursement upon dissolution. See Nardini v. Nardini, 414 N.W.2d 184, 188 (Minn. 1987) (stating that "the art of advocacy . . . is not nearly as well-suited to the resolution of family disputes as is the art of compromise"). Permitting a district court to reimburse one party for necessary expenses paid during a marriage and related to the other party's nonmarital property destroys the incentive for compromise, both during the marriage and after a petition for dissolution is filed.
Third, to permit reimbursements for ordinary expenses would circumvent the method our courts have adopted regarding increases to the value of nonmarital property. "Passive" appreciation of nonmarital property, which arises from something other than the effort of the parties, retains its character as nonmarital property. Id. at 192. Conversely, "active" appreciation, which results from the efforts or other assets of the parties to the marriage, is considered marital property subject to division. Id. Here, the district court determined that the only increase in value to Chapin's nonmarital property was passive, a finding that Chaignot does not dispute. Our review of past decisions in which a court concluded that the increased value of nonmarital property was passive reveals no instance of a reimbursement to one party for necessary and ordinary expenses paid toward the nonmarital property during the marriage. Therefore, we reverse the district court's conclusion that Chaignot should be reimbursed for one-half of the property taxes paid on Chapin's nonmarital property during the marriage.
g. Retirement Assets
Chapin's final argument regarding marital property is that the district court abused its discretion by "improperly accounting" for Chaignot's retirement assets. He appears to argue that the district court abused its discretion by ordering Chaignot to pay him one-half of the net value of her IRA account rather than subtracting this amount from money Chapin already owed Chaignot. Given the district court's broad discretion to divide the marital estate, Chapin's argument is unpersuasive and without legal authority, and the court did not abuse its discretion.
4. Debts
At trial, Chapin presented a "debt fact sheet" purportedly showing that between 1983 and 1995, he and Chaignot borrowed money from friends for education and personal expenses and owed money to various attorneys for legal expenses. With interest, Chapin calculated that the parties' debt exceeded $380,000. The district court determined that the debts were legally unenforceable because they are barred by various statutes of limitations and refused to include them in its property division. Chapin now argues that every debt, with one exception, is enforceable and that the district court abused its discretion by not dividing them.
The apportionment of debt in a dissolution proceeding is treated as part of the property division. Korf v. Korf, 553 N.W.2d 706, 712 (Minn.App. 1996). The district court has broad discretion to divide the parties' debt, and we will affirm if the district court's decision has an "acceptable basis in fact and principle." Id. Whether a debt is enforceable is a legal question, which we review independent of the district court's conclusion. See, e.g., Johnson v. Murray, 648 N.W.2d 664, 670 (Minn. 2002) (stating that legal questions are reviewed de novo).
Generally, a six-year statute of limitations applies to contract actions. Minn. Stat. § 541.05, subd. 1(1) (2004); see also Windschitl v. Windschitl, 579 N.W.2d 499, 501 (Minn.App. 1998). But the Uniform Commercial Code applies to negotiable instruments and notes. A "negotiable instrument" is an unconditional promise to pay a certain sum of money, which is payable to bearer or to order when issued or in possession of the holder and is payable on demand or at a definite time. Minn. Stat. § 336.3-104(a) (2004). An instrument is considered a "note" if it is a promise. Minn. Stat. § 336.3-104(e) (2004). A cause of action against the maker of a note accrues on the date of the loan unless a different intention is shown by the note. Troup v. Rozman, 286 Minn. 88, 90, 174 N.W.2d 694, 696 (1970). Enforcement of a debt evidenced by a note that is payable at a definite time must be commenced within six years after the due date stated in the note. Minn. Stat. § 336.3-118(a) (2004). But if the debt is payable only on demand, the statute of limitation commences when actual demand is made. In re Estate of Dahle, 384 N.W.2d 556, 559 (Minn.App. 1986) (citing Bannitz v. Hardware Mut. Cas. Co., 219 Minn. 235, 237, 17 N.W.2d 372, 373 (1945)). Demand must be made within a reasonable time, normally six years, but "where the parties contemplate a delay in making the demand to some indefinite time in the future, the statutory period for bringing the action is not controlling." Id. If such demand is made, an action to enforce the obligation must be commenced within six years after demand. Minn. Stat. § 336.3-118(b). "If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten years." Id.
At trial, Chapin produced notes related to four of the alleged debts. The first note, dated September 20, 1991, evidences a $4,000 loan from "Direct Steel Inc." The term of the loan is "[d]emand," and the note does not otherwise indicate a definite date for repayment. Chapin testified that he is not currently paying his debts and that on most of them he has never paid any money. The record contains no evidence that Chapin has ever paid principal or interest on this loan from Direct Steel or that Direct Steel has demanded payment. Because he has not paid principle or interest for a period of ten continuous years, Direct Steel is barred from enforcing this note under section 336.3-118(b), and the district court did not abuse its discretion.
The second note represents a $17,000 loan that Chapin obtained from Robert Pratt. The note is dated August 23, 1994, states that annual interest of 10% will be charged, and that "interest only" is payable annually. The note also states that it is due on August 23, 1997. This debt provides for a specific time at which it is due, and enforcement is barred six years after this due date. Minn. Stat. § 336.3-118(a). Therefore, Pratt can no longer enforce this debt, and the district court did not abuse its discretion by excluding it from the property division.
The third note shows that Chapin borrowed $10,000 from Mary Ed Bol on May 18, 1992. The term of the note is six months. Chapin promised to pay Bol, beginning on May 18, 1992, and "continuing until the Promissory note is fully paid, interest on the outstanding balance at the rate of ten percent (10%) per annum, with an interest payment due on . . . August 18, 1992." The record indicates that Chapin made an interest payment of $250 in August 1992 but made no other payments. In August 2001, Bol's attorney sent Chapin a letter "to collect on a Promissory Note." But the note states that it was due six months after its making in November 1992. The note is unenforceable because Bol did not bring an action within six years after its due date, and the district court did not abuse its discretion.
The final note was signed and notarized on April 8, 1998, in which Chapin promises to pay attorney Frank Mabley a principal balance of approximately $77,000 "due and payable on or before August 2002 together with interest at 7%." The note states that it "replaces the earlier note dated September 24, 1990, and is given in exchange for it." Because the 1998 note required payment by August 2002, Mabley has until August 2008 to commence an action to enforce this debt. See Minn. Stat. § 336.3-118(a). Therefore, the district court erroneously concluded that this debt is unenforceable. Because this conclusion has no acceptable basis in fact or law, the district court abused its discretion by excluding the debt from the marital estate. On remand, the district court may reopen the record to consider whether the debt is marital property.
Chaignot argues that when Chapin signed the 1998 note to Frank Mabley, enforcement of the original 1990 note was barred by the statute of limitations and that, therefore, the 1998 note is an unenforceable contract because it was signed without consideration. Chaignot is incorrect. "[T]he running of a statute of limitations on a debt does not extinguish the debt but merely bars the remedy for the recovery of the debt." Jay M. Zitter, Annotation, Necessity and Sufficiency, In Order to Toll Statute of Limitations as to Debt, of Statement of Amount of Debt in Acknowledgment or New Promise to Pay, 21 A.L.R. 4th 1121, 1124 (1983). An acknowledgment of a debt tolls the statute of limitations and starts it running anew on the date of the acknowledgment. Reconstruction Fin. Corp. v. Osven, 207 Minn. 146, 148-49, 290 N.W. 230, 231 (1940). "And it is immaterial whether the acknowledgment precedes or follows the bar of the statute of limitations on the debt." Id. at 149, 290 N.W. at 231. An inquiry into whether there was consideration is irrelevant, as Chapin legally acknowledged the debt and renewed the statute of limitations by signing the 1998 note.
Chapin provides no promissory notes for the remaining debts that he claims. These purported debts are controlled by the general six-year statute of limitation. See Minn. Stat. § 541.05, subd. 1(1). Chapin testified that the debts were not incurred within the last six years, that he is not currently paying the debts, and that on most of them he has never paid any money. Enforcement of these debts is now barred by the general statute, and the district court did not abuse its discretion by excluding them from the marital-property division.