Opinion
Nos. A04-1953, A04-1954.
Filed May 31, 2005.
Appeal from the District Court, Ramsey County, File No. F1-97-156.
Timothy W.J. Dunn, (for respondent Linda Johnson).
John P. Guzik, Guzik Law Office, P.A., (for appellant Richard Johnson).
Considered and decided by Dietzen, Presiding Judge; Shumaker, Judge; and Huspeni, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Both parties to this dissolution action appeal and argue that the district court abused its discretion in dividing property and awarding attorney fees. Appellant claims further abuses of discretion in awarding sole legal and physical custody of the parties' children to respondent, in imputing income to appellant, and in awarding respondent a judgment for arrearages of child support from September 2002 until August 2004. Respondent claims an abuse of discretion in compensating appellant for sums respondent removed from the parties' joint accounts. Because the only aspect of the district court's ruling that is not supported by the record is the award of child-support arrearages from February 2004 until August 2004, we affirm with the modification of the judgment for arrearages.
FACTS
Three children were born to appellant Richard Johnson and respondent Linda Johnson during their marriage: a daughter, G., now emancipated, a son, Z., born in 1988, and a second daughter, B., born in 1990.
The dissolution action, commenced in January 1997, has been protracted due to the parties' repeated unsuccessful attempts at reconciliation. When the parties separated in June 1997, respondent remained in the homestead with the children. Appellant, pursuant to a court order, paid child support and spousal maintenance. He eventually moved to a home located a few blocks from the homestead.
In January 2002, appellant was terminated from his job as an actuary, at which he had earned an average annual income of $150,000. He received severance pay until May 2002 and paid child support through August 2002.
A final hearing was held in the summer of 2003, and a decree of dissolution was entered in December of that year. Under the decree, respondent was granted sole legal and physical custody of the two children who were still minors; an annual income of $80,000 was imputed to appellant as the basis for child support; appellant was awarded a nonmarital interest in the homestead and other property and was ordered to pay $20,000 toward respondent's attorney fees; and $15,000 was awarded to appellant from respondent's share of marital assets, because the district court determined that respondent had removed funds from the parties' joint accounts in violation of a court order.
Appellant moved for a new trial or amended findings; respondent moved to have appellant held in contempt for nonpayment of child support and attorney fees. The motion was heard in February 2004. In August 2004, the district court found appellant in contempt for nonpayment and entered judgment for child-support arrearages through August 2004 in the amount of $29,956.80. The district court also amended its findings on two assets worth $102,116 by finding them to be appellant's nonmarital property.
Appeals by both parties were consolidated by order of this court. Appellant challenges the custody award, the imputation of income, the award of attorney fees, the amount of his nonmarital lien on the homestead, and the judgment for child-support arrearages; respondent challenges appellant's nonmarital lien on the homestead, the award of a 401(k) plan and a savings account as nonmarital property, and the offset of $15,000 against her share of the marital property.
Respondent also seeks attorney fees on appeal. Minn. R. Civ. App. P. 139.06, subd. 1, provides that "A party seeking attorneys' fees on appeal shall submit such a request by motion under Rule 127." Respondent did not submit a motion. Therefore, her request is not properly before us and we do not address it.
DECISION
1. Custody
A district court has broad discretion to provide for the custody of the parties' children. Durkin v. Hinich, 442 N.W.2d 148, 151 (Minn. 1989). In fact, current 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). However, the district court must support its custody decision with particular findings. Durkin, 442 N.W.2d at 151.
Here, respondent was granted sole legal and physical custody of the parties' minor children. Appellant claims that the court "failed to make sufficient findings, let alone highly detailed and particularized findings" showing that it had considered the 13 best-interest factors of Minn. Stat. § 518.17, subd. 1 (2004), "in light of the evidence submitted at trial." We see no merit in appellant's claim. The district court devoted over 12 pages of findings to addressing the 13 best-interest factors of Minn. Stat. § 518.17, subd. 1, and to addressing the four factors set forth in Minn. Stat. § 518.17, subd. 2 (2004), which must be applied when joint custody is sought. The findings make frequent reference to the trial testimony of the parties and other witnesses. In his brief, appellant quotes portions of his testimony that conflict with the district court's decision. But the fact "[t]hat the record might support findings other than those made by the trial court does not show that the court's findings are defective." Vangsness, 607 N.W.2d at 474.
In regard to the second factor of Minn. Stat. § 518.17, the reasonable preference of the child, appellant claims that "the district court gave insufficient consideration to the minor child [Z.]'s expressly stated custodial preference." But the district court conducted in camera interviews of both Z. and B. and said that it would "not set forth any part thereof in these findings but only . . . indicate that such in camera interviews are considered in this Court's determination of custody of [Z.] and [B.]."
Appellant also argues that "there was no reason for the district court to not have awarded the parties joint legal custody." We disagree. The district court found that the parties lack the requisite ability to cooperate and mentioned specifically that both parties testified they did not talk to each other, could not agree as to whether Z. should see a particular movie, and that appellant attempted to enroll Z in a different school without consulting respondent. Evidence, including appellant's own testimony, supports the finding that the parties lack the ability to cooperate. Granting sole legal and physical custody to respondent was not an abuse of discretion. See Brauer v. Brauer, 384 N.W.2d 595, 599 (Minn. App. 1986) (noting that because joint physical custody is disfavored, "[i]t conflicts with [the] state of law" to say that its denial is disfavored).
2. Imputation of Income
A district court has broad discretion to provide for the support of the parties' children. Putz v. Putz, 645 N.W.2d 343, 347 (Minn. 2002). Minn. Stat. § 518.551, subd. 5b(d) (2004), requires a district court to calculate child support based on imputed income if "a parent is voluntarily unemployed or underemployed." The district court found that appellant is "voluntarily underemployed and has been so since May 2002" and imputed to him a net monthly income of $4,160.66 and a gross annual income of $80,000. The district court explained:
That estimate is based upon the past ability of [appellant]. He has averaged over the years income of over $150,000.00 gross per year. He earned as late as 2002 [the year in which he was fired in January] $81,000.00+ gross annually.
The [Qualified Rehabilitation Consultant] stated that [appellant] was employable but would have to take less money, between $60,000 and $100,000 gross per year. The mid-point of that range is $80,000.
Appellant was terminated in January 2002. He provided documentation showing that he looked for a job informally, i.e., through networking rather than through an unemployment service or making formal applications, until April 2002. In June 2002, he and two other individuals formed a business; the two testified that appellant worked as an actuary for the business. At the hearing in summer 2003, appellant testified that he had had "zero income" for the past year. But, in response to a court order in the subsequent contempt proceeding, appellant produced a 1099 form for 2003 that indicated the company had paid him $61,610.73. Thus, the record presents inconsistent accounts of appellant's financial status. Given these inconsistencies, it was within the discretion of the court to find that it was not practicable to determine appellant's income. "Under case law, income may be imputed when it is impracticable to determine." Gorz v. Gorz, 552 N.W.2d 566, 569 (Minn.App. 1996) (quotation omitted). The district court did not abuse its discretion in imputing income to appellant.
In her brief, respondent points out that no financial records for this company were produced in response to subpoenas for them. Appellant did not refute this in a reply brief.
The QRC's testimony was also inconclusive. On direct examination, he testified that Minnesota has few openings for actuaries, that appellant faces significant obstacles in finding work as an actuary, and that appellant would probably need to start at a lower salary than he left. On cross-examination, he testified that most companies would start appellant at between $60,000 and $100,000, annually, and that he believes appellant is employable.
3. Homestead
Whether property is marital or nonmarital is a question of law, but this court defers to the district court's underlying findings of fact. Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997). A district court's valuation of an item of property is a finding of fact that will not be set aside unless it is clearly erroneous on the record as a whole. Maurer v. Maurer, 623 N.W.2d 604, 606 (Minn. 2001). District courts have broad discretion in dividing property and setting reasonable valuation dates. Desrosier v. Desrosier, 551 N.W.2d 507, 510 (Minn.App. 1996). Whether to consider tax consequences of a property distribution is discretionary with the district court. Maurer, 623 N.W.2d at 608. Valuation of an asset need not be exact, but the value assigned must be within a reasonable range. Johnson v. Johnson, 277 N.W.2d 208, 211 (Minn. 1979).
Shortly before the parties' marriage in 1980, appellant used $34,000 from a pension plan to make a downpayment on a St. Anthony house he purchased on a contract for deed. When the balloon payment came due in 1983, he took out a mortgage on the house and changed the title so he and respondent were joint tenants. The house was later sold and the parties' homestead purchased with the proceeds. Appellant claimed $44,000 as a nonmarital interest in the homestead. The district court found that $34,000 was credibly traced to the homestead. This sum was used by the district court as the basis for the $67,643 lien awarded to appellant on the homestead. The district court further ordered that the lien will become due, the homestead sold, and the proceeds divided between the parties when the youngest child, now 14, turns 18 or finishes high school.
Appellant does not challenge the finding that $10,000 was not traceable.
The district court used the formula developed in Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981), which "apportions a property's increased equity between marital and nonmarital interests." Freking v. Freking, 479 N.W.2d 736, 739 (Minn.App. 1992).
Respondent challenges the lien, arguing that appellant's $34,000 was transmuted into marital property when appellant gave her a joint tenancy in the St. Anthony house. Minn. Stat. § 518.54, subd. 5 (2004), provides that "[a]ll property acquired by either spouse subsequent to the marriage . . . is presumed to be marital property regardless of whether title is held individually or by the spouses in a form of co-ownership such as joint tenancy. . . ." See also Antone v. Antone, 645 N.W.2d 96, 103 (Minn. 2002) (rejecting argument that party who had purchased homestead prior to marriage "withdrew his nonmarital equity in the homestead by refinancing the homestead"); Pfleiderer v. Pfleiderer, 591 N.W.2d 729, 733 (Minn.App. 1999) (holding that "transferring joint property into one party's name for estate planning purposes does not convert marital property into nonmarital property"); Montgomery v. Montgomery, 358 N.W.2d 169, 172 (Minn.App. 1984) (holding that "the form of ownership is not dispositive of the property's marital or non-marital nature"). But see McCulloch v. McCulloch, 435 N.W.2d 564, 568 (Minn.App. 1989) (testimony showed that party who conveyed his interest in homestead to spouse by creating a joint tenancy was making a gift that "transmuted . . . nonmarital property into marital property" and that "more than a mere legal transference took place"). Here, there was no evidence that appellant intended to make a gift to respondent of his premarriage downpayment on the house, and the district court did not err in deciding that the downpayment, traceable into the purchase of the parties' homestead, was appellant's nonmarital property.
Both parties challenge the value assigned to the homestead and used as a factor in calculating the amount of appellant's lien. Evidence from a real estate agent indicated that the value of the parties' homestead was about $400,000 at the time of trial in 2003, that it had been between $340,000 and $345,000 in July 2001, and that it had been about $265,000 in August 1997. The district court adopted a value of $345,000 and based its calculation of appellant's lien on that figure. Neither party accepts that valuation. Respondent argues that the August 1997 date of valuation, or $265,000, should have been used, thus reducing appellant's lien to $52,003. Appellant argues that the proper figure was the summer 2003 value of approximately $400,000, which would increase his lien to $78,200. Neither party offers any legal support for the argument that a date other than the one selected by the district court should have been used. The district court had broad discretion in determining both values and valuation dates, Desrosier, 551 N.W.2d at 510, and we see no abuse of discretion in the valuation selected by the district court here.
Appellant also raises a broader issue regarding valuation of all marital assets and alleges that the district court abused its discretion by selecting several different dates of valuation for various assets. In view of the parties' several (and commendable) attempts to reconcile during this protracted litigation, we cannot find an abuse of discretion in the decisions of the district court regarding dates of valuation.
Both in its original findings and in denying appellant's motion to amend, the district court erroneously stated that the real estate appraiser, during trial in 2003, valued the homestead at "between $340,000 and $345,000." The record reflects that this was the value in July 2001. The value at the time of trial was testified to be "right around 400,000 presently." We note that the valuation selected by the district court was approximately midway between the parties' individual valuations.
Appellant also argues that the district court abused its discretion in setting the lien at a fixed sum without interest because "[t]he sale of the home may not take place for another five to eight years" and "[the lien] does not award [appellant] any increase in the amount of his non-marital interest in the home." The district court found that "[t]he evidence before the Court does not support the relief in regard to the award of the lien in behalf of [appellant] in which he seeks to have the value of the lien remain open-ended." That evidence included, in addition to appellant's nonmarital lien of $67,643, nonmarital property including a $70,000 interest in a townhouse, real property worth $15,000, and $14,875 in a pension plan: a total of $167,518. Respondent had no comparable award of nonmarital property. In light of this disparity, the refusal to award interest on the homestead lien was not an abuse of discretion. See Schuck v. Schuck, 390 N.W.2d 2, 4 (Minn.App. 1986) (failure to award interest on lien on the homestead was not an abuse of discretion).
We note that Thomas v. Thomas, 407 N.W.2d 124 (Minn.App. 1987), requires district courts to explain by "explicit findings" a decision not to award interest when payment will be delayed. Id. at 127. Here, while no findings pertaining explicitly to the decision not to award interest on the lien were provided, such findings may be easily inferred from other parts of the dissolution decree.
4. Respondent's Attorney Fees
An award of attorney fees under Minn. Stat. § 518.14, subd. 1 (2004), rests within the discretion of the district court. Crosby v. Crosby, 587 N.W.2d 292, 298 (Minn.App. 1998), review denied (Minn. Feb. 18, 1999). Appellant argues that the award of $20,000 to respondent in need-based attorney fees was an abuse of discretion because the district court failed to make sufficient findings. We disagree. The district court found
[b]ased upon [respondent's] current income [of $1,923.24 per month] and her expenses [of $3,849.90 per month], [respondent] does not have the ability to pay all of these fees and costs [$31,236.51] and is in need of contribution from [appellant] towards her attorney fees and costs. The Court finds that [appellant] has the ability to contribute, and should contribute, the sum of $20,000.00 toward [respondent's] attorney fees.
The district court's findings are sufficient to enable this court to conduct meaningful review.
Appellant claims that "[t]here was no conduct on [his part] . . . which warrants an award of fees and costs." However, the fees were awarded on the basis of respondent's need, not of appellant's conduct. Appellant does not argue either that respondent does not need the award or that he does not have the ability to pay it. The award of attorney fees to respondent was not an abuse of discretion.
5. Judgment for Child-Support Arrearages
Under the decree of dissolution, appellant was ordered to pay $1,248.20 monthly in child support as of October 1, 2003; $18,723.00 within ten days for child-support arrearages; and $20,000 within 30 days for attorney fees. At the subsequent hearing in February 2004, respondent sought to have appellant held in contempt for nonpayment of these amounts. In August 2004, the district court issued an order based on findings that
[t]here is no payment for any child support from and after September 1, 2002 to the present, August 5, 2004. . . .
. . . .
11. . . . While it is true that [appellant] did pay child support for the time period from January 1, 2002 through August 2002 totaling $14,023.07, nevertheless he has continued arrearage of $29,956.80, calculated as follows:
1) 2002, four months at $1,248.20 total $4,992.80
2) 12 months at $1,248.20 total $14,978.40 for 2003
3) 8 months at $1,248.20 for a total of $9,885.60 for the year 2004.
12. [Appellant] has made no showing of any payments toward child support after August 31, 2002.
The district court entered judgment against appellant in the amount of $29,956.80.
Appellant claims that the district court abused its discretion because it simply assumed that no payments were made between February 2004, when the hearing was held, and August 2004, when the judgment was entered. There is merit to appellant's argument. No evidence was offered on arrearages after February 2004. Therefore, we modify the judgment of arrearages by reducing it to $22,467.60. Arrearages accruing after February 2004 may, to be sure, be the subject of future litigation. The record before us at present, however, does not support an award beyond February 2004. The judgment for child-support arrearages, as modified, is supported by the record and is not an abuse of discretion.
6. Appellant's Nonmarital Property
Whether property is marital or nonmarital is a question of law, but this court defers to the district court's underlying findings of fact. Olsen, 562 N.W.2d at 800. Marital property is property acquired by either spouse during the marriage and before the valuation date. Minn. Stat. § 518.54, subd. 5. Appellant moved for amended findings that $52,116 in his 401(k) plan and $50,000 in his savings account were nonmarital property. The district court granted the motion and modified the property division under the decree accordingly.
In its order, the district court wrote:
The evidence is that [appellant] managed to save these sums after September 9, 1997, which is the date of the parties' separation. The date of valuation is established as the prehearing conference for September 9, 1997. Accordingly, therefore, these two accounts would appear [to be] non-marital in character.
Respondent argues on appeal that the district court ruled correctly in the decree and erred in its posttrial modification: i.e., that the amounts awarded to appellant in the posttrial motions are the result of "active appreciation" and are therefore marital income. Respondent's argument, however, ignores the district court's subsequent determination that appellant acquired these amounts after the valuation date so that they are nonmarital property. This court defers to the district court's findings of underlying facts in reviewing a determination of the marital or nonmarital nature of property. Olsen, 562 N.W.2d at 800. We see no error in the district court's determination that sums acquired by appellant after the parties' separation are nonmarital.
We note further that respondent does not, in fact, allege that the 401(k) and savings account funds were not acquired after the valuation date. She argues instead that they are a result of active rather than passive appreciation, and she relies on Swick v. Swick, 467 N.W.2d 328, 331 (Minn.App. 1991) (distinguishing active from passive appreciation), review denied (Minn. May 16, 1991), for this argument. But Swick does not support her argument. The Swick court stated:
Upon dissolution, a spouse may receive the original nonmarital asset plus any passive appreciation in value. To illustrate, we consider the example of a painting that a wife brings into the marriage as nonmarital property. Over time the painting appreciates in value. Upon dissolution, the wife receives the painting, now worth more due to its appreciation, as her nonmarital property. The appreciation is not severable from the asset.
Active appreciation occurs when the parties contribute to the asset's increase in value during the marriage. If both spouses have contributed time, effort or money to the nonmarital asset, or have actively participated in its maintenance, improvement or management, then any appreciation may be marital property, divisible upon dissolution.
Thus, if a wife brought to the marriage a piece of real estate to which the couple made no contributions, then, like the painting, the land and its appreciation would be hers upon dissolution. But if the couple participated in the maintenance, improvement or management of the property, then the appreciation would be divisible as a marital asset upon dissolution while the property itself would remain the wife's nonmarital asset.
Id. (citations omitted). Because respondent does not show that she and appellant contributed anything to the disputed assets during the marriage, her active appreciation argument fails.
7. Allottment of Additional $15,000 to Appellant
The district court found that:
[Respondent] removed from joint marital accounts the total of $51,750.00 from 1998 through November 15, 2002. [Respondent] testified that she paid living expenses, tuition, repaired the automobile, put in a sprinkler system in the home, switched out patio sliding doors and window, and repaired the deck on the home. Because this was a marital asset, 50% of this amount would have been awarded to [respondent] or $25,875.00. The home's value has been increased by the improvements done to the home and the parties should be able to see a return on that when the home sells. Because this was in violation of the Court's Order, the Court finds it fair, just and equitable to award [appellant] $15,000.00 more than [respondent] in the final distribution of property.
Respondent argues that the district court did not consider the reason for which she removed the funds and claims she used them to pay child support and maintenance when appellant was not paying them.
If the court finds that a party to a marriage, without consent of the other party, has in contemplation of commencing, or during the pendency of, the current dissolution, separation, or annulment proceeding, transferred, encumbered, concealed, or disposed of marital assets except in the usual course of business or for the necessities of life, the court shall compensate the other party. . . .
Minn. Stat. § 518.58, subd. 1a (2004). During the years in which respondent removed the funds, appellant was paying both child support and maintenance. Therefore, the district court did not err in failing to find that respondent needed these funds to meet the needs of the children and the household, nor did it err in awarding to appellant $15,000 of the $51,750 respondent removed from the parties' accounts.
Because we see no abuse of discretion in the grant of custody, the property division, the imputation of income, and the awards of nonmarital property, we affirm; because we see no support in the record for an award of child-support arrearages for the period following the hearing on the motion for contempt, we modify that award.