Opinion
No. A05-1790.
June 29, 2006. Filed July 11, 2006.
Appeal from the District Court, Dakota County, File No. F00412428.
John T. Burns, Jr., (for appellant)
Julie K. Seymour, Richard P. Ohlenberg, Otten Associates, P.A., (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellant challenges the valuation and division of property and denial of temporary maintenance in this dissolution action. Respondent challenges the denial of his motion for conduct-based attorney fees. We affirm in part, reverse in part, and remand.
FACTS
Appellant Barbara Jean Johnson (wife) and respondent James Martin Johnson (husband) were married in September 1996, separated in May 2002, and began dissolution proceedings in June 2003. Their marriage was dissolved by a decree filed in March 2005. Although the parties stipulated to the value of some of their property, the district court was asked to decide the value of one parcel of real property (the Harwell Avenue property), the existence and value of nonmarital interests in that property, the division of personal property, and wife's request for temporary maintenance.
In this appeal, wife asserts that the district court (1) misinterpreted the parties' agreement with regard to their retirement accounts and erroneously held that the parties had stipulated that each party would receive his or her retirement account without an equalization of the value of the marital interest in those accounts; (2) abused its discretion in its division of personal property; (3) abused its discretion in calculating husband's nonmarital interest in the Harwell Avenue property; and (4) abused its discretion in failing to award her temporary maintenance. Husband notes review of the district court's denial of his motion for an award of conduct-based attorney fees.
DECISION
I. Division of retirement plans
Wife argues that the district court's finding that the parties each agreed to waive any claim to the other's 401(k) plan is clearly erroneous. "[P]ension benefits are property to be considered by the court in exercising its discretion in a property division. . . ." Faus v. Faus, 319 N.W.2d 408, 413 (Minn. 1982). "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 regarding a property division if its findings of fact are "against logic and the facts on [the] record." Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).
Before the start of trial, wife's attorney outlined the parties' agreement regarding their 401(k) plans as follows:
I also understand that we can probably pretty much stipulate to pension values. Mr. Johnson has approximately 28 thousand dollars in his account of which he claims, and we don't contest, that 14 thousand of that is non-martial, leaving 14 thousand as marital.
My client has just less than seven thousand dollars in her account and no non-marital claim is made. So we have a difference between the two of seven thousand dollars. We haven't reached an agreement on what would be the best method to do that but understand that the Court, if there isn't an agreement, would probably just order that there be a [qualified domestic relations order] for the 3,500 dollars to equalize it. Then my client would have ten-five of the marital retirement, he would have ten-five.
We are going to talk about it. . . . I think we can identify for the Court at least there is not a dispute as to the values on those.
. . . .
. . . [H]e's got 14 thousand marital, she's got seven thousand marital. So it's how do we equalize that disparity.
At trial, wife submitted exhibit 12 as her proposal for division of bank and retirement accounts. This exhibit shows the value of husband's 401(k) plan as $21,000 and proposes that each party be awarded his or her plan "free and clear of any claim" by the other party. But the testimony surrounding admission of this exhibit establishes that wife understood that the value of husband's plan is understated on the exhibit; that the parties were still trying to reach an agreement on how the marital interests in the 401(k) plans should be divided, contrary to the position contained in exhibit 12; and that, absent agreement, wife was asking the district court to make the appropriate division.
Husband introduced exhibit 23 as his proposal for division of bank and retirement accounts. Husband's exhibit shows the value of his 401(k) plan as $28,025.42, $13,279.22 of which he claimed as nonmarital, leaving $14,746.20 as the marital interest in his plan. Husband proposed that wife would receive $4,079.55 of his 401(k) plan pursuant to a qualified-domestic-relations order (QDRO). Husband did not offer any testimony concerning division of the 401(k) plans, but Exhibit 33, admitted as his proposed property division, included a payment of $4,079.55 from husband to wife as a pension equalizer if there was no QDRO.
But husband's proposed findings of fact and conclusions of law submitted to the district court after trial contain a proposed finding that the parties "stipulated prior to trial to waive any claim to the other's 401(k) plan, stocks, bonds, pension rights, vested or inchoate, acquired prior to or during the marriage," and a proposed conclusion of law awarding each party his or her interest in the 401(k) and pension plans free of any claim by the other party. There is no support in the record for such a finding or conclusion of law.
Although the district court acknowledged on the first page of the decree that the parties agreed that "the Court could order a QDRO and cash equalizer on any difference in pension values," its finding of fact 31 adopts husband's proposed finding that the parties stipulated to waive any claim to the 401(k) plan or pension of the other party. Its conclusion of law 6 awards each party his or her 401(k) plan free and clear of any claim by the other party. Because there is no support in the record for the finding that wife waived equalization of the marital interests in the 401(k) plans, we reverse the district court's finding of fact 31 and conclusion of law 6 and remand with instructions for the district court to exercise its discretion by equalizing the 401(k) plans by QDRO or cash award.
II. Northwest pension plan
Evidence was introduced that husband also had an interest in a Northwest Airlines pension plan with an unknown value and marital-property interest. Despite wife's proposed conclusion of law submitted to the court that she be awarded 50% of the pension accrued during the marriage pursuant to a QDRO, the district court awarded husband the entire interest in this plan based on the erroneous finding, discussed above, that the parties had agreed to such an award. On remand, the district court shall make findings regarding this asset and exercise its discretion by appropriately allocating the marital portion of this plan. The district court, in its discretion, may reopen the record to obtain additional information about this asset.
III. Valuation and division of personal property
Wife asserts that the district court awarded husband a disproportionate share of the parties' personal property. A district court's valuation of an item of property is a finding of fact, and it 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). An appellate court does not require the district court to be exact in its valuation of assets; "it is only necessary that the value arrived at lies within a reasonable range of figures." Johnson v. Johnson, 277 N.W.2d 208, 211 (Minn. 1979).
Wife's complaint is that the district court adopted husband's values for property in his possession to be retained by him and used wife's values for property husband was ordered to return to wife. She asserts, and husband agrees, that husband used "garage sale values" and she used "new purchase values." Wife argues that the district court "must at least use the same method [husband's method] to value the property" that husband was to return to her. The district court based its valuation on wife's evidence of value, which was the only evidence in the record for the property husband was ordered to return to wife. Because there is evidence in the record to support the district court's valuation of these items of personal property, and the district court has broad discretion in the division of personal property, we cannot conclude that the valuation or division of personal property was clearly erroneous.
Minn. Stat. § 518.58, subd. 1 (2004), provides that the district court "shall value marital assets for purposes of division between the parties as of the day of the initially scheduled prehearing settlement conference, unless a different date is agreed upon by the parties, or unless the court makes specific findings that another date of valuation is fair and equitable."
Wife argues that the district court erred by awarding the parties' border collie to husband without giving her credit for a portion of the dog's value. But the district court determined that the dog is husband's nonmarital property, based on the testimony of husband's brother-in-law that he gave the dog to husband only for Christmas in 2000. Determining whether property is marital or nonmarital is an issue over which we exercise independent review, although deference is given to the district court's findings of fact. Gottsacker v. Gottsacker, 664 N.W.2d 848, 852 (Minn. 2003). Nonmarital property includes a gift from a third party to one spouse alone. Minn. Stat. § 518.54, subd. 5(a) (2004). Because the evidence supports the district court's finding that the gift was to husband alone, the district court did not err in awarding the dog to husband.
Wife also asserts that the district court erred by equalizing the tax refunds for 2002 and 2003, while the parties were separated. She argues the parties "had already divided those funds." Wife provides no evidentiary support for her assertion that the parties had agreed to the division of the tax refunds. Tax refunds can be treated as marital property subject to equitable division. Fitzgerald v. Fitzgerald, 629 N.W.2d 115, 120-21 (Minn.App. 2001); see also Rundell v. Rundell, 423 N.W.2d 77, 81-82 (Minn.App. 1988) (affirming district court's conclusion that tax refunds acquired during the marriage were a marital asset). The parties' filing status for 2002 and 2003 was "married filing separately." We conclude that the district court did not err by treating the tax refunds as marital property and dividing them equally.
IV. Valuation of martial and nonmarital interest in real property
The parties jointly owned property located on Harwell Avenue, which was purchased by husband for $117,000 four years before the marriage. Husband claimed, and was awarded, a 44.6% nonmarital interest in the Harwell property.
The parties disputed the value of the property at the time of trial. The district court found husband's appraiser's valuation of $237,000 to be more credible than wife's appraiser's valuation of $255,000. "[T]he market valuation determined by the trier of fact should be sustained if it falls within the limits of credible estimates made by competent witnesses. . . ." Balogh v. Balogh, 356 N.W.2d 307, 310 (Minn.App. 1984) (quoting Lammi v. Lammi, 348 N.W.2d 372, 374 (Minn.App. 1984)). The district court did not err in determining the market value of the Harwell property at the time of the dissolution. Wife does not dispute that the Harwell property, which was refinanced by the parties during the marriage, had a $168,000 mortgage at the time of the dissolution, as found by the district court.
In adopting husband's calculation regarding the parties' nonmarital interests in the Harwell property, the district court referred to husband's exhibit 33. In exhibit 33, husband used $98,000 as the balance of the mortgage on the property at the time of the marriage. At trial, husband also testified that the mortgage balance was $98,000 when the parties married. Wife asserts that the mortgage balance at the time of marriage could not have been $98,000 based on evidence that when the property was refinanced in 2001, the mortgage was paid off in the amount of $99,365.97. Wife asserts that because "[t]here is no telling how much the encumbrance was on [the Harwell property] at the time of the marriage," husband cannot establish a non-marital interest in the property. But the husband's trial testimony is evidence that the mortgage was $98,000, and the district court's implicit adoption of this amount is not clearly erroneous.
The district court adopted, without discussion, husband's calculation of his nonmarital interest in the Harwell property and his calculation of wife's nonmarital interest in property that she owned prior to the marriage (Aston Circle property). But husband admits that his valuation of the Harwell property at the time of the marriage is based on a $20,000 error and that the correct value, using his method of determining appreciation on the property between the date of purchase and date of marriage, is $157,000, not $177,000 as shown on his exhibit 33, and adopted by the district court. This admitted error makes the district court's finding of husband's nonmarital interest in the Harwell property clearly erroneous.
The $20,000 error is apparent on the face of exhibit 33.
On appeal, wife challenges the method husband used to apportion appreciation between date of purchase and date of marriage, but wife did not raise this challenge in the district court. She used the same method to apportion appreciation on the Aston Circle property. It appears that the parties agreed to this method of determining market values for the Harwell and Aston Circle properties at the time of marriage.
More problematic, however, with regard to calculation of the nonmarital interest in real property owned by each party before the marriage, is failure to use the Schmitz formula to determine the parties' nonmarital interests. See Nardini v. Nardini, 414 N.W.2d 184, 190-95, (Minn. 1987) (applying formula developed in Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981), to property purchased prior to marriage).
In exhibit 15, wife used the Schmitz formula to calculate her nonmarital interest in the Aston Circle property, but the district court, without explanation, rejected wife's proposed calculation. The Schmitz formula depends on three variables: (1) the amount of the nonmarital contribution (a party's net equity at the time of marriage); (2) the value of the property at the time of marriage; and (3) the value of the property at the time of dissolution. Andersen v. Andersen, 374 N.W.2d 499, 502 (Minn.App. 1985) (citing Schmitz, 309 N.W.2d at 750). Under the formula, a party's nonmarital interest is calculated by dividing the party's equity in the property at the time of marriage by the value of the property at the time of marriage, then multiplying the result by the value of the property at the time of the dissolution. See Antone v. Antone, 645 N.W.2d 96, 102 (Minn. 2002) (setting out formula for valuation of nonmarital interest in property acquired prior to marriage).
With regard to the Harwell property, the value of the property at the time of the marriage, correcting for husband's mathematical error, was $157,000, subject to a $98,000 mortgage, giving husband equity in the property of $59,000, or 37.6% ($59,000 divided by $157,000). The value of the property at the time of dissolution was $237,000. Multiplying $237,000 by 37.6% results in husband's nonmarital interest in this property being $89,112, which exceeds the parties' current equity in the property ($69,000) by $20,112. Inexplicably, husband used, and the district court adopted, a formula that multiplied his nonmarital equity percentage in the property by the current equity in, rather than the current value of, the homestead to arrive at his nonmarital interest. We are at a loss to understand the rationale for this calculation.
There is a similar error in the formula proposed by husband and adopted by the district court to calculate wife's nonmarital interest in the Aston Circle property. Under Schmitz, wife's nonmarital interest is equal to her equity at the time of marriage ($51,794.10) divided by the value of the property at the time of marriage ($156,933.10), multiplied by its value at the time of dissolution ($195,500), resulting in $64,522.70 nonmarital interest. Husband's calculation inexplicably determined that $51,794.10 divided by $156,933.10 is 49.2% when, in fact, it is 33.0%. Husband then multiplied the erroneously calculated percentage by the equity rather than the market value of the property at the time of dissolution to arrive at $24,364.94 as wife's nonmarital interest. The district court accepted this figure without analysis. Husband also subtracted $14,571.94 from wife's nonmarital interest because wife received a cash-out payment for refinancing the property in 2001. Wife testified in her deposition that she refinanced the property and used $8,000 of the funds for attorney fees and the remainder to fix the brakes on her car, paint a room in the house, and supplement her living expenses when she was traveling for work. On remand, the wife's nonmarital interest in the Aston Circle property should be calculated without regard to refinancing, absent an explanation of and authority for a different approach. The district court should make findings about what portion, if any, of the proceeds used by wife should be credited against her nonmarital interest in this property rather than her portion of the marital estate.
Although neither party appealed the district court's calculation of wife's nonmarital interest in the Aston Circle property, wife argued that the district court's unquestioning adoption of husband's proposed findings of fact and conclusions of law demonstrated a lack of independent review of the evidence and application of the law. Given the magnitude of the difference between application of the Schmitz formula and the unexplained formula used by husband and adopted by the district court, the interests of justice require that the district court reexamine the determination of the value of the parties' nonmarital interests in both the Aston Circle and Harwell properties. Minn. R. Civ. App. P. 103.04. Cf. State v. Hannuksela, 452 N.W.2d 668, 673-74 n. 7 (Minn. 1990) (addressing appellate court's responsibility to decide cases in accordance with existing law); Greenbush State Bank v. Stephens, 463 N.W.2d 303, 306 n. 1 (Minn.App. 1990) (applying Hannuksela in a civil case), review denied (Minn. Feb. 4, 1991).
Because there are mathematical errors in the district court's calculations and because we do not understand why the district court did not apply the Schmitz formula to determine the parties' nonmarital interest in the Aston Circle and Harwell properties, we reverse the district court's findings with regard to both of these calculations and remand for application of the Schmitz formula, or a legally appropriate explanation of the rationale for using a different method of determining nonmarital interest, and for correction of mathematical errors.
We also reverse the property division and remand with instructions for the district court to make an equitable distribution of the marital property affected by the remand.
V. Rejection of wife's nonmarital claim in Harwell Avenue property
The district court found that wife did not have sufficient documentation of a claimed $5,000 nonmarital interest in the Harwell property. Wife's only argument is that her claim was unopposed and that husband's claim to a nonmarital interest in the property was equally undocumented. Although husband does not dispute that wife's father gave a gift of $5,000 that was used to purchase a furnace and air conditioner for the Harwell property, husband does not concede that the gift was nonmarital and wife did not specifically testify that the gift was to her alone. Based on the limited evidence in the record, we cannot say that the district court abused its discretion in finding that wife failed to establish that the $5,000 was nonmarital. To the extent that the district court's determination was based on its assessment of credibility, we defer to the district court. See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating that deference must be given to the opportunity of the district court to assess the credibility of witnesses).
VI. Visa debt
Wife argues that the district court failed to credit her for paying a Citibank Visa card debt that she claimed was a marital debt. But the district court credited husband's testimony that when the parties refinanced the Harwell property they paid off all credit card debt including a Citibank Visa card. Again, we defer to the district court's credibility determination.
VII. Maintenance
Wife challenges the denial of her request for temporary maintenance, which we review for an abuse of discretion. See Dobrin v. Dobrin, 569 N.W.2d 199, 202 (Minn. 1997). A district court abuses its discretion regarding maintenance if its findings of fact are unsupported by the record or it improperly applies the law. Id. "[T]he district court is not required to make specific findings on every statutory factor if the findings that were made reflect that the district court adequately considered the relevant statutory factors." Peterka v. Peterka, 675 N.W.2d 353, 360 (Minn.App. 2004) (citing Rosenfeld v. Rosenfeld, 311 Minn. 76, 83, 249 N.W.2d 168, 172 (1976)).
The district court found that wife's net monthly income is $2,427 and her reasonable monthly expenses are $2,416. The district court found that husband's net monthly income is $2,803 and his reasonable monthly expenses are $3,586. The district court noted the short duration of the marriage and that each party was self-sufficient and self-supporting during their lengthy separation. It found that both parties are able-bodied persons capable of supporting themselves without contribution from the other party.
The amount of wife's income was disputed. Wife's exhibit showing the calculation of her income omitted per diem income and income from a second job. Although husband at one point indicated that the figure he used for wife's per diem was a "guess," he later testified that the amount was a reasonable estimate based on wife's testimony that she received $48 per day for international travel, $36 per day for domestic travel, and that she traveled approximately three weeks of each month. Furthermore, husband demonstrated through extrapolation from wife's quarterly contribution to her 401(k) plan that wife's income was closer to the figure presented on husband's exhibit than to the figure presented on wife's exhibit. The district court found husband's calculations more credible than wife's calculations, and based on the record we cannot say that the district court's determination of wife's income was clearly erroneous.
The district court reduced the claimed expenses of each party and explained the reductions in its findings of fact. Despite wife's dissatisfaction with the district court's findings regarding her income and expenses, from our review of the record we cannot conclude that the district court's finding that wife is able to be self-supporting is clearly erroneous or that the district court abused its discretion in denying wife's request for temporary maintenance.
VIII. Denial of husband's request for conduct-based attorney fees
Husband argues that the district court abused its discretion when it denied his motion for conduct-based attorney fees. An award of conduct-based attorney fees under Minn. Stat. § 518.14, subd. 1, "rests almost entirely within the discretion of the trial court and will not be disturbed absent a clear abuse of discretion." Crosby v. Crosby, 587 N.W.2d 292, 298 (Minn.App. 1998) (quotation omitted), review denied (Minn. Feb. 18, 1999).
The district court found that wife's failure to attend a court-ordered mediation was an isolated incident that did not give rise to conduct-based fees. The district court also found that husband agreed to proceed by informal discovery and did not seek relief from the court for wife's alleged failure to provide requested documents, such that conduct-based fees were not appropriate for alleged discovery issues. And the district court determined that wife's failure to schedule a settlement conference in a timely manner and her last-minute request for maintenance did not support an award of conduct-based fees. Because the district court clearly considered and made findings on all of the bases raised by husband for an award of conduct-based fees, we cannot conclude that the district court abused its discretion in denying the request. Husband has also moved for need-based and conduct-based appellate attorney fees. Because we conclude that husband is entitled to neither, we deny the motion.