Opinion
No. A04-420.
Filed February 1, 2005.
Appeal from the District Court, Hennepin County, File No. Dc 268365.
Michael Ormond, Ormond Zewiske, Minneapolis, Mn, (for appellant).
Kathleen M. Picotte Newman, Joani Chalman Moberg, Larkin Hoffman Daly Lindgren, Ltd., Minneapolis, Mn, (for respondent).
Considered and decided by Toussaint, Chief Judge; Schumacher, Judge; and Minge, 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This opinion will be unpublished and may not be cited except as provided by Minn.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UNPUBLISHED OPINION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 proceeding, appellant John Mazzitelli challenges the district court's decision awarding respondent Sherri Mazzitelli a cash property settlement of $164,904.50 and $10,000 in attorney fees. To arrive at its decision, the district court invalidated portions of the parties' ante, premarital agreement (PMA). The PMA provided, in part, that (1) neither party would have a claim to property acquired by the other spouse during the marriage; (2) neither party would be responsible for the other's debts; (3) upon dissolution, spousal maintenance would not be awarded; and (4) neither party would be responsible for the payment of attorney fees to the other party.
The district court, using a summary-judgment standard, as stipulated to by the parties, issued an order that upheld the PMA provisions on spousal maintenance but invalidated the provisions on property division and conduct-based attorney fees. Appellant argues that the district court erred because the PMA provisions on property division and attorney fees were procedurally and substantively fair at their inception. Because we hold that the district court correctly determined that the provisions were substantively unfair at the time of enforcement and did not abuse its discretion in awarding conduct-based attorney fees, we affirm. We also grant respondent's motion for attorney fees on appeal.
DECISION I.
Posttrial Motions
Respondent moves to strike various arguments from appellant's brief. While a general statement of this court's scope of review is recited in Minn. R. Civ. App. P. 103.04, we generally consider only the issues the record shows were presented to and considered by the district court. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). Here, of the contested portions of appellant's brief, only those mentioning dissipation of marital property and responsibility for marital debts are properly before us. The others were either not raised in the district court or do not affect the judgment, and we strike those portions of the brief.
II.
Validity of PMA Provisions
The district court used a summary judgment standard to hold that the PMA was invalid with regards to property division and attorney fee issues. Summary judgment shall be rendered if the evidence shows that "there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law." Minn. R. Civ. P. 56.03. "On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
A PMA is treated as a contract, and state courts favor such agreements "governing property settlements upon dissolution." Hill v. Hill, 356 N.W.2d 49, 53 (Minn.App. 1984), review denied (Minn. Feb. 19, 1985). State law allows a man and woman of legal age to enter into a PMA as long as "(a) there is a full and fair disclosure of the earnings and property of each party, and (b) the parties have had an opportunity to consult with legal counsel of their own choice." Minn. Stat. § 519.11, subd. 1 (2002). A valid PMA determines the parties' rights in non-marital property and can determine their rights in marital property. See McKee-Johnson v. Johnson, 444 N.W.2d 259, 263-65 (Minn. 1989) (describing legislative history behind PMA statute); see also Minn. Stat. § 518.54, subd. 5(e) (2002) (defining non-marital property as all property "excluded by a valid antenuptial contract"). The party contesting the validity of the PMA has the burden of proof to show that it is unfair. Minn. Stat. § 519.11, subd. 5 (2002).
Minnesota's landmark case regarding antenuptial agreements is McKee-Johnson v. Johnson, 444 N.W.2d 259. While realizing that "parties contemplating marriage are free to contract away [their] statutory rights," McKee-Johnson requires all valid PMA's to be procedurally and substantively fair. Id. at 265. Following Minn. Stat. § 519.11, subd. 1, the supreme court noted that for a PMA to be procedurally fair, the parties must fully disclose their finances and have "unrestrained access" to independent counsel. Id. at 265-66. In this case, the district court found that the PMA was procedurally fair because it divulged the parties' financial assets and the names of the parties' attorneys in the matter. The district court also rejected respondent's claims that she was under duress when she signed the document.
The PMA must also be substantively fair. A substantive fairness inquiry requires review of the PMA both at its original execution and at its enforcement during the dissolution proceeding. Id. at 267. An investigation into a PMA's substantive fairness at its execution must address the possibility of overreaching. Id. Upon enforcement of the agreement, if the parties' original premises "have so drastically changed that enforcement would not comport with the reasonable expectations of the parties at the inception to such an extent that to validate them at the time of enforcement would be unconscionable," the PMA is substantively unfair. Id. In McKee-Johnson, the supreme court noted that the birth of a child during marriage may trigger an inquiry as to whether enforcement of the PMA would comport with the parties' circumstances or make enforcement unconscionable. Id. Finally, the supreme court added that it could not fashion a per se substantive fairness rule, because each case is highly fact-specific. Id.
In this case, the district court found that the birth of the parties' two children constituted a change of circumstances from when the PMA was executed, thus requiring the district court to determine if enforcement of the PMA would be unconscionable. The district court held that enforcement of the PMA's property distribution provisions would be unconscionable because they were "overreaching." To arrive at this conclusion, the district court looked at the parties' financial situation at the time of marriage: respondent had no assets and was $355 in debt while appellant had more than $600,000 in assets developed from his law practice. The parties also exhibited a large age discrepancy; appellant was 41 years old and respondent 27 years old at the time of marriage. The district court then analyzed the circumstances of the marriage — respondent stayed at home with the children for almost ten years while appellant earned all of the wages, which would have been considered marital property but for the PMA. At the time of dissolution, both parties were working and earning their own assets, but, according to the district court, "[t]he antenuptial agreement, if enforced, would have [appellant] retain all of the assets acquired during the marriage without recognition of [respondent's] efforts in their acquisition." In the end, the district court determined that the birth of the parties' two children had a drastic effect on the parties' acquisition of assets during the marriage that made enforcement of the PMA against respondent unconscionable.
Because we are not bound by and need not give deference to a district court's decision on a purely legal issue, Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn. 2003), we now embark on the supreme court's two-prong analysis and review the PMA's substantive fairness at the time of execution and enforcement. At the time the PMA was executed, both parties were working full-time. Despite the parties' unequal financial situations, respondent could not have been unaware that appellant wished to keep both parties' assets separate, as that objective was clearly written into the PMA at section 2.2.2. Further, respondent could not have been unaware of the breadth of appellant's assets, because both parties' financial figures were attached to the PMA. The PMA was thus substantively fair at the time of execution.
The parties had two children during the marriage, but the PMA anticipated this occurrence. Section 2.1.6 of the PMA provides that appellant shall pay respondent for every month that she is not employed full-time, either because (1) respondent stays at home to care for the children or (2) appellant requests her to stay home. Respondent's "salary" in this situation is equal to ten percent of her gross monthly income in the most recent month that she was employed on a full-time basis. Respondent did stay home with the children for approximately nine years. The district court found that the birth of the children drastically changed the parties' foreseeable circumstances from the execution of the PMA to its enforcement and invalidated the PMA's property division provisions.
Respondent argues that section 2.1.6 was only meant for respondent to take a short hiatus from full-time employment, and that dropping out of the workforce for almost ten years to raise the children was unforeseeable at the time the PMA was executed. In the totality of the circumstances, enforcing the PMA against respondent on the basis of section 2.1.6 would be substantively unfair. It was undisputed that at the time of trial, appellant had $50,000 in yearly gross income, more than $1 million in retirement assets, interests in the parties' homestead and a cabin, an ownership interest in his law office, and various personal property and furnishings. Appellant also had substantial interest income and access to investment accounts, from which he paid attorney fees and living expenses. At trial, it was undisputed that respondent had almost $49,000 in yearly gross income, but only $31,000 in retirement assets, a joint tenancy interest in the parties' homestead, and various personal property and furnishings. The reasonable expectations of the parties did not include respondent remaining out of the work force for almost ten years, unable to amass substantial assets, while appellant was earning a regular income and building a financial estate. Therefore, the PMA was substantively unfair at the time of enforcement, and we affirm the district court's ruling invalidating the PMA as it relates to property division.
III.
Property Division
The district court awarded respondent a cash property settlement of $164,904.50. 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. Chamberlain v. Chamberlain, 615 N.W.2d 405, 412 (Minn.App. 2000), review denied (Minn. Oct. 25, 2000). A district court abuses 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). In this case, given respondent's long absence from the work force and her lack of a financial estate, it was not an abuse of discretion for the district court to award her $164,904.50 in marital property.
The district court also found that during the dissolution proceeding appellant withdrew $132,300 from an investment account without respondent's knowledge or consent. After various credits were given to appellant, the district court determined that the dissipation amounted to $108,550. A party to a dissolution proceeding may not dispose of marital assets without the consent of the other party. Minn. Stat. § 518.58, subd. 1a (2002). Because the district court properly invalidated the PMA provisions regarding marital property, the investment account is marital property, and the dissipation statute applies. Therefore, the amount of funds dissipated was properly included in the district court's final property division.
Finally, the district court held that approximately $38,000 of respondent's personal debt was to be considered marital debt. "In dissolution actions, debts are apportioned as part of the property settlement and are treated in the same manner as the division of assets." Lynch v. Lynch, 411 N.W.2d 263, 266 (Minn. App. 1987). Because there was evidence in the record that respondent incurred substantial debts, from finding housing and household furnishings to paying her attorney fees, the district court properly allocated respondent's debts to the marital estate.
IV.
Attorney Fees
Appellant next argues that the district court's $10,000 attorney fee award is an abuse of discretion. An award of attorney fees under Minn. Stat. § 518.14, subd. 1 (2002), "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). Minn. Stat. § 518.14, subd. 1, allows a court to award conduct-based fees "against a party who unreasonably contributes to the length or expense of the proceeding."
Here, the district court twice sanctioned appellant under Rule 11 for alleging that respondent and her attorney were "engaged in a conspiracy to misrepresent information" before the court. To prove his argument, appellant made a motion to compel information that was protected by respondent's attorney-client privilege. Additionally, appellant moved to "strike" the district court's order, made during the pendency of this appeal, holding appellant responsible for fees charged by a financial witness who valued appellant's law practice based purely on information provided from appellant. This evidence of detrimental conduct by appellant provided adequate grounds for the district court to impose conduct-based attorney fees, and we affirm the district court's ruling.
Respondent moves for $13,552.50 in attorney fees on appeal. We grant respondent's motion in part, in the amount of $6,000.