Opinion
No. C9-02-1124.
Filed February 18, 2003.
Appeal from the Dakota County District Court, File No. F7913241.
Ronald B. Sieloff, Sieloff and Associates, P.A., (for respondent)
Kay Nord Hunt, Lommen, Nelson, Cole Stageberg, P.A., (for appellant)
Considered and decided by Shumaker, Presiding Judge, Lansing, Judge, and Minge, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Both parties appeal the district court's orders determining the amount of the lien to be paid by respondent Kathleen Middlecamp, the additional child support to be paid by appellant David Middlecamp, and other expenses to be reimbursed. We affirm in part, reverse in part, and remand.
FACTS
On September 4, 1992, the marriage of appellant David Middlecamp and respondent Kathleen Middlecamp was dissolved. Kathleen was awarded the parties' homestead subject to a lien in favor of David to secure payment for his one-half interest in the property when the youngest child turned 18 or finished high school, whichever occurred later.
The dissolution judgment included the following language regarding the disposition of the property:
Petitioner [Kathleen] is awarded * * * the homestead and adjacent lot * * * :
* * * *
Subject to a lien in favor of respondent [David], to be determined as follows:
The net sales proceeds shall be calculated as follows:
Selling price (fair market value)
Less:
a. Reasonable expenses of sale, including real estate commissions and points, if any. If respondent [David] elects to buy out petitioner's [Kathleen's] equity interest, she will receive credit only for actual costs of financing;
* * * *
c. The cost of any capital repairs or improvements made subsequent to entry of the Judgment and Decree herein, in excess of $500.00.
Divided by two.
By May 2001, the youngest child finished high school and was 18. This triggered Kathleen's responsibility to satisfy the homestead lien in David's favor. In June 2001, Kathleen claimed David owed child-support arrearages, and other expenses, which she argued should partially offset the satisfaction of the homestead lien.
The district court determined that the party references in the buyout were typographical errors and accorded Kathleen (as the petitioner) the right to buy out David (as respondent). The parties disagreed over several other matters. The first was the size of the homestead. The parties owned a side lot, which David claimed should be separately valued. Kathleen claimed that the side lot was a part of the parcel on which the residence was situated and should not be valued separately. The district court agreed with David.
Kathleen claimed total refinancing expenses of $9,426.17. This was based on a $200,000 loan and mortgage. The district court determined that the appropriate refinancing amount should be half the loan, determined the cost of that refinancing would be $1,909, and allowed Kathleen to deduct half that amount or $954.50 from what she would owe David. David asserts Kathleen is not entitled to any credit for costs of buying him out under the dissolution judgment.
Kathleen had made repairs and improvements to the homestead costing a total of $131,720.01 and pursuant to the language in the dissolution judgment claimed a credit against the value of the property. Expenditures were made between October 4, 1991 and May 25, 2001 for kitchen remodeling, landscaping, a driveway apron, a swimming pool, replacement windows, appliances, carpeting, painting the exterior, and numerous other projects. David argued that only items that added to the value of the property should be deducted from the appraised value and then only if each capital repair or improvement exceeded $500. The trial court found Kathleen could deduct the full cost of all items and did not address the $500 deductible question.
Kathleen claimed child-support arrearages totaled $14,229. David denied any arrearage. The district court found that the arrearage totaled $4,351.29.
Kathleen also claimed that David owed her $3,945 for health insurance and for unreimbursed medical expenses for their children. He denied owing anything. The district court found that David had satisfied his obligations to pay his share of these expenses.
David appeals the credit the district court determined Kathleen should be given for capital repairs and improvements. Both parties seek review of the district court's determination of the credit for the cost of financing and the amount of child-support arrearage. Kathleen further requests review of the district court's valuation of the homestead and the denial of any offset for health insurance and unreimbursed medical expenses.
DECISION
The issues in this case focus on the discretion of the district court in resolving disputes over financial determinations incident to and ten years after the dissolution of a marriage. With respect to most of the issues, the district court was confronted with ambiguities in the dissolution judgment and factual disputes between the parties. Whether judgment is ambiguous is a legal question. See Head v. Metro. Life Ins. Co., 449 N.W.2d 449, 452 (Minn.App. 1989), review denied (Minn. Feb. 21, 1990); Halverson v. Halverson, 381 N.W.2d 69, 71 (Minn.App. 1986). If a judgment is ambiguous, a district court may construe or clarify it. Stieler v. Stieler, 244 Minn. 312, 318-19, 70 N.W.2d 127, 131 (1955); Mikoda v. Mikoda, 413 N.W.2d 238, 241 (Minn.App. 1987), review denied (Minn. Dec. 22, 1987); Ulrich v. Ulrich, 400 N.W.2d 213, 218 (Minn.App. 1987). The meaning of an ambiguous judgment provision is a fact question reviewed on a clearly erroneous basis. See Landwehr v. Landwehr, 380 N.W.2d 136, 139-40 (Minn.App. 1985). The district court's interpretation must reflect the thoughts the judgment intended to convey. Bone v. Bone, 438 N.W.2d 448, 451 (Minn.App. 1989). An order clarifying the original judgment must include a consideration of the implied terms as well as those expressed. Thompson v. Thompson, 385 N.W.2d 20, 22 (Minn.App. 1986). We will not reverse a district court's order interpreting a dissolution judgment absent a clear abuse of discretion. Potter v. Potter, 471 N.W.2d 113, 114 (Minn.App. 1991), review denied (Minn. June 11, 1991). With respect to factual determinations such as value, cost, payment, and others, this court affirms trial court determinations unless they are clearly erroneous. Advanced Communication Design, Inc. v. Follett, 615 N.W.2d 285, 289 (Minn. 2000).
I.
The overall dispute in this case is the amount of David's lien on the homestead. Kathleen is attempting to satisfy that lien and keep the homestead that she has been occupying. To determine the lien, the first task is to determine the baseline value of the homestead. This court will not reverse a district court's valuation of the homestead unless it is "clearly erroneous on the record as a whole." Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d 42, 44 (1975) (citations omitted). "[I]t is only necessary that the value arrived at lies within a reasonable range of figures." Carrick v. Carrick, 560 N.W.2d 407, 413 (Minn.App. 1997) (quotation omitted).
The valuation dispute is over whether the second lot was a part of the homestead or should be valued separately. The district court accepted the valuation by David's appraiser, found that the homestead included a separate lot, and determined that the value was $264,000. The appraisal included $50,000 for the separate lot. Kathleen claimed the property was never intended to be treated as two separate parcels and that splitting off the side lot would detract from the existing homestead.
On appeal, Kathleen argues that both the district court and David's appraiser erred in valuing the side lot as if it was connected to all public utilities, including electricity, gas, water, sanitary sewer, and storm sewer, and as if zoning allowed a new home to be built on the lot. These matters were not raised at trial. Because arguments not raised at trial cannot be raised on appeal, we do not consider Kathleen's statements regarding utilities and zoning. Swarthout v. Mut. Serv. Life Ins. Co., 632 N.W.2d 741, 746-47 (Minn.App. 2001) (citing Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988)).
The dissolution judgment implies the side lot is separate from the homestead. In providing for payment of David's lien on the homestead, that judgment awards Kathleen "the homestead and adjacent lot." Given evidence in the record as to value and the provisions of the dissolution judgment and our limited review, we accept the determination of the district court that the homestead be viewed as having a separate lot and that the overall value is $264,000.
II.
The second issue concerns financing costs. The provisions of the dissolution judgment raise a threshold question of who can buy out whom and leave ambiguous how financing costs are calculated. The judgment orders that "if respondent [David] elects to buy out petitioner's [Kathleen's] equity interest, she will receive credit for actual costs of financing." Finding that the pronoun "she" did not fit the gender of the parties and that it was
questionable that the parties actually intended for the lienholder party to have the right of election to buy out the party who was awarded and still lives in the homestead,
the district court determined this language in the judgment was a typographical error and in fact should have read, "if [Kathleen] elects to buy out [David's] equity interest, she will receive credit for actual costs of financing." The district court had discretion to determine whether there was an error in the dissolution judgment, and its interpretation of the judgment is entitled to great weight on appeal. We hold the court did not abuse its discretion in making this correction.
Kathleen stated that her financing costs were $9,426.17. The district court reduced Kathleen's financing costs to $1,909 and ordered half, or $954.50, deducted from David's lien. The court noted in its memorandum that David should only have to pay refinancing costs related to the net lien amount, not costs related to the $200,000 refinancing. In addition, the court recognized that some costs were fixed regardless of the size of the mortgage. The district court did not abuse its discretion by determining that only the financing of the buyout of David's lien should be deducted and that certain fixed financing costs should be included.
However, we note that there are ambiguities in the district court's determination of the amount being financed and the treatment of prepaid interest and points. The district court did not reconcile the principal amount for purposes of its order with the amount due David nor did it include findings on separate items of cost. We note that prepaid interest is the responsibility of the borrower (Kathleen) and, according to the dissolution judgment, points are a part of allowable financing charges on a sale and presumably also on a buyout. It is unclear how the district court treated those items. We remand the financing costs portion of the judgment for determination of the amount and of what is included.
III.
The dissolution judgment provides that Kathleen is entitled to offset "the cost of any capital repairs or improvements * * * in excess of $500" from the appraised value of the residence. This became an issue in two ways: (1) whether the "in excess of $500" language meant $500 was to be subtracted from the aggregate of the capital improvements and repairs or from all expenditures for each capital project; and (2) whether deductions for capital improvements and repairs were limited to those that increased the value of the homestead. The district court determined Kathleen should be reimbursed for all of her expenditures; however, the court did not address the "in excess of $500" issue.
The Minnesota Supreme Court has defined an improvement as
a permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs.
Kloster-Madsen, Inc. v. Tafi's, Inc., 303 Minn. 59, 63, 226 N.W.2d 603, 607 (1975) (quotation omitted). Other decisions have amplified this definition. See Pacific Indem. Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548, 554 (Minn. 1977) (furnace installation is a capital improvement); Kloster-Madsen, 303 Minn. at 62-64, 226 N.W.2d at 606-07 (electric work was an improvement); Sandberg v. Johnston, 415 N.W.2d 346, 348-349 (Minn.App. 1987) (furnace, air conditioner, roof, and new driveway are capital improvements); Henry v. Raynor Mfg. Co., 753 F. Supp. 278, 281-82 (D.Minn. 1990) (garage door and opener are capital improvements); cf. Kline v. Doughboy Recreational Mfg. Co., 495 N.W.2d 435, 438 (Minn.App. 1993) (swimming pool was an improvement to real estate).
Numerous court decisions from other states provide further guidance. Massachusetts describes capital improvements as "betterments of a long lasting nature which add to the capital value of the property." Finn v. McNeil, 502 N.E.2d 557, 562 (Mass. App. Ct. 1987). Ohio concluded capital improvements are "permanent changes * * * made enhancing the value of the premises." Zywicznski v. Zysiczynski, 80 N.E.2d 807, 809 (Ohio App. 1947); Marek v. Marek, 383 A.2d 1031, 1032-33 (R.I. 1978) (vinyl siding, roof, and paved driveway were capital improvements).
Except for precedent directly on point, the caselaw as to what is a capital repair or improvement lacks clarity. We reach two conclusions: the repairs made by Kathleen are not included unless they are capital repairs. Although normally repairs would be maintenance, the dissolution order in this proceeding uses the phrase capital repairs along with improvements. Capital repairs and improvements are structural changes or additions to the property and betterments necessary to preserve or enhance its value and integrity. Such capital expenditures are contrasted to maintenance and repair. The latter are necessary for upkeep and occupancy of the property.
The district court included all items on Kathleen's list. This disregards the word capital and is too generous an interpretation. However, we agree with the district court that whether a project added to the value of the home is not the sole consideration. The test should be whether a prudent homeowner who anticipates selling his residence within the occupancy term remaining prior to a sale would invest in the specific improvement considering its contribution to the value and integrity of the homestead and the use and enjoyment the homeowner would anticipate receiving from the improvement over the term of continued ownership.
Here, it appears the new garage door and opener, driveway, furnace, roof, deck, wiring, shrubs and landscaping, windows, door, and kitchen replacement are probably capital improvements that contribute to value. Debatable items are appliances and carpeting. Items such as painting and decoration are maintenance and routine repair. Although there is a Minnesota case holding that a swimming pool is an improvement to real estate, the issue was not a buyout but what statute of limitations period governed a tort claim. See Kline, 495 N.W.2d 435. Thus, the determination of whether the swimming pool is an allowable capital improvement in this case is not governed by the Kline decision.
In making its determinations on remand, the court should not make Kathleen the victim of second-guessing; it should be recognized that she had some discretion. However, Kathleen did not have carte blanche to have work done and force David to pay half the cost of items that were simply for her personal preference, for expenditures a reasonable person would view of doubtful or minimal benefit, or for items that are not good-faith improvements. Although the ultimate classification of projects as capital expenditures or otherwise is a question of law, the nature, extent, value, durability, and utility of projects are questions of fact. Given the importance of such factual determinations, they may be outcome-determinative on the legal conclusion. On remand, the district court must review the projects for which Kathleen claims a credit is due.
David argues that Kathleen had a 1998 appraisal, which showed the property was valued at $234,560. Most of the improvements were completed subsequent to this appraisal. David contends the district court should have limited the allowable cost of improvements to $29,400. This is the difference between the 1998 appraised value and the current value as determined by the district court. The district court did not abuse its discretion by rejecting this narrow approach.
We note that some improvements were made prior to the date of the dissolution judgment. It is clear that only improvements after that date are eligible for credit. To the extent there were earlier capital improvements, they are not eligible for credit.
The $500 deduction should apply to each overall repair project or improvement project. When there are several expenditures for one larger project, the $500 reduction should be applied once to the series of expenditures that went into that project.
We remand to the district court for specific findings as to the various projects, determining whether the project meets the prudent-person test and can appropriately be classified as a capital repair or improvement and for application of the $500 deduction.
IV.
The next issue is whether the district court abused its discretion in determining David's arrearages on child support. The history of child support in this case is complex and unusual. At the time of the dissolution, David did not have a job. The parties agreed to delay child-support payments until he was employed. On August 2, 1993, an amended judgment for addressing child support was entered. It imputed income of $1,000 per month, ordered David to pay 30% of his income in child support, and increased his child support as his income increased in excess of $1,000 per month. The amended judgment apparently capped David's child support at $636 per month and required David to make quarterly reports to Kathleen about his income as long as 30% of his income did not reach the $636 cap. The judgment did not make any specific findings as to the reason for the deviation from the statutory guidelines by the $636 per month cap.
In the district court proceeding from which this appeal was taken, the judge observed that the original decree was unusual in that it capped child support without explanation. But the district court upheld the $636 cap and found "that $636 seems to have been recognized by both parties as a `cap' for approximately seven years up until the current motion."
We agree the order for child support was ambiguous. We affirm the district court's findings on the clarification of the judgment, holding that there was a $636 a month cap on the child support to be paid. Numerous child-support payments have been made by David since 1993. They have been calculated under the August 2, 1993 court order. Kathleen has accepted payments and has not sought to challenge or modify the August 2, 1993 order. The time for appealing the order or challenging the payments has passed. See Minn. Stat. § 518.145, subd. 1 (2002).
This leaves the question of whether David owes unpaid child support under the amended August 2, 1993 judgment. This question includes claims of improper or lack of reporting of income, allocation of income between David and his new wife in their joint law practice, and what payments have been made. These are questions of fact.
The district court examined David's income statement and child-support payments and determined there was $4,351.29 in arrearages. Since the district court's determinations are not clearly erroneous, we affirm the holding that David owes $4,351.29 in arrearages in child-support payments.
V.
Kathleen alleges that the district court erred by failing to order appellant to pay for certain health insurance coverage for unreimbursed medical expenses. The parties dispute both which types of claims should be paid and the timing of payment. These are factual questions which we review under the clearly erroneous standard.
The district court analyzed the insurance and medical expenses, claims, and arguments and found that no additional amounts were due Kathleen. With one exception, we accept the district court's determinations. The exception involves the starting number of $3,945 that the district court used in its calculations. The district court assumed this figure represented the total of Kathleen's unreimbursed expenses. Actually, the record indicates the starting figure from Kathleen's spreadsheet was $7,888.95. Based on the record and the district court's computations, the correct summary calculation appears to be:
Total amount of unreimbursed medical/dental expenses on Kathleen's spreadsheet as accepted by the court $7,888.95 Less disallowed amounts paid by Kathleen prior to the dissolution — 2,311.92 Less disallowed amounts paid by Kathleen prior to David obtaining employment — 735.02 Total amount to divide between Kathleen and David 4,842.01 David's portion 2,421.00 Less what David paid to Kathleen — 628.38 Amount David owes
Kathleen 1,792.62 Less what Kathleen owes David because he paid $700 to the orthodontist — 350.00 Final total David owes Kathleen for unreimbursed medical expenses 1,442.62
We reverse this determination of medical expenses and remand for entry of the correct amount. On remand the district court may make such further changes as it finds necessary.