Richard Kryzer, Appellant, vs. Jeff Passow, et al., Respondents.

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat § 480 A. 08, subd. 3 (1998).

 

STATE OF MINNESOTA
IN COURT OF APPEALS
C9-99-270

In Re the Marriage of:
William Howard Frey, II, petitioner,
Appellant,

vs.

Barbara Hursh Frey,
Respondent.

 

Filed October 26, 1999
Affirmed in part, reversed in part, and remanded
Lansing, Judge

Ramsey County District Court
File No. F3-97-1180

Daniel J. Goldberg, Messerli & Kramer, P.A., 1800 Fifth Street Towers, 150 South Fifth Street, Minneapolis, MN 55402 (for appellant)

Kyle E. Hart, Brian L. Williams, Fabyanske, Westra & Hart, P.A., 920 Second Avenue South, Suite 1100, Minneapolis, MN 55402 (for respondent)

Considered and decided by Toussaint, Chief Judge, Lansing, Judge, and Willis, Judge.

 

U N P U B L I S H E D   O P I N I O N

LANSING,

Judge 

This is an appeal from judgment in a marital dissolution action. William Frey challenges the disallowance of a nonmarital interest in the homestead equity and an investment account, the division of marital property, the failure to reduce child support at the older child's emancipation, and the award of attorneys' fees. We affirm in part, reverse in part, and remand. 

FACTS

William and Barbara Frey dissolved their 21-year marriage in 1998. Two of their three children are minors, and the Freys stipulated to joint legal custody with sole physical custody in Barbara Frey. William Frey holds a Ph.D. in biochemistry and has been professionally employed throughout the marriage. Barbara Frey has been a homemaker, minimally employed outside the home. Between 1985 and 1988, William Frey inherited approximately $547,000 from his mother and his maternal grandparents. From 1988 through their 1997 separation, the Freys used the inheritance to augment earned income in meeting their expenses. In July 1988, the Freys sold their existing home and purchased a new home in North Oaks.

In the dissolution action the Freys were able to reach agreement on the amount and duration of spousal maintenance and the amount of child support. They were unable to agree on (1) the categorization of marital and nonmarital contribution in the homestead equity; (2) the categorization of marital and nonmarital interests in an investment account; (3) the distribution of marital assets; (4) the duration of child support; (5) the payment method for William Frey's patent income; and (6) responsibility for Barbara Frey's attorneys' fees. William Frey appeals the district court's order on each of these issues.

 

D E C I S I O N

I

Property acquired during a marriage is presumed to be marital property.[1] To overcome this presumption a party must demonstrate the nonmarital character of the property by a preponderance of the evidence.[2] Nonmarital property includes property "acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse."[3] For nonmarital property to retain its nonmarital character, "it must either be kept separate from marital property or, if commingled with marital property, be readily traceable."[4] We review de novo the district court's legal determination of whether property is marital or nonmarital, but apply a clear-error standard to the fact findings underlying the determination.[5]

William Frey asserts the district court erred by failing to find he had met the burden of establishing that almost all of the $131,541.86 down payment on the Freys' current home was from nonmarital property. The court found "[i]nherited assets appear to have contributed to the parties' purchase of [their home]." But it determined that the property lost its nonmarital character due to "long-term and continuous use * * * for general family purposes" and that William Frey failed to trace the property by a preponderance of the evidence.

The evidence demonstrates the Freys purchased their current home with a $131,541.86 down payment. The down payment was drawn on a bank account that reflected a $138,500 deposit 11 days earlier. The deposit consisted of a $10,000 loan from William Frey's father and wire transfers from several investment accounts. The investment accounts contained the proceeds of William Frey's inheritance. William Frey concedes that he cannot establish that the $10,000 loan was nonmarital. But the evidence demonstrates that $121,500 of the total used for the down payment was William Frey's nonmarital asset.[6] Because the nonmarital property was in the bank account for only 11 days, it was not materially commingled with marital property.[7] The $121,500 is readily traceable.

Nonmarital property used to purchase joint real estate should be allocated with reasonable appreciation to the contributing spouse upon dissolution.[8] William Frey acknowledges that extensive home improvements preclude assigning a specific amount of appreciation from the date of purchase to the date of valuation and therefore requests an allocation equal only to his down payment amount.[9] Because the $121,500 was nonmarital property that was readily traceable, we reverse and remand for the district court to amend the judgment to account for William Frey's $121,500 nonmarital downpayment.

 

II

On the property distribution date, the Freys' investment account had a value of $103,286. Barbara Frey stipulated that the account contained $28,085 in nonmarital property, and the court concluded that the remaining $75,201 was marital property. William Frey asserts that the district court erred by applying too strict a tracing standard.

We disagree that the court applied an incorrect standard. Between 1988 and 1997 the account statements contained more than $160,000 in unexplained deposits, the accounts earned approximately $100,000 in interest, and between 1995 and 1996 William Frey deposited more than $132,000 of his wages into the accounts. Although

William Frey deposited nonmarital inheritance money into the account, it was commingled with $392,000 in marital amounts. Most of the money was spent. The remaining $75,201 is more connected to the wage deposits in time sequence than to the inheritance money. The court found that the inherited money William Frey deposited into the accounts was commingled with marital money for almost ten years. The extensive commingling over a lengthy period supports the district court's finding that the $75,201 was marital property.

 

III

The district court has broad discretion in valuing and dividing marital property.[10] The court is required to "make a just and equitable division of the marital property."[11] An equitable division, however, "is not necessarily an equal division."[12]

The court awarded Barbara Frey the Freys' home, stating the award compensated her "disparate employability and [William Frey's] related opportunities to acquire income and capital assets." These findings paralleled findings of disparate educational levels and disparate capacity for self-support. Although these disparities are addressed to some extent by spousal maintenance, the findings also support a less-than-equal property distribution.

William Frey argues the court erred by not equally dividing the equity in the Freys' home. The cases William Frey cites stand for the proposition that an equal division is presumptively fair, but not that a disproportionate division is inequitable.[13] Further, subtracting the $121,500 nonmarital part of equity leaves William Frey with approximately 38 percent of the Freys' assets, which corresponds to distributions previously upheld as equitable.[14] The property division is equitable and supported by the court's findings.

 

IV

A district court is required "to prorate an obligor's child support obligation as each child becomes emancipated" unless it makes specific findings on why the obligation should not be prorated.[15] In providing for child support, the court neither prorated based on emancipation nor made written findings that justified continuing the child support level.[16] Barbara Frey acknowledges the lack of findings or justification. We reverse and remand for the district court to provide that the child support amount be reduced to the appropriate statutory guideline amount when the Freys' 16-year-old child reaches emancipation.

 

V

The district court has broad discretion in providing for the distribution of marital property and will not be reversed absent an abuse of this discretion.[17] William Frey, as part of his work, patented an invention that he and his employer sold to the Chiron Corporation. Under the contract's terms, William Frey will receive two $50,000 payments, one in 1998 and the other in 1999. The parties stipulated that they would equally divide the income. The district court incorporated the stipulation but further ordered William Frey to

execute all necessary documents to ensure that [Barbara Frey's] one-half share is paid directly to her by [his employer]. The parties each shall be liable for their own income taxes on the payments made to them under this paragraph.

William Frey asserts the district court abused its discretion. We agree that the court's order exceeds William Frey's power under the contract and disregards his tax obligation.[18]

The payments represent future income to William Frey, who is a party to the contract.[19] As a party to the contract, William Frey should receive the entire amount of future income and be taxed on that amount.[20] The division of the future income payments should occur after William Frey has paid the appropriate taxes. We reverse and remand to the district court to redirect the future payments as provided by the contract.

 

VI

The district court has broad discretion in awarding attorneys' fees in a dissolution action.[21] The court may award attorneys' fees if it finds (1) that the fees are necessary for the good-faith assertion of the party's rights; (2) that the party from whom fees, costs, and disbursements are sought has the means to pay them; and (3) that the party to whom fees, costs, and disbursements are awarded does not have the means to pay them.[22] The court does not need to make detailed findings on each party's finances if the information is contained in the record, the court finds that the recipient does not have the ability to pay, and an inference of the opposing party's ability to pay can readily be drawn.[23]

The court ordered William Frey to pay $27,392.57 of Barbara Frey's attorneys' fees. The court's findings imply that the fees were necessary for Barbara Frey's assertion of her rights. But the court did not address whether Barbara Frey has the means to pay her attorneys' fees. In light of the property division and future patent income, the record does not unequivocally show that Barbara Frey does not have the means to pay any of her attorneys' fees. Because the court failed to make findings addressing this significant factor, we reverse and remand the attorneys' fees award.

 

Affirmed in part, reversed in part, and remanded.

 

[1] Minn. Stat. § 518.54, subd. 5 (1998).

[2] See Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997) (citations omitted).

[3] Minn. Stat. § 518.54, subd. 5(a) (1998).

[4] Olsen, 562 N.W.2d at 800 (citation omitted).

[5] Id.

[6] See Kottke v. Kottke, 353 N.W.2d 633, 636 (Minn. App. 1984) (affirming award of home sale proceeds to repay nonmarital property used to purchase the property), review denied (Minn. Dec. 20, 1984).

[7] See Griffith v. Griffith, 415 N.W.2d 763, 766 (Minn. App. 1987) (routing money through a joint bank account does not necessarily change its nonmarital character), review denied (Minn. Feb. 12, 1988).

[8] See Nolden v. Nolden, 448 N.W.2d 892, 894 (Minn. App. 1989).

[9] See Ranik v. Ranik, 383 N.W.2d 431, 435 (Minn. App. 1986) (awarding nonmarital property without appreciation), review denied (Minn. May 22, 1986).

[10] Maranda v. Maranda, 449 N.W.2d 158, 164 (Minn. 1989).

[11] Minn. Stat. § 518.58, subd. 1 (1998).

[12] Reynolds v. Reynolds, 498 N.W.2d 266, 270 (Minn. App. 1993) (citation omitted).

[13] See, e.g., Miller v. Miller, 352 N.W.2d 738, 742 (Minn. 1984).

[14] See Reynolds, 498 N.W.2d at 270-71 (approving 42.5 percent to 57.5 percent division of property); Kaste v. Kaste, 399 N.W.2d 128, 130-31 (Minn. App. 1987) (approving 43-percent to 57-percent division), review denied (Minn. Mar. 13, 1987).

[15] Reynolds, 498 N.W.2d at 273.

[16] See id. (court abused discretion by not allowing for reduction in child support obligation); Erickson v. Erickson, 409 N.W.2d 898, 901 (Minn. App. 1987) (same).

[17] Maranda, 449 N.W.2d at 164.

[18] See Lucas v. Earl, 281 U.S. 111, 114, 50 S. Ct. 241, 241 (1930) (person earning income cannot avoid liability for taxes by assigning income and associated tax liability to third party); see also United States v. Basye, 410 U.S. 441, 449-50, 93 S. Ct. 1080, 1086 (1973) (anticipatory assignment of income ineffective as means of avoiding tax liability).

[19] See Lucas, 281 U.S. at 114, 50 S. Ct. at 241 ("however the matter might stand between husband and wife he was the only party to the contracts by which the [income was] earned, and it is somewhat hard to say that the last step in the performance of those contracts could be taken by anyone but himself alone").

[20] See Helvering v. Horst, 311 U.S. 112, 118, 61 S. Ct. 144, 147-48 (1940) ("The exercise of [the power to dispose of income] to procure the payment of income to another is the enjoyment and hence the realization of the income by him who exercises it.").

[21] Solon v. Solon, 255 N.W.2d 395, 397 (Minn. 1977).

[22] Minn. Stat. § 518.14, subd. 1 (1998).

[23] Gully v. Gully, ___ N.W.2d ___, ___, 1999 WL 681686, at *11 (Minn. Sept. 2, 1999).