In re the Marriage of: Jean K. Haefele, petitioner, Respondent, vs. Richard J. Haefele, Appellant.

Annotate this Case

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C9-02-1818

 

In re the Marriage of:
Jean K. Haefele, petitioner,
Respondent,

vs.

Richard J. Haefele,
Appellant.

 

Filed July 8, 2003

Affirmed in part, reversed in part, and remanded

Wright, Judge

 

Hennepin County District Court

File No. DW231667

 

 

Kay Nord Hunt, Lommen, Nelson, Cole & Stageberg, P.A., 1800 IDS Center, 80 South Eighth Street, Minneapolis, MN  55402 (for appellant)

 

A. Larry Katz, Elizabeth B. Bowling, Katz, Manka, Teplinsky, Due & Sobol, Ltd., 225 South Sixth Street, Suite 4150, Minneapolis, MN  55402 (for respondent)

 

 

            Considered and decided by Lansing, Presiding Judge, Shumaker, Judge, and Wright, Judge.

 

U N P U B L I S H E D  O P I N I O N

 

WRIGHT, Judge

 

On appeal after remand in this dissolution proceeding, appellant argues that the district court abused its discretion when it (1) valued and distributed marital property and marital debt, (2) imposed an 8-percent fixed interest rate on the property-equalization payment, and (3) declined to grant his motion for a new trial based on the trial judge's alleged bias.  Respondent requests attorney fees on appeal.  We affirm in part, reverse in part, and remand. 

FACTS

 

            This appeal is from an order following our remand in Haefele v. Haefele, 621 N.W.2d 758 (Minn. App. 2001), review denied (Minn. Feb. 21, 2001).  The parties were married on May 29, 1968, and separated on May 1, 1997.  Appellant Richard Haefele is an attorney and respondent Jean Haefele is an artist who personally sells her work.  Both parties were born in 1945.

            The dissolution petition and marital termination agreement (MTA) were drafted by appellant.  During the summer of 1997, the parties executed the MTA.  The parties agreed to set the property valuation date in June 1997.  After requesting that the parties amend the MTA, the district court accepted it and entered the judgment of dissolution in August 1997. 

In March 1998, respondent moved to reopen the judgment, alleging mistake and fraud arising from inconsistencies as to the valuation and distribution of marital property.  The district court reopened the judgment, revalued the property, and, based on that revaluation, redistributed it equally.  Id. at 761.  Appellant appealed on several grounds, and we affirmed in part, reversed in part, and remanded.  Id. at 767.  We stated two purposes for the remand: (1) "to allow the district court to consider additional property-value evidence, and, if necessary, amend the findings of fact and conclusions of law," id. at 766, and (2) to permit the district court to determine whether attorney fees awarded to respondent were appropriate.  Id. at 767.

            On remand, the district court considered additional marital-property evidence, including an inventory of several thousand prints produced from respondent's original watercolor paintings, the parties' real property, and appellant's financial obligation to his mother.  Both parties offered expert testimony on the value of the watercolor prints.  Appellant's mother testified regarding money that she characterized as a loan to appellant.  The Chaska city administrator testified to a financing obligation associated with real property owned by the parties.

            The parties had several parcels of real property that are relevant to this second appeal: (1) an Eden Prairie property that was used as a group home and sold in 2001; (2) the Chaska Mill property, a commercial property; and (3) the property the parties owned in Crow Wing County.  After receiving evidence regarding these properties, the district court divided the proceeds from the sale of the group home, awarded the Chaska Mill property to appellant, and awarded the Crow Wing County property to respondent.

            In its second amended findings of fact, conclusions of law, order for judgment, and judgment and decree, the district court divided the parties' property and reserved spousal maintenance.  Both parties moved for amended findings or, in the alternative, for a new trial.  The district court denied both motions.  This appeal followed. 

D E C I S I O N

 

            "A trial court's duty on remand is to execute the mandate of the remanding court strictly according to its terms."  Duffey v. Duffey, 432 N.W.2d 473, 476 (Minn. App. 1988) (citing Halverson v. Vill. of Deerwood, 322 N.W.2d 761, 766 (Minn. 1982)).  "When the trial court receives no specific directions as to how it should proceed in fulfilling the remanding court's order, the trial court has discretion in handling the course of the cause to proceed in any manner not inconsistent with the remand order."  Duffey, 432 N.W.2d at 476 (citation omitted).  "On appeal from a denial of a motion for a new trial, the verdict must stand unless it is manifestly and palpably contrary to the evidence, viewed in a light most favorable to the verdict."  ZumBerge v. N. States Power Co., 481 N.W.2d 103, 110 (Minn. App. 1992), review denied (Minn. Apr. 29, 1992). 

I.

            Appellant asserts that the district court abused its discretion when it valued and divided the parties' marital property and debt.

A.         Valuation of the art inventory

            Appellant first argues that the district court improperly valued the inventory of prints produced from respondent's watercolor paintings.  "District courts have broad discretion over the division of marital property, and we will not disturb the division on appeal absent a clear abuse of discretion." Chamberlain v. Chamberlain, 615 N.W.2d 405, 412 (Minn. App. 2000) (citation omitted), review denied (Minn. Oct. 25, 2000).  For this court to conclude that the district court abused its discretion, the district court's factual findings must be "against logic and facts on [the] record."  Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984) (citation omitted).  We will not reverse a district court's valuation of an asset 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); see also March v. March, 435 N.W.2d 569, 572 (Minn. App. 1989).  The district court's valuation of assets need not be exact; "it is only necessary that the value arrived at lie within a reasonable range of figures."  Johnson v. Johnson, 277 N.W.2d 208, 211 (Minn. 1979) (citing Hertz, 304 Minn. at 145, 229 N.W.2d at 44).  "In valuing an asset for purposes of marital dissolution, market value of the asset is controlling."  Bateman v. Bateman, 382 N.W.2d 240, 246 (Minn. App. 1986), review denied (Minn. Apr. 24, 1986).

In the MTA that was vacated, 70,000 unsold prints of respondent's artwork were valued at $12.50 each, for a total value of $875,000.  When respondent moved to vacate the MTA, she called an expert, Bonnie Lindberg of Elayne Galleries, who testified that the inventory of prints was worth $34,000 and the original watercolor paintings were worth $9,800.  The district court adopted this valuation in the amended findings of fact.  Appellant appealed, and we remanded so that the district court could consider additional valuation evidence.  Haefele, 621 N.W.2d at 766.

            On remand, the parties presented evidence, including the testimony and reports of expert witnesses, regarding the value of the prints.  Appellant presented evidence from two experts.  Henry Swiggum, an accredited member of the International Society of Appraisers, testified and submitted a written report.  Swiggum, applying a fair market value, appraised the inventory at $955,870.  In his report, Swiggum explained that the fair market value of the prints is "defined as the price at which property would change hands, between a willing buyer and a willing seller, neither being under any compulsion, to buy or sell, and both having a reasonable [knowledge] of relevant facts."  Swiggum testified that 25 percent should be deducted from the fair market value of the inventory to account for respondent's "costs and expenses in regard to sale of these prints, such as shrink-wrapping, advertising, transportation to the shows, costs of selling prints."  Deducting 25 percent resulted in a final appraised value of $716,903.  On cross-examination, Swiggum explained how 25 percent of the fair market value approximated the value of respondent's services:

Q.        But if she's going to have to put a lot of work into it, Mr. Swiggum, how did you value her services?

A.        Well, they're included in the wholesale prices that she's obtaining according to my appraisal.  That's ample compensation.

 

            * * * *

 

Q.        And there's nothing in your valuation that takes into consideration her packing her car, going out to a fair, sitting the whole weekend attempting to sell her artwork? 

A.        Yes, there is, because I mentioned the 25 percent reduction that I was taking off that total figure of $955,000.

Q.        Yeah but you said those were the hard costs.  You didn't take her labor into consideration, did you?

A.        Well, her labor, she's compensated for her labor in the fair market value she's receiving for her artwork.

 

Appellant also presented an appraisal from Richard Berning, a certified business appraiser and certified valuation analyst.  To estimate the value of the prints, he employed the discounted-net-cash-flow method, which "is based on the premise that value is the present value of the future economic income to be derived by the owners."  He appraised the art inventory's value at $380,000. 

Respondent presented two witnesses:  Lindberg and Howard Kaminsky, a certified senior appraiser.  Because respondent called Kaminsky as a rebuttal witness to challenge Berning's methodology, the district court did not permit Kaminsky to testify as to his appraised value of the art inventory prints.  Rather, Kaminsky was only permitted to critique the opinions of the other experts.  Kaminsky testified that the appraised value must "factor in a reasonable salary for the owner."  In critiquing Berning's appraisal, Kaminsky stated:

I guess I can't overemphasize that there's no value associated to the artist's time with respect to those sales.

 

* * * *

                       

[Berning's] not factoring in an expense of the owner, i.e., the artist to sell the product.  And, you know, you've seen hundreds of business valuations.  You know that in every one of those valuations, there is a reasonable salary affiliated with the sales.  I've never prepared a report in my 15 years where you didn't have a reasonable salary.

 

In its order after remand, the district court found each expert valuation to be "riddled with imperfections."  Ultimately, it chose to accept Swiggum's figure, while making an adjustment for one of its flaws.  The district court found that Swiggum's appraisal of $716,903 failed to account for respondent's income for selling her work.  The district court estimated respondent's income to be $50,000 per year[1] for 10 years after the valuation date, until she reached the retirement age of 62 years.  Thus, the district court deducted $500,000 ($50,000 x 10 years) from Swiggum's already discounted figure, and appraised the art inventory at a final value of $216,903.  The district court explained that the $500,000 deduction "is a ‘cost of sale' that was not addressed in Swiggum's analysis; this is the cost of a full-time salesperson with [respondent's] unique expertise." 

An expense reflecting the value of respondent's income for selling her art properly may be deducted from the fair market value of the art inventory to ascertain the value of the asset.  See Rogers v. Rogers, 296 N.W.2d 849, 852-53 (Minn. 1980) (stating, in context of valuing a corporation, that corporation's value "should not include the salaries of its employees and officers, except as those salaries may reflect a distribution of profits").  But in its present condition, the record does not permit an accurate determination of the amount that should be deducted for respondent's salary affiliated with the sale of her art.  Swiggum reduced the fair market value of the art collection by 25 percent and attributed part of the reduction to respondent's salary.  But he did not specify what portion of the 25 percent reduction for the cost of sale is attributable to respondent's salary.  As such, Swiggum's 25-percent reduction overstated the deductible expense for respondent's salary because an unknown portion is for other expenses.

Upon review, we conclude that the district court's valuation of the art inventory is clearly erroneous.  We arrive at this conclusion for three reasons.  First, the district court's calculation of the deduction for respondent's salary is overstated because it is accounted for twice.  In addition to Swiggum's 25-percent deduction, which includes respondent's salary, the district court makes a $500,000 lump-sum deduction for respondent's salary.  Because the district court began with Swiggum's already-discounted figure of $716,903 and because Swiggum specifically testified that his $716,903 valuation accounted for respondent's salary, there is a dearth of evidentiary support for the district court's second reduction of the value of the prints to reflect respondent's salary. 

Second, the method the district court employed to arrive at a figure of $500,000 is not supported by the evidence.  Although the $50,000 figure taken from the parties' financial statement has evidentiary support, the district court did not cite any evidentiary support for the length of time it estimated respondent would continue to work, the consistency of her income over time, or that her work would in fact be that of a "full-time salesperson." 

Third, the methodology used to arrive at the $500,000 salary deduction overstates the present value of respondent's future income.  See DuBois v. DuBois, 335 N.W.2d 503, 506 (Minn. 1983) (noting, in context of pension valuation, that "present value discounts an award [to be received in the future] to that amount which, if presently received, could be invested to yield the future sum"; it is the amount "which a person would take now in return for giving up the right to receive an unknown number of monthly [payments] in the future").  Without evidentiary support for the method chosen by the district court to factor in respondent's future income, however, we conclude that the finding of $500,000 is clearly erroneous.  We, therefore, remand for re-valuation of the art inventory in a manner not inconsistent with this opinion, leaving to the district court's discretion the decision to reopen the record. 

Appellant also contends that, notwithstanding the district court's decision to reserve the issue of spousal maintenance, the district court's reduction of the art inventory's fair market value by $500,000 to account for the expense affiliated with respondent's sale of the art for 10 years constitutes a de facto award of spousal maintenance without the requisite findings of respondent's need and appellant's ability to pay.  We disagree that this reduction in the value of the art inventory equates to spousal maintenance.  But the reduction in the inventory's value must be tied to a reasonable estimate of respondent's salary.  Because the district court overstated the deduction for respondent's salary from the fair market value by using a calculation that double counts the salary and overstates the present value of future income, and because Swiggum's valuation fails to clarify what portion of the 25-percent reduction is attributable to respondent's salary, the record does not support a $500,000 deduction for respondent's salary.

On a related matter, appellant contends that the district court's reservation of spousal maintenance was an abuse of discretion.  We affirmed the district court's pre-remand reservation of spousal maintenance.  Haefele, 621 N.W.2d at 766.  Once an issue is considered, adjudicated, and reviewed on appeal, it becomes the law of the case and will not be reexamined or readjusted on a second appeal of the same case.  Mattson v. Underwriters at Lloyds of London, 414 N.W.2d 717, 719-20 (Minn. 1987).  Because we determined in the previous appeal that reservation of spousal maintenance was not erroneous, we decline to reexamine this issue on appeal.

B.         Marital debt

Appellant asserts that the district court abused its discretion when it failed to consider certain financial obligations as marital debt. 

1.         Debt to appellant's mother

Appellant argues that the district court improperly refused to consider a purported loan from his mother.  "Debts, like assets, are apportionable, and each division of property is considered in the light of the particular facts of that case."  Chamberlain, 615 N.W.2d at 414.  A district court need not consider undocumented and unsecured transfers or unrepaid intrafamily debt as marital debt.  Novick v. Novick, 366 N.W.2d 330, 332 (Minn. App. 1985) (refusing to acknowledge as marital debt transfers from parents to party).

In its order denying a new trial, the district court explained that appellant "failed to give the court an acceptable and believable accounting" of the debt.  The district court found that appellant did not produce documentation establishing long-term debt to his mother.  The district court found that appellant's mother was a "knowledgeable lawyer and a sophisticated businessperson, and, therefore, more than capable of documenting a loan."  Finally, the district court stated that "[t]he testimony of [appellant] and his mother concerning the alleged debt was not credible." 

This case is factually similar to Korf v. Korf, 553 N.W.2d 706, 712 (Minn. App. 1996), where the debt attributable to the party's parent was not in writing and was never discussed with the party until after the dissolution proceedings commenced.  Deferring to the district court's credibility determination, we concluded that the district court did not abuse its discretion when it declined to consider the loan a marital debt.  Id. 

Here, whether the obligation to appellant's mother is properly characterized as marital debt rests on a determination of witness credibility.  The district court did not find the testimony of appellant's mother credible.  As in Korf, we defer to the fact-finder's credibility determination.  Vangsness v. Vangsness, 607 N.W.2d 468, 472-73 (Minn. App. 2000).  Our review of the record establishes that each of the district court's factual findings as to appellant's intrafamily debt has evidentiary support.  Accordingly, we conclude that the district court did not abuse its discretion in rejecting appellant's claim that his debt to his mother is a marital debt.

2.         College loan debt

Appellant also challenges the district court's refusal to treat the debt for the college education of the parties' children as marital debt.  In its post-trial order, the district court reasoned that "[n]o evidence was adduced to show that the parents and not the student are or were responsible for repayment of these loans.  * * * The Court has not been provided with information that would establish that these loans are marital obligations or that any of them were incurred during the marriage."

Our review of the evidence establishes that the district court's findings are well founded.  The evidence of the college loan that exists in the record contains no names, no indication of who is responsible for the college loan, and no date of origin.  Based on this record, there is insufficient evidence to support a finding that the alleged debt was marital.  Accordingly, we conclude that the district court did not abuse its discretion when it declined to acknowledge the college loan debt as marital debt. 

C.        Real property

Appellant asserts that the district court abused its discretion when it valued and divided certain parcels of real property.

1.         Property preservation expenses

            Appellant contends that the district court abused its discretion when it declined to credit appellant for the expense of preserving the various properties.  He asserts that, although he received rents from several properties, the overall negative cash flow justifies his reimbursement for expenses. "The court can consider the cost of maintaining property during the pendency of the action as one of the factors influencing its equitable division of property."  Smith v. Smith, 410 N.W.2d 334, 337 (Minn. App. 1987), review denied (Minn. Sept. 30, 1987).  Consideration of maintenance costs, however, is a discretionary matter.  Id.  From our review, we conclude that the district court was well within its discretion when it declined to reimburse appellant for maintenance costs. 

2.         Eden Prairie group home

Appellant argues that the district court abused its discretion in determining the equity in the Eden Prairie group home.  Specifically, appellant argues that (1) he should be reimbursed for the contributions he made to preserve the property before it was sold, (2) he should not have had to pay interest in relation to the property division, and (3) the equity in the property should be reduced by the capital gains consequences of selling the home. 

The Eden Prairie group home was operated for people with disabilities.  The district court's August 1997 order directed the sale of this property and division of the resulting proceeds with appellant assuming any tax liability.  The group home was vacant for a period prior to its sale because of zoning changes.  After the sale in October 2001, the net proceeds of $97,121.32 were held in escrow.  Deducted from that amount were $5,800 in real estate taxes and $22,809.50 in attorney fees.  The stipulated total remaining amount of $69,561 was divided as follows between the parties.  Respondent was awarded $34,780.50, which was half of the marital equity, plus $11,129.50 "for accumulated interest on her share over the four years since 1997."  The latter constitutes interest on the delayed equalization payment from the June 1997 property valuation date.  As discussed above, we conclude that the district court did not abuse its discretion when it ruled that appellant should not be reimbursed for property preservation expenses. 

With regard to appellant's interest obligation, the district court noted:

[Appellant] asserts that he should not have to pay interest on the portion of the equalization payment that represents the award of the group home since petitioner was awarded one-half the proceeds.  The Court agrees.  Respondent is not paying interest on the group home equity.  The equalization payment has been retroactively adjusted (reduced) to exclude properties not awarded to the [appellant] in the Second Amended Judgment and Decree.  No portion of the equalization payment in said Judgment and Decree represents Group Home equity.  Pursuant to the Second Amended Judgment and Decree, Respondent is ordered to pay interest solely upon the unequal division of marital property (i.e. the equalization payment) from the time that the parties originally sought to equitably divide their property (1997).

 

An award of money in a dissolution action accrues interest on the unpaid balance from the time of judgment until it is paid.  Riley v. Riley, 385 N.W.2d 883, 888 (Minn. App. 1986); see Merickel v. Merickel, 401 N.W.2d 90, 91 (Minn. App. 1987) (stating that wife "clearly entitled" to interest on dissolution property settlement paid two years late).  Here, the interest is being assessed on the equalization payment resulting from the sale of the group home, retroactively adjusted to 1997, not the equity in the group home.  Appellant contends that the district court abused its discretion because interest should not have been assessed until the sale of the property in October 2001.  We disagree.  Because respondent was deprived of her portion of the equalization payment during the delay pending the sale, she is entitled to the interest on the delayed payment.  See Riley, 385 N.W.2d at 888 (remanding to district court for entry of judgment for interest when former husband deprived former wife of money awarded in property division for more than a year).  Thus, we conclude that it was not error for the district court to require appellant to pay interest on the equalization payment. 

Appellant also argues that the district court erred by not accounting for appellant's payment of capital-gains taxes for the group home.  A district court has discretion to consider tax consequences when dividing property.  Maurer v. Maurer, 623 N.W.2d 604, 607-08 (Minn. 2001).  But a district court should not consider tax consequences when to do so would be speculative.  Id.  As the district court notes, the record contains no evidence of appellant's capital-gains tax liability attributable to the group home sale.  In the absence of any evidence, the district court did not abuse its discretion when it declined to consider the capital-gains consequences for the sale of the group home.

3.         Chaska Mill property

Appellant also challenges the district court's refusal to deduct the tax increment financing (TIF) debt on the Chaska Mill property when determining its value.  The district court found that appellant

had no greater cost as a result of the TIF than if there had been no TIF * * * .  The development authority granted the parties money to develop the Mill.  An agreement was made to pay real estate taxes at the regular rate to the City, and that those taxes would be diverted from the City general fund to the development authority.  Each year, the amount due to the development authority was reduced by the payment of regular real estate taxes.

 

Appellant maintains that, as of the June 1997 property valuation date, the TIF was an encumbrance that reduced the property's equity.  Chaska city administrator David Pokorney testified that, in June 1997, there was a TIF debt obligation on the Chaska Mill property in the amount $151,564.  As such, the TIF represented a debt owed to the Chaska Economic Development Authority.[2]

We conclude that, for purposes of property valuation, the TIF is indistinguishable from a mortgage, which would reduce the equity in a parcel of real estate.  See, e.g., Freking v. Freking, 479 N.W.2d 736, 740 (Minn. App. 1992) (stating that mortgage obligation reduced value of parties' interests in property).  On the property valuation date, the TIF was a note, an obligation connected to the Chaska Mill property that was owed to the development authority.  Thus, the district court abused its discretion in not reducing the equity in the Chaska Mill property by the amount of the TIF obligation in June 1997.  We, therefore, remand to the district court to adjust the property valuation and equalization.

 

4.         Crow Wing County property

            Appellant's final argument regarding the division of marital property relates to the district court's decision to award the Crow Wing County property, which appellant used for hunting, to respondent.  Appellant argues that, because he had no notice prior to the proposed findings on remand that respondent had requested the property be awarded to her and because he made improvements to the property, the award is an abuse of discretion.  We are mindful of the property's recreational value to appellant that results from his prior use.  In light of the district court's broad discretion in property division, however, appellant's claims do not establish an abuse of that discretion.  Chamberlain, 615 N.W.2d at 412.

Appellant also asserts that the district court erred because it awarded the property to both appellant and respondent.  This argument lacks merit since, as the district court's post-trial order makes clear, respondent was awarded the real property in Crow Wing County and appellant was awarded the personal property on that real property.

II.

As a property equalization payment, the district court required appellant to pay respondent $424,855 plus 8 percent per annum interest "accrued since August 18, 1997 and accruing on the unpaid balance until paid in full."  Because the judgment interest rate since 1997 has fluctuated between 2 and 6 percent,[3] appellant asserts that the district court abused its discretion when it set the interest rate at 8 percent.  Appellant also argues that the district court abused its discretion when it imposed a payment schedule requiring him to pay $6,000 per month for four years.

            Among other reasons, the district court concluded that an 8-percent interest rate was appropriate because (1) caselaw supports it, (2) the parties agreed to 8 percent in the original, now-vacated MTA, (3) 8 percent was a reasonable rate when the MTA was executed and when the district court ordered the 2000 amended judgment and decree, (4) it is not appropriate to adjust the interest rate downward based on market conditions, and (5) it would be inequitable to permit appellant to receive a greater interest rate than he returns to respondent.

            As discussed above, an award of money in a dissolution action accrues interest on the unpaid balance from the date of judgment until it is paid.  Riley, 385 N.W.2d at 888.  In a dissolution action, the district court is "vested with a broad discretion" in setting an equitable interest rate where interest is due.  Johnson v. Johnson, 250 Minn. 282, 292, 84 N.W.2d 249, 256 (1957).  This discretion is not controlled by statutory or legal interest rates applicable in other cases.  Id.  The equitable interest rate set by the district court, however, should reasonably approximate prevailing interest rates for an ordinary investor, thereby restoring respondent to the position she would have been in had she held the property.  See id.  The Johnson court concluded that the district court abused its discretion when it set an interest rate at 6 percent, rather than the prevailing rate of 3 percent, on the delayed payment of a property settlement in a dissolution case resulting from the fraudulent concealment of assets.  Id. (stating that "[i]n view of the interest rates which have prevailed during the period between [the date of the dissolution] and the date of the court's findings, it is only reasonable to assume that the defendant wife, [as an ordinary investor], would have earned interest at an average rate of approximately 3 percent"). 

            The judgment interest rate, Minn. Stat. § 549.09, achieves the standard set in Johnson of placing the obligee in the position that would have been enjoyed by a reasonable investor had the property been in the possession of the obligee.  Moreover, in Riley, we analyzed the application of Minn. Stat. § 549.09 to a property settlement award in a dissolution case and found "no reason to distinguish an award of money in a dissolution action from judgments for the recovery of money in other types of cases."  Riley,385 N.W.2d at 888. 

            The district court's rationale for setting interest rates at 8 percent rather than the judgment interest rate sought by appellant is inconsistent with both Johnson and Riley.  Much of the district court's rationale is based on the premise that a fluctuating interest rate tied to market conditions would be unfair to respondent.  But, as Johnson explains, examining prevailing interest rates is necessary when setting a reasonable rate.  Johnson, 84 N.W.2d at 256.  Moreover, the judgment interest rate imposed by the statute applied in Riley operates in precisely the manner rejected by the district court, fluctuating yearly in accordance with the rate of return on one-year United States treasury bills.  Minn. Stat.    § 549.09.  Since the dissolution in 1997, the interest rate imposed by Minn. Stat. § 549.09 has fluctuated between 2 percent and 6 percent.  Even respondent's post-remand proposed findings of fact and conclusions of law set the interest rate at 5 percent, rather than 8 percent. 

            While Johnson makes clear that the district court is not compelled to use the statutory interest rates applicable in other cases, the district court is still required to set a reasonable interest rate that reflects prevailing interest rates for a reasonable investor during the period between the dissolution and the date of the district court's findings.  However, appellant's contention that the court-imposed payment schedule constitutes an abuse of discretion is without merit.  In the absence of findings as to the district court's basis for concluding that a fixed interest rate of 8 percent is reasonable in light of the prevailing rates between the date of the dissolution and the date of the district court's findings, we reverse and remand for further proceedings on this issue.  

III.

In a post-remand motion before the district court, appellant sought to remove the district judge for alleged personal animus.  Following a hearing, the chief judge denied the motion.  Appellant now argues that he is entitled to a new trial before a different judge because the original trial judge was biased against him.  We consider this argument to be a challenge to the denial of his motion to remove the district judge for "personal animus."  In the previous appeal, we concluded that the district court did not abuse its discretion when it denied appellant's motion to remove the trial judge for bias.  Haefele, 621 N.W.2d at 766.  Thus, we limit our consideration of appellant's argument to the post-remand hearings. 

Minn. R. Civ. P. 63.03 provides that a judge may not be removed "except upon an affirmative showing of prejudice on the part of the judge."  Generally, this prejudice must arise from an extrajudicial source prompting the judge to make a decision based on knowledge acquired outside the judge's participation in the case.  In re Estate of Lange, 398 N.W.2d 569, 573 (Minn. App. 1986).  But "pervasive bias" is an exception to the "extrajudicial source" rule, which occurs when the bias stems from events at trial that are "so extreme as to display [a] clear inability to render fair judgment."  Liteky v. United States, 510 U.S. 540, 551, 114 S. Ct. 1147, 1155 (1994) (quotation omitted).  "[R]emoval is warranted only where the judge's impartiality might ‘reasonably' be questioned; therefore, a judge should not * * * be removed simply because a litigant subjectively believes the judge is biased."  State v. Laughlin, 508 N.W.2d 545, 548 (Minn. App. 1993). 

At most, appellant asserts that the district court ruled against him or made factually inaccurate rulings.  "Prior adverse rulings, however, clearly cannot constitute bias * * * ."  Olson v. Olson, 392 N.W.2d 338, 341 (Minn. App. 1986).  Appellant does not claim an extrajudicial source of bias, and we conclude from our review that neither the record nor the district court's adverse rulings constitute evidence of pervasive bias.  We, therefore, deny the relief appellant requests. 

IV.

Respondent requests attorney fees for being required to reargue issues resolved in the first appeal.  "A party seeking attorney[] fees on appeal shall submit such a request by motion under Rule 127."  Minn. R. Civ. App. P. 139.06, subd. 1.  Because respondent has not filed such a motion, we decline to address this issue.

Affirmed in part, reversed in part, and remanded.


[1]  The district court derived its annual-salary estimate from a 1996 financial statement submitted to Bremer First American Bank in which the parties jointly reported respondent's salary as $50,000.

[2] Pokorney testified that, when the Haefeles paid their property taxes, if the taxes paid were at least as much as the amount of principal and interest owed to the Chaska Economic Development Authority for that year, the amount of principal and interest due would be reduced.  If, however, the property taxes owed were less than the principal and interest payment, the Haefeles would be obligated to pay the difference to satisfy their TIF debt.  This demonstrates that, although the TIF contemplates the use of property tax payments to fulfill the TIF obligation, the obligation was nevertheless a debt independent of the property-tax payment.

[3]  Minn. Stat. § 549.09 (2002) sets the interest rate for verdicts, awards, and judgments and provides for the district court administrator to calculate the interest rate applied to a judgment or award "from the time that it is entered or made until it is paid."  Id.  The rate fluctuates yearlyin accordance with the rate of return on one-year United States treasury bills.  Id.; see also 2003 Interest Rates on Minnesota State Court Judgments, at http://www.courts.state.mn.us/cio/story/2003_interest_rate.rtf (stating that interest rate on a judgments and awards was 5 percent in 1997, 5 percent in 1998, 4 percent in 1999, 5 percent in 2000, 6 percent in 2001, 2 percent in 2002, and 4 percent in 2003) (last visited July 1, 2003).