In re the Marriage of: Karen J. Busko, petitioner, Appellant, vs. Paul S. Busko, Respondent.

This opinion will be unpublished and

may not be cited except as provided by

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

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-1100

 

In re the Marriage of:

Karen J. Busko, petitioner,

Appellant,

 

vs.

 

Paul S. Busko,

Respondent.

 

Filed April 13, 2004

Reversed and remanded Hudson, Judge

 

Otter Tail County District Court

File No. F0-02-1124

 

 

Charles A. Krekelberg, Jason M. Hastings, Krekelberg & Skonseng, P.L.L.P., P.O. Box 353, Pelican Rapids, Minnesota 56572 (for appellant)

 

Deven L. Nice, Nice Law Office, 902 West Lincoln Avenue, Fergus Falls, Minnesota 56537 (for respondent)

 

            Considered and decided by Stoneburner, Presiding Judge; Hudson, Judge; and Crippen, Judge.*

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

Without moving for a new trial, appellant challenges the trial court's determination that appellant's mother made a gift of certain funds to the parties and hence that the parties' marital estate included the portion of those funds that the parties had not repaid to appellant's mother.  Because neither the evidence nor the trial court's findings support the determination that the funds were a gift, we reverse and remand.

FACTS

The parties married in 1970.  In 1986, they received $28,500 from Lois Frees, the mother of appellant Karen Busko.  No writing established the transfer as a loan or gift.  Appellant and her husband, respondent Paul Busko, used the money to pay down the mortgage on their home.  While the parties agree that, during Frees' life, they paid her interest on the $28,500, the record is unclear regarding whether they repaid any of its principal, or, if they did, how much principal was repaid.

            Frees died intestate in 1995.  Appellant was her sole heir and respondent was named the personal representative of Frees' estate.  It is undisputed that the estate's inventory included what the inventory referred to as a "$28,500.00 loan to Paul & Karen Busko which was to be forgiven upon death of the decedent."  During administration of the estate, the right to receive repayment of the "loan" was distributed to appellant, and appellant signed a receipt for the transfer of this "asset."

            In the parties' subsequent dissolution, they litigated whether the funds were a traditional loan or a loan which was forgiven upon Frees's death.  The trial court ruled that the $28,500 from Frees was a marital asset, essentially ruling that the loan debt had been forgiven, making worthless the right to repayment that the probate proceedings had transferred to appellant.  Without seeking a new trial, appellant challenges that ruling.

D E C I S I O N

            Absent a motion for a new trial, our scope of review includes legal issues properly raised at trial.  Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 308-11 (Minn. 2003).  It also includes whether the evidence supports the trial court's findings of fact and whether the findings of fact support the conclusions of law and the judgment.  Erickson v. Erickson, 434 N.W.2d 284, 286 (Minn. App. 1989).

            Appellant contends that the funds were a loan that was not forgiven, that it was a valid debt of the parties' marital estate, and that, because she inherited the right to repayment of the loan, the portion of the marital estate representing the amount due on the loan should be awarded to her as her non-marital property.  Respondent counters that the trial court correctly held that the $28,500 was marital property, and contends that even if the $28,500 can be construed as a loan, it was forgiven and the right to repayment was never an asset of Frees' probate estate.

            Whether property is marital or nonmarital is a question of law, but reviewing courts defer to the trial court's underlying findings of fact.  Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997).  All property acquired by either spouse during the marriage is presumed to be marital property.  Minn. Stat. § 518.54, subd. 5 (2002).  To overcome the presumption that property is marital, the party alleging it to be nonmarital must show, by a preponderance of the evidence, that the property is nonmarital.  Olsen, 562 N.W.2d at 800.  Nonmarital property includes property inherited from a third party by one spouse but not the other.  Minn. Stat. § 518.54, subd. 5(a).

Here, the determination that the unrepaid portion of the loan was part of the marital estate is based on respondent's testimony that the funds were a loan and that the loan was to be forgiven at Frees's death, and therefore was a gift.  The trial court ruled that the gift was made at the time of the original loan "before [her] death, but actually matured upon her death."  Neither respondent nor the trial court explicitly characterized the "gift" as an inter vivos gift, but, on appeal, respondent cites Olsen v. Olsen for the proposition that the loan was a gift.  Olsen, 562 N.W.2d at 800.  Olsen addresses inter vivos gifts rather than gifts causa mortis and states that the elements of an inter vivos gift are delivery, donative intent, and the donor's absolute disposition of the intended gift.  Id.  These elements must be proved by clear and convincing evidence; evidence that the existence of the asserted facts is "highly probable."  Oehler v. Falstrom, 273 Minn. 453, 457, 142 N.W.2d 581, 585 (1966) (requiring clear and convincing evidence); In re Estate of Lobe, 348 N.W.2d 413, 414 (Minn. App. 1984) (defining clear and convincing proof).

The most important factor in determining whether a gift exists is donative intent, which can be "demonstrated by the surrounding circumstance, including the form of the transfer."  Olsen, 562 N.W.2d at 800.  A trial court's findings of fact are not set aside unless clearly erroneous.  Minn. R. Civ. P. 52.01.  Here, respondent's testimony is the only direct evidence supporting the finding that the parties' loan debt was forgiven, and his testimony was equivocal at best.  Respondent testified that it was his understanding that the loan would be forgiven.  In addressing Frees' alleged forgiveness of the loan, he stated that the loan "would just be forgiven.  I mean it more or less -- I don't know, I seem to remember forgotten about as far as, you know, it would just be forgiven essentially."  Other than the estate's inventory reference, there is no other evidence, by way of a will, contract, or any other written document, that the loan was actually a gift or that the loan was otherwise forgiven.

Not only is respondent's testimony unclear, nearly all of the indirect evidence shows that Frees did not intend the $28,500 to be a gift.  The evidence shows that respondent approached Frees to discuss the loan arrangement.  It also shows that the parties paid Frees interest on the funds, that they may have repaid some of its principal, that Frees retained the right to ask for money back, and that her probate estate treated the arrangement as a traditional loan by including the right to its repayment as an asset of the estate.  Consistent with this evidence, the trial court found that Frees had a "reservation" in the "gift" "[to] be paid interest on this sum until her death."  A "reservation" to be paid interest and the right to reclaim the money show that Frees both lacked the donative intent necessary for an inter vivos gift, and that she did not absolutely dispose of the $28,500.  Therefore the $28,500 could not have been a gift.  See Oehler, 273 Minn. at 456, 142 N.W.2d at 585 (noting that a gift requires the donor deliver the property to the donee "with intent to vest title in the donee, and without reserving any right to reclaim the property"). 

On this record, and in light of the trial court's own findings that Frees did not absolutely dispose of the funds at issue, we conclude both that there is insufficient evidence to support the trial court's determination that Frees made a gift of the $28,500 to the parties, and that the trial court's findings do not support that determination.  Therefore, we reverse the ruling that the $28,500 was a gift.  Also, because there was no gift of the funds to the parties, the right to receive repayment of the portion of the funds that were not repaid to Frees during her life was an asset of her estate that had value and was distributed to appellant in the probate proceedings.  Thus, on remand, the district court shall determine the amount of the $28,500 which was not repaid, reduce the marital estate by that amount, award the unrepaid amount to appellant as her nonmarital property, and make any adjustment to the distribution of the marital estate that is necessary to achieve the equitable distribution of the parties' martial assets required by Minn. Stat. § 518.58, subd. 1 (2002).  Whether to reopen the record on remand shall be discretionary with the district court. 

            Reversed and remanded.

 

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.