In re Teofilo Rubio Sison, petitioner, Respondent, vs. Gloria Cirela Favis, Appellant.

In re Teofilo Rubio Sison, petitioner, Respondent, vs. Gloria Cirela Favis, Appellant. A04-1228, Court of Appeals Unpublished, May 3, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-1228

 

 

In re Teofilo Rubio Sison, petitioner,
Respondent,

vs.

Gloria Cirela Favis,
Appellant.

 

 

Filed May 3, 2005

Affirmed

Wright, Judge

 

 

Ramsey County District Court

File No. F8-02-1465

 

 

Robert J. Polski, Jr., 1712 US Bank Center, 101 East Fifth Street, St. Paul, MN  55101-1819 (for appellant)

 

Jerome M. Rudawski, 2332 Lexington Avenue North, Roseville, MN  55113 (for respondent)

 

            Considered and decided by Minge, Presiding Judge; Wright, Judge; and Huspeni, Judge.*

U N P U B L I S H E D  O P I N I O N

WRIGHT, Judge

 

In this appeal from a dissolution decree, appellant challenges the district court's determination of marital property.  We affirm.

FACTS

 

Appellant Gloria Favis and respondent Teofilo Sison were married in January 1998.  During the marriage, the parties' income was principally derived from the acquisition, renovation, and rental of real property.  Favis handled the parties' business affairs, acquiring the properties individually or through a limited liability company, Mid International.  Sison contributed substantial labor to the renovation and management of the properties.  Neither Favis nor Mid International paid Sison a wage or salary, but Favis otherwise covered Sison's living expenses.

            The parties separated in late 2000 or early 2001, and Sison filed a petition for dissolution of the marriage in October 2002.  The petition was accompanied by a restraining provision, in accordance with Minn. Stat. § 518.58, subd. 1a (2002), directing the parties not to sell or otherwise dispose of their property pending the dissolution proceedings.  Pursuant to Minn. R. Gen. Prac. 304.02, the parties submitted informational statements that disclosed several parcels of real property acquired during the marriage.  In its discovery order dated July 31, 2003, the district court directed Favis to produce documentation relating to the parcels of real property and to Mid International.  Favis never complied with this order.

            At a trial before a family court referee, the principal issue was whether certain parcels of real property were marital property.  Because Favis failed to comply with the July 31 discovery order, the evidence at trial primarily consisted of the parties' informational statements and their testimony. 

Four specific properties are the subject of this appeal:  1074 Arkwright Avenue; 3832 Conroy Trail; 1411 Farrington Avenue; and 12812 Independence Avenue.  Although Favis did not produce documentary evidence of recorded titles for any of these properties, she claimed that these properties were owned by Mid International, in which she and her daughter each held a 50 percent share.  Favis's testimony supplies the only evidence regarding the extent of her ownership or control of Mid International.

            The parties do not dispute that Mid International acquired the Arkwright property in 1999.  The Arkwright property, an 11-unit apartment building, required extensive renovation.  Sison testified that, after completing substantial remodeling work, he was the full-time manager of the property until the parties separated in February 2001.  Favis variously testified that, at some time in 2001, Mid International either sold or exchanged the property for $400,000, approximately $50,000 more than the assessed market value.  Favis reported this transaction as a like-kind exchange on her own 2001 federal income-tax return, realizing a gain of $56,000.  No other documentary proof of this transaction was supplied.

The parties also did not dispute that the Conroy property was acquired in August 1999 and was used as the marital residence.  Sison testified that he performed substantial remodeling work on the property.  Favis admitted that the property remained in the possession of Mid International at the time of the trial.

According to her informational statement, Favis acquired the Farrington property in 2001.  This assertion is corroborated in part by a note, taken by Favis's counsel, indicating that Favis had acquired the property prior to 2002.  Sison testified that he performed substantial remodeling work on this property prior to the separation, suggesting that the property was acquired before 2001.  Favis testified that this property was sold to her daughter when Mid International had financial difficulties in 2002 and 2003.  No other proof was offered of the sale.

Sison testified that, although the Independence property was purchased in September 2000 for use as the parties' new marital residence, they never moved in because of their discord.  Favis initially testified that she purchased the property in 2001 with financial assistance from her daughter.  She later characterized the transaction as refinancing an existing contract for deed, in which Mid International transferred the property to her daughter.  Although Favis claimed that the property was her daughter's residence, the 2001 and 2003 tax records indicate that it was Favis's home address.  Favis again testified that this property was sold when Mid International had financial difficulties in 2002 and 2003.  But no proof of the sale other than Favis's testimony was offered.

The district court issued its Findings of Fact, Conclusions of Law, Order for Judgment and Judgment and Decree on May 7, 2004.  Assessing Favis's credibility, the district court found:

Throughout the trial [Sison's] testimony was much more credible than [Favis's].  [Favis] experienced continued lapses in memory, countered by astute and total recall of other business details when she perceived it as in her favor.  This is true despite her attorney's valiant efforts to explain away her behavior as induced by illness, high blood pressure, high blood pressure medication or the lack of high blood pressure medication; for which there was no medical support.

 

The district court found that Favis was the sole owner of Mid International and, without determining whether Mid International held title to the properties, found that Favis treated the properties as her own.  Because of a dearth of documentary proof, the district court also rejected Favis's assertions that any of the real property at issue had been exchanged or sold. 

Based on these findings, the district court concluded that the parcels of real property are marital property and ordered them sold with equitable distribution of one-half of the proceeds from the sale to each party.  The district court directed that, until Sison received the value of his half of the parties' equity, Sison would receive 80 percent of sale proceeds.[1]  This appeal followed.

 

 

D E C I S I O N

 

Favis challenges the district court's determination that the four parcels of real property are marital property.  The classification of property as marital or nonmarital is a question of law, which we review de novo.  Antone v. Antone, 645 N.W.2d 96, 100 (Minn. 2002).  But we review the district court's findings of fact underlying this determination for clear error.  Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997).  On review for clear error, we defer to the district court's assessment of witness credibility and view the record in the light most favorable to the district court's findings.  Chafoulias v. Peterson, 668 N.W.2d 642, 662-63 (Minn. 2003); Vangsness v. Vangsness, 607 N.W.2d 468, 472 (Minn. App. 2000).  We will not reverse the district court's findings absent a firm and definite conviction that a mistake was made.  Prahl v. Prahl, 627 N.W.2d 698, 702 (Minn. App. 2001).   

            The determination of marital property is governed by Minn. Stat. § 518.54, subd. 5 (2004), which provides in relevant part:

"Marital property" means property, real or personal, . . . acquired by the parties . . . to a dissolution . . . at any time during the existence of the marriage relation between them . . . .  All property acquired by either spouse subsequent to the marriage and before the valuation date is presumed to be marital property . . . .  The presumption of marital property is overcome by a showing that the property is nonmarital property.

 

"Nonmarital property" means property . . . which

(a)       is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse;

(b)       is acquired before the marriage;

(c)       is acquired in exchange for or is the increase in the value of property which is described in clauses (a) [and] (b) . . . .

 

To overcome the marital-property presumption, a spouse has the burden to establish the property's nonmarital character by a preponderance of the evidence.  Olsen, 562 N.W.2d at 800.

            When a spouse acquires an interest in a business during a marriage, that interest is marital property, unless it was acquired in exchange for nonmarital property.  Hoffa v. Hoffa, 382 N.W.2d 522, 526 (Minn. App. 1986).  Under these circumstances, the spouse must introduce competent evidence that traces the ownership interest to nonmarital property.  Scholle v. Scholle, 411 N.W.2d 912, 914-15 (Minn. App. 1987).  If a spouse is among several unrelated owners of a closely held corporation, the value of the spouse's interest may be considered marital property.  Berenberg v. Berenberg, 474 N.W.2d 843, 847 (Minn. App. 1991), review denied (Minn. Nov. 13, 1991).

            Favis initially argues that, because the controverted parcels were acquired by either her daughter or Mid International, the district court erred in concluding that they are marital property.  This argument invites a two-part analysis.

            First, we consider the district court's factual determination that Favis, and not some other person, is the owner of the parcels.  Favis failed to comply with the district court's discovery order directing Favis to produce documentation relating to the ownership of the parcels, the shareholders of Mid International, and Mid International's assets.  Relying on the parties' informational statements and Sison's testimony, the district court found that Favis was the sole owner of Mid International and that she controlled the properties and treated them as her own.  Without expressly finding whether Favis or Mid International held record title to the properties, the district court found by inference that Favis was the owner.

The record here supports this inference.  In his testimony, Sison described the properties in detail and explained Favis's role in the parties' business.  This testimony is corroborated in part by Favis's tax records and informational statement.  Based on its determination that Favis solely owns Mid International, the district court did not need to state precisely whether Favis or Mid International held record title.  And because Favis's testimony was contradictory, the district court found that her accounting of the properties was not credible.  Viewing the record in the light most favorable to the findings, with deference to the district court's evaluation of the witnesses' credibility, we conclude that the district court did not commit clear error by determining that Favis was the owner of the properties.

Second, we consider the district court's legal conclusion that Favis's marital property includes the holdings of Mid International.  The record is silent as to whether Favis acquired Mid International prior to the marriage or whether any portion of Mid International's assets are nonmarital property.  Thus, Favis did not meet her burden of proving by a preponderance of the evidence that the properties were acquired with her nonmarital property.  See Scholle, 411 N.W.2d at 914-15.  Because the parties do not otherwise dispute that the properties were acquired during the marriage, the marital-property presumption is determinative as a matter of law.  See Minn. Stat. § 518.54, subd. 5.

Favis alternatively challenges the district court's factual determination that either Favis or Mid International retains possession of the properties because, she contends, the properties were transferred or sold prior to the dissolution.  Accordingly, Favis maintains that the parcels are not marital property.

Aside from her testimony, which the district court determined to lack credibility, and a single uncorroborated tax record, Favis did not offer any evidence that the properties had been exchanged or sold.  The district court credited Sison's testimony regarding ownership and discredited Favis's claims of sale or transfer.  With deference to this assessment of credibility, we conclude that the district court did not clearly err when it determined that Favis retained possession of the properties.  We, therefore, affirm the district court's classification of the four parcels of real property as marital property.

Affirmed.

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

 

[1] For the first time at oral argument, Favis claimed that this aspect of the ordered distribution would result in Sison receiving a disproportionate share of the parties' equity.  We observe that the decree awarded each party an equal share of the equity, and that Sison is entitled to 80 percent of the sale proceeds only until payment of his share is satisfied.  In order for a disproportionate share to result, we would have to conclude, contrary to the credible evidence, that Favis previously sold the properties and that the proceeds of the sale were properly treated as marital property by an earlier distribution to Sison.  This argument, however, was not raised by Favis before the district court or in her appellate brief.  Thus, appeal on this basis is waived.  See Balder v. Haley, 399 N.W.2d 77, 80 (Minn. 1987) (holding that issues not raised in appellate brief are waived).