In re the Marriage of: Gregory Edward Johnston, petitioner, Appellant, vs. Anna Carroll Johnston, Respondent.

In re the Marriage of: Gregory Edward Johnston, petitioner, Appellant, vs. Anna Carroll Johnston, Respondent. A04-2383, Court of Appeals Unpublished, November 22, 2005.

This opinion will be unpublished and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

A04-2383

 

In re the Marriage of:

Gregory Edward Johnston, petitioner,
Appellant,
 
vs.
 
Anna Carroll Johnston,
Respondent.

 

Filed November 22, 2005

Affirmed

Stoneburner, Judge

 

Hennepin County District Court

File No. DW 281611

 

David E. Zins, Suite 125, 5353 Gamble Drive, Minneapolis, MN 55416 (for appellant)

 

Ellen M. Schreder, Carson, Clelland & Schreder, Suite 305, 6300 Shingle Creek Parkway, Minneapolis, MN 55430 (for respondent)

 

            Considered and decided by Worke, Presiding Judge; Stoneburner, Judge; and Hudson, Judge.

U N P U B L I S H E D  O P I N I O N

 

STONEBURNER, Judge

 

            Appellant challenges several property-division-related decisions of the district court and the award of conduct-based attorney fees in this dissolution action.  Because most of the challenged decisions fall within the district court's broad discretion, the findings supporting the decisions are not clearly erroneous, and the remaining challenged decisions do not rise to the level of reversible error, we affirm. 

D E C I S I O N

 

I.          Property division

            District courts have broad discretion over the division of marital property, and appellate courts will not alter a district court's property division absent a clear abuse of discretion or an erroneous application of the law.  Chamberlain v. Chamberlain, 615 N.W.2d 405, 412 (Minn. App. 2000), review denied (Minn. Aug. 8. 2000); Ebnet v. Ebnet, 347 N.W.2d 840, 842 (Minn. App. 1984).  A district court abuses its discretion regarding a property division if its decision is "against logic and the facts on [the] record."  Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).  Appellate courts "will affirm the trial court's division of property if it had an acceptable basis in fact and principle even though [the appellate court] might have taken a different approach."  Antone v. Antone, 645 N.W.2d 96, 100 (Minn. 2002).  The trial court's findings of fact will not be set aside unless they are clearly erroneous.  Id.  An appellate court does not require the district court to be exact in its valuation of assets; "it is only necessary that the value arrived at lies within a reasonable range of figures."  Johnson v. Johnson, 277 N.W.2d 208, 211 (Minn. 1979) (citing Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d 42, 44 (1975)); Kitchar v. Kitchar, 553 N.W.2d 97, 102 (Minn. App. 1996), review denied (Minn. Oct. 29, 1997).  "Where conflicting opinions of expert witnesses have a reasonable basis in fact, the trier of fact must decide who is right, and the decision will not be overturned on appeal."  Griepp v. Griepp,381 N.W.2d 865, 869 (Minn. App. 1986) (quotation omitted).  The difference between expert witnesses' valuations is "inescapably a credibility issue."  Bury v. Bury, 416 N.W.2d 133, 137 (Minn. App. 1987).

a.         Use of wife's post-valuation-date debt to reduce value of Iris Lane property

 

            Appellant (husband) first argues that the district court erred by including wife's post-valuation-date expense in the calculation of the marital interest in wife's current homestead, described as the "Iris Lane property."  The parties acquired the property as joint tenants and stipulated that the fair market value of the property as of the valuation date[1] was $205,000.

            Almost three months after the valuation date, wife incurred a refinancing charge of $6,912 when she refinanced the Iris Lane property.  The district court reduced the marital equity in the property by the amount of this post-valuation-date debt.  Husband argues that the district court erred in doing so because the district court was required to value all marital assets as of the valuation date.  Husband cites Wopata v. Wopata, 498 N.W.2d 478, 485 (Minn. App. 1993) ("[T]he trial court is required to value marital assets . . . as of the day of the initially scheduled prehearing conference, unless . . . the trial court makes a specific finding that another date is fair and equitable.")(citing Minn. Stat. § 518.58, subd. 1 (Supp. 1991)). 

            Wife appears to argue that because she incurred the refinancing charge to pay interest and fees on tax liability she incurred in 2001 when she withdrew retirement funds to pay credit-card balances and her automobile lease, the charge constitutes marital rather than non-marital debt.  The district court found that wife used her retirement funds to pay marital debt, but there is no finding that the refinancing charge was a marital debt.  The district court stated that "[t]he refinancing charge is an appropriate deduction for determining the marital equity [of the Iris Lane property] in this case."  We cannot determine the basis of the district court's conclusion from this statement.  But we decline to remand for additional findings on this debt because, on this record, the effect of any error on the overall property division is minimal.  See Minn. R. Civ. P. 61 (requiring harmless error to be ignored); Wibbens v. Wibbens, 379 N.W.2d 225, 227 (Minn. App. 1985) (declining to remand when error was de minimus).

b.         Tax liability for revenue recapture on Lyndale Avenue rental property

            During their marriage, the parties sold a Lyndale Avenue rental property on a contract for deed basis and incurred a tax liability for the recapture of depreciation taken on that property.[2] Husband argues that the trial court erred by failing to allocate to wife an equal share of tax liability.  The parties stipulated that, because of this tax liability, the property had no value for property division purposes.  But husband argues that because he presented evidence of the amount of the tax liability incurred,[3] the district court should have allocated this debt in the property division.  Wife argued thata the stipulation precluded consideration of the tax liability as a marital debt.  The district court found that "the tax liability is partially speculative [and] there is no basis to assess it to [wife]."

            On appeal, husband acknowledges that the district court has discretion when determining whether to consider the tax consequences of a property distribution.  Maurer v. Maurer, 623 N.W.2d 604, 607 (Minn. 2001) (citing Aaron v. Aaron, 281 N.W.2d 150, 153 (Minn. 1979) (stating that it is within the trial court's discretion to consider tax consequences of award)).  Maurer affirmed the district court's consideration of future tax consequences in valuing retirement assets.  Id. at 605.  Husband argues that because, as in Maurer,the record in this case contains a reasonable and supportable basis for making an informed judgment as to the probable tax liability, the district court abused its discretion by declining to consider the tax liability and erroneously labeled it "speculative."

            Husband's accountant testified that the primary variable in his calculation of this tax liability is the amount of husband's taxable income, which determines the rate of taxation.  Although husband acknowledges that he can control the amount of his income, the uncontroverted testimony of husband's accountant was that husband's income has consistently exceeded $38,050 per year, the amount that triggers the maximum combined state and federal rate of 32%, which is what husband's accountant used to calculate the tax.  Based on this testimony, the district court would not have abused its discretion if it had chosen to consider this debt.  But we cannot conclude that the district court abused its discretion by failing to apportion this debt because consideration of tax liability is discretionary and the district court's statement that the calculation is "partially speculative" is not clearly erroneous.  Because we conclude that the district court did not abuse its discretion by declining to apportion this debt, we do not reach wife's argument that the parties' stipulation precluded such consideration. 

            c.         Deer Hill Court valuation

            Husband purchased his homestead located on Deer Hill Court in 1992 and has a substantial nonmarital interest in the property.  Both parties had the property appraised.  Husband's expert testified that on the valuation date, the value of the property was $390,000, and wife's expert testified that the value of the property on that date was $444,000.  Husband argues that the trial court abused its discretion when it adopted wife's expert's valuation.  We disagree.  Each party vigorously cross-examined the opposing expert about the Deer Hill Court property value.  The district court's determination that the value of the property is $444,000 is within the range of values submitted to the district court and is not clearly erroneous.  See Bury, 416 N.W.2d at 137 (Minn. App. 1987) (deferring to district court's valuation when parties had presented conflicting testimony and husband had attacked wife's expert's credentials and experience, and stating that the difference between expert witnesses' valuations is "inescapably a credibility issue").

d.         Dissipation of assets

            1.         SEP/IRA accounts

            Husband asserts that wife withdrew $37,997 from marital SEP/IRA accounts without his knowledge or consent and used the funds to pay credit-card debt and her automobile lease and to make the down payment on the Iris Lane property.  Husband argues that the payment of more than the minimal amount due on the credit cards was an atypical expenditure of marital funds that constituted an improper disposition of marital assets, and that the $37,997 should be imputed to wife under Minn. Stat. § 518.58, subd. 1a (2004) (providing that if a party is found to have transferred, encumbered, concealed or disposed of assets in order to reduce the marital estate available for division, that party is accountable for the assets unless they were used to meet necessary living expenses).  Spending marital assets to meet normal financial obligations and maintain marital property is not "dissipation" as required under a previous version of Minn. Stat. § 518.58.  Volesky v. Volesky, 412 N.W.2d 750, 753 (MiInn.App. 1987). 

            The district court found that the bulk of the withdrawals were not to be imputed against wife because she used the funds to pay off marital debt.  Whether debts are marital or nonmarital presumptively depends on the date they were incurred.  See Minn. Stat. § 518.54, subd. 5 (2004) (stating presumption that property acquired during marriage is marital property).  The determination of whether a debt is marital or non-marital property is a legal conclusion reviewed de novo, but the findings supporting the conclusion are reviewed for clear error.  Burns v. Burns, 466 N.W.2d 421, 423 (Minn. App. 1991).  The record supports the district court's implicit finding that the debts were incurred during the marriage and thus presumptively marital debts.  The district court has broad discretion in its division of marital assets and debts.  Dahlberg v. Dahlberg, 358 N.W.2d 76, 80 (Minn. App. 1994).  Based on the record as a whole, we conclude that the district court's determination that the debts were marital and that wife's use of the funds to pay these debts did not dissipate marital assets was not an abuse of discretion and was not erroneous.

                        2.         Joint savings account

            Husband also asserts that wife closed a jointly held bank account five months after the parties separated by withdrawing the entire balance of $2,655.59, which she used to pay her attorney's retainer fee.  Husband asserts that the funds in the joint savings account belonged to his children and himself.[4]  Wife testified that she believed the funds in the account were from the closing on her premarital homestead.  The district court did not make any findings relating to the joint savings account and did not set off these funds against wife's share of the property division.  Even if the failure to include these funds in the property division was erroneous, because the failure to address this account does not significantly affect the overall fairness of the property division, we will not remand for additional findings.  See Prahl v. Prahl, 627 N.W.2d 698, 704-05 (Minn. App. 2001) (holding that, although district court clearly erred in overvaluing a marital asset by as much as $6,773, the error did not render the property distribution an abuse of discretion "[i]n the context of the entire property award[.]").

            e.         American Funds IRA/SEP valuation

            Husband asserts that the parties stipulated that the value of wife's American Funds IRA/SEP account as of the valuation date was $7,427.14 and that the trial court abused its discretion by disregarding this stipulation and valuing the account at $6,178.  The referee implicitly rejected husband's assertion that there was a binding stipulation regarding the amount of this account.  The district court affirmed the referee's determination of value that was based on an account statement issued on March 31, 2003, several weeks prior to the April 22, 2003 valuation date. 

            The alleged stipulation is the only evidence husband offers of the account value on April 22.  The alleged stipulation consisted of a statement made by wife's attorney on the record at a deposition when both parties were present.  But there is no evidence that the parties acknowledged that they understood or agreed to be bound by the statement.  Cf. Beach v. Anderson, 417 N.W.2d 709, 711-12 (Minn. App. 1988) (upholding an oral stipulation when the parties acknowledged on the record that they understood the terms of the stipulation and agreed to be bound by it), review denied (Minn. Mar. 23, 1988).  We conclude that the district court did not err by rejecting the assertion that the parties stipulated to the value, and the court's value, based on the only valuation evidence offered, is not clearly erroneous.  See Snesrud v. Instant Web, Inc., 484 N.W.2d 423, 428 (Minn. App. 1992) (stating factual findings reversed only if appellate court is of "definite and firm conviction that a mistake has been made."), review denied (Minn. June 17, 1992).

g.         Division of marital interest in Calhoun Parkway property

            Husband objects to the trial court's equal division of the marital appreciation in nonmarital property located on Calhoun Parkway, which he owns with his father.  During the marriage, husband's share of rental income from this property was turned over to husband's father, who managed and maintained the property.  Husband does not argue that the district court erred in determining what portion of this property was marital, but argues that because wife did not actively contribute anything to this property she should not be entitled to one-half of the marital equity in it.  But the parties contributed marital income to the reduction of the mortgage-loan balance and to improvements on this property.  See Burns, 466 N.W.2d at 424 (stating "[i]ncome from nonmarital property is marital property," holding that marital income from husband's nonmarital property used during the marriage to retire the mortgage on that property was marital property, and affirming equal division of marital equity in the property).  We find no merit in husband's argument that the district court was required to award him a greater share of the marital equity in this property.

II.        Conduct-based attorney fees

            The district court awarded wife $3,900 in conduct-based attorney fees.  An award of attorney fees is discretionary and will not be disturbed absent an abuse of that discretion.  Dabrowski v. Dabrowski, 477 N.W.2d 761, 766 (Minn. App. 1991).  The district court must make findings regarding conduct-based fees "to permit meaningful appellate review" of the award.  Kronick v. Kronick, 482 N.W.2d 533, 536 (Minn. App. 1992).  To award conduct-based fees, the court must identify the offending conduct, the conduct must have occurred during litigation, and it must be found to have unreasonably contributed to the length or expense of the proceeding.  Minn. Stat. § 518.14, subd. 1 (2004); Geske v. Marcolina, 624 N.W.2d 813, 818-19 (Minn. App. 2001). 

            The district court specified that $900 of the fee award was attributed to husband's September 2003 motion to compel discovery.  The court found that husband improperly conditioned access to the Calhoun property on wife's provision of additional discovery materials.  Husband argues that the court clearly erred when it found that he canceled an already scheduled appointment to view the Calhoun property, because wife had not even requested access to the Calhoun property at that point.  But even if that finding was erroneous, the record contains evidence that husband conditioned access to the property on wife's compliance with husband's discovery request for her checking-account records.  The record further reflects that husband continued to condition his discovery responses on wife's compliance with his discovery requests even after the referee specifically ordered the parties not to do so.  We conclude that the court did not clearly err when it determined that husband did not cooperate in discovery, and the award of attorney fees in the amount of $900 for non-cooperation with discovery was not an abuse of discretion. 

The district court also awarded $3,000 based on findings that husband failed to cooperate with the court and counsel and extended the trial by continuously focusing on "irrelevant" matters.  From our review of the record, we cannot conclude that husband's focus on wife's dog-showing activities and her lack of contribution to marital expenses was entirely irrelevant.  Husband had colorable claims that these issues were relevant to the equitable distribution in this case.  Husband also had a non-frivolous argument that wife should be responsible for certain debts incurred during the marriage.  Despite the district court's rejection of husband's theory of how the marital estate should have been divided, he was entitled to present his theory and make a thorough record of his case.  But he was not entitled to make cumulative arguments on these issues.

The district court acknowledged that husband was successful in some of his motions and arguments.  Nonetheless, the district court found that husband contributed to the length of the proceeding.  We defer to those findings.  We note the district court's statement that she had the "experience and ability to make a reasoned analysis of the time necessary and appropriate to litigate a case such as this one," and the district court's statement of her "abiding and persistent conclusion that the fees escalated dramatically, and partly unnecessarily, due to [husband's] non-cooperation with the Court and [wife's] counsel, resulting in delay and lengthening the proceedings."  For purposes of review, it would have been more helpful for the district court to have more specifically identified instances of non-cooperative conduct, but given the reduction of wife's request for fees from $12,000 to $3,000 and the specific finding of non-cooperation, we conclude that the attorney fee award does not constitute an abuse of discretion.

Affirmed.

[1] The district court determined that the valuation date was April 22, 2003, the day of the initially scheduled prehearing settlement conference.

[2] Husband also raised the court's failure to award the Lyndale property to him.  He stated at oral argument that this issue has been addressed by agreement of the parties and is moot for purposes of this appeal.

[3] Husband's accountant testified that the combined federal and state income tax liability incurred by the parties as a result of depreciation recapture on this property is $11,101.76, payable in installments as principal payments are received over the term of the contract for deed, or until it has been paid in full.

[4] Despite his argument that the funds were nonmarital, husband also argued that wife's use of these funds to pay her attorney fees constituted a dissipation of marital assets.