In re the Marriage of: Marian C. Dunham, petitioner, Respondent, vs. Milton G. Dunham, Appellant.

In re the Marriage of: Marian C. Dunham, petitioner, Respondent, vs. Milton G. Dunham, Appellant. A06-2195, Court of Appeals Unpublished Decision, December 31, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-2195

 

In re the Marriage of:
 
Marian C. Dunham, petitioner,
Respondent,
 
vs.
 
Milton G. Dunham,
Appellant.

 

Filed December 31, 2007

Affirmed in part, reversed in part and remanded

Randall, Judge

 

Hennepin County District Court

File No. DW 257731

 

Dianne Wright, Wright Family Law and Mediation P.L.L.P., White Pine Building, 342 Fifth Avenue North, Bayport, MN 55003 (for respondent)

 

Amy L. Helsene, Larkin, Hoffman, Daly & Lindgren Ltd., 1500 Wells Fargo Plaza, 7900 Xerxes Avenue South, Minneapolis, MN 55431 (for appellant)

 

            Considered and decided by Randall, Presiding Judge; Kalitowski, Judge; and Hudson, Judge. 

U N P U B L I S H E D   O P I N I O N RANDALL, Judge

            On appeal from a dissolution judgment, appellant-husband argues that the district court (a) erred in finding respondent-wife had a non-marital interest in the parties' homestead; (b)  erred in excluding an exhibit rebutting her non-marital claim; (c) erred in deducting "loans" from respondent's mother from the homestead equity; (d) erred in determining severance pay received by appellant was an advance property distribution to him; (e) erred in excluding 2003 tax liability from the property division; (f) erred by awarding respondent a disproportionate amount of the marital estate; (g) erred in awarding respondent need-based attorney fees; and (h) erred by not considering if the attorney fees award caused appellant undue hardship.  We affirm in part, reverse in part, and remand.

FACTS

 

            Appellant Milton G. Dunham and respondent Marian C. Dunham were married in 1958.   Respondent initiated the dissolution action in 1998.  The district court issued a temporary order in April 2005 awarding respondent temporary relief because she claimed appellant was not giving her sufficient funds to manage her expenses.  The parties' marriage was dissolved on January 27, 2006.  Neither party sought spousal maintenance as respondent had resigned from teaching in 1965 and appellant had retired after over thirty years as a Hennepin County family court referee on December 31, 2004.  At the time of the dissolution the parties' homestead constituted the major asset and their incomes were limited to various retirement and Social Security streams.

            In the property division, respondent was awarded the homestead.  Additionally, the district court found that she had a 47% non-marital interest in the homestead valued at $238,000 because the down payment on their first home came from her premarital savings.  The district court excluded from its property division seven outstanding loans, a severance payment received upon the appellant's retirement, and back taxes owed.  The district court excluded $42,423 of the homestead's equity from the division because respondent claimed that this amount constituted unpaid loans her mother made to them throughout their marriage that should be satisfied.  The district court excluded a $40,735.99 severance payment appellant received during this dissolution proceeding from his award because it concluded this amount was an advance property distribution.  The district court excluded appellant's 2003 federal and state back-tax liability (filed married-separate) from the property award because it determined it would be inequitable to have respondent share this burden when it appeared appellant "just did not pay his taxes."  To provide appellant with his share of the marital assets the district court awarded him a lien interest of $63,255 on the homestead. 

            As part of its award the district court equalized the parties' income streams.  Appellant's retroactive Public Employees Retirement Association ("PERA") benefits that accumulated while the dissolution was pending were divided in the proportion calculated to equalize the parties' income streams after the dissolution.  The district court's income equalization did not include the non-marital portion of respondent's monthly retirement but did include the non-marital portion of appellant's military pension.  The district court awarded respondent $20,000 in need-based attorney fees because, during the years the dissolution proceeding was pending, appellant's income exceeded respondent's by more than $100,000 annually.

 

 

D E C I S I O N

I.

            Appellant argues the district court's finding that 47% of their first home was financed using respondent's premarital funds, giving her a non-martial interest in their homestead, was erroneous.  We disagree.  Whether an asset is marital or non-marital property is a question of law, which this court reviews de novo.  Gottsacker v. Gottsacker, 664 N.W.2d 848, 852 (Minn. 2003).  But this court defers to the district court's findings of fact unless this court is "left with the definite and firm conviction that a mistake has been made."  Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997) (quotation omitted).

It is the duty of the district court as fact-finder to determine the appropriate weight and credibility of the evidence because "it has the advantage of hearing the testimony, assessing relative credibility of witnesses and acquiring a thorough understanding of the circumstances unique to the matter before it."  Hasnudeen v. Onan Corp., 552 N.W.2d 555, 557 (Minn. 1996); see also Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating that appellate courts defer to a district court's credibility determinations).

            "Non-marital property" includes property acquired by a party before the marriage or acquired in exchange for such property.  Minn. Stat. § 518.003, subd. 3b (2006).  The party proposing that property is non-marital has the burden of proving this by a preponderance of the evidence.  Olsen, 562 N.W.2d at 800.  The party seeking to establish the non-marital nature of property must either maintain the non-marital property separately or be readily able to trace it if commingled with marital funds.  Wopata v. Wopata, 498 N.W.2d 478, 484 (Minn. App. 1993).  If a party cannot show that non-marital property was invested in a readily traceable asset, and it appears that marital and non-marital funds have been commingled to a degree that renders the non-marital funds untraceable, the district court should declare it to be marital property.  Id.  On the other hand, there is no strict dollar-for-dollar tracing requirement; a party proposing that property is non-marital must prove it by a preponderance of the evidence.  Carrick v. Carrick, 560 N.W.2d 407, 413 (Minn. App. 1997).  Testimonial evidence can be sufficient to establish a non-marital claim.  Doering v. Doering, 385 N.W.2d 387, 390-91 (Minn. App. 1986) (concluding the district court's determination that an asset was non-marital was not clearly erroneous given the "unique perspective" it has to judge credibility).

            The parties purchased their first home June 4, 1960 for $17,500.  $8,381 of the purchase price was paid upfront and a mortgage was taken for the remaining $9,119.  This home was sold August 21, 1969, for $23,000. The parties purchased their second home (their homestead at the time of dissolution) July 29, 1969, for $55,000.  The parties took out a $31,500 mortgage on the property with the balance paid with the proceeds from the first home's sale.  Although foreclosure proceedings commenced in 1984 on the homestead, the mortgage was redeemed by respondent's family and was satisfied by the parties in 2002.  An appraisal valued the home at $238,000 during the dissolution proceedings. 

Here the testimony of respondent and her sister supports the district court's determination that respondent proved by the preponderance of the evidence that she had a non-marital interest in the homestead because respondent used her premarital savings as the $8,381 down payment on their first home.  Respondent testified that for six years prior to the marriage she sent a portion of each paycheck to her father to save for her.  Respondent's sister's testimony corroborated that after respondent left home she sent money to her father, as was their family's practice.  Appellant testified that the down payment was paid out of their joint savings and a $4,000 loan from respondent's parents.  He testified the loan was repaid with interest in 1963.  But respondent and her sister both testified their father would not have loaned appellant money.  And respondent testified they did not have joint savings or the means to repay a $4,000 loan because during their first years of marriage they had to repay appellant's premarital debts, they had a baby, and she took a leave of absence from teaching. 

Because there were no exhibits on point, the court's determination was based on evaluating the relative credibility of the parties.  Although respondent's non-marital claim is weak for lack of documentary support, we cannot say we are firmly convinced the district court erred.  Respondent testified that her non-marital property was maintained separately and invested in their first home.  Because the court found respondent and her sister more credible than appellant, and their testimony was sufficient to prove by a preponderance of the evidence that respondent had a premarital interest in the homestead, its finding was not erroneous. 

Appellant also argues that even if respondent had a valid non-marital interest in the homestead, the district court used incorrect numbers to calculate the percentage of her interest.  We agree, but a recalculation does not alter the percentages.  The district court calculated respondent's premarital interest in their $17,500 first home as 47% using $8,387 as the non-marital portion/down payment.  But the actual down payment was $8,381.  $8,387/$17,500 = 47.93%; $8,381/$17,500 = 47.89%.  The six-dollar difference does not affect respondent's 47% non-marital interest.  See Wibbens v. Wibbens, 379 N.W.d 225, 227 (Minn. App. 1985) (refusing to remand for de minimis technical error); see also Minn. R. Civ. P. 61 (requiring harmless error to be ignored). 

II.

Appellant argues that the district court abused its discretion by not admitting into evidence an exhibit which supported his testimony challenging respondent's non-marital interest in the homestead.  Absent an erroneous interpretation of the law, whether to admit or exclude evidence is a question within the district court's broad discretion.  Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn. 1997).  Appellant did not produce this evidence until two days before trial and he had failed to disclose it in response to a specific interrogatory request served six months' before trial.  His explanation for the late discovery of the documents was found not to be credible by the district court.  He was allowed to testify to their substance.  The district court's decision to exclude the exhibit was within its discretion.

III.

            Appellant argues that deducting seven outstanding "loans" owed to the respondent's mother ($42,423) from the homestead equity was an abuse of the court's discretion because:  (1) there was insufficient evidence to prove the loans existed; and (2) if they are considered loans, the loans made more than six years ago should not be considered marital debt because collection is barred by the statute of limitations.  We disagree.

            This court has affirmed a district court's characterization of purported intra-family "loans" as gifts where they were "undocumented, unsecured and without interest."  Novick v. Novick, 366 N.W.2d 330, 332 (Minn. App. 1985).  But testimony may be enough to establish that transfers of money between family members were loans.  Nolden v. Nolden, 448 N.W.2d 892, 894 (Minn. App. 1989). 

            An action "upon a contract or other obligation, express or implied, as to which no other limitation is expressly prescribed" must be commenced within six years.  Minn. Stat. § 541.05, subd. 1 (1) (2006).  The applicability of a statute of limitations is a legal question reviewed de novo.  Benigni v. County of St. Louis, 585 N.W.2d 51, 54 (Minn. 1998).  A defense based on the statute of limitations may be waived by agreement.  State v. Hart Motor Exp., Inc., 270 Minn. 24, 29, 132 N.W.2d 391, 394 (1964) (holding that forbearance of legal action is adequate consideration for agreement).

            Respondent testified that she received seven loans over the course of the marriage during times of emergency.  This testimony was corroborated by her sister.  Both testified that their mother expected repayment because these were loans, not gifts.  But there was no evidence presented that respondent's mother had attempted or was attempting to collect on these loans although some were nearly 40-years old. 

            Three of the seven loans were made in the time period surrounding the undisputed foreclosure action on their homestead for expenses related to the parties' children and past-due household bills in collection.  The remaining four loans were for four used cars over a 33-year period.  Respondent testified that during their 48-year marriage the appellant was unwilling to buy her a car.  Appellant denied knowledge of these loans and testified he thought respondent had gotten money for her cars "[a]t the same place that she has gotten money in the past without explanation.  She doesn't explain that to me, she doesn't communicate that to me."            

            Of the $42,423 respondent claims her mother loaned her from 1969 to 2002, there is documentary evidence to support the amount of $9,913.05.  This evidence included repayment plans drafted by respondent's mother.  And an additional $25,400 loan for respondent's most recent car was seemingly admitted by appellant because his "Summary of Assets" exhibit noted that the value of respondent's car is zero because it "assumes the value equals loan."  Under cross-examination appellant denied that this indicated he was aware there was a loan outstanding on the vehicle. 

            The district court concluded: 

Based on the testimony by the parties at trial, it is hard to imagine how [appellant] was unaware there were funds coming in, from some source other than his employment, to run the household and provide for the needs of [respondent] and the parties two children throughout the marriage. 

 

Although it is unclear if respondent's mother would have vigorously pursued collection if not for this dissolution action, the district court's finding is not clearly erroneous.  And because respondent still intends to pay the loans back, the statute of limitations defense appears to be waived. 

 

IV.

            Appellant argues the court erred by including the entire net proceeds of his severance package as part of his award in the property division.  During the pendency of marriage dissolution "each party owes a fiduciary duty to the other for any profit or loss derived by the party, without the consent of the other, from a transaction or from any use by the party of the marital assets."  Minn. Stat. § 518.58, subd. 1a (2006).  But a party may liquidate marital assets without the other spouse's consent for "necessities of life."  Id.  "Spending of marital assets to meet routine financial obligations and properly maintain the parties' marital property does not constitute dissipation."  Volesky v. Volesky, 412 N.W.2d 750, 753 (Minn. App. 1987) (emphasis added).  Dissipation is "frivolous, unjustified spending…."  Id. at 752. 

            Appellant cites Volesky in support of his argument that he did not dissipate a marital asset because he spent his severance pay on "necessities."  But in Volesky the marital asset was used because there was no other source to draw from.  Id. at 751.  The appellant also cites March v. March, but in that case the marital asset was used to replace the homestead's roof and for spousal maintenance.  435 N.W.2d 569, 572 (Minn. App. 1989).  And these cases also require that the party not conceal the marital asset.  Id., Volseky, 412 N.W.2d at 753.

            The district court stated that appellant's "receipt and use of his severance pay was a concern to the [respondent] and the court."  The severance pay was received on January 22, 2005.  Appellant spent $23,709.20 in nine months.  Although retired during these months, appellant had a cash flow of $4,057/month from his military pension and Social Security.  Appellant did not have respondent's consent to use this asset because she testified she was not even aware of the severance payment's existence.  Appellant does not claim he used this asset with her permission.  The record supports the finding that this marital asset was concealed from respondent because it was direct-deposited in appellant's personal bank account. 

            Appellant concedes that $4,752 of the severance pay should be considered an advance property distribution.  And we conclude that the district court did not err in including the remaining $18,487.  $13,431.74 was spent on his back taxes for returns filed married-separate (state and federal taxes for 2004[1]).  As will be discussed more thoroughly below, because appellant inexplicably failed to file on time or pay his taxes, this was not a marital debt.  Because the debt was non-marital, the money taken from this marital asset should be considered an advance property distribution to appellant.  Although the $5,055.26 remaining was arguably spent on necessities, appellant did not explain why he was unable to pay his expenses given his $4,142/month income.  The district court did not clearly err in including the entire severance pay amount as an advance property distribution to appellant because he concealed the asset from respondent and did not explain why depleting the marital asset was justified.

V.

            Appellant argues that excluding his back tax liability owed from tax year 2003 from the property award was error.  The district court found that appellant

failed to present any compelling evidence of why he was unable to pay his income taxes, but claims it was [respondent's] fault for filing her return.  It appeared he underwithheld, had access to a large amount of cash from his severance package and just did not pay his taxes.

 

            Debt apportionment is part of property division, but district courts are "not required to apportion marital debts but [are] only required to meet the just and equitable standard of property divisions."  Berenberg v. Berenberg, 474 N.W.2d 843, 848 (Minn. App. 1991), review denied (Minn. Nov. 13, 1991).  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).

            Appellant did not file his 2003 state and federal taxes until June 15, 2005.  He filed as married-separate.  On his federal return, appellant took the standard deduction of $5,700 on his $142,186.18 taxable income ($93,193.09 net income).  On his Minnesota return, he listed a $3,000 deduction for charitable contributions in excess of $500.  Including penalties and interest, appellant owes $13,491.21 to the federal government and $2,796.73 to Minnesota. 

            There is evidence that appellant under-withheld his taxes because he did not voluntarily withhold any federal taxes on his 2003 Social Security statement.  Although appellant disputes the court's finding that the severance package could have been used to pay these taxes because the tax liability was incurred before the money was paid, he did receive the severance pay before he filed his 2003 taxes. 

            The court's finding that appellant "just did not pay his taxes" is supported by the evidence.  Appellant claims he could not pay his taxes because of payments made to respondent to run the household ($1,600/month) and tuition payments for his son's medical school ($30,000/year plus expenses).  Appellant produced seven checks written during 2003 to the medical school for a total of $12,250 and argues total expenses claimed were "unchallenged."  But respondent's exhibit 31 showed that the son had received a letter in July of 2003 from the medical school that his tuition payments were past due.  Appellant did not produce any evidence of payments made to respondent.  And even if these payments were made as appellant claims, his inability to pay his taxes remains unexplained.  These expenses would amount to $49,200 of his yearly income of over $140,000 (net income of $93,000).  In 2003, the homestead's mortgage had been paid in full.  Appellant did not have car payments.  Appellant testified he only "indirectly" paid for utilities on the home because bills were paid out of the bi-weekly amounts he gave respondent.  Appellant has nine credit cards and testified his credit card bills are approximately $350/month.  Appellant does not have substantial savings and does not invest.  Appellant testified that he did not think he used all of his funds each month.  Appellant did not present any evidence clarifying how his substantial income had been spent.

            Appellant claims that his tax liability is respondent's fault because she filed without him, forcing him to take the standard deduction.  Although it is undisputed appellant's income would be taxed at a higher rate filing separately, it is unclear why appellant argues he could not itemize his deductions because they did not file jointly.  Further, appellant did not introduce past joint tax returns to support his claim that he was losing significant tax benefits.  And appellant's argument that he was "forced" by respondent to file married-separate because she had done so first is unpersuasive because his taxes were filed over a year late.          

            Appellant also argues that it was erroneous for the district court to admit respondent's exhibit 30 regarding his cash flow because it lacked foundation, he was given insufficient notice, and it misstated the facts.  We find no error.  See Johnson v. Washington County, 518 N.W.2d 594, 601 (Minn. 1994) ("Evidentiary rulings concerning ‘materiality, foundation, remoteness, relevancy, or the cumulative nature of the evidence' are within the trial court's sound distraction and will only be reversed when that discretion has been clearly abused." (quotation omitted)).  Further, the court did not rely exclusively on this exhibit to conclude appellant could have paid his taxes in the year the payment was due.

            The district court did not abuse its discretion by concluding it would be neither just nor equitable to penalize respondent for appellant's failure to pay his 2003 taxes.

VI.

Appellant argues that respondent was awarded a disproportionate share of the marital estate.  We disagree in part and agree in part.  

The district court is required to make an equitable division of marital property, but a property division is not required to be "mathematically equal to be just and equitable."  Justis v. Justis, 384 N.W.2d 885, 888 (Minn. App. 1986), review denied (Minn. May 29, 1986).  This court will affirm the district court's property division if it has an acceptable basis in fact and principle even if it might have taken a different approach.  Antone v. Antone, 645 N.W.2d 96, 100 (Minn. 2002).  

Appellant argues the court erred in dividing his retroactive PERA benefits in the same manner as they will be divided in the future to equalize the parties' income streams.  His argument is based on the theory that, because he was paying respondent monthly for her expenses, respondent is "double-dipping."  But during this time period, respondent filed a motion for temporary relief because appellant's lack of support had left her "almost destitute" and requested their retirement earnings be equalized during the dissolution proceedings.  Respondent's motion was granted and appellant was ordered to pay her $800/month in support.  Appellant did not submit any evidence of his purported bi-weekly payments to respondent.  The court did not err in awarding the retroactive payments to the respondent consistent with the proportions calculated to equalize their income streams.  

Appellant argues the district court erroneously calculated the parties' income equalization because it failed to exclude appellant's non-marital interest in his military pension.  We agree.  The court found 58.60% of the appellant's military pension ($1,120.46/$1,912.05) was marital, leaving $791.59 as the non-marital share.  But in its income equalization, the court failed to segregate his non-marital share.  This resulted in monthly income of $4,606 to each party.  PERA was used as an equalizer, with 84% of the benefit awarded to respondent.

            The corrected equalization is as follows: 

 

Total Amount

Respondent

Appellant

Respondent's net monthly Social Security

$859

$859

 

Respondent's gross monthly Teacher's retirement

 

 

 

**Marital portion ($861.62 x .416)

$358.43

$358.43

 

**Non-marital portion ($861.62 - $358.43)

$503.19

 

 

Appellant's net monthly Social Security

$2,145

 

$2,145

PERA

$3,434

 

$3,434

Appellant's Military Pension

 

 

 

**Marital portion ($1,912.05 x 58.60%)

$1,120.46

 

$1,120.46

**Non-marital portion ($1,912 - $1,120.46)

$791.59

 

 

Subtotal (rounded off)

$9,212.00

$1,217

$6,699

Equalizing funds to Respondent using PERA

 

$2,741

-$2,741

Monthly income to each party

 

$3,958

$3,958

Percentage of PERA to each party

 

79.82%

20.18%

 

Because the court erred in including the entire amount of appellant's military pension in its equalization of the income streams, this corrected chart should be adopted.  The percentage of PERA benefits awarded to each party was also erroneous because it followed from the district court's miscalculation.  Therefore the division of the retroactive PERA benefits must be corrected.  We reverse the district court's income stream equalizations and remand to correct its division and reallocate the retroactive PERA benefits.   

VII.

            Appellant argues that it was error for the district court to award attorney fees to respondent.  We agree.  In a dissolution proceeding, the district court shall award need-based attorney fees if it finds (1) the fees are necessary for a good-faith assertion of a party's rights; (2) the party from whom fees are sought has the means to pay them; and (3) the party to whom fees are awarded does not have the means to pay them.  Minn. Stat. § 518.14, subd. 1 (2006). 

            Here the district court did not find and the evidence does not support that respondent lacked the means to pay her attorney.  The district court awarded $20,000 in attorney fees to respondent because:  "During the years prior to trial, [appellant] was in a superior financial position to [respondent], receiving over $100,000 per year more than [respondent].  [Respondent] requires a contribution from [appellant] with respect to her attorney fees and costs."  But the fact that the parties' incomes were disparate during the marriage is not enough to support an award of need-based fees.  See Geske v. Marcolina, 624 N.W.2d 813, 817 n.2 (Minn. App. 2001) (holding that a demonstration of disparate income, without a showing that the individual cannot pay, is an insufficient basis for a need-based award because cases predating the three-part standard of Minn. Stat.

§ 518.14, subd. 1 have been superseded by the statute to the extent that they are inconsistent).

            And although "a lack of specific findings on the statutory findings . . . is not fatal to an award," it must be reasonably implied upon review that they were considered by the district court.  Id. at 817.  Here, a review of the district court's order implies that respondent is able to pay her attorney.  Both parties' current income is comprised entirely of various retirement and Social Security payments.  Following the dissolution, the parties' income streams were equalized.  Respondent was awarded the primary asset of the marriage:  the unencumbered homestead.  Respondent was ordered to sell or refinance the homestead within 60 days to finance the $63,225 cash equalization award owed appellant.  Because this asset can be used to pay her attorney fees, we cannot say respondent demonstrated she is entitled to need-based attorney fees.[2]  We reverse the attorney fees award.

Affirmed in part, reversed in part, and remanded.

[1] Appellant's 2004 tax returns were part of the record.  This amount also includes federal taxes for 2002.  Appellant testified he was unsure how they filed that year.

[2] Respondent indicated in her brief that she intends to bring a separate motion for need- and conduct-based attorney fees incurred on appeal.  A motion for attorney fees may be made within 15 days after filing of this court's opinion.  Minn. R. Civ. App. P. 139.06, 139.03.  But in light of our reversal of the district court's award of need-based attorney fees, and our conclusion that appellant is entitled to affirmative relief, respondent is not entitled to appellate fees.