In re the Marriage of: Kenneth Robert Smigelsky, petitioner, Respondent, vs. Wendy Sue Smigelsky, Appellant.

In re the Marriage of: Kenneth Robert Smigelsky, petitioner, Respondent, vs. Wendy Sue Smigelsky, Appellant. A06-758, Court of Appeals Unpublished, December 26, 2006.

This opinion will be unpublished and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

A06-758 In re the Marriage of:

Kenneth Robert Smigelsky, petitioner,
Respondent,

vs.

Wendy Sue Smigelsky,
Appellant.

 

Filed December 26, 2006

Reversed and remanded

Stoneburner, Judge

 

Becker County District Court

File No. F405398

 

John G. Westrick, Kirk M. Anderson, Westrick & McDowall-Nix, P.L.L.P., 450 Degree of Honor Building, 325 Cedar Street, St. Paul, MN 55101 (for respondent)

 

Charles A. Krekelberg, Krekelberg, Skonseng & Hastings, P.L.L.P., 10 North Broadway, Box 353, Pelican Rapids, MN 56572-0353 (for appellant)

 

            Considered and decided by Halbrooks, Presiding Judge; Klaphake, Judge; and Stoneburner, Judge.

U N P U B L I S H E D  O P I N I O N

 

STONEBURNER, Judge

 

            Appellant wife challenges the property division in this dissolution matter, asserting that the district court erred in (1) determining that an investment account and an automobile were marital property; (2) failing to consider a $20,000 loan from wife's parents as marital debt; (3) concluding that a credit-card debt incurred by respondent husband after the parties' separation was a marital debt; and (4) determining husband's net income for purposes of calculating child support.  We reverse the district court's determinations on the marital character of the investment account, car, and credit-card debt, and the award of an equitable offset for husband's labor against the loan from wife's parents.  Because the findings are inadequate for meaningful review of the marital or non-marital character of that loan, husband's credit-card debt, and calculation of husband's net income for child-support, we remand for additional findings on those issues.

FACTS

            At trial in this dissolution action, the parties submitted the issues of custody, child-support, and property division to the district court.  Appellant Wendy Smigelsky (wife) works as a registered nurse.  Respondent Kenneth Smigelsky (husband) owns and operates a small landscaping business and works during the offseason at electrical and construction businesses.  The parties have one minor child.   

            Wife argued that an Edward Jones investment account, which she opened at the time of the parties' separation, and a Volkswagen Passat are her nonmarital property because they were traced to annuity payments she received during the marriage from a settlement for a childhood injury.  The district court concluded that neither the investment account nor the Volkswagen were nonmarital property because they were not sufficiently traced to the annuity payments, which the district court found were commingled with marital funds in the parties' joint account. 

            The district court also concluded that a $20,000 loan from wife's parents for the parties' home remodeling project is wife's nonmarital debt based on findings that husband did not know about the loan until trial, only wife signed the promissory note to her parents, and that it was "equitable" to offset the value of husband's extensive labor on the remodeling project against the loan.  The district court assigned as marital a credit-card debt of $8,045.76, which was incurred solely by husband during the parties' separation.  And the district court found that husband's net monthly income for child-support is $1,000. 

            The district court denied wife's motion for amended findings or a new trial, and this appeal followed. 

D E C I S I O N

 

I

            During the marriage, wife received annuity payments of $41,850 and $62,775 from a settlement for a childhood injury.[1]  Wife argues that she appropriately traced funds in an investment account and funds used to purchase a Volkswagen Passat to the annuity payments to establish that the investment account and vehicle are nonmarital.  We agree. 

The determination of whether property is marital or nonmarital is reviewed de novo, but an appellate court must defer to the district court's findings of fact unless they are clearly erroneous.  Gottsacker v. Gottsacker, 664 N.W.2d 848, 852 (Minn. 2003).  To retain its nonmarital character during a marriage, property must either be kept separate from marital property or be readily traceable to a nonmarital asset.  Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997).  "A spouse seeking to trace an asset to a nonmarital source . . . need only show by a preponderance of the evidence that the asset was acquired in exchange for nonmarital property."  Doering v. Doering, 385 N.W.2d 387, 390 (Minn. App. 1986) (quotation omitted). 

The district court found that the annuity funds were "gifted" to husband and lost their nonmarital character when they were commingled with other funds in the parties' joint bank accounts.  See Crosby v. Crosby, 587 N.W.2d 292, 296-97 (Minn. App. 1998) (affirming district court's determination that one spouse regularly commingled nonmarital and marital funds to such an extent that deposited nonmarital funds lost that characteristic), review denied (Minn. Feb 18, 1999).  Although the record supports a finding that some of the annuity funds were commingled with marital funds in the parties' joint checking account, there is no evidence to support a finding that the annuity funds were commingled with marital funds in the parties' joint savings account or an inference that wife intended to gift nonmarital funds to husband merely by placing the funds in the joint savings account.  Except for funds from the checking account used to purchase the Volkswagen, wife makes no nonmarital claim to any funds placed in the checking account or funds withdrawn from the savings account by either party before the parties' separation.  We conclude that the district court's finding that wife "gifted" the nonmarital annuity funds that remained in the savings account to husband is clearly erroneous, and we reverse that holding. 

Tracing of Volkswagen to annuity funds

            Wife testified, and exhibits confirm, that in March 2004, wife deposited an annuity payment in the amount of $62,756.41 into the parties' joint savings account, which at that time contained only a nominal sum.  In late April 2004, wife transferred $14,600 from the savings account into the parties' joint checking account and immediately wrote a check for that amount to purchase a Volkswagen Passat.  Husband testified that he knew that the money for the Passat came from wife's annuity payment, acknowledging that those funds were the only possible source of money for the vehicle purchase.  Because wife has shown by a preponderance of the evidence that the Volkswagen Passat was acquired in exchange for nonmarital funds, we conclude that the district court erred in characterizing the vehicle as marital property and reverse that holding.

Tracing of investment account to annuity funds

            When the parties separated, wife closed the joint savings account, which had a balance of approximately $37,000.  She initially placed the money into a savings account in her name only, then transferred the funds to the Edward Jones investment account at issue in this appeal.  Because a preponderance of evidence shows that the investment account was purchased solely with wife's nonmarital funds, the district court erred in holding that wife had failed adequately to trace this asset, and we reverse the district court's determination that this fund is marital. 

II

            A district court apportions debt as part of the marital property division and treats the division of marital debt in the same manner as the division of assets.  Justis v. Justis, 384 N.W.2d 885, 889 (Minn. App. 1986), review denied (Minn. May 29, 1986).  "The trial court is accorded broad discretion in the division of debt; on review, the trial court's decision must be affirmed if it has an acceptable basis in fact and principle, even though this court may have taken a different approach."  Bliss v. Bliss, 493 N.W.2d 583, 587 (Minn. App. 1992) (citing Servin v. Servin, 345 N.W.2d 754, 758 (Minn. 1984)), review denied (Minn. Feb. 12, 1993).   

            Loan from wife's parents

            During the marriage, the parties were remodeling their home.  Wife testified that her parents, with husband's knowledge, loaned wife $20,000 for home improvements and that the loan was a marital debt, although the promissory note contains only wife's signature.  The district court credited husband's testimony that he was not aware of this loan until trial.  The district court also found that it was "equitable" to "offset" husband's labor on the home against this loan and did not include the debt in the property division.

            Because we cannot determine from the district court's findings whether the district court considered the debt marital or nonmarital, we remand for additional findings and a clear determination of the character of the debt.  See Stich v. Stich, 435 N.W.2d 52, 53 (Minn. 1989) (requiring remand for additional findings to enable appellate review).  But we conclude that in any case, the evidence does not support the district court's determination of an "equitable offset" for husband's labor.  The record reflects that wife primarily supported the parties through employment and contributions of nonmarital funds, enabling husband to spend time on the home remodeling project.  Wife also contributed labor to the remodeling project.  An "equitable offset" for husband's labor against a marital or nonmarital debt is not supported by the record or any authority.  To the extent that the district court relied on an equitable offset to disregard the loan in the division of property, we reverse.

            Husband's credit-card debt

            Wife argues that the district court erred in determining that an $8,045.76 credit-card debt incurred by husband after the parties' separation was a marital debt.  Debt acquired during the marriage and before the valuation date, which is generally the date of the initially scheduled prehearing conference, is presumed to be marital.  See Minn. Stat. § 518.54, subd. 5 (2004) (defining marital property); Minn. Stat. § 518.58, subd. 1 (2004) (describing factors to consider when dividing marital property).  The record does not establish what valuation date was used by the district court, but the parties do not dispute that unless the funds were used by husband for reasonable support of himself and the minor child during the separation, the debt would be his nonmarital debt.  Cf. Bliss, 493 N.W.2d at 587 (affirming district court's determination that debt reasonably incurred after separation to provide necessary support for the parties and their children is marital).  Husband testified that he used the credit card for attorney fees and to pay for living expenses for himself and the parties' child.  The district court appears to have credited this testimony, but made no findings on why wife should be responsible for husband's attorney fees or what portion of this debt related to support for husband and child.  We therefore reverse the finding that the credit-card debt is a marital debt and remand for a determination of the character of the debt based on adequate findings supported by the record.

III

 

            Wife argues that the district court clearly erred in its determination of husband's net monthly income for child-support purposes.  A district court has broad discretion to provide for the support of the parties' children.  Putz v. Putz,645 N.W.2d 343, 347 (Minn. 2002).  The district court abuses that discretion when it sets support in a manner that is against logic and the facts on record or misapplies the law.  Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).  A district court's determination of an obligor's income for child-support purposes is a finding of fact that will not be set aside if it has a reasonable basis in fact and is not clearly erroneous.  State ex rel. Rimolde v. Tinker, 601 N.W.2d 468, 470 (Minn. App. 1999).

            The district court found that husband's average net monthly income from his landscaping business and off-season employment is approximately $1,000 per month, but gave no explanation of how it arrived at that figure.  For child-support purposes, "[i]ncome from self-employment is equal to gross receipts minus ordinary and necessary expenses."  Minn. Stat. § 518.551, subd. 5b(f) (2004).  Husband is involved in a start-up business that appears not to have generated any net income in 2003 and 2004.  He has also worked as an electrical technician during the off-season; he conceded he had earnings not reflected on his 2004 tax return.  The tax returns and pay slips in the record do not indicate how the district court arrived at husband's net monthly income.  Wife urges this court to find that husband's net monthly income is approximately $1,900.00 per month, based on husband's testimony that this amount represents his reasonable monthly expenses and that "[m]ost of the time" he is capable of meeting his monthly expenses.  We decline to do so, concluding that on this record we are unable appropriately to review this issue.  We remand for additional findings concerning calculation of husband's net monthly income.  On remand, the district court may, in its discretion, reopen the record on any remanded issue and may redetermine the equitable division of property.

            Reversed and remanded.

[1] The district court implicitly held that the annuity payments were wife's non-marital property.  Because husband did not file a notice of review on this issue, the determination that the payments are wife's non-marital property is not before us and is not subject to relitigation on remand.  See Minn. R. Civ. App. P. 106; Martin v. Martin, 401 N.W.2d 107, 108 n.1 (Minn. App. 1987) (declining to review challenge to property division when no notice of review was filed).