This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. ß 480A.08, subd. 3 (2000).

 

STATE OF MINNESOTA

IN COURT OF APPEALS
C4-00-1317

 

In Re the Marriage of:

 

Jerome J. Jarosch, petitioner,

Respondent,

 

vs.

 

Peggy Ann Jarosch,

Appellant.

 

Filed May 15, 2001

Affirmed in part, reversed in part, and remanded

Shumaker, Judge

 

Ramsey County District Court

File No. F398945

 

 

 

 

Ronald B. Sieloff, Sieloff and Associates, P.A., Yankee Square Office III, 3460 Washington Drive, Suite 214, Eagan, MN 55122 (for respondent)

 

Stephen M. Lindlof, 2580 White Bear Avenue, Suite 103, St. Paul, MN 55109 (for appellant)

 

 

 

Considered and decided by Peterson, Presiding Judge, Shumaker, Judge, and Foley, Judge.*

U N P U B L I S H E D†† O P I N I O N

GORDON W. SHUMAKER, Judge

 

††††††††††† In this dissolution proceeding, appellant challenges the amount of her spousal maintenance award, alleging the district court (a) overstated her net monthly income; (b) understated her reasonable monthly expenses; and (c) understated respondentís ability to pay maintenance.† Appellant also argues that the district court abused its discretion in denying her motion to increase spousal maintenance.†† Finally, appellant contends that the district court overstated respondentís nonmarital interest in the homestead and should have awarded her a portion of respondentís nonmarital interest in the homestead.† Respondent alleges that the district court abused its discretion in denying his motion to terminate spousal maintenance.† We affirm in part, reverse in part, and remand.

 

FACTS

 

Appellant Peggy Ann Jarosch and respondent Jerome James Jarosch were married May 19, 1973.† The couple separated March 9, 1998.† The couple raised four children, all of whom were adults and no longer dependent on the parties at the time of the divorce.† At the time of the divorce, respondent was 52 years old and appellant was 48 years old.†

The parties entered into a purchase agreement to purchase a home on June 10, 1973, only three weeks after the marriage, at which time they paid $1,000 in earnest money.† At the closing of the sale one month later, they paid an additional $7,300 as a down payment. The earnest money and down payment totaling $8,300 were drawn from a savings account respondent had prior to the marriage.† The total purchase price of the home was $33,200, and the parties took a purchase money mortgage of $24,900 to cover the balance.

Respondent worked as a state employee for 23 out of the partiesí 26 years of marriage.† He also had supplemental part-time employment and self-employment from time-to-time throughout the marriage, including working for McDonaldís, preparing tax returns, and polishing and selling rocks.†

Throughout most of the marriage, appellant remained at home as a homemaker.† Since January 1999, appellant has worked part time as an order stocker earning between $6.50 and $7.25 an hour, and has an approximate net monthly income of $457.58.† Appellant also attends school part time, pursuing a secretarial technician certificate.

Respondent currently has health insurance through the State of Minnesota.† Respondent and appellant agreed that respondentís health insurance would provide coverage for appellant as long as the children were enrolled in college, until they reach the age of 25.† Because none of the children are currently enrolled in college, appellant has no coverage for health insurance at this time.

The district court found that appellant had the ability to work full time and calculated her gross monthly income at $1,247.† The court also awarded appellant $366 per month in spousal maintenance.† Appellant challenges the amount of this award. The court also found that respondentís nonmarital interest in the homestead was $33,616.63.† Appellant challenges the calculation of that amount and the courtís order denying to appellant a portion of respondentís nonmarital interest.

In a separate motion, appellant moved to increase spousal maintenance based on changed circumstances.† The district court denied this motion.† Appellant challenges this order.† Respondent moved to terminate spousal maintenance on the basis of a substantial change in circumstances.†† The court denied that motion.† Respondent challenges that order.†

D E C I S I O N

I.

Appellant argues that the district court abused its discretion by awarding her only $366 per month in spousal maintenance, arguing that the court overestimated her monthly income, understated her monthly expenses, and underestimated respondentís ability to pay.† On appeal from an award of maintenance, we ask whether the district court abused its broad discretion.† Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982).† This court will not disturb a maintenance award if it has a ďreasonable and acceptable basis in fact and principle.Ē† DuBois v. DuBois, 335 N.W.2d 503, 507 (Minn. 1983).† In order to successfully challenge a district courtís factual findings, the party challenging the findings

must show that despite viewing that evidence in the light most favorable to the [district] courtís findings, * * * the record still requires the definite and firm conviction that a mistake was made.

 

Vangsness v. Vangsness, 607 N.W.2d 468, 474 (Minn. App. 2000).† Underlying factual findings will be set aside only if they are clearly erroneous.† McCulloch v. McCulloch, 435 N.W.2d 564, 566 (Minn. App. 1989).

a.†††††††† Calculation of appellantís income

Appellant challenges the district courtís finding that she is capable of full-time employment and that her net monthly income would be $1,153.48.†

She is currently employed by Taymark as an order stocker, earning $7.25 per hour. She works approximately 18 to 24 hours a week.† She testified that she has currently completed three credits of a 48-credit secretarial technician program.†

A vocational evaluator testified that appellant can be expected to earn, even without updating her skills, between $7 and $9 an hour. The vocational evaluator also testified that appellant ďhas decided that she wanted to go * * * into the clerical field * * *Ē and that this is† ďan area she would be likely to have success.Ē† The vocational evaluator recommended that appellant enroll in an entire program, such as the Secretarial Diploma Program at Century Community College, so that appellant could increase her employability and her marketability for a promotion.††

The district court found that appellant is able to work on a full-time basis and earn $7.25 per hour, which translates into a net monthly salary of $1,153.48.† The courtís findings are not supported by the evidence. †Appellant testified that she is currently enrolled in classes and therefore only works part time.† This case is similar to Reif v. Reif, 426 N.W.2d 227 (Minn. App. 1988).† In Reif, the wife was enrolled in a full-time nursing program.† Id. at 229.† She was not employed at the time of the dissolution and testified that she could not find work.† Id.† Despite these facts, the district court found that the wife had the ability to earn $400 a month.† Id. at 230.† This court reversed, stating† ď[b]eing capable of employment and being appropriately employed are not synonymous.Ē† Id. (quoting Nardini v. Nardini, 414 N.W.2d 184, 197 (Minn. 1987).† The evidence on record does not support the district courtís determination that appellant can work full time.† We reverse the imputation to appellant of a net monthly income of $1,153.48 and remand for the district court to redetermine what amount, if any, should be imputed to appellant in light of the schooling she plans to attend.

b.†††††††† Determination of appellantís reasonable needs

Appellant argues that the district court clearly erred in finding her reasonable needs.† Specifically, she contends that the court underestimated her living expenses by (1) failing to clearly include any household and utility expenses; (2) estimating her rent expense at $86 less than respondentís estimated rent; (3) failing to include any expense related to her schooling; and (4) failing to allow her a new-car expense.

A district court may award maintenance if it finds that the spouse seeking maintenance lacks sufficient property to provide for her reasonable needs, especially during a period of training or education, or is unable to provide adequate self-support through appropriate employment.† Minn. Stat. ß 518.552, subd. 1 (1998).† In determining a spouseís reasonable needs, a district courtís calculation of estimated living expenses must be supported by the evidence.† Rask v. Rask, 445 N.W.2d 849, 854 (Minn. App. 1989).

††††††††††† Housing expenses

Appellant initially submitted a budget to the district court showing her rent as $200 a month.† She did not indicate a monthly expense for utilities.† She testified that at the time of trial she was living with her mother, and she paid her mother $200 a month in rent.† She did not pay for utilities.† She further testified that she planned to move out of her motherís home and that she could not stay with her mother because of personality conflicts.† Appellant stated that she planned to purchase a house and estimated that her monthly payment would be $600 - $800.

The district court found that appellantís budget for rent was too low, and increased her monthly housing allowance to $714.† The court did not add anything to pay utilities.† The court accepted respondentís budget for housing and utilities, finding that his monthly rent payment would be $800 and that his monthly utility expenses would be $150.

The district court erred in estimating that respondent would have greater housing expenses than appellant.† At the time of trial, neither party had secured a permanent home.† Therefore, the parties estimated their respective expenses.† It was not reasonable to assume that appellant would have no utility expenses and lower rent.† Thus, absent evidence to the contrary, the court should have estimated that appellant would have the same expenses as respondent.† This determination is reversed and the matter is remanded for redetermination.

Schooling expenses

Appellant argues that the district court erred in excluding her schooling costs in determining her reasonable needs.† She testified that at the time of trial she was enrolled in school and had completed three credits toward her coursework.† She testified that she projected her schooling costs would be about $600 a year.

However, there is very little evidence in the record that supports the finding that $600 a year is needed for school expenses.† The only admissible evidence presented at trial was a bill in the amount of $469.86 for the tuition of the class in which appellant was enrolled.† Because the evidence does demonstrate that appellant did have a schooling expense, and there is no evidence in the record supporting the exclusion of that expense, the district courtís determination is reversed and the matter is remanded for redetermination.† On remand, the district court may consider additional evidence to determine appellantís reasonable schooling expense.

New-car expense

††††††††††† Appellant challenges the district courtís denial of a reasonable car-payment expense.† She testified that she had an expense for car repairs of $70 a month.† She testified that she hoped to purchase a new car, but never presented an estimate of a new-car payment.† Given these facts, the district court did not abuse its discretion in limiting appellantís reasonable needs to car repairs.† See id. (disallowing an expense for a new house that wife hoped to purchase, but had not yet done so).

c. ††††††† Determination of respondentís ability to pay

Appellant argues that the district court underestimated respondentís ability to pay maintenance because it failed to consider possible income tax refunds and it used respondentís 1999 pay stubs rather than a 1998 tax return.†

At the time of trial, respondent worked for the State of Minnesota as an auditor.† Respondent is a licensed CPA, and his 1998 tax returns reflected the fact that he earned a net monthly income of $3,696.71.† His 1998 tax refunds were in the amount of $7,116.97.† His 1999 pay stubs revealed that his net monthly income was $2,582.42.† Respondent testified that, at the time of trial, he had no other employment than with the State of Minnesota.† The district court relied on the 1999 pay stubs in determining respondentís monthly income and his ability to pay maintenance.

The court did not err in using respondentís current pay stubs rather than his tax return of the previous year.† Carrick v. Carrick, 560 N.W.2d 407, 412 (Minn. App. 1997) (remanding maintenance obligation, stating it should have been based on obligorís current income).† The record reflects that respondent was not earning the same income as the previous year, because he was not engaged in any outside employment as he was formerly.† Further, there is no evidence in the record to suggest that respondent will be eligible for a 1999 tax refund similar in size to the one he received in 1998.† On the contrary, respondent testified that the refund was based on deductions from a home mortgage, property taxes, temporary spousal maintenance in the amount of $600 a month, and exemptions for dependent minor children.† Respondent testified that these deductions will not be available to him, as he no longer owns property, no longer pays maintenance in the amount of $600 a month, and no longer has dependent children living with him.† The district court did not err in using the 1999 pay stubs.

II.

Appellant challenges the district courtís determination of respondentís nonmarital interest in the homestead.†

At the outset, we note that respondent has asserted that this is not an appealable issue.† We disagree.† In her notice of appeal, appellant listed the January 12, 2000, Amended and Restated Judgment and Decree and the May 30, 2000, order denying, inter alia, appellantís motion for increased spousal maintenance.† The district court determined the division of the marital and nonmarital shares in the January 12, 2000, order.† In a March 9, 2000, order, the court granted respondentís motion under Minn. R. Civ. P. 52 and 60.02, to clarify the division of marital property.† Respondent argues that appellant should have appealed the March 9, 2000, order if she wished to challenge the determination of the marital and non-marital property.† We hold that it was proper to appeal the January 12, 2000, order rather than the March 9, 2000, order.

Whether property is marital or nonmarital is a question of law, but reviewing courts defer to the district courtís findings of fact unless they are clearly erroneous.† Olsen v. Olsen, 562 N.W.2d 797, 799-800 (Minn. 1997).† The party claiming a nonmarital interest in property must prove necessary facts by a preponderance of the evidence.† Campion v. Campion, 385 N.W.2d 1, 5 ( Minn. App. 1986).

ďMarital propertyĒ includes property acquired during the marriage.† Minn. Stat. ß 518.54, subd. 5 (2000).† ďNonmarital propertyĒ includes all property acquired before marriage and the increase in value of that property.† Minn. Stat. ß 518.54, subds. 5(b), (c) (2000).† ď[I]ncreases in value of nonmarital property remain nonmarital if shown to be attributable solely to market forces or conditions, such as simple appreciation in value of an asset.Ē† White v. White, 521 N.W.2d 874, 878 (Minn. App. 1994).† Upon dissolution, a spouse is entitled to receive what was originally a nonmarital asset and any increase in value attributable to inflation and general market conditions.† Nardini, 414 N.W.2d at 192.

The present value of a nonmarital asset used in the acquisition of marital property is the proportion the net equity or contribution at the time of acquisition bore to the value of the property at the time of purchase multiplied by the value of the property at the time of separation.† The remainder of equity increase is characterized as marital property and is distributed according to [the statute].

 

Nardini, 414 N.W.2d at 191 (quoting Brown v. Brown, 316 N.W.2d 552, 553 (Minn. 1982)).

††††††††††† When real property comprises both marital and nonmarital interests, the interests should be apportioned according to the formula stated in Nardini.† However, before applying this formula, the court must determine which types of increase in value are present.† There are three kinds of increase:

(1) the increase in value attributable to the physical improvement of the property through application of marital funds and marital effort; (2) the increase in value attributable to the increase in equity by application of marital funds to reduce the mortgage indebtedness; and (3) the increase in value attributable to inflation and market forces.

 

Nardini, 414 N.W.2d at 193.

†††††††††††

††††††††††† Here, the record shows that the parties purchased the homestead for $33,200 in 1973.† The purchase price included a $1,000 earnest money payment, a $7,300 down payment, and a $24,900 mortgage.† The district court found that the earnest money payment and the down payment came from respondentís nonmarital savings.† The court further found that the parties made $9,000 in improvements to the homestead during the marriage, and that respondent also expended $2,956.46 for repairs made to the home in anticipation of its sale and in principal reduction of the two debt-consolidation loans after the parties separated.

††††††††††† Respondent testified that the parties paid off the entire $24,900 mortgage during the marriage.† The homestead was subsequently encumbered by two additional home-equity loans.† The first loan was in the amount of $22,436.69 taken in or about July 1992.† Respondent testified that the loan was used to pay off a car loan and for things around the house.† He explained that the main purpose of this loan was to receive a tax deduction for the car loan.† The second loan was taken out in the amount of $10,000 in or about January 1997.† Respondent testified that this loan was used to reduce the debt incurred on a checking-plus account.† When the parties sold the homestead in September 1999, the parties still owed $16,118.65 on the two loans.

††††††††††† The district court determined respondentís nonmarital share by first adding together (1) the nonmarital down payment of $8,300, (2) the reduction of indebtedness from the date of acquisition to the valuation date of $8,781.45[1], and (3) the value of the home improvements to the homestead of $9,000.† ($8,300 + $8,781.45 + $9,000 = $26,081.45).† The court divided respondentís nonmarital down payment by the sum of the three components and determined that his nonmarital share was 31.82% ($8,300/$26,081.45).

††††††††††† In Nardini, the court explained the proper calculation of a husbandís nonmarital share, using a hypothetical.† In that hypothetical, the husband owned real estate valued at $30,000, and subject to a $20,000 mortgage.† During the marriage, the couple expended marital funds and labor in improvements to the property totaling $10,000.† They used marital funds to reduce the unpaid balance of the mortgage to $4,000.† At the time of the dissolution, the property had a market value of $100,000.† The court apportioned the interests as follows:

††††††††††††††††††††††† 1. ††††††† $10,000/$40, 000 = 25%

††††††††††††††††††††††† 2.†††††††† $100,000 x 25% = $25,000 (husbandís nonmarital interest)

††††††††††††††††††††††† 3.†††††††† $100,000 - $25,000 = $75,000 (marital interest)

Nardini, 414 N.W.2d at 193. The court never added the reduction of indebtedness into the calculation of the nonmarital share.† Rather, because the reduction of the mortgage was paid with marital funds, reduction of the marital interests by the amount of the mortgage balance was found to be appropriate.† Id.

In applying these principles to the present case, the district court erred in considering the encumbrances in calculating the percentage of the nonmarital interest. Accordingly, the proper calculation of the nonmarital share is as follows:

1.†††††††† $8,300 (nonmarital down payment)/$42,200 (the purchase price plus the $9,000 in improvements) = 19.6%.

2. ††††††† $135,000 (market value as determined by the sale price) Ė x (closing costs)[2] - $2,956.46 (repairs and principal reduction of loans) = y (net value of the property)

 

3. ††††††† y (net value of the property) x 19.6% = n (respondentís nonmarital share)

 

4.†††††††† y (net value of the property) Ė n (nonmarital share) = m (marital interest)

 

5.†††††††† m (marital interest) - $16,118.65† (the balance of debt consolidation loans) = d (amount for distribution).

 

We reverse and remand the district courtís determination of respondentís nonmarital share of the homestead.† On remand, the judgment should be amended to reflect the proper calculation of the nonmarital and marital estates.

III.

Appellant challenges the district courtís denial of her motion to award a portion of respondentís non-marital interest to her.† Minn. Stat. ß 518.58, subd. 2 (1998), allows a court to award up to one-half of a spouseís nonmarital property to the other spouse if necessary to prevent unfair hardship.† Awards of nonmarital property are left to the discretion of the district court.† Doering v. Doering, 385 N.W.2d 387, 391 (Minn. App. 1986).† ďA very severe disparity between the parties is required to sustain a finding of unfair hardship necessary to apportion nonmarital property.Ē† Ward v. Ward, 453 N.W.2d 729, 733 (Minn. App. 1990), review denied (Minn. June 6, 1990).

The district court can apportion nonmarital property if it finds unfair hardship

based on all relevant factors including the length of the marriage, any prior marriage of a party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, needs, and opportunity for future acquisition of capital assets and income of each party.

 

Minn. Stat. ß 518.58, subd. 2.

††††††††††† Here, the evidence in the record shows that the parties were married for 26 years.† At the time of the divorce, respondent was 52 and appellant was 48.† Both parties suffer from some health problems.† Respondent has had to reduce his stress level and has dangerously high cholesterol.† Appellant has complications related to obesity.† Appellantís income is limited, due to outmoded job skills.† Although there is some disparity in the respective income potentials of the parties, it is not such as to create an unfair hardship if the parties are awarded their nonmarital property.† We find no abuse of discretion in the courtís refusal to award to appellant a portion of respondentís nonmarital property.

IV.

Respondent moved to terminate spousal maintenance based on a recent, substantial reduction in income.† At the hearing on that motion, the district court also heard appellantís motion to increase spousal maintenance based on changed circumstances.† The court denied both motions.† Both parties challenge these denials.

The parties have not provided this court with a transcript of the modification proceedings.† Thus, we are limited to determining whether the district courtís conclusions of law are supported by the factual findings.††† See Duluth Herald & News Tribune v. Plymouth Optical Co., 286 Minn. 495, 498, 176 N.W.2d 552, 555 (1970).†

Denial of motion to terminate maintenance

Respondent changed jobs after trial, apparently because of a medical condition.† This change in jobs resulted in a reduction of income from $54,454 to $39,693.† Recognizing this change in circumstances, the district court reached two contradictory conclusions of law.† In denying appellantís motion to increase maintenance, the court stated that:

[respondent] has made a showing that he has experienced a reduction of income to such a level that he is unable to pay the spousal maintenance now ordered by the Court.

 

In denying respondentís motion to terminate maintenance, the court found that ď[respondent] will have the ability to pay the award.Ē† Because there is no record to review, it is unclear how to resolve these two seemingly contradictory conclusions of law.† We reverse and remand to the district court for clarification.

††††††††††† Denial of motion to increase maintenance

At the same hearing, appellant moved the district court to increase spousal maintenance based upon a substantial change in circumstances that rendered the January 12, 2000, judgment and decree unreasonable and unfair.† The court denied this motion.

Modification of support obligations is within the district courtís discretion, and, absent an abuse of that discretion, this court will not reverse a refusal to modify child-support or maintenance obligations.† Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982); Abuzzahab v. Abuzzahab, 359 N.W.2d 329, 332 (Minn. App. 1984).† A reviewing court will find an abuse of discretion only when the district court reaches ďa clearly erroneous conclusion that is against logic and the facts on record.Ē† Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).

The terms of an order respecting maintenance or support may be modified upon a showing of * * * substantially increased or decreased earnings of a party * * * [or] substantially increased or decreased need of a party * * * which makes the terms unreasonable and unfair.†

 

Minn. Stat. ß 518.64, subd. 2(a) (1998).† The statute places a dual burden on the party seeking the modificationófirst to demonstrate that there has occurred a substantial change in one or more of the circumstances identified in the statute and, second, to show that the substantial change has the effect of rendering the original award unreasonable and unfair.† Nardini, 414 N.W.2d at 198-99; Rydell v. Rydell, 310 N.W.2d 112, 115 (Minn. 1981).

††††††††††† Appellant and respondent agreed that appellant would remain covered under respondentís health insurance plan so long as one of the partiesí children stayed in school and was under the age of 25.† On February 1, 2000, appellant signed an affidavit stating that none of the partiesí children were enrolled in school.† As a result, appellant had to obtain Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage for medical insurance.† The cost is $185.25 per month for medical insurance and $22.75 for dental insurance.

††††††††††† The district court denied appellantís motion on the basis that respondent could not afford any increase in spousal-maintenance obligations.† There is no evidence in the record that indicates the district court erred in this conclusion.

††††††††††† Affirmed in part, reversed in part, and remanded.

 



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

[1] The reduction of indebtedness figure was determined by finding the difference between the original $24,900 mortgage less the balance of $16,118.65 owed on the two debt consolidation loans ($24,900 - $16,118.65 = $8,781.35).

[2]† Appellant asserts in her brief that closing costs were $10,237.26.† Because we do not have transcripts from the later proceedings, we are unable to ascertain whether the record supports this assertion.† On remand, the district court should make a factual finding in relation to closing costs.