This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
IN COURT OF APPEALS
In Re the Marriage of: Renee Anita Peterson,
Mark John Peterson,
Affirmed in part, reversed in part, and remanded.
Pope County District Court
File No. F299260
Joellen P. Doebbert, 1022 Broadway, P.O. Box 1175, Alexandria, MN 56308 (for respondent)
Neil R. Tangen, P.O. Box 758, Starbuck, MN 56381 (for appellant)
Considered and decided by R. A. Randall, Presiding Judge, Robert Schumacher, Judge and G. Barry Anderson, Judge.
G. BARRY ANDERSON, Judge
Appellant challenges district court’s (1) award of past and future temporary maintenance to respondent; (2) division of marital property; (3) disproportionate property award to respondent to compensate her for her attorney fees; and (4) calculation of appellant’s income for child-support purposes. Respondent, by notice of appeal, challenges the district court’s finding that the IDEX Growth-A investment account was appellant’s nonmarital property. We affirm the district court’s maintenance, division of property, and income-calculation determinations because the evidence supports the findings of fact and the findings support the conclusions of law, but we reverse and remand to the district court the issue of whether the IDEX Growth-A account was appellant’s nonmarital property.
Appellant Mark John Peterson and respondent Renee Anita Peterson dissolved their marriage of twelve years. The marriage produced three minor children; ages nine, six, and two. The district court ordered the parties to share legal custody of the children and awarded respondent sole physical custody of the children. Custody is not disputed. The parties maintained a frugal lifestyle based, in part, on the limited money given to respondent by appellant to cover household needs. Respondent testified that she made ends meet by purchasing the family’s clothing at rummage sales and baking bread for the family to eat.
Respondent is a graduate of the Prairie Bible Institute, a Canadian four-year non-accredited college. Her field of study prepared her to be a missionary or perform Christian education work for a church. Respondent has never worked in her field of study. Prior to marriage, respondent performed clerical duties for various employers. During the marriage, respondent worked several part-time jobs but, as agreed by the parties, stayed home to care for the children once they were born. Appellant owns and operates Peterson Excavating, a company engaging in various excavation projects, including the installation of septic tanks.
Prior to trial, the district court heard respondent’s motion for temporary relief. Respondent, unemployed, had no source of income. The district court awarded respondent, among other things, $1,500 in temporary attorney’s fees, $600 per month in temporary maintenance, and monthly child support in the amount of $1,162.13.
The parties tried their case to the district court over three days. On the first day of trial, the district court granted a continuance to respondent because appellant admitted to having documents he previously denied possessing. After trial, the district court entered an interlocutory decree following a stipulation between the parties relating to the division and valuation of certain marital property and, shortly thereafter, issued the judgment and decree. The district court determined appellant’s net monthly income to be $3,119.34, arriving at this amount by averaging appellant’s income from 1996 through 1998, and by adding $7,000 in unreported income per year to appellant’s income because appellant acknowledged that he engaged in questionable business practices which resulted in unreported income. The district court, among other things, ordered appellant pay respondent $1,091.77 in child support each month, $600 in monthly temporary spousal maintenance for two years, and past due child support and maintenance from the date the parties separated. The district court also awarded an unequal division of property to respondent so she could pay her attorney fees.
Appellant challenges several of the district court’s findings or conclusions concerning the (1) award of past and future temporary maintenance to respondent; (2) division of marital property; (3) disproportionate award of property to respondent to compensate her for her attorney fees; and (4) the calculation of appellant’s income for child support purposes. Respondent, by notice of appeal, challenges the district court’s finding that the IDEX Growth-A investment account was appellant’s nonmarital property.
Because neither party made a posttrial motion, our review of this case is limited to whether the evidence supports the findings of fact and whether the findings support the conclusions of law and the judgment. Gruenhagen v. Larson, 310 Minn. 454, 458, 246 N.W.2d 565, 569 (1976); Erickson v. Erickson, 434 N.W.2d 284, 286 (Minn. App. 1989). 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).
Appellant first argues that the record does not support an award of past and future maintenance to respondent because she is well educated, healthy, and “only wants maintenance because she does not want to work. That is not enough.”
Maintenance awards are governed by Minn. Stat. § 518.552, subd. 1 (2000), which allows a court to grant maintenance if a spouse (1) lacks sufficient property to provide for “reasonable needs * * * considering the standard of living established during the marriage,” or (2) cannot provide self-support. Id. Once need is established, the district court must consider “the financial resources of the party seeking maintenance * * * and the party’s ability to meet needs independently” and “the ability of the spouse from whom maintenance is sought to meet needs while meeting those of the spouse seeking maintenance.” Minn. Stat. § 518.552, subd. 2(a), (g) (2000); see Bourassa v. Bourassa, 481 N.W.2d 113, 115 (Minn. App. 1992) (explaining that the court’s task is basically to balance recipient’s need against obligor’s financial condition).
During the marriage, appellant supported respondent’s desire to stay home and care for the parties’ children yet now complains that respondent is acting in bad faith by refusing to work. Essentially, appellant asks this court to impute income to respondent because she is underemployed. A court may impute income based on a party’s earning capacity if it first finds the party is underemployed in bad faith. Carrick v. Carrick, 560 N.W.2d 407, 410 (Minn. App. 1997). But a district court cannot find bad faith where, as here, a homemaker continues to do the same work she did during marriage and there is no evidence of a deliberate attempt to limit income so as to obtain maintenance. See id. at 410-11 (holding district court’s assessment of wife’s employability is punitive when applied retroactively to a traditional homemaker with a part-time work history). Appellant’s argument is without merit.
In addition, respondent is in need of spousal maintenance. The district court found that respondent (1) engaged in clerical work prior to the marriage and learned some technical skills, but these skills are now obsolete due to her 12-year absence from the work force; (2) lacked sufficient property, including marital property awarded to her, to provide for her reasonable needs when considering the standard of living established during the marriage; and (3) was unable to provide adequate self-support through appropriate employment, and will require at least two years to develop the skills necessary to find appropriate employment.
The record supports the district court’s findings. Respondent testified that she has no income except spousal maintenance and child support. She cannot afford a home and is currently living with her parents. Respondent testified that she would like to stay at home with her children at least until the youngest child is in kindergarten. Once in kindergarten, respondent testified that she may be able to work part-time while the children are in school. Respondent stated that when she worked part time, she earned approximately $6.50 per hour. We conclude that the findings are not clearly erroneous and sustain the district court’s maintenance award.
Appellant also argues that the district court erred by attributing $7,000 in unreported annual income to him. The district court found that appellant (1) has the ability to pay maintenance and to provide for his needs; (2) earned, on average, an extra $7,000 per year in unreported income; and (3) lacked credibility because he has wrongfully withheld evidence, acknowledged that he fraudulently reported his income to the IRS, and destroyed or failed to generate work invoices as a usual business practice.
Appellant testified that:
My wife and I decided that as long as the IRS decided they didn’t want to treat us fairly, then we would take what we thought we were due before they did.
In addition, appellant testified that (1) sometimes he does not keep copies of his work invoices; (2) he receives some cash jobs every year and does not deposit the amounts earned into his bank account; and (3) the invoices produced at trial did not include jobs where the customer paid cash or the customer’s check was not deposited into his bank account. Moreover, appellant stated that in 1998 he installed a septic tank and “probably [did] not” deposit the cash into his bank account. The customer testified that he paid approximately $7,500 to appellant, “probably” in cash. Appellant also admitted that in 1999 he received $3,000 to $7,000 in cash from another client for installing a septic system. Appellant testified that he placed the cash received from business receipts into the parties’ safe.
Appellant contends that the safe contained $20,000 in cash when the parties separated; respondent testified that there was approximately $50,000 in the safe.
Due to appellant’s admitted tax fraud and failure to regularly keep business invoices, it would have been impossible for the district court to make a specific finding explaining how it arrived at the annual $7,000 number. But the district court stated that it did not find appellant to be credible and we defer to such determinations. See Vangsness v. Vangsness, 607 N.W.2d 468, 472 (Minn. App. 2000) (stating this court considers evidence in the light most favorable to findings and defers to the district court’s credibility decisions). In addition, appellant’s testimony, the testimony of his customers, and the large amount of cash in the parties’ safe circumstantially supports the district court’s finding that appellant underreported at least $7,000 of annual income. See Baker v. Citizens State Bank of St. Louis Park, 349 N.W.2d 552, 558 (Minn. 1984) (stating district courts may draw inferences from circumstantial evidence). We conclude that the district court did not clearly err in finding that appellant earned $7,000 annually in unreported income.
Accordingly, we conclude that the record supports the findings, and that those findings, in turn, sustain the district court’s award to award respondent of $600 per month in past and future temporary maintenance.
Appellant next contends that the evidence does not support the district court’s award of $98,000 in depreciating business equipment to him while the court awarded respondent appreciating assets. The division of marital property is governed by Minn. Stat. § 518.58 (2000). Minn. Stat. § 518.58, subd. 1 (2000), provides for “just and equitable” division of marital property. Id.
Appellant stipulated to the $98,000 value of his business equipment prior to trial. Appellant does not challenge that his equipment is worth $98,000, but argues that each year his equipment loses some of its value, which in turn decreases his marital property value award each year. This argument is misplaced for two reasons. First, appellant’s tax returns show that appellant subtracts the equipment depreciation from his business income on a yearly basis. Second, the district court did not award appellant only depreciating assets. He received land valued at approximately $21,000 and an insurance policy worth approximately $15,000; both are appreciating assets. We conclude that in the context of the entire property award, the facts sustain the district court’s division of the marital property.
Appellant argues that the record does not support the district court’s decision to award an unequal division of property to respondent to help her pay attorney fees. Under Minnesota law, the district court may, in its discretion, award attorney fees “against a party who unreasonably contributes to the length or expense of the proceeding.” Minn. Stat. § 518.14, subd. 1 (2000).
The district court found that (1) respondent made repeated requests for information from appellant, who denied the existence of documents; (2) on the first day of trial, appellant admitted that he had the documents; (3) a continuance of the trial was required because the documents were crucial to respondent’s case; and (4) respondent’s efforts in tracking appellant’s unreported cash income were time consuming and costly. The district court also found that (1) respondent incurred $22,379 in attorney fees; (2) she does not have the independent ability to pay her fees; and (3) it is reasonable to make an unequal property award to ensure payment of the fees.
Appellant argues that despite the district court’s findings, the court erred in awarding attorney fees because respondent has the ability to pay her own fees, and because these fees are unconscionable.
The district court found that appellant’s failure to produce evidence required the court to issue a continuance. Once produced, the court found the evidence difficult to understand. These uncontested findings support the conclusion that appellant’s conduct unreasonably protracted the length and expense of the proceedings. As this court has noted, fee awards under Minn. Stat. § 518.14 “may be based on the impact a party’s behavior has had on the costs of litigation regardless of the relative financial resources of the parties.” Korf v. Korf, 553 N.W.2d 706, 711 (Minn. App. 1996) (citations and quotation omitted) (upholding attorney fees without specific findings on need). In addition, nothing in the record supports appellant’s assertion that respondent counsel’s fees are unconscionable. Given the wide latitude granted a district court in awarding attorney fees in such circumstances, we conclude that the findings are not clearly erroneous and support the district court’s conclusion to award respondent a disproportionate amount of the marital property to compensate her for her attorney fees.
Appellant argues that the record does not support the district court’s calculation of his net income for child support purposes because the court (1) failed to credit certain business expenses; (2) failed to consider his 1999 income; (3) failed to consider the absence of income-producing assets awarded to respondent that reduce his income; and (4) erroneously attributed to him unreported income of $7,000 annually.
This court will affirm a district court’s determination of net income for the purpose of calculating child support if it has a reasonable basis in fact. Strauch v. Strauch, 401 N.W.2d 444, 448 (Minn. App. 1987). Income from self-employment is defined by statute as
gross receipts minus ordinary and necessary expenses. Ordinary and necessary expenses do not include amounts allowed by the Internal Revenue Service for accelerated depreciation expenses or investment tax credits or any other business expenses determined by the court to be inappropriate for determining income for purposes of child support. The person seeking to deduct an expense, including depreciation, has the burden of proving, if challenged, that the expense is ordinary and necessary.
Minn. Stat. § 518.551, subd. 5b(f) (2000). Net income may be different from taxable income. Id.
A. Business Expense Credit
Appellant first argues that he has substantial business equipment repair and depreciation expenses that the court failed to consider.
“[E]xpenses incurred solely for the production of income should be considered in full when determining support and maintenance obligations.” Fulmer v. Fulmer,594 N.W.2d 210, 214 (Minn. App. 1999). A total disregard of depreciation is reversible error. Freking v. Freking, 479 N.W.2d 736, 740 (Minn. App. 1992). When the record contains evidence of legitimate depreciation deductions, courts should consider those deductions in determining an obligor’s net income. Preussner v. Timmer, 414 N.W.2d 577, 579 (Minn. App. 1987).
We find appellant’s argument to be without merit. When calculating appellant’s net income, the district court used appellant’s adjusted gross income, which accounts for appellant’s repair and maintenance costs. Moreover, the district court considered appellant’s depreciation expenses when calculating his net income for child support purposes. The district court stated:
Depreciation is an ordinary and necessary business expense, and it cannot simply be ignored. Depreciation must be subtracted from [appellant’s] income. * * * [T]he Court will consider that the life of [appellant’s] equipment, on average, is 7 years. The Court will subtract actual depreciation on the business equipment at a rate of 1/7 of the equipment’s value for each of the applicable years.
B. 1999 Income
Appellant next argues that the district court failed to consider his 1999 income, which would have lowered his net monthly income. See Thomas v. Thomas, 407 N.W.2d 124, 127 (Minn. App. 1987) (stating a district court must determine current net income for the purposes of setting child support). The district court did not include appellant’s 1999 income when calculating his monthly income because
[Appellant’s] business records demonstrate that he generated substantially less business than in the 4 previous years. The documented income is an aberration. [Appellant] lacks credibility. He has wrongfully withheld evidence from discovery from [respondent]. He has acknowledged that he fraudulently reported his income to the IRS. [Appellant] also destroys several invoices (or generates none) as a usual business practice.
This court defers to trial court’s credibility determinations. Vangsness, 607 N.W.2d at 472. Moreover, the substantial decrease in appellant’s business earnings and appellant’s testimony that he did not report income to the IRS circumstantially supports the court’s decision not to include appellant’s 1999 income figures in its income calculation. See Baker, 349 N.W.2d at 558 (stating district courts may draw inferences from circumstantial evidence).
C. Income Producing Assets
Appellant also contends that the district court, in calculating his net income, attributed capital gains income to him but then awarded the marital assets that produced the capital gains to respondent. Appellant provides no support for his argument. When a party challenges a district court’s findings, the evidence “tending directly or by reasonable inference to sustain the * * * findings * * * shall be summarized” by the party challenging the findings. Minn. R. Civ. App. P. 128.02, subd. 1(c). When summarizing the evidence supporting a district court’s findings, the party challenging the findings must cite the portions of the record containing those findings. See id. (stating each statement of material fact in appellant’s brief “shall” be accompanied by cite to record); Hecker v. Hecker, 543 N.W.2d 678, 681-82 n.2 (Minn. App. 1996) (noting “material assertions of fact in a brief properly are to be supported by a cite to the record” and stating such cites are “particularly important” where “the record is extensive”), aff'd 568 N.W.2d 705 (Minn. 1997). Appellant has not met his burden.
Finally, appellant argues that the court erroneously found that appellant does not report an average of $7,000 per year as income. We find this argument, addressed above, to be without merit.
We conclude that the facts sustain the district court’s finding regarding appellant’s net income for child support purposes.
Respondent, by notice of appeal, challenges the district court’s finding that the IDEX Growth-A account is entirely appellant’s nonmarital property. Property acquired during a marriage is presumed to be marital. Minn. Stat. § 518.54, subd. 5 (2000) (defining “marital property”); Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997). Deciding whether property is marital or nonmarital is a legal question but appellate courts defer to the district court’s underlying findings of fact unless they are clearly erroneous. Olsen, 562 N.W.2d at 800. A party alleging property is non-marital must show it to be so by a preponderance of the evidence. Id.
The district court found that
The IDEX Growth-A account was set up by [appellant] * * * 2 years before the parties’ marriage. * * * During the parties’ marriage, no outside funds were added to the IDEX Growth-A account. Also, no funds were withdrawn from this account. The account grew in value due to the appreciation of the shares and due to the reinvestment of capital gains and dividends. [Appellant] had no control over whether or not the capital gains and dividends were reinvested. The account did not permit the shareholder to receive the capital gains or dividends in lieu of reinvestment.
Respondent argues that the district court clearly erred in finding that appellant did not have control over whether or not the capital gains and dividends were to be reinvested, and finding that the account did not permit appellant to receive capital gains and dividends in lieu of reinvestment, because nothing in the record supports these findings.
The passive appreciation in value of nonmarital property is nonmarital in nature. White v. White, 521 N.W.2d 874, 878 (Minn. App. 1994). A portion of a retirement account may have a nonmarital component because the investor’s role is passive: no investment decisions are made, and neither party could withdraw the funds or otherwise control the investments. Id. at 879.
But income, as opposed to passive appreciation, “becomes an asset ‘acquired during the marriage’ and as marital property, is divisible between the parties upon dissolution.” Swick v. Swick, 467 N.W.2d 328, 331 (Minn. App. 1991), review denied, (Minn. May 16, 1991). Furthermore, “assets acquired with income generated by a nonmarital asset are also marital property divisible upon dissolution.” Id. (citation omitted). Our Supreme Court stated that an asset acquired with income generated from a nonmarital asset, such as shares purchased with reinvested dividends, ordinarily become marital property. Nardini v. Nardini, 414 N.W.2d 184, 194 (Minn. 1987).
Appellant’s investment broker, who opened the account in question, testified that (1) through capital gains and dividend reinvestment, the number of appellant’s shares grew from 425 to approximately 1,350 shares; (2) the IDEX Growth-A account was used as a retirement investment although it was not a qualified IRA account; (3) the IDEX fund manager, and not appellant, decided which stocks or bonds would be held within the fund; and (4) appellant chose to reinvest all dividends or capital gains when he set up the account. But nothing in the record suggests that appellant did not have control over whether or not the capital gains/dividends were to be reinvested, or that the account did not permit appellant to receive capital gains/dividends in lieu of reinvestment without a penalty. Consequently, we conclude that the district court’s findings on this issue are clearly erroneous. We remand this issue to the district court for determination as to whether or not the portion of in the IDEX Growth-A account earned from reinvestment of capital gains and dividends, approximately 925 shares, constitutes marital property.
Affirmed in part, reversed in part, and remanded.
 The district court specifically found that appellant could afford to pay maintenance and provide for his own needs, but did not make any findings as to appellant’s monthly expenses. Appellant, however, did not submit proposed monthly expenses to the court and does not challenge the district court’s finding that he has the ability to pay. Instead, appellant argues only that the district court overstated his income by attributing $7,000 in unreported annual income to him.