This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
In Re the Marriage of:
Richard Dennis Antone, petitioner,
Debra Kay Antone,
Filed November 6, 2001
Hennepin County District Court
File No. DC243201
Daniel J. Goldberg, Messerli & Kramer, P.A., 1800 Fifth Street Towers, 150 South Fifth Street, Minneapolis, MN 55402 (for respondent)
A. Larry Katz, Robert W. Due, Katz & Manka, Ltd., 4150 U.S. Bank Place, 601 Second Avenue South, Minneapolis, MN 55402 (for appellant)
Considered and decided by Toussaint, Presiding Judge, Klaphake, Judge, and Amundson, Judge.
U N P U B L I S H E D O P I N I O N
TOUSSAINT, Chief Judge
On appeal from the amended judgment dissolving the parties’ marriage, appellant Debra Antone alleges that the district court (1) erred by understating the marital interest in respondent Richard Antone’s premarital rental properties; (2) should not have ruled that respondent traced a nonmarital interest in a business; (3) inequitably divided the parties’ debts; (4) should have awarded appellant attorney fees; and (5) should have valued the marital homestead and awarded it appellant. Both parties challenge aspects of the appellant’s maintenance award. Because the record supports the district court’s findings of fact and because those findings support the district court’s conclusions of law, we affirm.
D E C I S I O N
Appellant challenges the disposition part of the increase in the value of respondent’s premarital rental properties. Property acquired during a marriage is presumed to be marital. Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997). 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. Id. A party asserting property to be nonmarital must show it to be so by a preponderance of the evidence. Id. When dividing marital property, the district court is required to divide property equitably. Rohling v. Rohling, 379 N.W.2d 519, 522 (Minn. 1986). In the division, the district court has broad discretion, and will be affirmed if its division has an acceptable basis in fact and principle, even though [an appellate court] might have made a different disposition of the problem.” Id. Funds earned during a marriage, including those earned by nonmarital assets, are marital funds. Pearson v. Pearson, 363 N.W.2d 337, 339 (Minn. App. 1985).
Here, the district court treated the increase in the equity of the properties created by the use of marital funds to reduce the mortgage principals as marital property. It also awarded respondent, as nonmarital property, the equity he had in the properties when the parties married. Neither of these determinations is contested. The district court further found that market forces caused the fair market value of the rental properties to increase during the marriage and ruled that all of the market-related increase in equity of the properties was respondent’s nonmarital property because the marital funds spent on the properties (other than to reduce the mortgage principals) was only that necessary to maintain the properties, not to improve them. Appellant argues that the marital asset created when the mortgage principals were reduced by the use of marital funds is entitled to share in the market-related increase in the properties’ equities and that the district court’s refusal to use the formula set out in Schmitz v. Schmitz, 309 N.W.2d 748 (Minn. 1981), and its progeny for the determination of the relative sizes of the marital and nonmarital components of the market-related increase in the properties’ equities is contrary to that line of cases.
Use of the Schmitz formula is a presumptive, but not mandatory, method for determining the marital and nonmarital interests in the same asset. See Nardini v. Nardini, 414 N.W.2d 184, 193 (Minn. 1987) (stating, where hypothetical example had marital and nonmarital components, “the interests should be apportioned according to the [Schmitz] formula set out in Brown v. Brown, 316 N.W.2d 552 (Minn. 1982)”) (emphasis added); id., at 194 (stating “[w]hile the general principles underlying [the Schmitz analysis] are susceptible of broad application, the mechanical application of the formula is inapposite when the property in question is a business or some complex combination of real and personal property”); Brown, 316 N.W.2d at 553 (stating “[i]n [Schmitz], we approved a formula by which a trial court might correctly apportion the increase in equity between marital and nonmarital assets”) (emphasis added). Also, while the increase in the value of nonmarital property attributable to marital effort or marital funds is marital, “an increase in the value of nonmarital property attributable to inflation or to market forces or conditions, retains its nonmarital character.” Nardini, 414 N.W.2d at 192; see White v. White, 521 N.W.2d 874 (Minn. App. 1994) (affirming treatment of increased value of retirement plan occurring during marriage and attributable to owner’s premarital contributions as nonmarital, while treating as marital, increased value of contributions made during marriage).
Here, the district court found that none of the increase in the market value of the rental properties was a result of marital effort or marital funds and that all of the increase was the result of market conditions. Additionally, its posttrial order recognized that the Schmitz analysis is not mandatory. Thus, not only did the district court adequately consider the factual and legal considerations relevant to ruling that the passive, market-related increase in the value of the rental properties was nonmarital, but, also to reverse the district court on this point would be to disregard Nardini’s distinction between the increase in value attributable to marital effort and to market forces. We decline to do so, particularly in light of the fact that the judgment shows that the district court considered the award of the nonmarital, market-related increase in the equity of the rental properties when it divided the marital estate.
Appellant challenges the determination that respondent had a 50% nonmarital interest in a business started during the marriage. A party seeking to trace a non-marital asset while must do so by a preponderance of the evidence, strict tracing is not required, and credible oral testimony is sufficient to trace a nonmarital interest. Doering v. Doering, 385 N.W.2d 387, 390-91 (Minn. App. 1986).
Respondent owned a 50% interest in a business when the parties married. After the marriage, that business started producing items in addition to its original products, took on additional investors, and lost money. Respondent and his partner liquidated the original business, paid its creditors, formed a new business to carry on the old business’s original product line, and bought many of the old business’s assets from the old business’s major creditor. Respondent later bought out his partner’s 50% interest in the new business. In addressing respondent’s nonmarital interest in the new business, the district court found that (1) the new business made “the same products for the same customers” as the old business had before the marriage; (2) no marital interest was created by the change in corporate form because that transformation “was not an arm’s length transaction and no consideration was paid”; (3) there was no marital effort in creating new products for the new business or changing the way the new business ran; and (4) respondent’s purchase, during the marriage, of his partner’s 50% interest in the new business created a 50% marital interest in that business. The record supports these determinations and shows that the new business sent out a letter to the customers of the old business who had purchased the old business’s original products. The letter stated that the old business no longer existed, that the old business’s files had been transferred to the new business, and that those files would “remain in effect as previously established.” Because the new business is essentially the original portion of the old business being carried on by a new name and because it is undisputed that respondent had a nonmarital interest in the old business, the fact that the new business came into existence during the marriage does not automatically deprive respondent of his nonmarital interest therein. See generally, Nash v. Nash, 388 N.W.2d 777, 781 (Minn. App. 1986) (holding that routing nonmarital funds through marital account “‘does not transform non-marital property into marital property’” (quoting Montgomery v. Montgomery, 358 N.W.2d 169, 172 (Minn. App. 1984)), review denied (Minn. Aug. 20, 1986).
The judgment noted that the temporary order told the parties that each would be liable for his or her own credit card debt incurred after the temporary hearing. It also stated that respondent was credible when he testified that he needed to use a line of credit to help meet his monthly obligations to appellant and his own living expenses. The district court then ruled that each party would pay their own post-separation credit-card debt and that the increase in the line of credit was marital. Appellant alleges that the inconsistent treatment of these debts is inequitable and asks that both debts be treated similarly. The district court has broad discretion in dividing debts and will be affirmed if its division has an acceptable basis in fact, even if we might have reached a different decision. Bliss v. Bliss, 493 N.W.2d 583, 587 (Minn. App. 1992), review denied (Minn. Feb. 12, 1993).
In light of the district court’s determination of respondent’s credibility, we affirm the inclusion in the marital estate of the increased line-of-credit debt. See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating appellate courts defer to district court credibility determinations); cf. Minn. Stat. § 518.58, subd. 1a (2000) (stating property not improperly used if used for necessities of life or in usual course of business). In doing so, we reject appellant’s argument that respondent’s alleged failure to account for certain portions of the increase in the credit-line debt requires that he be charged with those amounts; respondent’s own exhibit detailing the increase in the line of credit informed the court that there were “Unknown” amounts he had spent on “co-pays, small bills.” Regarding the credit-card debt, the district court, in the temporary order admitted appellant had incurred $9,500 in credit-card debt before the temporary hearing but denied appellant’s request that respondent be ordered to pay that amount. The district court did so noting that respondent had incurred $8,400 in credit-card debt that he was responsible to pay. In the judgment posttrial order, the district court again refused appellants requests that respondent pay appellant’s credit-card debt. The district court’s three separate rejections of the same argument show that it is convinced that it is equitable for appellant to pay her own credit-card debt. On this record, appellant has not shown that the resulting difference in the treatment of the line-of-credit debt and the credit-card debt renders the disposition of those debts an abuse of the district court’s discretion.
Noting that the parties’ experts arrived at disparate values of the parties’ home, the district court found the home subject to substantial liens, declined to value the home, and rejected appellant’s request that the home be awarded to her, stating there were insufficient marital assets to make a commensurate award to respondent. The district court also found that neither party could afford to continue to live in the home. The district court then ordered that the home be sold and that appellant receive the portion of the net proceeds necessary to satisfy her cash-equalizer payment. If necessary, respondent was to pay appellant any part of the cash equalizer not satisfied by appellant’s share of the home’s proceeds.
Appellant alleges that the district court should have valued the home to facilitate appellate review, to allow evaluation of offers to buy the house, and to allow comparison of its equity with the cash-equalizer payment. But, sale of an asset and division of its proceeds “has the advantage of certainty and may be necessary to for equitable division when an indivisible asset constitutes the bulk of the marital property.” Nardini, 414 N.W.2d at 188. Because any valuation by the district court would only be an estimate of how the market would value the home, it is unclear how letting the market actually value the home prejudices appellant. See Midway Ctr. Assocs. v. Midway Ctr., Inc., 306 Minn. 352, 356, 237 N.W.2d 76, 78 (1975) (stating appellant must show both error and prejudice); Minn. R. Civ. P. 61 (harmless error is ignored). Appellant’s argument that the finding that the parties could not afford to live in the house required a finding of the home’s value is similarly unclear. The parties cannot afford to live in the house because of cost of doing so, not the value of the home.
Appellant also challenges the requirement that the house be sold, noting that even if respondent’s valuation of the home is accepted, after a sales commission and satisfaction of the liens, there is not enough equity left in the home to satisfy her cash-equalizer payment. But the judgment requires respondent to pay appellant any difference between the net proceeds of the home’s sale and the cash-equalizer payment. Also, awarding appellant the house rather than the cash would deprive appellant of funds necessary for investment and would be inconsistent with the finding that neither party can afford to live in the home.
The district court awarded appellant permanent maintenance, including $4,500 per month starting the month after the home is sold and continuing until 60 months after judgment was entered, followed by $2,500 per month thereafter. Each party challenges the award. Absent an abuse of its “wide discretion,” a district court’s maintenance award “is final.” Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982). While Minn. Stat. § 518.552 (2000) lists factors to be considered in setting the amount and duration of maintenance, no single factor is dispositive and the issue is basically the recipient’s need balanced against the obligor’s financial condition. Erlandson, 318 N.W.2d at 39-40. Doubt about a maintenance recipient’s ability to become self-supporting is to be resolved in favor a permanent maintenance award. Minn. Stat. § 518.552, subd. 3 (2000); Nardini, 414 N.W.2d at 198.
Alleging that the parties’ 11-year marriage was not a “long-term” marriage, respondent cites language in Gales v. Gales, 553 N.W.2d 416, 421 (Minn. 1996), to argue that permanent maintenance is improper here. But Gales did not “quibble” with the finding in that case that an 11-year marriage was “long-term.” Id. at 421. Also, any argument by respondent that Gales revived the “exceptional-case” standard for awarding permanent maintenance is incorrect. Dobrin v. Dobrin, 569 N.W.2d 199, 201 (Minn. 1997); Chamberlain v. Chamberlain, 615 N.W.2d 405, 410-11 (Minn. App. 2000), review denied (Minn. Oct. 25, 2000).
Appellant alleges the step reduction in her maintenance award from $4,500 to $2,500 is improperly based on speculation that she will be able to increase her income by $2,000 per month. The district court found appellant’s reasonable monthly expenses for herself and the children to be $5,811. Generally, child support is not taxable to the recipient while maintenance is taxable to the recipient. 26 U.S.C. § 71(a) (maintenance), (c)(1) (child support) (West 1988). Thus, after sale of the house, to meet her expenses appellant will have $3,134 in untaxed child support and (imputed) net monthly income from employment. To meet the $2,677 of expenses not covered by these amounts, appellant will have an additional $2,500 in taxable maintenance and about a half million dollars in funds from her cash equalizer that can be invested. The district court did not speculate unduly when it ruled that a $2,500 monthly maintenance award would allow appellant to meet her expenses after sale of the house.
We reject appellant’s challenge to the imputation to her of a $1,250 net monthly income from employment. The district court’s estimate explicitly recognized appellant’s absence from the work place and was consistent with a conservative view of expert testimony regarding her earning potential. Under these circumstances, appellant has not shown that the district court failed to consider the relevant facts when estimating her earning potential or that the record does not support the estimate. Appellant argues that modeling opportunities are “practically nonexistent” for a woman of her age. Even if true, that would not preclude appellant from working in one of her other specialties or from retraining. For these reasons, we reject appellant’s challenges to the step reduction in her maintenance award.
After noting that respondent had already paid some of appellant’s attorney fees, the district court denied appellant’s request for additional attorney fees. Appellant challenges the denial. Generally, attorney fees in family cases are governed by Minn. Stat. § 518.14, subd. 1 (2000), which allows awards of need-based and conduct-based fees. Neither appellant nor the district court cites the statute. And appellant does not indicate whether she believes herself entitled to need-based or conduct-based fees. She alleges respondent “dissipated” certain funds by using some of the funds to pay her attorney fees but most of them to pay his fees. She argues that, to equalize the disparity, she is entitled to a fee award equal to half the difference in the amounts of attorney fees respondent paid. This argument is, essentially, an attack on the property distribution. See Minn. Stat. § 518.58, subd. 1a (requiring district court to compensate party for use of marital property by spouse without party’s permission and not in normal course of business or for necessities of life). Given the size of the marital estate, not awarding appellant the amount she seeks did not render the property division inequitable. Cf. Ruzic v. Ruzic, 281 N.W.2d 502, 505 (Minn. 1979) (holding division of marital property must be equitable, not equal); Wibbens v. Wibbens, 379 N.W.2d 225, 227 (Minn. App. 1985) (refusing to remand for de minimis error). Citing cases involving versions of the Minn. Stat. § 518.14 predating its 1990 revision, appellant also seeks fees based on her allegation that respondent has a greater ability to pay fees than she does. Under the current statute, however, a disparity in ability to pay fees is not sufficient to allow an award of need-based fees. Geske v. Marcolina, 624 N.W.2d 813, 817 n.2 (Minn. App. 2001).
The district court held that the appreciated value of the parties’ home was respondent’s nonmarital property because appellant entered no credible evidence that the home had been improved during the marriage. We defer to district court credibility determinations. Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988).
Appellant also argues that because she is the custodial parent, case law requires the district court to make findings addressing the impact selling the house would have on the children. Because the district court found that the parties lack the financial ability to remain in the home, it cannot be in the children’s best interests for appellant to retain the home.
 While the parties were married more than 13 years, the dissolution took about two years.