This opinion will be unpublished and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

C5-01-1501

C9-01-2165

 

 

In Re the Marriage of:

Elizabeth Todd Garretson, petitioner,

Respondent,

 

vs.

 

James Robert Garretson,

Appellant.

 

 

Filed June 11, 2002

Affirmed in part, reversed in part, and remanded

Halbrooks, Judge

 

 

Ramsey County District Court

File No. F1992221

 

Susan V. Kleven, 5200 Willson Road, Suite 150, Edina, MN 55424 (for respondent)

 

Patricia A. O’Gorman, 8750 90th Street South, Suite 207, Cottage Grove, MN 55016 (for appellant)

 

 

 

            Considered and decided by Halbrooks, Presiding Judge, Peterson, Judge, and Huspeni, Judge.*

U N P U B L I S H E D   O P I N I O N

HALBROOKS, Judge

In this consolidated dissolution appeal, appellant alleges that the trial court’s findings do not support respondent’s maintenance award, requests a reduction in his maintenance obligation in light of the loss of his job, and requests child support.  Respondent challenges the trial court’s determination that a trust in appellant’s name is non-marital property.  Because the trial court accurately assessed respondent’s need for maintenance, we affirm the maintenance award.  Because the evidence indicates that the trust funds have remained segregated from marital property, we affirm the trial court’s determination that the funds are non-marital property.  But because the trial court applied the standard for modification of child support payments rather than the standard for initial establishment of child support payments, we remand for application of the proper statute.  

FACTS

            Respondent Elizabeth Garretson and appellant Todd Garretson married on October 15, 1977, and have three children, one of whom was a minor at the time of the dissolution.  The marriage was dissolved on March 2, 2001.  In its initial order, the trial court awarded physical custody of the parties’ minor child to appellant and awarded respondent permanent spousal maintenance in the amount of $2,000 per month, but did not award respondent an interest in a family trust.  The court reserved the issue of child support because appellant had not sought child support.  While finding that respondent’s obligation under Minn. Stat. § 518.551, subd. 5 (2000), if awarded, would be $466 per month, the court also found that appellant had voluntarily reduced his income in contemplation of the dissolution.  Pursuant to a temporary order dated January 12, 2000, respondent was ordered to pay child support.  The decree eliminating respondent’s child support obligation was effective March 2, 2001. 

Appellant moved for amended findings.  The trial court made some clerical changes and issued an amended order but denied all other motions.  On July 30, 2001, appellant moved for child support and to terminate his maintenance obligation and respondent sought reimbursement for child support.  The trial court denied the motions.  This appeal follows. 

D E C I S I O N

1.         The trial court did not err in ruling that the trust is nonmarital property.  

            Although the determination whether property is marital or nonmarital is a question of law, we defer to the trial court’s underlying factual findings.  Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997).  Nevertheless,

if we are left with the definite and firm conviction that a mistake has been made, we may find the trial court’s decision to be clearly erroneous, notwithstanding the existence of evidence to support such findings.

 

Id. (quotation omitted).  Appellant has the burden of proving that the trust is his nonmarital property.  Hafner v. Hafner, 406 N.W.2d 590, 593 (Minn. App. 1987). 

A.        The trust is solely for the benefit of appellant and does not consist of any marital funds. 

 

            Nonmarital property becomes marital property if it is commingled with marital property such that it is not possible to trace its source.  Olson, 562 N.W.2d at 800.  No commingling of marital and nonmarital property occurred in this case.  

            The court found that the trust is “a discretionary trust the express purpose of which is for the health, education or support of [appellant] and his issue.”  The language of the trust states that

[n]o beneficiary shall have the power to sell, assign, transfer, encumber, or in any manner to anticipate or dispose of any interest in the trust, or the income therefrom, prior to the actual distribution by the Trustees to such beneficiary. 

 

Appellant’s father testified that the trust is entirely for appellant’s benefit and that trust funds should only be distributed to appellant and appellant’s children.

            Respondent does not dispute that appellant’s father created the trust solely for appellant’s benefit.  Rather, respondent argues that the trust ceased to be a spendthrift trust when the parties allegedly placed marital funds in the trust.  Respondent argues that appellant’s parents gave them large checks as Christmas gifts and that appellant placed the checks in the trust.  But appellant’s father testified that the Christmas gifts were solely for appellant.  Respondent also testified that the Christmas checks were made payable to appellant.  Furthermore, appellant denied that he invested the funds in the trust.  Respondent’s commingling argument fails because the checks were not marital income and because appellant did not invest them in the trust.  The evidence supports the finding that the trust was created solely for the benefit of appellant. 

B.        Trust income is the result of passive appreciation rather than active investment on the part of appellant.

 

Respondent argues that the trust’s earned income renders the trust marital property.  Income derived from nonmarital property is marital property, but passive appreciation of nonmarital assets is not.  Prahl v. Prahl, 627 N.W.2d 698, 706 (Minn. App. 2001).  We disagree with respondent’s argument for a number of reasons.  First, the trust funds are the result of passive appreciation, as appellant has not actively invested any funds in the trust.  Second, since the trust is a discretionary trust, trust monies are not readily available to appellant.  Appellant does not have free access to distributions, as his brother is a co-trustee with authority to block appellant’s access to the funds.  As the trust is not a liquid asset, it is not income to appellant.  Swick v. Swick, 467 N.W.2d 328, 332 (Minn. App. 1991) (noting that “appreciation of an asset can only be realized when the asset is sold or distributed.”), review denied (Minn. May 16, 1991).

C.        The trust pays its own taxes. 

Nonmarital property can become marital property if the parties pay taxes on the property from their joint incomes.  Linderman v. Linderman, 364 N.W.2d 872, 877 (Minn. App. 1985).  Appellant claims that the parties paid taxes on trust monies from their joint incomes.  The trust pays its own taxes on undistributed income, and the parties have not been taxed on this income.  The parties are only taxed on taxable distributions.  Appellant received $37,439 from the trust to obtain further education, to finance his son’s education, and to pay accounting fees.  $22,062 of the $37,439 was taxable.  The parties did not pay taxes on this income, however.  Appellant used trust distributions to pay the taxes.  None of the circumstances that would transform the trust into marital property are present.  Appellant has met his burden of demonstrating that the trust is nonmarital property. 

2.         Minn. Stat. § 518.551, subd. 5 (2000), is the proper statute for establishing child support awards. 

 

            A trial court has broad discretion to provide for the support of the parties’ children.  Rutten v. Rutten,347 N.W.2d 47, 50 (Minn. 1984).  The trial court abuses its discretion when it establishes child support in a manner that is against logic and the facts on record.  Id.  A trial court’s findings on net income for purposes of child support will be affirmed on appeal if those findings have a reasonable basis in fact and are not clearly erroneous.  State ex rel. Rimolde v. Tinker, 601 N.W.2d 468, 470 (Minn. App. 1999). 

Although the trial court reserved the issue of child support in the initial decree, it determined that respondent’s child support obligation under Minn. Stat. § 518.551, subd. 5, was $446 per month.  Ruling on posttrial motions, the trial court concluded that appellant had failed to demonstrate changed circumstances such that he should receive child support.  Appellant argues that the changed-circumstances standard does not apply to a request for the initial award of child support and that the trial incorrectly applied the modification standard of Minn. Stat. § 518.64 (2000). 

Appellant’s argument is valid.  The changed-circumstances standard does not apply to requests for the initial child support award.  See Johnson v. Johnson, 533 N.W.2d 859, 863 (Minn. App. 1995) (noting that Minn. Stat. § 518.64 applies to modification of child support orders and Minn. Stat. § 518.551 applies to initial child support orders).  Because a finding of changed circumstances is not necessary to award child support, we remand for application of Minn. Stat. § 518.551, subd. 5.

3.         Maintenance Award. 

 

            We review a trial court’s maintenance award under an abuse-of-discretion standard.  Dobrin v. Dobrin, 569 N.W.2d 199, 202 (Minn. 1997); Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982).  For this court to conclude the trial court abused its broad discretion with respect to an award of spousal maintenance, the trial court’s factual findings must be “against logic and the facts on [the] record.”  Rutten, 347 N.W.2d at 50 (citation omitted).  “Findings of fact concerning spousal maintenance must be upheld unless they are clearly erroneous.”  Gessner v. Gessner, 487 N.W.2d 921, 923 (Minn. App. 1992) (citation omitted). 

            Respondent must show a need for maintenance based on the fact that she lacks financial resources or that she is unable to support herself with employment:

In a proceeding for dissolution of marriage * * * the court may grant a maintenance order for either spouse if it finds that the spouse seeking maintenance:

 

(a) lacks sufficient property, including marital property apportioned to the spouse, to provide for reasonable needs of the spouse considering the standard of living established during the marriage, especially, but not limited to, a period of training or education, or

           

            (b) is unable to provide adequate self-support, after considering the standard of living established during the marriage and all relevant circumstances, though appropriate employment * * * .

 

Minn. Stat. § 518.552, subd. 1 (2000). 

The statute establishes factors that a court should consider in establishing the amount of a maintenance award.  These factors include (1) the financial resources of the party requesting maintenance, (2) the probability that the party seeking maintenance will become self-supporting, (3) the standard of living the party enjoyed while married, (4) the duration of the marriage, (5) employment opportunities the party seeking maintenance may have sacrificed, (6) the age and physical condition of the party seeking maintenance, (7) the ability of the payor spouse to make maintenance payments, and (8) the contribution the party seeking maintenance made to the preservation of the value of marital property.  Minn. Stat. § 518.552, subd. 2(a)–(h) (2000). 

The trial court made findings as to these factors, noting that

after considering the standard of living established during the marriage, [respondent’s] financial need, the disparity of the incomes, the length of the marriage, the support that [respondent] has provided [appellant], the valuable services [respondent] has provided in caring for the children, [respondent’s] questionable health, her age, her lack of skills, and education and all relevant circumstances, [respondent] is entitled to permanent spousal maintenance. 

 

The record supports this conclusion.  The parties’ financial circumstances are starkly different.  In 1998, appellant earned $78, 396, and respondent earned $17,000.  Appellant is a “rent a tech” and a consultant who has two bachelor’s degrees.  Respondent has a high school education and two quarters of college.  She does not have any special skills and was 48 at the time of dissolution.  She currently has a data-entry position that pays $11 an hour.  The trial court noted that it was “highly unlikely” that respondent would ever be able to earn an income comparable to appellant’s. 

            Respondent made a significant contribution to the parties’ household during the 23-year marriage.  Respondent stated that she “did it all” in that she prepared meals, cleaned the house, and did the shopping and laundry.  Respondent contributed to the preservation of marital assets by caring for the parties’ children, thereby avoiding daycare expenses.  Additionally, respondent’s role contributed to the advancement of appellant’s consulting career.  During the marriage, respondent provided in-home daycare and held various retail sales clerk positions. 

            Respondent suffered a significant drop in her standard of living after the parties’ separation.  Prior to the separation, the parties resided in a $195,000 house in St. Paul.  After the separation, respondent moved to a two-bedroom apartment in a neighborhood where she feels unsafe walking outside at night.  An expert witness testified that respondent could not maintain a household similar to what she had during the marriage because it would result in a $2,000 monthly shortfall.

            Respondent also suffers from a variety of health problems.  She has debilitating, bi‑monthly migraine headaches, vertigo, and Bell’s palsy.  Because respondent broke her ankle in 1981 and pins were inserted at that time, she is unable to stand for long periods of time.

            The court found that appellant’s monthly expenses are $4,250 and his net monthly income is $4,055.72.  The court determined respondent’s net monthly income to be $1,195.54 and her monthly expenses as $2,317.  Appellant argues that the trial court did not make adequate findings to support its award of $2,000 per month of permanent maintenance, that respondent’s monthly shortfall is $100 rather than $1,100 and that he has a shortfall of $194 per month.  He further contends that the trial court’s finding that he voluntarily accepted employment, thereby reducing his income,[1] as opposed to working as an independent consultant, was in error because he took the permanent employment to receive health benefits for himself and his sons. 

            The trial court made a finding that appellant voluntarily reduced his income in contemplation of the dissolution proceeding.  Although appellant claims that the change was to obtain health benefits for himself and his children, appellant could still have obtained health insurance from respondent, as the marriage was legally intact during the separation.  Although the court did not make an explicit finding of bad faith, such a finding is not necessary.  See Warwick v. Warwick, 438 N.W.2d 673, 677-78 (Minn. App. 1989) (finding that the trial court’s conclusion that appellant’s failure to pay child support and maintenance despite the means to do so constituted contempt of court and was “effectively a finding of bad faith”).  Although the egregious conduct present in Warwick does not exist in this case, the trial court did find that appellant’s reason for taking private employment was not compelling, as he could have obtained benefits from respondent’s insurance. 

Appellant’s statement regarding respondent’s monthly shortfall also appears to be in error.  Respondent claims that she misstated her monthly expenses at trial when she testified that the figure was $1,500.  The $1,500 figure came from respondent’s “bare bones” budget and did not take into account standard-of-living factors.  The trial court recognized this omission and adopted a figure of $2,317.  Because standard of living is a relevant factor in setting maintenance awards, the trial court’s adoption of the higher figure is not erroneous.  The court’s maintenance award was within its discretion.  

            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, § 10. 

[1]  In 1998, appellant made $78,396 as an independent consultant.  Appellant made $65,626 (gross) in his full time position in 1999.  In 2000, appellant’s gross income was $71,150.16 ($48,668.64 annual net).