This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).






In re the Marriage of:

Margaret R. Feldick,

n/k/a Margaret R. Riha, petitioner,





Robert L. Feldick,

n/k/a Robert L. Feldiek,



Filed May 18, 2004

Affirmed in part, reversed in part, and remanded

Huspeni, Judge*

Dissenting, Anderson, Judge


Ramsey County District Court

File No. FO-01-428


Joseph M. Buchmeier, P.O. Box 25525, Woodbury, MN 55125 (for respondent)


Beverly Kaye Dodge, William D. Siegel, Barna, Guzy & Steffen, Ltd., 400 Northtown Financial Plaza, 200 Coon Rapids Boulevard, Minneapolis, MN 55433-5894 (for appellant)



            Considered and decided by Toussaint, Chief Judge; Anderson, Judge; and Huspeni, Judge.

U N P U B L I S H E D   O P I N I O N


In challenging certain provisions of the decree dissolving his marriage, appellant Robert Feldiek argues that the trial court (a) overvalued certain business interests owned by the parties; (b) failed to recognize his nonmarital interest in one of the parties’ businesses; (c) miscalculated the parties’ nonmarital interests in the homestead’s proceeds; and (d) overstated the nonmarital interests of respondent Margaret Riha in certain investment accounts.  We affirm in part, reverse in part, and remand. 


            When the parties married in 1979, both had certain premarital real property; respondent having acquired hers at appellant’s suggestion.  During the marriage, the parties made nonmarital contributions to the purchase of a homestead from time to time.  Also during the marriage, respondent’s parents, brother, and uncle transferred funds to respondent and/or appellant by check and certificate of deposit.  Ten of these transfers are at issue in this appeal.  The accounts into which the challenged funds were initially deposited and the investment accounts in which the funds were subsequently invested were in both parties’ names.

During the marriage, appellant operated two businesses, Residential Appraisers, Inc. (RAI) and Concessions, Inc. (CI).  The former was an appraising business; the latter a business in which appellant sold food at various events, and in which respondent was sometimes employed during the marriage.  The bulk of CI’s income is derived from sales at the State Fair, for which CI has an allegedly nontransferable license.

During the pendency of the dissolution proceeding, the parties reached a stipulation on some issues, but disputed (a) the value of RAI and CI; (b) the extent of appellant’s nonmarital interest in CI; (c) the extent of the parties’ nonmarital interests in the homestead;[1] and (d) the extent of respondent’s nonmarital interests in the investment accounts arising from funds transferred by her family.

After a three-day trial at which both parties presented expert testimony on the values of the businesses, the trial court determined that (a) appellant and his expert were not credible witnesses and respondent and her expert were credible; (b) the value of RAI was $144,000; (c) the value of CI was $30,000; (d) both businesses were entirely marital property; (e) appellant had a $10,000 nonmarital interest in the parties’ homestead; (f) respondent had a $40,000 nonmarital interest in the homestead; (g) all of the contested gifts were made to respondent alone and that all investment accounts flowing from those nonmarital gifts were her nonmarital property; and (h) the parties’ marital estate was to be divided equally. 


            Where, as here, there is no motion for a new trial, appellate courts may review substantive issues of law properly raised at trial.   Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 310 (Minn. 2003).  Appellate courts may also determine whether the evidence supports the findings of fact, and whether the findings of fact support the conclusions of law and the judgment.  Gruenhagen v. Larson, 310 Minn. 454, 458, 246 N.W.2d 565, 569 (1976). 


            The trial court valued CI at $30,000 and RAI at $144,000.  In doing so, it found respondent and her expert to be credible while finding appellant not credible, and appellant’s expert lacking in both courtroom decorum and credibility.  We note initially that appellate courts defer to trial court rulings on witness credibility.  Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (lay witnesses); State ex rel. Trimble v. Hedman, 291 Minn. 442, 456, 192 N.W.2d 432, 440 (1971) (expert witnesses).  Further, the valuation of an asset is a finding of fact that will be affirmed if it is within the limits of a credible estimate made by competent witnesses, “even if it does not coincide exactly with the estimate of any one [witness].”  Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d 42, 44 (1975).

While appellant alleges that the trial court disliked his expert and therefore found him not credible, our review of the record indicates that the court was concerned that appellant’s expert “did not perform an evaluation of either business, and did not present a written evaluation,” but instead submitted a letter of opinion.  The court observed that without an evaluation “it was not possible . . . to examine the foundations for [the valuations provided by appellant’s expert].”  Appellant argues that his expert did, in fact, value the businesses ($2,550 for RAI, and $10,000 for CI), and that the trial court erred in not adopting those valuations.  We conclude, however, that even if this court were to find inappropriate any reliance by the trial court on the demeanor of appellant’s expert, rejection by the trial court of the values urged by appellant was within the broad discretion granted to trial courts in these matters.[2]

In valuing the businesses, the trial court had before it the tax returns and financial documents of the businesses, as well as some information appellant had provided to his expert.  The trial court also had before it respondent’s expert’s evidence.  The tax returns and financial documents had been prepared by appellant’s accountant, based on information provided by appellant.  Appellant admitted that the financial information he provided his accountant regarding CI omitted certain income, but alleged that the omitted income was offset by omitted expenses.  Appellant admitted that, in reference to RAI, each year “additional profits . . . show up, according to my accountant, but I don’t know about these.”  The information appellant provided directly to his expert included allegations of the number of hours appellant worked in each of his businesses.  (Appellant claimed to spend the vast majority of hours working at RAI, which his expert valued at $2,550, and that CI, which his expert valued at $10,000, was a “hobby” at which he spent many fewer hours.)  The trial court found the recitation of those hours not credible.

In valuing CI, the trial court accepted appellant’s argument that the license held by that business was not transferable; the valuation arrived at by the court ($30,000) was $10,000 less than the figure urged by respondent’s expert ($40,000).

Our review of the record convinces us that the trial court rejected valuations suggested by appellant’s expert when those valuations were based on information provided solely by appellant – a witness clearly found by the trial court to be not credible.  The trial court also declined to rely on financial documents that had dubious bases, and which produced results appellant could not explain.  Finally, it could be argued that there is something intuitively inconsistent about appellant spending the bulk of his time and deriving the bulk of his income from RAI, while his expert valued that business at about 25% of his valuation of CI, a business which appellant described as a “hobby.”  See Nardini v. Nardini, 414 N.W.2d 184, 190 (Minn. 1987) (stating “sound valuation requires not only the consideration of all relevant facts but also the application of common sense, sound and informed judgment, and reasonableness to the process of ‘weighing those facts and determining their aggregate significance’” (emphasis added)).  We find no clear error in the trial court’s refusal to adopt the business valuations submitted by appellant’s expert.

Appellant’s initial challenge to the credibility of the valuation offered for both businesses by respondent’s expert is that those valuations fail to adequately employ the eight factors set forth in IRS Revenue Ruling 59-60.  See id. (adopting factors in IRS Revenue Ruling 59-60 as considerations in valuing business.)  We find no merit in this argument.  The appraisal of RAI by respondent’s expert states that seven of the 59-60 factors were considered and discusses the remaining factor.  Therefore, we reject any argument that respondent’s expert was not familiar with the 59-60 valuation process.  Further, while the 59-60 factors were not explicitly discussed in the report by respondent’s expert valuing CI, the record indicates that respondent’s expert had been instructed to value that business based on documents and assumptions other than the 59‑60 factors; he had not verified the assumptions, and indicated that the valuation was of “limited” worth because of what it did and did not consider.  The presence of these statements are in the written valuation of CI by respondent’s expert, and the consideration of that written valuation by the district court explains why the district court valued CI at 75% of what respondent’s expert proposed.

Appellant argues further that respondent’s expert did not perform “due diligence” in valuing either business because he relied on information provided by respondent and did not interview or seek additional information from appellant.  But respondent’s expert testified that a business valuation does not necessarily require an interview of the owner and that, after getting information from respondent, he concluded he did not need additional information from appellant for CI.[3]  Moreover, because appellant and his expert were found to be not credible, testimony by respondent’s expert on the value of either business based on information provided by appellant was also at risk of being considered not to be credible.  Thus, any valuation of respondent’s expert based on information provided by appellant would have been, at best, suspect.

Appellant next argues that assumptions used by respondent’s expert in valuing CI were incorrect because information on the value of that business had not been verified.  The trial court recognized the expert’s admission that removing certain assumptions from the expert’s valuation of CI could reduce the expert’s valuation of that asset by “‘tens of thousands’ of dollars.”  This observation indicates to us that the trial court knew of possible defects in valuation when it chose a value of 75% of that proposed by respondent’s expert.  Moreover, because the $20,000 difference between the trial court’s valuation of CI and that suggested by appellant’s expert is approximately 2.7% of the marital estate, any error does not merit a remand.  Cf. Wibbens v. Wibbens, 379 N.W.2d 225, 227 (Minn. App. 1985) (refusing to remand for de minimis error). 

In further attacking the valuation of CI, appellant argues that the valuation was based on only two years’ business history.  He does not, however, identify the impact of this alleged weakness.  See Midway Ctr. Assocs. v. Midway Ctr., Inc., 306 Minn. 352, 356, 237 N.W. 2d 76, 78 (1975) (requiring party to show error and prejudice to prevail on appeal); see also  Minn. R. Civ. P. 61 (requiring harmless error to be disregarded).

In a final challenge to the value of CI, appellant argues that business was overvalued because the businesses used as comparables were not, in fact, comparable.  Appellant also notes that respondent’s expert erroneously assumed that a license held by the business could be transferred.  These possible defects, however, were discussed at trial, and as already noted, the trial court did adopt appellant’s position regarding the non-transferability of the license.    

In valuing RAI at $144,000, respondent’s expert used four calculations, two of which were rule-of-thumb calculations, and averaged them.  Alleging that respondent’s expert was misinformed regarding several components of the rule-of-thumb calculations, appellant argues that those valuation methods were invalid.  But if only the values produced by the other valuation methods are averaged, the value of RAI, which appellant argues is overvalued, increases to $147,321.  Also, respondent’s expert testified that use of rule-of-thumb calculations was appropriate and that businesses were conveyed based on rule-of-thumb valuations.  We conclude that the trial court was acting within its broad discretion in accepting this testimony as credible.

Appellant also challenges the trial court’s action in essentially denying appellant’s request for a key-person discount of RAI.  This denial, however, is consistent with respondent’s testimony that appellant did not work as many hours at the business as he claimed.  The denial is also consistent with the court’s determination that appellant was not a credible witness, and with the observation in the report by respondent’s expert that, when the report was submitted, appellant had not responded to questions regarding the business, and that the expert reserved the right to modify the report in response to any new information.  To the extent appellant’s refusal to produce information prompted a refusal to grant a “key-person” discount, he is not entitled to relief.  See Tuthill v. Tuthill, 399 N.W.2d 230, 232 (Minn. App. 1987); Taflin v. Taflin, 366 N.W.2d 315, 319 (Minn. App. 1985). 

            Finally, neither CI nor RAI was going to be sold, and the tax consequences of any sale were not clear.  Therefore, we reject appellant’s argument that valuations should have recognized tax consequences of selling these businesses.  Consideration of tax consequences is discretionary with the trial court and speculative tax consequences should not be considered.  Maurer v. Maurer, 623 N.W.2d 604, 608-09 (Minn. 2001). 


            Property acquired during a marriage is presumed to be marital.  Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997); see Minn. Stat. § 518.54, subd. 5 (2002) (defining “marital property”).  Whether property is actually marital is a legal question reviewed de novo, but we defer to the district court’s underlying findings of fact unless they are clearly erroneous.  Olsen, 562 N.W.2d at 800.  A party asserting a nonmarital interest in property must show the existence of that interest by a preponderance of the evidence.  Id.  For property to be nonmarital, “it must either be kept separate from marital property or, if commingled with marital property, be readily traceable.”  Id.  To trace a nonmarital interest in marital property, a party need only do so by a preponderance of the evidence; strict tracing is not required and testimony which is credited by the district court but unsupported by documentation can be sufficient to trace a nonmarital interest.  Doering v. Doering, 385 N.W.2d 387, 390-91 (Minn. App. 1986).

Whether a nonmarital interest has been traced is a question of fact the district court’s resolution of which will not be altered absent clear error.  See id. at 391.  A finding of fact is “clearly erroneous” if we are “left with the definite and firm conviction that a mistake has been made” and, in deciding whether a finding is clearly erroneous, we view the record in the light most favorable to the challenged finding, recognizing that it is not clearly erroneous just because the record “might support” a finding other than the one made.  Vangsness v. Vangsness, 607 N.W.2d 468, 472, 474 (Minn. App. 2000).

Appellant argues that he traced a $15,500 nonmarital interest from premarital property into a $17,000 trailer used by CI.  But a receipt for the trailer showed it was purchased more than a year after appellant sold his premarital property and that the price was $10,000.  At best, the receipt-related evidence renders the existence and amount of appellant’s nonmarital interest in the business a credibility determination.  We defer to the trial court on these determinations.  Sefkow, 427 N.W.2d at 210. 

In addressing the parties’ nonmarital interests in their homestead, the trial court found (a) the parties bought a house for approximately $100,000; (b) appellant and respondent contributed $10,000 and $20,000 to the purchase, respectively; (c) the parties initially had a $70,000 mortgage on the home; (d) within two years, respondent used $20,000 of her nonmarital funds to reduce the mortgage; and (e) appellant and respondent had nonmarital interests in the house of 10% and 40%, respectively.  In calculating the parties’ nonmarital interests, the trial court assumed that respondent made her entire $40,000 nonmarital contribution to the house at the time of purchase.  Although appellant argues that the purchase price of the homestead was $125,162.76, there is evidence in the record to support the $100,000 figure.  We will not disturb the trial court’s determination on this issue.

Appellant argues that much of the improvement of the real property respondent sold to generate the funds she used to reduce the mortgage occurred during the marriage, that some of those funds were therefore marital, and hence that the trial court overstated respondent’s nonmarital interest in the house.  While there is some support in the record for appellant’s argument that some improvements to respondent’s property may have occurred during the marriage, the amount of marital improvement supported by the record is limited.  Respondent testified that most of the improvements occurred before the marriage.  Viewed in the light most favorable to the trial court’s findings, the record supports the rejection of appellant’s assertion that there was a significant marital interest in the proceeds of respondent’s premarital property.[4] 

            Appellant argues that the assumption that respondent contributed all of her nonmarital funds to the homestead at the time of purchase gives her a disproportionate share of the home’s appreciation.  No evidence was entered on the value of the property on the date respondent made any subsequent contributions, however.  Therefore, the two-part Schmitz calculation that appellant seems to suggest is required is not possible on the record before us.  Also, to the extent that appellant argues that respondent is entitled only to reimbursement of the amount her nonmarital property reduced the homestead mortgage, that argument is inconsistent with caselaw.  Cf. Gottsacker v. Gottsacker, 664 N.W.2d 848, 853 (Minn. 2003) (noting passive increase in value of nonmarital asset is nonmarital property).[5] 

During the marriage, respondent’s family gifted her funds that formed the basis of the award to her of nonmarital interests in investment accounts.  Appellant challenges the award to respondent of those nonmarital interests, alleging that the trial court failed to apply the presumption that property acquired during the marriage is marital and failed to independently assess the testimony of one of respondent’s witnesses.  We have carefully reviewed the record and reject the majority of appellant’s challenges to the trial court’s treatment of the gifts.  See Wilson v. Moline, 234 Minn. 174, 182, 47 N.W.2d 865, 870 (1951) (stating appellate court need not “discuss and review in detail the evidence for the purpose of demonstrating that it supports the trial court’s findings,” and that its “duty is performed when [it] consider[s] all the evidence . . . and determine[s] that it reasonably supports the findings”); Vangsness, 607 N.W.2d at 474-75 & n.1 (applying Wilson).

With one notable exception addressed below, we also reject appellant’s challenges to the trial court’s decisions on the tracing of the gifts of funds.  See Prahl v. Prahl, 627 N.W.2d 698, 705 (Minn. App. 2001) (commingling of marital and nonmarital assets does not cause the nonmarital assets to lose their nonmarital character if the nonmarital interest can be traced); Nash v. Nash, 388 N.W.2d 777, 781 (Minn. App. 1986) (depositing of nonmarital funds into a joint account does not cause the nonmarital funds to lose their nonmarital character if the nonmarital funds can be otherwise traced), review denied (Minn. Aug. 20, 1986); Doering, 385 N.W.2d at 390-91 (affirming tracing of nonmarital interest based solely on undocumented testimony).  To the extent appellant argues that respondent’s consultations with him regarding what to do with gifts compels a conclusion either that gifts were not made to respondent alone or that she conveyed the gifts to the marital estate, we reject that argument.  In analyzing a question regarding who is the recipient of a gift, “the identity of the donee . . . turns on the donor’s intent.”  Olsen, 562 N.W.2d at 800.  And a donor’s intent in making a gift cannot be affected by what the donee does after receipt of the alleged gift.  Thus, any consultation of appellant by respondent does not bear on whether the funds were gifts to respondent.  Also, appellant does not argue that, after receipt of the gifts, respondent somehow gifted the funds to the marital estate.  See id. (noting requirements of inter vivos gift). 

While appellant’s argument that all of the gifted funds were marital fails, one of the gifts bears inescapable evidence that it is marital.  An April 6, 1991 $10,000 certificate of deposit from respondent’s uncle bears the following names:  “MARGARET ANN FELDICK OR ROBERT FELDICK.”  Respondent does not address how she can claim a nonmarital interest in this certificate of deposit, where the donor put the names of both parties on the document.  We reverse the trial court’s award of all gifted funds to respondent as nonmarital, and remand to enable the trial court to consider as marital the certificate that bears the names of both parties, and to divide the value of that certificate equitably between the parties.  Whether to reopen the record on remand shall be discretionary with the trial court.

Appellant also argues that regardless of the nonmarital character of certain investment accounts awarded to respondent, income from nonmarital property is generally deemed marital.  This is not always the case, however.  See Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981) (stating there was “no basis” to argue that certain assets kept separate from the marital estate “or their accretions during the marriage are marital property”); White v. White, 521 N.W.2d 874, 878-79 (Minn. App. 1994) (affirming award to party of nonmarital interest in retirement account representing value account would have had if, at party’s marriage, party stopped working and stopped contributing to account but account continued earning interest); Ranik v. Ranik, 383 N.W.2d 431, 435 (Minn. App. 1986) (where party deposited nonmarital inheritance into separate account not used for marital purposes, this court affirmed ruling that interest earned by party’s funds were nonmarital stating “[the] inheritance was always maintained in a separate account and the interest on the inheritance is readily traceable to [the] nonmarital property”), review denied (Minn. May 22, 1986).  Moreover, this record shows virtually no contribution by appellant to the acquisition of, or earnings generated by, respondent’s gifts.  Therefore, even if the income earned by respondent’s nonmarital gifts were deemed marital, that fact would not preclude the trial court from awarding those earnings to respondent.  See Minn. Stat. § 518.58, subd. 1 (2002) (requiring equitable division of marital property in light of, among other things, each party’s contribution to “acquisition, preservation, . . . or appreciation” of martial property).  

Finally, appellant argues that because marital funds were used to pay the taxes on funds awarded to respondent as nonmarital, those funds should be deemed marital.  The amount of taxes at issue is not identified in the record, however, and the amount by which the marital estate was (allegedly) understated is anything but clear.  Therefore, we cannot determine on the record before us whether there is any merit to appellant’s argument.

Affirmed in part, reversed in part, and remanded.


G. BARRY ANDERSON, Judge (dissenting)

            I respectfully dissent from that portion of the majority opinion that affirms the district court’s valuation of the R.A.I. appraisal business.  In all other respects, I join in the majority opinion.

            I begin with the observation that the district court here was faced with a difficult challenge in that appellant was not cooperative in providing information for appraisal purposes, and, after a careful review of the record, I can only conclude that the district court quite properly found appellant, and appellant’s expert, to have serious credibility issues.  Additionally, the credibility of appellant and his business records is affected by his admission that he had received unreported income. 

            Particularly with respect to the valuation of the concessions business, these defects are ultimately fatal to appellant’s claims on appeal.

            But with respect to the appraisal business, different circumstances obtain.  It is a business with very low barriers to entry.  As all parties and experts concede, R.A.I. is a small business, very dependent upon appellant’s personal relationships with mortgage originators. 

            Because of these undisputed facts, independent of appellant’s credibility problems, I conclude that the failure to apply a “key person” discount to any valuation of the appraisal business, no matter how complex, careful, or professional the formula used to arrive at the valuation, is error.1 

            I recognize that respondent’s expert, whose testimony is the principle support for the district court’s finding of fact and conclusions of law with regard to valuation of this appraisal business, is a highly qualified expert, with multiple degrees from prestigious institutions.  But degrees and qualifications are not evidence.  Here, because respondent’s expert did not apply a key person discount to the valuation or explain why a key person discount should not be applied, the evidence in the record does not support the $144,000 valuation for the RAI appraisal business.  I would reverse the district court on this issue and remand for retrial on the issue of business valuation.  Nelson v. Nelson, 411 N.W.2d 868, 874 (Minn. App. 1987) (holding that a key person or marketability discount of 30% was arbitrarily low).



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

[1]  During the dissolution proceedings, the parties sold the homestead and divided some of its proceeds.  The remainder of the proceeds were put in escrow.

[2] Our rejection of appellant’s challenges to the trial court’s valuations of the businesses and affirmance of the valuations given by the trial court does not imply that other valuations could not or would not have been affirmed.  We recognize that valuation of businesses such as those in this case often defies precision.  See Hertz v. Hertz, 304 Minn. 144, 229 N.W.2d 42 (1975).  On appeal, we cannot retry a case.  Highview N. Apartments v. County of Ramsey, 323 N.W.2d 65, 67 (Minn. 1982) (stating “[o]ur role on appeal is not to retry the case but to determine only if the trial court’s findings are clearly erroneous”).

[3] Appellant’s brief alleges that, “[o]n cross-examination [respondent’s expert] acknowledged that no request for information was ever sent to [appellant].”  This statement misrepresents the record by omitting facts critical to understanding what happened.  On cross examination, respondent’s expert testified that (a) he did not send any questions directly to appellant; (b) a list of questions was sent to appellant’s attorney with the understanding that they would be forwarded to appellant; (c) no response was received by the time the report was finished; and (d) based on the responses to certain questions posed to respondent, the answers to the questions sent to appellant’s attorney were thought “unnecessary.”

[4] Appellant also attempts to trace a nonmarital interest in the homestead from his premarital land, arguing that he bought it for $49,000 and sold it for $65,400, “generating a profit of $21,771.00.”  We do not follow the arithmetic of his argument, and decline to reverse the trial court based on that argument.

[5]We also reject appellant’s argument that it is error to distinguish between active and passive increases in the value of an asset.  See Gottsacker, 664 N.W.2d at 853 (approving active/passive distinction). 



[The following footnote is from the Dissenting Opinion.]

1 A “key person” is defined as an individual performing “highly personal or unique services from which the entire business income is derived.”  Nemitz v. Nemitz, 376 N.W.2d 243, 247 (Minn. App. 1985), review denied (Minn. Dec. 30, 1985).  Appellant fits the classic definition of a “key person”; appellant’s personal relationships with mortgage originators are critical to generating revenue, R.A.I. has only two full-time employees (appellant and an office manager), and other, fully qualified, appraisal firms abound.  To put it most bluntly, appellant is R.A.I., and the opinion of respondent’s expert does not reflect this “key person” status.