This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
IN COURT OF APPEALS
In Re the Marriage of:
Pamela J. Ellingson, petitioner,
Alan G. Ellingson,
Filed July 3, 2007
Affirmed; motion to strike granted in part,
denied in part; motion for fees denied
Washington County District Court
File No. F3-03-2565
James C. Selmer, Marc M. Berg, James C. Selmer & Associates, P.A., 500 Washington Avenue South, Suite 2010, Minneapolis, MN 55415 (for respondent)
Edward L. Winer, Ben M. Henschel, Jana Aune Deach, Moss & Barnett, 4800 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402 (for appellant)
Considered and decided by Peterson, Presiding Judge; Shumaker, Judge; and Ross, Judge.
U N P U B L I S H E D O P I N I O N
In these consolidated appeals
regarding the identification and division of marital property,
appellant-husband argues that the district court (a) erred by failing to
characterize a portion of the appreciation of husband’s business as his
nonmarital property to the extent that the increase was a function of market
forces; (b) abused its discretion by denying his motion for a new trial when it
improperly excluded expert witness testimony from two of husband’s experts and
associated exhibits, and limited the testimony of two other experts; (c) should
have considered certain tax consequences of selling husband’s businesses; (d)
should not have directed the parties to file joint income tax returns for 2004;
and (e) should have treated certain checks as income rather than property. By notice of review, respondent-wife argues
that the district court abused its discretion by failing to reserve the issue
of maintenance and seeks appellate attorney fees. We affirm the district court’s determination
that, under Nardini v. Nardini, 414
N.W.2d 184 (
The district court
dissolved the 14-year marriage of appellant Alan Ellingson (husband) and
respondent Pamela Ellingson (wife) after a trial in 2005. The parties had no children together; husband
has an adult son by a previous marriage.
Husband owns 100% of the common stock of Al’s Cabinets, Inc., a C-corporation,
which he started in 1974 in his garage. Husband
also owns two affiliated businesses, which are S-corporations: R.P.E., Inc.,
and Quality Kitchens of Minnesota, Inc. All
three businesses are located in
Al’s Cabinets manufactures
custom cabinets for Twin Cities residential homes, with a primary customer base
of high-end home builders. The business
employs about 75 people and generates about $7.5 million in yearly
revenues. R.P.E. is a real estate
holding company, started in 1994, which leases a building to Al’s
Cabinets. Quality Kitchens, which was
started in 2000, sells prefabricated kitchen cabinets, manufactured mostly in
After a temporary-relief hearing, the district court awarded wife $10,000 each month in temporary maintenance and $50,000 in need-based attorney fees. By stipulation, the court appointed Stephen Dennis, CPA, as a neutral business expert to appraise the value of the three businesses. The parties submitted issues of property division and maintenance for trial.
The district court issued a scheduling and discovery order, which was amended twice by stipulation. During discovery, the parties selected and gave notice of experts to give opinions on the valuation of the businesses, real estate, and personal property. Immediately before trial, the parties filed motions in limine. Wife’s attorney moved to exclude, on the ground of late disclosure, evidence and testimony from (1) husband’s additional business expert, Jay Bartkowski, on the value and tracing of husband’s nonmarital interest in Al’s Cabinets; and (2) husband’s real estate appraiser, Blair Kjetland, on the value of husband’s recently-constructed home in Prescott, Wisconsin. The district court excluded the opinions of both challenged experts, but allowed husband to testify on the nonmarital tracing issue and the construction cost of the home. During trial, the district court also sustained wife’s objections, on the ground of late disclosure, to specific testimony on (1) from Wayne Brown, husband’s primary business expert, on the increase in value of Al’s Cabinets during the marriage as a result of market conditions; and (2) from Timothy Niggeling, the parties’ certified public accountant, on the tax implications of husband’s possible sale of the businesses.
The district court ordered judgment dissolving the marriage. The court found that the value of the nonmarital component of Al’s Cabinets was $470,000, the figure presented by Dennis, the neutral expert, as its value on December 31, 1990, before the parties’ marriage. This value fell between the book value of $418,000 on that date and Brown’s adjusted-value appraisal of $550,000. The district court rejected husband’s theory of an increased nonmarital component to Al’s Cabinets based on appreciation caused by inflation or market forces during the marriage. The district court declined to order maintenance and divested itself of jurisdiction to award maintenance in the future.
Husband moved for amended findings, or, in the alternative, a new trial, alleging that expert testimony was improperly excluded. The district court ordered amended findings, but denied husband’s motion for a new trial.
The judgment was not immediately entered because of a clerical error. Husband filed an appeal from the undocketed judgment and the order denying the new-trial motion; wife filed a notice of review. This court dismissed as premature the part of the appeal arising from the judgment. After the judgment was properly entered, husband filed a new appeal, which was consolidated with the original appeal. On appeal, wife moves to strike certain portions of husband’s appendix and seeks appellate attorney fees.
D E C I S I O N
dissolution, a district court has broad discretion in dividing marital
property, and an appellate court will not reverse absent abuse of that
discretion. Gottsacker v. Gottsacker, 664 N.W.2d 848, 852 (
A presumption exists that
all property acquired during a marriage is marital property. Minn. Stat. § 518.003, subd. 3b
(2006). A party may overcome this
presumption with a showing that the property is nonmarital.
In examining property that
falls into the final category, we consider whether the appreciation of the
property is active or passive. Active
appreciation of a nonmarital asset is considered marital property, while
passive appreciation of a nonmarital asset is considered nonmarital
property. Gottsacker, 664 N.W.2d at 853.
An increase in value of a nonmarital asset is classified as “active
appreciation” when it is “the result of marital effort.”
In Nardini v. Nardini, 414 N.W.2d 184, 195 (
the increase in the value of nonmarital property attributable to the efforts of one or both spouses during their marriage, like the increase resulting from the application of marital funds, is marital property. Conversely, an increase in the value of nonmarital property attributable to inflation or market forces or conditions, retains its nonmarital character.
Nardini, 414 N.W.2d. at 192. The court determined that the character of
income earned by the parties’ efforts during the marriage was not changed by
its retention as shareholder equity in a closely-held corporation.
more than 35 years of essentially prosperous and mildly inflationary conditions provided a favorable climate in which a budding business could grow and flower[,] . . . a business, like a garden, must be tended if it is to flourish . . . . What [husband] really invested in was the opportunity to turn his talents toward the development of an enterprise in which he had a personal stake.
Husband argues that the district court erred by characterizing the entire increase in value of Al’s Cabinets during the marriage as marital property. He maintains that economic conditions—the growth of the housing market, inflation, and the growth of the business’s three largest customers—contributed in significant part to the increased value of Al’s Cabinets during the parties’ marriage. He argues, therefore, that the portion of the increased value attributable to these passive forces should remain nonmarital.
But the record shows that, like the business in Nardini, Al’s Cabinets relied on husband’s active management to remain competitive in the marketplace during the parties’ 14-year marriage. Testimony established that husband, the business’s founder and chief executive officer, had ultimate authority and responsibility for establishing and maintaining customer relationships, hiring employees, making major decisions about equipment purchasers and suppliers, incorporating Al’s Cabinets, deciding to form R.P.E. Inc., spinning off the prefabricated business into Quality Kitchens of Minnesota; and moving Al’s Cabinets to its present facility and later expanding the facility. Although husband delegated day-to-day operation of the business to Ray Olsen as chief financial officer in 1998, husband still contacted the business every day. The district court did not clearly err in finding that husband’s involvement “evidences his persistent oversight and continuing, undeniable role as the boss.”
Thus, to use Nardini’s garden analogy, a strong housing market provided “fertile ground” for Al’s Cabinets to grow. But the business, like a garden, has only been able to flourish because husband made active efforts to tend it in response to favorable economic conditions. Husband argues that the growth of Al’s Cabinets’ three largest customers created passive appreciation that was not attributable to his efforts. But these customers could at any time have taken their business elsewhere, if the company had not made active efforts to provide acceptable service to them. The district court did not clearly err by finding “that the increase in value of Al’s Cabinets since the date of marriage is attributable to the efforts of both parties . . . .” The record also supports the district court’s finding that “the company has grown because its earnings have grown, earnings over which [husband] has always had authority to reinvest or distribute as income.” Therefore, the district court did not err by determining that the entire increase in value of Al’s Cabinets during the period of the marriage was marital property; and the evidence supports the district court’s valuation for the nonmarital portion of the business as $470,000, the value determined by the neutral business expert at the time of the parties’ marriage.
argues that the district court abused its discretion by failing to order a new
trial on the ground that the district court improperly excluded testimony and
exhibits from four of his expert witnesses.
The decision whether to admit or exclude expert testimony rests within
the district court’s sound discretion. Benson v. N. Gopher Enters., 455 N.W.2d 444, 445 (
Generally, failure to
timely disclose an expert’s identity results in suppression of expert testimony
only if “counsel’s dereliction . . . is inexcusable and
results in disadvantage to his opponent.”
Dennie v. Metro. Med. Ctr.,
387 N.W.2d 401, 405 (
Husband maintains that the district court abused its discretion by excluding all testimony from two of his experts, Jay Bartkowski and Blair Kjetland, and by limiting the testimony of two other experts, Wayne Brown and Timothy Niggeling. Husband also asserts that the district court improperly failed to allow his attorney to make an offer of proof on the record regarding Niggeling’s testimony.
The record shows that husband disclosed Bartkowski as an expert witness in March 2004. By the parties’ agreement, the court issued amended scheduling orders in May 2004 and July 2004. The last order required that by October 1, 2004, “[o]pinions and reports of all party-retained experts and court-appointed neutrals shall be disclosed” for trial in January 2005. Neither party strictly met the October 1, 2004 discovery deadline. The record shows that on November 30, 2004, husband’s attorney furnished to wife’s attorney a prehearing statement with attached schedules on nonmarital tracing. At a pretrial hearing on December 10, the parties agreed that by December 17 they would exchange all exhibits and expert reports. On December 17, wife’s attorney received a revised version of the tracing schedules, but no formal report. The district court granted the motion in limine with respect to Bartkowski’s testimony and exhibits.
The record appears unclear as
to whether furnishing the exhibits one day before the discovery deadline, in
schedule form, materially prejudiced wife’s attorney’s ability to prepare for
trial. But we conclude that the district
court did not abuse its discretion by denying a new trial because there has
been no showing that had Bartkowski’s testimony on tracing and the accompanying
exhibits been admitted, the result of the trial would have been different. The district court determined, as a matter of
law, that the increase in value of Al’s Cabinets during the marriage is “attributable
to efforts of both parties and is therefore marital property.” On the tracing issue, the district court received
husband’s testimony, which the court expressly determined to be credible. Based on this testimony, the district court
determined nonmarital interests in the parties’
The record shows that after an agreed-on neutral real-estate appraiser was unable to perform, wife’s attorney retained a different appraiser, Fred Nagel, with his understanding that Nagel would also act as a neutral. After both parties reviewed Nagel’s appraisal, husband’s attorney retained Kjetland to perform a different appraisal using a replacement-cost method, which wife’s attorney received on November 29, 2004, without prior notice. The district court excluded Kjetland’s testimony.
Because neither party strictly complied with October 1 discovery deadline, wife may not have been prejudiced by the late disclosure of Kjetland’s appraisal. But the record does not establish prejudice to husband, who testified on the cost of building his home. The district court valued the home based on Nagel’s fair-market-value appraisal ($771,000), which fell between Nagel’s replacement-cost appraisal ($810,000) and husband’s cost-of-construction testimony ($605,000). Because the district court rejected Nagel’s appraisal based on the replacement-cost valuation method and husband’s cost-of-construction testimony, husband was not prejudiced by the failure to allow Kjetland’s appraisal, which also used the replacement-cost method.
Husband argues that the
district court abused its discretion by failing to allow Wayne Brown to testify
on the portion of growth of Al’s Cabinets during the marriage attributable to
market factors. The district court
sustained wife’s objection based on lack of disclosure, stating “[i]f it’s not
in the report we’re not going to have testimony about it . . . .” By offer of proof, the witness then gave his
opinion that, based on his report, the market growth factor would be 11%, calculated
on the difference between the company growth of 17% and the company’s company-specific
risk premium of six percent. But Brown’s report did not support his
opinion testimony because the report used the company-specific risk premium as
an “additional risk factor” in valuing the company using a capitalized earnings
method, rather than as a measure of the company’s growth attributable to
husband’s efforts. Therefore, the
contents of the report did not adequately disclose Brown’s opinion testimony. See
Husband argues that the district court abused its discretion by refusing to allow testimony from Timothy Niggeling, the parties’ personal and business CPA, on the tax consequences of husband’s proposed sale of the business. At trial, the district court sustained wife’s attorney’s objection, for lack of disclosure, to Niggeling’s testimony and a schedule showing the tax effect of selling Al’s Cabinets, R.P.E., and Quality Kitchens. Wife’s attorney stated that, at Niggeling’s deposition, there was no indication that Niggeling would offer an opinion on the tax consequences of selling the businesses.
Although Niggeling was identified in advance as an expert, wife was prejudiced by not knowing in advance the contents of his opinion testimony. Therefore, the district court did not abuse its discretion by failing to allow, without prior notice to wife, his opinion on the tax consequences of selling the businesses, and did not abuse its discretion in denying a new trial.
Husband also argues that
the district court was required to receive an offer of proof of Niggeling’s
testimony stated on the record. But
because the rules of civil procedure do not specify a required form for an
offer of proof, the district court had discretion to receive a written exhibit
for that purpose. See
argues that the district court, in dividing marital property, abused its
discretion by failing to consider the tax consequences of his proposed sale of
the businesses. Whether to consider tax
consequences of a property distribution is discretionary with the district court. Maurer
v. Maurer, 623 N.W.2d 604, 607 (
The district court should
not consider tax consequences of a property division when to do so would force
it to speculate. Miller v. Miller, 352 N.W.2d 738, 744 (
Husband argues that the district court ignored credible evidence that he plans to sell the businesses to his 29-year-old son, who is currently a pilot making about $30,000 per year. Husband testified that he had plans to retire and that he was training his son to see if his son wanted to buy the businesses. But the record shows that the son currently owes his father $180,000, and husband testified that he had “no idea where [his son] is financially.” He testified that if his son did not wish to purchase the businesses, he would hire a broker to sell them in about a year, but he expressed concern about the percentage fee a broker would charge.
The district court found that “from [husband’s] testimony, it does not appear reasonably certain, or even probable, . . . that he will sell his business in the near term and incur the liability.” This finding is not clearly erroneous. On this record, when the evidence of imminent sale of the businesses is speculative, the district court did not abuse its discretion by declining to consider the tax consequences of a possible sale.
maintains that the district court abused its discretion by ordering the parties
to file a joint income-tax return for 2004 and to split equally any tax refund. Whether the parties to a dissolution must file
a joint tax return presents a question of property division, which falls within
the district court’s broad discretion. Theroux v. Boehmler, 410 N.W.2d 354, 356
Husband argues that because Niggeling was precluded from testifying about tax issues, the record contains no evidence on which to base a decision to order a joint return for 2004. But wife correctly points out that husband’s offer of proof on Niggeling’s testimony related only to the tax consequences of selling the businesses, rather than the financial implications of joint versus separate tax filing. The record contains copies of the parties’ previous tax returns, which were jointly filed. Ray Olsen, the CFO of Al’s Cabinets, testified that he was “waiting for direction from [the parties]” on whether they would file jointly or separately for 2004. Based on the parties’ historical pattern of filing joint tax returns, the district court did not abuse its discretion by ordering them to file joint returns for 2004.
Husband argues that the district court erred by including in the property division the proceeds of certain paychecks, totaling $173,504, which he spent before the dissolution valuation date on ordinary living expenses and to construct his new home. Husband maintains that (1) the proceeds from the checks represented income to him, not property; (2) the district court’s order amounted to “double-counting” because the value of his new home was included in the property division, and (3) the judgment improperly required him to share his income with wife when she was already receiving temporary maintenance.
“All property acquired by
either spouse subsequent to the marriage and before the valuation date is
presumed to be marital property.” Minn.
Stat. § 518.003, subd. 3b (2006). Even
if this court would have reached a different conclusion, the district court’s
division of property will be accepted if it has an acceptable basis in fact and
principle. Servin v. Servin, 345 N.W.2d 754, 758 (
Husband acknowledges that
the district court’s inclusion of the proceeds from husband’s paychecks
received before the valuation date was tied to the determination that the
parties would file joint tax returns for 2004 and share equally in the income
and tax liabilities for that year. To
that end, the district court also assigned to wife, as marital property, funds
from wife’s liquidation of the parties’
filed a notice of review, challenging the district court’s failure to reserve the
issue of maintenance. Whether to reserve jurisdiction over the
issue of maintenance is within the district court’s discretion.
Wife also filed a motion
for conduct-based appellate attorney fees.
has moved to strike approximately 200 pages of husband’s appendix on the ground
that the material contained in those pages is not part of the record on
appeal. The record on appeal is limited
to “[t]he papers filed in the [district] court, the exhibits, and the
transcript of the proceedings.”
Affirmed; motion to strike granted in part, denied in part; motion for fees denied.
Husband also asserts, in passing, three additional arguments: that the district
court abused its discretion by (1) allowing wife to submit trial exhibits not
timely disclosed, (2) determining the value of two assets based solely on
wife’s witness’s offer of proof, and (3) determining the cash value of the
parties’ frequent flier miles absent evidence in the record. He does not, however, support these arguments
with legal authority. An assignment of
error “based on mere assertion” and not supported by argument or authority is
waived “unless prejudicial error is obvious on mere inspection.” State
v. Modern Recycling, Inc., 558
N.W.2d 770, 772 (
Husband argues that because wife did not file a second notice of review after
the appeals were consolidated, she has only noticed review of the order denying
husband’s motion for amended findings or a new trial. Husband cites no authority for this
position. Minn. R. Civ. App. P. 106
does not condition the right to file a notice of review on the order being
appealable by respondent. Kostelnik v. Kostelnik, 367 N.W.2d 665, 669 (Minn.
App. 1985), review denied, (Minn.
July 26, 1985). The purpose of a notice
of review is to allow an appellate court to consider a matter already before it
in its entirety.