This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
STATE OF MINNESOTA
IN COURT OF APPEALS
In re the Marriage of:
Patricia A. Jodsaas, n/k/a
Patricia A. Newton, petitioner,
Larry E. Jodsaas,
Filed October 10, 2007
Hennepin County District Court
File No. DW 270014
William R. Skolnick, Sean A. Shiff, Skolnick & Associates, P.A., 2100 Rand Tower, 527 Marquette Avenue South, Minneapolis, MN 55402 (for appellant)
A. Larry Katz, Brian L. Sobol, Susan A. Daudelin, Katz, Manka, Teplinsky, Due & Sobol, Ltd., 225 South Sixth Street, Suite 4150, Minneapolis, MN 55402 (for respondent)
Considered and decided by Willis, Presiding Judge; Minge, Judge; and Hudson, Judge.
U N P U B L I S H E D O P I N I O N
On appeal from a marital-dissolution judgment, appellant wife and respondent husband both challenge the district court’s division of assets related to the sale of husband’s company. We affirm in part, reverse in part, and remand.
Before appellant wife Patricia Newton and respondent husband Larry Jodsaas married in November 1990, husband worked at Control Data for approximately 26 years. In 1988, he was promoted to senior vice president and assigned to lead VTC, Inc., a division of Control Data. VTC manufactured computer-disc-drive components. On October 26, 1990, just before the parties married, husband and a business associate, Greg Peterson, purchased VTC from Control Data. Husband owned 80% of the company and Peterson owned 20%.
In 1994, husband and Peterson sold convertible debentures in VTC to TA Associates for $40 million. As a result of the sale, Peterson’s ownership interest in VTC increased to 24% and husband’s decreased to 76%. VTC’s employees were paid bonuses totaling $5 million.
In March 2000, Lucent Technologies purchased the technology and processes of VTC’s component-manufacturing business for approximately $100 million. As part of that transaction, TA Associates sold their debentures and received a portion of the $67 million in net sale proceeds. Husband received approximately $34,651,727. Peterson received $10,943,958. Husband and Peterson then paid VTC’s employees bonuses totaling approximately $16 million, and Peterson received a $1 million bonus. The district court found that the bonuses were paid “in recognition of their employees’ continued contribution to the success of VTC and based upon representations to the employees dating back to the early 1990’s that the employees would continue to share in the success of the company.”
In December 2000, husband and Peterson formed PolarFab, LLC, using the remaining assets of VTC, including its building and equipment. PolarFab manufactures circuits on silicon wafers, which the district court found to be “a distinct change from VTC’s business as a manufacturer of disc drive components.”
As part of the sale to Lucent, PolarFab agreed to manufacture at cost a specified number of circuit wafers for Agere Systems, a subsidiary of Lucent. A portion of the payments for the wafers went to TA and a bank. Because PolarFab did not receive all of the funds paid for the circuit wafers that were being sold “at cost,” the district court found that “this clause of the Lucent sales contract caused significant financial problems for PolarFab because the company produced wafers for Agere at a loss.” To fund PolarFab’s cash-flow shortages, husband contributed to PolarFab an installment payment that Lucent/Agere made to him and an additional $821,000. The district court found that “[t]hese capital contributions were necessary to keep PolarFab operating as an ongoing entity.” PolarFab’s accounting firm created a separate “preferential capital” account for such “capital contributions in excess of each owner’s capital account.” As of July 2005, husband’s preferential capital account was $13,796,008, and Peterson’s was $3,000,000.
In the summer of 2004, PolarFab started seeking new lines of credit or, alternatively, a buyer for the company. Ultimately, Sanken Electric Co. Ltd. purchased husband’s and Peterson’s interests in PolarFab for $83 million. PolarFab’s outstanding debts were paid, and husband and Peterson paid $8,447,401 in bonuses to employees, including a $1 million bonus to Peterson. Husband received approximately $3.7 million and Peterson received approximately $3.6 million. Because husband had earlier transferred 25% of the company’s ownership to Peterson, at the time of the sale, husband owned 51% of the company and Peterson owned 49%.
Husband and wife separated, and wife filed a petition for dissolution in August 2001. In a December 9, 2005 order, the district court divided most of the parties’ property—more than $70 million in assets—but reserved “[a]ll issues related to PolarFab LLC” and set those issues for trial. The December 9 order awarded each party half of the tax benefit from PolarFab’s net operating losses carried into and generated in 2004—noting that husband would use approximately $2,000,000 of the net-operating-loss balance in filing amended tax returns for 2001 and that any benefit realized would be divided equally between the parties when it was received.
After the trial, in an order dated March 7, 2006, the district court concluded that VTC and PolarFab were not entirely distinct entities and, therefore, wife had an equitable interest in PolarFab despite the fact that the “events which led to PolarFab’s success or failure occurred substantially after the parties separated.” But the district court also rejected wife’s arguments that husband had unlawfully dissipated assets during the dissolution proceeding by selling PolarFab to Sanken, by paying substantial bonuses to employees, or by conveying 25% of the ownership of PolarFab to Peterson under a “member control agreement.” The district court awarded wife $2 million as her equitable share of husband’s interest in PolarFab (which the court determined to be $3.7 million in sale proceeds and $598,727 in tax savings from the use of net operating losses) and the tax benefits derived from PolarFab’s losses; one-third of the proceeds that husband would receive when certain funds that were held in escrow after the sale were released; and $462,500 as her share of the tax benefits derived from husband’s use of PolarFab’s losses for 2001. The district court also directed each party to pay his or her own attorney fees.
The parties filed cross-motions for amended findings. The district court denied wife’s motion and granted husband’s motion in part, but denied it in part. The court’s amended judgment provides that wife should receive $1.95 million for her interest in PolarFab—the court reduced its valuation of husband’s interest in PolarFab to $3.7 million, noting that the tax savings had already been considered in the December 9 order. The amended judgment also provides that wife’s interest in the tax benefits that husband used in 2001 should be determined by an agreed-on neutral party rather than set at $462,500. Wife appeals, and husband has filed a notice of review.
D E C I S I O N
In dissolution matters, martial property is to be equitably divided between the parties. Minn. Stat. § 518.58, subd. 1 (2006). And a district court’s division of martial assets is a discretionary decision, which will not be set aside on appeal if it has a reasonable basis in fact and principle. Servin v. Servin, 345 N.W.2d 754, 758 (Minn. 1984); see Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984) (noting the extent of the district court’s discretion in dividing marital property).
I. Wife’s interest in PolarFab.
Husband challenges the district court’s award to wife of a share of the proceeds of the PolarFab sale. He concedes that both VTC and PolarFab were assets acquired during the marriage and therefore were marital assets, but he argues that he should be awarded all of the proceeds of the PolarFab sale because PolarFab was an entity distinct from VTC, because the PolarFab sale occurred after the parties separated, and because wife “did not make any personal contribution to the development or operation of PolarFab” while he risked most of his personal assets to keep PolarFab solvent.
When dividing marital property, a district court considers each party’s contribution to “the acquisition, preservation, depreciation or appreciation” of the “amount or value of the marital property, as well as the contribution of a spouse as a homemaker[,]” and it is “conclusively presumed that each spouse made a substantial contribution to the acquisition of income and property while they were living together as husband and wife.” Minn. Stat. § 518.58, subd. 1 (2006). Spouses who are living apart and independently are not living together as husband and wife and “equity allows courts to look at the respective contribution, or lack thereof, of each party to the acquisition of marital assets during the separation and take that into account when [dividing marital property].” Gummow v. Gummow, 375 N.W.2d 30, 36 (Minn. App. 1985).
A. PolarFab as a distinct entity.
Husband argues that under Antone v. Antone, 645 N.W.2d 96 (Minn. 2002), this court must conclude that VTC and PolarFab are distinct entities. But Antone is distinguishable for two reasons. First, while Antone, like this case, involved the formation of a new business after the termination of a prior business, Antone addressed whether the interest in the new business that was in the name of the husband was marital or nonmarital. Antone, 645 N.W.2d at 104-05. Here, however, husband candidly admits that the interest in the new business (PolarFab) was a marital asset, and the question is to what extent, if any, wife should receive a share of the proceeds from the sale of that asset. Thus, Antone addressed a legal question different from the issue here.
Second, the new business formed in Antone was formed with new capital. Antone, 645 N.W.2d at 105. PolarFab, however, was partially funded with payments from the sale of the marital interest in VTC. Further, here, the district court found that, while the “events which led to PolarFab’s success or failure occurred substantially after the parties separated[,]” PolarFab was not entirely separate from VTC because (1) PolarFab occupied VTC’s building; (2) Lucent’s purchase price for VTC was affected by PolarFab’s agreement to supply product to Lucent after the sale; and (3) after the Lucent sale, Lucent continued to make contingent payments to VTC’s principals, and some of those payments were invested in PolarFab. Thus, in addition to addressing a legal question not present in the current appeal, Antone is also factually distinguishable, and we conclude that Antone is not dispositive here.
B. Proceeds of sale of PolarFab.
Husband also argues that because of PolarFab’s financial failure, any “residual value” from VTC was lost and that any payment that was received for PolarFab in 2005 was the result of his post-separation efforts. In determining the extent of the marital interest in PolarFab that would be awarded to wife, the district court “weighed a number of factors,” including “the interest in finality in this high-conflict divorce[,]” the relationship between VTC and PolarFab, the benefit both parties received from VTC transactions in 1994 and 2000, the parties’ separation in 2001, the investment of Lucent contingency payments in PolarFab operations, the effort and expertise husband contributed to PolarFab after the parties’ separation, and the personal financial liability he assumed to PolarFab’s creditors. The district court’s findings on these matters are supported by the record and are not clearly erroneous under Minn. R. Civ. P. 52.01. Further, the district court explicitly acknowledged the unique nature of the parties’ circumstances when it determined that PolarFab is inextricably linked to VTC. The district court’s thoughtful analysis of this question is consistent with the supreme court’s observation that “each marital dissolution proceeding is unique and centers upon the individualized facts and circumstances of the parties,” and we will not disturb it. Dobrin v. Dobrin, 569 N.W.2d 199, 201 (Minn. 1997).
C. Clerical error.
Noting that wife was initially awarded less than half of the value of the marital interest in PolarFab, husband argues that the district court “made a clerical error” when it amended the judgment to award wife more than half of that martial interest. Cf. Miller v. Miller, 352 N.W.2d 738, 742 (Minn. 1984) (stating that, in the dissolution of long-term marriages, an equal division of martial property is presumptively equitable). While Minn. Stat. § 518.58 requires an equitable division of the parties’ marital property, the statute does not require an equal division. Crosby v. Crosby, 587 N.W.2d 292, 297 (Minn. App. 1998), review denied (Minn. Feb. 18, 1999). Therefore, an unequal division of the interest in PolarFab is not, by itself, an abuse of discretion. The memorandum accompanying the district court’s order amending the judgment, like the original judgment, makes clear that the division of the PolarFab interest “did not rely upon a mathematical formula, but instead [was the result of the district court’s consideration of] a number of factors.”
The district court’s balancing of case-specific factors is consistent with the unique nature of family-court proceedings, but the factors that the order amending the judgment recites as justifying an award to wife of more than half of the marital interest in PolarFab are the same factors that the original judgment recites as justifying an award to her of less than half. And the district court did not explain how its consideration of the same factors led it to a different result. In the absence of a more detailed explanation of the division of the marital interest in PolarFab, we decline to affirm on this issue and remand for the district court to reevaluate the division of the marital interest in PolarFab and to make any adjustment to the property division necessary to achieve the equitable distribution of marital property required by Minn. Stat. § 518.58, subd. 1. The district court shall support whatever division it makes with explanatory findings. On remand, the district court shall have discretion regarding whether to reopen the record.
II. Claimed wrongful disposition of assets.
Unless a party to a dissolution proceeding has the permission of the other party, that party must not, during the proceeding, transfer, encumber, conceal, or dispose of marital assets “except in the usual course of business or for the necessities of life[.]” Minn. Stat. § 518.58, subd. 1a (2006). Wife challenges the district court’s determination that husband did not violate this statute. She argues that he “dissipated” assets when he transferred 25% of the ownership interest in PolarFab to Peterson for insufficient consideration and back-dated the documents transferring the interest to make it appear that the transaction did not take place during the dissolution. Whether Minn. Stat. § 518.58, subd. 1a, is violated is a fact question. See Minn. Stat. § 518.58, subd. 1a (stating that “[i]f the court finds that a party to a marriage [violated the statute], the court shall compensate the other party . . .”). Therefore, we review the finding that husband did not violate the statute for clear error. Minn. R. Civ. P. 52.01.
The district court’s recitation of the facts underlying its finding that husband did not violate the statute thoroughly refutes wife’s argument. With regard to husband’s transfer to Peterson of part of husband’s interest in PolarFab, the district court explicitly found that “the transfer was effected for legitimate business reasons,” that the transfer was “not [intended] to dissipate the marital estate[,]” and that the “relation back” of the transfer’s effective date “was appropriate in all respects.” The district court also found that husband’s transfer to Peterson was a “long contemplated business transaction” that was completed in October 2002 but was legitimately backdated to 2000 because of “the structure of the business as a Subchapter S Corporation and the planning required before the transfer of the 25% interest could be effected.” These findings are supported both by the testimony of husband, who stated that the primary consideration for the transfer was Peterson’s increased responsibility in the company, and by the testimony of PolarFab’s accountant, who stated that husband received additional net operating losses from Peterson as additional consideration for the transfer. And although the district court’s findings reflect credibility determinations, we defer to those determinations. Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988). On this record, wife has not shown that the district court clearly erred in finding that husband transferred a portion of his PolarFab interest for legitimate business reasons. And wife has identified no support in the record or in caselaw for her assertion that the transfer was otherwise impermissible. Cf. Dep’t of Labor & Indus. v. Wintz Parcel Drivers, Inc., 558 N.W.2d 480, 480 (Minn. 1997) (stating that a party who inadequately briefs an argument waives that argument).
Wife also argues that she is statutorily entitled to compensation for husband’s wrongful disposition of assets because, instead of collecting all of the $13 million in preferential capital that PolarFab owed to him when the company was sold to Sanken, he joined Peterson in giving the employees $8,447,401 in bonuses. See Minn. Stat. § 518.58, subd. 1a (stating that if a party to a dissolution wrongfully disposes of assets, the district court “shall” compensate the other party); Minn. Stat. § 645.44, subd. 16 (2006) (stating that “‘[s]hall’ is mandatory”). The district court found that the bonuses paid to PolarFab’s employees affected the parties proportionately, that the successes and failures of VTC and PolarFab over the years depended on the organizations’ employees, that husband and Peterson had previously paid generous bonuses to their employees, and that the bonuses “though very generous were not inappropriate” or “outside the realm of good faith business conduct.” The district court ultimately found that husband’s actions were taken “in the usual course of business” and did not violate his fiduciary duty to wife under Minn. Stat. § 518.58, subd. 1a.
While wife argues that the payment of the bonuses was not in the usual course of business because it was not the “normal routine” of PolarFab to give such large bonuses, the district court found that the bonuses were not “outside the realm of good faith business conduct.” Whether a party acts in good faith is a credibility determination on which we defer to the district court. Tonka Tours, Inc. v. Chadima, 372 N.W.2d 723, 728 (Minn. 1985) (referring to good faith); Sefkow, 427 N.W.2d at 210 (referring to credibility). Further, the district court found that these bonuses were awarded at a time when husband and Peterson were relieved to be receiving any proceeds from a sale of the company. Thus, even if this record could support different findings, we conclude that wife has not shown that the district court’s findings are clearly erroneous. See Vangsness v. Vangsness, 607 N.W.2d 468, 474 (Minn. App. 2000) (stating that the record on appeal is viewed in the light most favorable to the district court’s findings and that the fact that the record “might support findings other than those made by the [district] court does not show that the court’s findings are defective”). We affirm the district court’s finding that husband did not violate Minn. Stat. § 518.58, subd. 1a.
III. Valuation of tax benefits.
Wife challenges the district court’s valuation of the tax benefits that husband received from the use of PolarFab operating losses in 2001, 2002, and 2003. Husband incorrectly argues that wife is engaging in an “impermissible collateral attack on the partial property settlement” recited in the December 9 order. Paragraph 12 of the December 9 order states: “PolarFab, LLC/Tax Benefit of Net Operating Losses Through 2003 – All issues related to PolarFab LLC are reserved and are set for trial on January 7 through January 19, 2006.” While the December 9 order does address net operating losses carried into 2004, the determination of net operating losses for 2001-03 was reserved for trial.
The valuation of an asset is a finding of fact, which will not be set aside on appeal unless it is clearly erroneous. Maurer v. Maurer, 623 N.W.2d 604, 606 (Minn. 2001). And a district court’s valuation need not be exact, as long as it “lies within a reasonable range of figures.” Johnson v. Johnson, 277 N.W.2d 208, 211 (Minn. 1979). Here, the December 9 order and the amended judgment both state that husband would claim $2 million of PolarFab’s net operating losses in his amended 2001 tax returns, and that if he realized tax savings arising from PolarFab’s remaining net operating losses that were carried into 2004 or from any net operating losses that were generated in 2004, husband must pay wife half of those tax savings. The March 7, 2006 order noted that husband’s amended 2001 returns actually claimed $4 million in net operating losses and awarded wife $462,500 to compensate her for the net operating losses husband claimed in excess of the $2 million contemplated in the December 9 order and the judgment.
While the amended judgment provides that “the value to [husband] of the additional $2,000,000 in net operating losses from 2001 should be determined by the parties’ agreed upon neutral, Stephen Dennis, and divided in the same manner as agreed upon by the parties for the 2004 loss carry forward,” the district court based its findings on written and oral testimony by the company’s accountant, which the district court specifically found to be credible. See Sefkow, 427 N.W.2d at 210 (requiring appellate court deference to district-court credibility determinations).
Wife claims that the finding is erroneous because the accountant, and therefore the district court, “neglected the tax savings for 2001.” Wife further argues that the accountant and the district court “failed to consider the tax benefits that resulted from husband offsetting his tax liability arising from the Lucent payments.” But wife provides no support for her assertion that consideration of such an offset is required. Cf. Wintz, 558 N.W.2d at 480. And the district court specifically provided for the valuation of the 2001 tax savings by a neutral party and the equal division of those savings. Thus, wife’s claim that the 2001 tax savings were “neglected” is not supported by the record. And the district court based its valuation of the 2002 and 2003 tax benefits on the analysis done by PolarFab’s accountant, which the district court determined to be credible. The valuation of the parties’ tax benefits was not clearly erroneous.
IV. Denial of attorney fees.
Finally, husband contends that the district court abused its discretion by not ordering wife to pay him conduct-based attorney fees under Minn. Stat. § 518.14, subd. 1 (2006), which allows attorney fees to be assessed against a party who unreasonably contributes to the length or expense of the litigation. We will not disturb a district court’s decision regarding conduct-based attorney fees absent an abuse of discretion. Sharp v. Bilbro, 614 N.W.2d 260, 264-65 (Minn. App. 2000), review denied (Minn. Sept. 26, 2000). Here, both parties sought conduct-based attorney fees in district court. And while the district court found that wife “unnecessarily extended the length and breadth of discovery and of these proceedings,” it also found both that husband “failed to produce, or to produce in a timely fashion, a number of important documents” and that “the parties’ misconduct offsets one another, and neither should receive conduct based attorney’s fees . . . .”
Husband argues that his delays in producing discovery were “appropriately explained,” that “there was no finding that ultimately any discovery was withheld,” and that any delays in discovery resulted in only minimal fees billed to appellant “as contrasted to at least $118,000 in fees incurred by respondent responding to baseless allegations of fraud.” The district court, however, specifically found that husband’s explanations for his failure to produce discovery were “without merit,” and the record does not show this finding to be clearly erroneous. Therefore, we conclude that the district court did not abuse its discretion by declining to award conduct-based attorney fees to either party.
Affirmed in part, reversed in part, and remanded.
 Wife cites cases and uses terminology predating the 1991 enactment of what is now Minn. Stat. § 518.58, subd. 1a (2006), which refers to the transfer, encumbrance, concealment or disposition of assets; pre-1991 cases (and some later cases that refer to pre-1991 cases) use the term “dissipation of assets.”