may not be cited except as provided by
Minn. Stat.§ 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
In Re the Marriage of:
Denae Larson, petitioner,
Owen Neil Larson,
Filed May 27, 1997
Affirmed in part, reversed and remanded in part.
Polk County District Court
File No. F9-94-230
Shirley A. Dvorak, Moosebrugger, Dvorak & Carter, P.L.L.P., 219 South Third Street, P.O. Box 5159, Grand Forks, ND 58206-5159 (for Appellant)
Scott D. Jensen, Camrud, Maddock, Olson & Larson, Ltd., 500 First National Bank Building, 322 DeMers Avenue, P.O. Box 5849, Grand Forks, ND 58206-5849 (for Respondent)
Considered and decided by Harten, Presiding Judge, Short, Judge, and Mansur, Judge.
Appellant challenges the district court's division of the parties' marital estate. We hold the district court properly relied upon testimony in arriving at the status of property, and therefore properly divided the marital estate. We also hold that the district court abused its discretion when it did not include respondent's reasonable business expenses during calculation of his child support obligation, and in denying appellant's prayer for reasonable attorney fees resulting from her motion to enforce the dissolution agreement. We affirm in part, reverse in part, and remand in part.
After dissolution, the couple's three children were placed in appellant's custody. Appellant was also awarded $18,000 per year in child support, $22,413.26 per year in alimony, in addition to an award of $198,713 in personal assets, and $314,000 in business assets. The court awarded respondent $217,759 in personal assets, $395,846 in nonmarital assets, and $314,000 in business assets. The single largest asset the parties had was 272 shares of American Crystal Sugar gifted to them by respondent's father. The shares have grown in value since the parties first obtained them; presently, each share is worth approximately $2,000. The district court determined that the stock came into appellant's possession in two different contributions from respondent's father: the first in 1982 (44 shares), the second in 1984 (136 shares). Appellant later bought 20 shares which, after a stock split and a reverse stock split, as well as an additional purchase of 20 shares, brought the final number to 272 shares. The district court determined the 1982 contribution was a gift and that the 1984 contribution was part sale and part gift. The district court based its determination on the testimony of respondent and his father. Appellant now appeals, claiming that the district court erred in (1) classifying 182.923 shares of stock as nonmarital; (2) failing to award appellant half of respondent's marital property; (3) determining child support; (4) failing to require respondent to place obligatory payments in an escrow account; and (5) failing to award appellant attorney fees.
Appellant argues that the shares made available to respondent in 1982 were not gifted to him. All property acquired during marriage is presumed to be marital property. Minn. Stat. § 518.54, subd. 5 (1994). When one spouse acquires property by gift, bequest, devise or inheritance from a third party, it is specifically designated as nonmarital property. Minn. Stat. § 518.54, subd. 5(a) (1994).
Appellant argues that respondent failed to prove the nonmarital status of the property because the evidence presented was testimonial. She cites Gorz v. Gorz, 428 N.W.2d 839 (Minn. App. 1988), for the premise that testimony alone is not adequate evidence to substantiate a finding by the court that a gift was made. This reading of Gorz is too narrow. In Gorz, this court held
428 N.W.2d at 843 (emphasis added). Gorz does not indicate that documentary evidence is the only acceptable form of evidence to prove nonmarital property. In fact, Gorz includes mention of otherwise proving nonmarital status. In addition, the Gorz court was affirming the district court's determination, while in the instant case, appellant asks this court to reverse the district court's determination.
In the instant case, there is adequate evidence on the record which would tend to support appellant's claim that the stock was a gift. During the hearing, Elmer Larson stated:
That was those 44 shares, I guess, that I gifted to [Owen]. He--that's before I quit farming. It was a gift that he could start with.
The district court relied on this testimonial evidence to conclude that the 1982 transfer was a gift. We recognize testimony as well as documents for its tendency to prove the existence or nonexistence of a fact. Therefore, it was not an abuse of the district court's discretion to find that testimony conclusively established that the stock contribution was a gift.
Appellant argues that the 1984 contribution was not meant to be a gift. Instead, she contends that it was meant to be compensation for work done by respondent. A transfer of property made during marriage intended as compensation or payment is considered marital property. Campion v. Campion, 385 N.W.2d 1, 5 (Minn. App. 1986).
During the trial, Elmer Larson testified with regard to the employment relationship between him and his son.
Q. Did he work for you from '82 to '84?
A. Well, yeah, he was still working, but that beet stock was that income from those beets was what he was working for.
The record reveals that respondent's compensation for working for his father was to be obtained from the price the crop would get on the market, not the benefits derived from the stock contribution. The district court did not abuse its discretion by failing to conclude that the 1984 contribution was compensatory. Appellant claims that the 1984 contribution resulted in the creation of marital property. The record shows that there was a sale agreement in existence between Owen and Elmer Larson. The agreement sets out the conditions of a sale where Elmer Larson was to sell 136 shares in beet stock for $17,680, which in today's market would be representative of the market price for 39.29 shares of beet stock. The district court found that 96.71 shares were gifted, and 39.29 shares were marital property. The record substantiates this arrangement.
Q. Tell me about the first gift of beet stock that you made to Owen?
A. That was those 44 shares, I guess, that I gifted to [Owen]. He--that's before I quit farming. It was a gift that he could start with. Then, when I quit, I gifted--I had to gift some because I wanted to sell it to him cheaper than what the going price was. So I charged him what I paid, then he--I gifted everything between what I paid and what the going price was.
The testimony regarding the terms of the 1984 stock sale clarified the intentions of that agreement. Because a portion of the stock was bought with marital funds, and another part was intended as a gift free of cost, we hold that the district court did not abuse its discretion by assigning marital status to the stock involved in the sale, and nonmarital status to the portion given without cost.
Appellant alternatively argues that the beet stock (all 272 shares) lost its nonmarital status because appellant used it to secure a line of credit for OLF Corp. In Minnesota, tracing of an asset to a nonmarital source is required when the owner shows by a preponderance of the evidence that the asset was acquired in exchange for nonmarital property. Kottke v. Kottke, 353 N.W.2d 633, 636 (Minn. App. 1984), review denied (Minn. Dec. 20, 1984). Minnesota law dictates that nonmarital property is property real or personal, acquired by either spouse before, during, or after the existence of their marriage, which
(a) is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse;
* * * *
(c) is acquired in exchange for * * * property which is described in clauses (a), (d), and (e).
Minn. Stat. § 518.54, subd. 5(a)(c) (1994).
Appellant relies upon Pettit v. Pettit, 472 N.W.2d 668 (Minn. App. 1991), in support of her argument that respondent's use of the shares of stock as collateral for a line of credit has removed its nonmarital property status. In Pettit, the respondent used his inheritance to pay a farm indebtedness. Pettit, 472 N.W.2d at 670. This court found that this payment was traceable to the nonmarital funds; however, this court also found that the payment was not an exchange made to acquire property. As a result, this court held that where part of a nonmarital inheritance is used to pay off an unsecured loan, proceeds of which were used in operating the farm as distinguished from acquiring property, the portion of inheritance used to pay off the loan did not qualify as nonmarital property.
The immediate case is distinguishable. The party in Pettit actually used the nonmarital property to pay a debt. After the payment, the obligor's interest was changed from cash (the inheritance) to a secured payment on the debt. A payment is not property under the statute. Said another way, payment in full is not a property interest, therefore, it may not attain nonmarital status. In the instant case, appellant has used the property (the stock) to secure a line of credit. While it is true that, as in Pettit, no property was acquired, in this case respondent still has ownership of the stock. Therefore, and most importantly, the relevant portion of the stock retains its status as respondent's nonmarital property. There was no abuse of discretion.
Next, appellant claims that the increase in value of the stock is marital, even if the stock itself is nonmarital. The record shows that in 1984 the stock had a market value of $450 per share. Currently, that same stock is worth $2,000 per share. Appellant argues that the rise in the value of American Crystal Sugar stock is due to the labor of its individual members, which includes her own labor on their farm. We do not agree.
[I]ncreases in the value of non-marital 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 non-marital property attributable to inflation or market forces or conditions, retains its non-marital character.
Nardini v. Nardini, 414 N.W.2d 184, 192 (Minn. 1987). Appellant argues that respondent, as a member of the cooperative, and she, as his spouse, put time and effort into the business of the cooperative, thereby helping it to prosper. However, as appellant notes, respondent's failure to do his work would not have affected the rise in the value of the stock as there are so many other members of the cooperative. The value of the stock results from the fluctuations of the market and therefore the district court did not abuse its discretion by determining the increase in value was nonmarital property.
Appellant argues that the district court abused its discretion when it failed to invade respondent's nonmarital property award to make a more equitable division of property. Appellant asserts that because her award is less than respondent's, an unfair hardship has resulted. This argument is unpersuasive.
Minnesota law requires the district court to make a just and equitable division of marital property. Minn. Stat. § 518.58, subd. 1 (1994). An equitable division of marital property, however, is not necessarily an equal division. Riley v. Riley, 369 N.W.2d 40, 43 (Minn. App. 1985), review denied (Minn. Aug. 29, 1985). A very severe disparity between the parties is required to sustain a finding of unfair hardship necessary to apportion nonmarital property. Ward v. Ward, 453 N.W.2d 729, 733 (Minn. App. 1990), review denied (Minn. June 6, 1990). A district court is authorized to apportion up to one-half of nonmarital property when either spouse's resources or property, including the marital property awarded the spouse, are so inadequate as to work an unfair hardship. Minn. Stat. § 518.58, subd. 2 (1994). "It is an unusual case where nonmarital property is distributed." Dammann v. Dammann, 351 N.W.2d 651, 653 (Minn. App. 1984).
Here, the record shows that appellant was awarded a fair amount of the couple's marital assets as well as a fair amount of the farm assets. Appellant was awarded approximately $314,000 in business assets and $198,713 in personal assets. Respondent, on the other hand, was awarded $217,759 in personal assets, $395,846 in nonmarital assets, and $314,000 in business assets. In addition, appellant has a two-year associates degree in nursing and is currently a registered nurse, and she earns approximately $35,000 per year. Appellant's situation, resulting from the award, is far from an unfair hardship situation. Appellant's employability and financial situation, due in part to the dissolution agreement, are such that there is no indication that she will have difficulties supporting herself and her children. The district court therefore did not abuse its discretion.
Respondent claims the $19,700 he pays in land rent and the $1,867.78 he incurs in buying out appellant's interest in the farm assets are business expenses and must be included in the court's calculation of net income. We agree in part.
The expenses incurred from the payment of land rent are at the very core of respondent's business. Without the use of the rented land respondent would be unable to carry on the normal operation of his business. We feel that these expenses, therefore, are directly connected to income generation. See Larson v. Larson, 408 N.W.2d 612, 616-17 (Minn. App. 1987) (holding district court erred when it failed to consider farm expenses, including renting of land, in determining net income), review denied (Minn. Aug. 19, 1987). On the other hand, the same may not be said for the expenses he incurs when buying out appellant's interest in the farm assets. Thus, we hold the district court erred in not including respondent's land rent payments in its calculation of his net income. In so doing we remand, directing the district court to calculate appellant's child support obligation in a manner consistent with this opinion.
Here, there is no evidence that respondent has instigated tactics with the intent to delay or prolong the litigation. While there is evidence that appellant made one motion with respect to the terms of the order, this one instance alone does not put this matter on a comparable basis with cases like Ferrar, and therefore the district court did not abuse its discretion when it refused to award appellant attorney fees.
Appellant also asks for an award of attorney fees in relation to this appeal. As noted above, there is nothing in the record that would establish that appellant is unable to pay her own legal fees. She is gainfully employed, and she is receiving a substantial maintenance award. Legal fees need not be awarded to appellant with respect to this appeal.
Affirmed in part, reversed and remanded in part.
[ ]* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
[ ]1 Respondent is the sole stockholder of Owen Larson Farms, Inc., a subchapter S corporation.