may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
STATE OF MINNESOTA
IN COURT OF APPEALS
In Re the Marriage of:
Leslie Stella Danielson, f/k/a
Leslie Stella Bauer, petitioner,
Danny Jay Danielson,
Filed January 19, 1999
Washington County District Court
File No. F0965984
Barbara J. May, 4105 N. Lexington Avenue, Suite 310, Arden Hills, MN 55126 (for respondent)
Gary L. Kujawski, 2202 Fifth Street, Suite 21A, White Bear Lake, MN 55110 (for appellant)
Considered and decided by Crippen, Presiding Judge, Willis, Judge, and Foley, Judge.[*]
Danny Jay Danielson appeals that portion of a dissolution judgment that denied him the award of a nonmarital interest in the parties' house. We affirm.
On April 22, 1991, before the parties' marriage, appellant bought a house for $97,270, financing the purchase with an $82,250 loan. He made an earnest money deposit of $1,000 and an additional cash payment of $16,567.51. While the parties dispute the source of these funds, there is no evidence that respondent Leslie Stella Danielson contributed directly to the cash down payment on the house.
Respondent moved into the house in late 1992, and the parties began the process of finishing the house, including work on the basement, garage, and yard. Both parties claim to have contributed substantially, both financially and in labor, to the finishing work. The evidence shows that at all relevant times, appellant made the mortgage payments on the house, while respondent paid other living expenses.
The parties were married on June 18, 1994, and continued to live together in the house until they separated on August 7, 1996. Respondent filed a dissolution petition on December 3, 1996.
By a judgment dated February 9, 1998, the district court dissolved the parties' marriage and found that appellant failed to meet his burden of establishing his claimed nonmarital interest in the house. This appeal followed.
Because appellant purchased the house before his marriage to respondent, he claims the district court erred in failing to award him a nonmarital interest in the property. "Whether property is marital or nonmarital is a question of law that this court may review with independent judgment." Swick v. Swick, 467 N.W.2d 328, 330 (Minn. App. 1991) (citing Johnson v. Johnson, 388 N.W.2d 47, 48-49 (Minn. App. 1986)), review denied (Minn. May 16, 1991). But this court must defer to the district court's underlying findings of fact, which will be set aside only if they are clearly erroneous. Id. (citing Minn. R. Civ. P. 52.01).
Nonmarital property includes all property acquired before marriage and the increase in value of that property. Minn. Stat. § 518.54, subd. 5(b), (c) (1998). But a party claiming a nonmarital interest in property "must prove the necessary underlying facts by a preponderance of the evidence." Wiegers v. Wiegers, 467 N.W.2d 342, 344 (Minn. App. 1991) (citing Johnson, 388 N.W.2d at 49). In addition, where nonmarital property is commingled with marital property, the nonmarital property must be readily traceable or it may lose that character. Id.
Appellant argues that his nonmarital interest in the house equals the proportion his cash down payment bore to the purchase price for the house, multiplied by the house's value at the date of the dissolution. See Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981) (using formula for determining nonmarital interest); see also Brown v. Brown, 316 N.W.2d 552, 553 (Minn. 1982) (applying Schmitz formula and holding that trial court erred in failing to account for distinction between marital and nonmarital character of homestead). Appellant thereby claims his nonmarital interest is $25,037.77 [$16,567.51 (cash down payment) / $97,270 (purchase price) x $147,000 (value at date of dissolution)]. Because there was approximately $27,000 in equity in the house at the date of dissolution, appellant's claimed nonmarital interest represents nearly all of the equity.
The district court found that because of the parties' substantial investment in finishing the house, it could not apportion marital and nonmarital interests. The increase in the property's value reflects, to an unknown extent, the parties' substantial efforts in finishing the house. Appreciation attributable to the parties' mutual contribution of time or money is "active appreciation," which is marital property. See Swick, 467 N.W.2d at 331 (distinguishing passive appreciation, which remains nonmarital property). Appellant did not present sufficient evidence to support an apportionment of the increase in the house's value between marital and nonmarital property.
The district court also found it impossible to apportion marital and nonmarital interests in the house because of the depletion of equity due to refinancing. The parties encumbered the house with a $40,000 second mortgage that reduced both their marital interests and any nonmarital interest of appellant. See Freking v. Freking, 479 N.W.2d 736, 740 (Minn. App. 1992) (stating that mortgage "reduced the values of the parties' marital and nonmarital interests"). Appellant offered no evidence regarding the apportionment of this reduction between the marital interests and his claimed nonmarital interest.
Finally, the district court found that there was no evidence of the property's value at the date of the parties' marriage. The Schmitz formula for apportioning marital and nonmarital interests, which appellant urges this court to apply, depends on three variables: (1) the amount of the nonmarital contribution; (2) the value of the property at the time of the marriage; and (3) the present value of the property. Andersen v. Andersen, 374 N.W.2d 499, 502 (Minn. App. 1985) (citing Schmitz, 309 N.W.2d at 750). Appellant paid $97,270 for the house on April 22, 1991, but he made no showing regarding the property's value at the date of parties' marriage.
In addition, appellant offered no clear evidence of the source of his cash down payment. While he testified that the funds came from his savings account, appellant provided no written documentation of the transaction, and the ultimate source of the funds is disputed by the parties. Proof of a nonmarital contribution is essential to appellant's claim. See Wiegers, 467 N.W.2d at 344 (stating that spouse claiming nonmarital property must prove underlying facts by preponderance of evidence); see also Gorz v. Gorz, 428 N.W.2d 839, 843 (Minn. App. 1988) (noting importance of documentary evidence in proving nonmarital contribution).
Because appellant did not meet his burden of establishing his claimed nonmarital interest in the house, the district court did not err in denying him the award of such an interest.
[*] Retired judge of the Minnesota Court of Appeals, serving by apointment pursuant to Minn. Const. art. VI, § 10.