This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).

STATE OF MINNESOTA

IN COURT OF APPEALS

C8-98-1528

In re the Marriage of:

Karen Marie Mistelske, petitioner,

Respondent,

vs.

Charles Emerson Mistelske,

Appellant.

Filed May 25, 1999

Affirmed in part, reversed in part, and remanded; motion denied

Randall, Judge

Anoka County District Court

File No. F8-95-8282

Jeffrey P. Hicken, Jenson, Hicken & Scott, P.A., 2150 Third Avenue North, 300 Anoka Office Center, Anoka, MN 55303 (for respondent)

Louis M. Reidenberg, Ellen E. Barton, Reidenberg & Barton, P.L.L.P., 625 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402 (for appellant)

Considered and decided by Harten, Presiding Judge, Randall, Judge, and Huspeni, Judge.[*]

U N P U B L I S H E D O P I N I O N

RANDALL, Judge

Appellant challenges the district court's judgment and decree dissolving his marriage to respondent and challenges an order amending the judgment and decree. Appellant asserts that the district court erred in its designation of nonmarital and marital property and that it abused its discretion by (a) awarding respondent a portion of appellant's nonmarital property; (b) sequestering a portion of his property award; and (c) awarding respondent attorney fees. Respondent asserts that the district court abused its discretion by (a) awarding appellant a disproportionate share of the marital property; (b) refusing to sequester a portion of appellant's property, and (c) excluding a relocation award from the marital estate. Both parties request attorney fees on appeal. We affirm in part, reverse in part, and remand, and we deny both parties' requests for attorney fees.

FACTS

The parties, appellant Charles Emerson Mistelske and respondent Karen Marie Mistelske, were married in 1984 and had two children together. During their marriage, appellant was self-employed in the salvage business, and respondent was employed as a cook. The district court determined that respondent had a net monthly income of $283 and imputed a $6,000 net monthly income to appellant. The court also found that respondent and the two children had monthly expenses of $5,594 and that appellant had monthly expenses of $1,750.

Respondent petitioned for dissolution in July 1995, and the district court dissolved the parties' marriage on March 31, 1997. The district court awarded respondent sole legal and physical custody of the parties' children and ordered appellant to pay respondent $900 per month in permanent maintenance and $1,600 per month in child support. Respondent was additionally awarded the parties' unencumbered homestead and $100,000 in cash or equivalent property. Appellant was awarded the junkyard property; junkyard inventory, fixtures, and equipment; the remaining balance from proceeds received from the condemnation of another lot ("corner lot"); the inventory from the corner lot; and the $25,000 advance from nonmarital property he received before the judgment. Appellant's property award was reduced by the $100,000 the court directed him to give to respondent in cash or property and by $259,000 that the court ordered placed in a trust account for the purpose of paying past income taxes. The court also ordered appellant to pay respondent's attorney $40,000 in attorney fees and costs.

Both parties moved for a new trial or for amended findings of fact and conclusions of law. The district court denied the motions for a new trial and denied appellant's requests for substantive changes in the original findings and conclusions. The court also denied respondent's motion requesting a $350,000 trust fund to pay child support, maintenance, and health insurance premiums and refused to alter the property distribution. The court then ordered that $21,760 held in trust by appellant's former attorney be deposited with the court administrator and held as an interim trust to insure payment of child support, maintenance, health insurance premiums, and unreimbursed medical expenses. The district court further awarded appellant the relocation award from the city's condemnation action against the junkyard property after determining that respondent had no valid claim to that award. The court granted respondent's request for $5,000 in attorney fees for the posttrial motions.

D E C I S I O N

I. Nonmarital Property

This court exercises de novo review over whether property is designated marital or nonmarital. Johnson v. Johnson, 388 N.W.2d 47, 48-49 (Minn. App. 1986). An appellate court must defer to the district court's findings of fact, however, which can be overturned only if they are clearly erroneous. Id. at 48-49.

"A party seeking to establish the nonmarital character of an asset must do so by a preponderance of the evidence." Wopata v. Wopata, 498 N.W.2d 478, 484 (Minn. App. 1993) (citation omitted). If the value of nonmarital property is increased during a marriage as a result of one or both of the parties' efforts, that increase is marital property. Nardini v. Nardini, 414 N.W.2d 184, 192 (Minn. 1987). "[A]n increase in the value of nonmarital property attributable to inflation or to market forces or conditions, retains its nonmarital character." Id. In determining the present value of a nonmarital asset used to acquire marital property, the court should determine

the proportion the net equity or contribution at the time of acquisition bore to the value of the property at the time of purchase multiplied by the value of the property at the time of separation. The remainder of equity increase is characterized as marital property and is distributed according to Minn. Stat. § 518.58 (1980).

Brown v. Brown, 316 N.W.2d 552, 553 (Minn. 1982) (citing Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981)).

A. Homestead

Appellant purchased the homestead prior to the parties' marriage. He asserts that the property was worth approximately $35,000 on the date of marriage and that the parties made improvements during the marriage, increasing the value by 50%. He insists that the property is 66% marital and 34% nonmarital.

Despite appellant's assertion on appeal that the improvements to the property increased its value by 50%, there is no support in the record for this assertion other than his own testimony, which the district court specifically found not credible. See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating appellate courts must defer to district court's credibility determinations). As the district court determined, a large addition was added during the marriage, as well as almost all of the landscaping. Because appellant has not demonstrated what portion of the property represented appreciation from market forces, the district court did not err in refusing to rule that any portion of the property's increased value was nonmarital. See Scholle v. Scholle, 411 N.W.2d 912, 915 (Minn. App. 1987) (stating district court properly presumes growth of property is marital property if it is not shown that some portion of growth represents appreciation).

B. Corner Lot

Appellant notes that he owned the corner lot before the parties' marriage. He insists that because no improvements were made to the lot with marital property, the property is 100% nonmarital.

Appellant testified at trial that he paid $60,000 for the lot, but presented no other evidence of this purchase price. He testified that he did not know if he paid cash for the property or took out a loan. Appellant further did not establish whether the increase in value of the property was attributable to the parties' efforts during the marriage or merely to inflationary forces. Thus, the district court did not err in determining that only the $20,000 in construction materials appellant purchased before the marriage and placed on the lot was nonmarital property.

C. Junkyard Property

Appellant argues that he expended $62,000 purchasing the junkyard property and constructing two buildings on the property before the parties' marriage. He asserts that a total of $117,000 was invested in the property, of which 53% was nonmarital and 47% was marital.

Appellant testified that he paid $20,000 to $25,000 for the junkyard property. He did not testify regarding the cost for the two buildings he asserts were built on the property prior to the parties' marriage. Instead, he introduced copies of building permits listing $37,000 as the total value of the proposed buildings. Other than the building permits, which simply list the values of planned construction, appellant introduced no other evidence of the buildings' values. It was within the district court's discretion to discount the building-permit evidence. Additionally, appellant again failed to demonstrate what portion of any increase in the junkyard property's value stemmed from inflationary forces. Thus, the district court did not err in concluding that only the $22,500 that appellant initially invested in the property is nonmarital.[1]

D. Junkyard Inventory, Equipment, and Fixtures

Appellant next argues that the junkyard inventory and fixtures should have been labeled nonmarital because his business has remained essentially unchanged since the date of the marriage. He asserts that the court should have concluded that the inventory, fixtures, and equipment at the junkyard at the time of dissolution were acquired in exchange for similar items he owned prior to the marriage.

Here, outside of his own testimony and aerial photographs, appellant has introduced no evidence to establish what portion of the tangible property he owned prior to the marriage and has made no attempt to trace his nonmarital property. See Wopata, 498 N.W.2d at 484 (holding "to maintain its nonmarital character, nonmarital property must be kept separate from marital property or, if commingled, must be readily traceable" (citation omitted)). Thus, the district court did not err in concluding that appellant did not met his burden of tracing his nonmarital property. See Coffel v. Coffel, 400 N.W.2d 371, 374 (Minn. App. 1987) (stating party asserting current assets are traceable to nonmarital property has burden of proof).

II. Unfair Hardship

The court may award either spouse up to one-half of the other party's nonmarital property

[i]f the court finds that either spouse's resources or property, including the spouse's portion of the marital property * * *, are so inadequate as to work an unfair hardship, considering all relevant circumstances.

Minn. Stat. § 518.58, subd. 2 (1998). The district court has discretion in determining whether a party suffered unfair hardship justifying an award of a portion of the other party's nonmarital assets. See Johnson v. Johnson, 372 N.W.2d 832, 835 (Minn. App. 1985) (holding district court had discretion in determining whether party suffered unfair hardship justifying nonmarital asset award), review denied (Minn. Oct. 24, 1985).

The district court found that respondent deserved a portion of appellant's nonmarital property but, contrary to appellant's assertion, did not connect this finding with its conclusion that respondent would be awarded $100,000 in cash or its equivalent in property. The total marital portion of the parties' property, less $259,000 placed in trust for back taxes, equals approximately $1,090,900. Respondent was awarded the homestead, valued at $175,000, and $100,000 in cash or equivalent property, and appellant was awarded the remainder of the marital estate. Thus, the $100,000 awarded to respondent did not infringe on appellant's nonmarital property award. Rather, this amount was a portion of the marital estate.

III. Sequestration of Funds

A decision to sequester funds is within the district court's discretion. See Peterson v. Peterson, 304 Minn. 578, 580-81, 231 N.W.2d 85, 87 (1975) (holding district court's sequestration of savings account balance to insure future maintenance payments was within district court's discretion).

In all cases when maintenance or support payments are ordered, the court may require sufficient security to be given for the payment of them according to the terms of the order. Upon neglect or refusal to give security, or upon failure to pay the maintenance or support, the court may sequester the obligor's personal estate and the rents and profits of real estate of the obligor, and appoint a receiver of them.

Minn. Stat. § 518.24 (1998).

Here, the parties are seemingly confused over whether the district court sequestered funds. Appellant argues that the district court abused its discretion in its posttrial order by sequestering more than $350,000 to insure payment of maintenance and child support. Respondent asserts that the district court abused its discretion by refusing to sequester $350,000.

The record demonstrates that in its initial judgment and decree the district court did not place $350,000 in trust, as respondent requested. The district did order that $259,000 be placed in trust for payment of past income taxes. In a subsequent order on January 7, 1998, the court ordered that all non-relocation proceeds from the condemnation action involving the junkyard be deposited in a trust pending the outcome of the condemnation case. In its order amending the findings and conclusions, the court ordered that this trust would be continued. In the same order, the district court directed that $21,760 be held by the court administrator as an interim trust to insure payment of child support, maintenance, health insurance premiums, and unreimbursed medical expenses. The court stated that this was only an "interim trust" for the "remaining legal proceedings."

Appellant does not challenge the district court's decision to place $21,760 in a trust fund. Further, in light of appellant's past failure to pay child support and insurance premiums, the district court did not abuse its discretion by imposing this trust. Although respondent insists that the district court abused its discretion by refusing to establish a $350,000 trust to insure payment of child support, maintenance, insurance, and medical bills, it was within the district court's discretion to sequester a smaller amount.

IV. Property Award Disparity

The district court is given great deference in determining marital property distributions. Rohling v. Rohling, 379 N.W.2d 519, 522 (Minn. 1986). An appellate court will affirm the district court's decision "'if it has an acceptable basis in fact and principle even though we might have made a different disposition of the problem.'" Id.

(quoting Bollenbach v. Bollenbach, 285 Minn. 418, 426-27, 175 N.W.2d 148, 154 (1970)).

Respondent argues on appeal that the district court abused its discretion by awarding appellant a disproportionate share of the parties' marital property. Appellant asserts in his reply brief that the parties stipulated that he would receive the junkyard business.

Respondent's attorney stated immediately prior to trial:

I suppose the only thing we can stipulate to is [respondent and the children] will have continuing ownership of the homestead and that [appellant] will have continuing control of the business enterprise of the parties known as Commercial Auto Parts.

This statement alone does not evince an intent by respondent to stipulate that appellant would receive the junkyard property free of any interest respondent might have in the property. Even if the statement did demonstrate respondent's intent to enter into such a stipulation, the parties themselves did not orally agree on the record to a stipulation, and there is no written stipulation in the record. Further, the district court does not address such a stipulation in its judgment and decree; therefore, even if the parties did intend to stipulate, the court did not accept the stipulation. See Glorvigen v. Glorvigen, 438 N.W.2d 692, 697 (Minn. App. 1989) (recognizing stipulations are only advisory to the court).

The district court need not divide marital property equally. Crosby v. Crosby, 587 N.W.2d 292, 297 (Minn. App. 1998), review denied (Minn. Feb. 18, 1999). The division must be equitable, however. Minn. Stat. § 518.58, subd. 1 (1998). Here, the district court awarded respondent the homestead, valued at $175,000, and an additional $100,000. The court awarded appellant the junkyard property, inventory, and equipment and the lot and its inventory. His award was valued at approximately $1,227,398, less $259,000 placed in trust for payment of back taxes and respondent's $100,000 award. Of the total amount of property he received, only $77,500 was nonmarital property, and he previously received a $25,000 advance on this nonmarital property award. Thus, respondent received a marital property award of $275,000, while appellant received approximately $815,898 in marital property. The court provided no explanation for its decision to award respondent only 25% of the marital property. The district court abused its discretion by awarding appellant a disproportionate amount of the parties' marital property. We therefore reverse and remand the property division portion of the judgment. On remand, the district court shall (a) reopen the record to the extent necessary to receive information regarding condemnation-related changes in the status of the corner lot and junkyard properties occurring since entry of the original dissolution judgment; (b) have discretion to reopen the record regarding other marital property issues; (c) have discretion to reapportion marital property between the parties to achieve the equitable property distribution required by Minn. Stat. § 518.58, subd. 1; and (d) make findings addressing its resolution of the remanded issues.

V. Relocation Award Division

Whether property is marital or nonmarital is a question of law reviewed de novo on appeal. Johnson, 388 N.W.2d at 48-49. Respondent argues that the district court erred when it determined in its posttrial order that the $560,000 relocation award appellant received for the junkyard property was not marital property. Respondent cites no authority for her position other than Minn. Stat. § 518.54, subd. 5 (1998), which states that all property acquired by either spouse during the marriage is presumed to be marital property, absent a showing that the property is nonmarital.

A relocation award is an award designed to compensate a party for the expenses of relocating a property subject to a condemnation action. See 42 U.S.C. § 4622(a) (1994) (stating "actual reasonable expenses" will be awarded for moving displaced business); Minn. Stat. § 117.52 (1998) (stating when federal assistance not available, acquiring authority shall provide relocation assistance required by federal statute). Because monies received for relocation are expended for the cost of relocation, that award did not add to the value of the business for purposes of division of marital assets. On this record, the district court properly concluded that these funds were not property subject to the dissolution proceedings.

VI. District Court Attorney Fees

The district court awarded fees both because of respondent's needs and because of appellant's actions. The district court determined that respondent's attorney fees were necessary, that respondent could not afford to pay her attorney fees, and that appellant could afford the fees. See Minn. Stat. § 518.14, subd. 1 (1998) (stating attorney fees may be awarded if necessary for good-faith assertion of party's rights, party directed to pay has ability to pay, and party to whom fees awarded does not have ability to pay). The district court also found that appellant unreasonably contributed to the proceedings' length and expense by failing to appear at hearings and refusing to comply with court orders. See id. (stating need-based fee award does not preclude award based on party's contribution to proceedings' length and expense). We conclude the district court did not abuse its discretion by awarding respondent attorney fees based on need and on appellant's actions. See Korf v. Korf, 553 N.W.2d 706, 711 (Minn. App. 1996) (stating attorney fees award will not be reversed absent abuse of discretion by district court).

VII. Attorney Fees on Appeal

Respondent filed a separate motion requesting fees on appeal pursuant to Minn. Stat. § 518.14, subd. 1. Respondent states in her motion that she will devote a portion of her brief to addressing this issue. In her brief she states only that she is entitled to attorney fees and that "[t]he same economic basis for the award made at the trial court level exists for the appeal as well." Respondent has not provided this court with any information on her current income or expenses, and her failure to provide updated information precludes a need-based attorney fees award on appeal. See Gales v. Gales, 553 N.W.2d 416, 423 (Minn. 1996) (refusing to award need-based fees on appeal where party seeking fees did not provide court current income and expenses information).

In his reply brief, appellant requests attorney fees pursuant to Minn. Stat. § 549.211, subd. 2 (1998). Appellant has not made a separate motion for fees and, therefore, cannot recover fees under Minn. Stat. § 549.211. See Lucio v. School Bd. of Indep. Sch. Dist. No. 625, 574 N.W.2d 737, 743 (Minn. App. 1998) (refusing to award fees under section 549.211 where party failed to make proper motion), review denied (Minn. Apr. 30, 1998).

Affirmed in part, reversed in part, and remanded; motion denied.

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

[1] Appellant also insists that the district court abused its discretion by failing to consider the capital gains tax he will have to pay if he does not reinvest the condemnation award from the junkyard property. In Reynolds v. Reynolds, 498 N.W.2d 266, 271 (Minn. App. 1993), this court determined that capital gains tax should have been considered in dividing marital property where foreclosure was pending against an apartment owned by the parties. Here, however, although the junkyard has been condemned, appellant has demonstrated that he intends to reinvest the condemnation award after relocating, as evidenced by his receipt of relocation funds.