This opinion will be unpublished and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

C6-99-1893

 

In Re the Marriage of:

Helen Joanne Hovelson, a/k/a

Helen Joanne Ostrem, petitioner,

Respondent,

 

vs.

 

William Christian Hovelson,

Appellant.

 

Filed May 30, 2000

Affirmed in part, reversed in part.

Anderson, Judge

 

Hennepin County District Court

File No. DW122754

 

Kevin J. McGrath, Rodney H. Jensen, Jensen & McGrath, P.L.L.P., 1100 Northland Plaza, 3800 West 80th Street, Bloomington, MN  55431 (for respondent)

 

John M. James, John C. James, 4530 IDS Center, 80 South Eighth Street, Minneapolis, MN  55402 (for appellant)

 

Edward M. Cohen, Jr., Cohen & Friedberg, Ltd., 3015 Ottawa Avenue South, Minneapolis, MN  55416 (court’s receiver)

 

           

            Considered and decided by Anderson, Presiding Judge, Schumacher, Judge, and Peterson, Judge.

U N P U B L I S H E D   O P I N I O N

ANDERSON, Judge

             Appellant challenges the resolution of multiple issues regarding the division of property as established by the findings of a court-appointed receiver in a marital dissolution action.  Appellant also challenges the post-decree appointment of the receiver.  Because the district court properly determined that appellant dissipated marital assets, and that a receiver was necessary post-decree, but miscalculated the amount of the dissipation, we affirm in part and reverse in part.      

FACTS

            In 1994, appellant William Hovelson (husband) and respondent Helen Hovelson (wife) separated after over 30 years of marriage.  Husband is a manufacturer’s representative with an average annual income of approximately $160,000.  Wife is a homemaker not employed outside the home.  During discovery husband refused to turn over certain financial documents and wife moved to compel discovery.  The court ordered husband to turn over the documents.  Although husband did provide some of the documents, wife suspected that husband was dissipating martial assets and made a motion to appoint an independent receiver to review the marital assets. 

            The district court appointed a receiver to investigate, account for, and protect the marital assets of the parties.  In addition, the court ordered husband to account for all income received after January 1, 1994.   In 1997, the receiver presented his findings to the court in a 37-page report.  The report detailed husband’s evasive financial practices and incomplete financial documents.  The receiver suspected husband of dissipating marital assets, filed a motion to sequester husband’s assets, and that motion was granted.  The receiver took control of the marital assets, paid wife $3,400 per month and paid husband $3,499 per month for reasonable monthly expenses.  

            The receiver’s final report stated that husband had earned approximately $800,000 from 1994 to 1998, and had dissipated between $120,000 and $180,000 in marital assets during that time.  In September 1999, the district court ordered husband to pay wife $3,400 per month in spousal maintenance, awarded wife $80,000 to equalize the property distribution, ordered husband to pay wife’s attorney fees, and ordered husband to pay the receiver's fees and costs.  In addition, the court ordered the receiver to continue to sequester husband’s finances to ensure the payment of maintenance, property settlement, attorney fees, and receiver costs.  

D E C I S I O N

Husband challenges the district court’s decision that he dissipated $180,000 in marital assets and the appointment of a receiver post decree.  The district court has broad discretion when determining the division of marital property.  Rutten v. Rutten, 347 N.W.2d 47, 50 (1984).  The reviewing court must affirm the district court decision if the decision has an acceptable basis in fact and principle.  Bollenbach v. Bollenbach, 285 Minn. 418, 426-27, 175 N.W.2d 148, 154 (1970).

 Specifically, husband claims that: (1) there is no evidence that he dissipated assets in contemplation of separation or dissolution; (2) there is no evidence that he inappropriately used marital assets; (3) all post-separation assets are non-marital property and not subject to review; (4) even if the post-separation assets are part of the marital estate, the district court erred in calculating the 1997 and 1998 dissipation; (5) the district court erred in charging his marital account with a $41,936 gift to his daughter; and (6) the district court improperly appointed a receiver post-decree.

I.

First, husband asserts that the record does not support a finding that he dissipated marital assets in contemplation of separation or dissolution.  Minn. Stat. § 518.58, subd. 1(a) (1998) states:

If the court finds that a party to a marriage, without consent of the other party, has in contemplation of commencing, or during the pendency of, the current dissolution, separation, or annulment proceeding, transferred, encumbered, concealed, or disposed of marital assets except in the usual course of business or for the necessities of life, the court shall compensate the other party by placing both parties in the same position that they would have been in had the transfer, encumbrance, concealment, or disposal not occurred.

 

The parties were separated in October 1994 but the court asked the receiver to review the parties’ assets back to January 1994.   Wife claimed that husband was dissipating assets in contemplation of their separation and dissolution during that time. 

During discovery, wife requested husband’s financial documents as far back as 1990; she repeatedly requested copies of husband’s tax returns, retirement benefit records, employment reimbursement information and other documents.  Husband continually refused to turn over the documents, and only turned over partial, inaccurate and disorganized records when the court ordered compliance with the discovery requests.  The district court inferred that husband was dissipating assets based on his refusal to obey the discovery order and his non-cooperation throughout the separation.   See Federated Mut. Inc. Co. v. Litchfield Precision Components, Inc., 456 N.W.2d 434, 436-37 (Minn. 1990) (noting that failure to produce evidence permits inference that evidence, if produced, would have been unfavorable); Baker v. Citizens State Bank of St. Louis Park, 349 N.W.2d 552, 558 (Minn. 1984) (the district court may draw inferences from circumstantial evidence).  The district court ordered the receiver to review documents only as far back as January 1994; this order is reasonable in light of husband’s non-compliance in providing documents as far back as 1990.

II.

Next, husband argues that the district court erred in finding that he dissipated assets.  “Dissipation is frivolous, unjustified spending of marital assets.”  Volesky v. Volesky, 412 N.W.2d 750, 752 (Minn. App. 1987).  If a party in a dissolution proceeding disposes of marital assets, the party shall be accountable for those assets unless the assets are justifiably consumed to meet necessities of life or in the usual course of business.  Minn. Stat. § 518.58, subd. 1a (1998). 

 Husband claims that he did not have a nefarious purpose in spending the parties’ money.  But section 518.58 does not require a nefarious purpose.  Rather, section 518.58 states that both parties to a dissolution action owe a fiduciary duty to one another for any profit or loss derived without the consent of the other pending the dissolution.  Minn. Stat. § 518.58, subd. 1a (1998).

There is extensive evidence that husband did not act as fiduciary for wife’s interests; for example (1) husband impeded wife’s attempt to investigate the parties’ financial affairs; (2) husband failed to disclose to the receiver, and presumably his wife, about the existence of an additional bank account; (3)  husband’s financial records were incomplete and often inaccurate; and (4) husband failed to file a 1994 tax return and the accuracy of his 1995, 1996 and 1997 returns is questionable.  In addition, there is evidence that husband wasted the parties’ assets prior to appointment of the receiver.  From 1994 through 1998 husband had an average net monthly income of nearly $10,000.^[1]  During the separation, husband paid wife $3,400 a month in maintenance and, it appears, spent the remainder of the net income, approximately $7,000, every month.  When the receiver sequestered husband’s assets in 1997 he denied husband’s request for a budget of $15,000 and allowed husband $3,499 per month for reasonable living and business expenses.  Husband did not request an increase in his monthly budget and was able to earn nearly $130,000.  The receiver reasoned that husband had been dissipating approximately $3,000 per month prior to the receivership based on husband’s current budget.^[2]

The record supports the district court’s finding that husband dissipated assets.  The disheveled state of husband’s financial records makes a more detailed analysis of husband’s finances difficult.  The district court’s estimate of $3,000 per month in dissipation is reasonable based on husband’s refusal to comply with court orders, his concealment of assets, and his ability to maintain his business on the receiver-appointed budget.

III.

Husband also asserts that income after the parties’ separation in October 1994 is a non-marital asset and therefore not subject to dissipation review.  The district court considered all assets through December 1998 as marital assets subject to equal distribution.  Husband argues that wife is not entitled to property after October 1994 because they were separated for an extended period.  See Batsell v. Batsell, 410 N.W.2d 14, 17 (Minn. App. 1987) (property acquired during an extended separation, 20 years, was not marital property under Minn. Stat. § 518.58), review denied (Minn. Sept. 30, 1987).  Unlike Batsell the parties in this case were only separated for five months before a dissolution petition was filed.  Although the dissolution took nearly five years to complete, the parties were continually pursuing the divorce and husband’s actions significantly contributed to the length of the proceedings.  For husband to now seek relief based on largely self-created delay is incongruous at best.  The district court did not abuse its discretion in finding that the parties accrued marital assets from October 1994 through December 1998.

IV.

Husband also asserts that the district court erred in finding that he dissipated assets after the receiver sequestered his income.  The receiver sequestered all of husband’s income beginning in October 1997.^[3]  From that income, the receiver paid $3,400 in monthly maintenance payments to wife and $3,499 to husband.  The remaining amount was charged against husband’s marital account for the next fourteen months as dissipated.  Husband argues that the district court erred by charging his marital account with $17,115.52 in dissipated assets, calculated from October 1997 through December 1998.  We agree. 

The receiver testified that husband did not dissipate any assets after October 1997.  Despite this testimony, the district court included the months of November 1997 through December 1998, an amount totaling $17,115.52, when calculating dissipation.  The district court does not explain why these months were included in the calculation.

The receiver had full control of husband’s income after October 1997, therefore, including the $17,115.52 in additional dissipated assets is an error and we reverse.

V.

            Bank records show that the parties’ daughter and her business, Office Services Center, were the recipients of over $50,000 from her father or her father’s business from 1994 through 1998.  The parties dispute whether the $50,000 was a loan or a gift.  Husband challenges the district court’s characterization of the $50,000 as a loan.

            The district court found that daughter contemplated the repayment of the entire $50,000 and treated the full unpaid balance as an account receivable.  Daughter testified that she repaid over $8,000 of the money.  Accounts receivable are marital property subject to division.  See Davey v. Davey,415 N.W.2d 84, 88 (Minn. App. 1987) review denied (Minn. Jan.20, 1988).  The record supports the district court’s finding that the $50,000 was an account receivable and also supports the distribution of the $41,936 balance.

VI.

            Finally, husband challenges the district court’s authority to maintain the appointment of the receiver post-decree.  In the September 1999 order, the district court ordered the receiver to continue to sequester husband’s assets to ensure the payment of maintenance, property settlement, attorney fees, and receiver costs.  The district court may appoint a receiver

 

by the judgment, or after judgment, to carry the same into effect, or to preserve the property pending an appeal, or when an execution has been returned unsatisfied and the judgment debtor refuses to apply property in satisfaction of the judgment

 

Minn. Stat. § 576.01, subd. 1(2) (1996).  The district court made the following findings in support of appointing a receiver in 1997: husband was suspected of hiding assets, was uncooperative, and refused to comply with court orders.  In addition, husband continued to be uncooperative after the receiver was appointed; husband concealed the existence of a bank account and repeatedly misrepresented his income to the receiver.  Husband’s history of financial misdealings and his continued attempt to conceal assets support the district court’s decision to maintain a post-decree receivership.  While a post-decree receivership is necessary here, we have serious reservations about a commitment to a long-term receivership and the high costs associated with the receivership.  The district court has a continuing obligation to provide oversight to the receiver and to consider whether the receivership continues to be necessary.

VII.

            Finally, we consider wife’s motion to strike husband’s supplemental appendix and section I of husband’s reply brief.  The appendix and the brief raise the issue of potential self-employment and Minnesota income tax liability for the first time on appeal.  A reply brief must be confined to matters raised in the brief of the respondent.  Minn. R. Civ. App. R. 128.02, subd. 3; see also State by Humphrey v. Ri-Mel, Inc., 417 N.W.2d 102, 110 (Minn. App. 1987) (explaining that a new issue raised in a reply brief “is not properly before this court and will not be considered”), review denied (Minn. Feb. 17, 1988).  Moreover, “[t]his court will grant a motion to strike material submitted in a party’s appendix when that material did not come before the trial court.”  Cressy v. Grassmann, 536 N.W.2d 39, 43 (Minn. App. 1995) (citation omitted), review denied (Minn. Sept. 28, 1995).  Husband’s claim of additional tax liability was not raised in district court, was not raised in his main brief, exceeded the scope of wife’s brief, and therefore is not properly before us.  Accordingly, we grant wife’s motion to strike husband’s supplemental appendix and section I of the reply brief.

            Affirmed in part, reversed in part.