This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C4-02-253

 

In re:

Brian Brockway, petitioner,

Respondent,

 

vs.

 

Janet Rae Brockway,

Appellant.

 

Filed August 13, 2002

Affirmed

Randall, Judge

 

Ramsey County District Court

File No. F6-99-464

 

 

Daniel J. Goldberg, Messerli & Kramer, P.A., 1800 Fifth Street Towers, 150 South Fifth Street, Minneapolis, MN 55402 (for appellant)

 

Alan C. Eidsness, Lisa T. Spencer, Henson & Efron, P.A., 1200 Title Insurance Building, 400 Second Avenue South, Minneapolis, MN 55401 (for respondent)

 

 

            Considered and decided by Randall, Presiding Judge, Stoneburner, Judge, and, Foley, Judge.*

 

U N P U B L I S H E D   O P I N I O N

R. A. RANDALL, Judge

 

            Appellant challenges the district court’s denial of her motion to reopen the dissolution judgment and decree under Minn. Stat. § 518.145, subd. 2 (2000), arguing that she proved fraudulent nondisclosure by respondent, mistake by the business appraiser, and newly discovered evidence materially impacting stock value.  Appellant also argues that the district court erred by adopting, verbatim, respondent’s proposed findings and that the district court abused its discretion in denying her request for attorney fees.  Because the district court’s findings are supported by the record, and because we find no abuse of discretion, we affirm. 

FACTS

 

            This appeal arises out of the dissolution of the 21-year marriage of appellant Janet Rae Brockway and respondent Brian Patrick Brockway.  Respondent is the founder and, at the time of trial, was a 51% shareholder in Data Sciences International (DSI), holding 8,819,910 shares of DSI stock.  During the five-day dissolution trial, the parties contested the value of the DSI stock. 

            DSI manufactures tiny electronic implants that are designed to be inserted into the body and transmit data about vital body functions.  DSI sells the implants for use in laboratory animals.  The Food and Drug Administration has not approved use of such devises in humans.  The parties agree that if these devises were approved for use in humans, the value of the company would be significantly higher. 

            The parties retained Patrick Schmidt, the director of valuation services at an accounting firm, to conduct a neutral appraisal of DSI.  Using December 31, 1997, as the valuation date, Schmidt determined that the value of the DSI stock was $.36 per share.  Appellant requested an updated valuation as of the pretrial hearing date, June 24, 1999, pursuant to Minn. Stat. § 518.58, subd. 1 (2000), which provides that the pretrial hearing date is the appropriate valuation date unless the court finds that a different date is fair and equitable.  The parties agreed to use the end-of-the-month date of June 30, 1999, as the evaluation date, and the court so ordered.  Schmidt revalued DSI’s stock as of June 30, 1999, and concluded that the stock was worth $.26 per share. This decreased the total value of respondent’s shares from $3,175,167.60 to $2,293,176.60, decreasing appellants’ share by $440,996.

            At trial, Schmidt explained in detail his methodology and valuation.  Appellant called Daniel Roach, a business valuation consultant, to attack Schmidt’s valuation. Roach argued that Schmidt’s valuation failed to adjust or normalize earnings to reflect the value of DSI’s research and development, patents, and other intangible assets.  Respondent then called Stephen Dennis, who is a lawyer, CPA, and accredited in business valuations, to rebut Roach’s testimony. 

            In the district court’s August 22, 2000, findings of fact, conclusions of law, and judgment and decree, the court found that on June 30, 1999, DSI’s stock was worth $.26. The court concurred with respondent’s rebuttal witness, Dennis, who concluded that Schmidt’s valuation was consistent with generally accepted accounting practices and that Schmidt “applied appropriate methodologies that should adequately and accurately capture the total equity value of DSI.” 

            The record reveals various stock and stock-related transactions that occurred after the June 30, 1999, valuation date.  In September 1999, before trial, respondent sold 55,000 shares of DSI stock at $.36 per share.  In November 1999, before the trial concluded, DSI’s board of directors established $.36 per share as the appropriate value to use in the company’s stock transactions for the coming year.  On October 3, 2000, after the entry of the judgment and decree, respondent signed a memorandum of intent to sell 500,000 shares of DSI at $.40 per share.  In June 2001, DSI redeemed 400,000 of respondent’s shares at $.425 per share, and respondent sold 300,000 shares at $.50 per share.  In August 2001, respondent sold 100,000 shares at $.50 per share. 

            Before entry of the judgment and decree, several events occurred, which appellant alleges affected on DSI’s stock price.  First, in early 2000, a medical company announced a ten-year plan to incorporate electronic implants as part of its growth strategy.  Respondent stated that if a major medical company was behind the technology, it would create credibility for the technology.  Second, by January of 2000, respondent realized that DSI was having higher revenues than previous years.  Third, in March or April 2000, DSI’s strategic-planning consultant advised DSI that its market was larger than previously thought.  Fourth, respondent acknowledged that in the summer of 2000, the first major medical IPO in years occurred, and “a number of articles in the popular press as well as the investment press * * * said that Med-Tech was coming back into favor with investors for the first time in many years.”  Fifth, in April 2000, DSI received an e-mail from its overseas distributor that discussed how it appeared that the pharmaceutical industry was planning to standardize the use of telemetry for monitoring laboratory animals in preclinical research, which would be positive for DSI because DSI has a 90% market share of the telemetry that is sold to pharmaceutical companies. 

            The district court denied appellant’s motion to amend the findings and conclusions, and, in March 2001, appellant moved to reopen the judgment and decree, arguing that the judgment should be reopened or vacated under Minn. Stat. § 518.145, subd. 2 (2000) for reasons of fraudulent nondisclosure by respondent, mistake by the business appraiser, and newly discovered evidence materially impacting stock values.  In December 2001, the district court denied appellant’s motion.  This appeal follows.   

D E C I S I O N

 

I.   Reopening the Judgment and Decree

 

            A court may relieve a party from a judgment and decree, order, or proceeding for

(1)              mistake, inadvertence, surprise, or excusable neglect;

(2)              newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under the rules of civil procedure, rule 59.03; [or]

(3)              fraud, whether denominated intrinsic or extrinsic, misrepresentation, or other misconduct of an adverse party[.]

 

Minn. Stat. § 518.145, subd. 2 (2000).  The district court’s decision refusing to reopen a judgment “will not be disturbed absent an abuse of discretion.”  Kornberg v. Kornberg, 542 N.W.2d 379, 386 (Minn. 1996) (citations omitted).  An appellate court will affirm a district court’s findings of fact on the question of whether the judgment was prompted by fraud, duress or mistake unless such findings are clearly erroneous.  Hestekin v. Hestekin, 587 N.W.2d 308, 310 (Minn. App. 1998). 

            A.  Fraud

            Appellant contends that the district court abused its discretion by denying her motion to reopen the judgment because respondent failed to disclose material information occurring before entry of the judgment and decree, namely that  (1) respondent sold stock at $.40 per share six weeks after entry of the decree; (2) respondent was aware before the conclusion of trial that the value of the DSI stock was increasing; (3) respondent’s counsel stated in his proposed findings that the company was “struggling more that it had before and it was continuing to decline” when respondent knew of favorable changes; and (4) the amount at issue is material.  We disagree. 

            “[P]arties to a marriage dissolution have a duty to disclose all assets and liabilities completely and accurately,” and, thus, ordinary fraud does not require an affirmative misrepresentation or an intentional course of concealment.  Doering v. Doering, 629 N.W.2d 124, 130 (Minn. App. 2001), review denied (Minn. Sept. 11, 2001).  But to maintain an action for fraud, the nondisclosed information must be material.  See id.  (concluding that husband presented evidence that wife failed to disclose material facts about her assets). 

            Here, the record shows that respondent did not notify appellant of the various events occurring after the valuation date but before entry of the judgment and decree including the medical company’s announcement, the e-mail from overseas distributor, and the strategic planning consultant’s conclusions.  But the district court found that “the events in question that occurred subsequent to the June 30, 1999 valuation date were mere unforeseen circumstances, or changes in known circumstances with only a speculative effect and that these events did not warrant disclosure, and do not now warrant reopening of the Judgment and Decree.”  The district court found that the medical company’s announcement “may have been encouraging,” but “it had only a minimal effect, if any, on DSI stock,” noting that DSI received discouraging information from two of the medical company’s competitors.  The court specifically found that the medical company’s announcement “had no material effect on the value of DSI” as of the valuation date or the date of entry of the judgment and decree.  With respect to DSI’s strategic planner’s conclusions, the district court found that the development was “speculative and would not have a significant impact” on either the June 30, 1999 valuation date or the date of entry of the judgment and decree and that “speculating that the research business may potentially be greater than previously thought is not material so as to warrant reopening” of the judgment and decree.  Regarding the e-mail from DSI’s distributor, the district court found that it would “not have a material impact on the June 30, 1999 valuation date” or the date of entry of the judgment and decree, noting that the distributor’s announcement “did not have any significant effect on DSI’s overall sales” for 2000 and that DSI’s sales for the first three quarters of 2000 were close to target.  These findings are based on evidence in the record and are not clearly erroneous. 

            Appellant does not allege that respondent failed to disclose any information before the valuation date.  We do note that the duty to disclose assets “extends to the time the decree is entered.”  Ronnkvist v. Ronnkvist, 331 N.W.2d 764, 765-66 (Minn. 1983).  But the district court “is required to value marital assets for the purposes of division between the parties as of the day of the initially scheduled prehearing conference unless the parties agree to a different date or the trial court makes a specific finding that another date is fair and equitable.”[1]  Wopata v. Wopata, 498 N.W.2d 478, 485 (Minn. App. 1993) (citing Minn. Stat. § 518.58, subd. 1 (Supp. 1991)).  The district court’s findings of fact and conclusions of law are a correct statement of the record and the law.  This is not to say that all post-valuation date information need not be disclosed.  Minn. Stat. § 518.58, subd. 1 (2000), provides that “[i]f there is a substantial change in value of an asset between the date of valuation and the final distribution, the court may adjust the valuation of that asset as necessary to effect an equitable distribution.”  (Emphasis added).  Here, the district court’s findings that the events were not material support its conclusion that the events did not have a substantial change in the value of the DSI stock.  

            Appellant also asserts that events occurring after entry of the judgment and decree should be considered in establishing DSI’s stock’s value, namely that respondent sold shares for $.40 six weeks after entry of the judgment and decree.  But the proper inquiry is to the value on the valuation date, unless pursuant to Minn. Stat. § 518.58, subd. 1, appellant can establish “a substantial change in value of an asset between the date of valuation and the final distribution,” upon which the could has discretion to adjust the valuation of that asset.  Here, the district court declined to exercise such discretion.  The district court denied appellant’s motion to amend the findings and denied her motion to reopen the judgment.  Notably, appellant has not produced any business valuation that would state that the value of DSI as of August 22, 2000, the date of the entry of the judgment and decree, was $.36, $.40, or any other amount.  Additionally, although appellant asserts that the change in the stock’s value was material, we note that unlike publicly traded stocks where values are reported daily, closely-held shares can move around, seemingly high on a percentage basis ($.30 stock going up or down $.07 or $.08 “looks like” a huge move), but the reason for changes are hard to pinpoint, and are hard to tie to a specific date because price changes may be reported only at the time of infrequent stock sales.  Further, because there is no true liquidity in the stock (as opposed to the three national exchanges where buyers and sellers are always available), a nickel or dime change in the price of a reported sale may be due to nothing more than an owner wanting to sell some for any price available or a buyer may desire to get some for whatever price has to be paid.  Put another way, closely-held shares are priced most often to “hopes about the future” as opposed to the three major stock exchanges where willing buyers and willing sellers determine prices on a daily basis.

            Here, the district court made exhaustive findings.  The fact that DSI’s price increased by $.10 between June and September of 1999, and an additional $.04 by October of 2000, does not change our analysis that the district court properly addressed valuation.

            We reject appellant’s contention that respondent committed fraud because respondent’s counsel stated in his proposed findings that the company was “struggling more that it had before and it was continuing to decline” when respondent knew of favorable changes.  Whether or not the potential favorable changes impacted the company to the extent that made counsel’s statement was untrue is a question of fact.  The district court specifically found the subsequent information to be immaterial, and because there is evidence in the record to support this finding, it is not clearly erroneous. 

            Because the evidence supports the district court’s finding, we conclude that the district court did not abuse its discretion in denying appellant’s motion to vacate on this ground.

            B.  Mistake, Inadvertence, Surprise, or Excusable neglect

            Appellant asserts that the district court abused its discretion by denying her motion to reopen the judgment because Schmidt made a mistake in lowering the value of DSI in his updated appraisal to $.26 per share.  We disagree. 

            The district court found that no mistake had occurred because, among other reasons, “Schmidt was given all financial and business planning information relevant to the June 30, 1999, valuation date” and Schmidt was the neutral evaluator and applied appropriate valuation methods.   Schmidt gave a detailed explanation of his method for valuating the DSI stock.  In order to update his previous valuation, Schmidt obtained additional financial information from DSI, obtained an updated projection for the company, interviewed DSI’s chief financial officer and respondent, updated the earlier valuation schedules, and conducted additional research on comparable companies used in the earlier analysis.  Roach’s disagreement with Schmidt’s valuation is not a sufficient basis to establish a mistake.  See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating deference must be given to district court's opportunity to assess witnesses’ credibility).  Both parties were represented by counsel and had financial experts testifying about the neutral appraiser’s valuation methods.  See Kornberg, 525 N.W.2d at 19 (recognizing that the parties’ “extensive representation by counsel and financial advisors negates any inference of mistake”).  Because the findings are based on the evidence in the record, the district court's findings are not clearly erroneous.  Accordingly, we conclude the district court did not abuse its discretion in denying appellant’s motion on this basis. 

C.  Newly Discovered Evidence

            Appellant asserts that the district court abused its discretion by denying her motion to reopen the judgment and decree because information existing in early 2000, namely the medical company’s announcement, the distributor’s e-mail, the updated sales figures, and DSI’s strategic planner’s conclusions, contradicted Schmidt’s reduction in valuation from $.36 to $.26, and, thus, constituted newly discovered evidence.  We disagree. 

            Minn. Stat. § 518.145, subd. 2(2), provides that newly discovered evidence is evidence “which by due diligence could not have been discovered in time to move for a new trial.”  The district court concluded that the claimed information was either already known, easily discovered, or immaterial.  The record shows that appellant’s expert Roach could obtain publicly available information such as the medical company’s announcement and that appellant could have easily obtained DSI’s recent sales figures.  Because evidence in the record supports the district court’s finding, we cannot conclude that the finding was clearly erroneous.  

            But as the district court recognized, the distributor’s e-mail and DSI’s strategic planning consultation may be newly discovered evidence.  But even presuming the information constitutes newly discovered evidence, reopening a judgment is not warranted unless “the new evidence is so material that it would probably produce a different” result.  Kerkhoff v. Kerkhoff, 400 N.W.2d 752, 758 (Minn. App. 1987), review denied (Minn. Mar. 25, 1987).  And “[n]ewly discovered evidence which is cumulative, impeaching, or contradictory does not warrant a new trial.”  Schweich v. Ziegler, Inc., 463 N.W.2d 722, 731 (Minn. 1990) (citation omitted).  As the district court found, both the e-mail from the overseas distributor and the information regarding DSI’s strategic planning, although newly discovered, were not so material that a different verdict would result.  The record shows that although this information was positive to DSI, other events that respondent described in his September 2001 deposition, may have negated any positive effect.  For example, respondent stated in an affidavit that one medical company stated that the implants were “too far away from being useful in humans,” and another was “not at all” interested in pursuing implantable technology at that time.  Thus, at best, the post-valuation date information was contradictory, in addition to being speculative.  We conclude that appellant has not established that the district court’s abused its discretion in refusing to reopen the judgment on this ground.   

II.    Adoption of Respondent’s Proposed Findings

 

            Appellant also contests the district court erred by adopting, verbatim, respondent’s proposed findings of fact and conclusions of law.  We disagree. 

            “[W]holesale adoption” of proposed findings “is not reversible error per se” but “raises the question of whether the trial court independently evaluated each party's testimony and evidence.”  Bliss v. Bliss, 493 N.W.2d 583, 590 (Minn. App. 1992), review denied (Minn. Feb. 12, 1993).  The district court “must scrupulously assure that findings and conclusions - whether they be the court's alone, one or the other party's or a combination - are always detailed, specific and sufficient enough to enable meaningful review by this court.”  Id. (footnote omitted). 

            Here, the district court adopted respondent’s proposed findings verbatim.  But the district court’s ten-page findings and order are “detailed, specific and sufficient enough to enable meaningful review by this court.”  Id.  Under existing law, the conclusions and findings, while repeated verbatim, should be considered those of the district court.  We find no error. 

III.   Attorney Fees

 

            Appellant claims that the district court abused its discretion by failing to award conduct-based attorney’s fees, arguing that respondent unreasonably contributed to the length or expense of the proceeding. 

A refusal to award attorney fees will not be reversed absent a clear abuse of discretion.  Bogen v. Bogen, 261 N.W.2d 606, 611 (Minn. 1977).  In dissolution cases, attorney fees are generally governed by Minn. Stat. § 518.14, subd. 1 (2000), which allows need-based and conduct-based fee awards.  Geske v. Marcolina, 624 N.W.2d 813, 816 (Minn. App. 2001).  A district court may award conduct-based fees against a party who unreasonably contributes to the length or expense of a proceeding.  Minn. Stat. § 518.14, subd. 1 (2000).  Because the standards for making need-based and conduct-based fee awards differ, the district court must indicate to what extent the award was based on need or conduct or both.  Geske, 624 N.W.2d at 816.  A court must make specific findings of the factors on which an award of attorney's fees was made or denied.  Richards v. Richards, 472 N.W.2d 162, 166 (Minn. App. 1991). 

            Appellant moved the court to award attorney fees in her motion to vacate or amend the judgment, without citing any legal basis for awarding fees.  Appellant’s affidavit accompanying the motion did not assert any facts to support need-based or conduct-based fees.  Appellant merely alleged that respondent committed fraud; she did not assert that respondent unreasonably contributed to the length or expense of the proceeding.  The court denied the motion without discussion, and the record does not contain a transcript for the hearing on the motion to vacate the judgment.[2]  The record contains no evidence that the issue of conduct-based fees was properly before to the district court.  Generally, issues are waived if they are not raised in district court.  See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating reviewing court generally considers only those issues presented to and considered by district court).  Accordingly, we find no abuse of discretion when the district court denied appellant’s request for attorney fees. 

            Affirmed.