This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-2219

 

In re the Marriage of:

Lori Irene Busch, petitioner,

Respondent,

 

vs.

 

Rob Dee Busch,

Appellant.

 

Filed September 5, 2006

Reversed and remanded; motion denied

Willis, Judge

 

Wright County District Court

File No. F4-04-3737

 

Robert J. Hajek, Roger E. Meyer, Hajek, Meyer & Beauclaire, PLLC, 3433 Broadway Street Northeast, #110, Minneapolis, MN  55413 (for respondent)

 

Kevin J. Kolosky, 5640 41st Avenue South, Minneapolis, MN  55417-2926 (for appellant)

 

            Considered and decided by Willis, Presiding Judge; Lansing, Judge; and Parker, Judge.*

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

WILLIS, Judge

In this appeal from a dissolution judgment, appellant challenges the district court’s calculation of the parties’ marital and nonmarital interests in the parties’ real property and the division of the marital interest in the parties’ homestead.  Because the district court did not make the findings that are necessary for us to review its determination of the parties’ marital and nonmarital interest in the parties’ homestead, we reverse and remand.

FACTS

            Appellant Rob Dee Busch (husband) and respondent Lori Irene Busch (wife) were married in May 1999 and then lived in a house in Crystal (Crystal house) that wife had purchased eight years earlier.  In November 2002, the parties bought and moved into a house in Hanover (Hanover homestead), and a month later, the parties sold the Crystal house. 

In November 2004, the parties separated, and wife petitioned for the dissolution of the marriage.  The parties had no children together.  After a trial in May 2005, the district court issued a judgment and decree that, among other things, provided for the division of the parties’ real and personal property.  The district court’s property division included an award to wife of “all of the parties’ right, title, interest, and equity in and to [the Hanover homestead]” and an award to husband of “his business and business equipment in his possession.” 

In July 2005, husband moved for amended findings, disputing the district court’s property distribution and its calculation of the parties’ marital and nonmarital interests in the parties’ real property and certain personal property.  In September 2005, the district court denied husband’s motion.  Husband now appeals, challenging only the district court’s calculation of the parties’ marital and nonmarital interests in the parties’ real property and the division of the marital interest in the parties’ homestead.

D E C I S I O N

I.

 

Husband appeals from the district court’s denial of husband’s motion for amended findings, claiming that the district court’s findings overstate wife’s nonmarital interest and understate the parties’ marital interest in the Hanover homestead, and are not supported by the record.  This court reviews the denial of a motion for amended findings under an abuse-of-discretion standard.  See Stroh v. Stroh, 383 N.W.2d 402, 407 (Minn. App. 1986) (providing that the purpose of a motion to amend is to allow the district court to review its own exercise of discretion).  “Whether property is marital or nonmarital is a question of law, but a reviewing court must defer to the trial court’s underlying findings of fact.”  Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997). 

A district court’s findings “shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the [district] court to judge the credibility of the witnesses.”  Minn. R. Civ. P. 52.01.  A finding is “clearly erroneous” when this court has “the definite and firm conviction that a mistake has been made.”  Vangsness v. Vangsness, 607 N.W.2d 468, 472 (Minn. App. 2000) (quotation omitted).  When determining whether findings are clearly erroneous, this court views the record in the light most favorable to the findings.  Id. 

            Property received by either spouse during a marriage is presumed to be marital.  Minn. Stat. § 518.54, subd. 5 (2004).  A party can rebut this presumption by showing that the property is within one of the categories listed in Minn. Stat. § 518.54, subd. 5, which provides that property is nonmarital if it:

(a) is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse;

(b) is acquired before the marriage;

(c) is acquired in exchange for or is the increase in value of property which is described in clauses (a), (b), (d), and (e);

(d) is acquired by a spouse after the valuation date; or

(e) is excluded by a valid antenuptial contract.

 

See Robert v. Zygmunt, 652 N.W.2d 537, 541 (Minn. App. 2002) (discussing rebuttal of presumption).  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). 

In Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981), the supreme court adopted a formula to identify nonmarital and marital interests in appreciated homestead property.  The Schmitz formula is summarized as follows:

The present value of a nonmarital asset used in the acquisition of marital property is 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. . . .

 

Brown v. Brown, 316 N.W.2d 552, 553 (Minn. 1982).  The Schmitz formula applies to property acquired during the marriage with a nonmarital downpayment as well as to property acquired before the marriage if marital funds were used to reduce the mortgage balance.  Antone v. Antone, 645 N.W.2d 96, 102–103 (Minn. 2002).  “For property acquired before the marriage, the formula uses the time of the marriage instead of the time of the purchase.”  Id. at 102.  A district court need not strictly apply the Schmitz formula; it is sufficient if the district court arrives at a figure that is close to the figure that would have been reached had the district court used the Schmitz formula.  Charlson v. Charlson, 374 N.W.2d 473, 476 (Minn. App. 1985). 

            Here, the district court did not apply the Schmitz formula to determine wife’s nonmarital interest in the Crystal house or in the Hanover homestead.  Instead, because the parties sold the Crystal house 11 1/2 years after wife bought it, the district court divided the net equity from the sale of the Crystal house by 11 1/2 to calculate an annual rate of equity increase; apportioned eight years of equity as wife’s nonmarital interest for the time that wife lived in the home before the marriage; and apportioned three and one-half years of equity as a marital interest, representing the time that both parties lived in the home after the marriage.  Thereby, the district court found that 70% (8/11.5) of the value of the Crystal house was wife’s nonmarital asset and that 30% (3.5/11.5) was the parties’ marital asset.  The district court further found that the “entire sales proceeds from the sale of the Crystal [house] were used to help finance the purchase of the Hanover homestead.”  The district court therefore found that wife had a nonmarital interest in the Hanover homestead but did not identify the amount or percentage of that interest.  Both parties presume on appeal that because the district court found that the entire proceeds from the sale of the Crystal house were applied to the Hanover homestead, the district court intended to apply the 70%-30% split between nonmarital and marital interests to the Hanover homestead as well. 

Husband argues that the district court should have applied the Schmitz formula to determine wife’s nonmarital interests in the Crystal house and the Hanover homestead.  Wife argues that (1) the district court’s “‘division of years’ calculation” is appropriate, because it takes into consideration the length of time that the wife lived in the Crystal house before the marriage and the length of time that the parties lived in the home together; and (2) “the facts in this case [are] not conducive to the Schmitz analysis.” 

The district court provided no explanation for not applying the Schmitz formula, and wife provides no basis for her assertion that the “facts in this case [are] not conducive” to the application of the Schmitz formula.  As we have noted, a district court is not required to apply the Schmitz formula strictly as long as the figures it reaches are close to those that would result from the application of the formula.  See Charlson, 374 N.W.2d at 476.  But the record here lacks the evidence and findings necessary for us to make that determination.  We therefore reverse and remand to the district court to reopen the record to receive the information necessary for the application of the Schmitz formula and to make a determination of the parties’ nonmarital and marital interests in the Crystal house and Hanover homestead.

A.        Application of the Schmitz Formula to Determine Wife’s Nonmarital Interest in the Crystal House and the Hanover Homestead.

 

To determine wife’s nonmarital interest in the Crystal house using the Schmitz formula, wife’s net equity in the Crystal house at the time of the marriage must be divided by the value of the Crystal house at the time of the marriage, and the resulting figure must be multiplied by the value of the Crystal house at the time of sale.[1]  Then, to determine wife’s nonmarital interest in the Hanover homestead, wife’s nonmarital interest in the Crystal house, assuming that all proceeds from the sale of the Crystal house were applied to the Hanover homestead, must be divided by the purchase price of the Hanover homestead and the resulting figure must be multiplied by the value of the Hanover homestead at the time of the parties’ separation.[2] 

To apply the Schmitz formula, the district court must make the following findings to determine wife’s nonmarital interest in the Crystal house, which is, in turn, necessary to determine wife’s nonmarital interest in the Hanover homestead:  (1) the value of the Crystal house at the time of the parties’ marriage; and (2) wife’s net equity in the Crystal house at the time of the parties’ marriage (or the total encumbrances on the Crystal house at the time of the parties’ marriage).

The district court’s findings recite that, at the time of the parties’ marriage, the tax-assessed value of the Crystal house was $87,900 and that wife believed the fair market value of the Crystal house at the time of their marriage to be $110,000 and husband believed it to be $97,000.  The district court made no finding of the value of the Crystal house at the time of the parties’ marriage.  See Dean v. Pelton, 437 N.W.2d 762, 764 (Minn. App. 1989) (stating that although “[r]eciting the parties’ claims may be helpful in understanding what the trial court considered in making its findings . . . , the findings themselves must be affirmatively stated as findings of the trial court”).  Exactitude is not required in the district court’s valuation of an asset in a dissolution proceeding; “it is only necessary that the value arrived at lies within a reasonable range of figures.”  Johnson v. Johnson, 277 N.W.2d 208, 211 (Minn. 1979). 

Wife testified that she did not know the amount of the mortgage on the Crystal house or the amount of equity that she had in the Crystal house at the time of her marriage.  Wife’s attorney stated at trial that the amount of the mortgage on the Crystal house at the time of the marriage was in the parties’ stipulated findings, but it is not.  Later, wife testified that she had borrowed no money against the Crystal house other than the mortgage of $62,500 that she placed on the house when she bought it.  But the record shows that, when the parties sold the Crystal house, there were three separate mortgages against it: a Wells Fargo mortgage in the amount of $10,854, a second Wells Fargo mortgage in the amount of $6,575, and a Bank of America mortgage in the amount of $52,621, for a total of approximately $70,050.  The discrepancy between the $62,500 encumbrance against the Crystal house in 1991 and the $70,050 in total encumbrances against the house at the time of its sale in 2002 could be the result of either wife taking out additional mortgages before her marriage or the parties taking out additional mortgages after their marriage.  Nothing in the record explains the discrepancy.

            Husband argues that this court can apply the Schmitz formula to determine wife’s nonmarital interest in the Crystal house by using the total amount of encumbrances against the Crystal house just before it was sold, which husband claims were all premarital encumbrances, to determine roughly what wife’s equity in the Crystal house was at the time of the marriage.  The record shows that when wife purchased the Crystal house she obtained a $62,500 mortgage but that a few months before its sale it was encumbered by mortgages totaling approximately $70,050.  There is, however, no evidence regarding the nonmarital or marital character of the additional encumbrances on the Crystal house at the time of its sale, and this court may not presume that all were nonmarital.

B.        The Amount of the Proceeds of the Sale of the Crystal House Used to Finance the Purchase of the Hanover Homestead.

 

            Husband also argues that the district court erred by finding that “[t]he entire sales proceeds from the sale of the Crystal house were used to help finance the purchase of the Hanover homestead.”  The district court found that the net proceeds from the sale of the Crystal house were $125,988.  The record shows that the $125,988 were used (1) to pay a $111,591 bridge loan, of which $56,675.29 had been used to make a downpayment on the Hanover homestead, $52,621 had been used to pay the Bank of America mortgage on the Crystal house, and $1,591 had been used to satisfy loan interest, and (2) to make $14,397 in improvements to the Hanover homestead.  The record thus reflects that proceeds from the sale of the Crystal house in the amount of $52,621 were used to pay off a mortgage on the Crystal house and approximately $14,397 of the proceeds were used to make improvements to the Hanover homestead.  Therefore, because not all of the proceeds from the sale of the Crystal house were used to buy the Hanover homestead, the district court’s finding is erroneous. 

Based on the record, it is likely that the district court intended to find that the entire net proceeds realized from the sale of the Crystal house, $73,367, were applied to the Hanover homestead.  The record shows that at least $71,892.29 of the net proceeds were applied to the Hanover homestead:  $56,675.29 were used to repay the part of the bridge loan that was used for a downpayment on the Hanover homestead, approximately $820[3] were used to pay the interest on the portion of the bridge loan used for the downpayment, and $14,397 were used to make improvements to the Hanover homestead.  There is a minor discrepancy of approximately $1,400 between the net proceeds realized from the Crystal house and the amount applied to the Hanover homestead, either through the downpayment or improvements to the house.  On remand the district court should clarify how much of the net proceeds from the Crystal house were applied toward the Hanover homestead and how it was applied.

Husband argues that the record does not support a finding that all of the net proceeds realized from the sale of the Crystal house were applied to the Hanover homestead.  Husband argues that the actual downpayment made on the Hanover homestead can be determined by subtracting the mortgage taken out on the Hanover homestead ($164,550) from the purchase price, including county taxes ($219,423), which is a difference of $54,873.  But in the district court, husband stipulated that a downpayment of $56,675.29 was made on the Hanover homestead, and the record supports that amount.  The settlement statement from the purchase of the Hanover homestead shows that the total amount due from husband and wife was $224,225.29 (which includes the $219,413 sale price, $10.16 in county taxes, and $4,802.13 in closing costs) and that the parties paid this amount with a $3,000 earnest-money payment, a $56,675.29 downpayment, and a mortgage of $164,550.

II.

Husband argues that the district court abused its discretion by awarding wife all of the marital interest in the Hanover homestead and argues that, instead, the marital interest in the homestead should be divided equally between the parties.  “District courts have broad discretion over the division of marital property and appellate courts will not alter a district court’s property division absent a clear abuse of discretion or an erroneous application of the law.”  Sirek v. Sirek, 693 N.W.2d 896, 898 (Minn. App. 2005).  A district court abuses its discretion regarding a property division if its findings of fact are “against logic and the facts on [the] record.”  Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). 

Because we reverse and remand on the issue of the amounts of the parties’ marital and nonmarital interests in the Crystal house and the Hanover homestead, we decline to review the district court’s division of the parties’ marital interest in the Hanover homestead.  Without knowing what the marital interest in the Hanover homestead is, we cannot determine whether the district court’s property division, including the award of the entire marital interest in the Hanover homestead to wife, is equitable.  See Ruzic v. Ruzic, 281 N.W.2d 502, 505 (Minn. 1979) (providing that equitable, not equal, division of marital property is required by statute).

III.

Wife requests that this court award her attorney fees, arguing that husband’s appeal is “frivolous and made in bad faith.”  “Attorney fees may be awarded in dissolution cases where the appeal was frivolous or in bad faith.”  Dabrowski v. Dabrowski, 477 N.W.2d 761, 766 (Minn. App. 1991).  We decline to make such an award in this case because the issues raised in this appeal were not frivolous, and there is no evidence that they were raised in bad faith.

            Reversed and remanded; motion denied.