This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-519

 

In re the Marriage of:
Sandra Dawn Schaefer, petitioner,
Respondent,

vs.

Michael Paul Schaefer,
Appellant.

 

Filed April 10, 2007

Affirmed in part, reversed in part, and remanded

Peterson, Judge

Dissenting, Randall, Judge

 

Dakota  County District Court

File No. F7-04-10031

 

Patricia A. O’Gorman, 8750 90th Street South, Suite 207, Cottage Grove, MN  55016 (for respondent)

 

Geraldine C. Steen, 14550 Excelsior Boulevard, Suite 206, Minnetonka, MN  55345 (for appellant)

 

            Considered and decided by Lansing, Presiding Judge; Randall, Judge; and Peterson, Judge.

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

            On appeal in this dissolution matter, appellant-husband challenges the district court’s determination of maintenance, arguing that the court failed to consider the liquid nature of respondent-wife’s property settlement and that notwithstanding wife’s disability, given the short duration of the marriage, the court erred in awarding permanent maintenance.  Husband also argues that the district court failed to adequately address the parties’ nonmarital interests in certain assets and erred in awarding attorney fees to wife.  We affirm in part, reverse in part, and remand.

FACTS

            The parties were married in July 1998.  They have no children together, but respondent-wife Sandra Dawn Schaefer has two children from a previous relationship.  Following an incident in November 2002, appellant-husband Michael Paul Schaefer asked wife to move out of the marital homestead.  Wife leased an apartment for her and her children until March 2004, when the parties reconciled.  The parties separated again in October 2004 and dissolved their marriage by judgment and decree entered September 2, 2005. 

            At the time of the dissolution, wife was 45 years old, and husband was 46.  Husband was employed as an executive director of Catholic Finance Corporation, earning a gross monthly income of $10,439.58 during the first half of 2005.  Effective July 1, 2005, husband received a raise of about $25,000 per year.  In addition to his salary, husband had the use of a company vehicle, for which the company paid all associated costs, and husband reimbursed the company for personal mileage.  On June 30, 2005, husband received a bonus in the gross amount of $25,055 and the net amount of $13,569.64.      In addition to his employment with Catholic Finance, since 2000, husband has operated a business called Parking Finance Advisors.  Parking Finance’s gross revenues were $24,863 in 2003 and $35,679.53 in 2004.  Husband testified that Parking Finance had no income in 2000 and a negative income in 2001.  Husband testified that the revenues received in 2003 and 2004 resulted from him serving as an expert witness in a lawsuit; in 2003, Parking Finance performed three feasibility studies for its main client, earning $3,500 per study; and the main client had no work for Parking Finance during the preceding two years. 

            Wife was self-employed as a court reporter from 1992 through 2000.  In August 2000, wife obtained employment as a legal assistant at a law firm, and she advanced to the position of supervisor of a staff of about 12 legal secretaries.  After suffering a stress-related panic-and-anxiety attack in October 2002, wife received short-term-disability income through her employment.  Wife attempted to return to the law firm early in 2003 but was unable to perform her duties and was asked to leave the law firm.  Wife continued receiving short-term-disability income until April 2003, when she qualified for and received long-term-disability income provided through her employment.  After coverage under wife’s long-term-disability insurance expired in April 2005, the Social Security Administration approved her application for disability benefits.

            The district court found:

            39.  That [wife] has been diagnosed with, and continues to suffer from, anxiety-panic disorder, major depression, post-traumatic stress disorder (PTSD), and migraine headaches.  [Wife] has been seen consistently by a single treating psychologist, generally twice weekly, since her discharge from United Hospital, and has also been treated by a psychiatrist, who has prescribed a host of medications for [wife’s] conditions.

 

            40.  That [wife] continues to suffer from recurring and severe panic attacks in times of stress.  [Wife] testified that memory loss accompanies a panic attack, and that she attempts to avoid situations that “trigger” panic attacks.  When such attacks occur or are impending, she must treat them with prescription medication to alleviate their effects.

 

            . . . .

 

            44.  That because of [wife’s] disability, it is not reasonable to expect her to be able to acquire sufficient education or training to enable her to find employment.  [Wife] is suitably educated and trained; she simply is unable to make use of that education and training because of her disability.

 

The district court awarded wife $3,000 per month in permanent spousal maintenance.            Both parties owned homes before the marriage.  Wife sold her home, and the parties lived in husband’s home during the marriage.  Wife received net proceeds of more than $80,000 from the sale of her home.  Of that amount, wife deposited $70,000 into an account held by husband and his father.  Both parties contributed to improvements to the marital home during the marriage, and the home was sold before trial for about $470,000, which yielded net proceeds of about $212,000.  Before trial, husband claimed a 20% nonmarital interest in his home, which equaled $80,000.  At trial, husband claimed a 30% nonmarital interest.  The district court awarded wife $100,000 from the proceeds of the sale.

D E C I S I O N

I.

            Appellate courts review a district court’s maintenance award under an abuse-of-discretion standard.  Dobrin v. Dobrin, 569 N.W.2d 199, 202 (Minn. 1997).  A district court abuses its discretion regarding maintenance if its findings of fact are unsupported by the record or if it improperly applies the law.  Id.  “Findings of fact concerning spousal maintenance must be upheld unless they are clearly erroneous.”  Gessner v. Gessner, 487 N.W.2d 921, 923 (Minn. App. 1992).

            Spousal maintenance may be granted when the district court finds that the spouse seeking maintenance

(a) lacks sufficient property, including marital property apportioned to the spouse, to provide for reasonable needs of the spouse considering the standard of living established during the marriage, especially, but not limited to, a period of training or education, or

 

(b) is unable to provide adequate self-support, after considering the standard of living established during the marriage and all relevant circumstances, through appropriate employment[.]

 

Minn. Stat. § 518.552, subd. 1 (2006).

            To establish the amount and duration of a spousal-maintenance award the district court must consider and make findings on the statutory factors set forth in Minn. Stat. § 518.552, subd. 2 (2006).  Reinke v. Reinke, 464 N.W.2d 513, 514-15 (Minn. App. 1990).  The issue is, in essence, a balancing of the recipient’s need against the obligor’s ability to pay.  Erlandson v. Erlandson, 318 N.W.2d 36, 39-40 (Minn. 1982).

            The district court found that wife “lacks sufficient property, including marital property apportioned to her in this proceeding, to provide for her reasonable needs considering the standard of living established during the marriage.  None of the property to be apportioned her is income-producing property.”  Husband argues that the district court ignored the liquid nature of the property settlement awarded to wife and that with her cash award exceeding $140,000,[1] wife could have paid off significant debt and reduced her monthly expenses. 

            In setting maintenance, the district court should consider financial resources, including income from assets that are received in the property distribution; but it should not expect a spouse to invade principal to meet monthly living expenses.  Fink v. Fink, 366 N.W.2d 340, 342 (Minn. App. 1985).  Requiring wife to use her cash award to pay off debts to reduce the debt payments in her monthly budget would be an indirect way of requiring her to invade principal to meet monthly living expenses.  When determining wife’s need for maintenance, the district court did not abuse its discretion when it did not require wife to use her cash award to reduce her debts.

            Regarding the duration of the maintenance award, the district court found that due to wife’s disability, “it is not reasonable to expect her to be able to acquire sufficient education or training to enable her to find employment.  [Wife] is suitably educated and trained; she simply is unable to make use of that education and training because of her disability.”  Husband argues that because the evidence does not show how long wife’s disability will continue, the district court erred in awarding permanent maintenance.  See Dobrin, 569 N.W.2d at 202 (stating that “[i]mplicit in Minn. Stat. § 518.552 is that the spouse seeking maintenance demonstrate the need therefor”).

            The record does not contain evidence that wife can be expected to recover, she has been unable to work since 2002, and the Social Security Administration determined that she is disabled.  The district court found:

            That it is unknown whether [wife] will ever recover from her disability.  The Social Security Administration has found her disabled, that is, not capable of maintaining any employment available in the economy.  The uncertainty of [wife’s] condition mandates a permanent award of maintenance. 

 

            “Poor health is a proper reason for awarding permanent maintenance.”  McConnell v. McConnell, 710 N.W.2d 583, 586 (Minn. App. 2006) (quotation and citations omitted).  In McConnell, this court reversed and remanded for reconsideration a temporary maintenance award because the district court failed to credit undisputed evidence regarding the obligee’s debilitating health problems and made speculative findings about the obligee’s ability to become self-supporting.  Here, as in McConnell, the record includes medical records that document wife’s health problems and disability and a Social Security Administration record that states that wife is disabled.  As the McConnell court noted, a social-security disability determination is reasonable evidence supporting an obligee’s claim of inability to become self-supporting.  Id.  The record shows that wife has been unable to maintain employment since leaving her job at the law firm in October 2002, and, as the district court found, it is unknown whether she will ever recover from her disability.

            The only significant distinction between this case and McConnell is that McConnell involved a 17-year marriage, whereas this case involves a seven-year marriage.  In Gales v. Gales, the supreme court stated that an exceptional circumstance must exist to support a permanent maintenance award and used the example “of a long-term traditional marriage in which there is an older, dependent spouse who has little likelihood of achieving self-sufficiency because of an absence from the labor market for a long period of time.”  553 N.W.2d 416, 421 (Minn. 1996).[2]  But Gales did not involve a disabled spouse.  Id.  Although the parties here were not married for as long as the parties in McConnell, wife became disabled during the time that they were married, and it was not known at the time of trial whether she would be able to return to work.  Minn. Stat. § 518.552, subd. 3 (2006), requires that if uncertainty exists as to the necessity of a permanent award, the court must award permanent maintenance.

            Citing Dobrin, husband argues that notwithstanding wife’s disability, it was error to award permanent maintenance due to the short length of the marriage.  569 N.W.2d at 203.  But in Dobrin, wife’s own trial testimony indicated that she was feeling “pretty good” and that her health did not prevent her from working.  569 N.W.2d at 202.  Husband also argues that a permanent maintenance award cannot be based on emotional distress related to the break-up of a relationship.  See, e.g., Gales, 553 N.W.2d at 422.  But the record does not indicate that wife’s mental-health disability is related to the break-up of her relationship with husband.  Applying the McConnell analysis and the statutory presumption favoring a permanent maintenance award when uncertainty exists, we conclude that the district court did not abuse its discretion in awarding wife permanent maintenance.

            Husband argues that the district court overstated his income because it included income earned by Parking Finance for expert-witness fees in a lawsuit, which was a one-time occurrence.  But it is not apparent that the district court relied on any amount earned by Parking Finance when determining husband’s ability to pay maintenance.  The district court found:

            That [husband] has the ability to provide for his own needs while contributing to the needs of [wife].  [Husband] is now earning $150,000.00 per year from his salaried employment and has additional income from Parking Finance Agency.  In addition to his monthly salary through Catholic Finance Corporation, he receives bonuses. 

 

            Husband argues that wife’s minor child from a previous marriage could not be a factor in the district court’s maintenance analysis.  The district court did not consider wife’s minor child in determining maintenance.  The district court found that wife has reasonable monthly living expenses of $4,920, “exclusive of the individual expenses of [wife’s] son who resides with her and for whom [husband] bears no liability for support.” 

            Husband argues that the district court did not consider wife’s excessive spending pattern.  There is evidence that wife is a compulsive spender.  But the evidence regarding the parties’ lifestyle during the marriage and wife’s monthly expenses following the marriage did not include evidence of compulsive spending by wife. 

            Citing March v. March, 435 N.W.2d 569 (Minn. App. 1989), husband argues that in finding that wife had contributed to the acquisition, preservation, and appreciation in the value of property and had functioned as a homemaker, the district court erred in failing to consider the parties’ separations.  March states that the presumption that each spouse made a substantial contribution to the acquisition of income and property while living together as husband and wife does not apply to the time period when they no longer lived together.  435 N.W.2d at 571.  The district court’s findings do not indicate that the district court relied on the presumption but rather on evidence regarding contributions actually made by wife.  Also, wife testified that during the separation that began in 2002, even though she maintained an apartment for her and her children, she spent most of her time at the house with husband. 

            Husband has failed to show that the district court abused its discretion in awarding maintenance.

 

 

II.

            District courts have broad discretion over the division of marital property, and a property division will not be overturned on appeal except for a clear abuse of discretion.   Antone v. Antone, 645 N.W.2d 96, 100 (Minn. 2002); Sirek v. Sirek, 693 N.W.2d 896, 898 (Minn. App. 2005).  When dividing marital property, the district court is required to “make a just and equitable division.”  Minn. Stat. § 518.58, subd. 1 (2006).  Appellate courts “will affirm the [district] court’s division of property if it had an acceptable basis in fact and principle even though [the appellate court] might have taken a different approach.”  Antone, 645 N.W.2d at 100.

            “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).  All property, real or personal, is presumed to be marital if “acquired by the parties, or either of them . . . at any time during the existence of the marriage relation between them, or at any time during which the parties were living together as husband and wife[.]”  Minn. Stat. § 518.003, subd. 3b (2006).  Nonmarital property is real or personal property acquired by either spouse that “(a) is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse; [or] (b) is acquired before the marriage[.]”  Id.  “Nonmarital property includes both property acquired before the marriage and the increase in value of that property.”  Quinlivan v. Quinlivan, 359 N.W.2d 276, 279 (Minn. App. 1984).  “A party seeking to establish the nonmarital character of an asset must do so by a preponderance of the evidence.  In order to maintain its nonmarital character, nonmarital property must be kept separate from marital property or, if commingled, must be readily traceable.”  Wopata v. Wopata, 498 N.W.2d 478, 484 (Minn. App. 1993) (citations omitted); see also Carrick v. Carrick, 560 N.W.2d 407, 413 (Minn. App. 1997) (noting that the standard required is not “strict tracing,” but a preponderance of the evidence).

            Husband argues that wife produced insufficient evidence to show her nonmarital interest in the parties’ homestead.  Wife received more than $80,000 in proceeds from the sale of the home she owned before the marriage.  Of that amount, wife deposited $70,000 into an account held by husband.  The document cited by the district court in determining wife’s nonmarital interest in the homestead shows that the $70,000 was deposited into the account, but it does not show what happened to that money after it was deposited into the account.  To support an award of a nonmarital interest in the homestead based on the proceeds of the sale of the home wife owned before the marriage, a tracing of how the proceeds were used is required.

            Wife testified that, after the parties separated, husband kept the information relating to the account and receipts and information relating to the home improvements.  To the extent that husband’s acts caused wife’s inability to trace the proceeds from the sale of her home, husband should not benefit.  See Federated Mut. Ins. Co. v. Litchfield Precision Components, Inc., 456 N.W.2d 434, 436 (Minn. 1990) (stating that unfavorable inferences may be drawn from a party’s failure to produce evidence in its possession); Bollenbach v. Bollenbach, 285 Minn. 418, 428, 175 N.W.2d 148, 155 (1970) (stating that a party’s failure to produce full account of debts and assets justifies adverse inferences); Eisenschenk v. Eisenschenk, 668 N.W.2d 235, 243 (Minn. App. 2003) (noting that a party may not complain about district court’s failure to rule in his favor when “one . . . reason [ ] it did not do so is because that party failed to provide the district court with the evidence that would allow the district court to fully address the question”), review denied (Minn. Nov. 25, 2003).  But the district court made no findings on this issue.  Accordingly, we reverse the district court’s determination of wife’s nonmarital interest in the homestead and remand for additional findings about withdrawals from the account into which wife deposited the $70,000.  On remand, the district court may open the record to receive additional evidence.

            Husband also argues that the district court erred in failing to award him a nonmarital interest in life-insurance policies and retirement funds.  The district court found that the life-insurance policies had cash values at the time of marriage but that, because premiums continued to be paid during the marriage, a nonmarital interest no longer existed.  But continuing to pay premiums during the marriage increased the cash values of the policies and did not cause the cash values at the time of marriage to lose their nonmarital character.  The cash values at the time of marriage remained nonmarital property.  See Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981) (discussing formula that can be used to determine nonmarital interest in property when payments continue to be made during marriage and property increases in value).  Therefore, we reverse the award of the life-insurance policies in which husband claimed a nonmarital interest in the cash surrender values and remand for the district court to consider whether the property distribution should be modified to account for husband’s nonmarital interests in the cash surrender values.

III.

            The district court shall award need-based attorney fees to enable a party to carry on the proceeding provided that it finds “that the fees are necessary for the good-faith assertion of the party’s rights . . ., the party from whom fees . . . are sought has the means to pay them; and the party to whom fees . . . are awarded does not have the means to pay them.  Minn. Stat. § 518.14, subd. 1 (2006).  The district court may also impose attorney fees when a litigant “unreasonably contributes to the length or expense of the proceeding.”  Id. (2006).  To award conduct-based fees, the court must identify the offending conduct, the conduct must have occurred during litigation, and it must be found to have unreasonably contributed to the length or expense of the proceeding.  See id.; Geske v. Marcolina, 624 N.W.2d 813, 818-19 (Minn. App. 2001).  An award of attorney fees under Minn. Stat. § 518.14, subd. 1, “rests almost entirely within the discretion of the trial court and will not be disturbed absent a clear abuse of discretion.”  Crosby v. Crosby, 587 N.W.2d 292, 298 (Minn. App. 1998) (quotation omitted), review denied (Minn. Feb. 18, 1999).

            The district court awarded wife $9,400 in attorney fees, finding:

            55.  That [husband] has the ability to pay both his own attorney’s fees and costs and [wife’s] attorney’s fees and costs.  [Wife] does not have the ability to pay her own attorney’s fees and costs.  Moreover, [husband] has unreasonably contributed to the length and expense of the proceeding.  Although [husband] is the executive director of Catholic Finance Corporation, the agency that employs him, [husband] failed to produce any paycheck stubs, any information concerning his salary, or any information concerning his bonus or amounts he was charged by his employer.  To obtain this information, [wife’s] counsel was forced to subpoena [husband’s] employer at a cost of $603.22.  In addition, [wife] was required to subpoena [husband] to bring records to court.  [Husband] has engaged in a course of conduct that has unreasonably contributed to the length and expense of this proceeding, that has exacerbated [wife’s] condition, and that has exponentially increased attorney fees.

 

            Husband argues that subpoenas to his employer were unnecessary because he testified regarding his salary and bonuses.  The fact that husband testified on the issue does not mean that wife was not entitled to pretrial discovery.  Husband also argues that the district court erred in considering the effect of his conduct on wife’s mental health.  The authority cited by husband does not support the position that the effect of uncooperative conduct by husband during the divorce proceeding may not be considered by the district court in awarding attorney fees.

            We affirm the district court’s award of need- and conduct-based attorney fees to wife.

            Affirmed in part, reversed in part, and remanded.

 

RANDALL, Judge (dissenting).

 

            I respectfully dissent.  The marriage here does not give rise to an award of “permanent maintenance.”  Focusing on language in Gales v. Gales, which states that “permanent awards are to be restricted to certain exceptional cases where there is little likelihood of the once-dependent spouse’s attaining self-sufficiency,” appellant argues that permanent maintenance is inappropriate here.  553 N.W.2d 416, 419 (Minn. 1996) (quotations omitted).  We note, as the majority does, that Dobrin v. Dobrin clarified Gales:

Gales did not change the law, but instead applied the criteria of Minn. Stat. § 518.552, subd. 2 to the record.  We take this opportunity to remind counsel that each marital dissolution proceeding is unique and centers upon the individualized facts and circumstances of the parties and that, accordingly, it is unwise to view any marital dissolution decision as enunciating an immutable rule of law applicable in any other proceeding.

 

569 N.W.2d 199, 201 (Minn. 1997).  What is important is that Dobrin did not overrule Gales and, instead, simply pointed out that Gales did not change anything, but properly applied the statutory criteria.  We agree that each marital dissolution “is unique.”

            An independent spouse in a lengthy, traditional marriage presents a reasonable case on the issue of permanent maintenance, although I acknowledge there can be others.  I do not find that these facts establish a case for permanent maintenance.  Here, the parties were married in July 1998.  Both were in their mid-forties.  There were no children of this marriage.  Respondent has a minor child from a prior marriage, who, by the time this opinion is released, will be an adult.  The parties only lived together for a few years before respondent’s emotional state led them to separate households.  The district court’s findings reflect that they separated after six years, in October 2004.  Appellant’s recollection is that they did not even live together for six years, but closer to four years, because of a 15-month separation, before the final separation.

            The essence of permanent maintenance (formerly called alimony) is that, traditionally, the woman in the marriage often gave up, or at least short-circuited, her own career to take care of the home while the male bread winner was outside the home working.  That scenario is changing rapidly, but still represents the majority of all marriage dissolutions.  The male continues on with his job, usually at a higher rate of earning than his ex-wife’s expectations because she has experienced a downturn in her job skills and educational opportunities.  An interpretation of Gales and Dobrin, and their progeny, discuss dependent spouses, their reasonable needs, and the unique facts of each case.

            Respondent is not the classic dependent spouse who gave up a career and job skills to get married.  She was trained and worked as a court reporter and/or a paralegal from 1992 to 2000 (two years into the marriage).  Because of her emotional disability, she left her last job.  In other words, she gave up nothing to get married, and during marriage continued her full-time professional career.

            Respondent does receive social-security disability of $1,300 a month and her emotional and physical health is documented in the file and the majority covers it.  My argument is that despite the catch phrase, “[w]here there is some uncertainty as to the necessity of a permanent award, the court shall order a permanent award leaving its order open for later modification,” Minn. Stat. § 518.552, subd. 3 (2006), does not end the discussion on brief marriages. 

            An equitable solution would have been for the district court to order maintenance for a set number of years, no less than one but no more than three, with an automatic order that the issue of maintenance be reviewed de novo at that time.  During that time, of course, either party would be free under the controlling statutes to make motions for a modification upward or downward of maintenance.  Right now, with lifetime permanent maintenance, appellant has the heavy burden of showing a substantial change of circumstances that make the original order unreasonable and unfair.  Beck v. Kaplan, 566 N.W.2d 723, 726 (Minn. 1997) (stating that a party seeking modification must show not only a substantial change in circumstances, but also that the “change has the effect of rendering the original maintenance award both unreasonable and unfair”).  That would be appellant’s burden. 

Although respondent’s medical file indicates some physical ailments, its roots are in emotional distress.  Even the social-security-disability award held open the possibility that she could re-enter gainful employment in the future.

            Essentially, we have a two-pronged argument in respondent’s case.  First, she alleges that she is too sick to support herself and, thus, she needs her ex-husband to support her full time.  Second, she argues that her ex-husband is well off, has lots of money, and can afford it.  That same logic would apply to a marriage, with no children, of five years, three years, one year, six months, or six days.  Marriage was never meant to be a disability-insurance/medical-insurance annuity for life regardless of the length of time, or the lack thereof, that the couple actually lived together as man and wife.

            From the record, respondent does need a certain amount of money now from appellant to live comfortably.  The court found her requested living expenses of $4,900 a month to be reasonable.  That seems high to me from the record, but respondent is quick to argue “the lifestyle” of the marriage.  The history of the phrase, “the lifestyle enjoyed during the marriage” is an old phrase rooted in an articulable argument that dissolution and two separate households should not interfere with all the disposable income a couple had while they were maintaining only one household.

            I strongly suggest that this is not the case for permanent maintenance.  Absent death or remarriage, respondent has an approximate life span of maintenance of 35 years.  Just at 30 years times $36,000 a year, we have a possible award of $1,080,000 plus the property settlement.

            I suggest that the issue of maintenance, along with the other issues, be reversed and remanded for a short-term award of maintenance, with an automatic de novo review (if no party moves for a modification sooner) to re-examine the medical reports, the status of respondent’s social security, and her employment capabilities.  It is entirely possible that the present award would again be continued, but that we do not know.

            I suggest this case, even though unpublished, is a questionable result for a short marriage, no minor children, and an illness that developed eroding the obligee’s job skills for an indefinite period of time, but with literally decades ahead of her for recovery to a possible return to the job market.