Ann McCaughan, 288 South Exchange Street, St. Paul, MN 55102 (Pro Se)

Mark A. Longe, Nygaard & Longe, 210 Ivy League Place, 475 Cleveland Avenue North, St. Paul, MN 55104 (for Respondent)

Considered and decided by Crippen, Presiding Judge, Peterson, Judge, and Mansur, Judge.[*]

In this postdissolution action, Ann McCaughan argues the district court erred in interpreting the amended dissolution decree to calculate the amount of respondent's lien interest against the former marital home. We affirm in part and reverse in part.

the total amount paid out by [McCaughan] for labor, parts and supplies to third parties for capital improvements to said homestead.

The judgment also stated that several other items not at issue in this appeal should be subtracted from the home's fair market value. The judgment provided that after these deductions, the balance should be divided equally between Warwick and McCaughan and Warwick's share reduced by any unforgiven support and maintenance arrears in existence when the lien was realized.

An amended judgment, filed in October 1988, changed the lien's due date to October 1998 but did not change the lien calculation provisions. A June 1993 order directed Warwick to pay one-half of the children's unreimbursed medical and dental expenses and allowed McCaughan to deduct any unpaid amounts from his lien interest.

Warwick accrued substantial support and maintenance arrears. Consequently, McCaughan received aid to families with dependent children and other assistance from Ramsey County for several years. McCaughan assigned her right to arrears to the county for the months that she received assistance.

In December 1995, McCaughan sought an order declaring that Warwick's lien was satisfied or establishing the amount of his lien. McCaughan claimed to have paid out $16,124 to third parties for capital improvements to the home. This amount included $1,449 in out-of-pocket expenses. The remaining $14,675 represented three home improvement loans taken out by McCaughan. Each loan provided that it would be forgiven if McCaughan used the money to pay for capital improvements to the home and lived in the home for ten years after the date of the loan. McCaughan had fulfilled these terms and all three loans had been forgiven.

The district court determined that because the home improvement loans were forgiven and never repaid by McCaughan, they did not constitute funds paid out by her and therefore were not deductible under the terms of the agreement. The district court also disallowed part of McCaughan's out-of-pocket capital expenditures as unsubstantiated or for maintenance expenses. The court calculated Warwick's lien interest as follows:

$117,000.00 Appraised value of home

-24,568.60 Mortgage principal payments

- 4,500.00 Warwick's pension award

- 5,311.00 Existing mortgage balance

- 914.42 Capital improvements

$ 81,705.98

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$ 40,852.99 Warwick's lien interest

The court then determined that the money Warwick owed to McCaughan for the children's unreimbursed medical and dental expenses and any unforgiven support and maintenance arrears should be deducted from Warwick's lien interest. The court said the parties and Ramsey County would have to work together to determine the amount of the arrears and the allocation of those funds between McCaughan and the county.

Anderson v. Archer, 510 N.W.2d 1, 3 (Minn. App. 1993).

In a dissolution, a lien interest on a marital home is a division of property. Potter v. Potter, 471 N.W.2d 113, 114 (Minn. App. 1991). A district court may not modify a property division in a dissolution. Minn. Stat. § 518.64, subd. 2(d) (1996). The district court, however, may clarify or construe a dissolution decree "so long as it does not change the parties' substantive rights." Potter, 471 N.W.2d at 114.

McCaughan argues the district court erred in construing the amended judgment to disallow the deduction of the forgiven home improvement loans. We agree. The district court determined that McCaughan was not entitled to a deduction for the home improvement loans under the terms of the agreement because she never repaid those funds. But the amended decree did not limit the capital improvement deduction to loan funds that McCaughan paid out to third parties for capital improvements and paid back to the lender. Instead, the decree provided that amounts "paid out by [McCaughan] * * * to third parties for capital improvements" could be deducted in calculating Warwick's lien interest. When McCaughan borrowed the home improvement loan funds, that money was hers, and the public agency lenders simply acted as her agents in dispersing the money to third parties. McCaughan therefore paid out the home improvement loan funds to third parties for capital improvements to the home and, under the plain language of the amended decree, was entitled to deduct those amounts in calculating Warwick's lien interest.

The terms of the loan agreements may appear generous, but the fact that McCaughan obtained the loan funds under terms that allowed her to avoid repaying the loans if she lived in the home for ten years does not change the fact that she obtained the funds and paid them out to third parties for capital improvements as required by the decree. When McCaughan satisfied the terms of the agreements, the loan funds were hers to keep. By also requiring McCaughan to have repaid the loans to get this deduction, the district court improperly read into the amended decree a clause that did not exist.

McCaughan next argues that the district court erred in disallowing some of her out-of-pocket capital expenditures. We disagree. Warwick identified the specific items that he claimed were unsubstantiated or maintenance expenses. The district court said it concurred with Warwick's accounting. The district court's finding regarding the amount of McCaughan's out-of-pocket capital expenditures was not clearly erroneous. See Minn. R. Civ. P. 52.01 (findings of fact will not be reversed unless clearly erroneous).

Finally, McCaughan raised an issue regarding the calculation of the arrears deduction. At oral argument, however, both parties agreed that this issue had been resolved. We therefore hold that (1) Warwick's lien interest must be calculated as determined by the district court with an additional $14,675 deduction from the home's fair market value for the home improvement loans and (2) pursuant to the parties' agreement, the highest amount of support and maintenance arrears claimed by any party must be deducted from Warwick's lien interest, placed in escrow, and distributed after the parties and Ramsey County determine the proper allocation of these funds.

Affirmed in part and reversed in part.

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