Nancy Murphy-Robinson, Cara A. Wittwer, Nancy Murphy-Robinson Law Office, 5215 Edina Industrial Boulevard, Edina, MN 55439 (for appellant)

Considered and decided by Anderson, Presiding Judge, Randall, Judge, and Schultz, Judge.[*]

Appellant argues the district court erred by ruling the earnings on appellant's pre-marital interest in his retirement plan were marital property. Respondent alleges she should have received a greater share of appellant's retirement plan and challenges the denial of her request for attorney fees. We affirm in part, reverse in part, and remand.

By statute, nonmarital property includes property acquired before marriage and the increase in the value of that property. Minn. Stat. § 518.54, subd. 5 (b), (c) (1998). Caselaw, however, distinguishes between (a) the increase in the value of nonmarital property occurring during a marriage which is due to the spouses' "entrepreneurial decision-making," which is marital property; and (b) increases in value of nonmarital property attributable to market forces, "such as simple appreciation" of an asset, which is nonmarital property. White v. White, 521 N.W.2d 874, 878 (Minn. App. 1994). Where the appreciation of nonmarital property is commingled with marital contributions and income earned on marital contributions, "the nonmarital investment loses that character unless it can be readily traced." Johnson v. Johnson, 388 N.W.2d 47, 50 (Minn. App. 1986) (citation omitted).

Here, the district court found no changes were made to Vanasek's retirement plan until September 30, 1994, when the various investment options were added to the plan. Using the retirement plan's quarterly statements, Vanasek's exhibit 229 detailed the growth of the premarital and martial funds during the marriage. Relying on this exhibit, the district court found that Vanasek's premarital contribution was worth $144,741 by September 30, 1994. After that date, the court said, "there is no way to trace with any specificity which funds in which options over six years were pre-marital." Thus, the district court ruled that the remaining balance of Vanasek's retirement plan was marital. We disagree.

The record shows (a) the parties agree Vanasek's nonmarital contribution to his retirement plan and the marital contribution to his plan were $124,278 and $63,742, respectively; (b) at the time of dissolution, the plan was worth $392,934.34; and (c) the plan's appreciation during the marriage was approximately $204,914. Also, part of exhibit 229 divided Vanasek's retirement plan into nonmarital and marital components and tracked the appreciation of each component. We reject the district court's finding that after September 30, 1994, Vanasek's nonmarital interest in his retirement plan became marital because it was subject to active and joint decision-making by the parties. While the parties discussed various investment options available within in the plan, it is undisputed that (a) they did not actually construct an investment portfolio; (b) they only selected the investment option within the plan which had the level of risk, return, and duration they thought best for their circumstances; (c) the plan options were managed by an investment committee of which neither party was a member; and (d) the investment committee tracked the investment returns and the market environment, and then decided how to structure the investment portfolio for the investment options within the plan. The only decision in this plan to be made by a particular party was the simple decision of choosing an option among those available under the plan. Reviewing options and changing one or not changing any is not the "active," entrepreneurial decision-making discussed in White. The district court erred when it concluded that Vanasek's premarital interest lost its nonmarital character after September 30, 1994. We remand for an appropriate recalculation of the parties marital and nonmarital interest in Vanasek's profit-sharing plan pursuant to a formula akin to that set forth in Schmitz v. Schmitz, 309 N.W.2d 748 (Minn. 1981) and its progeny[1].

We reject Quilling's argument that she was entitled to the earnings on Vanasek's premarital contributions accruing between the parties' marriage and September 30, 1994. The record supports the district court's findings that Vanasek traced the earnings on his premarital contributions through September 1994. See Minn. R. Civ. P. 52.01 (stating district court's findings of fact not set aside unless clearly erroneous).

We also reject Quilling's argument that the entire retirement plan is marital because the parties used the proceeds from the sale of her nonmarital homestead to meet day-to-day expenses. Quilling's argument would convert Vanasek's nonmarital interest in his retirement plan into a marital asset based on how another nonmarital asset was used in unrelated transactions. This is contrary to statute. See Minn. Stat. § 518.54, subd. 5 (1998) (making marital or nonmarital character of asset dependent on how and when that asset was acquired).

Lastly, Quilling challenges the district court's denial of her request for attorney fees, alleging Vanasek improperly denied requests for admissions, necessitating additional discovery, including Vanasek's deposition. See Minn. Stat. § 518.14, subd. 1 (1998) (allowing attorney fee awards against party who unreasonably contributes to length or expense of proceeding). Here, the district court found that Vanasek's actions did not unreasonably prolong or significantly increase the cost of the proceedings. On this record, this finding is not erroneous. We affirm the district court's denial of an attorney fee award.

Affirmed in part, reversed in part, and remanded.

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

[1] By the arguments presented to the district court and on appeal, the parties appear to have functionally agreed that the plan is to be divided using the Schmitz formula. We express no opinion on remand favoring or disfavoring any division. This issue is fairly for the district court.