Opinion
No. A05-418.
Filed: January 17, 2006.
Appeal from the District Court, Cass County, File No. F501576.
David R. Forro, Caldecott Forro, P.L.C., (for respondent)
Daniel Fiskum, Luther, Heckt Cameron, P.L.L.P., (for appellant)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
On appeal after remand in this dissolution matter, appellant-wife argues that the district court erred by (a) accepting new evidence from respondent-husband by affidavit; (b) holding that wife lacked authority to encumber the homestead she was awarded in the decree pending appeal despite husband's failure to obtain a stay and post a supersedeas bond; (c) making wife solely responsible for post-decree mortgages on the homestead; (d) failing to follow remand instructions in valuing the family business; and (e) using different valuation dates for different assets without explanation. We affirm but remand for clarification that wife is not liable to both the mortgage company and husband for the mortgage she placed on the homestead.
FACTS
The underlying facts about the parties' marriage and the original dissolution decree are set out in Wiedewitsch v. Erickson, C9-02-2080, 2003 WL 22014641 (Minn.App. Aug. 26, 2003). In that opinion, this court reversed and remanded the issue of the award of the homestead to wife, instructing the district court to determine if the property division fairly compensated husband for the invasion of his substantial non-marital interest in the homestead. Id. at *3-4. This court also instructed the district court to make findings on the value and character of the Breezy Point property, the Longville cabin, and the family business, Plumbing Heating Economizers, Inc. Id. In remanding, this court stated that "a restructuring of the property division may be required" to make the division equitable. Id. at *4.
In February 2004, husband submitted a "Remand Pre-Hearing Memorandum" to the district court, alleging that wife placed mortgages in the amount of $110,000 on the Backus homestead after the court awarded it to her in the original decree. At a subsequent hearing regarding the issues and process on remand, wife's counsel noted that neither party had moved for a new trial and suggested the remanded matters should be submitted based on the trial record and additional briefing by counsel. Wife's counsel argued that the district court, on remand, was not allowed to take or consider new evidence and pointed out that what husband had submitted to the court was new evidence.
Husband's counsel argued that wife should have to account for the proceeds of the post-decree mortgage she placed on the homestead, the amount of which was greater than the marital interest in that property. But husband's counsel agreed with the suggestion of additional briefing and proposed findings based on the trial record, after which the district court could determine if it needed additional evidence. An agreement was reached that the parties would file contemporaneous briefs based on the trial record, and proposed findings of fact on the remanded issues.
Wife's counsel asserted that wife used the proceeds of the $110,000 mortgage for necessities such as creating a new career as a realtor, paying legal bills, paying bills assigned by the court, and living expenses.
Despite the agreement to limit the briefs to the trial record, husband asserted in his brief that wife's post-decree mortgages on the homestead constituted an invasion of husband's non-marital interest in the property to the extent of $88,944.47 that "must be accounted for in the division of the parties' marital estate." Husband argued that only the marital estate could be divided. Regarding the business, husband argued that the appropriate valuation date is December 31, 2001, the date of the business tax returns for 2001, because these were the available data on the business closest to the October 31, 2001 date used for valuation of all but one of the parties' other assets. Husband argued that the business had no marital value because neither its net operating income nor its assets increased in value during the marriage. Husband asserted that the marital interest in the Breezy Point property was $7,376 and that the marital interest in the Longville cabin was $11,845.59. Husband calculated the total marital estate as $137,033.82, his non-marital interest in the homestead as $258,944.47, concluded that the district court "must" award the homestead to husband, and proposed that he assume payment of the post-decree mortgages as payment of wife's share of the marital property.
In her brief, wife argued that the findings in the original decree failed to take into account that $40,505.22 in marital money was used to reduce the $90,230.57 home-equity credit line used to purchase the homestead and argued that the Schmitz calculation in the original decree "must be revised" thereby changing the non-marital and marital interests in the homestead. Wife argued that the original dissolution court had awarded husband numerous assets in which wife had a marital interest. In an exhibit attached to her brief, wife computed that $142,181.35 of marital assets were awarded to husband and $23,951.20 in marital assets were awarded to wife, resulting in husband having been awarded $59,115 of wife's interest in the marital estate. Wife argued that husband failed to trace a non-marital interest in the plumbing and heating business sufficient to justify a finding of non-marital interest and asserted that the martial value of the asset was $218,881 as listed on an exhibit in the trial, making her share of that interest $109,441. Wife also argued that she "should get credit" for half of the $59,493 used to pay down the business debt during the marriage and half of the $31,000 in the business's bank accounts when the dissolution began. Wife concluded that Exhibit 1 introduced at trial showed total assets of more than $1.6 million shortly before the dissolution and argued that the award of the homestead to her constituted only 20% of the total value of the estate. Wife offered supplemental findings to support the award of the homestead to her as an equitable division of the marital property and, in the alternative, argued that the record supported a finding of unfair hardship justifying an award of non-marital property to her.
In July 2004, the district court issued an amended judgment based on "a review of the evidence already adduced at trial and the submissions of the parties." Relevant to this appeal, the district court found that December 31, 2001, is an appropriate valuation date for the business because it is the "nearest date of records constituting relevant evidence as to the value of the business. . . ." The district court further found that although the net operating income and value of the business assets increased during the first two years of the marriage, both decreased during the second two years of the marriage due to the move to Backus and the change in plumbing codes. The district court found that "[a]s of the valuation date, the business's assets were reduced and the net operating income was less than on the date of marriage. Accordingly, the Court finds that the business has no marital value to divide and is entirely [husband's] non-marital property." The relevant findings in the original judgment were amended accordingly.
Finding 17 of the original judgment, regarding the homestead, was vacated and replaced in pertinent part with:
On September 24, 2002, [wife], having been awarded the Backus homestead, placed a mortgage on the property in the amount of $60,000. On November 27, 2002, after [husband] filed and served his appeal, [wife] placed a second mortgage on the Backus property in the amount of $40,000, which she increased to $50,000 on January 31, 2003. These mortgages now encumber the homestead property.
And Conclusion of Law 12 of the original judgment was vacated and amended to read in pertinent part:
[Husband] is awarded all right, title, interest and equity free and clear of any claim on the part of [wife] in and to the real property known as the Backus homestead, subject to the remaining amount due on the mortgages placed on the property by [wife]. . . . [Wife] shall have no right, title, interest or equity in and to [the Backus] property, having received out of the property the sum of $110,000 by the mortgages she placed on the property. [Husband], upon [wife] vacating the property, shall assume and pay the mortgages on the property and indemnify and hold [wife] harmless on those mortgages.
The court used "Petitioner," who was husband, which appears to be a clerical mistake.
The court used "Petitioner," who was husband, which appears to be a clerical mistake.
Wife moved for a new trial or, alternatively, amended findings. On the day before the hearing on wife's motion, wife served husband and faxed to the court a memorandum in support of her motion and wife's affidavit stating that the current balance of mortgages on the homestead is $230,000 rather than $110,000 as stated in the amended judgment and explaining that the proceeds were used for living expenses and to pay off debts. Wife's counsel argued that a new trial was necessary to determine the value of Plumbing Heating Economizers, Inc. because the court did not have sufficient information to value the business. Wife's counsel acknowledged that this position was contrary to his earlier opposition to husband's request for additional evidence regarding valuation of the business, but said "having seen what the Court has done," he had "come around to [husband's counsel's] way of thinking on this."
In September 2004, the district court issued an order stating that wife's memorandum and affidavit were untimely under Minn. R. Civ. P. 59.04 and 6.04, but that the court would consider them in the interests of justice. The order prohibited wife from further encumbering the homestead, allowed husband to submit a responsive brief to address the issues in wife's memorandum and affidavit, and specifically requested that husband address the $230,000 mortgage on the homestead.
Husband's counsel filed a responsive memorandum and supporting affidavit by husband's counsel stating that on June 21, 2004, wife placed a new $230,000 mortgage on the homestead. Attached to the affidavit was a notice of lis pendens filed by husband with the county recorder on February 26, 2003, and a copy of wife's $230,000 mortgage.
In January 2005, the district court denied wife's motions for new trial and amended findings, ordered husband to be responsible for $110,000 of the mortgage on the homestead, ordered wife to be responsible for the additional $120,000 mortgage, and entered judgment against wife and for husband in the amount of $120,000.
Wife appeals from the July 2004 amended judgment, the September 2004 order, and the January 2005 order.
DECISION
I. Consideration of new evidence absent evidentiary hearing
Procedural and evidentiary rulings are within the district court's discretion and are reviewed for an abuse of discretion. Braith v. Fischer, 632 N.W.2d 716, 721 (Minn.App. 2001), review denied (Minn. Oct. 24, 2001). Wife asserts that the district court's consideration of evidence of the post-decree mortgage(s) and use of the proceeds was error or an abuse of discretion because it was not contained in the original trial record. We find no merit in this challenge.
Wife relies on Rathbun v. W.T. Grant Co., 300 Minn. 223, 219 N.W.2d 641 (1974), and Johnson v. Johnson, 563 N.W.2d 77, 78 (Minn.App. 1997), review denied (Minn. June 30, 1997), for the proposition that "a trial court that makes amended findings may consider only the evidence submitted during the trial, and it may not go outside of the trial record to consider new evidence." But wife misrepresents the rule, which actually reads, " [i]n considering [a] motion for amendment of its findings, the trial court must apply the evidence as submitted during the trial of the case. It may neither go outside the record, nor consider new evidence." Rathbun, 300 Minn. at 238, 219 N.W.2d at 651 (emphasis added). Both Rathbun and Johnson addressed motions for amended findings. See id. at 238, 219 N.W.2d at 651; Johnson, 563 N.W.2d at 78.
In this case, the district court was required to make additional findings on remand from this court. "It is the duty of the trial court on remand to execute the mandate of this court strictly according to its terms. The trial court has no power to alter, amend, or modify our mandate." Halverson v. Vill. of Deerwood, 322 N.W.2d 761, 766 (Minn. 1982) (citations omitted). "When the trial court receives no specific directions as to how it should proceed in fulfilling the remanding court's order, the trial court has discretion in handling the course of the cause to proceed in any manner not inconsistent with the remand order." Duffey v. Duffey, 432 N.W.2d 473, 476 (Minn.App. 1988) (citing John Wright Assocs., Inc. v. City of Red Wing, 256 Minn. 101, 102, 97 N.W.2d 432, 434 (1959)). Here, counsel for the parties agreed to submit additional briefing and proposed findings on the remanded issues based on the trial record. At the time of this agreement, the district court had already received information that wife had placed a mortgage on the homestead, and wife's counsel confirmed that wife had encumbered the property and stated that she used the proceeds for living expenses and to pay debts. After the district court amended the judgment, wife voluntarily produced additional evidence concerning the amount of the mortgage(s) and use of the proceeds. At no time did wife argue to the district court that it could not consider the post-decree mortgages. Even when wife changed her position from opposing an evidentiary hearing to requesting an evidentiary hearing, wife was focused on evidence concerning valuation of the business and did not propose to present any evidence relating to the mortgage(s), her use of the proceeds, or any increased value to the homestead at an evidentiary hearing.
Wife argues that husband's failure to obtain a stay or to post a supersedeas bond when he appealed the original judgment left her free to encumber the homestead that was awarded to her, but this argument does not support her apparent assertion that the district court could not consider the encumbrance on remand. Minn. Stat. § 518.58, subd. 1a (2004), provides in pertinent part:
If the court finds that a party to a marriage, without consent of the other party . . ., during the pendency of the current dissolution . . ., encumbered . . . marital assets except . . . for the necessities of life, the court shall compensate the other party by placing both parties in the same position that they would have been in had the . . . encumbrance . . . not occurred. . . . In compensating a party under this section, the court, in dividing the marital property, may impute the entire value of an asset and a fair return on the asset to the party who . . . encumbered . . . it. . . . [T]he absence of a restraining order against the . . . encumbrance . . . of marital property is not available as a defense under this subdivision.
(Emphasis added.) And the "reconsideration of a case on remand (and a subsequent appeal) is a continuation of the original proceeding." Mattson v. Underwriters at Lloyds of London, 414 N.W.2d 717, 720 (Minn. 1987); see Rooney v. Rooney, 669 N.W.2d 362, 371 (Minn.App. 2003) (applying Mattson in a dissolution context), review denied (Minn. Nov. 25, 2003), cert. denied, 124 S. Ct. 2075 (2004). We conclude that the encumbrances on the homestead occurred "during the pendency of the current dissolution" action under Minn. Stat. § 518.58, subd. 1a, and hence that the district court was required to consider the mortgages.
The district court did not abuse its discretion in considering the evidence presented by the parties concerning the mortgages and the use of the mortgage proceeds. Wife obtained $110,000 cash from the value of the homestead when the total marital estate was found by the district court to have a value of $137,034. Under these circumstances, the district court did not abuse its discretion in requiring wife to repay the additional $120,000 in mortgage funds that she obtained.
For the first time on appeal, wife argues that she was deprived of the opportunity to present evidence that she used the proceeds of the mortgage(s) to improve and increase the value of the property as well as for the necessities of life. The district court considered her untimely affidavit detailing her use of the funds (which did not include any assertion that the proceeds were used to improve the homestead). And wife did not request an opportunity to present any further evidence on this issue though testimony or affidavit. We conclude that wife waived this issue by failing to assert it in the district court. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).
II. Entry of judgment for $120,000 against wife
"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) (citing Chamberlain v. Chamberlain, 615 N.W.2d 405, 412 (Minn.App. 2000), review denied (Minn. Oct. 25, 2000), and Ebnet v. Ebnet, 347 N.W.2d 840, 842 (Minn.App. 1984)). 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). Appellate courts "will affirm the trial 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 v. Antone, 645 N.W.2d 96, 100 (Minn. 2002).
Wife argues that entering a $120,000 judgment in favor of husband when she is already liable on a note to the lending institution for the full amount of the mortgage ($230,000) has increased her liability to $350,000. Husband concedes that he would only be entitled to enforce this judgment for any amount he ultimately has to pay toward the additional $120,000 encumbrance on the homestead. Husband does not object to a clarification in the judgment that wife is not liable to both the mortgage company and husband for this amount. We appreciate husband's candor and reasonableness on this point. We remand on this issue with specific directions to the district court to insert such clarifying language into the judgment.
III. Husband's liability for $110,000 of the mortgage
Wife speculates that husband will not fulfill his obligation under the judgment to pay $110,000 of the encumbrance on the homestead. Because this argument is premature and based only on speculation, we decline to address it. We note that although wife remains liable on the note for this amount, the homestead remains encumbered to secure payment.
IV. Valuation of the business
On remand, the district court was directed to make findings "as to the fair market value of the business, whether the business is marital or non-marital property, or whether the apportionment of the business consists of both marital and non-marital interests." Wiedewitsch, 2003 WL 22014641 at *4. The district court found that the appropriate date for valuation of the business was December 31, 2001, and found that the business was entirely non-marital, but failed to make findings on the fair market value of the business. Generally, the district court must execute the mandate of this court strictly according to its terms on remand and has no power to alter, amend, or modify our mandate. Halverson, 322 N.W.2d at 766.
We reject as without merit wife's objection to the December 31, 2001 valuation date for the business; the district court made the finding required by Minn. Stat. § 518.58, subd. 1 (2004), to explain why that date was fair and equitable. And there is no merit to wife's assertion that December 31, 2001, should have been used as the valuation date for the homestead because the parties stipulated to the value of the homestead, and the reason supporting use of a different date to value the business does not apply to the homestead. Because the record supports the district court's finding that as of December 31, 2001, "the business's assets were reduced [below the value of the assets at the time of marriage] and the net operating income was less than on the date of marriage," and the finding supports the district court's conclusion that, therefore, "the business has no marital value to divide and is entirely [husband's] non-marital property," we conclude that there is nothing to be gained by remanding this case for a calculation of the fair market value of the business.
V. Valuation of "Princeton house"
We decline to address wife's arguments concerning the district court's treatment of proceeds from the sale of what is referred to as the "Princeton house" and the determination that the proceeds were non-marital in the original judgment because this issue was not within the scope of the remand.