Opinion
No. A03-394.
Filed January 13, 2004.
Appeal from the District Court, LeSueur County, Peterson, Judge, File No. F301000065, Reversed and remanded.
Keith J. Kerfeld, Kafi C. Linville, Tewksbury, Kerfeld, Zimmer, Minneapolis, Mn.
Raphael J. Miller, Gaylord, Mn, (for appellant).
Dennis P. Moriarty, Jaspers, Moriarty Wallburg, P.A., Shakopee, Mn, (for respondent).
Considered and decided by Peterson, Presiding Judge; Toussaint, Chief Judge; and Harten, Judge.
This opinion will be unpublished andmay not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
In this appeal challenging the property distribution in a marital dissolution, appellant-husband argues that the district court (a) erred in concluding that certain land was respondent-wife's nonmarital property; (b) violated Minn. Stat. § 518.58, subd. 1 (2002), by awarding the land to wife based on husband's misconduct; and (c) awarded wife an inequitably large portion of the marital assets. We reverse and remand
FACTS
Appellant-husband Roger W. Sirek and respondent-wife Carol M. Sirek married in 1983 and began farming in a cooperative arrangement with husband's parents. In March 1990, they entered into a contract for deed to purchase three parcels of farmland from husband's mother, Arvilla Sirek (Sirek), for $141,000. At that time, the fair market value of the land was approximately $180,000, but the purchase price was discounted because husband had worked on the farm without a salary for several years before the marriage.
Parcel one contained approximately 80 acres, parcel two contained five acres, and parcel three contained approximately 40 acres.
Husband's father died in October 1989.
In 1995, the parties began having trouble making the contract-for-deed payments, and payments were often made late. Sirek ultimately received all payments due under the contract for deed through June 1997. By 1997, the parties' marriage relationship had deteriorated, and although they continued living in the same house, they no longer had regular communication with one another.
In July 1999, Sirek spoke with an attorney about canceling the contract for deed, and in October 1999, the attorney prepared a mediation notice and personally delivered the notice to husband Husband read the notice and placed it with other mail on the kitchen counter. The parties routinely placed mail in this location, and wife testified that she regularly looked at the mail placed there.
After the 14-day mediation period expired, Sirek's attorney personally served husband with the notice of cancellation of the contract for deed. The cancellation notice did not contain language required under Minn. Stat. § 559.21, subd. 3 (1998), identifying the event that triggered the commencement of the reinstatement period, but when Sirek's attorney served the notice, he told husband that he had 60 days from the date of service to reinstate the contract for deed or he would lose his interest in the property. Husband placed the cancellation notice on the kitchen counter where he regularly put mail, and it sat there for a period of days. Husband did not tell wife that he had received the mediation notice or the cancellation notice, and wife never saw either notice. Husband made no effort to reinstate the contract.
When the reinstatement period expired on January 1, 2000, Sirek's attorney recorded the cancellation of contract for deed. At that time, the fair market value of the farmland was approximately $374,000, and the total amount owed on the contract for deed was approximately $110,680. To reinstate the contract for deed, the parties would have had to pay approximately $32,000.
After the cancellation, husband continued farming part of the land, and Sirek rented out the remainder.
In January 2001, husband petitioned for dissolution of the parties' marriage, and in August 2001, during the discovery process for the dissolution, wife first became aware of the proceeding to cancel the contract for deed. Wife began a separate action challenging the cancellation in which she alleged fraud, collusion, insufficiency of notice, and unjust enrichment.
A March 2002 judgment dissolved the parties' marriage and addressed child custody and child support. The judgment reserved property and debt issues pending the outcome of wife's action challenging the cancellation of the contract for deed.
Following a trial in wife's action, the district court in that action concluded that the cancellation notice was statutorily improper and ambiguous and did not provide either husband or wife with adequate notice, but the defects were cured as to husband by the statements Sirek's attorney made when he served husband with the notice. The court concluded that husband was divested of any interest in the property but that husband's conduct prevented wife "from receiving actual and/or constructive notice that a cancellation of the contract for deed was being commenced against the property," and as a result of the defective notice, wife's "interest in Parcels 1, 2, and 3 was not terminated."
The court also concluded that wife failed to prove that husband and Sirek, through conspiracy or collusion, prevented wife from learning about the cancellation, and, therefore, failed to prove that either committed fraud against wife. Finally, the court concluded that wife had the right to either reinstate the contract for deed by paying Sirek the delinquent principal and interest payments, plus the amount Sirek had paid for property taxes, or obtain a warranty deed from Sirek in satisfaction of the contract for deed by paying Sirek the outstanding unpaid principal amount due, plus interest and property taxes. Husband did not appeal the judgment in wife's action.
After wife's action challenging the cancellation proceeding was completed, the district court issued a supplemental judgment in the dissolution proceeding. In the supplemental judgment, the court awarded wife all right, title, and interest in parcels one, two, and three, "subject to the contract for deed and life estate interests of Arvilla Sirek." This appeal followed.
DECISION
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. Chamberlain v. Chamberlain, 615 N.W.2d 405, 412 (Minn. App. 2000) (clear abuse of discretion), review denied (Minn. Oct. 25, 2000); Ebnet v. Ebnet, 347 N.W.2d 840, 842 (Minn. App. 1984) (misapplication of the law). Whether property is marital or nonmarital is a question of law, but a reviewing court must defer to the district court's underlying findings of fact and will not reverse those findings unless they are clearly erroneous. Swick v. Swick, 467 N.W.2d 328, 330 (Minn. App. 1991), review denied (Minn. May 16, 1991).
Husband argues that the district court incorrectly determined that the three parcels of land subject to the contract for deed are nonmarital property. Before addressing this argument, it is necessary to clarify that although the supplemental judgment in the dissolution proceeding states that "[wife] shall be awarded all right, title and interest to the [three parcels]," this award is made "subject to the contract for deed and life estate interests of Arvilla Sirek." The parties did not own the three parcels of land at any time during their marriage or during the dissolution proceeding, but rather owned only a vendee's interest in a contract for deed; therefore, the district court could not award the parcels to either party in the dissolution. But it is clear that what wife was actually awarded in the supplemental judgment was the right to obtain title to the three parcels by performing the vendee's obligations under the contract for deed.
"Marital property" means property . . . acquired by the parties, or either of them, to a dissolution . . . proceeding at any time during the existence of the marriage relation between them . . . but prior to the date of valuation under section 518.58, subdivision 1. All property acquired by either spouse subsequent to the marriage and before the valuation date is presumed to be marital property[.] . . . The presumption of marital property is overcome by a showing that the property is nonmarital property.
"Nonmarital property" means property . . . acquired by either spouse before, during, or after the existence of their marriage, which
(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.
Minn. Stat. § 518.54, subd. 5 (2002).
To overcome the presumption of marital property, a party must show by a preponderance of the evidence that the property meets one of the definitions of nonmarital property provided in Minn. Stat. § 518.54, subd. 5. Gottsacker v. Gottsacker, 664 N.W.2d 848, 853 (Minn. 2003) (method of overcoming presumption); Crosby v. Crosby, 587 N.W.2d 292, 296 (Minn. App. 1998) (requiring showing by a preponderance of the evidence), review denied (Minn. Feb. 18, 1999).
The district court concluded that the vendee's interest awarded to wife "should fairly be considered non-marital." Husband argues that because the parties entered into the contract for deed in 1990, which was during the marriage and long before the valuation date, and none of the definitions of nonmarital property in Minn. Stat. § 518.54, subd. 5, applies, the presumption of marital property was not overcome, and the district court's conclusion is clearly erroneous. Wife argues that because the valuation date for the dissolution is December 13, 2001, and she acquired her interest in the three parcels on October 21, 2002, when the district court ruled in her favor in her action challenging the contract cancellation, she acquired the interest after the valuation date, and, therefore, the interest is nonmarital.
Wife's argument mischaracterizes the result of her action challenging the contract cancellation. Her action did not allow her to acquire an interest in the three parcels. The parties acquired an interest in the parcels in 1990 when they entered into the contract for deed. Sirek attempted to terminate this interest, but because the cancellation notice was defective, wife's interest in the parcels was not terminated. Guider v. Mayco, Inc., 312 Minn. 493, 498, 252 N.W.2d 601, 604 (1977). Thus, wife did not acquire her interest in the parcels on October 21, 2002, when the district court ruled in her favor; she retained an interest that was acquired during the marriage. Because wife did not show by a preponderance of the evidence that her interest in the three parcels meets one of the definitions of nonmarital property in Minn. Stat. § 518.54, subd. 5, the district court erred in concluding that the interest should be considered nonmarital. See Wopata v. Wopata, 498 N.W.2d 478, 484 (Minn. App. 1993) (holding that "[w]here a party cannot show that nonmarital money was invested in a readily traceable asset, the trial court should characterize it as marital property").
Husband argues that awarding wife the marital interest in the three parcels was an abuse of the district court's discretion because the award was based on husband's alleged marital misconduct. Upon dissolution of a marriage, "the court shall make a just and equitable division of the marital property of the parties without regard to marital misconduct." Minn. Stat. § 518.58, subd. 1 (2002).
Wife contends that husband's argument that misconduct should not have been a factor in the property division is irrelevant because Minn. Stat. § 518.58, subd. 1, provides that marital property should be divided without regard to marital misconduct, and the interest in the three parcels is nonmarital property. But, as we have already explained, the interest awarded to wife is marital property.
The district court took judicial notice of the file for wife's separate action and concluded that by husband's conduct in
violating his fiduciary and marital obligations to [wife] as concerns cancellation of at least his interest in the real property subject to the Arvilla Sirek Contract for Deed, [husband] has jeopardized marital assets and equity which should have inured to the benefit of both parties. By his conduct [husband] has in effect forfeited any rightful marital claim to any of the real property being redeemed by [wife] from mortgages or contract cancellations. By her own efforts and financial dealings, and in spite of [husband's] conduct, [wife] may retain an interest in the real property. All facts considered, the real property interest awarded [wife] in the Contract for Deed matter . . . should fairly be considered non-marital and beyond any legal or equitable claim by [husband]. . . . This decision on [husband's] ["]non-share" in the redeemed property also results in a fair, reasonable, and equitable division of the assets of this relationship when viewed in the total context of the items awarded to [husband] as non-marital.
(Emphasis added.)
These statements demonstrate that the district court improperly considered marital misconduct when making the property division. The statements indicate that the district court concluded that because husband failed to act to protect the parties' interests in the three parcels during the cancellation proceeding, he forfeited his marital interest in the parcels and wife's interest should be considered nonmarital.
When dividing marital property, the court shall "consider the contribution of each [spouse] in the acquisition, preservation, depreciation or appreciation in the amount or value of the marital property." Minn. Stat. § 518.58, subd. 1 (2002). Also, during a marriage dissolution, or while contemplating commencing a marriage dissolution, each spouse owes a fiduciary duty to the other with respect to marital assets. Minn. Stat. § 518.58, subd. 1a (2002).
If the court finds that a party to a marriage, without consent of the other party, has in contemplation of commencing, or during the pendency of, the current dissolution . . . transferred, encumbered, concealed, or disposed of marital assets except in the usual course of business or 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 transfer, encumbrance, concealment, or disposal not occurred.
Id.
The district court did not find that husband's conduct with respect to the contract cancellation changed the amount or value of the marital property or that husband transferred, encumbered, concealed, or disposed of marital assets during, or in contemplation of the dissolution. The court found only that husband's conduct jeopardized marital assets. It is ironic, but even though husband's conduct jeopardized marital assets, his failure to inform wife about the contract-cancellation notice actually became the basis for wife's successful challenge to the cancellation proceeding, which ultimately resulted in preserving the vendee's interest in the contract for deed as a marital asset.
It is possible that if husband had informed wife about the cancellation proceeding, she would have acted to reinstate the contract for deed, and, therefore, would not have had to bring her action challenging the cancellation. But the record does not demonstrate that she would have acted. The record in this dissolution proceeding includes a copy of a memorandum issued by the district court in wife's action. That memorandum states:
[I]t is questionable whether [wife] would have acted if she had known. While this court believes she would have acted and would not have allowed the contract to be cancelled, it is also clear [wife] was in default on this contract, and yet [wife] never inquired of her husband or her mother-in-law as to the status of the contract for deed. Certainly, there was a lack of communication between the parties due to the status of [their] marriage, however, [wife] still had a duty to manage her affairs.
Husband argues that awarding wife the entire marital interest in the three parcels was inequitable and asks this court to grant him at least one half of the marital interest in the parcels. We will not determine in the first instance whether husband should receive any portion of the marital interest in the three parcels. Instead, because the division of property was improperly based on husband's conduct and on the district court's erroneous legal conclusion that wife's interest in the three parcels should be considered nonmarital property, we reverse the property distribution and remand to the district court for further proceedings consistent with this opinion.