Filed September 24, 2002.
Appeal from the District Court, Hennepin County, File No. DC247499.
Jane Binder, Christine Howard, (for appellant)
Dennis W. Strid, (for respondent)
Considered and decided by Willis, Presiding Judge, Minge, Judge, and Parker, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
In this dissolution proceeding of the parties' 25-year marriage, appellant Kathleen Ann Lundeen argues that the district court erred by (a) establishing a monthly maintenance award that was insufficient to meet her reasonable monthly needs; (b) failing to award her permanent maintenance; (c) failing to require respondent John Eric Lundeen to secure his maintenance obligation with life insurance; (d) failing to restrict husband's use of a joint asset pending its sale; (e) finding her liable for taxes on certain funds husband spent; (f) failing to secure her interest in the family business; and (g) failing to award her need-based and conduct-based attorney fees. We affirm in part, reverse in part, and remand.
DECISION Sufficiency of Maintenance Award
Wife first argues that the district court erred by not ordering spousal maintenance in an amount sufficient to meet her needs. In establishing the maintenance amount, wife contends that the district court failed to consider the income tax impact on her maintenance award as well as husband's increased ability to pay maintenance.
On appeal from an award of maintenance, appellate courts determine only whether the district court abused its broad discretion. Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982). This court will not find an abuse of discretion absent "a clearly erroneous conclusion that is against logic and the facts on [the] record." Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).
A district court may award maintenance if it finds that a spouse is unable to support herself reasonably through appropriate employment in view of the standard of living established during the marriage. Minn. Stat. § 518.552, subd. 1(b) (2000). While Minn. Stat. § 518.552, subd. 2 (2000), lists factors for the court to consider in determining the amount and duration of maintenance, the issue is, in essence, a balancing of the recipient's need against the obligor's ability to pay. Erlandson, 318 N.W.2d at 39-40.
Here, we observe that the district court appropriately considered all of the statutory factors. See Minn. Stat. § 518.552, subd. 2(a)-(h) (factors to be considered when determining amount and duration of maintenance include financial resources of parties; duration of marriage; standard of living during marriage; age, education, and physical condition of the spouse seeking maintenance; time necessary to acquire sufficient education to enable spouse seeking maintenance to find appropriate employment; probability of completing education and becoming fully or partially self-supporting; and ability of spouse from whom maintenance is sought to meet needs of both parties).
The record reveals that the parties had a traditional marriage. Wife stayed home to care for the children while husband was the wage-earner, employed as CEO of their closely-held corporation, AVVR, Inc. During the last years of their marriage, the corporation paid wife $43,200 per year in salary, although she performed no duties for the corporation. Husband, as president, earned a gross annual income of approximately $187,000. The couple also earned gross annual income of $64,800 from a rental property. The court determined husband's current net monthly income to be approximately $12,000 and his reasonable monthly expenses to be $5,180. This leaves husband with a $6,820 monthly surplus. Wife's reasonable monthly expenses were determined to be $4,715. The court found that the parties enjoyed a comfortable, affluent lifestyle during their marriage, acquiring several properties and other assets without accumulating any significant debt. The parties' sizeable marital estate was distributed nearly equally and its division is not in dispute.
The court also considered the health of both parties. Wife is a breast cancer survivor, but testified that her prognosis is good. Husband suffers from degenerative symptoms of diabetes and takes insulin two to three times daily. He testified that as a result of his illness, he intends to retire after selling the business.
The court found that given wife's age, lack of a college degree, and absence from the workforce during marriage, it was unlikely she could acquire sufficient education or training to find appropriate employment. Given the standard of living the parties enjoyed during their marriage, the court awarded wife $4,500 per month in temporary maintenance, finding that wife would be self-supporting after the sale of the business.
The difference between wife's reasonable monthly expenses and her maintenance award creates a monthly deficit of $215 per month. Husband argues that because the court found that wife included $832 per month in transportation expenses in her monthly budget which are presently paid for by the family business, wife actually has a monthly surplus of $617. However, the court's findings are unclear as to whether the transportation expenses were subtracted to arrive at the $4,715 figure.
Wife argues that her reasonable monthly expenses are greater than $4,715 because the court failed to consider the income tax she will have to pay on her maintenance award and erred in reducing her monthly expenses given the parties' standard of living. Wife also argues that husband has the ability to pay more maintenance.
Whether to consider tax consequences is discretionary with the district court, but the district court should not speculate about tax consequences. Miller v. Miller, 352 N.W.2d 738, 744 (Minn. 1984). To consider tax consequences, a district court "must have sufficient information that the actual tax liability * * * can be calculated with a reasonable degree of certainty." Miller, 352 N.W.2d at 744. Here, although the court's order states that income tax consequences were considered in establishing wife's maintenance award, neither the record nor the order reflects the court's consideration.
With respect to the budgetary reductions made by the court, wife contests the reduction in clothing allowance to $120 per month. The court reduced wife's budget after reasonably considering that wife is not employed, and because wife testified that she did not spend extravagantly and always looked for "deals." Wife also contests the court's reduction of her entertainment expenses and allotted "spending money." However, the record reveals that wife testified that the $300 per month listed in miscellaneous spending money actually went to her adult daughter, not herself, as a monthly expense. She also testified that she went out to eat less than one night a week, and that she was a "careful" spender and that when she did go out to eat, it was to moderately priced restaurants. Consequently, the court found that $200 in "spending money" and $300 for "entertainment expenses" was excessive and reduced those amounts, although the order does not specify what reduction was made.
The court's findings of wife's reasonable monthly expenses are also supported by evidentiary exhibits that include husband's analysis of wife's monthly expenses substantiated by her own bank and credit card statements. Including expenses currently paid for by husband and AVVR, wife's average monthly expenses from 1995-2000 were $4,006. Thus, on the record before us, we cannot conclude that the court abused discretion in finding wife's reasonable monthly expenses to be $4,715. However, because there is insufficient evidence to support the court's findings that wife is able to meet her reasonable monthly expenses, including tax liability, with her present maintenance award, and in light of husband's ability to pay, we conclude that the district court erred in awarding wife $4,500 in maintenance and remand for reconsideration of wife's net monthly expenses and maintenance award.
Temporary vs. Permanent Maintenance
Wife next argues that the district court erred in not awarding permanent maintenance. The district court awarded wife temporary maintenance while retaining jurisdiction. This court reviews a district court's maintenance award under an abuse-of-discretion standard. Erlandson, 318 N.W.2d at 38. "There must be a clearly erroneous conclusion that is against logic and the facts on record before this court will find that the trial court abused its discretion." Rutten, 347 N.W.2d at 50 (citation omitted).
Section 518.552, subdivision 2, sets forth factors to be considered in determining the amount and duration of spousal maintenance. Where there is uncertainty as to whether an award of permanent maintenance is necessary, the district court must order permanent maintenance but retain jurisdiction for later modification. Minn. Stat. § 518.552, subd. 3 (2000). There is no bright-line rule for determining when permanent maintenance is appropriate; rather each case must be decided on its own facts and no single statutory factor for determining the type of maintenance is dispositive. Erlandson, 318 N.W.2d at 39. The relevant statutory factors include consideration of
(a) the financial resources of the party seeking maintenance, including marital property apportioned to the party * * *;
(b) the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment, and the probability, given the party's age and skills, of completing education or training and becoming fully or partially self-supporting;
(c) the standard of living established during the marriage;
(d) the duration of the marriage and, in the case of a homemaker, the length of absence from employment * * *; [and]
(f) the age, and the physical and emotional condition of the spouse seeking maintenance.
Minn. Stat. § 518.552, subd. 2 (2000). It appears that the facts found by the district court present the situation envisioned by the legislature for permanent maintenance. The parties had a long-term marriage, with one spouse out of the workforce for a considerable period of time. In addition, the court found it was unlikely wife was able to earn the income necessary to support the standard of living established during the marriage. Moreover, although the court found that wife would have the means to become self-sufficient when AVVR is sold, it provided no detailed evidence in support of that finding.
With respect to the value of AVVR, the court found that the reasonable value of AVVR, Inc. was between $1,958,000 and $2,450,433 based on expert testimony from both parties. Assuming a third party purchased 100% of the AVVR stock, the court found that the net income after taxes would be between $1,441,100 and $1,803,200. However, the court could not determine with any accuracy either the value of the business or the tax consequences, but nonetheless made the finding that "[b]oth parties will have sufficient assets to live off of while not forcing one party or the other to work past retirement."
While it is conceivable that wife will become self-sufficient following the sale of the business, until the structure and price of the sale are known, it is speculative to assume that the net sale price of AVVR will be great enough to generate sufficient investment income. See Fink v. Fink, 366 N.W.2d 340, 342 (Minn.App. 1985) (noting interest on maintenance recipient's property settlement is to be considered in determining need for maintenance but "[c]ourts normally do not expect spouses to invade the principal of their investments to satisfy their monthly financial needs"). Thus, it is uncertain that wife will have the means to become self-sufficient. Further, until husband retires, it is likely he will have ample resources to provide wife with spousal maintenance. Should husband's resources change upon retirement, or should wife's investment prove adequate, he can subsequently move for modification under Minn. Stat. § 518.64 (2000). Accordingly, we conclude that the court's findings support an award of permanent maintenance and that the district court erred in awarding temporary maintenance.
Security Requirement for Spousal Maintenance
Wife argues that the district court erred in failing to require husband to secure his spousal maintenance obligation with life insurance. The district court has discretion to determine "whether the circumstances justifying an award of maintenance also justify securing it with life insurance." Laumann v. Laumann, 400 N.W.2d 355, 360 (Minn.App. 1987), review denied (Minn. Nov. 24, 1987);Minn. Stat. § 518.24 (2000). Life insurance on the obligor's life is justified when it would afford the receiving spouse "a measure of security for loss of maintenance in the event her husband should predecease her." O'Brien v. O'Brien, 343 N.W.2d 850, 853 (Minn. 1984). There is no requirement that an award of maintenance be secured by life insurance. Minn. Stat. § 518.24.
Here, because the district court awarded spousal maintenance only until the court-ordered sale of AVVR, it concluded that it was unnecessary for husband to secure insurance for his obligation.
Requiring some form of security for spousal maintenance is generally limited to cases where there is permanent spousal maintenance, a marriage of long duration, and the dependent spouse's age and lack of marketable skills justify it. Arundel v. Arundel, 281 N.W.2d 663, 667 (Minn. 1979); Walker v. Walker, 553 N.W.2d 90, 96 (Minn.App. 1996). However, as husband points out, the cost and feasibility of obtaining such insurance was never briefed or argued. Generally, this court will not consider matters not argued and considered in the court below. Thiele v Stich, 425 N.W.2d 580, 582 (Minn. 1988). Moreover, because wife's need for ongoing maintenance after the sale of AVVR is speculative, the district court did not err in failing to require husband to obtain an insurance policy to secure his maintenance obligation.
Rental Income Account
The parties own a commercial building that generates rental income of $64,800 annually. The court did not award the building to either party. Instead, the court ordered its sale with the net sale proceeds to be divided equally between the parties. The record indicates that husband has exercised control over the rental income account and the decree awarded husband all accounts in his name or under his control.
Wife argues that the district court erred in failing to restrict husband's use of the rental income pending the sale of the building while simultaneously requiring that she pay tax on the income. On these facts, it appears that the district court failed to fully account for division of the rental income proceeds after the dissolution but prior to the sale, essentially failing to divide the marital property as required by statute. See Minn. Stat. § 518.58, subd. 1 (2000) (stating the court "shall make a just and equitable division of the marital property"); Neubauer v. Neubauer, 433 N.W.2d 456, 461 n. 1 (Minn.App. 1988) (stating that where a decree makes no division of real estate, ownership rights remain to be determined of the omitted property), review denied (Minn. Mar. 17, 1989). See also Minn. Stat. § 518.54, subd. 5 (2000) (defining marital property as real or personal property acquired by the parties during the existence of the marriage but prior to the date of valuation).
Under the facts presented here, the valuation date of the building is functionally the date of the sale, which has yet to occur. According to the decree, the asset (the building) continues to belong to both parties prior to its sale, therefore any income and expenses (including taxes) prior to the sale should be divided equitably, and the decree does not provide for this. Therefore, division of the rental income must be determined. Moreover, providing wife equal access to the rental income account affects the issue of spousal maintenance that, as previously noted, we remand for reconsideration and recalculation. We conclude that the court erred in failing to account for the ongoing distribution of the parties' asset pending its sale and remand for its equitable distribution.
At the hearing on the parties' motions for amended findings, husband agreed to stipulate to an order that an accounting should be made of the rental income account and conceded that wife is a co-owner and entitled to half the net income.
Wife next argues that the court erred in failing to require husband to reimburse her for taxes she paid on the parties' rental income because husband expended funds from the rental income account during the dissolution for his own personal expenses. In denying wife's motion, the court found that the vast majority of the rental income was used to pay off mortgages on their marital property, thereby benefiting both parties.
The record supports the court's findings such that they are not clearly erroneous. Wife argues that because husband paid off the mortgage on the marital homestead, he reduced his maintenance obligation. Wife fails to consider that she was granted the marital homestead free of any debt, thereby increasing its value and reducing her expenses. Because both parties benefited from the rental income, the district court did not abuse discretion in apportioning the tax liability equally.
Wife further argues that the district court erred in failing to order husband to reimburse her for personal expenditures he made from the rental account funds during the pendency of the dissolution. If a party in a dissolution dissipates marital assets, "that party shall be accountable for that dissipation unless the assets are justifiably consumed to meet necessary living expenses of the parties." Volesky v. Volesky, 412 N.W.2d 750, 752 (Minn.App. 1987); Minn. Stat. § 518.58, subd. 1a (2000). Here, the court impliedly found husband's testimony credible concerning payments he made from the account. Husband testified that the payments were for debts that were primarily marital in nature and benefited both parties, such as paying joint federal taxes and homestead property taxes, and purchasing a lawnmower for wife. Moreover, the district court specifically found that wife's assertions were not credible in light of the errors in her exhibits (double-counting distributions from the account), and denied wife's motion to amend the decree. See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (explaining that reviewing courts generally affirm a trial court's credibility determinations, since the trial court is in the best position to assess the witness). Moreover, for those expenditures that improperly dissipated the parties' assets during the pendency of the dissolution proceedings, the district court properly credited husband's portion of the marital assets in that amount in accordance with Minn. Stat. § 518.58, subd. 1a.
Security Requirement for Family Business
Wife argues that the district court failed to protect her lien interest in AVVR pending its sale. In her motion for amended findings, wife moved the court to escrow AVVR's cash holdings; and to order husband not to increase his salary or take a bonus, provide weekly accounting reports, and order a neutral accountant to determine whether husband made personal expenditures with AVVR assets. Wife's argument arises from husband's postdecree salary increase of over $43,000 annually.
At the hearing on the parties' motions for amended findings, wife conceded that these issues were not addressed at trial, in part because she didn't want the business sold. Generally, a party may not raise an issue for the first time in a motion for a new trial and "[t]his court need not consider issues raised on appeal that were not raised in the trial court." Ellingson v. Burlington N. R.R. Co., 412 N.W.2d 401, 405 (Minn.App. 1987), review denied (Minn. Nov. 13, 1987); see also Thiele, 425 N.W.2d at 582 (stating appellate court generally will not consider matters not argued and considered in the court below).
The court consequently denied wife's motion but, in light of husband's fiduciary duty to assure that the assets are properly utilized, amended the prior order to allow wife to review internally generated monthly financial statements of AVVR at her own expense. Because the record supports the court's amended finding and conclusion concerning wife's interest in AVVR, it is not clearly erroneous. However, we note that wife is not precluded from seeking to enforce husband's fiduciary duty under the decree. As the district court held in conclusion of law #4 of the amended decree, husband has a fiduciary duty to wife to assure that the assets of the business, including its substantial cash resources, are properly utilized, with the knowledge that this asset is to be sold and divided between the parties.
Husband's salary increase arguably decreases the value of the asset to be sold. In the interests of judicial efficiency, we remand to the district court for a determination of whether or not husband's salary increase constitutes a breach of his fiduciary duty.
Appellant argues that the district court abused discretion in denying her both need-based and conduct-based attorney fees. An award of need-based attorney fees under Minn. Stat. § 518.14, subd. 1 (2000), "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 shall award attorneys fees in an amount necessary to enable a party to carry on or contest the proceeding, provided it finds:
(1) that the fees are necessary for the good-faith assertion of the party's rights in the proceeding and will not contribute unnecessarily to the length and expense of the proceeding;
(2) that the party from whom fees, costs, and disbursements are sought has the means to pay them; and
(3) that the party to whom fees, costs, and disbursements are awarded does not have the means to pay them.
Minn. Stat. § 518.14, subd. 1. This court will not reverse a refusal to award attorney fees unless the district court clearly abused discretion. Kitchar v. Kitchar, 553 N.W.2d 97, 104 (Minn.App. 1996), review denied (Minn. Oct. 29, 1996).
In this case, both parties accrued substantial attorney fees. Wife's fees exceed $100,000 (including expert and court reporter fees) and husband's attorneys fees are nearly $80,000. The district court found that both parties were awarded adequate assets such that each has the ability to pay their own attorney fees.
In a footnote in Geske v. Marcolina, 624 N.W.2d 813, 817 n. 1 (Minn.App. 2001), this court acknowledges that there is a question of whether Minn. Stat. § 518.14, subd. 1, can require need-based fee awards (i.e., that the district court has no discretion and must award need-based attorney fees) in light of the statutory language of "shall" versus the abuse-of-discretion standard of review applied to awards of attorney fees.
Wife argues that the district court was required to award her need-based fees because of the court's determination that wife is in need of spousal maintenance and because husband has resources to pay the fees. However, under the statute, this is not enough. The court must also find that the fees are "necessary for the good-faith assertion of the party's rights * * * and will not contribute unnecessarily to the length and expense of the proceeding." Minn. Stat. § 518.14, subd. 1. The court specifically found that both parties' failure to comply with a court order contributed to the length and expense of the proceedings. Thus, the court did not abuse discretion in denying wife need-based attorney fees.
Wife also argues that the court erred in failing to award her conduct-based fees. Under Minn. Stat. § 518.14, the court may, "in its discretion" award "additional fees, costs, and disbursements against a party who unreasonably contributes to the length or expense of the proceeding." This part of the statute pertains to conduct-based fees. Geske v. Marcolina, 624 N.W.2d 813, 817 (Minn.App. 2001).
In denying wife's request for conduct-based attorney fees, the court found that both parties' failed to comply with the court's amended order for trial and thus, contributed to the length and expense of the proceedings. Wife argues that the court erred in failing to properly address her request for fees and that its finding that she contributed to the length and expense of the proceedings was error because at worst, she only "inconvenienced" the court.
The district court specifically identified the conduct of the parties that contributed to the length and expense of the proceedings. The record reveals that the parties' attorneys agreed, contrary to the court's order (and without seeking the court's permission), to extend the time for exchange of trial exhibits. Indeed, the court assessed each party $1,000 costs for failure to comply with the amended order for trial. We therefore conclude that the district court acted within the court's scope of discretion in denying wife conduct-based attorney fees. See Kitchar, 553 N.W.2d at 103-04 (affirming denial of conduct-based fees where, among other things, both parties' conduct contributed to the expense of the case); Kahn v. Tronnier, 547 N.W.2d 425, 431 n. 5 (Minn.App. 1996) (rejecting argument that district court abused its discretion by refusing to award conduct-based fees where both parties contributed to length and expense of proceeding), review denied (Minn. July 10, 1996).