Antone v. Antone

• Decision Date: 13 June 2002
• Docket Number: No. C8-01-679.,C8-01-679.
• Citation: 645 N.W.2d 96
• Parties: In Re the Marriage of Richard Dennis ANTONE, Respondent, v. Debra Kay ANTONE, Petitioner, Appellant.
• Court: Minnesota Supreme Court

645 N.W.2d 96

In Re the Marriage of Richard Dennis ANTONE, Respondent, v. Debra Kay ANTONE, Petitioner, Appellant.

No. C8-01-679.

Supreme Court of Minnesota.

June 13, 2002.

Rehearing Denied July 16, 2002.

A. Larry Katz, Robert W. Due, Katz & Manka, Ltd., Minneapolis, for appellant.

Daniel J. Goldberg, Messerli & Kramer, P.A., Minneapolis, for respondent.

Michael D. Dittberner, Edina, for amicus curiae Family Law Section, Minnesota State Bar Association.

Heard, considered, and decided by the court en banc.

OPINION

LANCASTER, Justice.

This is an appeal from a court of appeals' decision affirming a trial court's amended judgment dissolving the parties' marriage. Debra Kay Antone (appellant) claims the trial court erred by failing to recognize a marital interest in the appreciation of 18 rental properties, by failing to recognize a marital interest in the marital homestead, and by concluding that Richard Dennis Antone (respondent) had a nonmarital interest in a business started during the marriage. Because the trial court erred in its disposition of the rental properties, the marital homestead, and the business, we reverse and remand.

Appellant and respondent were married in 1986. Almost 12 years later, respondent petitioned for dissolution. In November 2000, the trial court entered a judgment dissolving the parties' marriage. The parties received joint legal custody of their two children. Appellant received sole physical custody of the children subject to visitation by respondent. Respondent was ordered to pay child support and spousal maintenance to appellant. The trial court awarded seven rental properties acquired during the marriage, 18 rental properties acquired before the marriage, and the capital stock and assets in Empire Products, Inc. (EPI) to respondent. The trial court ordered the homestead to be sold, and respondent was ordered to pay appellant $803,376 from the proceeds of the sale. We turn to the trial court's division of the property at issue in this appeal.

The 18 rental properties

Respondent acquired 18 rental properties before his marriage to appellant. Those properties consisted of a 12-unit apartment building, a triplex, and 16 single-family houses. Each property had an outstanding mortgage balance at the time of the marriage.

The trial court did not determine the fair market value of the properties at the time of the marriage. The parties stipulated to the fair market value at the time of the dissolution of one of the properties, and the trial court adopted the valuations submitted by appellant's appraiser of the remaining 17 properties. The trial court determined the properties' mortgage balances both at the time of the marriage and at the time of the dissolution.

Respondent used a management company to manage the properties. He instructed the company not to improve the properties and authorized it to make only the minimum amount of repairs necessary to maintain them. This prompted the trial court to conclude that market forces, rather than marital efforts, caused the properties to appreciate.

The trial court concluded that the rental income generated by the properties constituted marital income. The parties used the rental income to reduce the mortgage balances during the marriage. The trial court concluded that the amount by which the mortgage balances were reduced during the marriage was marital equity and that the remaining equity in the properties was respondent's nonmarital property.

The marital homestead

In 1978, respondent acquired what would become the marital homestead for $153,000. Although the trial court acknowledged that the parties' antenuptial contract valued the homestead at the time of the marriage at $375,000, the trial court did not state whether it adopted that value. When the parties married, the homestead was subject to a $93,000 mortgage. During the marriage, the parties refinanced the homestead. At the time of the dissolution, the homestead was subject to a first mortgage with a balance of $138,000, a second mortgage with a balance of $44,000, and a home equity line of credit secured by a third mortgage with a balance of $99,000. Because the mortgage balances increased during the marriage, the trial court concluded there was no marital equity in the homestead.

Although the trial court did not determine the exact value of the homestead at the time of the dissolution, the trial court found that it was worth more than $680,000 at dissolution. The trial court found that market forces caused the homestead's appreciation and there were no additions or other capital improvements during the marriage that would have increased the homestead's value. Because there was no marital equity in the homestead and no marital efforts contributed to the homestead's increased value, the trial court concluded that the homestead was entirely respondent's nonmarital property.

The trial court found that neither party could afford to continue living in the homestead and ordered it be sold. The trial court ordered the proceeds of the sale be paid in the following order: (1) costs of sale; (2) all encumbrances presently of record; (3) to appellant in the amount of $803,376; and (4) all remaining proceeds to respondent.

Filters Corporation, Inc. and Empire Products, Inc.

In 1975, respondent and Greg Anderson purchased Filters Corporation, Inc. (FCI) as equal partners from Anderson's parents. FCI was primarily a military contractor that manufactured fabric bags to hold explosive charges for tank shells.

In 1993, FCI invested in a new business venture to manufacture underwear for incontinent people. The underwear business experienced substantial losses. Because of the losses, FCI ceased operations. In 1995, respondent and Anderson formed EPI, each owning 50%. Like FCI, EPI was a military contractor.

In 1997, respondent purchased Anderson's 50% interest in EPI. The trial court concluded that this purchase created a marital interest in half of the EPI stock. Respondent claimed that his remaining interest in EPI was nonmarital property that he traced to the 50% interest in FCI he owned at the time of the marriage. The trial court found that EPI made the same products for the same customers as FCI had before the marriage, that there was no marital effort to create new products or to change how the business operated, and that no marital interest was created by the change in corporate form from FCI to EPI because it was not an arm's-length transaction and no consideration was paid. The trial court concluded that respondent had a nonmarital interest in 50% of EPI.

Respondent moved for amended findings of fact and conclusions of law. The trial court denied respondent's motion. Appellant moved for amended findings of fact and conclusions of law or a new trial, and for a stay of the sale of the homestead. The trial court granted appellant's motion in part, amending its conclusions of law to require respondent to satisfy any difference if the proceeds of the homestead's sale were insufficient to pay appellant $803,376, and denied the remainder of appellant's motion.

Appellant appealed and respondent filed a notice of review to examine the spousal maintenance provision. The court of appeals affirmed. The court of appeals rejected appellant's argument that the trial court erred by failing to use the formula we adopted in Schmitz v. Schmitz, 309 N.W.2d 748 (Minn.1981), to divide the marital and nonmarital interests in the 18 rental properties. The court of appeals stated that use of Schmitz is a presumptive, but not mandatory, method to determine the marital and nonmarital interests in an asset. The court of appeals held that the trial court had adequately considered the facts and the law to hold that the market-related appreciation was respondent's nonmarital property. The court of appeals also affirmed the trial court's holding that the appreciated value of the homestead was respondent's nonmarital property. The court of appeals deferred to the trial court's conclusion that appellant had not submitted any credible evidence that the homestead had been improved during the marriage. Finally, the court of appeals held that the record supported the trial court's findings of fact and affirmed the trial court's holding that respondent had a 50% nonmarital interest in EPI.

I.

A trial court has broad discretion in evaluating and dividing property in a marital dissolution and will not be overturned except for abuse of discretion. Maranda v. Maranda, 449 N.W.2d 158, 164 (Minn.1989). We will affirm the trial court's division of property if it had an acceptable basis in fact and principle even though we might have taken a different approach. Servin v. Servin, 345 N.W.2d 754, 758 (Minn.1984). We defer to the trial court's findings of fact and will not set them aside unless they are clearly erroneous. Maurer v. Maurer, 623 N.W.2d 604, 606 (Minn.2001). Whether property is marital or nonmarital, however, is a question of law subject to de novo review. Olsen v. Olsen, 562 N.W.2d 797, 800 (Minn. 1997).

All property acquired by either spouse during the marriage is presumed to be marital property, without regard to the form of ownership. Minn.Stat. § 518.54, subd. 5 (2000); Olsen, 562 N.W.2d at 800. To overcome the presumption that property is marital, a party must demonstrate by a preponderance of the evidence that the property is nonmarital. Olsen, 562 N.W.2d at 800; see also Minn.Stat. § 518.54, subd. 5. Nonmarital property includes property "acquired before the marriage," property that is "acquired in exchange for" property acquired before the marriage, and "the increase in value of property" acquired before the marriage. Minn.Stat. § 518.54, subd. 5(b)-(c) (2000).

II.

We first address the trial court's division of the 18 rental properties that respondent acquired before the marriage. Each property was subject to a substantial mortgage at the time of the marriage. Appellant concedes that...