Baker v. Baker

• Citation: 733 N.W.2d 815
• Decision Date: 03 July 2007
• Docket Number: No. A06-1252.,A06-1252.
• Parties: In re the Marriage of Carol Bernice BAKER, petitioner, Appellant, v. Daniel Remember BAKER, Respondent.
• Court: Minnesota Court of Appeals

733 N.W.2d 815

In re the Marriage of Carol Bernice BAKER, petitioner, Appellant, v. Daniel Remember BAKER, Respondent.

No. A06-1252.

Court of Appeals of Minnesota.

July 3, 2007.

Kay Nord Hunt, Lommen, Abdo, Cole, King & Stageberg, Minneapolis, MN, for appellant.

Richard D. Goff, Richard D. Goff & Associates, Minneapolis, MN, for respondent.

Considered and decided by MINGE, Presiding Judge; WRIGHT, Judge; and HARTEN, Judge.^*

OPINION

WRIGHT, Judge.

In this appeal from the district court's judgment dissolving the parties' marriage, appellant-wife challenges the district court's division of the parties' marital property, arguing that the district court (1) understated the portion of respondent-husband's retirement accounts that is marital property; (2) understated the overall value of husband's surgical practice by not including the value of the institutional goodwill of the practice; and (3) abused its discretion by holding that husband did not improperly dispose of marital assets. By notice of review, husband challenges the district court's spousal-maintenance award to wife, arguing that it is based on erroneous and insufficient findings. We affirm in part, reverse in part, and remand.

FACTS

In May 2003, appellant-wife Carol Baker filed a petition for dissolution of her 13-year marriage to respondent-husband Daniel Baker. After a trial before a referee, the district court entered a judgment dissolving the parties' marriage, dividing their property, and awarding wife spousal maintenance.¹ Thereafter, wife moved the district court to amend its findings of fact and conclusions of law. The district court denied the motion, and this appeal followed.

ISSUES

I. Did the district court err as a matter of law when it held that the value of the appreciation of husband's premarital retirement funds is nonmarital property?

II. Did the district court erroneously conclude that the law precludes the inclusion of the value of the institutional goodwill accumulated in husband's surgical practice during the parties' marriage in the overall valuation of the practice?

III. Did the district court abuse its discretion when it held that husband did not improperly encumber or dispose of marital assets when he used them to pay his attorney fees, fund education accounts for his and wife's grandchildren, pay for his daughter's wedding, and purchase a one-half interest in a Porsche?

IV. Did the district court abuse its discretion when it set husband's spousal-maintenance obligation?

ANALYSIS

As an initial matter, we consider the scope of review in this case. Wife filed a motion for a new trial or amended findings of fact and conclusions of law. Because the motion did not identify specific grounds for a new trial, the district court concluded that, "No motion for a new trial is before th[is] Court." The district court also denied the motion for amended findings of fact and conclusions of law. In the absence of a motion for a new trial, our scope of review includes substantive legal issues properly raised to and considered by the district court, whether the evidence supports the findings of fact, and whether those findings support the conclusions of law and the judgment. Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 310 (Minn. 2003) (stating that new-trial motion is not prerequisite to appellate review of substantive legal issues properly raised and considered in district court); Gruenhagen v. Larson, 310 Minn. 454, 458, 246 N.W.2d 565, 569 (1976) (stating that absent motion for new trial, appellate courts may review whether evidence supports findings of fact and whether findings support conclusions of law and judgment).

I.

Wife first argues that the district court erred as a matter of law when it held that the appreciation of husband's premarital retirement funds is nonmarital property. Whether property is marital or nonmarital is a question of law over which we exercise de novo review. Gottsacker v. Gottsacker, 664 N.W.2d 848, 852 (Minn. 2003). But in doing so, we defer to the district court's findings of fact. Id.

Marital property is "property, real or personal, including vested public or private pension plan benefits or rights, acquired by the parties, or either of them, to a dissolution . . . proceeding at any time during the existence of the marriage." Minn.Stat. § 518.003, subd. 3b (2006) (codified at Minn.Stat. § 518.54, subd. 5 (2004)). All property acquired by either spouse during the marriage is presumed to be marital property. Id. To overcome this presumption, a spouse must demonstrate by a preponderance of the evidence that the property is nonmarital. Crosby v. Crosby, 587 N.W.2d 292, 296 (Minn.App. 1998), review denied (Minn. Feb. 18, 1999). Nonmarital property includes property acquired by either spouse before marriage and any increase in the value thereof, Minn.Stat. § 518.003, subd. 3b, provided such an increase is the result of passive appreciation, Gottsacker, 664 N.W.2d at 853 (citing Nardini v. Nardini, 414 N.W.2d 184, 193 (Minn. 1987)); Swick v. Swick, 467 N.W.2d 328, 331 (Minn.App. 1991), review denied (Minn. May 16, 1991). Appreciation is passive when it is "`attributable to inflation or to market forces or conditions.'" Gottsacker, 664 N.W.2d at 853 (quoting Nardini, 414 N.W.2d at 192). In other words, appreciation occurring when "no investment decisions are made, and neither [spouse] may withdraw the funds or otherwise control the investments," is passive. Prahl v. Prahl, 627 N.W.2d 698, 706 (Minn.App. 2001). Conversely, appreciation that is attributable to the exertion of efforts by one or both spouses during the marriage generally is deemed active and, thus, marital property. Gottsacker, 664 N.W.2d at 853 (quoting Nardini, 414 N.W.2d at 192); White v. White, 521 N.W.2d 874, 878 (Minn.App. 1994). Such efforts may include the application or investment of marital funds, marital labor, or entrepreneurial decision-making that is marital in nature. White, 521 N.W.2d at 878.

When the parties married, husband had $957,473 in a retirement plan entitled Specialists in General Surgery Pension and Profit Sharing Plan ("SIGS accounts"). During the marriage, additional contributions and investment returns caused the value of the SIGS accounts to reach $3,088,072 on the date of valuation for the dissolution proceedings. During trial, husband's expert, Thomas Harjes, testified as to the proper allocation of that amount between marital and nonmarital property. To derive this allocation, Harjes classified the premarital amount of $957,473 as nonmarital property and all contributions made during the marriage as marital property. For each year of marriage, Harjes determined the percentage of funds in the SIGS accounts that was marital property and the percentage that was nonmarital property. He then used those percentages to divide the investment returns between marital and nonmarital property. Based on these calculations, Harjes concluded that $639,577 of $3,088,072 was marital property subject to equitable division. The district court adopted Harjes's conclusions and allocated the final value of the SIGS accounts between marital and nonmarital property accordingly.

Wife challenges this allocation, arguing that the district court should have allocated the entire amount by which the SIGS accounts have increased above the premarital amount of $957,473 to marital property because that increase is attributable to the exertion of marital efforts. Specifically, wife argues that this increase is the result of husband's active management of the SIGS accounts himself and through his financial advisor. The district court rejected this argument, holding that the appreciation of a spouse's nonmarital retirement funds is not active appreciation "simply because the spouse . . . hires a financial advisor to manage the funds."

We agree that a financial advisor's management of a retirement account containing nonmarital funds does not necessitate a finding that the appreciation of those funds is active. That nonmarital funds are managed by a financial advisor, however, does not preclude a finding that the appreciation thereof is active. Rather, to make this determination, a district court must examine the nature of the spouses' efforts regarding these retirement accounts. Gottsacker, 664 N.W.2d at 853. Here, the district court's findings of fact and the record evidence of husband's involvement with the SIGS accounts establish that the appreciation of the SIGS accounts is active and, therefore, marital property.

At trial, wife testified that she and husband hired financial advisor Randy Trask to manage the SIGS accounts. Specifically, wife testified that "after we were married we invited Merrill Lynch representatives to come out to our home and discuss retirement plans for our future. . . . [T]ogether we sat down and chose some Merrill Lynch plans and then invested money in those plans." Trask testified that husband paid him an annual fee to manage these accounts.² Trask confirmed that he "could not have discretionary management over any of these accounts if [husband] would not allow it" and that husband "has the ultimate control over [the] accounts." Harjes also confirmed that husband has full discretion regarding how the accounts are controlled.

The evidence conclusively establishes that husband and Trask created an agency relationship when they mutually agreed that Trask would act on husband's behalf but subject to husband's control. See A. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d 285, 290 (Minn. 1981) ("Agency is the fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act."); see also Dalager v. Montgomery Ward & Co., 350 N.W.2d 391, 394 (Minn.App. 1984) (holding that whether agency relationship exists is fact question unless evidence is...