Brandt v. Brandt

• Citation: 427 N.W.2d 126,145 Wis.2d 394
• Decision Date: 01 June 1988
• Docket Number: No. 87-1514,87-1514
• Parties: In re the Marriage of Melitta J. BRANDT, Petitioner-Appellant Cross-Respondent, v. Werner W. BRANDT, Respondent-Cross-Appellant.
• Court: Wisconsin Court of Appeals

Page 126

427 N.W.2d 126

145 Wis.2d 394

In re the Marriage of Melitta J. BRANDT Petitioner-Appellant Cross-Respondent, v. Werner W. BRANDT, Respondent-Cross-Appellant.

No. 87-1514.

Court of Appeals of Wisconsin.

Submitted on Briefs April 5, 1988.

Opinion Released June 1, 1988.

Opinion Filed June 1, 1988.

[145 Wis.2d 400] Magdalena Z. Wegner of Joseph F. Schmitt Associates, S.C., Cedarburg, for petitioner-appellant-cross-respondent.

Michael S. Heffernan of Stolpher, Koritzinsky, Brewster & Neider, S.C., Madison, for respondent-cross-appellant.

Before SCOTT, C.J., BROWN, P.J., and NETTESHEIM, J.

NETTESHEIM, Judge.

Melitta Brandt appeals and Werner Brandt cross-appeals the property division provisions of a divorce judgment. Melitta contends that the trial court abused its discretion by: (1) concluding that certain of Melitta's inherited property had been commingled with other assets, thereby rendering it marital property; (2) including this inherited property in the marital estate without a finding of hardship; (3) declining to enforce a post-nuptial agreement; and (4) failing to consider the tax consequences of the property division. Werner argues that the trial court abused its discretion by: (1) failing to award interest on the property division from the date of the divorce to the date of distribution; (2) valuing the property as of the date of the divorce; and (3) concluding that certain other of Melitta's inherited property did not lose its "exempt" status because of sale.

Except for a distribution from a "Clifford trust," we conclude that the identity of Melitta's inherited property was not properly preserved and was therefore properly included in the marital estate. We reject all other arguments of both parties. Consequently, the judgment is affirmed in part and reversed in part and the cause is remanded to the trial court for modification of the property division.

FACTS

Melitta and Werner were married in Munich, West Germany on September 6, 1952. Both were German citizens, Werner had immigrated to the United States but at the time of the marriage was stationed in Germany with the United States Army. Prior to the marriage, Melitta had inherited a small estate upon the death of her father. Melitta was the great-granddaughter of the founder of the Opel Motor Car Company. As a result, Melitta stood to inherit a substantial estate upon her mother's death. Melitta's family was initially opposed to her marriage to Werner. Within a few days following their marriage, Melitta and Werner entered into a post-nuptial agreement whereby they agreed to maintain their separate estates. Thereafter, opposition to the marriage evaporated. Four children were born to the marriage. All are now adults.

In 1963, Melitta's mother died, leaving a will which provided that the inheritances should forever remain the separate property of the beneficiary. The will also provided that the inheritances were never to become marital property or be subject to the management or control of a non-beneficiary. Melitta inherited an estate of nearly five million Deutschemarks.

Melitta's inheritance remained in Germany under the administration of a German executor. Melitta would, from time to time, ask the executor to provide her money from the inheritance. Melitta used this money to supplement the family's income. In 1966, Melitta and Werner moved to Wisconsin when Werner became an associate professor at the University of Wisconsin--Milwaukee. His starting salary was $13,000 for the academic year.

Nearly all of Melitta's assets from her inheritance were invested in Continental Gummiwerke stock in Germany. In 1969, a block of this stock was used to fund a "Clifford trust" created for the benefit of the parties' children. The trust was established with the Northern Trust Company of Illinois and remained inactive except for two corpus distributions to Melitta.

Beginning in 1969, the value of the Continental stock began to steadily decline. Because of this, Melitta and Werner decided to transfer the bulk of Melitta's inheritance to the United States. They consulted an Attorney Callahan in Chicago for estate planning advice. During these discussions, no mention was made of the post-nuptial agreement. Attorney Callahan advised Attorney Callahan also recommended that the parties "separate things out" as a prelude to equalizing the estates, thereby minimizing taxes for estate planning purposes. He advised the parties to create and maintain separate accounts and terminate a joint investment account that was created with Werner's gifts and inheritance.

Melitta and Werner to pay off debts against Melitta's inherited assets ¹ and suggested that the parties begin a gift program to their children to minimize inheritance taxes.

The parties took some steps to implement Attorney Callahan's advice. The gift program commenced. However, the joint investment account was not terminated.

When the Continental stocks arrived from Germany, an investment account for Melitta was created with R.W. Baird & Company. At the same time, a separate investment account with Baird was also established for Werner. Originally, Melitta's Baird account was mistakenly titled in both parties' names. When this error was discovered, the account was changed to Melitta's name at her direction. It is this account which the trial court concluded had been so commingled with other assets that it could not be traced.

Melitta executed a power of attorney appointing Werner as the managing agent of her Baird account. In addition, Werner managed the family's other assets. However, Melitta often helped Werner make investment choices by doing preliminary research for him. Melitta testified that she trusted Werner's investment decisions. Over the course of their marriage, Werner and Melitta had nearly thirty separate investment, savings and checking accounts at a number of different institutions. Additional accounts were discovered as the proceedings below progressed.

Eventually, the Continental stock was sold. The proceeds were used for family purposes, gifts, reinvestment, and deposit to various accounts of the parties. During the marriage, the parties' investments flourished. Melitta and Werner purchased real estate, built a fine home, made significant contributions to charity, and supported the financial and other needs of their children. They also financially assisted relatives who had special needs.

During the course of the marriage, Werner's economic condition also improved. His salary increased from $13,000 to $32,000 for the academic year. He also received approximately $100,000 by gift and inheritance.

In July 1979, Melitta approached the Marshall & Ilsley Bank about opening an account using the assets from her investment account at Baird. Melitta and Werner had lengthy discussions over this issue. Melitta created the M & I account and in late 1979 she transferred her assets from Baird to this account. She also transferred the "Clifford trust" to an M & I account.

In November 1979, Werner and Melitta consulted a Milwaukee attorney for further estate planning advice. Again, no mention was made of the post-nuptial agreement.

Melitta filed for divorce on June 4, 1980. The trial was conducted on three separate dates (November 9 and 27, 1981, and February 26, 1982). At the close of these proceedings, the trial court granted the divorce. The property division issues were taken under advisement. ² Partial findings of fact and conclusions of law were filed on April 15, 1982. These documents specifically provided for supplemental findings of fact and conclusions of law concerning the property division issues.

Post-trial briefs were filed and a decision regarding the property division was rendered on February 1, 1983. The trial court concluded that enforcement of the post-nuptial agreement would be inequitable since it was "so long forgotten or ignored by the parties and their finances managed to the satisfaction of all in the interim." The court also determined that some of the However, the court also concluded that Melitta's Baird investment account, before its transfer to the M & I account, had been commingled with other assets such that any inherited portion other than the "Clifford trust" could not be traced. Therefore, the M & I investment account, with a value as of the date of divorce in excess of $1 million, was included in the marital estate. This asset, together with all other marital property, was divided equally.

property inherited by each party remained the separate [145 Wis.2d 405] property of such party. The "Clifford trust" was included in this category, and the trust was awarded to Melitta.

In an unusual turn, the parties chose not to implement the trial court's decision by reducing it to findings of fact, conclusions of law and judgment. Instead, the parties embarked on negotiations seeking to establish different valuations than those assigned by the court. As a result, this case laid judicially dormant for a substantial time. When these negotiations proved unsuccessful, the parties requested that the court conduct further proceedings. A hearing was held in August 1985. The parties submitted further briefs. The court's final decision was not issued until June 24, 1986. Thus, this action endured in the trial court for over six years.

In its final decision, the trial court reaffirmed its original valuation of Melitta's M & I account (as well as other accounts not in dispute here) as of the date of the divorce. The court also reaffirmed the equal property division. To accomplish such division, the court directed Melitta to pay Werner a "balancing" amount of $481,786.93, after crediting a previous payment of $92,300. Interest at the rate of twelve percent per annum from February 1, 1983, to August 26, 1985, was also ordered. Payment was ordered within ninety days of entry of the supplemental judgment which was entered October 28, 1986. Additional facts...