Steinmann v. Steinmann

• Citation: 2008 WI 43,749 N.W.2d 145
• Decision Date: 23 May 2008
• Docket Number: No. 2005AP1588.,2005AP1588.
• Parties: In re the Marriage of Tony K. STEINMANN, Petitioner-Respondent, v. Rose M. STEINMANN, Respondent-Appellant-Petitioner.
• Court: United States State Supreme Court of Wisconsin

749 N.W.2d 145

2008 WI 43

In re the Marriage of Tony K. STEINMANN, Petitioner-Respondent, v. Rose M. STEINMANN, Respondent-Appellant-Petitioner.

No. 2005AP1588.

Supreme Court of Wisconsin.

Argued October 4, 2007.

Decided May 23, 2008.

For the respondent-appellant-petitioner there were briefs by Daniel W. Hildebrand, Megan A. Senatori, and DeWitt Ross & Stevens, S.C., Madison; and Raymond E. Krek and Krek & Associates, S.C., Jefferson, and oral argument by Megan A. Senatori.

For the petitioner-respondent there was a brief by Richard E. Reilly, Kathryn A. Keppel, and Gimbel, Reilly, Guerin & Brown, Milwaukee, and oral argument by Richard E. Reilly.

¶ 1 LOUIS B. BUTLER, JR., J

This is a review of an unpublished court of appeals opinion¹ affirming a circuit court decision for Walworth County by the Honorable Michael S. Gibbs that awarded maintenance from Rose Steinmann (Rose) to Tony Steinmann (Tony) and divided the Steinmanns' property in a divorce proceeding. Rose challenges the circuit court's property division, which she argues included a flawed "double-counting" of assets; improper application of transmutation rather than tracing principles; and an erroneous failure to allocate debts related to unpaid taxes on assets from a lawsuit settlement, rather than a proper application of tracing principles. She also challenges the court's maintenance award.

¶ 2 We conclude that Rose has failed to establish that the circuit court's property division and maintenance awards reflected an erroneous exercise of discretion. We further conclude that the court properly interpreted and applied the marital property agreement between Rose and Tony Steinmann, as well as the applicable facts of record and legal authority, in reaching its property division and maintenance award determinations. Consequently, we affirm.²

I

¶ 3 Rose and Tony were married in 1994 and divorced in 2004. This was the second marriage for both, and no children were born of the marriage. Rose is the sole owner of Dairy Source, Inc. (DSI), a cheese brokerage and distribution company. At the time of the marriage, Tony worked for Berner Cheese Corporation (Berner), which purchased its raw materials from DSI, but in 1999, Tony resigned his position with Berner and Rose hired him to work for DSI.

¶ 4 A 1999 lawsuit filed by Tony, Rose and DSI against Berner was settled in 2001, resulting in a $1.35 million payment to Tony, Rose and DSI.³ None of the parties reported the settlement to the IRS. Their failure to report the income from the settlement resulted in an IRS audit; the parties confirmed at oral argument that the IRS's final decision about tax liability, both as to the amount and who will be held liable in what amount, remains pending.⁴

¶ 5 After they married,⁵ the couple entered into a Limited Marital Property Classification Agreement (Agreement) which classifies various assets and income. The Agreement divided the Steinmanns' assets into categories of "marital property," "survivorship marital property,"⁶ "individual property of Rose M. Steinmann," and "individual property of Tony K. Steinmann." The individual property lists for both Rose and Tony Steinmann include, in pertinent part:

1. All property whether Real or Personal which is listed on Schedule "A"[⁷] attached hereto and incorporated herein; and

2. All earnings of either Party after the date of the marriage ... and

3. All property acquired at any time from a third party by gift, devise, bequest or inheritance; and

4. All property acquired with any individual Property or acquired in exchange for any Individual Property or acquired from the proceeds of sale of any Individual Property....

¶ 6 The Agreement was silent as to maintenance obligations should the marriage dissolve, but specified that the Agreement would be binding on the issue of property division in the event of divorce. However, the Agreement also provided that it could be modified or waived "by written instrument duly subscribed and acknowledged by the parties." In a hearing preceding the divorce trial, the Agreement was determined to be valid and enforceable, as well as "binding upon [the] court for property division pursuant to § 767.255(3)(L), Wis. Stats. [2003-04]."⁸

¶ 7 Prior to their marriage, Rose and Tony had purchased a residence in Delavan, Wisconsin, for $160,000, with both contributing to the down payment. The property was jointly titled. During the marriage, the couple purchased several additional properties, including a $2.2 million home on Lake Geneva (Loramoor residence). This property was also jointly titled, and the mortgage was held jointly. The Loramoor residence was purchased partially with proceeds from the Berner settlement.

¶ 8 Tony and Rose also purchased waterfront property on Lake Michigan and on Marco Island, Florida, and two boat slips at the Marco Island Yacht Club, all of which were also jointly titled. These properties were all purchased at least partially through funds from Rose's 1114 savings account. Funds from that account were also used to purchase cars, boats, and an ATV. In addition, a series of private planes, yachts, and a Cadillac automobile owned by DSI were available for the Steinmanns' use.⁹

¶ 9 In the course of the marriage, Rose's income far exceeded Tony's. For example, Rose's cumulative net income for the years 1996 through 2002 was $873,645, while Tony's net income for those years was $120,687.¹⁰

¶ 10 Tony filed for divorce on February 28, 2003. Two months later, Rose terminated Tony from DSI. In May 2003, a family court commissioner issued a temporary order directing Rose to pay Tony $5,250 per month in maintenance because he was unemployed at the time. Rose was granted temporary use of the Loramoor residence. When Tony became employed again in June 2003, maintenance was reduced to $1,875 per month. However, the court vacated the maintenance awards the next year and ordered Tony to repay the $28,956 Rose had paid for maintenance, holding repayment in abeyance pending final property division. The court also ordered the sale of the Loramoor residence¹¹ and continued a previously ordered freeze on the 1114 account, allowing only expenses for the Loramoor residence to be deducted from that account, and ordering that funds in the account could not fall below $100,000.

¶ 11 After an eight-day bench trial, the circuit court, Honorable Michael S. Gibbs presiding, granted the Steinmanns' divorce on December 17, 2004. At the time of the divorce, Rose reported an annual salary of $140,000, and Tony reported $85,000 in annual income.

¶ 12 In a decision issued on April 26, 2005, the circuit court awarded Tony $2,000 per month maintenance for ten years, the length of the marriage. The court ruled that individual property covered by the Agreement remained the sole property of that individual, but divided the marital property equally, including the Delavan home, the Loramoor residence, the Marco Island lot, the Lake Michigan lot, and the Marco Island boat slips, all of which were jointly titled. The circuit court rejected Rose's argument that the court should apply tracing principles to designate those properties her individual property, explaining that while the properties may have been purchased with Rose's individual assets, the joint titles rendered them marital property.

¶ 13 The court also divided the Berner settlement equally among Tony, Rose, and DSI. The court noted that an IRS audit was underway regarding the income tax liability on the $1.35 million settlement, and declined to divide such pending tax liability of an undetermined amount.

¶ 14 A few additional marital property assets were not divided equally. An ATV, fishing boat, and automobile were awarded to Tony, while Rose was awarded a greater share of jewelry and household items. To arrive at a net equalization, in essence compensating Tony for being awarded the lesser share of those items not evenly divided, the court further ordered Rose to make a $13,433 equalization payment to Tony.

¶ 15 The court filed its Findings of Fact and Conclusions of Law and Judgment of Divorce on May 16, 2005. On June 8, 2005, after denying a motion for reconsideration and a motion to stay proceedings pending appeal, the court entered an order that the Corvette, pontoon boat, Marco Island lot, and Lake Michigan lot be sold and the proceeds divided equally. The court also ordered Rose to pay Tony $764,000, plus any accrued interest, for his share of the sale of the Loramoor residence.

¶ 16 Rose filed an appeal on June 16, 2005. In her appeal Rose made essentially the same arguments which she has continued to make to this court regarding tracing and transmutation, double-counting, tax liability, and the maintenance award. She also argued that the circuit court erred when it ordered the Loramoor residence sold before trial.¹²

¶ 17 The court of appeals affirmed the circuit court decision in Steinmann v. Steinmann, 298 Wis.2d 548, 727 N.W.2d 373 (2006), ruling that the circuit court did not err in its property division and maintenance determinations. Id., ¶ 41. The court rejected Rose's tracing arguments, concluding instead that the joint titles indicated donative intent and transformed the property from individual to marital property. Id., ¶¶ 21-24. The court further held in pertinent part that the circuit court's double counting of assets was harmless error, that the circuit court properly considered the Berner settlement as a divisible asset while "refus[ing] to speculate on the ultimate financial penalty on the still-incomplete IRS audit . . .," and that the court's maintenance award was not an erroneous exercise of discretion. Id., ¶¶ 31-34, 39-40.

¶ 18 Rose filed a petition for review, and we granted the petition. At oral argument, it was suggested that certain matters regarding the divorce were still pending in the circuit court. On October 11, 2007, this court directed the parties to file letters stating which matters...