Opinion
No. C7-99-1269.
Filed February 1, 2000.
Appeal from the District Court, Carver County, File No. F097129.
Brian L. Sobol, Katz Manka, Ltd., (for respondent)
Mark D. Luther, (for appellant)
Considered and decided by Harten, Presiding Judge, Kalitowski, Judge, and Amundson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
In this marital dissolution action, appellant Daniel Richard Lee challenges the district court's judgment and decree, claiming the court erred in (1) accepting respondent Dona Michelle Lee's valuation of the parties' business and dividing marital debt; (2) awarding child support and maintenance based on imputed income; (3) awarding additional family support in lieu of a property award; (4) granting full legal and physical custody of the children to respondent; (5) awarding respondent a portion of her attorney fees; and (6) extending an order for protection. We affirm in part, reverse in part, and remand.
DECISION I.
A. Valuation of Business
Appellant claims the district court abused its discretion in adopting the valuation of the business prepared by respondent's expert. We disagree. A district court has broad discretion in valuing property and we will affirm a valuation that is supported by an acceptable basis in fact and principle, even if we might have arrived at a different result. Balogh v. Balogh, 356 N.W.2d 307, 312 (Minn.App. 1984). We will sustain a valuation if it falls within the limits of credible estimates by competent witnesses. Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d 42, 44 (1975).
Appellant's expert valued the business at zero, but admitted that his valuation would be inaccurate to the extent that the data provided by appellant was incorrect. Respondent's expert valued the business at $330,000 using a method based on the capitalization of excess earnings, including a 15% discount for lack of marketability. A trial court may adopt the capitalization-of-earnings approach in valuing a closely held corporation provided it excludes the reasonable compensation for the owner-spouse's services in calculating the net income of the business. Rogers v. Rogers, 296 N.W.2d 849, 853 (Minn. 1980).
Appellant claims the court erred in adopting respondent's valuation because it included only 1995 and 1996 data. We disagree. The record provides sufficient support for the district court's determination that appellant failed to provide credible evidence concerning his 1997 income and business revenue. Because the court found the 1997 financial data not credible, it reasonably adopted a business valuation that excluded the suspect data.
Moreover, appellant's own expert conceded that the valuation offered by respondent's expert would be accurate if based on accurate financial information. When a trial court values a business at the amount the parties' experts agree it is worth, a reviewing court should affirm that valuation. See Hertz, 304 Minn. at 145, 229 N.W.2d at 44 (affirming valuations within limits of credible estimates of competent witnesses). The court did not abuse its discretion in adopting respondent's expert's valuation of the business.
B. Division of Property and Debt
A district court has broad discretion when dividing property, and we will affirm if its division "`has an acceptable basis in fact and principle even though [the appellate court] might have made a different disposition of the problem.'" Rohling v. Rohling, 379 N.W.2d 519, 522 (Minn. 1986) (quoting Bollenbach v. Bollenbach, 285 Minn. 418, 426-27, 175 N.W.2d 148, 154 (1970)). In Bollenbach, the court stated:
A party * * * cannot be permitted to subvert the orderly processes of the courts by concealing, dissipating, or misusing his assets in anticipation of divorce so as to reduce the property available for division or as a standard for the court in fixing payments for alimony or support.
285 Minn. at 428, 175 N.W.2d at 155. The allocation of marital debt is part of the property division between spouses, but the court is not required to apportion debt. Justis v. Justis, 384 N.W.2d 885, 889 (Minn.App. 1986), review denied (Minn. May 29, 1986).
Here, there was no homestead and little marital property to divide other than the parties' jointly owned business. Appellant received a 100% ownership interest in the business, but claims the district court erred by making him solely responsible for the business debts. We disagree. It is not an abuse of discretion to hold one spouse liable for the parties' debts where he or she has a stable, high-paying job and the other spouse is unemployed and has no specialized skills. Elwell v. Elwell, 372 N.W.2d 67, 71 (Minn.App. 1985); see also Dahlberg v. Dahlberg, 358 N.W.2d 76, 80 (Minn.App. 1984) (affirming award to wife of disproportionate share of assets and allocation to husband of all debts where husband had "considerably greater resources"). Nor does a court necessarily abuse its discretion by holding one spouse liable for debt related to an income-producing marital asset that he or she receives as part of the property settlement. Nolan v. Nolan, 354 N.W.2d 509, 513 (Minn.App. 1984), review denied (Minn. Dec. 20, 1984). Finally, it is not an abuse of discretion to allocate debt incurred after separation to the spouse responsible for amassing it. Dahlberg, 358 N.W.2d at 80. All of these factors are present in this case, and the district court did not err in refusing to apportion business debt between the parties.
Appellant argues that the district court erred in failing to apportion to respondent one-half of the fees paid to the neutral child-custody expert. We disagree. The relevant order did not provide that each party was to be responsible for payment of one-half of the fees; rather, the fee was to be paid "from the marital estate." Because the custody expert was paid long before the final property division, the payment was properly made from the marital estate.
Appellant cites no evidence that would undermine the court's determination that he concealed ownership of the Malibu Response boat and failed to provide an adequate accounting for the funds he withdrew from his SEP-IRA. Therefore, the court did not abuse its discretion in dividing the relatively few marital assets, and in attributing these dissipated and concealed assets to appellant. See Minn. Stat § 518.58, subd. 1a (1998) (stating court "shall" compensate party for assets transferred, encumbered, concealed, or dissipated by party's spouse).
III.
A. Appellant's Income
Appellant contends the district court abused its discretion by imputing annual income to him of $150,000 to $180,000. We disagree. A court may base a support award on earning capacity when "it is impracticable to determine [an] obligor's actual income." Veit v. Veit, 413 N.W.2d 601, 605 (Minn.App. 1987). A district court has particularly broad discretion in determining the income of self-employed individuals because "the opportunity for a self-employed person to support himself yet report a negligible net income is too well known to require exposition." Ferguson v. Ferguson, 357 N.W.2d 104, 108 (Minn.App. 1984). We defer to a district court's credibility determination that a party acted in bad faith in allowing his income to stay artificially low. See Tonka Tours, Inc. v. Chadima, 372 N.W.2d 723, 728 (Minn. 1985) (stating that whether party acted in good faith is essentially a credibility determination). See also Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (appellate courts must defer to district court's credibility determinations); Minn.R.Civ.P. 52.01 (due regard shall be given to opportunity of district court to judge credibility of witnesses).
The court found that appellant failed to explain adequately why his gross business revenues, and consequently his income, decreased so substantially during 1997. Moreover, the record supports the conclusion that appellant's financial data generally lacked credibility. The record contains evidence that appellant (1) took cash payments without reporting them as business revenue; (2) spent an inordinate amount of time boating rather than working after the separation; (3) began paying personal expenses with cash or through his business account following the separation; and (4) underreported income by claiming personal expenses as business expenses without making a proper accounting. Appellant's failure to disclose assets, standing alone, justifies the court's making inferences adverse to him. Roehrdanz v. Roehrdanz, 410 N.W.2d 359, 363 (Minn.App. 1987), review denied (Minn. Oct. 28, 1987). See also Taflin v. Taflin, 366 N.W.2d 315, 319 (Minn.App. 1985) (obligor cannot complain when inadequate documentation of earnings results in refusal to modify child support order). The court did not abuse its discretion in imputing income to appellant.
B. Maintenance and Child Support
We will not reverse a district court's determination regarding a maintenance award unless the court abused its wide discretion. Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982). We will reverse for an abuse of discretion only where the district court has made a clearly erroneous determination that is against logic and the facts on the record. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).
In determining the amount of maintenance and whether maintenance should be temporary or permanent, the district court must consider the factors set forth in Minn. Stat. § 518.552, subd. 2 (1998). In essence, however, a maintenance determination is a balancing of the incomes and needs of the two spouses. The central determination in that balancing process is the available resources of each spouse. Maeder v. Maeder, 480 N.W.2d 677, 679 (Minn.App. 1992), review denied (Minn. Mar. 19, 1992).
Here, the district court made the necessary findings to support an award of rehabilitative maintenance: (1) respondent was a homemaker and was substantially out of the workforce during the marriage; (2) she will require two years of training to become self-supporting; (3) although no evidence was introduced concerning respondent's income potential, it is reasonable that she remain in the home until the parties' youngest child enters the first grade; (4) the parties enjoyed a comfortable standard of living during the marriage; and (5) appellant has imputed income of $150,000 to $180,000 per year. The court found the reasonable monthly living expenses for respondent and the children to be $4,913, an amount that provides for a lesser standard of living than the parties enjoyed during the marriage.
Based on these considerations, the court awarded four years of rehabilitative maintenance in the amount of $3,500 per month. Including the $2,047 in child support, the total monthly support and rehabilitative maintenance award equals $5,574. Appellant argues that the maintenance award is inequitable to the extent that it exceeds respondent's living expenses. We disagree. A maintenance award is not necessarily invalid simply because it exceeds the recipient's monthly expenses, especially when the assumed expenses provide a lower standard of living than the recipient had during the marriage. Walker v. Walker, 553 N.W.2d 90, 96 n. 2 (Minn.App. 1996). We also note that the figures involved here do not account for taxes respondent will incur as a result of the award. In light of the parties' relative resources and needs, an award of $3,500 monthly rehabilitative maintenance for four years was not an abuse of discretion.
C. Additional Family Support in Lieu of Property Settlement
In lieu of awarding respondent a property settlement, the court awarded her an additional $300,000, to be paid in $2,500 monthly installments as "additional family support" or "supplemental spousal maintenance." Appellant argues that the district court lacked authority to structure the property division in this manner. We agree.
Initially we note that the district court faced a difficult task in attempting to award respondent an equitable share of the parties' only significant marital asset without destroying that asset in the process. Appellant's refusal to provide accurate, reliable financial information exacerbated the problem. Although we appreciate the difficulties faced by the district court, we conclude that the court erred in converting the property settlement into an award of additional maintenance without justification pursuant to the applicable statutory factors. See Minn. Stat. § 518.552, subd. 2. Moreover, the court made no findings to support its calculation of the $300,000 it awarded as support or supplemental maintenance. Therefore, we reverse the award of $300,000 and remand to the district court for findings concerning the value of respondent's interest in the marital property and establishment of a payment plan that reflects the parties' respective rights and obligations.
A court is not required to consider the reduction in appellant's income due to payments of cash installments on a property division. Bury v. Bury, 416 N.W.2d 133, 138 (Minn.App. 1987). Therefore, recharacterizing the award as a property settlement will not necessarily affect the propriety of the court's award of monthly rehabilitative maintenance. Moreover, while a court may include income from a property settlement in assessing a party's need for maintenance, it should not include the value of the property itself, because a party should not be forced to liquidate assets in order to meet expenses. Id. On remand, the district court should clarify the extent to which payments for the property settlement constitute the value of the underlying property.
Finally, the district court indicated that a reason for structuring the property settlement as a support award was to prevent its discharge in bankruptcy, as this would leave respondent susceptible to losing her interest in the only significant marital asset. Appellant argues that the district court had no authority to attempt to protect the property settlement from discharge in bankruptcy. We disagree. This court has previously upheld a nondischargeability provision made part of a decree pursuant to the parties' settlement agreement. Nelsen v. Nelsen, 444 N.W.2d 302, 304 (Minn.App. 1989). Consistent with decisions in other jurisdictions, we decline to hold that a court may not attempt to impose the same condition when the property division occurs after a trial on the merits. See, e.g., Halouska v. Halouska, 585 N.W.2d 490, 504 (Neb.Ct.App. 1998).
D. Attorney fees
Appellant contends the district court abused its discretion by awarding respondent $40,000 in attorney fees. We disagree. The decision to award attorney fees in a marital dissolution action rests almost entirely within the discretion of the trial court. Novick v. Novick, 366 N.W.2d 330, 334 (Minn.App. 1985). We will not reverse an award of attorney fees absent a clear abuse of discretion. Korf v. Korf, 553 N.W.2d 706, 711 (Minn.App. 1996). A court may award attorney fees based on the respective financial resources of the parties. Minn. Stat. § 518.14, subd. 1 (1998). Alternatively, a court may award fees based on the impact of one party's conduct on the costs of the litigation. Id.; Holder v. Holder, 403 N.W.2d 269, 271 (Minn. 1984).
The district court concluded that an award of fees was appropriate given the relative resources of the parties and because appellant's conduct prolonged the litigation and increased respondent's attorney fees. The record supports the court's findings that appellant concealed assets, failed to respond properly to discovery, and pursued pro se custody challenges despite overwhelming evidence and unanimous expert recommendations that respondent retain custody.
Appellant argues that the award is too high because the amount of the maintenance and support award provides respondent with ample resources to pay her own fees. We disagree. An award of attorney fees is not necessarily excessive even where a maintenance award is sizable enough to allow the recipient spouse to pay his or her own fees. See, e.g., Lyon v. Lyon, 439 N.W.2d 18, 21 (Minn. 1989) (awarding wife $40,000 in fees even though she would have been able to pay based on size of her share of $7 million estate). Moreover, an award of attorney fees against a party who engages in misconduct is appropriate irrespective of the parties' relative financial ability. Korf, 553 N.W.2d at 711. Based on this record, the district court did not abuse its discretion in ordering appellant to pay a substantial portion of respondent's attorney fees.
IV.
Appellant alleges the district court abused its discretion in granting full physical and legal child custody to respondent. We disagree. Our review of a custody determination is limited to whether the district court abused its discretion by making findings unsupported by the evidence or by improperly applying the law. Pikula v. Pikula, 374 N.W.2d 705, 710 (Minn. 1985). The court's underlying findings of fact will be upheld if they are not clearly erroneous. Minn.R.Civ.P. 52.01.
In order to contest the custody award successfully, it is not enough to point to other facts in the record that may prompt a different fact-finder to make a different decision; rather, appellant must show that the district court's findings are clearly in error. Crosby v. Crosby, 587 N.W.2d 292, 295 (Minn.App. 1998), review denied (Minn. Feb. 18, 1999). Appellant has failed to meet this burden. The district court granted custody to respondent based on an adequate consideration of the applicable statutory factors under Minn. Stat. § 518.17, subd. 1(a) (1998), and this custody determination is consistent with the recommendation of every professional involved in the case. The court did not abuse its discretion in awarding physical custody to respondent.
Appellant's challenge to the court's award of full legal custody to respondent is likewise without merit. The district court should grant joint legal custody only when the parents can cooperate in parenting decisions. Wopata v. Wopata, 498 N.W.2d 478, 482 (Minn.App. 1993). Given the history of conflict between these parties and the continuing protective order, the district court properly concluded that it could not consider joint legal custody because the parties would be unable to cooperate on major decisions. Minn. Stat. § 518.17, subd. 2 (1998).
V.
Finally, appellant challenges the district court's extension of the order for protection. The Domestic Abuse Act provides that a trial court may issue an order for protection in cases of domestic abuse. Minn. Stat. § 518B.01, subd. 6(a) (1998). The trial court exercises its discretion in issuing a protective order. Hall v. Hall, 408 N.W.2d 626, 629 (Minn.App. 1987), review denied (Minn. Aug. 19, 1987).
Appellant argues that the district court's extension of the existing protective order was improper because the court heard no evidence at trial that appellant had a current intention to harm or cause fear in respondent. We disagree. The standard for extending an existing protective order only requires a showing that "the petitioner is reasonably in fear of physical harm from the respondent." Minn. Stat. § 518B.01, subd. 6a(2) (1998). The statute further provides that "[a] petitioner does not need to show that physical harm is imminent to obtain an extension * * * under this subdivision." Minn. Stat § 518B.01, subd. 6a.
The district court extended the order for protection after finding that respondent presented credible testimony that she reasonably remains fearful of appellant. In making this determination, the court considered (1) expert reports that appellant has difficulty managing his anger; (2) appellant's continued denial of having committed abuse, despite participation in a domestic-abuse program; and (3) appellant's assignment of blame to respondent throughout the proceedings, as evidenced by his numerous motions leveling unsubstantiated charges of child abuse, even as late as during trial. The district court did not clearly err in holding that respondent's fear of harm was reasonable.
VI.
In summary, we reverse the award of additional family support in lieu of a property settlement and remand with instructions that the district court make findings concerning the amount and appropriate structure of appellant's payment to respondent for her equitable share of the parties' marital property. On remand, whether to re-open the record shall be in the district court's discretion. We affirm the district court's decision in all other respects.
Affirmed in part, reversed in part, and remanded.