Court Opinion

ID: 9883998
Source: CourtListenerOpinion
Date Created: 2023-10-06 02:30:18.071379+00
Date Added: 2024-06-11T07:48:34.161595
License: Public Domain

OPINION
FOLEY, Judge.
This is an appeal from the trial court’s judgment and decree which dissolved the parties’ marriage. On appeal, appellant Patricia L. Duffey argues the trial court erred by determining the increase in value of respondent John W. Duffey’s nonmarital business interest was nonmarital property and by determining the amount and duration of spousal maintenance.
FACTS
The parties were married on August 9, 1966. Currently, appellant is 42 years old and respondent is 43 years old. The parties have two children, Timothy, 17 years old, and John, 19 years old.
Respondent has worked full time for C.J. Duffey Paper Company (Duffey Paper) for the last 20 years. His duties at Duffey Paper relate mainly to warehousing and maintenance. Respondent is not involved in making management decisions and plays no role in the operation of the company.
Respondent owns a minority interest in seven closely-held corporations and one partnership, all of which are related to the wholesaling of paper products. Respondent’s individual interest in the corporations varies from 12% to 36%. However, respondent, together with other members of his family, own a controlling interest in all of the corporate entities.
Respondent is a vice president and secretary of Duffey Paper in which he owns a 26% interest. Respondent has been on the Duffey Paper Board of Directors for approximately 14 years. His mother, sister and Alfred Reger comprise the rest of the board. Respondent is also an officer and director of the other corporations in which he has an interest. Respondent claims although the Duffey corporate entities have technically named a Board of Directors, they do not have board meetings.
Reger was hired by the Duffey family to serve as the president, treasurer, chairman of the board and general operating officer of the Duffey corporations. While Reger has worked for these corporations for approximately 40 years, he has no ownership in Duffey Paper or Paper Converting Corporation. He owns only a small interest in Martin Falk Paper Company-Minneapolis, Martin Falk Paper Company-Duluth, 425 North Washington, Inc. and Performance Service Company. Undisputed testimony indicated Reger “runs the whole ship,” delegating few responsibilities to others.
During trial, respondent traced each share of stock to shares he held either before the marriage or received by gift or inheritance after marriage. Respondent testified he never personally purchased any of his shares of stock. The trial court found respondent’s interest in his various business entities were nonmarital property and any increase in value in respondent’s interest in the various entities remained his nonmarital property.
Both parties submitted expert testimony relative to the value of respondent’s various business entities. Appellant’s expert testified respondent’s business interests totaled $3.6 million. Respondent’s expert valued respondent’s business interests at $3 million.
During their marriage, the parties enjoyed a comfortable, upper middle class standard of living. The Duffeys were long-standing members of a country club and took at least one trip to Palm Springs every year.
Prior to the parties’ marriage, appellant worked for one year as a secretary. Appellant did not work outside the home during *832the marriage and is currently unemployed. Appellant testified she planned on completing her education to become knowledgeable, and she thought she would probably work for life satisfaction if it rounded off her life. However, appellant does not feel an obligation to support herself.
The trial court found the value of the parties’ marital estate was $1,431,489 and awarded appellant $858,893 or 60%. In addition, the trial court awarded appellant temporary spousal maintenance in the amount of $5,000 per month for four years.
ISSUES
1. Did the trial court err by determining the increase in value of respondent’s non-marital business interests was nonmarital property?
2. Did the trial court err by determining the amount and duration of spousal maintenance?
ANALYSIS
1. As appellant does not challenge the trial court’s determination that respondent’s interest in his various business entities is nonmarital property, the issue for our consideration is whether the trial court properly found the increase in value of respondent’s nonmarital business interests to be nonmarital property.
Findings of fact made by a trial court will not be set aside unless clearly erroneous and due regard must be given to the opportunity of the trial court to judge the credibility of the witnesses. Minn.R. Civ.P. 52.01. We will not set aside findings of fact unless left with a definite and firm conviction a mistake has been made. Minnesota Public Interest Research Group v. White Bear Rod & Gun Club, 257 N.W.2d 762, 782-783 (Minn.1977). The trial court’s characterization of property as marital or nonmarital is a determination of law. Van de Loo v. Van de Loo, 346 N.W.2d 173, 175 (Minn.Ct.App.1984). However, we must defer to the trial court’s findings on underlying facts, such as dates of acquisition and value. Rosenberg v. Rosenberg, 379 N.W.2d 580, 583 (Minn.Ct. App.1985), pet. for rev. denied (Minn. Feb. 19, 1986).
The Minnesota Supreme Court has recently considered the allocation of marital and nonmarital interests. See Nardini v. Nardini, 414 N.W.2d 184 (Minn.1987). In Nardini, the husband held a 50% interest in a business prior to the marriage. Subsequent to the marriage, the parties purchased the other 50% interest. The Nardini court held the trial court’s fundamental error in apportioning the martial and nonmarital business interests was its assumption that the husband’s 50% non-marital interest should forever be 50% of the value of the business. Id. at 195. The Nardini court held:
[T]he increase in the value of nonmari-tal property attributable to the efforts of one or both spouses during their marriage, like the increase resulting from the application of marital funds, is marital property. Conversely, an increase in the value of nonmarital property attributable to inflation or to market forces or conditions, retains its nonmarital character.
Id. at 192 (emphasis added). Here, the trial court found:
The testimony indicated that Respondent is not a key person in any of the business entities. Respondent’s involvement with the businesses relates primarily to warehousing, equipment, buildings, and trucks. Mr. Reger testified that although both he and Respondent’s father had attempted to involve Respondent in what they considered the “paper business” in general and not just the warehouse/maintenance functions, Respondent has shown no interest and has not been involved in these key functions in the business and has maintained an extremely limited and minor role confined primarily to the warehouse.
The evidence does not support that Respondent contributed in any material way toward any increase in value in any of the business entities during the marriage relationship. Any increase in value in Respondent’s interest in the various business entities is attributed to *833factors unrelated to Respondent’s efforts and is in the nature of appreciation. Accordingly, all of Respondent’s interests in the various entities is his nonmarital property.
(Emphasis added.)
Nardini involved a corporation owned entirely by husband and wife, the husband owned a 60% interest and the wife owned a 40% interest. Here, appellant owns no stock and has not contributed in any way toward the appreciation in the value of respondent’s business interests. Further, respondent’s marital efforts did not contribute to the increase in the value of his business entities.
As we are not left with a “definite and firm conviction” that the trial court erred in determining the increase in the value of respondent’s nonmarital business interests was respondent’s nonmarital property, we affirm.
Appellant also argues because respondent, together with other members of his family, are controlling shareholders, he can choose whether or not to declare a cash dividend or retain the earnings. Thus, it is appellant’s position that all corporate earnings, whether distributed in the form of dividends or retained in the form of retained earnings constitute marital property. In Nardini, the corporation had retained earnings of $563,598, all of which was earned during the marriage. The court held:
It seems to us that the nature of income generated through the efforts of the marital partners is not changed by its retention as shareholder equity in a wholly owned corporation. Whether the business be carried on as a family corporation or a partnership or a sole proprietorship, income earned during the marriage, whether distributed or undistributed or reinvested in the business, is marital property.
Id. at 195. The distinguishing factor here is the retained earnings were not generated through the efforts of appellant or respondent. Thus, any increase in the value of respondent’s stock due to retained earnings is nonmarital property.
2. The trial court has wide discretion in determining the amount and duration of spousal maintenance and its determination will not be reversed absent an abuse of that discretion. Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn.1982). Here, the trial court found:
[Appellant] is presently 41 years of age and in good health. She has not held full-time employment throughout the parties’ marriage, though she is fully capable of doing so. An employment evaluation submitted by [appellant] indicates a strong aptitude and interest in sales, particularly real estate sales. [Appellant] is capable of securing employment to contribute to her own support.
In this case, as in Nardini, when the statutory criteria are applied, it is apparent the award of spousal maintenance should have been permanent. The Nardini court held:
The best that can be said, however, of the prospect of Marguerite’s becoming fully self-supported through a combination of income from investments and employment is that it is uncertain at this time. The statute requires that uncertainty to be met by an award of permanent maintenance with the order left open for later modification.
Id. at 198 (emphasis added). Although appellant may be capable of securing employment, it is uncertain whether she can become fully self-supporting. Therefore, we find the trial court’s award of temporary spousal maintenance is clearly an abuse of discretion. We reverse and remand for a determination of an appropriate amount of permanent spousal maintenance.
DECISION
Affirmed in part, reversed in part and remanded.