Court Opinion

ID: 4096133
Source: CourtListenerOpinion
Date Created: 2016-11-07 20:08:21.238009+00
Date Added: 2024-06-11T14:19:37.784113
License: Public Domain

This opinion will be unpublished and
                          may not be cited except as provided by
                          Minn. Stat. § 480A.08, subd. 3 (2014).

                               STATE OF MINNESOTA
                               IN COURT OF APPEALS
                                     A16-0155

                                  In re the Marriage of:
                             Lana Michelle Kerola, petitioner,
                                       Respondent,

                                            vs.

                                   Greg William Kerola,
                                        Appellant.

                                 Filed November 7, 2016
                                        Affirmed
                                      Jesson, Judge

                             Washington County District Court
                                File No. 82-FA-14-4981

Heather Monnens, GDO Law, White Bear Lake, Minnesota (for respondent)

Jerry A. Burg, The Law Office of Jerry A. Burg, Minneapolis, Minnesota (for appellant)

         Considered and decided by Jesson, Presiding Judge; Stauber, Judge; and Reyes,

Judge.

                         UNPUBLISHED OPINION

JESSON, Judge

         On appeal in this marital dissolution dispute, appellant-husband argues that the

district court improperly classified a loan against his retirement plan as his nonmarital

property and failed to grant him a cash award of his nonmarital inheritance. Because the

district court did not err by classifying a loan that benefitted husband’s nonmarital
residence as nonmarital property and did not abuse its discretion in designating assets

awarded to the parties, we affirm.

                                           FACTS

       In 2015, the district court dissolved the four-year marriage of appellant Greg Kerola

and respondent Lana Rogers, formerly known as Lana Kerola. Greg works for Allina

Health System; Lana works for Polar Semiconductor. The parties have no children in

common. Each party owned a residence before the marriage and when they married, they

lived in Greg’s home in White Bear Lake and rented out Lana’s condominium in

Woodbury.

       In 2015, after a petition for dissolution was filed, the parties stipulated that each of

them would be awarded that party’s premarital home “as . . . nonmarital property at no

value, subject to any encumbrances thereon.” They also stipulated to a partial division of

other property, including two of Greg’s retirement plans and Lana’s retirement plan. But

they retained additional issues for trial, including the marital or nonmarital character of a

loan taken against Greg’s Allina 401(k) plan, as well as the disposition of an inheritance

that Greg had received, which was applied to debts during the marriage. They agreed to

submit these issues in writing to the district court.

       Allina 401(k)

       The parties agreed to value Greg’s Allina 401(k) plan at $39,418. In 2013, Greg

took out a loan of approximately $10,000 against the 401(k). The loan proceeds were

deposited into the parties’ joint checking account and were spent to repair mold and

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structural damage in the garage of the White Bear Lake home, which had occurred before

the parties’ marriage.

        The parties submitted competing expert testimony on the marital-nonmarital

character of the 401(k) loan and its proceeds. Greg’s expert, Dax Stoner, treated the loan

and its repayment as marital, and opined that $23,174 of the plan’s value was marital, and

$16,244 was nonmarital. Lana’s expert, Mark Zingle, treated the loan and its repayment

as nonmarital, and opined that $32,158 of the plan’s value was marital, and $7,260 was

nonmarital.

        Greg’s inheritance

        In 2010, Greg inherited $54,500, which he placed in a Trustone Financial account.

In 2011, Lana was added to that account as a co-owner. After spending a portion of the

inheritance, the parties agreed to invest the remainder and placed approximately $22,000

in a Trustone Wealthbuilder account in Greg’s name.

        In 2013, Lana moved $22,000 from that account to a Wings Financial account for a

few days briefly and then moved it to a Franklin Templeton investment account in her

name. Lana alleges that Greg, who was the listed beneficiary on the latter account, was

aware of the transfer because he received statements showing that the funds had been

moved. Greg alleges, however, that he did not know that the account was solely in Lana’s

name.

        In 2014, after the parties separated, Lana withdrew the funds from the Franklin

Templeton account and applied them in two places. First, she reimbursed herself $8,000,

including interest, which she had borrowed in 2013 to satisfy the second mortgage on the

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White Bear Lake home, which the parties had wished to pay off. To satisfy the mortgage,

she increased a loan against a Buick that she had purchased in 2012 and used the proceeds

from the Buick refinance to pay off the second mortgage.

       Second, Lana used $13,435 of the account funds to pay off a secured loan on a

Bayliner boat, which the parties had purchased in 2012. Lana alleges that she had been

paying on the boat loan, but she could no longer afford that expense when the parties

separated. She alleges that she requested permission from Greg to sell the boat, and he

either failed to respond or refused to do so until July 2015. She also alleges that, although

Greg was proposing to sell the boat and split the proceeds, that solution was unreasonable

because he had been unwilling to work with her to sell the boat in the spring or summer to

maximize the profits, and she had concerns that he would not cooperate in selling it. She

therefore requested that the district court grant Greg all interest in the boat and allocate that

interest as partly marital and partly nonmarital.

       The district court issued its findings of fact, conclusions of law, and judgment,

adopting Lana’s proposed marital and nonmarital split of the Allina 401(k). The district

court also found that the boat had a value of $15,000, granted Greg a nonmarital interest

of $13,435, and designated the remaining $1,565 as marital property. The district court

found that Greg was not entitled to repayment of the funds Lana used to pay off the second

mortgage on the White Bear Lake home because he had benefitted from the use of those

funds. Greg appeals.

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                                      DECISION

       I.     The district court did not err by assigning the loan from Greg’s Allina
              401(k) as nonmarital property.

       Greg argues that the district court erred by assigning the loan taken against his Allina

401(k) as his nonmarital property. He argues that the loan, whose proceeds were used to

pay for repairs on the White Bear Lake property, originated and was spent during the

marriage and was therefore marital property. Therefore, he maintains, he is entitled to a

larger proportion of the remaining Allina 401(k) funds as his nonmarital property.

       We first note that the parties stipulated before trial that each of them would be

awarded their premarital residence, together with any encumbrances, and the district court

granted those residences to each party as nonmarital property. Stipulations are favored in

dissolution cases to simplify and expedite litigation, and if accepted by the district court,

they are merged into the judgment. Shirk v. Shirk, 561 N.W.2d 519, 522 (Minn. 1997).

Therefore, once the district court approved the stipulation and the judgment was entered,

the terms of the resulting judgment, including the determination that each party would

retain all ownership of his or her home purchased before the marriage, operated as a final

determination of their rights in that real property. See id.

       The determination of whether property is marital or nonmarital is a legal conclusion,

which this court reviews de novo, but the findings supporting the conclusion are reviewed

for clear error. Burns v. Burns, 466 N.W.2d 421, 423 (Minn. App. 1991). Nonmarital

property includes property that was acquired by either spouse before the marriage, property

acquired in exchange for nonmarital property, and the appreciation in value of nonmarital

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property. Minn. Stat. § 518.003, subd. 3b (2014). Property is presumptively marital if it

is acquired during the marriage, but a spouse may defeat that presumption by showing by

a preponderance of the evidence that the property is nonmarital. Baker v. Baker, 753

N.W.2d 644, 649-50 (Minn. 2008). The district court treats the division of debt in the same

manner as the division of assets. Justis v. Justis, 384 N.W.2d 885, 889 (Minn. App. 1986),

review denied (Minn. May 29, 1986).

       The district court found that, “[W]hile the loan was taken out during the marriage,

the White Bear Lake home received the benefit of the loan[,]” and it concluded that the

loan was nonmarital property. Greg argues, however, that because the loan proceeds from

the 401(k) were used during the marriage to repair the home in which the parties were then

living, the loan should have been designated as marital. He maintains that Lana failed to

meet her burden to show that the loan was his nonmarital property because the proceeds,

which were placed in the parties’ joint checking account, were used for ordinary and

necessary repairs, and she did not argue before the district court that they increased the

home’s value. Cf. Schmitz v. Schmitz, 309 N.W.2d 748, 750 (Minn. 1981) (providing a

formula for allocating the increase in value of property during a marriage between marital

and nonmarital components). But Greg does not contest the district court’s finding of fact

that the loan proceeds were used to remedy conditions that existed in the White Bear Lake

home before the parties’ marriage. On this record, the district court did not clearly err by

finding that the White Bear Lake home, which the parties agreed was Greg’s nonmarital

property, received the benefit of the loan.

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       Greg also argues that a loan taken against an asset during a marriage is taken against

the marital interest in the asset, so that the loan against the 401(k) should be considered a

loan against the parties’ marital property. He relies on Kerr v. Kerr, 770 N.W.2d 567, 570-

71 (Minn. App. 2009), in which this court concluded that when a husband and wife

refinanced their homestead, the resulting decrease in equity was attributable to the marital

portion of the equity and did not diminish the wife’s nonmarital interest. Id. Kerr is

inapposite, however, because here, the loan proceeds were spent entirely to benefit Greg’s

nonmarital property, the White Bear Lake home. We therefore conclude that the district

court did not err by assigning the proceeds of the 401(k) loan as Greg’s nonmarital

property.1

       II.    The district court did not abuse its discretion by granting Greg the boat to
              reflect his nonmarital interest in that asset.

       Greg argues that the district court abused its discretion by declining to award him

the cash remaining from his inheritance and instead awarding him a nonmarital interest in

the Bayliner boat. The district court has broad discretion in the division of property, and

we will affirm a district court’s division if it has an acceptable basis in fact and principle,

even if we might have taken a different approach. Antone v. Antone, 645 N.W.2d 96, 100

(Minn. 2002). Although the district court must divide the marital property in a “just and

1
  We also note that, even if the district court did err in its designation of the loan as
nonmarital, in order to obtain reversal based on error, a party must show significant
prejudice resulting from the error. Loth v. Loth, 227 Minn. 387, 392, 35 N.W.2d 542, 546
(1949); see Wibbens v. Wibbens, 379 N.W.2d 225, 227 (Minn. App. 1985) (declining to
remand for de minimis error). On this record, when Greg received value for the repairs to
his nonmarital home, we cannot conclude that he has shown significant prejudice by his
failure to receive a larger portion of the remaining Allina 401(k) as his nonmarital property.

                                              7
equitable” fashion, it need not equally divide that property. White, 521 N.W.2d at 878

(citation omitted).

       Greg maintains that Lana dissipated his nonmarital inheritance by using a portion

of it to pay off the debt on the boat and repay herself for a debt that she incurred on the

Buick. Cf. Minn. Stat. § 518.58, subd. 1a (2014) (stating that, during the pendency of the

action, the parties owe a fiduciary duty to each other and may not transfer or encumber

marital assets except in the usual course of business or for necessities). He argues that she

did not consult him and improperly spent a portion of his inheritance without his

knowledge, and the judgment awarded him the boat, but left him without the inheritance

funds as a liquid asset.

       Here, the district court did not decline to award Greg his nonmarital property; rather,

it awarded him the proceeds of his nonmarital property in the form of a nonmarital asset

that could be sold. See Minn. Stat. § 518.003, subd. 3b (2014) (defining a party’s

nonmarital property to include property “acquired in exchange for” nonmarital property).

Greg does not contest that the parties purchased the boat together, that Lana attempted to

contact him to sell the boat, and that he was unresponsive to her efforts. Under these

circumstances, we cannot conclude that the district court abused its broad discretion by

designating Greg’s nonmarital inheritance of $13,435 to be awarded in the form of an

interest in the boat.2 We further note that Greg seeks both the return of $13,435 from his

2
 Greg does not argue specifically that he did not benefit from Lana’s use of the other
portion of the inheritance funds to pay down the mortgage on his home. See Melina v.
Chaplin, 327 N.W.2d 19, 20 (Minn. 1982) (stating that issues not briefed are forfeited).

                                              8
inheritance and an order that the boat be sold, with him receiving one-half the proceeds.

Because this portion of his inheritance now only exists as equity in the boat, Greg would

receive a windfall if he were to receive both the $13,435 and one-half of the proceeds from

a boat sale.

       Finally, Greg seeks an adjustment of the equalizer payment ordered by the district

court, based on his other arguments as to property division. Because Greg asserts no other

mathematical error in the equalizer, in view of our affirmance of the district court’s order,

we decline to order such an adjustment.

       Affirmed.

We conclude nonetheless that the district court’s assignment of that repayment to him does
not represent an abuse of discretion.

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