Court Opinion

ID: 9741925
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:04:17.681273+00
Date Added: 2024-06-11T07:24:27.213366
License: Public Domain

FORSBERG, Judge
(dissenting):
I respectfully dissent. During the marriage, the parties never maintained separate accounts. Respondent was a signatory on the business account. All income, whether wages, loans, dividends, real estate proceeds, or income tax refunds was deposited in the joint accounts. All real estate was either purchased in both names or transferred into joint tenancy. The parties made no differentiation in the source of funds when they made their expenditures. All household expenses, construction expenses, real estate taxes, and personal income tax expenses were paid out of the joint accounts.
At trial appellant failed to establish the value of the various pieces of real estate at the time of the marriage, or the time of the divorce. He could not demonstrate what portion of any increase in value was non-marital. He did not show what portions of the installment payments were principal and which were interest. He made no showing that the increase in value of the homestead was equal to the cost of the improvements.
Instead, he attempted to demonstrate that the proceeds from the real estate were used exclusively to fund the acquisition of additional real estate and the capital improvements on the real estate, and that the other income to the family was used exclusively to fund the normal household expenses. The trial court found that he did not meet his burden:
Petitioner has failed to sustain his burden of proof on the issue of demonstrating that some portion of the parties’ real estate is his separate non-marital property. He has failed to demonstrate his intent to maintain the property as his separate property by commingling the proceeds with joint marital property, by deeding the real estate to Respondent and himself jointly, and by failing to maintain adequate records to substantiate his claim. Petitioner attempts to demonstrate retrospectively that he intended to maintain the proceeds from his real estate as his separate non-marital property, while admitting that installment payments, taxes and insurance on said properties were paid with marital funds. During the course of their marriage, Petitioner never maintained an account upon which Respondent was not a signatory. Respondent contributed all funds from her non-marital assets, namely, Calista and Bethel, to the parties’ mutual benefit. All monies earned or received by the parties were deposited in their joint accounts. All assets were held jointly. The business was in both parties’ names. Improvements to the house, and installment payments on the house were made out of the same account that the parties used to pay all their bills, buy groceries and into which they deposited their wages.
I believe that the trial court did not err in determining that the property was insufficiently traced, particularly since this was a 13-year marriage when funds were passing in and out of the joint accounts. As this court stated in Haaland v. Haaland, 392 N.W.2d 268 (Minn.Ct.App.1986):
Where all funds pass through a general fund such as this and there is no attempt to segregate the funds by their source, “[t]he presumption that property acquired during the marriage is marital control.” Rudbeck v. Rudbeck, 365 N.W.2d 330, 334 (Minn.Ct.App.1985). By commingling her trust account fund with the general family finances and using the funds on general living expenses any *768non-marital character of the funds was lost. See Linderman v. Linderman, 364 N.W.2d 872, 877 (Minn.Ct.App.1985).
Id. at 272.
This case also presents a question not yet considered by the Minnesota Supreme Court (nor specifically addressed by the statute), and that is whether nonmarital property may be transmuted to marital property. Courts seem to have adopted the following differing theories on how non-marital assets are transmuted to marital assets:
(1) Nonmarital property simply cannot transmute into marital. This rule at least has the advantage of certainty. Wade v. Wade, 72 N.C.App. 372, 381, 325 S.E.2d 260, 269, rev. denied, 313 N.C. 612, 330 S.E.2d 616 (1985).
(2) Nonmarital can be changed into marital property if the owner demonstrates by affirmative acts an intent to change such property to marital property. In re Marriage of Cook, 117 Ill.App.3d 844, 849-50, 73 Ill.Dec. 222, 227, 453 N.E.2d 1357, 1362 (1983). Since this represents what the parties would want, it is the fairest solution. It has, however, the distinct disadvantage of uncertainty and will tend to be decided on a case by ease basis.
(3) Transmutation may occur by virtue of change in ownership or by commingling of nonmarital property with marital property. This rule has the advantage of certainty and more or less tracks with the intention of the parties.
(4) By agreement, either express or implied or by gift, an item of separate property may be transmuted into marital property. In re Marriage of Cleveland, 99 Ill.App.3d 293, 298-99, 54 Ill.Dec. 610, 614, 425 N.E.2d 475, 479 (1981).
This court appears to have adopted the first theory, except that it permits what is described as tracing. “Tracing” may exist even in cases where there is a title change (i.e., creation of a joint tenancy) or a commingling of funds. This appears to be more of a “tracing” by accounting techniques than actual, physical tracing. See Nash v. Nash, 388 N.W.2d 777, 781 (Minn.Ct.App.1986), pet. for rev. denied (Minn. Aug. 20, 1986); Montgomery v. Montgomery, 358 N.W.2d 169, 172 (Minn.Ct.App.1984). Moreover, commingling as referred to in this line of cases is not only a matter of mixing assets, but is also an actual transfer of title from one spouse to the other. If such a “gift” from one spouse to another is not a transmutation of property from nonmarital to marital, parties then are powerless to jointly of at least implicitly agree to effectuate such a change.
However, in Haaland this court seems to adopt theory number 3 by creating a presumption which is virtually impossible to rebut and is essentially what was held in In re Marriage of Holman, 122 Ill.App.3d 1001, 1006-08, 78 Ill.Dec. 314, 318, 462 N.E.2d 30, 34 (1984). I urge adoption of theory number 3, which would result in affirmance of the trial court on this issue.