Court Opinion

ID: 9686379
Source: CourtListenerOpinion
Date Created: 2023-08-24 15:45:28.57448+00
Date Added: 2024-06-11T09:49:38.069481
License: Public Domain

GILBERT, Justice.
While I concur with the majority’s analysis as to the parties’ homestead property and the EPI Corporation, I disagree with its conclusion that the trial court should have applied the Schmitz formula to apportion the marital and nonmarital interests in the 18 rental properties acquired by respondent prior to the marriage. The majority breaks new ground, unsupported by either the Minnesota Statutes or this court’s previous decisions, by holding that almost all of the purely market-related passive appreciation of nonmarital property during the marriage is marital property.
The majority disregards unambiguous statutory language defining increase in value of nonmarital property owned before, during, or after marriage as being nonmarital in favor of its concern for not “depriving the marital estate of any return on its investment,” i.e., a return on the principal reduction in the mortgages on the 18 nonmarital properties. This sweeping language may affect not only prior owned property identified in Minn.Stat. § 518.54, subd. 5(b) (2000), but also the property excluded under a valid antenup-tial contract under subdivision 5(e) of the same statute. While the majority may consider this to be good policy, it is up to the legislature to set that policy. Where a statute is unambiguous, we should honor its plain meaning. Burkstrand v. Burkst-rand, 632 N.W.2d 206, 210 (Minn.2001). However, the majority avoids performing any appropriate statutory analysis and does not even find the statute at issue to be ambiguous, yet ignores the statute’s clear intent, thereby amending the statute by judicial fiat.
Under Section 518.54, subdivision 5, nonmarital property can be “acquired by either spouse before, during, or after the existence of their marriage.” The majori*106ty focuses solely on the language about property acquired before the marriage. However, the statute clearly provides for the acquisition of nonmarital property during the marriage, specifically including the increase in value of nonmarital property acquired before marriage within the definition of nonmarital property. Id., subd. 5(b)-(c). The majority then transforms a decrease of mortgage indebtedness on nonmarital property paid solely from passive income to modify section 518.54, subdivision 5(c), and capture a portion of the increase in value of the nonmarital property, even though the legislature has defined this increase in value as nonmarital property. The legislature did not provide that a decrease of mortgage indebtedness on nonmarital property could be used to convert a portion of the increase in value of nonmarital property to marital property. Interestingly, nowhere in the statute is the marital estate return on investment rationale ever mentioned, rather it is an unsupported result that the majority has created without any authority. The majority’s holding applying the Schmitz formula would appear to apply with equal force to property that has otherwise been excluded by a valid antenuptial contract where there are decreased mortgage balances and increases in market value.
The facts in this case are dramatically different than those presented in Schmitz v. Schmitz, 309 N.W.2d 748 (Minn.1981), Nardini v. Nardini, 414 N.W.2d 184 (Minn.1987), or any of the other cases cited by the majority. In order to reach the desired result, the majority equates the pay down of mortgage balances with the acquisition of property subsequent to marriage. However, it is undisputed that respondent acquired all 18 properties before his marriage to appellant. (The seven other rental properties acquired after the marriage were treated as marital.) Furthermore, it is undisputed that these 18 properties increased in value during the marriage solely as the result of market forces. Accordingly, any increase in value for these 18 nonmarital properties during the marriage should remain nonmarital.
The majority states that Nardini supports transforming these statutorily defined nonmarital assets into marital assets. However, unlike Nardini, where there was no dispute that the value of the stock at dissolution was “attributable to the efforts of the marital partners over the course of more than 30 years of marriage,” 414 N.W.2d at 194, none of the increased value of the 18 properties in this case can be attributed to either marital effort or labor. In fact, the record makes clear, and the trial court found, that both respondent and appellant chose not to spend any of their marital funds or exert any personal labor on improving any of the 18 properties. Instead, a professional property management company rented and maintained the properties and passive market forces led to all of the increased value of the nonmar-ital properties. As a result, these properties retained their nonmarital character and the Schmitz formula should not apply. There was also no commingling of funds between marital and nonmarital accounts, transfers of titles between spouses, or new acquisitions in this asset group.
The majority also cites to dicta from Nardini in support of its conclusion that the Schmitz formula should apply. However, the majority fails to adhere to the unambiguous holding of Nardini: “[A]n increase in the value of nonmarital property attributable to inflation or to market forces or conditions, retains its nonmarital character.” 414 N.W.2d at 192. The 18 nonmarital properties increased in value solely as a result of market forces or conditions, thereby retaining their nonmarital character. Furthermore, Schmitz involved a homestead property acquired after mar*107riage and held in joint tenancy by both spouses. 309 N.W.2d at 748. Rent from the duplex in Schmitz was commingled and both parties worked to maintain the property. See id. The accretions from assets that were not commingled or improved upon by the efforts of both parties were held to be nonmarital. Id. at 750.
The majority boldly states as to undisputed nonmarital property that “[w]e hold as a matter of law that a portion of the market-related appreciation during the marriage is marital property.” This proposition is not supported by any citation to our case law or statutory authority. The majority opinion also imports a “net equity” concept into its rationale to modify both the definition of nonmarital property acquired before the marriage and the increase in value of that property. It relies on the formula used in Schmitz, but fails to acknowledge that the Schmitz property was acquired after marriage in joint tenancy by both spouses and the nonmarital equity from the sale of another property was used to acquire a new homestead property in both spouses’ names. The majority, without explanation, simply equates a mortgage principal pay down from passive rental income generated from the non-marital properties to be equivalent to an acquisition of a new property after marriage. The majority then states that the “trial court’s characterization of all of the market-related appreciation during the marriage as respondent’s nonmarital property ignores the fact that those same market forces caused the marital equity to appreciate.” It is unclear what the majority means by this, especially since this proposition is also not accompanied by any citation to any authority.
As the majority points out, we are to affirm a trial court’s division of property in a marriage dissolution if such division had an acceptable basis in fact and principle even though we might have taken a different approach. Servin v. Servin, 345 N.W.2d 754, 758 (Minn.1984). Based on the unambiguous statutory language, the trial court correctly applied the law. At the same time, even if the majority’s approach were acceptable, it certainly cannot be construed as the only acceptable approach. The record shows that the trial court carefully considered both the factual and legal components in ruling that the increase in the value of the 18 properties was due solely to passive, market forces. The trial court’s findings as to these properties were based on this careful consideration, giving full credit to appellant for the reduction in mortgage balances. The trial court was well within the broad discretion afforded to it in dividing the parties’ property. While the majority believes that the trial court should have taken a different approach, the trial court was without authority to do so and its conclusion that the passive appreciation of respondent’s non-marital property remained nonmarital was not an abuse of discretion. Accordingly, I would affirm the court of appeals as to the 18 nonmarital properties.