On March 7, 2022, the Minnesota Court of Appeals issued its nonprecedential decision in Bienemann v. Bienemann. Despite the many issues raised on appeal, the opinion stands out for its in-depth analysis concerning marital and nonmarital interests.

Case history

Husband and Wife married in 2000. Wife, who grew up in the Soviet Union, moved to the United States to marry Husband. Wife had a mathematics degree and previously earned a living as a teacher and software consultant.

During the parties’ marriage, Wife worked as a homemaker and took care of the parties’ child. Husband, the recipient of a substantial inheritance during the marriage, worked in wholesale apparel sales. The parties enjoyed a comfortable standard of living together.

Husband petitioned to dissolve the marriage in February 2019. Trial took place in June 2020. In addition to custody and parenting time, the issues of property division and spousal maintenance were disputed.

Husband was awarded sole physical custody of the minor child.

The district court determined that both Husband and Wife were underemployed. The court imputed income of $90,000.00 per year to Husband and $31,000.00 per year to Wife.

Wife was awarded permanent spousal maintenance, absent a child support obligation in favor of Husband.

The district court awarded the marital residence to Husband after finding it was purchased with sale proceeds from Husband’s pre-marital residence and most of the remaining mortgage was paid off with an inheritance received by Husband.

Husband also received his vehicle, hunting equipment, and nonmarital accounts valued at approximately $1,800,000.00.

Wife received her vehicle, personal property, individual accounts, and a property equalizer of $90,635.00 upon a finding that the parties’ marital estate totaled $191,270.00.

The district court denied both parties’ requests for attorney fees.

Issues on appeal

Wife appealed, arguing the district court: (1) erred in its treatment of income generated from Husband’s nonmarital accounts; (2) erred in failing to account for marital improvements to the homestead; (3) erred by failing to apportion the marital estate its share of the homestead’s market-based appreciation; (4) erred in awarding less alimony than she demonstrated a need for; and (5) abused its discretion in failing to award need-based attorney fees.

Income from investments

As to income earned from Husband’s nonmarital property, Judge Reyes noted that income produced during a marriage from a nonmarital investment is marital property.

The district court determined that Husband’s inherited accounts were nonmarital property. However, the parties’ tax returns revealed that said accounts earned over $60,000.00 in interest and dividends in the two years leading to the valuation date.

Judge Reyes suggested that the district court, in awarding the entirety of the accounts to Husband as nonmarital property, failed to distinguish the principal investments and their growth due to appreciation (nonmarital property) and income (marital property).

Husband argued that the district court did not err because Wife did not show that the increased value resulted from active investment decisions by Husband. However, Judge Reyes confirmed that the “active-versus-passive” distinction only applies to “appreciation” and not “income.”

Home improvements

On the issue of home improvements, Wife argued that the district court erred by failing to account for approximately $200,000 in marital improvements to the homestead. The court of appeals agreed.

Judge Reyes noted that “improvements to nonmarital property made by the parties during the marriage are presumed to be marital property.” He added that any increase in value to nonmarital property “resulting from marital improvements” is also marital, while an increase in value due solely to “market-based appreciation” is nonmarital.

At trial, Husband testified that the improvements were funded from the parties’ joint account that held his employment income. The relevant appraisal also called out the improvements and indicated how he contributed to the property’s overall condition.

Still, the district court’s findings did not mention the improvements at all, failing to account for the marital equity within the home.

Husband argued Wife failed to cooperate in discovery by failing to produce information supporting her denial of Husband’s nonmarital claim. However, Judge Reyes confirmed Husband (not Wife) had the burden of proof.

Equity classification

Wife argued that the district court failed to apply the Schmitz formula to ensure the marital estate received its share of the homestead’s appreciation. The court of appeals agreed.

Judge Reyes confirmed, “When marital equity is created in a nonmarital property as a result of the parties using marital funds to reduce the mortgage balance, the marital estate is entitled to its share of the property’s market-based appreciation.”

Recall, under the Schmitz formula, the present value of a nonmarital asset used in the acquisition of marital property is: (1) the proportion of net equity or contribution at the time of acquisition; (2) bore to the value of the property at the time of purchase; (3) multiplied by the value of the property at the time of separation.

The district court in Bienemann merely credited the mortgage principal spend-down to the marital estate and classified remaining equity as nonmarital.

Spousal maintenance

Wife argued the district court abused its discretion by awarding wife $300 less per month in its conclusions of law than it found she needed in its findings of fact.

Judge Reyes noted that a “district court abuses its discretion if it resolves the discretionary question in a manner that is against logic and the facts on the record.”

The district court awarded Wife permanent spousal maintenance after considering the statutory factors and finding that her limited financial resources, age, extended absence from profession, limited English skills, diminished earning capacity and health challenges supported her need for alimony.

Concurrently, the district court found Husband had the ability to pay spousal maintenance while supporting his needs and the needs of the parties’ child.

While the district court determined Wife’s “need” totaled $3,800.00 per month, it failed to explain why it awarded just $3,500.00 per month. Judge Reyes felt a clerical error was in play.

Attorney fees

Wife argued the district court erred in denying her request for need-based attorney fees in the absence of specific findings on the issue. The court of appeals agreed, noting the record “could” support a need-based fee award.

Judge Reyes noted that the record suggests that Husband has the means to pay while Wife does not. He suggested, “The district court frequently noted that Husband could earn a high salary and live comfortably on his inheritance, whereas Wife could only survive with permanent spousal maintenance and would be made ‘destitute’ if she had to pay child support.”

Conclusion

As lawyers, our core function involves educating others — whether the client, opposing counsel, or the judge. Each brings a unique history and function to a case.

As family law attorneys, we enmesh ourselves in the forms and formulas outlined in Chapter 518. We speak a unique language. Many come to court assuming the judge knows, or cares about, the kind of nuances in play in Bienemann. Do your best to teach the decision-maker.

Jason Brown is a shareholder in the family law department at Barna, Guzy & Steffen, Ltd. in Coon Rapids, Minnesota. In addition to his work as a lawyer, he provides mediation services. Jason can be reached at [email protected].