In re the Marriage of Mary Ellen Block, f/k/a Mary Ellen Jensen v. William Ray Block ( 2015 )

This opinion will be unpublished and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
A14-1096
In re the Marriage of
Mary Ellen Block, f/k/a Mary Ellen Jensen, petitioner,
Appellant,
vs.
William Ray Block,
Respondent.
Filed August 3, 2015
Affirmed
Bjorkman, Judge
Ramsey County District Court
File No. 62-FA-10-2043
M. Sue Wilson, Amy Yanik Meisel, M. Sue Wilson Law Offices, P.A., Minneapolis,
Minnesota (for appellant)
Alan C. Eidsness, Lisa T. Spencer, Henson & Efron, P.A., Minneapolis, Minnesota (for
respondent)
Considered and decided by Stauber, Presiding Judge; Schellhas, Judge; and
Bjorkman, Judge.
UNPUBLISHED OPINION
BJORKMAN, Judge
Appellant-wife challenges a dissolution judgment and related posttrial orders,
arguing that the district court abused its discretion by (1) dividing the parties’ property
inequitably, (2) denying her motions to reopen the dissolution judgment based on fraud,
and (3) awarding her inadequate spousal maintenance. In a related appeal, respondent-
husband also challenges the spousal-maintenance award, arguing that the district court
(1) applied the wrong legal standard and (2) confused certain assets in determining his
ability to pay maintenance. We affirm.
FACTS
Appellant Mary Ellen Rice1 and respondent William Ray Block were married in
1985. Throughout the marriage, husband successfully engaged in numerous business
ventures, with real-estate enterprises now collectively worth more than $30 million. Wife
did not work outside the home, instead maintaining the parties’ home and raising their
two daughters, who are now adults.
Wife commenced this dissolution action in August 2010. The central focus at the
September 2012 trial was the valuation and division of the various businesses. The
parties substantially agreed as to the value of the businesses, and that husband owes
money to some of his businesses and some of them owe him money. But the parties
disagreed about the appropriate allocation of debt owed by three businesses: (1) White
Eagle GC LLC, a Wisconsin golf course designed to capitalize on the pending bridge
across the St. Croix River from Stillwater, which lacks sufficient cash flow to cover its
expenses and owes $4,079,091 to husband (and $2.6 million to MH Mortgage and $1.2
million to the Small Business Administration); (2) Preservation Development LLC,
which owns residential golf course lots on or near the White Eagle golf course, lacks
1
The district court granted wife’s request to change her surname from Block to Rice.
2
sufficient cash flow to cover its expenses, and owes husband $2,014,239; and (3) MH
Mortgage Corp., the sole significant asset of which is the $2.6 million note from White
Eagle.
On February 7, 2013, the district court entered judgment dissolving the parties’
marriage and dividing their property. The district court awarded husband all of the
businesses except MH Mortgage, which it awarded to husband and wife in equal shares,
and awarded husband and wife each a one-half interest in the debts Preservation
Development and White Eagle owe to husband and MH Mortgage. The district court
found that it is uncertain whether Preservation Development and White Eagle will ever
repay the debts, and reasoned that an equal distribution gives both parties an incentive to
collect and fairly distributes the “substantial risk associated with these assets.” As a final
property settlement, the district court ordered husband to pay wife a cash equalizer of
$3,310,946, with interest, in several lump sums over approximately four years. And the
district court made findings regarding the parties’ reasonable monthly expenses and
wife’s employment prospects but reserved the issue of spousal maintenance pending final
payment of the property equalizer.
Both parties moved to amend the dissolution judgment.2 Wife sought to add
specific language protecting her interest in the debts owed by White Eagle and
Preservation Development from possible manipulation by husband, as sole owner of the
businesses. Husband principally sought to amend the valuations of several businesses
2
This case involves extensive posttrial motion proceedings. For the sake of brevity, we
focus only on those facts necessary to our analysis of the issues presented on appeal.
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and the equalizer payment. On July 31, the district court substantially granted the parties’
motions, amending the dissolution judgment to include the requested protective language
and reducing the equalizer payment to $1,273,111.
Wife subsequently moved for an award of spousal maintenance. While that
motion was pending, wife sought relief from the judgment on the basis of newly
discovered evidence and fraud and because prospective application of the dissolution
judgment was no longer equitable. Wife argued that husband newly testified at a
November 2013 deposition that the funds he provided to Preservation Development were
not loans but capital contributions. The district court conducted a hearing on both
motions on February 20.
On March 31, while the motions were under advisement, wife filed another motion
seeking relief from the judgment on the basis of fraud and evidence discovered after the
February 20 hearing, namely the 2012 and 2013 tax returns for Preservation
Development, White Eagle, and MH Mortgage. The district court stayed the motion and
any further motions or discovery until after it decided the pending motions.
On May 19, the district court denied wife’s motion for relief from the judgment,
finding that she did not establish entitlement to relief based on newly discovered
evidence or fraud “as relating to the classification of the parties’ notes in Preservation
Development, LLC and White Eagle.” But the district court found that the substantial
decrease in the property equalizer made reservation of spousal maintenance unreasonable
and unfair and awarded wife rehabilitative spousal maintenance of $8,000 per month,
commencing March 1.
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Wife thereafter sought permission to pursue her March 31 motion and to conduct
additional discovery. The district court denied wife’s requests. Wife appealed; husband
filed a notice of related appeal.
DECISION
I. The district court did not abuse its discretion in dividing the parties’
property.
A district court has broad discretion in a dissolution proceeding to make a just and
equitable division of the parties’ property. See Minn. Stat. § 518.58, subd. 1 (2014);
Gottsacker v. Gottsacker, 664 N .W.2d 848, 852 (Minn. 2003). We view the record in
the light most favorable to the district court’s findings and defer to the district court’s
credibility determinations. Vangsness v. Vangsness, 607 N.W.2d 468, 472 (Minn. App.
2000). We will affirm the district court’s decision if it has “an acceptable basis in fact
and principle, even though we might have taken a different approach.” See Antone v.
Antone, 645 N.W.2d 96, 100 (Minn. 2002).
Wife argues that the district court abused its discretion by dividing the debts of
Preservation Development and White Eagle equally between the parties while awarding
the businesses to husband. She contends that this unfairly eliminates any incentive for
husband to have the businesses repay those debts and that the district court should have
instead credited husband with the debts and ordered him to pay her cash for half of the
amount owed. The district court found wife’s proposal inequitable. That determination,
which wife did not timely challenge in her posttrial motions, finds ample support in the
record.
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It is undisputed that $6,093,330 of the parties’ money went into Preservation
Development and White Eagle. It is also undisputed that at the time of trial these marital
funds were documented as loans from husband to the two businesses. And it is
undisputed that, no matter how the funds are designated in the business records or tax
returns, there is a substantial risk that the two businesses will not repay the loans.
The disposition wife urges would place all of this risk on husband. The district
court declined to do this, instead opting to divide the financial burden associated with the
risk equally but to maximize the potential that the debts would be repaid by awarding the
businesses solely to husband, who has demonstrated business acumen. While this does
not represent the only possible division, it is a reasoned way to equitably resolve a
difficult issue. We conclude that the district court did not abuse its discretion by treating
the funds in question as speculative debts, the risk and reward of which should be shared
equally between the parties.
II. The district court did not abuse its discretion in denying wife’s motions to
reopen the judgment due to fraud.
A district court may relieve a party from a dissolution judgment and order a new
trial if the other party committed fraud or if prospective application of the judgment is no
longer equitable. Minn. Stat. § 518.145, subd. 2 (2014). If the moving party fails to
make a prima facie showing of fraud or inequity, the district court may summarily
dismiss the motion. See Thompson v. Thompson, 739 N.W.2d 424, 428 (Minn. App.
2007). We review for abuse of discretion the district court’s decision whether to reopen
the dissolution judgment. Id.6
Wife argues that the district court abused its discretion by denying her February
and March 2014 motions for relief from the amended dissolution judgment and for leave
to conduct additional discovery regarding husband’s alleged misconduct. Both motions
allege that husband committed fraud against wife and fraud on the court by asserting at
trial that Preservation Development and White Eagle owe him money when the funds in
question are actually capital contributions. We are not persuaded. Husband consistently
testified at trial that the funds in question, while designated as loans to the business in the
business records, probably should not be considered debts and, regardless of label, are
“uncollectable.” Similarly, husband consistently testified, and both wife and the district
court were aware, that husband frequently moves assets between his businesses and
reclassifies funds in accordance with his business needs—part of a business strategy that
had proven highly successful. Indeed, the district court accounted for the risk that this
strategy poses to wife’s interest by granting wife’s motion to add protective provisions to
the dissolution judgment.3
In sum, the district court awarded wife a speculative but real and actionable
interest in half of the $6,093,330 in marital funds provided to White Eagle and
Preservation Development. Nothing in the record indicates that husband fraudulently
misrepresented the status of the funds during or after trial, and husband continues to
acknowledge that he has a duty to pay wife her half if the debts are repaid. On this
record, we conclude the district court did not abuse its discretion by denying wife’s
3
The protections include reporting requirements, limitations on husband’s ability to take
fees or salary out of the companies, and wife’s right to engage a receiver at husband’s
expense. Wife has not requested a receivership.
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motions for relief from the amended dissolution judgment due to fraud or prospective
inequity and declining to conduct any further hearings or permit any further discovery on
that claim.
III. The district court did not abuse its discretion in awarding spousal
maintenance.
We will not reverse a district court’s decision regarding spousal maintenance
unless the court abused its discretion by improperly applying the law or making clearly
erroneous findings. Melius v. Melius, 765 N.W.2d 411, 414 (Minn. App. 2009). And we
will not disturb factual findings concerning spousal maintenance unless they are
“manifestly contrary to the weight of the evidence or not reasonably supported by the
evidence as a whole.” Hemmingsen v. Hemmingsen, 767 N.W.2d 711, 716 (Minn. App.
2009) (quotation omitted). “But whether the district court applied the correct legal
standard is a question of law, which we review de novo.” Thompson, 739 N.W.2d at 430.
The parties challenge various aspects of the spousal-maintenance award—the legal
standard applicable to wife’s maintenance request, the amount awarded, and the
retroactive application of the award.4 We address each of these issues in turn.
4
Wife notes that the award is designated as “temporary” and recites the principle that
“uncertainty” justifies a permanent award, but does not substantiate a claim of error based
on that designation. Accordingly, any such argument is waived. See Schoepke v.
Alexander Smith & Sons Carpet Co., 290 Minn. 518, 519-20, 187 N.W.2d 133, 135
(1971). Moreover, the district court labeled the award as “temporary” because the
parties’ circumstances will likely change after husband makes the final payment of the
property equalizer, and expressly permitted either party to “request review” of the
maintenance award at that point.
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Legal standard
Husband argues that the district court should have summarily rejected wife’s
spousal-maintenance motion because it was an untimely request to amend the original
dissolution judgment. We disagree. The district court initially reserved the issue of
maintenance at wife’s request because of the “extent of the parties’ marital estate and
resulting property distribution and cash equalizer,” which was originally set at
$3,310,946. Wife agrees that the interest from this amount would have been sufficient
for her to meet her needs independently. The district court subsequently reduced the cash
equalizer by more than half, but did not award spousal maintenance or amend the finding
that it is appropriate to reserve maintenance. Within one month, wife moved for spousal
maintenance.
Wife sought spousal maintenance on the ground that “there has been a substantial
change of circumstances which makes the [amended dissolution judgment], specifically
the reservation of spousal maintenance to [wife], unreasonable and unfair.” And she
expressly invoked the spousal maintenance-modification statute, Minn. Stat. § 518A.39,
subd. 2 (2014), in support of her maintenance request. The district court applied that
standard in awarding maintenance.
A district court may modify the terms of any “order respecting maintenance” if a
substantial change in circumstances renders the terms of that order unreasonable or
unfair. Minn. Stat. § 518A.39, subd. 2(a). While this case does not present the usual
scenario under which a modification occurs, the circumstances fall within the plain
language of the statute. And husband does not identify any reason that the district court
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could not modify the existing order reserving spousal maintenance until husband pays the
property equalizer in full. Accordingly, we conclude that the district court did not err by
considering wife’s motion as a request to modify that order.
Amount
Both parties challenge the amount of the award. We turn first to wife’s arguments.
She contends that the award is insufficient because the district court improperly reduced
her monthly living expenses from $18,855 to $10,000. We disagree. The district court
found in the original dissolution judgment that wife has reasonable monthly expenses of
$10,000. Wife did not timely challenge that finding. And the finding, which is based on
reductions for redundant credit card costs, improper allocations for the parties’ adult
children, and expenses that exceeded the marital standard of living, has ample support in
the record.
Wife next argues that the district court abused its discretion because an $8,000
monthly maintenance award leaves her with at least a $2,000 monthly shortfall. We are
not persuaded. The district court determined that “it is fair and appropriate for a portion
of [wife]’s budget to be met through part time employment or the equalizer money she
has received and will receive.” This determination is consistent with the unchallenged
initial findings that wife is healthy and educated and able to work though unlikely to earn
more than $24,000 per year, and the undisputed evidence that wife’s property settlement
will provide her substantial interest income. Similarly, the district court has the
discretion to reduce the award based on tax considerations but is not required to do so.
See Maurer v. Maurer, 623 N.W.2d 604, 607 (Minn. 2001) (holding that a “bright-line
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rule would leave little, if any, room for the exercise of discretion”). On this record, we
discern no abuse of discretion in setting spousal maintenance below wife’s reasonable
monthly expenses.
Husband, in turn, asserts that the district court confused certain assets in
determining his cash flow and, as a result, clearly erred in finding that he is able to pay
$8,000 in monthly maintenance. The finding at issue provides:
[Husband]’s cash flow has changed significantly since
trial. The Court previously found that [husband]’s monthly
cash flow included an anticipated monthly expense of $9,500
attributable toward amortizing the SBA loan. However,
[husband] has not been making this monthly payment and
there is no evidence that he will be making that payment in
the near future. Therefore it is appropriate to remove the
amortization of the SBA loan from [husband]’s monthly
expenses which frees up that amount for payment of
temporary spousal maintenance. [Husband] therefore has the
ability to pay spousal maintenance.
(Emphasis added.) Wife essentially agrees, and we are convinced, that the district court
confused White Eagle’s SBA loan with White Eagle’s MH Mortgage loan in this finding.
We also observe that the record is not entirely clear as to whether husband is actually
paying the $9,500 toward amortization of the MH Mortgage loan, as he testified he would
have to do. But neither of these considerations undermines the district court’s ultimate
determination that husband has the ability to pay $8,000 in monthly maintenance.
The district court found that husband’s monthly net cash flow, after accounting for
taxes and the $9,500 obligation in question, is $21,500. Husband does not challenge this
finding. He argues only that he will not be able to pay maintenance “given the large
outstanding balance on the equalizer payment which is paid from his cash flow.” We are
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not persuaded. First, even after paying his monthly expenses of approximately $6,000,
husband enjoys approximately $15,500 each month in net cash flow from which he can
pay spousal maintenance and save toward paying the remainder of the cash equalizer.
Second, the district court expressly contemplated that husband would not be paying the
cash equalizer exclusively or even mostly from cash flow. Rather, the district court
observed that husband has numerous assets, including more than $5 million in cash held
in his businesses, that he could use to pay the equalizer. On this record, the district court
did not clearly err in finding that husband has the ability to pay the $8,000 monthly
maintenance obligation.
Retroactivity
Finally, wife argues that the district court abused its discretion by making the
award retroactive to March 1, 2014, rather than the date of the original dissolution
judgment. We disagree. The maintenance-modification statute provides that a
modification of maintenance “may be made retroactive only with respect to any period
during which the petitioning party has pending a motion for modification but only from
the date of service of notice of the motion on the responding party.” Minn. Stat.
§ 518A.39, subd. 2(e) (2014). Wife filed her modification motion in August 2013, the
district court heard the motion in February 2014, and it granted the motion and awarded
maintenance in May. Making that award retroactive to March 1 was well within the
district court’s discretion; making it retroactive to the date of the original dissolution
judgment was not. See Lee v. Lee, 775 N.W.2d 631, 643 (Minn. 2009) (stating that “the
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choice of retroactive date is committed to the discretion of the district court, as long as
the date chosen is within the statutory limits”).
Affirmed.
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