In re the Marriage of: Brian D. Peterson v. Joyce Marie Deeb

Court of Appeals of Minnesota·Decided April 27, 2015·No. A13-2259·Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn.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

A13-2259

A13-2281

In re the Marriage of: Brian D. Peterson, petitioner, Appellant,

vs.

Joyce Marie Deeb,

Respondent.

Filed April 27, 2015

Affirmed

Hooten, Judge

Dakota County District Court File No. 19HA-FA-12-103

J. Virgil Bradley, Rachael C. Peters, Cornerstone Family Law, LLC, Minneapolis, Minnesota (for appellant)

Patricia A. O’Gorman, Patricia A. O’Gorman, P.A., Cottage Grove, Minnesota (for respondent)

Considered and decided by Schellhas, Presiding Judge; Stauber, Judge; and Hooten, Judge.

UNPUBLISHED OPINION

HOOTEN, Judge In these consolidated appeals in a marital dissolution matter, appellant-husband argues that the district court erred by: (1) not enforcing the parties’ antenuptial agreement; (2) miscalculating respondent-wife’s nonmarital interest in real property; and

(3) appointing a receiver to liquidate real property. In her related appeal, respondent-wife argues that the district court abused its discretion by admitting evidence of appellant- husband’s alleged nonmarital interest in real property. We affirm.

FACTS

Appellant-husband Brian D. Peterson and respondent-wife Joyce Marie Deeb were married in 1999. Peterson petitioned for dissolution of the marriage in January 2012. After a five-day trial in April 2013, the district court issued a judgment and decree dissolving the marriage and determining child custody, child support, property division, and other issues. The parties do not contest any issues relating to child custody or child support, but both parties appeal from the district court’s division of real property in light of the parties’ rights under their antenuptial agreement.

Before the parties married, Deeb was the sole owner of residential real property located in Inver Grove Heights (the homestead). At the time of marriage, the fair-market value of the homestead was $240,000, the homestead was encumbered by a mortgage in the amount of $165,000, and Deeb therefore had equity in the homestead in the amount of $75,000. In the antenuptial agreement, the parties disclosed all of their assets, and they were represented by independent counsel when they negotiated its terms and entered into the agreement. Under the agreement, Deeb retained her $75,000 nonmarital interest in the homestead, but any “future increase in value or equity” of the homestead would be considered marital property. According to the agreement, within 30 days after the marriage, the homestead was to be transferred into joint tenancy and both parties were to become joint obligors of the mortgage on the homestead. Exhibit B, which was attached

to the agreement, indicated that Peterson owned a nonmarital asset called “Zurich Money Market” (the Zurich account) that was worth $15,417 at the time of marriage.

In 2005, the parties refinanced the homestead in order to purchase a cabin. Prior to refinancing, the “appraised value” of the homestead was $429,000, which was encumbered by a mortgage of $146,387.06. Therefore, the total equity in the homestead was $282,612.94, which consisted of Deeb’s $75,000 nonmarital equity as well as marital equity of $207,612.94. The purchase price of the cabin was approximately $225,000, and of that amount, $173,612.94 of the purchase price was paid with funds obtained through the refinancing of the homestead. Peterson also contributed nonmarital funds toward the purchase of the cabin that were later traced to the Zurich account. By applying funds obtained by the refinancing of the homestead, as well as other funds, the parties were able to purchase the cabin without having to obtain a mortgage on the cabin. As a result of the refinancing and the purchase of the cabin, the homestead was encumbered by a new mortgage in the amount of $320,000, and $109,000 of equity remained in the homestead.

In 2008, the parties purchased rental property for $88,000. The rental property was financed in part by encumbering the cabin with a home equity line of credit in the amount of $45,230.24. At the time of dissolution, the rental property was unencumbered and was being used as rental property.

Upon dissolution, the district court awarded Deeb the homestead and ordered that she was responsible for paying the mortgage. The fair-market value of the homestead at the time of dissolution was $276,000, and it was encumbered by a mortgage in the amount of $278,000. In interpreting and enforcing the antenuptial agreement, the district

court found that Deeb had a $75,000 nonmarital interest that “persists in the marital estate” and that Peterson had a $15,417 nonmarital interest in the cabin. The district court ordered that the parties sell the cabin and, out of the net proceeds of the sale, pay Deeb $75,000 for her nonmarital interest and Peterson $15,417 for his nonmarital interest in the cabin. The remaining proceeds from the sale of the cabin were to be equally distributed as marital property. The district court also ordered the parties to sell the rental property and distribute the proceeds as marital property, but gave Peterson the opportunity to purchase the rental property if he paid Deeb her share.

These appeals followed.

DECISION

A district court’s division of property upon marital dissolution is reviewed for an abuse of discretion. Antone v. Antone, 645 N.W.2d 96, 100 (Minn. 2002).

I.

Peterson acknowledges that Deeb had a $75,000 nonmarital interest in the homestead at the time of marriage and that the distribution of the parties’ property upon dissolution is governed by their antenuptial agreement. But, he disputes the district court’s interpretation and enforcement of the antenuptial agreement. Under Peterson’s interpretation of the antenuptial agreement, Deeb’s nonmarital interest was extinguished when the parties refinanced the homestead and the value of the homestead decreased. The district court rejected Peterson’s interpretation, concluding that the interpretation and enforcement of the agreement so as to extinguish Deeb’s nonmarital interest would be substantively unfair and “unconscionable.” We agree.

Generally, Minnesota public policy favors the freedom to contract. Lyon Fin.

Servs., Inc. v. Ill. Paper & Copier Co., 848 N.W.2d 539, 545 (Minn. 2014). Under freedom of contract principles, “parties are generally free to allocate rights, duties, and risks.” Id. Consistent with this public policy, “[a]n antenuptial agreement is a type of contract recognized and favored at common law.” Pollack-Halvarson v. McGuire, 576 N.W.2d 451, 455 (Minn. App. 1998), review denied (Minn. May 28, 1998). Minnesota has “long recognized” the validity of antenuptial agreements, which alter the statutory dissolution schemes regarding the disposition of both marital and nonmarital property. See McKee-Johnson v. Johnson, 444 N.W.2d 259, 263–65 (Minn. 1989), overruled on other grounds by In re Estate of Kinney, 733 N.W.2d 118 (Minn. 2007).

The common-law procedural requirements applicable to the execution of a valid antenuptial agreement were codified in 1979. Id. at 263; see also Minn. Stat. § 519.11, subd. 6 (2014). The statute provides that two people of legal age may enter into an antenuptial agreement in order to determine what rights each party has in his or her nonmarital property upon dissolution of the marriage. Minn. Stat. § 519.11, subd. 1 (2014). Under the statute, an antenuptial agreement is valid and enforceable if “(a) there is a full and fair disclosure of the earnings and property of each party, and (b) the parties have had an opportunity to consult with legal counsel of their own choice.” Id. If the agreement complies with these procedural requirements, a party challenging the validity of the agreement has the burden of proof to demonstrate its invalidity. Id., subd. 5 (2014).

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In re the Marriage of: Brian D. Peterson v. Joyce Marie Deeb, (Mich. Ct. App. 2015).

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