Lee v. Lee

OPINION

This case concerns the interpretation of Minnesota’s spousal maintenance statutes and the application of these statutes to retirement payments received from pension funds. After respondent Raymond Michael Lee retired, he brought a motion in the district court to modify his monthly maintenance obligation. The court lowered Raymond’s maintenance obligation from $825 per month to $700 per month. *633Raymond appealed, and the court of appeals eliminated his monthly maintenance payments altogether. Appellant Elaine Irene Lee challenges the holdings of the court of appeals that (1) Raymond’s pension benefits earned before marriage, but paid after the marriage dissolution, are not available as a source of spousal maintenance, (2) Raymond’s pension benefits earned during marriage and previously awarded to him as marital property should not be considered when determining Raymond’s ability to pay maintenance, and (3) Elaine cannot receive any portion of Raymond’s pension benefits until Raymond has received the full value of his premarital benefits and benefits previously awarded to him as marital property. Finally, Elaine challenges the court of appeals’ modification of the effective date of the district court’s order, and the district court’s denial of her motion for attorney fees. We affirm in part, reverse in part, and remand.

None of the relevant facts in this case are in dispute. Elaine and Raymond married in 1968. The parties dissolved their marriage in 1993. While they were married, Raymond worked as an electrician and Elaine as a homemaker.

The parties’ dissolution decree required Raymond to pay Elaine $650 per month in spousal maintenance. As part of the division of the marital estate, the district court also apportioned pension benefits earned by Raymond through his union while the parties were married equally between the parties, giving Elaine a 50% share, and leaving Raymond with a 50% share.1

In 1994, Raymond petitioned the district court to lower his maintenance obligation because he was unemployed and could no longer afford the $650 monthly payment. The court granted Raymond’s motion. In 2004, Elaine petitioned the court to increase Raymond’s monthly maintenance payment on the grounds that Raymond had returned to work shortly after the court decreased Raymond’s maintenance obligation. Elaine also discovered that in addition to the previously awarded benefits, Raymond had an interest in two defined benefit pension plans, the International Brotherhood of Electrical Workers Pension Benefit Fund and the National Electrical Benefit Fund, neither of which was taken into account in the original di*634vorce decree. Elaine asked the district court to award her 50% of the newly-discovered pension benefits Raymond had accrued while Elaine and Raymond were married.

The district court granted Elaine’s motion, retroactively reinstated the $650 per month maintenance obligation, and imposed an increased maintenance obligation to $825 per month beginning on November 1. 2003. The court also awarded Elaine a 50% property interest in Raymond’s pension benefits that were not accounted for in the original decree.2 The court of appeals affirmed. Lee v. Lee, No. A04-1070, 2005 WL 949038 (Minn.App. Apr. 26, 2005). These developments are relevant only to the extent that when they were over, Elaine and Raymond were each awarded a 50% property interest in all of Raymond’s pension benefits earned while the parties were married — valued at $795.64 per month — a valuation that neither party challenges.

In 2005, Raymond retired and began to receive monthly pension benefit payments. Raymond petitioned the district court to lower his monthly maintenance obligation, arguing that his income had decreased in retirement and Elaine’s income had increased, due in part to Elaine’s receipt of her share of pension benefits earned by Raymond during marriage and previously awarded to Elaine. Elaine opposed Raymond’s motion, asked the court to award her maintenance for life, and also asked the court to order Raymond to purchase life insurance to guarantee Elaine lifetime maintenance upon Raymond’s death.

The district court began its analysis by calculating the monthly incomes and monthly expenses of the parties. The court found that Elaine received $1,674.14 monthly: $878.50 in Social Security payments and $795.64 from her 50% share of Raymond’s pension benefits earned during marriage. The court determined that Raymond received $4,022.78 monthly: $1,555 in Social Security benefits and $2,467.78 in pension benefits, including his 50% share of pension benefits earned during marriage.

The court then subtracted from Raymond’s gross monthly income the portion of Raymond’s monthly pension payment previously awarded to Raymond as marital property.3 The court arrived at an adjusted monthly income figure for Raymond of $3,227.14.

The district court then compared the parties’ monthly incomes with their reasonable monthly expenses. The court esti*635mated4 Elaine’s monthly expenses to be $1,950, and Raymond’s to be $2,100. The court concluded that “[a] balancing of the parties’ surpluses and shortages would result in a reduced spousal maintenance payment of $700 per month.”

The court also ordered Raymond to obtain a life insurance policy naming Elaine as the beneficiary in the amount of $75,000. The district court made its order retroactive to May 1, 2006, and denied both parties’ requests for attorney fees.

Raymond appealed the district court’s order, and the court of appeals reversed, reducing Raymond’s monthly maintenance obligation to zero. Lee v. Lee, 749 N.W.2d 51, 57 (Minn.App.2008). The court of appeals vacated the district court’s order requiring Raymond to procure insurance, on the grounds that Raymond no longer had a maintenance obligation to secure. Id. at 60-61. The court of appeals also changed the effective date of the district court’s order from May 1, 2006, to July 1, 2005, and on Elaine’s cross-appeal, affirmed the district court’s denial of need-based attorney fees. Id. at 61. We granted Elaine’s petition for review.

I.

Maintenance is defined by statute as “an award made in a dissolution or legal separation proceeding of payments from the future income or earnings of one spouse for the support and maintenance of the other.” Minn.Stat. § 518.003, subd. 3a (2008). Minnesota Statutes § 518A.29 (2008), in turn, states that “gross income includes ... pension and disability payments.” 5

Minnesota Statutes § 518.552 (2008) outlines the conditions and factors courts must consider before awarding maintenance. Section 518.552, subdivision 1, states that:

[T]he court may grant a maintenance order for either spouse if it finds that the spouse seeking maintenance:

(a) lacks sufficient property, including marital property apportioned to the spouse, to provide for reasonable needs of the spouse considering the standard of living established during the marriage, especially, but not limited to, a period of training or education, or

(b) is unable to provide adequate self-support, after considering the standard of living established during the marriage and all relevant circumstances, through appropriate employment, or is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the home.

In calculating the appropriate amount and duration of maintenance, the statute provides that “[t]he maintenance order shall be in amounts and for periods of time, either temporary or permanent, as the court deems just, without regard to mari*636tal misconduct, and after considering all relevant factors.” Minn.Stat. § 518.552, subd. 2. The statute lists eight non-exclusive factors for courts to consider when crafting maintenance orders:

(a) the financial resources of the party seeking maintenance, including marital property apportioned to the party, and the party’s ability to meet needs independently, including the extent to which a provision for support of a child living with the party includes a sum for that party as custodian;

(b) the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment, and the probability, given the party’s age and skills, of completing education or training and becoming fully or partially self-supporting;

(c) the standard of living established during the marriage;

(d) the duration of the marriage and, in the case of a homemaker, the length of absence from employment and the extent to which any education, skills, or experience have become outmoded and earning capacity has become permanently diminished;

(e) the loss of earnings, seniority, retirement benefits, and other employment opportunities forgone by the spouse seeking spousal maintenance;

(f) the age, and the physical and emotional condition of the spouse seeking maintenance;

(g) the ability of the spouse from whom maintenance is sought to meet needs while meeting those of the spouse seeking maintenance; and

(h) the contribution of each party in the acquisition, preservation, depreciation, or appreciation in the amount or value of the marital property, as well as the contribution of a spouse as a homemaker or in furtherance of the other party’s employment or business.

Id.

Minnesota Statutes § 518A.39, subd. 1 (2008), provides that “the court may from time to time, on motion of either of the parties ... modify the order respecting the amount of maintenance.” Subdivision 2(a) provides that “[t]he terms of an order respecting maintenance or support may be modified upon a showing of one or more of the following, any of which makes the terms unreasonable and unfair: (1) substantially increased or decreased gross income of an obligor or obligee; (2) substantially increased or decreased need of an obligor or oblige,” plus other factors not relevant in this case. Id., subd. 2(d).

Moreover, “[o]n a motion for modification of maintenance, including a motion for the extension of the duration of a maintenance award, the court shall apply, in addition to all other relevant factors, the factors for an award of maintenance under section 518.552 that exist at the time of the motion.” Minn.Stat. § 518A.39, subd. 2(d). Id., subd. 2(d).

The legislature also specifically provided direction with regard to the division of marital property. Minnesota Statutes § 518.58, subd. 1 (2008), directs the courts to “make a just and equitable division of the marital property of the parties” based on a number of factors set forth in the statute. That same statute directs the court to value the marital assets for purposes of division between the parties as of a specific date: the date of the initially scheduled prehearing settlement conference, a different date agreed upon by the parties, or a third date if the court makes specific findings that another date of valuation is fair and equitable. Id.

Minnesota Statutes § 518.58, subd. 2, addresses awards of nonmarital property. If the district court finds that a spouse’s *637resources or property, “including the spouse’s portion of the marital property,” are so inadequate as to “work an unfair hardship,” the court may apportion up to one-half of nonmarital property to prevent the unfair hardship. Elaine does not claim that this statute applies in this case.

Minnesota Statutes § 518.58, subd. 4, addresses pension plans. That statute provides that the district court may divide as marital property pension plan benefits or rights in the form of future pension plan payments. Id. § 518.58, subd. 4(a). The statute specifically limits the division by making any award “payable only to the extent of the amount of the pension plan benefit payable under the terms of the plan”, and prohibits an award of a lump sum amount from a defined benefit pension plan. Id.

Finally, Minnesota Statutes § 518.582 (2008) prescribes a procedure for valuing pension benefits or rights. Subdivision 1 of the statute authorizes the district court to appoint a qualified person experienced in the valuation of pension plan benefits or rights to function as an expert witness to value pension plan benefits or rights, and subdivision 4 of that statute provides that parties may, in lieu of valuing pension benefits through the use of a court appointed actuary, “stipulate [to] the present value of pension benefits or rights that are marital property.”

Both parties take issue with the court’s calculation of Raymond’s monthly income. Raymond argues that the district court should have excluded all pension payments from its calculation of his income, because they either consist of non-marital property or of marital property previously awarded to him. Elaine argues that the district court erred by excluding from Raymond’s monthly income the portion of Raymond’s monthly pension payment previously awarded to Raymond as marital property. We reject both claims, and hold that the court did not err in calculating Raymond’s monthly income.

In dissolution eases, the district court has broad discretion regarding the division of property, spousal maintenance and child support. Bollenbach v. Bollenbach, 285 Minn. 418, 427, 175 N.W.2d 148, 154 (1970). The district court’s award of maintenance or division of property will only be reversed on appeal if the court abused its discretion. Hertz v. Hertz, 304 Minn. 144, 146, 229 N.W.2d 42, 44 (1975). However, statutory construction is a question of law, which we review de novo. Brookfield Trade Ctr. Inc., v. County of Ramsey, 584 N.W.2d 390, 393 (Minn.1998).

In analyzing Raymond’s monthly pension payments, the court of appeals divided the payments into three categories: (1) pension benefits earned by Raymond before the parties married (pre-marital benefits), (2) pension benefits earned by Raymond after the parties dissolved their marriage (post-marital benefits), and (3) pension benefits earned by Raymond during the period of the parties’ marriage (marital benefits). The court of appeals further divided pension benefits into two subcategories: (1) benefits previously awarded as property, and (2) benefits not awarded as property. See Lee, 749 N.W.2d at 56-59. The court of appeals analyzed each category separately, asking whether the district court properly included (or excluded) each category of pension payments in the district court’s calculation of Raymond’s income. See id.

A. Pre-Marital Pension Benefits

In subtracting from his income only the portion of Raymond’s monthly pension payments derived from benefits earned during marriage and previously awarded to him as marital property, the district *638court implicitly held that Raymond’s premarital pension benefits could be included in the court’s calculation of his monthly income.6

The court of appeals took a different view, holding that pension benefits earned prior to the parties’ marriage could not be included when calculating Raymond’s monthly income as a matter of law. Lee, 749 N.W.2d at 58. The court of appeals concluded that present payments of pension benefits acquired by Raymond before marriage are not “future income or earnings” within the meaning of Minn.Stat. § 518.003, subd. 3a, reasoning that characterizing pre-marital benefits as future income “ignore[s] the fact that payment of pension benefits is really a distribution of an investment comprising employer contributions for work performed during a certain period, employee contributions for that same period, and appreciation on that investment.” Lee, 749 N.W.2d at 58.

We disagree. “Future income or earnings,” as the court of appeals acknowledged, refers to a time frame. In this case, the word “future” limits the potential sources for maintenance to income or earnings received after the marriage has been dissolved (or, more precisely, after the date of valuation, see Minn.Stat. § 518.58, subd. 1 (2008)). The crux of the interpretive dispute is whether pension benefits are considered “income or earnings” at the time the benefits are earned or at the time the benefits are received. A review of the applicable statutory provisions convinces us that Raymond’s pension benefits not previously awarded as property are properly considered “income” at the time the benefits are received.

Minnesota Statutes § 518A.39, subd. 2, the section governing the modification of existing maintenance awards, states that “an order respecting maintenance or support may be modified upon a showing of ... substantially increased or decreased gross income of an obligor.” (Emphasis added.) “Gross income,” in turn, “includes ... pension and disability payments,” Minn.Stat. § 518A.29 (2008), without any restriction as to when the pension benefits were earned. The legislature’s use of the term “payments” in section 518A.29 is of particular significance, indicating a legislative intent to consider pension benefits as income when the obligor actually receives a disbursement of pension funds. In contrast, the statute governing the division of marital property states that “[mjarital property” includes “vested public or private pension plan benefits or rights, acquired by the parties.” Minn.Stat. § 518.003, subd. 3b (2008). Pension rights are also described as “rights in the form of future pension plan payments.” Minn. Stat. § 518.58, subd. 4(a) (emphasis added). These provisions demonstrate that the legislature knew how to distinguish between vested pension rights — -pension benefits earned but not yet received — -and actual pension payments.

The court of appeals also concluded that current payments of pre-marital pension benefits should be characterized as non-marital property, rather than income. Lee, 749 N.W.2d at 58. Non-marital property is defined as property acquired before or after the marriage relationship. Minn. Stat. § 518.003, subd. 3b.7 Assuming (as *639both parties do here) without deciding that pension benefits earned before marriage are non-marital property, this fact alone does not foreclose the conclusion that premarital pension benefit payments may also be characterized as future income available for maintenance. The plain language of the statute authorizes courts to consider pension benefit payments as income8 when calculating maintenance awards; this consideration is subject only to the rule, agreed to by both parties, that pension benefits that have previously been awarded as marital property cannot also be considered income.

As applied to this case, we agree with Elaine that the district court properly included payments derived from Raymond’s pre-marital pension benefits in its calculation of Raymond’s monthly income. The payments at issue were covered by the statutory definition of “gross income,” and were received by Raymond well after the parties dissolved their marriage, qualifying them as “future income” within the meaning of Minn.Stat. § 518.003, subd. 3a.

B. Marital Pension Benefits Previously Awarded as Property

When calculating Raymond’s monthly income, the district court subtracted the portion of Raymond’s pension income ($795.64) previously awarded to him as marital property,9 and the court of appeals affirmed the district court’s decision. Lee, 749 N.W.2d at 57. Elaine argues that the district court’s exclusion of Raymond’s pension income previously awarded to him as marital property was error. We disagree.

Minnesota Statutes § 518A.39, the provision authorizing the modification of a maintenance order, cautions courts that “all divisions of real and personal property provided by section 518.58 shall be final, and may be revoked or modified only where the court finds the existence of conditions that justify reopening a judgment under the laws of this state, including mo*640tions under section 518.145, subdivision 2.” Minn.Stat. § 518A.39, subd. 2(f). In other words, absent mistake, fraud, newly discovered evidence, or other extraordinary circumstances, see Minn.Stat. § 518.145, subd. 2 (2008), courts may not upset the division of marital property made at dissolution in the course of modifying a maintenance order.

When calculating Raymond’s monthly income, considering Raymond’s marital pension benefits previously awarded to him as property would not necessarily divest Raymond of his marital property; he might have sufficient other income from which to pay the maintenance award. But including marital pension benefits previously awarded as property in Raymond’s income would potentially increase the total amount of Raymond’s maintenance obligation. This is akin to putting money into Raymond’s left pocket while simultaneously removing money from his right pocket, in effect modifying the prior property division without finding the existence of the factors set forth in Minn.Stat. § 518.145, subd. 2.10

Here, when calculating Raymond’s monthly income, we conclude that the district court properly declined to consider his pension income previously awarded to him as marital property.

C. Post-Marital Pension Benefits

In calculating Raymond’s monthly income, the district court included the portion of Raymond’s monthly pension benefits earned after the parties dissolved their marriage. The court of appeals reversed, holding that Raymond’s post-marital pension benefits do not qualify as “future income” until Raymond has received the full value of his marital property award and pre-marital benefits. Lee, 749 N.W.2d at 57. The court of appeals concluded that “[w]hile neither party provided any evidence to establish the value of the pension benefits awarded at the time of the original decree, it is clear that for the foreseeable future, [Raymond’s] monthly benefits payments will not equal that full value.” Id.

The court of appeals rested its conclusion on two prior court of appeals decisions, both of which warrant a brief examination here. In Kruschel v. Kruschel, the husband-obligor was awarded sole ownership of his pension plan when the parties dissolved their marriage. 419 N.W.2d 119, 120 (Minn.App.1988). The district court also awarded maintenance to the wife-obli-gee. Id. Five years after dissolution, the obligor retired and petitioned the court to lower his maintenance obligation. Id. at 120-21. He argued that continuing to pay maintenance would force him to disgorge a portion of his pension benefits, which were previously awarded him as marital property. Id. at 121. The court of appeals agreed, citing Minn.Stat. § 518.64, subd. 2 (2004) (current version at Minn.Stat. § 518A.39, subd. 2(f)) (stating that “all divisions of real and personal property provided by section 518.58 shall be final”). *641419 N.W.2d at 121. The court of appeals remanded the case, and instructed the district court that “maintenance may not be ordered to be paid from [the obligor]’s pension payments until he has received from the pension an amount equivalent to its value as determined in the original property distribution.” Id. at 123.

Similarly, in In re Marriage of Richards, the husband-obligor was awarded, as marital property, the entire value of his pension earned during marriage. 472 N.W.2d 162, 163 (Minn.App.1991). After the parties dissolved their marriage, the value of the obligor’s pension benefits increased due to a change in the obligor’s employer’s benefits package. Id. The obli-gee argued that any pension payments received by the obligor in excess of the amount awarded to the obligor as property at divorce were “future income,” and therefore available for maintenance payments. Id. at 165. The court of appeals agreed with the obligee but, relying on Kruschel, 419 N.W.2d at 121, held that because the obligor was entitled to $50,556 in pension benefits under the original decree, “until [the obligor] receives this amount, [the obligee] may not claim a share of increased pension income in excess of the original award.” Richards, 472 N.W.2d at 165. In other words, the court of appeals adopted a no-apportionment rule, holding that all of the obligor’s pension payments must be considered part of the obligor’s property award until the sum of the payments exceeds the total award.

In this case, the parties agree with the rule articulated in Kruschel that Minnesota Statutes § 518A.39, subd. 2(f), prohibits district courts from using pension payments as an income source for maintenance when the same pension benefits were previously awarded to the obligor as marital property. But the no-apportionment rule adopted by the court of appeals in Kruschel, as applied in this case, goes far beyond what is required to protect Raymond’s interest in his property award. Of the $2,467.78 Raymond receives each month in pension payments, only $795.64 represents marital property previously awarded to him. As long as Raymond receives and keeps $795.64 in monthly pension payments, he receives exactly what the property award entitles him to receive — no more, no less.

Any rule allocating the entirety of his monthly pension payment to Raymond as marital property does so artificially; the $2,467.78 pension payment Raymond receives each month represents the cumulative benefit earned by Raymond for work performed throughout his career — before, during, and after his marriage to Elaine. Therefore, we disagree with the court of appeals that the amount Raymond receives each month in excess of his property award must be considered marital property until he receives the full value of his property award. Rather, any monthly amount exceeding $795.64 represents income that is not part of the property award. We hold that a district court may include in its calculation of an obligor’s ability to pay maintenance the portion of an obligor’s monthly pension payment exceeding the amount the obligor is entitled to receive each month as marital property. Accord Olski v. Olski, 197 Wis.2d 237, 540 N.W.2d 412, 413 (1995) (holding that post-marital pension benefits represented an income stream available for maintenance).11 The district court properly in-*642eluded in its calculation of Raymond’s monthly income the difference between Raymond’s total monthly pension payment and the portion of Raymond’s monthly pension payment previously awarded to him as marital property.

II.

In light of our decision, some further comment is necessary on issues not reached by the court of appeals. In the court of appeals, Raymond challenged the district court’s action in setting Elaine’s monthly maintenance award at $700 per month. To arrive at the $700 per month figure, the district court conducted a “balancing of the parties’ surpluses and shortages.” The court of appeals questioned this action by the district court, which awarded Elaine roughly $424 more per month than her monthly expenses: “We comment on the district court’s actions only to note that equalization of the parties’ incomes by an adjustment of maintenance is without authority or precedent.” Lee, 749 N.W.2d at 60 n. 2. The court of appeals was not required to take any further steps, because in its view, regardless of Elaine’s needs, Raymond had no ability to make maintenance payments under the court of appeals’ analysis of his income.

The concept of “reasonable needs” is a malleable one, and will vary from case to case depending on the unique characteristics of the party seeking maintenance and the standard of living established during the marriage. We have repeatedly stated that the support to which a divorced party is entitled “is not simply that which will supply her with the bare necessities of life.” Arundel v. Arundel, 281 N.W.2d 663, 666 (Minn.1979). Rather, the obligee can expect a sum that will “[keep] with the circumstances and living standards of the parties at the time of the divorce.” Botkin v. Botkin, 247 Minn. 25, 29, 77 N.W.2d 172, 175 (1956); see also Arundel v. Arundel, 281 N.W.2d 663, 666-67 (Minn.1979); But here, the district court found that Elaine required $1,950 monthly to cover her reasonable needs and received $1,674.14 monthly in income from all sources before she received any maintenance. By awarding Elaine maintenance of $700 per month, the district court appears to have awarded Elaine more than she reasonably needed to support herself. On remand, the district court should reexamine the maintenance award with these principles in mind, and make appropriate findings to support the current maintenance award or a different award should the circumstances have changed.

The district court also ordered Raymond to obtain a life insurance policy naming Elaine as the beneficiary in the amount of $75,000, in order to secure the maintenance obligation that the court imposed. The court of appeals vacated the insurance award on the narrow grounds that Raymond lacked sufficient income to pay maintenance, and therefore had no obligation to secure with life insurance. Lee, 749 N.W.2d at 60-61. We note, however, that Raymond argued before the court of appeals that the district court erred by failing to make findings of fact with respect to his insurability and the cost of life insurance. The court of appeals apparently agreed, but again concluded no action was necessary in light of its decision on maintenance. Id.

Insurability and cost of insurance seem to us to be significant facts in determining both the propriety of an insurance require*643ment and the impact of the cost of insurance on Raymond’s monthly expenses. The district court should make factual findings on these issues as well on remand.

III.

Finally, we address two other issues raised by Elaine before this court. Elaine challenges the court of appeals’ decision to change the effective retroactive date of the district court’s order from May 1, 2006, to July 13, 2005, the day Raymond served his motion. Lee, 749 N.W.2d at 60. The court of appeals held that because the district court did not give an explanation for its choice of May 1, 2006, the order should have been made retroactive to the day Raymond served his motion on Elaine. Id.

Elaine argues that (1) the district court did not need to provide a factual basis for choosing the retroactive date that it did, and (2) if the district court was required to provide a factual basis for its retroactive date, the court of appeals should have remanded the case to the district court to provide an explanation for its choice of a date.

Minnesota Statutes § 518A.39, subd. 2(e), states that “[a] modification of support or 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.” “May” is permissive. Minn.Stat. § 645.44, subd. 15 (2008). We agree with Elaine that the choice of retroactive date is committed to the discretion of the district court, as long as the date chosen is within the statutory limits. However, that discretion must be exercised based on the facts as found by the district court. Here, there were no factual findings to support the date chosen. On remand, the district court shall make factual findings to support its choice of an effective date. See In re Marriage of Schmidt, 436 N.W.2d 99, 105 (Minn.1989).

Finally, we agree with the court of appeals that an award of attorney fees is committed to the discretion of the district court, and that there was no abuse of discretion here. See Gully v. Gully, 599 N.W.2d 814, 825 (Minn.1999).

Affirmed in part, reversed in part, and remanded.