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Dissipation - Loss of Asset Due to Invalid Foreclosure
© 2005 National Legal Research Group, Inc.
MINNESOTA: Sirek v. Sirek, 693 N.W.2d 896 (Minn. Ct. App. 2005)
The parties fell into arrears on a contract to purchase land from the husband's mother, who served on the parties a notice to cancel the contract. The husband did not tell the wife of the notice or bring the payments up to date, and the mother canceled the contract. But the wife prevailed in a nondomestic action to set the cancellation aside, on grounds that the notice of cancellation was deficient. In a later divorce action, the trial court erred by holding that the husband had dissipated the value of the parties' equity in the land. The cancellation was set aside, so that the husband's action did not actually remove the parties' equity from the marital estate.
During the marriage, the parties farmed a parcel of land owned by the husband's parents. When the husband's father died, the parties entered into a long-term contract to purchase the land from his mother. The land was worth $180,000, but the mother agreed to sell it for only $141,000, in light of the husband's many years of uncompensated work on the property.
For the next seven years, the parties made monthly payments on the contract to purchase. The parties then encountered financial difficulties, and stopped making the payments. In response to the nonpayment, the husband's mother served upon the husband a notice of cancellation of the contract for deed. The husband did not tell the wife about the notice, instead placing it first on the kitchen counter and then in a cupboard with other marital bills. When the time stated in the notice for bringing the payments up to date expired, the husband's mother canceled the contract to purchase. The property, worth $374,000, reverted to the husband's mother.
One year later, the husband filed for divorce from the wife. When the wife learned of the cancellation, she filed a nondomestic action against the husband and his mother to reinstate the contract for failure to comply with statutory termination procedures. She prevailed in this action and was given the right to reinstate the contract by tendering the amount due.
The trial court initially held that the land at issue was the wife's nonmarital property, because it was acquired by means of the wife's nondomestic action. In an unpublished decision, the Minnesota Court of Appeals reversed, holding that the land was acquired by means of the marital funds used to make the payments, and merely preserved by the wife's nondomestic action. Sirek v. Sirek, 2004 WL 61126 (Minn. Ct. App. 2004).
On remand, the trial court recognized the marital character of the land, but still awarded it to the wife. It reasoned that the husband had improperly dissipated a marital asset by allowing cancellation of the contract for deed. The Minnesota statute expressly provides that when marital property is dissipated by one party to a divorce, "the court shall compensate the other party by placing both parties in the same position that they would have been in had the transfer, encumbrance, concealment, or disposal not occurred." Minn. Stat. Ann. 518.58(1a) (Westlaw 2005).
On a second appeal, in a published opinion, the Minnesota Court of Appeals again reversed. No marital property had been dissipated on the facts:
[The trial court] found that appellant disposed of marital assets by not informing respondent or contesting the cancellation of the contract for deed. But that determination is not applicable because the district court in the Farmland litigation determined that respondent's interest in the Farmland had not been legally terminated. Consequently, the Farmland was part of the marital estate at the time of the Dissolution litigation. Because the Farmland was part of the marital estate, we conclude that Minn.Stat. 518.58, subd. 1a, the [dissipation] provision, does not apply to the property division.
693 N.W.2d at 899. The wife's argument was that the husband should be penalized for his bad conduct. This argument necessarily failed, as the mother's attempt to cancel the contract to purchase was invalid, so that nothing was actually dissipated on the facts:
Respondent argues that our conclusion allows parties contemplating a dissolution proceeding to freely dispose of marital property knowing they will suffer no consequence and will subsequently be eligible for an equitable division of the marital estate. But here, we are presented with the unusual situation where the marital property disposed of by one party was returned to the marital estate before the district court equitably divided the property. We simply conclude that when marital property is disposed of prior to or during a dissolution proceeding, but redounds to the marital estate before the division of that estate, Minn.Stat. 518.58, subd. 1a, does not apply.
Id. at 900. The case was remanded for a third attempt to divide the marital property, this time without considering dissipation as a factor.
Editor's Comment: The simple fact of the matter is that the husband's misconduct in Sirek did not cost the marital estate its interest in the land. His misconduct came close to having that effect, but coming close is not enough. The land was not actually lost, so the husband could not have dissipated its value. It is also worth noting, as the court observed in its unpublished opinion, that the core of the husband's misconduct was his failure to tell the wife of the cancellation notice; but that failure was also the basis of the wife's successful nondomestic action to have the cancellation set aside.
That having been said, the husband's misconduct did have one clear ill effect on the marital estate: The wife was forced to incur attorney's fees and other costs to prosecute the nondomestic action. Assuming that she spent marital funds for that purpose, that expenditure was a loss of marital property which would not have occurred if the husband had told the wife of the cancellation notice. The husband's conduct was therefore not without cost to the marital estate. To argue that the husband lost the entire property, however, is inconsistent with the facts.
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