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STATE OF MINNESOTA IN SUPREME COURT A06-1252 Court of Appeals Meyer, J. Concurring, Anderson, Paul H., J. Took no part, Magnuson, C.J. and Dietzen, J.

In re the Marriage of: Carol Bernice Baker, Respondent, vs. Daniel Remember Baker, Appellant. Filed: June 26, 2008 Office of Appellate Courts

SYLLABUS The appreciation in the value of a nonmarital asset is marital solely to the extent that marital effort--the financial or nonfinancial efforts of one or both spouses during the marriage--has been expended to generate it, irrespective of whether a spouse has control over the asset. The appreciation in the value of the nonmarital portion of an investment portfolio is passive where no significant effort was diverted from the marriage to generate the increase. Only the financial and nonfinancial efforts of the spouses themselves are relevant to the assessment of marital effort.

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The district court abused its discretion by failing to have the husband account for attorney fees paid out of a marital checking account. Affirmed in part, reversed in part, and remanded. Heard, considered, and decided by the court en banc. OPINION MEYER, Justice. In this dissolution action, we review two issues. First, we are asked to decide whether the investment return1 on the nonmarital portion of certain retirement accounts is also nonmarital. The court of appeals held that the investment return2 on the nonmarital portion of the retirement accounts is marital property, attributing to the account holder, under an agency theory, the actions of an investment advisor. Baker v. Baker, 733 N.W.2d 815, 821-22 (Minn. App. 2007). In addition, the court of appeals determined that the account holder's own actions with respect to the accounts constituted active management. Id. at 821. We hold that the single test for whether appreciation of nonmarital property is marital or nonmarital is the extent to which marital effort --the
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By "investment return," we mean the total difference between the value of the accounts at the date of the parties' marriage and the value of the accounts on the valuation date. Because there were no withdrawals from the accounts during the marriage and all investment income--interest, dividends, and capital gains--was added to the accounts, the "investment return" at issue here includes both any app reciation or depreciation in the value of the investments and any income earned by the investments during the marriage.
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The court of appeals used the term "appreciation" rather than "investment return," but we read the court's opinion to use the term "appreciation" to encompass both investment income and appreciation in the value of the investments. In this opinion, we use "appreciation" more narrowly to refer only to the increase in the value of the investments from market fluctuations and not to the income the investments generate. 2

financial or nonfinancial efforts of one or both spouses during the marriage--generated the increase. We further hold that, in this case, no significant marital effort was expended to generate the appreciation in value of the retirement funds at issue. We therefore reverse as to the retirement accounts, but we remand to the court of appeals for consideration of the alternative argument that the commingling of income and appreciation and of marital and nonmarital property in the investment accounts renders all of the return marital property. Second, we are asked to determine whether the district court abused its discretion in failing to account in the property division for attorney fees paid by the husband from marital assets. The court of appeals determined that the husband violated Minn. Stat.

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