Steinmann Decision Contains Puzzling Implications

By Attorney Gregg Herman
June 16, 2008

Last month, the Wisconsin Supreme Court issued its decision in its only pending family law case, Steinmann v. Steinmann, No. 2005AP1588. This is the first of three articles which will discuss the case, and its puzzling implications. I’ll start out by summarizing the holding itself.

The case involved a 10 year marriage, the second for both parties, with no children. After marriage, the parties signed a “Limited Marital Property Classification Agreement,” which attempted to classified their assets into categories of “marital property,” “survivorship marital property,” “individual property of Rose M. Steinmann,” and “individual property of Tony K. Steinmann.”

On appeal, Rose challenged the circuit court’s property division.

First, Rose argued that the Walworth County Circuit Court, Judge Michael S. Gibbs presiding, should have applied tracing rather than transmutation principles. She further argued that, had the court properly applied tracing principles, it would have identified the jointly titled properties as her individual property under the agreement and awarded Rose her full interest in those properties.

Justice Louis B. Butler Jr. wrote for the Supreme Court that, although tracing and transmutation principles may be employed outside the context of gifted and inherited property, the application of these principles in the present case did not affect the ultimate determination regarding equitable property distribution.

Second, Rose argued that the trial court improperly double-counted assets in its property division. The justices determined that, to the extent the circuit court may have engaged in double-counting by itemizing and dividing some assets that had already been converted to other assets, such double-counting was harmless error.

Third, Rose contended that the circuit court should not have treated a settlement in a lawsuit involving her business as an asset without also allocating the pending debts related to unpaid taxes on the settlement. The Supreme Court found that, while it is true that Wis. Stat. § 767.255(1) requires courts to divide the property of divorcing parties, the statute does not require courts to divide every potential debt of the parties, particularly when the precise dollar amount of a debt has not yet been determined. Both parties agreed that the IRS determination was still pending, with the final amount of tax liability for Rose and Tony still unknown. As such, the future tax liability potentially tied to the settlement was too speculative to expect the circuit court to make any kind of precise division of debts based on an unknown amount of future tax liability.

Finally, Rose challenged the circuit court’s maintenance award. The determination of the amount and duration of maintenance is entrusted to the sound discretion of the circuit court and the Supreme Court will not disturb these findings where the record shows that the court considered the facts and came to a reasonable conclusion consistent with applicable law. Because Rose has failed to establish that the court’s maintenance award constituted an erroneous exercise of discretion, the Supreme Court deferred to the circuit court’s maintenance determination.

In the next two articles, I’ll analyze and critique portions of the court’s decision regarding tracing principles where there is a marital agreement, and the lessons to be gleaned for practitioners who draft these increasing popular documents.

Then, I’ll probe the maintenance portions of this opinion – which, unfortunately contains dicta that creates a good deal of confusion and merits withdrawal from the opinion.

The article originally appeared in Wisconsin Law Journal.

Attorney Gregg Herman is a founding partner of Loeb & Herman S.C. in Milwaukee, WI. He practices family law exclusively, and can be reached via e-mail or by calling (414) 272-5632.