## Facts

- Michael and Martha Derr married in 1990 and had one child in 1993.
- In 1994, Michael’s parents gave him a 27-unit apartment building titled solely in Michael’s name.
- In 1999, the parties borrowed $300,000 through a mortgage equity loan secured by the apartment building; the loan documents named both spouses as borrowers.
- The loan proceeds were used for marital purposes, and the mortgage payments were made with marital funds.
- At divorce, the apartment building was valued at about $905,000, and the loan’s outstanding principal was about $282,935.
- The circuit court treated the apartment building as Michael’s non-divisible property and treated the mortgage debt as Michael’s non-divisible debt.
- The circuit court found Michael “wasted” $45,000 and accounted for that in the property division.
- The circuit court also determined Michael’s income for child support.
- Michael appealed the debt classification, the waste finding, and the income determination; Martha cross-appealed the classification of the apartment building.

## Issues

1. Whether the apartment building gifted to Michael during marriage was properly classified as non-divisible property.
2. Whether the mortgage debt from the equity loan, incurred jointly and used for marital purposes, was properly classified as non-divisible debt.
3. Whether the circuit court properly found that Michael wasted $45,000 and could account for that in the property division.
4. Whether the circuit court correctly determined Michael’s income for child-support purposes.

## Decision

- The court of appeals affirmed the classification of the apartment building as Michael’s non-divisible property.
- The court of appeals reversed the classification of the mortgage debt as Michael’s non-divisible debt and held the debt was divisible.
- The court of appeals affirmed the finding that Michael wasted $45,000 and the treatment of that waste in the property division.
- The court of appeals affirmed the circuit court’s determination of Michael’s income for child support.
- The case was remanded for adjustment of the property division consistent with treating the mortgage debt as divisible.

## Legal Principles

- Gifted property to one spouse is generally excluded from division in divorce absent proof that the owning spouse intended to gift or reclassify it to the marital estate.
- Determining whether an asset is divisible requires attention to (1) tracing the asset’s source and (2) donative intent to the marital estate.
- A debt jointly incurred by spouses for marital purposes is generally a divisible marital obligation, even if the debt is secured by collateral that is itself excluded property.
- Using excluded property as collateral does not, by itself, convert the collateral into divisible property or render the resulting joint loan obligation non-divisible.
- Appellate review gives deference to circuit-court fact findings and discretionary determinations, including findings regarding asset dissipation and income for support, when supported by the record.

## Conclusion

The court of appeals held that the gifted apartment building remained Michael’s excluded property, but the equity-loan mortgage—jointly incurred and used for the marriage—was divisible debt; it also upheld the circuit court’s waste finding and child-support income determination and remanded to revise the property division accordingly.


Derr v. Derr, 280 Wis. 2d 681, 696 N.W.2d 170 (Wis. Ct. App. 2005)