In re the Marriage of: Mandeep Singh Sodhi, petitioner, Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-0094

In re the Marriage of:
Mandeep Singh Sodhi, petitioner,
Appellant,

vs.

Leisa Lynn-Ketelsen Sodhi,
Respondent.

Filed March 5, 2018
Affirmed
Johnson, Judge

Hennepin County District Court
File No. 27-FA-15-4017

Kay Nord Hunt, Lommen Abdo, P.A., Minneapolis, Minnesota; and

Jeffrey K. Priest, Priest Law Firm, Ltd., Eagan, Minnesota (for appellant)

Michael P. Boulette, Messerli & Kramer, P.A., Minneapolis, Minnesota (for respondent)

Considered and decided by Bratvold, Presiding Judge; Ross, Judge; and Johnson,
Judge.
U N P U B L I S H E D O P I N I O N
JOHNSON, Judge
Mandeep Singh Sodhi and Leisa Lynn -Ketelsen Sodhi were married for
approximately 25 years before their marriage was dissolved. Mandeep challenges multiple
aspects of the district court’s dissolution decree. We affirm.
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FACTS
Mandeep and Leisa were married in August 1991 . This dissolution action was
commenced in 2015. The couple has one adult child and two minor children. Before trial,
the parties agreed on all matters related to custody of the minor children. The issues at trial
and on appeal primarily concern the value and allocation of the couple’s marital assets and
liabilities.
In the early y ears of their marriage, both Mandeep and Leisa were employed .
Mandeep worked for various consulting companies , and Leisa worked in information
systems and project management. In 2002, Mandeep founded Select Source International,
LLC (SSI), using $100,000 of marital funds as an initial capital investment. SSI has nine
employees and works with approximately 175 to 250 consultants, whom it assigns to its
corporate clients for various projects. Mandeep is the sole member of SSI and its key
employee. For purposes of federal income tax, Mandeep elected S-corporation status for
SSI, which means that the company does not pay income tax but, rather, passes its net
income through to its sole member , Mandeep. See 26 U.S.C. § 1366 (2016); 26 C.F.R.
§§ 1.1366-1(a), 301.7701-3 (2017). In 2014, Mandeep received a salary of $263,805, and
SSI had net income of approximately $ 167,834. Leisa quit her job in 2013, with
encouragement from Mandeep.
As of the commencement of th is case, the couple had net marital assets of roughly
$5,000,000. The couple’s most valuable marital asset was SSI. Mandeep argued that the
company was worth $1 ,325,000; Leisa argued that the company was worth $2,050,000 .
When the case was commenced, the couple jointly owned a parcel of commercial real estate
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with net equity of approximately $800,000 , passive investments worth approximately
$531,000, and personal property worth approximately $50,000, among other assets.
In September 2016, the district court issued its dissolution decree. The district court
issued an amended decree in November 2016 after Mandeep moved for amended findings
and a new trial . In the amended decree, the district court ordered Mandeep to pay
temporary spousal maintenance to Leisa in the amount of $ 6,500 per m onth through
December 2016 and $5,000 per month from January 2017 to March 2022 . T he district
court valued SSI at $2,000,000 and ruled that Mandeep should retain full ownership of the
company. The district court found that SSI had an outstanding debt to Mandeep in the
amount of approximately $186,000 and assigned that marital asset to him. The district
court ordered the couple to sell their commercial real property and to divide the net
proceeds equally. The district court found that Leisa dissipated $ 53,579 in marital assets
during the pendency of the dissolution proceeding . The district court awarded Leisa
$90,000 in need-based attorney fees and expert fees, including $60,000 in attorney fees
that she paid with marital assets during the pendency of th e case . The district court
concluded that each party should be allocated net marital assets worth $2,099,429 in
addition to half of the net proceeds of the sale of the commercial real property. To
accomplish that division of marital assets and liabilities in light of its other rulings , the
district court ordered Mandeep to make a settlement payment to Leisa in the amount of
$1,124,617, to be paid over five years. Mandeep appeals and raises six issues.
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D E C I S I O N
When dissolving a marriage, a district court “shall make a just and equitable division
of the marital property of the parties without regard to marital misconduct, after making
findings regarding the division of the property.” Minn. Stat. § 518.58, subd. 1 (2016). The
district court
shall base its findings on all relevant factors including the
length of the marriage, any prior marriage of a party, the age,
health, station, occupation, amount and sources of income,
vocational skills, employability, estate, liabilities, needs,
opportunity for future acquisition of capital assets, and income
of each party. The court shall also consider the contribution of
each 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.

Id. A district court may divide marital property by dividing the asset in kind, ordering the
sale of the asset and division of the proceeds, or “order[ing] distribution of the entire asset
to one of the parties, a nd order[ing] the recipient to pay to the other spouse a just and
equitable share of the value of the asset.” Nardini v. Nardini, 414 N.W.2d 184, 188 (Minn.
1978). “An equitable division of marital property is not necessarily an equal division.”
Crosby v. Crosby, 587 N.W.2d 292, 297 (Minn. App. 1998), review denied (Minn. Feb. 18,
1999). “[E]ach case is to be considered in light of its particular facts.” Lenzmeier v.
Lenzmeier, 304 Minn. 568, 571, 231 N.W.2d 71, 74 (1975). Accordingly, a district court
has “broad discretion” in dividing property. Crosby, 587 N.W.2d at 296. This court applies
a clear -error standard of review to a district court’s findings of fact and an abuse -of-
discretion standard of review to its ultimate decision concerning what is just and equitable.
Mauer v. Mauer, 623 N.W.2d 604, 606 (Minn. 2001).
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I. Value of SSI
Mandeep first argues that the district court erred by finding that the fair market value
of SSI was $2,000,000. He argues that the district court should have found that the value
of the company was a lesser amount , such as the amount to which his expert witness
testified.
“There is . . . no universal formula for determining the value of a closely held
business.” Nardini, 414 N.W.2d at 189. A district court must “determine the value of the
business as if the transaction were a sale of the entire business by a willing seller to a
willing buyer.” Id. The district court should consider all relevant facts and use com mon
sense in weighing the relevant facts. Id. at 190. This court applies a clear -error standard
of review to a district court’s finding of the value of a marital asset. Maurer, 623 N.W.2d
at 606. The district court has broad discretion, and “the value . . . need only fall ‘within a
reasonable range of figures.’” Id. (quoting Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d
42, 44 (1975)).
Before trial, the district court appointed Arthur Cobb to serve as a neutral expert to
conduct a valuation of SSI . See Minn. R. Evid. 706. Cobb issued a written report and
testified at trial. Cobb opined that, as of June 30, 2015, the fair market value of SSI was
$2,050,000. Mandeep retained his own expert, Howard Kaminsky, for the same purpose.
Kaminsky also issue d a written report and testified at trial. Kaminsky opined that, as of
June 30, 2015, the fair market value of SSI was $1,325,000.
Both Cobb and Kaminsky used the discounted-cash-flow method of estimating the
value of SSI. The difference between their respective estimates is due primarily to their
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differing views concerning the effect of income taxes on the company’s market value .
Cobb reasoned that, if SSI were sold, the buyer likely would maintain the company’s S -
corporation status, which would allow S SI to continue passing its profits through the
company to the individual owner without taxation at the co mpany level, which would
increase the company’s value to the buyer. Accordingly, when estimating SSI’s value,
Cobb did not reduce the amounts of its estimated annual profits by the income tax rate s
that normally appl y to companies that have not elected S -corporation status. Kaminsky,
however, reasoned that , if SSI were sold, the buyer likely would consider the impact of
income taxes when estimating a company’s cash flow. Accordingly, when estimating
SSI’s value, Kaminsky reduced the amounts of its estimated annual profits by the income
tax rates that normally appl y to companies that have not elected S -corporation status, a
reduction known as “tax affecting.” The district court decided “not to tax -affect the
business’s earnings for the purpose of valuation in this case.” In essence, the district court
adopted Cobb’s opinion that the value of SSI should be based on an assumption that, after
a sale, the company likely would retain its S -corporation status and, thus, would not pay
income taxes at the company level.1

1We are aware that, since oral argument in this case, federal tax law has changed.
See Pub. L. No. 115-97 (2018). Specifically, in 2018, corporations will pay federal income
tax at the rate of 21 percent, which is significantly lower than the highest 35-percent rate
that applied in 2017 and significantly lower than some individual rates. See 26 U.S.C. § 11
(a), (b) (2016); H.R. 1, § 13001, 115th Cong. (2018) (enacted). Accordingly, in the future,
a business such as SSI may wish to employ different tax strategies than the strategies about
which Cobb and Kaminsky testified. See, e.g., Ruth Simon, Pass-Through Businesses Are
Rethinking Their Status in Wake of Tax Law, Wall Street Journal, Feb. 22, 2018; Kelly
Phillips Erb, What Tax Reform Means for Small Businesses & Pass -Through Entities ,
Forbes, Dec. 22, 2017. Neither party has called our attention to the new federal tax law,
7
Mandeep contends that the district court erred by not tax-affecting SSI’s profits. He
contends that the district court’s approach to v aluation does not comport with common
sense because it implies that an S corporation is worth more than other forms of business
entities merely because of its tax status . Mandeep cites caselaw from other jurisdictions
that have considered the issue and have concluded that it is appropriate to tax-affect a
company’s estimated profits when estimating the company’s value. See, e.g., Bernier v.
Bernier, 873 N.E.2d 216 (Mass . 2007); Delaware Open MRI Radiology Assocs., P.A. v.
Kessler, 898 A.2d 290 (Del. Ch . 2006). In response, Leisa contends that “whether or not
to tax-effect is a nuanced question of fact, the answer to which will vary on a case-by-case
basis.” Leisa cites caselaw from other jurisdictions that have considered the issue and
concluded that whether to tax-affect a business’s earnings is a factual determination, made
with knowledge of the facts and circumstances of the case. See, e.g. , Gross v.
Commissioner, 78 T.C.M. (CCH) 201 (1999), aff’d 272 F.3d 333 (6th Cir. 2001) . Leisa
also cites an unpublished opinion of this court, which analyzed the issue of tax-affecting in
depth. See H amelink v. Hamelink, A13 -0244, 2013 WL 6839700 (Minn. App. 2013),
review denied (Minn. Feb. 26, 2014); see also Minn. Stat. § 480A.08, subd. 3(b) (2016)
(providing that “[u]npublished opinions of the Court of Appeals are not precedential”).
We agree with Leisa that a district court’s decision concerning whether to tax-affect
a company’s profits necessarily depends on the facts of a particular case. Specifically, the
decision depends primarily on whether, after a hypothetical sale to a hypothetical buyer ,

see Minn. R. Civ. App. P. 128.05, let alone suggested that we should analyze the district
court’s decision differently in light of the new federal tax law.
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the company is likely to pay income taxes on its profits at the company level. In this case,
the district court found that SSI likely would be purchased by a small company or an
individual, “either of which presents a high probability of retaining the pass -through
status.” This finding is not clearly erroneous in light of the evidence in the record . SSI is
a relatively small company, with only nine emplo yees, and it is managed exclusively by
Mandeep. Cobb testified that the company most likely would retain its pass-through status
in a hypothetical sale. That evidence supports an inference that a larger company is less
likely to acquire SSI and make it a subsidiary or a division. In that way, SSI is a different
kind of company than the company in Bernier, which owned and operated two
supermarkets, which likely had more than nine employees and likely did not depend on the
skills and contacts of a single key employee. Bernier, 873 N.E.2d at 221. Thus, given the
particular facts of this case, the district court did not abuse its discretion by not tax-affecting
SSI’s profits.
Mandeep also contends that the district court erred by finding that the value of SSI
is $2,000,000 despite the fact that Cobb testified that a hypothetical buyer likely would pay
between $800,000 and $1,000,000 on the date of a sale and would pay the balance of the
purchase price over approximately two to three years. Mandeep contends that the fair
market value of SSI should be no more than the amount of money that he could receive on
the date of a sale . In a similar context, this court recently concluded that if a business is
sold pursuant to a purchase agreement that requires the buyer to make payments to the
seller after the date of the sale, the market value of the company is the sum of all payments,
even those made after the date of the sale. See Gill v. Gill, 900 N.W.2d 717, 721-22 (Minn.
9
App. 2017), review granted (Minn. Oct. 17, 2017). Mandeep does not cite any caselaw to
indicate that an estimate of a company’s value must be limited to the payment that is
received when the transaction occurs . Even if fut ure payments are variable, they are
capable of estimation. See id. The district court reasonably determined that the value of
SSI is equal to the sum of all payments that a hypothetical buyer likely would make in
buying the company.
Thus, the district court did not err by finding that the fair market value of SSI on the
valuation date was $2,000,000.
II. Loan from Mandeep to SSI
Mandeep next argues that the district court erred by finding the exist ence of an
outstanding debt from SSI to Mandeep in the amount of approximately $18 6,000 and by
assigning that marital asset to him.
SSI’s balance sheet reflects a “loan from stockholder” in the amount of $185,658.
Both Kaminsky and Cobb treated that amount as a liability of SSI when estimating the
value of the company. The district court found that Mandeep had lent money to SSI, found
that the outstanding loan was a marital asset, and assigned the asset to Mandeep.
On appeal, Mandeep contends that the $185,658 figure does not reflect a loan to the
company but, rather, a capital contribution that is included in SSI’s equity and is not a
separate marital asset. Alternatively, Mandeep contends that, if there is an outstanding
loan, the amount is only $129,658 because a $56,000 transfer from the company to him in
early 2015 was a return of capital. In response, Leisa contends that SSI recognized the
debt on its financial statements for several years and that Mandeep did not introduce any
10
credible evidence to contradict the financial statements. We agree with Leisa that there is
evidence in the record to support the district court’s findings on this issue.
Thus, the district court did not err by finding that SSI owed Mandeep $185,658, by
finding that the loan is a marital asset, and by assigning the asset to him.
III. Value of Commercial Real Property
Mandeep argues that the district court erred by making a finding of the value of the
couple’s commercial real property and by ordering the parties to sell the property and
divide the proceeds evenly. After oral argument, however, the parties agreed that Mandeep
will purchase Leisa’s half -interest in the property. The parties jointly supplemented the
appellate record with a four-page stipulation and order of the district court, which provides,
in part, that the terms of the parties’ purchase agreement “shall govern the disposition of
the parties’ interest in” the property, “notwithstanding” the district court’s decision “or the
pending decision of the Court of Appeals.” We interpret the parties’ submission to indicate
that Mandeep’s argument concerning the parties’ commercial real property now is moot.
Thus, we need not analyze and resolve the issue that was briefed by the parties.
IV. Dissipation by Leisa
Mandeep next argues that the district court erred by finding that Leisa dissipated
only $53,579 in marital assets. Mandeep contends that the district court should have found
that she dissipated $177,057 in marital assets.
The relevant statute provides:
If the court finds that a party to a marriage, without consent of
the other party, has in contemplation of commencing, or during
the pendency of, the current dissolution . . . proceeding,
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transferred, encumbered, concealed, or disposed of marital
assets except in the usu al course of business or for the
necessities of life, 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. § 518.58, subd. 1a (2016). A party alleging dissipation bears the burden of
proof on the issue. Id. This court applies an abuse -of-discretion standard of review to a
district court’s determination that a party has dissipated marital assets . See Rohling v .
Rohling, 379 N.W.2d 519, 522-23 (Minn. 1986).
It is undisputed that, while the case was pending in the district court, Leisa withdrew
approximately $177,000 from an i nvestment account and spent all of those funds. It also
is undisputed that Leisa spe nt approximately $60,000 of th ose funds on attorney fees and
approximately $10,000 on expert-witness fees. Leisa testified generally that she spent the
remaining $107,157 in withdrawn funds on living expenses for herself and the parties’
children, but she was unable to account for those expenditures with any specificity.
The district court found that Mandeep did not satisfy his burden of proving that all
unaccounted-for funds were dissipated. The district court found that some of Leisa’s
expenditures were not made in the usual course of business or for the necessities of life, in
part because she did not adjust her lifestyle to reflect new economic conditions arising from
the parties’ separation. See Minn. Stat. § 518.58, subd. 1a. The district court resolved the
issue by finding that, of the $107,157 in unaccounted-for funds, Leisa justifiably spent half
of those funds on necessary living expenses and dissipated the other half.
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On appeal, Mandeep contends that the district court should have fou nd that Leisa
dissipated the $70,000 in funds that were spent on professional fees related to the
dissolution proceedings. Consistent with his argument, the supreme court has stated that
“attorney fees are not . . . in the usual course of business or for the necessities of life. ”
Baker v. Baker, 753 N.W.2d 644, 654 (Minn. 2008) (quotation marks omitted) .
Accordingly, “Any amount taken from marital property to pay one party’s attorney’s fees
should be accounted for . . . and the other party compensated in the distribution.” Thomas
v. Thomas, 407 N.W.2d 124, 128 (Minn. App. 1987). The district court acknowledged that
Leisa used marital funds to pay her own fees and that such expenditures ordinarily would
be “charged against ” her. But the district court d id not find those expenditures to be
dissipation because the district court accounted for those expenditures when considering
her request for need -based fees, which is discussed separately below. See infra part V.
Whether the district court erred with re spect to Leisa’s expenditures on attorney fees and
expert-witness fees depends on whether the district court erred by granting Leisa’s request
for need-based fees.
Mandeep also contends that he satisfied his burden of proof because Leisa did not
sufficiently explain how she disposed of approximately $107,000 in unaccounted -for
funds. Mandeep contends that the record does not support the district court’s finding that
any of those funds were spent on necessities of life. But because the burden of proof of
dissipation is on Mandeep, it was his burden to prove that Leisa’s expenditures were not
spent in the usual course of business or for the necessities of life. See Rohling, 379 N.W.2d
at 522-23. The district court’s finding that Leisa dissipated $53,579 in marital assets was
13
favorable to Mandeep to the extent that the evidentiary record is silent. Because Mandeep
did not introduce evidence that Leisa spent more than $53,579 on goods and services that
were not in the usual course of business and n ot for the necessities of life, he cannot
establish that the district court erred by finding that Leis a dissipated half of the
unaccounted-for funds.
Thus, the district court did not err by finding that Leisa dissipated $53,579 in marital
assets.
V. Need-Based Attorney Fees
Mandeep argues that the district court erred by awarding Leisa a total of $90,000 in
need-based attorney fees.
A district court “shall award attorney fees, costs, and disbursements in an amount
necessary to enable a party to carry on . . . the proceeding” if it finds:
(1) that the fees are necessary for the good faith
assertion of the party’s rights in the proceeding and will not
contribute unnecessarily to the length and expense of the
proceeding;

(2) that the party from whom fees, costs, and
disbursements are sought has the means to pay them; and

(3) that the party to whom fees, costs, and
disbursements are awarded does not have the means to pay
them.

Minn. Stat. § 518.14, subd. 1 (2016). We apply an abuse-of-discretion standard of review
to a district court ’s ruling on a request for need -based attorney fees. See Lee v. Lee, 775
N.W.2d 631, 643 (Minn. 2009).
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In her motion for need-based attorney fees, Leisa requested an award of $100,000.
The district court reasoned that an award of need -based fees is appropriate because
Mandeep’s resources were and are far greater than Leisa’s resources, because the spousal
maintenance awarded to Leisa will be insufficient to allow her to pay her ou tstanding
litigation expenses, and because the am ount Leisa requested was reasonable. The district
court concluded that Leisa satisfied each of the statutory criteria for need-based fees. The
district court determined that Leisa is entitled to the $60,000 in attorney fees that she
already had paid out of a mari tal investment account and to an additional $30,000 in
attorney fees that were unpaid at the time of trial.
Mandeep contends that the fee award is erroneous because he does not have the
means to pay an additional $30,000. See Minn. Stat. § 518.14, subd. 1(2). He asserts that
SSI is undercapitalized and that he is obligated to make more than one million dollars in
equalizer payments to Leisa over five years. He contends that the district court erred by
reasoning that he “has access to substantia l distributions and investment income to cover
any shortfall.” In response, Leisa argues that Mandeep is expected to receive a salary and
distributions from SSI that will be sufficient to allow him to pay the fee award . The
evidentiary record is consistent with Leisa’s argument. The two experts estimated that
Mandeep would earn a salary of between $300,000 and $335,000 per year in each of the
five years following the trial. In addition, Mandeep’s own expert estimated that he would
receive cash flow from SSI’s profits of between $ 184,000 and $ 218,000 per year during
the same period. Even if Mandeep was somewhat illiquid at the time of trial, the evidence
suggests that he is likely to experience significant positive cash flow in increasing amounts
15
in future years, which indicates that his payment of the award of need-based attorney fees
is unlikely to impede his ability to make equalizer payments.
Thus, the district court did not err by awarding Leisa $90,000 in need-based attorney
fees.
VI. Settlement Payment
Mandeep last argues that the district court erred by ordering him to pay Leisa
$1,124,617 over five years and by placing liens on his residence and on his interest in SSI
to secure the settlement payment.
To reiterate, the applicable statute provides, in part:
Upon a dissolution of a marriage, . . . the court shall
make a just and equitable division of the marital property of
the parties . . . after making findings regarding the division of
the property. The court shall base its findings on all relevant
factors including the length of the marriage, any prior marriage
of a party, the age, health, station, occupation, amount and
sources of income, vocational skills, employability, estate,
liabilities, needs, opportunity for future acquisiti on of capital
assets, and income of each party. The court shall also consider
the contribution of each in the acquisition, preservation,
depreciation or appreciation in the amount or value of the
marital property, as well as the contribution of a spouse a s a
homemaker.

Minn. Stat. § 518.58, subd. 1 (2016).
Mandeep contends that the settlement payment is inequitable on the ground that
Leisa’s entitlement to the payment is risk -free while he bears the risks inherent in SSI’s
business. In response, Leisa points out that the district court equally divided the parties’
marital estate of approximately $5,000,000, that Mandeep requested that he be awarded all
of SSI, and that he is allowed five years’ time in which to make the payment. Leis a’s
16
arguments sufficiently explain why the district court did not abuse its discretion . In
addition, we note that the evidence of SSI’s estimated future profitability supports the
district court’s decision not to award Mandeep a greater share of the marit al estate or to
impose more lenient terms on the settlement payment.
Mandeep also contends that the district court erred by imposing liens on his
residence and on his interest in SSI. Leisa contends in response that a district court may
impose a lien on marital property to secure the payment of a property settlement so long as
the lien is supported by “an acceptable basis in fact and principle.” Bakken v. Helgeson,
785 N.W.2d 791, 795 (Minn. App. 2010) (quoting Rohling, 379 N.W.2d at 522). She
asserts that the record supports the district court’s decision because, as the district court
recognized, Mandeep had a lack of liquidity at the time of trial, and Leisa is required to
wait five years to fully realize her share of the marital estate . We agree that the district
court was authorized to secure the settlement payment with liens and did not abuse its
discretion by doing so.
Thus, the district court did not err by ordering Mandeep to pay Leisa $1,124, 617
over five years and by securing his obligation with liens.
Affirmed.