Westwood v. Darnell , 299 Neb. 612 ( 2018 )


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  • Nebraska Supreme Court Online Library
    www.nebraska.gov/apps-courts-epub/
    06/29/2018 11:13 AM CDT
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    WESTWOOD v. DARNELL
    Cite as 
    299 Neb. 612
    Jennifer Westwood, appellant, v.
    Cheryl A. Darnell, appellee.
    ___ N.W.2d ___
    Filed April 13, 2018.    No. S-17-538.
    1.	 Divorce: Child Custody: Child Support: Property Division: Alimony:
    Attorney Fees: Appeal and Error. In a marital dissolution action, an
    appellate court reviews the case de novo on the record to determine
    whether there has been an abuse of discretion by the trial judge. This
    standard of review applies to the trial court’s determinations regarding
    custody, child support, division of property, alimony, and attorney fees.
    2.	 Evidence: Appeal and Error. In a review de novo on the record, an
    appellate court is required to make independent factual determinations
    based upon the record, and the court reaches its own independent con-
    clusions with respect to the matters at issue.
    3.	 ____: ____. When evidence is in conflict, the appellate court considers
    and may give weight to the fact that the trial court heard and observed
    the witnesses and accepted one version of the facts rather than another.
    4.	 Judges: Words and Phrases. A judicial abuse of discretion exists if the
    reasons or rulings of a trial judge are clearly untenable, unfairly depriv-
    ing a litigant of a substantial right and denying just results in matters
    submitted for disposition.
    5.	 Property Division. The purpose of a property division is to distribute
    the marital assets equitably between the parties.
    6.	 ____. Under Neb. Rev. Stat. § 42-365 (Reissue 2016), the equitable divi-
    sion of property is a three-step process. The first step is to classify the
    parties’ property as marital or nonmarital. The second step is to value
    the marital assets and marital liabilities of the parties. The third step
    is to calculate and divide the net marital estate between the parties in
    accordance with the principles contained in § 42-365.
    7.	 ____. The ultimate test in determining the appropriateness of the divi-
    sion of property is fairness and reasonableness as determined by the
    facts of each case.
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    299 Nebraska R eports
    WESTWOOD v. DARNELL
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    299 Neb. 612
    8.	 Property Division: Proof. The burden of proof to show that property is
    nonmarital remains with the person making the claim.
    9.	 Divorce: Property Division. As a general rule, all property accumu-
    lated and acquired by either party during the marriage is part of the
    marital estate, unless it falls within an exception to the general rule.
    10.	 ____: ____. Exceptions to the rule that all property accumulated and
    acquired during the marriage is marital property includes property accu-
    mulated and acquired through gift or inheritance.
    11.	 Divorce: Property Division: Taxes. Ordinarily, a trial court in Nebraska
    should not consider the speculative tax consequences of its distribution
    orders unless it has ordered the immediate liquidation or sale of an asset
    or a party must sell an asset to satisfy a monetary judgment.
    Appeal from the District Court for Lancaster County: Lori
    A. M aret, Judge. Affirmed.
    Elaine A. Waggoner, of Waggoner Law Office, for appellant.
    B. Gail Steen, of Steen Law Office, for appellee.
    Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke,
    JJ., and Steinke, District Judge.
    Heavican, C.J.
    INTRODUCTION
    The district court entered a decree dissolving the marriage
    of Jennifer Westwood and Cheryl A. Darnell and dividing their
    marital estate. Westwood appeals. We affirm.
    BACKGROUND
    Westwood and Darnell were married in Vermont in 2011.
    No children were born of the marriage. The parties separated
    on or about June 25, 2015. The district court’s decree awarded
    each party her personal property, automobile, and retirement
    account. Westwood was ordered to pay an equalization pay-
    ment to Darnell in the amount of $3,755.67.
    The record indicates that Westwood and Darnell were
    both employed by the Nebraska Department of Correctional
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    WESTWOOD v. DARNELL
    Cite as 
    299 Neb. 612
    Services. Both earned comparable salaries and had premarital
    retirement accounts to which they continued to contribute after
    they married. Household expenses were split equally.
    Westwood quit her job in March 2015. Shortly thereaf-
    ter, she withdrew $75,393.04 from her retirement account.
    After taxes, penalties, and fees, the sum of $51,999.99 was
    deposited in the parties’ joint bank account. The couple then
    paid off outstanding marital debts and deposited some of the
    money in a new retirement account. Among the bills paid with
    the proceeds from the withdrawal were the outstanding bal-
    ances of $20,849.73 for Darnell’s vehicle and $12,855.89 for
    Westwood’s vehicle.
    When the parties separated in June 2015, they had no mari-
    tal debt except the mortgage on their home and the balance on
    a credit card which had been used to purchase items for house-
    hold improvements. Each party also had a vehicle of somewhat
    similar value, a retirement account, and jointly held checking
    and savings accounts.
    The parties purchased a home together, though only
    Westwood was listed on the deed. The marital home was sold
    in August 2015. Westwood kept the $11,150.81 proceeds from
    the sale of the home. At some point prior to entry of the decree,
    Westwood paid Darnell $1,250.
    Westwood filed for divorce in December 2015. Following a
    trial, the district court awarded each party the personal prop-
    erty and automobile in her possession, her separate retirement
    account, and any bank accounts in her own name. Westwood
    was ordered to make an equalization payment to Darnell
    of $3,755.67.
    Westwood appeals.
    ASSIGNMENTS OF ERROR
    On appeal, Westwood assigns that the district court erred
    in its division of the marital property by (1) not classifying as
    separate property the proceeds from Westwood’s withdrawal
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    WESTWOOD v. DARNELL
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    299 Neb. 612
    of $51,999.99 from her retirement account; (2) failing to con-
    sider that Darnell was unjustly enriched by payment of the
    loan on her vehicle; and (3) failing to consider that Darnell
    refused to file taxes jointly, thus refusing to share in the tax
    burden imposed upon the withdrawal of Westwood’s retire-
    ment funds.
    STANDARD OF REVIEW
    [1] In a marital dissolution action, an appellate court reviews
    the case de novo on the record to determine whether there has
    been an abuse of discretion by the trial judge. This standard
    of review applies to the trial court’s determinations regard-
    ing custody, child support, division of property, alimony, and
    attorney fees.1
    [2,3] In a review de novo on the record, an appellate court
    is required to make independent factual determinations based
    upon the record, and the court reaches its own independent
    conclusions with respect to the matters at issue.2 However,
    when evidence is in conflict, the appellate court considers
    and may give weight to the fact that the trial court heard and
    observed the witnesses and accepted one version of the facts
    rather than another.3
    [4] A judicial abuse of discretion exists if the reasons or
    rulings of a trial judge are clearly untenable, unfairly depriv-
    ing a litigant of a substantial right and denying just results in
    matters submitted for disposition.4
    ANALYSIS
    In her first assignment of error, Westwood asserts that the
    district court erred in treating as marital property the funds
    Westwood withdrew from her retirement account.
    1
    Osantowski v. Osantowski, 
    298 Neb. 339
    , 
    904 N.W.2d 251
    (2017).
    2
    Id.
    3
    Id.
    4
    
    Id. - 616
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    WESTWOOD v. DARNELL
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    299 Neb. 612
    [5-7] The purpose of a property division is to distribute the
    marital assets equitably between the parties.5 Under § 42-365,
    the equitable division of property is a three-step process. The
    first step is to classify the parties’ property as marital or non-
    marital. The second step is to value the marital assets and mari-
    tal liabilities of the parties. The third step is to calculate and
    divide the net marital estate between the parties in accordance
    with the principles contained in § 42-365.6 The ultimate test
    in determining the appropriateness of the division of property
    is fairness and reasonableness as determined by the facts of
    each case.7
    [8-10] The burden of proof to show that property is non-
    marital remains with the person making the claim.8 As a
    general rule, all property accumulated and acquired by either
    party during the marriage is part of the marital estate, unless
    it falls within an exception to the general rule.9 Such excep-
    tions include property accumulated and acquired through gift
    or inheritance.10
    Westwood relies on Lisec v. Lisec11 to support her conten-
    tion that the money she withdrew from her retirement account
    maintained its status as her separate property. In Lisec, the wife
    argued that she was entitled to proceeds received from the sale
    of the marital home, because she provided the downpayment
    for the home from nonmarital funds. Specifically, the wife had
    received a gift of money from her mother, which she deposited
    into the parties’ joint checking account and then used to make
    5
    Neb. Rev. Stat. § 42-365 (Reissue 2016).
    6
    Gangwish v. Gangwish, 
    267 Neb. 901
    , 
    678 N.W.2d 503
    (2004).
    7
    Id.
    8
    Id.
    9
    
    Id. 10 Id.
    11
    Lisec v. Lisec, 
    24 Neb. Ct. App. 572
    , 
    894 N.W.2d 350
    (2017).
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    the downpayment on the home. The wife argued that these
    funds retained their identity as gifted funds.
    The Nebraska Court of Appeals affirmed the district court’s
    conclusion that the proceeds should be considered marital
    property, noting that the home was placed in both parties’
    names and that the settlement agreement the parties entered
    explicitly provided that jointly titled property was to be con-
    sidered marital property.
    Westwood argues that the Court of Appeals’ decision was
    premised on the settlement agreement; otherwise, the house
    proceeds would have been considered nonmarital property.
    Thus, in her case, because there was not a settlement agree-
    ment providing as much with regard to these retirement funds,
    the funds would be considered nonmarital even after their
    deposit in the parties’ joint account.
    Westwood’s contention with respect to the funds with-
    drawn from her retirement account is without merit. As an
    initial matter, Lisec is inapposite. Gifts and inheritances,
    even when received during the marriage, are presumed to be
    nonmarital. But retirement funds are not. Rather, retirement
    benefits earned during a parties’ marriage are considered to be
    marital property; only those benefits earned prior to marriage
    would be considered to be nonmarital.12 Westwood provides
    no authority to support the contention that retirement funds
    are converted into separate property after being withdrawn
    from a retirement account.
    The burden is on Westwood to show that the funds in ques-
    tion are nonmarital. She has not met this burden. As noted,
    Westwood directs us to no authority suggesting that such
    funds are presumed to be nonmarital. Nor did Westwood pre­
    sent sufficient evidence to show that the funds withdrawn
    were her nonmarital property earned prior to marriage and
    not benefits earned during the marriage. Finally, the funds
    12
    Lorenzen v. Lorenzen, 
    294 Neb. 204
    , 
    883 N.W.2d 292
    (2016).
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    WESTWOOD v. DARNELL
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    in question were withdrawn from Westwood’s retirement
    account, placed into the parties’ joint checking account, and
    used to pay marital debts. This supports the conclusion that
    the funds were considered marital property. Westwood’s first
    assignment of error is without merit.
    In her second assignment of error, Westwood argues that
    the district court erred in not finding that Darnell was unjustly
    enriched by having her automobile loan paid off using the
    funds withdrawn from Westwood’s retirement account.
    After clarifying Westwood’s contention during the oral
    argument for this appeal, we observe that the term “unjust
    enrichment” is used here in a colloquial sense: Westwood
    simply argues that the equities of this situation demand that
    the retirement proceeds be treated as separate property. And
    we have concluded that the burden to show that the funds
    were nonmarital was on Westwood and that she failed to meet
    this burden. As such, there is no merit to this assignment
    of error.
    In her third and final assignment of error, Westwood con-
    tends that the district court erred in not considering that
    Darnell refused to file joint tax returns when dividing the mari-
    tal estate. Westwood contends that a joint filing would have
    shifted the tax burden as to the withdrawal of funds from her
    retirement account.
    [11] Ordinarily, a trial court in Nebraska should not con-
    sider the speculative tax consequences of its distribution
    orders unless it has ordered the immediate liquidation or sale
    of an asset or a party must sell an asset to satisfy a monetary
    judgment.13 In Bock v. Dalbey,14 we were faced with the
    questions of (1) whether a district court can consider the tax
    consequences of one party’s refusal to file a joint return in
    dividing the marital estate, and (2) whether it has discretion
    13
    Bock v. Dalbey, 
    283 Neb. 994
    , 
    815 N.W.2d 530
    (2012).
    14
    
    Id. - 619
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    WESTWOOD v. DARNELL
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    299 Neb. 612
    to order the parties to file a joint return to preserve assets for
    the marital estate or to equalize its division of the estate. We
    generally held that a district court does not have discretion to
    order parties to file a joint tax return. We further noted:
    Married individuals can elect whether to file a joint or
    separate return. For joint returns, the federal government
    taxes the income of a married couple in the aggregate.
    Filing jointly generally, but not always, produces substan-
    tial tax savings. But a “[couple] filing a joint return are
    jointly and severally liable for all tax for the taxable year
    (not merely the amount shown on the return), including
    interest, additions for negligence, and fraud penalties if
    applicable.” The right of election under the federal tax
    code and the possible exposure to liability have prompted
    several courts to hold that a trial court cannot order a
    party to file a joint return.
    ....
    Here, the statutory remedy is found in . . . § 42-365
    . . . . This statute authorizes a trial court to equitably
    distribute the marital estate according to what is fair and
    reasonable under the circumstances. Because § 42-365 is
    broad in its scope, we agree with the decisions of courts
    that hold a trial court may adjust its equitable division of
    the marital estate to account for the tax consequences of
    filing separate returns.
    Therefore, under § 42-365, we hold that if a party seek-
    ing an equitable adjustment presents the court with the
    tax disadvantages of filing separate returns, a trial court
    may consider a party’s unreasonable refusal to file a joint
    return. Evidence of a tax disadvantage would normally
    include the parties’ calculated joint and separate returns
    for comparison.15
    15
    
    Id. at 996-97,
    1001, 815 N.W.2d at 533
    , 536.
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    Nebraska Supreme Court A dvance Sheets
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    WESTWOOD v. DARNELL
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    299 Neb. 612
    We do not opine today on whether evidence other than a
    completed joint tax return could serve as sufficient evidence
    of a tax disadvantage. In this instance, Westwood has failed to
    introduce any evidence, apart from her and Darnell’s separate
    tax returns and her testimony that the tax consequence would
    have been different, to support her contention regarding the
    consequences of a joint filing. Westwood’s third and final
    assignment of error is without merit.
    CONCLUSION
    The decision of the district court is affirmed.
    A ffirmed.
    Wright, J., not participating.