McGinnis v. McGinnis ( 2019 )

IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
(Memorandum Web Opinion)
MCGINNIS V. MCGINNIS
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
LISA M. MCGINNIS, APPELLANT,
V.
TIMOTHY L. MCGINNIS, APPELLEE.
Filed July 2, 2019. No. A-18-174.
Appeal from the District Court for Otoe County: MICHAEL A. SMITH, Judge. Affirmed.
Christopher A. Vacanti and William L. Finocchiaro, of Vacanti Shattuck, for appellant.
Kathryn D. Putnam, of Astley Putnam, P.C., L.L.O., for appellee.
PIRTLE, ARTERBURN, and WELCH, Judges.
PIRTLE, Judge.
INTRODUCTION
Lisa M. McGinnis appeals from a decree of dissolution of marriage entered in the district
court for Otoe County dissolving her marriage to Timothy L. McGinnis and dividing their marital
property. Lisa argues that some of the property was improperly classified as nonmarital property
and should have been included in the marital estate. Lisa further argues that the trial court
improperly denied her request for alimony. For the reasons that follow, we affirm.
BACKGROUND
Lisa filed for a dissolution of marriage on September 27, 2016. There were no minor
children affected by these proceedings. A trial was held on August 30, 2017. The trial court issued
a decree of dissolution of marriage on November 28, 2017, dissolving the marriage and dividing
the marital assets. Lisa subsequently filed a motion to alter or amend decree of dissolution on
December 1, 2017, on the basis that some aspects of the decree were inconsistent with other
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provisions of the decree, and on the basis that she believed some property was improperly allocated
to nonmarital assets. The trial court ultimately issued an “Amendment to Decree of Dissolution of
Marriage” which made some changes to the balance sheet and reiterated and further expanded on
some of its findings in the original decree. It is from this decree of dissolution of marriage and its
amendment that she appeals.
STATEMENT OF FACTS
Lisa and Timothy were married on June 6, 2009. Both Lisa and Timothy had prior
marriages. Each owned a home prior to being married and Timothy owned interests in four parcels
of farmland and his business, TLM Farms, Inc. At the time they were married, Lisa worked for a
flooring store while Timothy was employed by Omaha Public Power District (OPPD) in addition
to working for TLM Farms. Lisa eventually quit her job and opened a business which ultimately
failed in 2014. Lisa did not return to work after this, other than for a short time in a chiropractor’s
office. Timothy retired from his job at OPPD in 2013 to work for TLM Farms full time.
TLM Farms is a business that performs soil conservation work for agricultural property.
TLM Farms is a C-corporation and taxed as such. Timothy is the only employee of TLM Farms
and does not pay any subcontractors. The net worth of TLM Farms at the time of the marriage was
$50,766. Timothy’s second business interest was a farming agreement with his brother, Kent
McGinnis, allowing Kent to farm on the land Timothy owned in exchange for part of the harvest.
Timothy was responsible for paying a share of the expenses of the farming operation, but did not
actively participate in the farming.
Both Lisa and Timothy have suffered from some health issues over the course of their
marriage. Prior to the marriage, Lisa suffered from back pain, migraines, and ankle problems. Her
ankle pain and back pain have become worse and she suffers from insomnia, fibromyalgia, and
gastrointestinal issues which developed over the course of the marriage. Timothy was diagnosed
with prostate cancer in June 2016 and has had his prostate removed. The marriage ultimately broke
down and Timothy and Lisa were unable to reconcile resulting in the dissolution of marriage
action.
ASSIGNMENTS OF ERROR
On appeal, Lisa assigns that the trial court erred in finding (1) that the increase in value of
TLM Farms which occurred during the parties’ marriage should be considered a nonmarital asset,
(2) that the increase in value of Timothy’s farmland and interests in farmland which occurred
during the parties’ marriage should be considered a nonmarital asset, and (3) that no alimony
should be awarded to Lisa.
STANDARD OF REVIEW
In actions for dissolution of marriage, 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. Molczyk v.
Molczyk, 285 Neb. 96, 825 N.W.2d 435 (2013). A judicial abuse of discretion exists if the reasons
or rulings of a trial judge are clearly untenable, unfairly depriving a litigant of a substantial right
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and denying just results in matters submitted for disposition. Brozek v. Brozek, 292 Neb. 681, 874
N.W.2d 17 (2016).
ANALYSIS
Determination of Property to be Included in Marital Estate.
Lisa’s first two assignments of error each deal with the determination of the trial court that
the appreciation from two types of premarital assets should not be included in the marital estate.
In Nebraska, the division of property in a dissolution of marriage is controlled by Neb.
Rev. Stat. § 42-365 (Reissue 2016). Section 42-365 provides that when a dissolution of marriage
is decreed, the court may order the
division of property as may be reasonable, having regard for the circumstances of the
parties, duration of the marriage, a history of the contributions to the marriage by each
party, including contributions to the care and education of the children, and interruption of
personal careers or educational opportunities, and the ability of the supported party to
engage in gainful employment without interfering with the interests of any minor children
in the custody of such party.
Equitable property division under § 42-365 is a three step process. Meints v. Meints, 258 Neb.
1017, 608 N.W.2d 564 (2000). The first step is to classify the parties’ property as marital or
nonmarital. Id. The second step is to value the marital assets and determine the marital liabilities
of the parties. Id. The third step is to calculate and divide the net marital estate between the parties
in accordance with the principles contained in § 42-365. Meints v. Meints, supra.
All property accumulated and acquired by either spouse during the marriage is part of the
marital estate, unless it falls within an exception to this general rule. Stephens v. Stephens, 297
Neb. 188, 899 N.W.2d 582 (2017). Thus, income from either party that accumulates during the
marriage is a marital asset. Id. Any given property can constitute a mixture of marital and
nonmarital interests; a portion of an asset can be marital property while another portion can be
separate property. Id. Therefore, the original capital or value of an asset may be nonmarital, while
all or some portion of the earnings or appreciation of that asset may be marital. Id.
Appreciation or income of separate property is marital property to the extent that it was
caused by marital funds or marital efforts. Id. The active appreciation rule sets forth the relevant
test to determine to what extent marital efforts caused any part of the appreciation or income. Id.
The spouse seeking a determination that the appreciation is active must first demonstrate that there
was appreciation of the separate property. See id. See, also, 1 Brett R. Turner, Equitable
Distribution of Property § 5:56 (4th ed. 2019). Appreciation of nonmarital assets during the
marriage are presumed marital, for purposes of equitable distribution of the marital estate in a
marriage dissolution proceeding, unless the party seeking the classification of the growth as
nonmarital proves: (1) the growth is readily identifiable and traceable to the nonmarital portion of
the property and (2) the growth is not due to the active efforts of either spouse. Stephens v.
Stephens, supra. The burden is on the owning spouse to prove the extent to which marital
contributions did not cause the appreciation or income. Id. Appreciation or income of a nonmarital
asset during the marriage is marital, for purposes of equitable distribution of the marital estate in
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a marriage dissolution proceeding, insofar as it was caused by the efforts of either spouse or both
spouses. Id.
TLM Farms.
In dividing TLM Farms, the first step is to determine whether it is marital or nonmarital.
The burden of proof is on Timothy to demonstrate that it was nonmarital. The trial court found that
TLM Farms was nonmarital property. In her brief Lisa challenges the court’s determination that
TLM Farms was nonmarital. However, this was not specifically assigned as error. To be
considered by an appellate court, an alleged error must be both specifically assigned and
specifically argued in the brief of the party asserting the error. City of Gordon v. Montana Feeders,
Corp., 273 Neb. 402, 730 N.W.2d 387 (2007). As a result, we do not consider this argument.
Although the original value of an asset may be considered nonmarital, appreciation of that
asset may be considered marital property. Once an asset has been determined to be nonmarital, the
burden of proof is on the non-owning spouse to demonstrate that there was appreciation of the
asset during the marriage. See Stephens v. Stephens, supra. See, also, 1 Turner, supra. We find
that Lisa failed to meet this burden. The evidence of appreciation rested on the valuation of TLM
Farms. Lisa suggests a valuation which is derived from TLM Farms’ 2015 tax return depreciation
schedules and from balance sheets provided to the bank handling the company loans. There were
no experts hired to value the company or its income potential nor was there any evidence from
Lisa as to what the liquidation value of the company would be either at the time of trial or at any
point during the marriage. Lisa testified that she was unsure if the company increased or decreased
in value. Timothy testified that the liquidation value of the company would be $40,000 after paying
off all of the debts of TLM Farms, an amount lower than the value at the time of the marriage.
Given these facts, we cannot say that Lisa met her burden to demonstrate that there was
appreciation of the asset. We note that this should not be interpreted to mean that expert testimony
will be required in every instance for the valuation of a premarital asset, but there must be a clear
methodology used that reflects the evidence in the record as to the value of the asset, which was
lacking in this case.
The trial court initially concluded that there had been no material increase in value of TLM
Farms and later clarified in the amended decree that any appreciation was caused by outside market
forces and normal appreciation. Where the record adequately demonstrates that the decision of a
trial court is correct, although such correctness is based on a ground or reason different from that
assigned by the trial court, an appellate court will affirm. State v. Huff, 279 Neb. 68, 776 N.W.2d
498 (2009). The trial court was correct that TLM Farms was a nonmarital asset. However, it did
not need to analyze whether any appreciation was active or passive as Lisa had not met her burden
to show that there was appreciation as the initial step in the analysis. As such, we affirm the trial
court’s order as to TLM Farms for the reasons set forth above.
Premarital Farmland.
The second asset which Lisa challenges the classification of is four parcels of farmland.
The four parcels of land are: Rinnie Farms of which Timothy owns an undivided 1/2 interest;
Rockcreek which Timothy wholly owns; Wilhelm of which Timothy owns an undivided 1/2
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interest; and Jackson of which Timothy owns an undivided 1/2 interest (collectively, “the
farmland”). It is undisputed that all four parcels of land were purchased prior to the marriage.
At trial, testimony demonstrated that Timothy did not farm this land, but rather that it was
farmed by his brother, Kent. Pursuant to an agreement between Timothy and Kent, Timothy
receives a portion of the harvest in exchange for providing his share of the land and pays a portion
of some of the expenses. Although there was some testimony that Timothy would assist on the
farm from time to time, such as moving a truck, he did not perform any of the actual farming.
There was also testimony that Timothy was responsible for insuring his portion of the crops and
for selling his portion of the grain. However, testimony demonstrated that he would do work on
the property in the form of installing drainage tiles, as he does for other farmland through TLM
Farms, as well as various other work on the drainage of the property. Lisa demonstrated the
appreciation of the farmland with the introduction of the tax assessed values of the property in
2009 and 2016.
Next, we must determine if such appreciation was due to marital funds or efforts. As the
testimony demonstrated that Timothy was only paying expenses and receiving grain as payment
pursuant to the agreement with his brother, and not actually farming the land, we need not
determine whether actively farming the land would create a marital interest in the property. Rather,
these actions and expenses by Timothy are related to the farming agreement he had entered into
with his brother, separate from the land, and thus any activity related to the farming would create
a marital interest in that business, not necessarily the land.
The more important question in this case is whether Timothy’s limited work on the
farmland created a marital interest in the property by contributing to the appreciation in value of
the property. All three witness who testified agreed that such work on the property was
maintenance in nature as the work needed to be done in order to keep the land farmable. Other
jurisdictions that have adopted the active appreciation rule have found that marital efforts
expended to perform maintenance do not create appreciation as such efforts are preserving value
rather than adding value. See, Barner v. Barner, 716 So. 2d 795 (Fla. App. 1998); Spindler v.
Spindler, 207 Wis. 2d 327, 558 N.W.2d 645 (Wis. App. 1996). See, also, 1 Brett R. Turner,
Equitable Distribution of Property § 5:56 (4th ed. 2019). As each witness testified that Timothy’s
work on the property was maintenance to ensure the ability to farm the land and keep it productive,
we find that the evidence demonstrates that the land did not appreciate as a result of marital efforts,
but rather through market forces. Therefore, we affirm the trial court’s determination that the
farmland and its appreciation as well as all debts associated with the farmland are nonmarital assets
and were properly assigned to Timothy.
Determination of Alimony.
Lisa’s final assignment of error challenges the trial court’s determination that no alimony
would be awarded to her. In reviewing an alimony award, an appellate court does not determine
whether it would have awarded the same amount of alimony as did the trial court, but whether the
trial court’s award is untenable such as to deprive a party a substantial right or just result.
Kalkowski v. Kalkowski, 258 Neb. 1035, 607 N.W.2d 517 (2000). An appellate court is not inclined
to disturb the trial court’s award of alimony unless it is patently unfair on the record. Priest v.
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Priest, 251 Neb. 76, 554 N.W.2d 792 (1996). To determine whether an award of alimony is
appropriate, the Court must look at the circumstances of the parties, duration of the marriage,
history of contributions, interruption of careers or educational opportunities in determining
whether alimony is appropriate. Brozek v. Brozek, 292 Neb. 681, 874 N.W.2d 17 (2016). Alimony
is not to be used simply to equalize the income of the parties, but to assist the economically
disadvantaged spouse during a period of unavailability for employment or training. Preston v.
Preston, 241 Neb. 181, 486 N.W.2d 902 (1992).
The marriage lasted approximately 7 years and was a second marriage for both parties.
When the parties were married, Timothy had substantial assets in the form of his farmland while
Lisa’s main asset was her home located in Nebraska City. Timothy was working at OPPD and Lisa
was working at a flooring company where she earned $9 per hour. Lisa subsequently quit that
position and ran her own business for a number of years, but it closed in 2014. Timothy supplied
some of the capital for her business. Lisa also worked for a chiropractor for a short time, but then
did not have any other employment until the end of the marriage. Timothy also quit his position at
OPPD in 2013 and began working for TLM Farms full time. Neither of the parties argue that there
were missed career or educational opportunities as a result of the marriage. Presently, Timothy
continues to work at his business, TLM Farms, and earns income through his farming agreement
while Lisa is employed at a jeweler earning $9.75 per hour plus commissions. Each complains of
various physical ailments which prevent them from working as much or as hard as they would like
to. Timothy’s primary assets continue to be his farmland, his home, and TLM Farms. While these
have increased in value, the evidence also showed them to have significant debts attributed to
them.
Given the circumstances surrounding the marriage, including this was a second marriage
for both parties, and the fact that Lisa had returned to work at a job where she earns slightly more
than she did prior to the marriage, we cannot say that the trial court’s determination to award no
alimony to Lisa was patently unjust. She had returned to work and there was no evidence presented
that she had been impaired in her earning capacity as a result of the marriage. Rather, Lisa
primarily argues that her health issues had prevented her from working certain jobs necessitating
the alimony. However, it is clear from the record that she is presently working and while we are
sympathetic to her situation, we cannot say it was an abuse of discretion for the trial court to deny
her alimony. As such, we affirm the trial court’s determination that no alimony should have been
awarded to Lisa.
CONCLUSION
We conclude that the trial court did not err in assigning the appreciation in value of both
TLM Farms and the farmland as nonmarital assets and in awarding no alimony. As such, the trial
court’s order is affirmed.
AFFIRMED.
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