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Marshall v. Marshall

Supreme Court of Nebraska

October 13, 2017

Amy Marshall, appellee,
Brian W. Marshall, appellant.

         1. Divorce: Child Custody: Child Support: Property Division: Alimony: Attorney Fees: Appeal and Error. In an action for the dissolution of marriage, an appellate court reviews de novo on the record the trial court's determinations of custody, child support, property division, alimony, and attorney fees; these determinations, however, are initially entrusted to the trial court's discretion and will normally be affirmed absent an abuse of that discretion.

         2. Judges: Words and Phrases. 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 and denying just results in matters submitted for disposition.

         3. Evidence: Appeal and Error. When evidence is in conflict, an appellate court considers, and may give weight to, the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

         4. Divorce: Equity. In Nebraska, dissolution of marriage cases are equitable in nature.

         5. Property Division. The purpose of a property division is to distribute the marital assets equitably between the parties.

         6. ___. The ultimate test for determining the appropriateness of the division of property is fairness and reasonableness as determined by the facts of each case. There is no mathematical formula by which property awards can be precisely determined.

         7. Property Division: Appeal and Error. A division of property will not be disturbed on appeal unless it is patently unfair.

         8. Property Division. Under Neb. Rev. Stat. § 42-365 (Reissue 2016), the equitable division 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 determine the marital liabilities [298 Neb. 2] 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.

         9. ___ . Any given property can constitute a mixture of marital and non-marital interests; a portion of an asset can be marital property while another portion can be separate property.

         10. ___ . As a general rule, all property accumulated and acquired by either spouse during the marriage is part of the marital estate, unless it falls within an exception to the general rule.

         11. ___ . Compensation for purely personal losses is not in any sense a product of marital efforts. Compensation for an injury that a spouse has or will receive for pain, suffering, disfigurement, disability, or loss of postdivorce earning capacity should not equitably be included in the marital estate. On the other hand, compensation for past wages, medical expenses, and other items that compensate for the diminution of the marital estate should equitably be included in the marital estate as they properly replace losses of property created by marital partnership.

         12. Property Division: Proof: Presumptions. The burden of proving that all or a portion of an injury settlement is nonmarital rests on the spouse making the claim. If the burden is not met, the presumption remains that the proceeds from the settlement are marital property.

         13. Property Division. The rule announced in Parde v. Parde, 258 Neb. 101, 602 N.W.2d 657');">602 N.W.2d 657 (1999), does not require either that a settlement agreement itself must categorize the nature of the compensation or that parties must present expert testimony as to how settlement proceeds should be allocated. Rather, Parde simply requires competent evidence as to the nature of and underlying reasons for the compensation.

         14. Property Division: Proof. Where the evidence shows the settlement proceeds were inadequate to compensate the purely personal losses proved by the injured spouse, and also were inadequate to compensate loses to the marital estate, inequity would generally result from classifying all of the settlement proceeds as either marital or nonmarital.

         15. Property Division. The principles announced in Parde v. Parde, 258 Neb. 101, 602 N.W.2d 657');">602 N.W.2d 657 (1999), can be applied to settlement proceeds that have already been spent, so long as the nonmarital portion of the settlement proceeds can be sufficiently traced.

         16. ___. Setting aside nonmarital property is simple if the spouse possesses the original asset, but can be problematic if the original asset no longer exists.

         17. Property Division: Proof. Separate property becomes marital property by commingling if it is inextricably mixed with marital property or with the separate property of the other spouse. But if the separate property remains segregated or is traceable into its product, commingling does [298 Neb. 3] not occur. The burden of proof rests with the party claiming that property is nonmarital.

         18. Child Support: Rules of the Supreme Court. The Nebraska Child Support Guidelines provide that in calculating the amount of child support to be paid, the court must consider the total monthly income, which is defined as income of both parties derived from all sources, except all means-tested public assistance benefits which includes any earned income tax credit and payments received for children of prior marriages and includes income that could be acquired by the parties through reasonable efforts.

         19. ___: ___. The Nebraska Supreme Court has not set forth a rigid definition of what constitutes income, but instead has relied upon a flexible, fact-specific inquiry that recognizes the wide variety of circumstances that may be present in child support cases.

         20. Child Support: Taxation: Equity: Rules of the Supreme Court. Income for the purposes of calculating child support is not necessarily synonymous with taxable income. A flexible approach is taken in determining a person's income for purposes of child support, because child support proceedings are, despite the child support guidelines, equitable in nature.

         Petition for further review from the Court of Appeals. Moore, Chief Judge, and Irwin and Bishop, Judges, on appeal thereto from the District Court for Douglas County, Thomas A. Otepka, Judge. Judgment of Court of Appeals reversed, and cause remanded with directions.

          Donald A. Roberts and Justin A. Roberts, of Lustgarten & Roberts, P.C., L.L.O., for appellant.

          Anthony W. Liakos, of Govier, Katskee, Suing & Maxell, PC, L.L.O., for appellee.

          Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy, Kelch, and Funke, JJ.

          STACY, J.

         Amy Marshall petitions for further review of the Nebraska Court of Appeals' opinion in Marshall v. Marshall.[1] She [298 Neb. 4] argues the Court of Appeals misapplied the principles of Parde v. Parde[2] when determining how proceeds from a personal injury settlement should be classified in this dissolution action. She also argues the appellate court erred in recalculating child support, reversing the property division, and reversing the award of alimony. On further review, we reverse the decision of the Court of Appeals and remand the cause with directions to affirm the decree entered by the trial court.

         I. FACTS

         A complete recitation of the facts is set forth in the opinion of the Court of Appeals.[3] We summarize here only those facts which are relevant to the issues on further review.

         Amy and Brian W. Marshall married in 1993. Amy filed a complaint for dissolution in February 2013, and trial was held in October 2014. By that time, one of the parties' two children had reached the age of majority, and the other was 18. Disputed issues at trial were child support, alimony, classification and division of assets and debts, and attorney fees.

         1. Trial Evidence

         Most of the evidence at trial focused on two issues: how to classify and allocate a personal injury settlement received during the marriage and how to calculate Brian's total monthly income for purposes of child support and alimony. Given the factually intensive nature of these issues, we recite in some detail the evidence on which the district court relied.

         (a) Personal Injury Settlement

         In 2003, at age 34, Amy suffered a massive stroke. The stroke left her with permanent disabilities, including significant left-sided paralysis. Before the stroke, Amy had been taking the anti-inflammatory drug Vioxx on a regular basis. She did not have a prescription for Vioxx, but had been given free samples of the drug by a physician.

         [298 Neb. 5] Amy and Brian ultimately reached a settlement with Merck & Co., Inc. (Merck), the manufacturer of Vioxx. As part of the agreement, Amy and Brian executed a release of all claims. The release did not allocate the settlement proceeds to any particular claim or category of damages. The release contained a confidentiality provision limiting disclosure of the amount of the settlement payments; we thus will not reference the gross settlement amount in this opinion. It is sufficient to note that after deducting attorney fees and costs, Amy and Brian received net settlement proceeds totaling $330, 621.14.

         It is undisputed that the parties spent nearly all the settlement proceeds during their marriage. It is also undisputed that they were able to trace where most of the settlement proceeds were spent. As relevant to the issues on appeal, the evidence showed they used $84, 268.83 to pay off the mortgage on the marital home and $90, 123.36 to remodel the kitchen of that home. Another $5, 211.90 was used for additional remodeling of the home. Brian put $20, 000 into a new bank account in his name and used $33, 333 to purchase a one-third interest in a business, "Elite Fitness."

         (i) Permanent Disability and Pain and Suffering

         After the stroke, Amy was hospitalized for 1 week and then moved to a rehabilitation center for another 30 days. Once she was released to return home, Amy continued rehabilitation through physical therapy for approximately 4 years. Both Amy and her mother testified at trial about how the stroke affected her. The most complete explanation of Amy's condition and limitations after the stroke came from her rehabilitation physician:

Despite a complete course of rehabilitation, [Amy] remains with rather significant left-sided paralysis. She has no significant functional use of the left upper extremity. She previously worked as an owner/operator of a hair salon. This stroke eliminated the functional use of her left [298 Neb. 6] hand and ultimately she gave up her career and sold her salon. She has not been able to sustain reasonable work as a hairstylist since her stroke.
Functional tasks have become much more difficult . . . . [F]eeding is made more difficult as she is unable to cut her meat, prepare foods that require two hands and eating one-handed is simply clumsier and more difficult.
Likewise, dressing is performed entirely one-handed. She must select clothes from her wardrobe that do not have buttons or zippers. She also must perform toileting and bathing tasks one-handed and with adaptive equipment. These are performed more slowly and less thoroughly with her one-handed techniques. She is also unable to completely groom herself, particularly placing deodorant on her right side. She has difficulty grooming and bathing her right upper extremity with the paralyzed left arm.
[Amy] has the residuals of a neurogenic bladder post stroke. She has urinary urgency and must get to a bathroom more frequently than prior to her stroke. She is also more prone to the occasional bladder accident as a direct result of her stroke.
Exercise is performed more difficultly with her partially paralyzed left lower extremity. She is unable to ride a bicycle and is certainly unable to go jogging or ride an elliptical trainer. It is harder for her to achieve cardiovascular fitness under her hemiparetic circumstances.
Ambulation for [Amy] is clumsy and adaptive. She swings her left lower extremity forward in a circumferential pattern and has difficulty maintaining static stance on just her left lower extremity. She falls approximately once per month and has had [an] assortment of musculoskeletal bruises, sprains and strains as a result of her falls.
[Amy] requires lifelong treatment with an antiplatelet medication for her stroke. This slightly increases [298 Neb. 7] her overall risk of cerebral hemorrhage and certainly increases the amount of bruising she suffers with normal everyday activities.
[Amy] at the present time [December 23, 2009, ] is considered at maximum medical improvement in regard to her left hemiparetic stroke residuals. She has adapted her life to the near complete paralysis of her left upper extremity and the partial paralysis of her left lower extremity. Nonetheless, she has suffered significant functional impairments in her activities of daily living as a direct result of her stroke sequelae.

         (ii) Past and Future Lost Earnings

         Before the stroke, Amy co-owned a hair salon and earned approximately $43, 580 per year. After the stroke, Amy was not able to work at all for several years, so she sold her interest in the hair salon. Later, she used proceeds from the sale of her salon to remodel a portion of the basement of the parties' home into a hair salon. She eventually returned to work as a hairstylist, working about 3 hours a day, 2 to 3 days a week. She has 10 loyal clients, mostly family and friends, who are willing to assist her with styling. In 2013, the gross income from Amy's home salon was $6, 375 and her expenses were $7, 000. Amy's past lost earnings from the time of her stroke until the parties' separation exceeded the amount of the Merck settlement proceeds. Her future lost earnings were estimated at over $1, 133, 000.

         (b) Child Support

         For purposes of calculating child support, the parties agreed on the amount of Amy's total monthly income, but disagreed regarding the amount of Brian's total monthly income. The evidence showed Brian had several sources of income, as well as in-kind benefits.

         Brian works as the property manager for Marshall Enterprises, doing general property maintenance and upkeep. [298 Neb. 8] He owns 49 percent of Marshall Enterprises, and his mother owns the remaining 51 percent. Marshall Enterprises manages properties purchased by Brian's parents and held in trust. Brian testified that he receives a salary of $2, 500 per month, but his 2013 tax returns did not show any income from wages or salary. In addition, Marshall Enterprises provides Brian a truck, pays for maintenance and insurance on the truck, pays his cell phone bill of approximately $270 per month, allows Brian to live rent free in one of its rental properties that rents for $1, 000 per month, and provides health insurance for Brian and his family.

         Brian also operates a snow removal business. He testified he usually earns "$10, 000 or more" annually from his snow removal business. Brian's income tax returns for 2009 through 2013 reported net profits for this business of $11, 184, $10, 830, $15, 958, $12, 990, and $13, 805, respectively. Also, Brian's bank account statements from January to August 2014 showed average monthly deposits of more than $7, 400-well in excess of what he claimed to be earning from his property management and snow removal jobs-and he provided conflicting testimony regarding the source of ...

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