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Osantowski v. Osantowski

Supreme Court of Nebraska

December 8, 2017

Dori Ann Osantowski, appellee,
Brian Osantowski, appellant.

         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 conclusions with respect to the matters at issue. 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. 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.

         4. Judgments: Appeal and Error. When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion reached by the trial court.

         5. Divorce: Property Division. The ultimate test in determining the appropriateness of the division of property is fairness and reasonableness as determined by the facts of each case.

         6. ___: ___. 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, setting aside the non-marital property to the party who brought that property to the marriage. The second step is to value the marital assets and marital liabilities [298 Neb. 340] 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. ___: ___ . Generally, all property accumulated and acquired by either spouse during a marriage is part of the marital estate. Exceptions include property that a spouse acquired before the marriage, or by gift or inheritance.

         8. Divorce: Appeal and Error. Appeals in domestic relations matters are heard de novo on the record, and thus, an appellate court is empowered to enter the order which should have been made as reflected by the record.

         9. Agriculture: Crops: Animals. Agricultural crops are categorically different in nature from a herd of cattle and, therefore, are not entitled to the same treatment for tracing purposes.

         10. Agriculture: Crops: Equity. Courts are allowed flexibility in their treatment of stored and growing agricultural crops to account for the equities of the situation.

         11. Property Division: Appeal and Error. As a general principle, the date upon which a marital estate is valued should be rationally related to the property composing the marital estate. The date of valuation is reviewed for an abuse of the trial court's discretion.

         12. Appeal and Error. Absent plain error, errors argued but not assigned will not be considered on appeal.

         13. Appeal and Error: Words and Phrases. Plain error exists where there is an error, plainly evident from the record but not complained of at trial, which prejudicially affects a substantial right of a litigant and is of such a nature that to leave it uncorrected would cause a miscarriage of justice or result in damage to the integrity, reputation, and fairness of the judicial process.

         14. Appeal and Error. Plain error may be asserted for the first time on appeal or be noted by an appellate court on its own motion.

         15. Property Division. A nonowning spouse is entitled to some benefit when marital funds have been expended to improve or reduce the debt on the other spouse's nonmarital property.

         16. Divorce: Property Division: Alimony. In dividing property and considering alimony upon a dissolution of marriage, a court should consider four factors: (1) the circumstances of the parties, (2) the duration of the marriage, (3) the history of contributions to the marriage, and (4) the ability of the supported party to engage in gainful employment.

         17. ___: ___:. In addition to the specific criteria listed in Neb. Rev. Stat. § 42-365 (Reissue 2016), in dividing property and considering alimony upon a dissolution of marriage, a court should consider the [298 Neb. 341] income and earning capacity of each party and the general equities of the situation.

         18. Property Division. As a general rule, a spouse should be awarded one-third to one-half of the marital estate, the polestar being fairness and reasonableness as determined by the facts of each case.

         Appeal from the District Court for Seward County: James C. Stecker, Judge. Affirmed as modified.

          John W. Ballew, Jr., and Adam R. Little, of Ballew, Covalt & Hazen, P.C., L.L.O., for appellant.

          Stan A. Emerson, of Sipple, Hansen, Emerson, Schumacher & Klutman, for appellee.

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

          FUNKE, J.

         Brian Osantowski appeals from a decree of dissolution entered by the Seward County District Court, which dissolved his marriage to Dori Ann Osantowski, divided the marital assets and debts, and ordered Brian to make an equalization payment of $680, 000, distributing the estate about equally.

         Brian argues that his premarital crops should have been treated similarly to a herd of cattle-as a single asset for tracing purposes, that the court made specific errors in the division of marital assets, and that its distribution of the marital estate was inequitable.

         We reject Brian's argument that crops are similar to cattle herds for tracing purposes. However, we hold that the court erred in its division of certain marital assets and debts. Therefore, we affirm the district court's order as modified by this opinion.

         I. BACKGROUND

         Brian and Dori were married on September 23, 2011, and separated on or about May 26, 2014. Dori filed a dissolution [298 Neb. 342] complaint in June 2014. Trial was held on January 14 and February 12, 2016.

         1. Parties' Marriage

         During the marriage, Brian resided primarily in Polk County, Nebraska, at a residence owned by his parents. Dori maintained a residence in Lincoln, Nebraska, until May 2013. Dori testified that while she was living in Lincoln, she spent a minimum of three to four nights per week with Brian in Polk County during the academic year and full time during the summers and other school breaks. As of May 2013, Dori resided in Polk County full time and commuted to Lincoln for her final semester of school.

         In September 2013, Dori held a master's degree in entomology from the University of Nebraska-Lincoln (UNL) and was enrolled in a doctoral program for plant health at UNL. She testified that while she had originally intended to pursue a Ph.D. in entomology at South Dakota State University, she enrolled in a program at UNL instead because Brian had objected to the distance. Dori also stated that she changed her program to plant health so that she could gain a better understanding of agriculture in Nebraska and contribute to the Osantowski farming operation.

         Dori received a scholarship and a stipend for her school and living expenses. She also worked full time during the summers in Lincoln, earning between $8, 000 and $20, 000 in wages for 2011, 2012, and 2013 each. Most of Dori's income and scholarship money during the marriage went to tuition, insurance payments, payments for her motorcycle, commuting expenses, rent and utilities for the Lincoln apartment, and other living expenses. She testified that Brian provided minimal financial support to her during the marriage, but what he did provide was used for the household expenses she paid for the Polk County residence. In February 2014, Dori began working full time for an annual salary of $75, 000 and obtained medical and dental insurance for herself and Brian.

         [298 Neb. 343] Brian began farming in 2005. He has a farming operation with his two brothers in and around Polk County. Under the operation, Brian and his brothers own equipment separately but jointly acquire land, which is owned in equal thirds. Each brother, however, farms land independently and bears the rental fees and input costs for his operation. Accordingly, crops and expenses are completely separate and distinct to each individual.

         Brian testified that he receives benefits from his family which increase the profitability of his farming operation, including: discounted rental rates of $150 to $200 per acre versus the market rate of $300 to $400 per acre on the majority of the land that he rents; the majority of his diesel fuel at no cost to him; and the sharing of equipment, labor, shop space, and various other expenses.

         Dori testified that she made the following contributions to Brian's farming operation: Brian would consult her about chemical and herbicide application and general soil welfare; she created plat maps for all of the Osantowski fields to keep field spray records and to help plan for the future; she scouted fields for weed growth; she picked up parts and ran errands; and she went with Brian to check fields, pivots, and lay irrigation pipe. Brian agreed that Dori performed these tasks occasionally, except he explained that the plat maps created by Dori were part of her summer employment and that when Dori would ride with him to the fields, she did so because she enjoyed riding a "four-wheeler" and not because she actually helped with irrigation.

         Dori also testified that she performed all of the household duties at her Lincoln residence and that such duties in the Polk County residence were a team effort with Brian.

         2. Evidence Offered at Trial

         The parties offered into evidence two versions of a joint property statement, each listing premarital and marital debts and assets. One of the statements was dated May 18, 2015, and the other dated January 9, 2016. Each version listed the [298 Neb. 344] same assets and debts; however, slightly different values were assigned to some. Additional documents were received into evidence to support the property statements, including personal property appraisals from Grubaugh Auction Services, LLC; inventory reports from a certified public accountant; tax returns; settlement sheets from elevators; bank statements; retirement accounts; and balance sheets from several banks, including Great Western Bank.

         (a) Stored and Growing Crops

         In regard to the premarital and marital crop inventory, Brian called Michael Hershberger as his expert witness to determine the quantity of stored crops that Brian had on the date of marriage and on the date of separation. Hershberger is a certified public accountant who works with agricultural clients on a regular basis. In reaching his conclusions on these issues, Hershberger relied on Brian's tax returns from 2011 to 2014; the total annual yields in Brian's crop insurance reports, which were reported to him by Brian; two crop sales receipts; and a spreadsheet summary of Brian's recorded crop sales. The spreadsheet summary was prepared by Brian's mother, who does all of Brian's bookkeeping.

         On the first day of trial, Hershberger gave testimony regarding his determination of crop inventories and a report he authored was received into evidence. However, that testimony and the exhibit were stricken from the record, because Hershberger had relied on grain elevator receipts which were not provided to Dori through discovery. After Brian supplemented his discovery, Hershberger was again called to testify regarding the crop inventory.

         In regard to the premarital crop inventory, Hershberger opined that Brian had a total of 57, 156.26 bushels of corn in storage on September 23, 2011, and 91, 296.09 bushels of corn and 10, 405.99 bushels of soybeans ready for harvest. On September 23, the price at the local elevator was $6.07 for a bushel of corn and $11.57 for a bushel of soybeans. Accordingly, Hershberger concluded that the fair market [298 Neb. 345] value on the date of marriage for Brian's stored crops was $346, 938.50 and his unharvested crops were $554, 167.27 for corn and $120, 397.30 for soybeans, totaling $1, 021, 503.07. Based on the spreadsheet summary, he also concluded that Brian sold these crops for a total of $1, 207, 465.53.

         Hershberger testified that he believed his estimation of the total bushels of crops produced in 2011 was very accurate, because Brian had claimed on his crop insurance report that a total of 91, 863 bushels of corn and 10, 151 bushels of soybeans were produced.

         In regard to the marital crop inventory, Hershberger concluded that the parties had 95, 300.36 bushels of corn in storage on the date of separation and that a bushel of corn sold for $4.66 on that day. Accordingly, he valued the corn in storage on the date of separation as $444, 099.68.

         However, a balance sheet Brian had submitted to Great Western Bank, dated March 20, 2014, stated that he had 135, 000 bushels of corn on hand which had a value of $573, 750. Additionally, in Brian's November 2014 response to Dori's interrogatories, he stated that the March 20 balance sheet reflected the quantity and value of the stored crops. In both joint property statements, Dori relied on the March 20 balance sheet for the quantity and value of crops that were marital property.

         In the May 2015 joint property statement, Brian failed to list the quantity of crops in storage or assign a value thereto. But in the January 2016 joint property statement, Brian listed 14, 862 bushels of corn in storage on the date of separation with a value of $69, 257. At trial, Brian testified that his January 2016 estimation of the quantity of corn in storage on the date of separation was based on Hershberger's initial analysis.

         Hershberger admitted, however, that his opinions changed dramatically from the first day of trial to the second day of trial. His valuation of the stored crops on the date of separation changed from $69, 259.25 to $444, 099.68. While his [298 Neb. 346] valuation of the stored and growing crops on the date of marriage changed from $898, 603.04 to $1, 021, 503.07. Hershberger attributed these changes to his mistaken belief that all crops were sold before the next harvest began. But after he requested that Brian's mother identify the year of production for each crop at issue in the sale transactions on the spreadsheet summary, his analysis changed.

         (b) Personal Property and Farm Equipment

         Minimal testimony was elicited regarding the parties' premarital and marital personal property and farm equipment. The joint property statements set forth the items, and Brian and Dori generally agreed to them. The values, however, were not agreed upon by the parties. A personal property and equipment appraisal was completed by Grubaugh Auction Services and was received into evidence. The court generally adopted the valuations established in that report.

         (c) Real Estate

         In regard to real estate, the record shows that Brian owned four parcels of real estate prior to the marriage as follows: a one-third interest in the “NW¼ [of] Section 8, Township 15 North, Range 1 West[, ] Butler County[, Nebraska]” (Bosshart/Gruenwald farm); a one-third interest in the “SW¼W½NW¼ [of] Section 4, Township 15 North, Range 1, Butler County” (Hondorfer farm); a one-third interest in the “W½NE¼ [of] Section 8, Township 16 North[, Butler County]” (Dodendorf farm); and a one-third interest in the “E½SE¼ [of] Section 13, Township 16 North, Range 1, Polk County” (Jahn farm). During the marriage, the parties purchased a one-third interest in the “SW¼ of Section 10, Township 15 North, Range 2 West and the NW¼ of Section 15, Township 15 North, Range 2 West, Polk County” (Roberts farm). Secured debt was owed against each of the properties.

         [298 Neb. 347] (d) Premarital Debt

         In regard to the division of debt, there was no direct evidence of the value of Brian's debts on September 23, 2011. However, Brian annually submitted balance sheets to Great Western Bank that listed his debts and their value on the date of submission. The balance sheets nearest to the date of marriage were dated December 8, 2010, and March 8, 2012. The parties relied on the debts listed on the March 2012 balance sheet in their joint property statements, and the court awarded Brian the six debts listed therein as premarital. The court, however, did not include corresponding values to these debts.

         Though the parties listed different amounts for certain debts, the record indicates that the value of the premarital debts awarded to Brian are as follows: Great Western Bank 2010 operating line of credit, $162, 000; Great Western Bank loan for a 2008 Mercury Milan, $6, 927; Bosshart/Gruenwald farm secured debt, $125, 495; Dodendorf farm secured debt, $31, 557; "Ag Direct" loan for a Cat Challenger tractor, $49, 250; and Hondorfer farm secured debt (Great Western Bank account No. xxx6688), $247, 500. The six debts totaled $622, 729.

         Additionally, the record contains a 2011 "itemized categories report." This report shows that Brian paid $296, 046.69 in expenses after the date of the marriage. Brian testified at trial that each of these expenses were incurred for his 2011 crop, which he claimed as a premarital asset, and the court awarded him as such. Accordingly, these expenses were premarital debts.

         Therefore, Brian's total premarital debts, as reflected in the record, were approximately $918, 775.69.

         Dori had a $7, 000 debt to her father on the date of the marriage, and she was awarded this premarital debt by the court. The court did not assign a value to this debt, but on the joint property statements, Dori listed its value at $7, 000. The record does not reflect any reduction of the debt.

         [298 Neb. 348] 3. Trial Court's Decree

         In June 2016, the court issued its decree dissolving the parties' marriage and ordering the division of the marital estate. The court determined values for most of the premarital and marital assets it awarded.

         The court awarded premarital assets to Dori, with a total value of $20, 600, and to Brian, with a total value of $1, 139, 047. Two of the premarital assets awarded to Brian were the value of his 2010 crops, sold in 2011, and his 2011 crops, sold in 2012, but the court did not assign a value to these assets. It also awarded him the funds present on the date of the marriage in four separate bank accounts.

         However, the court found that all of Brian's premarital crops had been liquidated by the date of separation. It also found that Brian deposited the nonmarital proceeds from the liquidated crops into his premarital bank accounts, along with the proceeds from the sale of the marital crops. Accordingly, the court found that these premarital crops and monetary assets were commingled with marital assets. Therefore, it ruled that Brian was not entitled to a setoff from the marital estate for these premarital assets.

         The court also rejected Brian's argument that crops should be treated similarly to a herd of cattle-as a single asset for tracing purposes. It reasoned that a herd of cattle is similar to land in that it is a self-sustaining and income producing. Conversely, it stated that crops are an end product that is marketed and liquidated on a short-term basis to pay the expenses of producing it, purchase the seed used for the next crop's production, purchase equipment, and provide the farmer his income for the year. Accordingly, the court did not give Brian a credit for any of the crops in storage on the date of separation; instead, the court awarded Brian all of the crops in storage on the date of separation at a value of $573, 750.

         The court listed the marital debt it awarded to Dori with a corresponding value of $3, 216. While the court also awarded several marital debts to Brian, it did not assign values to all [298 Neb. 349] of them. Nevertheless, the court summarized its award of the marital estate as follows: Brian received $2, 517, 950 in marital assets and $1, 145, 294 in marital debt for a total estate of $1, 372, 656; Dori received $21, 611 in marital assets and $3, 216 in marital debt for a total estate of $18, 395.

         Regarding the equity of the distribution, the court found that the marriage was of short duration and that neither party gave up employment or educational opportunities, but that Dori did change her educational program to benefit the marriage. The court rejected Brian's argument that Dori should receive less than one-third of the marital assets. It reasoned that any financial benefit Brian brought to the relationship, above his income, was as the landlord of the premarital property he farmed and that the proper way to account for such a benefit would have been to charge the marriage a cash rent or a crop-share arrangement and segregate it as nonmarital property, of which Brian did not do or provide evidence.

         The court ordered Brian to make an equalization payment of $680, 000 to Dori, awarding about half of the marital estate to each party.

         The court overruled Brian's subsequent motion for new trial or to alter and ...

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