Cornwell v. Cornwell , 309 Neb. 156 ( 2021 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
06/08/2021 09:09 AM CDT
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Nebraska Supreme Court Advance Sheets
309 Nebraska Reports
CORNWELL v. CORNWELL
Cite as 309 Neb. 156Daniel D. Cornwell, appellant and
cross-appellee, v. Melanie J. Cornwell,
appellee and cross-appellant.
___ N.W.2d ___
Filed May 7, 2021. No. S-20-530.
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. 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.
4. Property Division: Pensions: Words and Phrases. Under the deferred
distribution method, the court makes no immediate division of retire-
ment benefits, but determines a percentage share which the nonowning
spouse will receive when the owning spouse retires and orders that
the nonowning spouse receive that percentage of every payment check
which the owning spouse is entitled to receive.
5. ____: ____: ____. Under the immediate offset method, the court deter-
mines the present value of a share in the pension of the owning spouse
and immediately awards the nonowning spouse a lump-sum amount in
view of that value.
6. Divorce: Attorney Fees. In awarding attorney fees in a dissolution
action, a court shall consider the nature of the case, the amount involved
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309 Nebraska Reports
CORNWELL v. CORNWELL
Cite as 309 Neb. 156in the controversy, the services actually performed, the results obtained,
the length of time required for preparation and presentation of the case,
the novelty and difficulty of the questions raised, and the customary
charges of the bar for similar services.
7. Courts: Attorney Fees. Courts have the inherent power to award attor-
ney fees in certain unusual circumstances amounting to conduct during
the course of litigation which is vexatious, unfounded, and dilatory, such
that it amounts to bad faith.
Appeal from the District Court for Nance County: Rachel
A. Daugherty, Judge. Affirmed.
Kathryn D. Putnam, of Astley Putnam, P.C., L.L.O., for
appellant.
Nathan T. Bruner, of Bruner, Frank, Schumacher & Husak,
L.L.C., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Heavican, C.J.
I. INTRODUCTION
The Nance County District Court dissolved the marriage of
Daniel D. Cornwell and Melanie J. Cornwell. In connection
with its division of the parties’ marital property, the district
court used the immediate offset method of valuation to value
the marital portion of Daniel’s pension. The district court then
awarded the pension to Daniel and ordered him to make a cash
equalization payment to Melanie, payable over time. Primarily
at issue on appeal is the use of the immediate offset method to
value the pension. We affirm.
II. FACTUAL BACKGROUND
Daniel and Melanie were married in 1999. At the time
of their marriage and for 11 years thereafter, Daniel was
employed with the Maryland State Police. As the result of a
workplace accident, Daniel retired in 2010.
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309 Nebraska Reports
CORNWELL v. CORNWELL
Cite as 309 Neb. 156Daniel’s pension was a disability pension and placed some
limitations on his future employment. However, Daniel was able
to obtain employment, first with Maryland Fire and Rescue and
later as a government contractor for the Department of Justice,
working with the Bureau of Alcohol, Tobacco, Firearms and
Explosives and the Federal Emergency Management Agency.
That job required him to live within 3 hours of his assigned
duty location, which was Kansas City, Missouri; thus, Daniel
and Melanie rented an apartment in the Kansas City area.
However, they also owned a property in Belgrade, Nance
County, Nebraska, which they considered to be their perma-
nent home.
At Daniel’s suggestion, Melanie moved to Scottsdale,
Arizona, in November 2016, because she had health issues
that the couple hoped would be helped by the warmer weather.
The parties separated in 2017, with Daniel’s filing for divorce
in June.
The record suggests that the divorce was contentious, with
many issues litigated, as is partially reflected by Melanie’s
cross-appeal regarding the district court’s failure to award her
attorney fees and costs. However, as noted above, the primary
issue on appeal is the valuation of Daniel’s retirement plan
from his employment with the Maryland State Police.
Daniel’s retirement plan is a defined benefit plan that has
been in pay status since his retirement in 2010. Daniel origi-
nally retired on a full service pension, but several months post-
retirement, the plan was retroactively changed to a disability
pension. Because the plan is in part a disability pension, Daniel
pays no taxes on that part of his monthly payout; the plan has
no lump-sum buyout provision.
The parties have stipulated that 49 percent of the value of
the pension is marital. Melanie wished to utilize the immedi-
ate offset method of valuation to value the pension. Melanie’s
expert, David Rosenbaum, set the current total value of the
pension at $2,561,009, with a 49-percent share valued at
$1,254,894.
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156Daniel’s expert, Ernest Goss, challenged the accuracy of
that valuation, suggesting that the valuation was speculative on
various bases. Instead, Daniel sought to divide the pension via
a domestic relations order (DRO).
Following a trial, the district court accepted Rosenbaum’s
valuation for purposes of valuation of the entire marital estate.
It then awarded the pension to Daniel and divided the estate
in half. Daniel was ordered to make an equalization payment
to Melanie in the amount of $403,892, to be payable annually
in the amount of $100,000 per year until paid in full. In addi-
tion, though noting that Daniel had perhaps engaged in some
“‘game playing’” at the mediation, the court ordered each
party to pay its own fees and costs.
Daniel appeals, and Melanie cross-appeals.
III. ASSIGNMENTS OF ERROR
Daniel assigns that the district court erred in using the
immediate offset method to value his pension.
On cross-appeal, Melanie assigns that the district court erred
in not awarding her attorney fees and costs.
IV. STANDARD OF REVIEW
[1-3] 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. 1 This
standard of review applies to the trial court’s determinations
regarding custody, child support, division of property, alimony,
and attorney fees. 2 In a review de novo on the record, an
appellate court is required to make independent factual deter-
minations based upon the record, and the court reaches its own
independent conclusions with respect to the matters at issue. 3
A judicial abuse of discretion exists if the reasons or rulings of
a trial judge are clearly untenable, unfairly depriving a litigant
1
Higgins v. Currier, 307 Neb. 748, 950 N.W.2d 631 (2020).
2
Id.3
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156of a substantial right and denying just results in matters sub-
mitted for disposition. 4
V. ANALYSIS
1. Pension Plan
On appeal, Daniel assigns that the district court erred in
utilizing the immediate offset method to value and distribute
his Maryland State Police pension, rather than the deferred
distribution method effected via the use of a DRO. Daniel
argues that the process of determining a present value of the
pension was too difficult and speculative. He also argues that
the district court failed to examine whether there was “suf-
ficient equivalent property in the estate to satisfy the claim of
the non-owning spouse without causing undue hardship to the
owning spouse.” 5
As an initial matter, we turn to Melanie’s assertions (1) that
Daniel sought a DRO prohibited by Maryland law and (2) that
he has waived any objection to the immediate offset method by
failing to object to her expert’s testimony. Both assertions are
without merit.
(a) QDRO Versus DRO
Throughout his case, Daniel and his counsel sought use
of the deferred distribution method and a qualified domestic
relations order (QDRO). And it appears, at least for purposes
of the Maryland pension plan at issue, that the correct term
is “domestic relations order.” Still, Melanie’s contention on
appeal is one of semantics—there is nothing in the record that
would suggest that a QDRO and a DRO are not functionally
the same thing. This argument is without merit.
(b) Waiver
We turn to Melanie’s waiver argument. Daniel and Melanie
differed in their positions regarding how the marital portion
4
Id.5
Brief for appellant at 19.
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156of Daniel’s Maryland State Police pension should be distrib-
uted. Melanie offered Rosenbaum’s report and testimony in
order to value the pension and, by extension, provide a basis
for use of the immediate offset method. Daniel offered Goss’
report and testimony to rebut Rosenbaum’s opinion of val­
uation and, by extension, support his contention that use of
the deferred distribution method was preferred because a reli-
able present value could not be determined. 6 Melanie argues
that by failing to object to Rosenbaum’s testimony, Daniel
has waived his objection to the immediate offset method and
Rosenbaum’s valuation.
We disagree. Daniel’s position throughout has been that
the district court should use the deferred distribution method
of valuation rather than the immediate offset method. Daniel
was not concerned with the admissibility of Rosenbaum’s evi-
dence or with the court’s ability to hear and consider testimony
regarding the immediate offset method; rather, he was con-
cerned with the weight granted that theory by the district court.
While a party must object to questions of admissibility or risk
waiving them, no such objections are required with respect
to the weight accorded such evidence. 7 Melanie’s contention
regarding waiver is without merit.
(c) Merits
We turn to the merits of Daniel’s appeal, pausing first to
note that the parties at times describe Daniel’s Maryland State
Police pension as a “disability pension.” Prior opinions from
this court and the Nebraska Court of Appeals have suggested
there may be circumstances under which disability pension
6
See 2 Brett R. Turner, Equitable Distribution of Property § 6:41 (4th ed.
2020).
7
Cf., Reiber v. County of Gage, 303 Neb. 325, 928 N.W.2d 916 (2019); City
of Lincoln v. Realty Trust Group, 270 Neb. 587, 705 N.W.2d 432 (2005);
Tank v. Peterson, 219 Neb. 438, 363 N.W.2d 530 (1985).
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156benefits are properly classified as nonmarital property. 8 We
need not address that question here, however, because the
parties have stipulated that 51 percent of Daniel’s disability
pension is nonmarital. Because no party challenges the proper
classification of these pension benefits, we confine our analysis
to whether there was error in the district court’s evaluation or
distribution of the marital portion of those benefits.
Under Neb. Rev. Stat. § 42-366(8) (Reissue 2016), a pension
is part of the marital estate. In Reichert v. Reichert, 9 this court
interpreted the statute and adopted the rule that “the marital
estate includes only that portion of the pension which is earned
during the marriage.” In Shockley v. Shockley, 10 we stated that
“[c]ontributions to pensions before marriage or after dissolu-
tion are not assets of the marital estate.”
[4,5] This appeal presents a choice between two major
competing methods of division, each with its own rules of
valuation: 11 the deferred distribution method and the immediate
offset method.
[Under the] “deferred distribution method” . . . the court
makes no immediate division of retirement benefits, but
determines a percentage share which the nonowning
spouse will receive when the owning spouse retires and
orders that the nonowning spouse receive that percent-
age of every payment check which the owning spouse
is entitled to receive. . . . This is in opposition to the
“immediate offset method” where the court determines
8
See, e.g., Shearer v. Shearer, 270 Neb. 178, 700 N.W.2d 580 (2005);
Parde v. Parde, 258 Neb. 101, 602 N.W.2d 657 (1999); Kramer v. Kramer,
252 Neb. 526, 567 N.W.2d 100 (1997); Bandy v. Bandy, 17 Neb. App. 97,
756 N.W.2d 751 (2008); John v. John, 1 Neb. App. 947, 511 N.W.2d 544(1993).
9
Reichert v. Reichert, 246 Neb. 31, 35, 516 N.W.2d 600, 604 (1994).
10
Shockley v. Shockley, 251 Neb. 896, 899, 560 N.W.2d 777, 780 (1997).
11
2 Turner, supra note 6, § 6:30 (discussing methods for distributing
retirement benefits—defined benefit plans in general).
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156the present value of a share in the pension of the owning
spouse and immediately awards the nonowning spouse a
lump-sum amount in view of that value. 12
The Court of Appeals noted in Polly v. Polly 13 that the deferred
distribution method is the most widely accepted method of
dividing retirement benefits; still, the immediate offset method
remains a viable method under Nebraska law. 14 Contrary to
Daniel’s implication, while the deferred distribution method is
perhaps the most widely accepted, such does not make it the
preferred method of division for retirement benefits.
The district court’s use of the immediate offset method of
valuation was not an abuse of discretion. Having reviewed
the record, we determine it is clear, as we have noted, that
the parties’ divorce was contentious. One of the benefits of
the immediate offset method is that it effectuates a complete
and immediate, albeit slightly deferred, split of the retirement
account at question, which in the case of Daniel and Melanie
would be advantageous. 15
Relatedly, the immediate offset method is useful in cases
where there is a likelihood of manipulation of the retirement
account. 16 The record contains an allegation that Daniel made
changes to his pension without notifying Melanie. When this
is considered in tandem with the general contentiousness of
this divorce, such supports the use of the immediate offset
method and as clean a break between Daniel and Melanie
as possible.
In addition, reasons to use the deferred distribution method
are not present. For example, we have evidence of present
12
Koziol v. Koziol, 10 Neb. App. 675, 692-93, 636 N.W.2d 890, 906 (2001).
See, also, 2 Turner, supra note 6, §§ 6:30 to 6:32.
13
Polly v. Polly, 1 Neb. App. 121, 487 N.W.2d 558 (1992).
14
Cf. Koziol v. Koziol, supra note 12.
15
See 2 Turner, supra note 6, §§ 6:31 and 6:36.
16
See id., § 6:36.
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156value. 17 Also, because Daniel’s pension was in pay status,
the amount of his benefits was not unusually speculative. 18
And both Daniel and Melanie have nonmarital property and
income, so the need for a steady retirement income that
would result from the deferred distribution method is not obvi-
ously present. 19
Daniel alleges that the parties’ limited marital estate sup-
ports the use of the deferred distribution method. Daniel con-
tends that the marital estate does not include sufficient property
that he could liquidate in order to make payment to equalize
the estate.
But contrary to Daniel’s implication, this was not a lim-
ited marital estate. Together, Daniel and Melanie had sig-
nificant assets, including three homes and multiple investment
accounts. Daniel had access to significant funds outside of the
marital estate, including at least 2 years’ pension payments
received during the pendency of the divorce of which Melanie
received none. Moreover, the district court created a plan for
the equalization payment, allowing Daniel to pay it off over
multiple years.
Having reviewed the record de novo, we cannot say that the
district court’s decision to use the immediate offset method of
valuation and to accordingly value and divide the estate as it
did was an abuse of discretion. There is no merit to this assign-
ment of error.
2. Attorney Fees
On cross-appeal, Melanie assigns that the district court erred
in not awarding her attorney fees and costs. She argues that
Daniel’s actions throughout the divorce process “frustrated and
impeded at nearly every step.” 20
17
See id.18
See id.19
See id.20
Brief for appellee on cross-appeal at 41.
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156As an initial matter, Daniel argues that Melanie has failed to
comply with this court’s rules regarding the filing of a cross-
appeal, because she does not have a separate title page indicat-
ing her cross-appeal. But Neb. Ct. R. App. P. § 2-109(D)(4)
(rev. 2014) provides not that the brief and the brief on cross-
appeal must each have separate title pages, but that “[w]here
the brief of appellee presents a cross-appeal, it shall be noted
on the cover of the brief and it shall be set forth in a separate
division of the brief.” Both of these criteria were met in this
case, with Melanie’s cross-appeal separately indicated on the
cover of her brief on appeal. Daniel’s argument to the contrary
is without merit.
[6,7] We now turn to the merits of Melanie’s cross-appeal.
In awarding attorney fees in a dissolution action, a court shall
consider the nature of the case, the amount involved in the con-
troversy, the services actually performed, the results obtained,
the length of time required for preparation and presentation of
the case, the novelty and difficulty of the questions raised, and
the customary charges of the bar for similar services. 21 In addi-
tion, courts have the inherent power to award attorney fees in
certain unusual circumstances amounting to conduct during the
course of litigation which is vexatious, unfounded, and dila-
tory, such that it amounts to bad faith. 22
As we did with respect to the valuation of the pension plan
and division of the marital estate, we review de novo on the
record to determine whether there has been an abuse of dis-
cretion by the trial judge in the award of attorney fees. 23 A
judicial abuse of discretion exists if the reasons or rulings of
a trial judge are clearly untenable, unfairly depriving a litigant
21
Dycus v. Dycus, 307 Neb. 426, 949 N.W.2d 357 (2020).
22
Leners v. Leners, 302 Neb. 904, 925 N.W.2d 704 (2019), disapproved
on other grounds, State on behalf of Kaaden S. v. Jeffery T., 303 Neb.
933, 932 N.W.2d 692 (2019); Fetherkile v. Fetherkile, 299 Neb. 76, 907
N.W.2d 275 (2018).
23
See Higgins v. Currier, supra note 1.
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CORNWELL v. CORNWELL
Cite as 309 Neb. 156of a substantial right and denying just results in matters sub-
mitted for disposition. 24
In this case, the record supports the district court’s decision
to not award attorney fees. As noted above, while the record
demonstrates that this divorce was contentious, the record also
shows that both sides at times prolonged the process. Given
this conflict, we cannot say the decision to not award fees and
costs was an abuse of discretion.
VI. CONCLUSION
The decision of the district court is affirmed.
Affirmed.
24
Id.