Holen v. Holen ( 2017 )

IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
(Memorandum Web Opinion)
HOLEN V. HOLEN
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).
CLAIRE C. HOLEN, APPELLEE,
V.
ERIK T. HOLEN, APPELLANT.
Filed December 12, 2017. No. A-16-1201.
Appeal from the District Court for Phelps County: TERRI S. HARDER, Judge. Affirmed in
part, affirmed in part as modified, reversed and remanded in part with directions, and in part
reversed and vacated.
Kent A. Schroeder, of Ross, Schroeder & George, L.L.C., for appellant.
Jane F. Langan Mach, of Rembolt Ludtke, L.L.P., for appellee.
MOORE, Chief Judge, and BISHOP and ARTERBURN, Judges.
BISHOP, Judge.
I. INTRODUCTION
The Phelps County District Court dissolved the marriage between Claire C. Holen and Erik
T. Holen. A decree, as amended, was entered from which both parties have appealed and assigned
numerous errors related to property, child custody, child support, alimony, and attorney fees. Some
portions of the decree are reversed and remanded with directions or vacated, one provision is
modified, and the balance of the decree is affirmed.
II. BACKGROUND
Claire and Erik were married in October 2005. They had three children, a son (born 2009)
and two daughters (born 2011 and 2012). At the time of trial, Claire was 39 years old, and Erik
was 42.
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Claire is from St. Louis, Missouri. She has a degree in psychology from the University of
Missouri, and was accepted into the University of Missouri Law School in 2000, but did not attend,
opting not to pursue a career in law. Erik is from north of Loomis, Nebraska, near Holdrege,
Nebraska. In 2001, he moved to St. Louis while working for an insurance company. After the
insurance company he worked for went out of business, he started working for a home
improvement company, where he met Claire in August 2002. At the time, Claire was working part
time as the finance manager of the home improvement company; she later provided care for her
cousin’s daughter. Erik later worked for a mortgage brokerage business in St. Louis, and in January
2005, he moved to Phoenix, Arizona, as part of a promotion. Claire moved to Phoenix in March,
and the parties got married in October. Shortly after the parties married, Erik went to work for
another mortgage company, but that company closed Erik’s office in early 2008 and he looked for
opportunity in a number of small ventures. While in Phoenix, Claire worked as a marketing
assistant for Club Assist, earning $40,000 per year. In 2007, Claire was promoted and became the
marketing manager for North America, earning $65,000 per year. In Phoenix, Claire was the one
who had the “consistent income” and benefits.
In August 2008, the parties were struggling in their marriage and Erik moved back to
Holdrege so he could farm. Claire followed in September, but continued to work for Club Assist,
which required her to travel. The parties’ son was born prematurely in March 2009. A few months
after their son’s birth, Claire became a stay-at-home mother, in part because her position at Club
Assist was being relocated to Los Angeles, California, and would have required her to move, and
in part because it was more important for her to stay at home with the parties’ premature son. She
did not work outside of the home again until shortly before the divorce proceedings were filed,
when she got a part-time job at the YMCA earning $11 per hour. Since February 2016, she has
also done some marketing consulting work for NorthStar Battery; she works from home and the
hours she works are project dependent.
In October 2014, Claire filed a complaint for dissolution of marriage. The following month,
Erik filed an answer and counterclaim. Claire asked for sole legal and physical custody of the
children, while Erik asked that he and Claire be granted joint legal and physical custody. Claire
sought child support and also asked that “uninsured health care” and work-related childcare
expenses be allocated between the parties. Each party asked for an equitable division of their assets
and debts. Additionally, Claire requested temporary and permanent alimony, attorney fees, and
costs. And Erik requested an order restraining both parties from certain actions related to the
parties’ “property assets,” except in the usual course of business or for the necessities of life.
In its temporary order filed on December 22, 2014, the district court awarded legal and
physical custody to Claire (although, the parenting plan incorporated into the temporary order says
the parties were awarded joint legal custody), subject to Erik’s parenting time every other weekend,
two evenings each week, alternating holidays, and 4 weeks every summer. Beginning December
1, Erik was ordered to pay child support of $1,339 per month, and spousal support of $1,250 per
month. He was also ordered to provide health insurance for Claire and the children during the
pendency of the proceedings. Additionally, Erik was ordered to continue making the mortgage
payment on the marital home, pay temporary attorney fees of $3,500, and expert witness fees in
the amount of $5,000.
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On December 11, 2015, Claire filed a motion for an anti-hypothecation order restraining
Erik from certain actions related to any real and personal property or assets owned by either party
or their businesses. She alleged that Erik had incurred over $300,000 in debt during the pendency
of this case, that he was wasting marital assets, and that his support and other obligations under
the temporary order were being paid by incurring debt in an attempt to shift that burden to her.
Also on December 11, Claire filed a motion to determine valuation date. She asked the Court for
an order determining the date of valuation of the marital estate “to be as of the date of filing of the
action or as close a date thereto as reasonably possible,” because, as she alleged, Erik wasted assets
and incurred over $300,000 in debt.
On January 29, 2016, the court entered an order restraining Erik from certain actions related
to any real and personal property or assets owned by either party or their businesses, except in the
ordinary course of business, for the necessities of life, or by agreement of the parties. Erik was
ordered to “comply with all pending leases and take such actions as may be necessary to preserve
the parties’ interests therein.”
In an order filed on March 22, 2016, the court determined “the date of valuation shall be
December 31, 2014. Any pre-paid expenses (for 2015) shall be added back to the marital estate.”
Trial was held on September 12 and 13, 2016. A number of the property issues had been
settled, but still at issue was an option to purchase farmland contained in a lease agreement, and
the related Dakota MAC debt. Also contested were issues of child custody and parenting time,
child support, alimony, and attorney fees. Claire and Erik testified, and each had other witnesses
testify on her or his behalf.
The district court entered a decree of dissolution on November 4, 2016. On agreement of
the parties, the court awarded “joint custody” of the minor children. However, it is clear the court
meant joint legal custody, because it went on to award physical custody to Claire, subject to Erik’s
specified parenting time. Erik’s parenting time includes every other weekend from 3:30 p.m. on
Friday until 8 a.m. on Monday; midweek parenting time every Monday from 3:30 p.m. to 7:30
p.m. when Claire works, and “if [Claire] works a second weekday evening each week, then [Erik]
shall have the children from 3:30 - 7:30 p.m. that evening too”; 4 weeks every summer; and 4
weeks every winter commencing with his second weekend of parenting time in January. Holiday
parenting time was also scheduled. Erik was ordered to pay $686 per month in child support, but
child support “shall abate by 50% during the months of June and January each year commencing
in 2017.” Erik was ordered to provide, maintain, and pay for health insurance coverage for the
minor children as long as it is available to him through his employer, with the same deductible and
the same coverage as currently in force. He was ordered to pay 59-percent of employment or
education-related daycare expenses, and 59-percent of nonreimbursed healthcare expenses
incurred by the children after the first $480 per child has been paid by Claire each year; however,
the total daycare and or unreimbursed medical expenses may not exceed $113 per month “due to
the poverty guidelines.”
The district court divided the parties’ assets and debts. In particular, Erik was awarded an
option to purchase certain real estate, which the court valued at $1,023,061. Erik was ordered to
pay a $160,580 property equalization to Claire. Claire was not awarded alimony. Each party was
ordered to pay their own attorney fees, but Claire was ordered to pay costs.
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Claire filed a motion for new trial or to alter or amend judgment, and Erik filed a motion
to alter or amend the decree. The district court addressed both motions in an order filed on
December 6, 2016. The district court overruled Erik’s motion in its entirety. In response to Claire’s
motion, the district court amended the decree to provide that Erik should pay alimony in the
amount of $1 per year for 3 years (2017, 2018, and 2019); it overruled the balance of Claire’s
motion.
Erik timely appealed, and Claire cross-appealed.
III. ASSIGNMENTS OF ERROR
Erik assigns 14 errors to the district court, which we consolidate and restate as follows: the
district court erred in (1) its findings and determinations with respect to the unexercised option to
purchase land, (2) failing to require Claire to account for $23,373.42 removed from an account
after the court-ordered date of valuation, (3) failing to award joint physical custody to the parties
or, in the alternative, more parenting time to Erik, (4) its determinations with respect to child
support, particularly failing to use Claire’s earning capacity when determining support, and (5)
failing to order both parties to provide health insurance coverage for the children.
Claire assigns on cross-appeal that the district court erred by: (1) not averaging Erik’s
income for purposes of child support and alimony, (2) capping Erik’s reimbursement for daycare
and medical expenses at $113 per month, and (3) failing to award her attorney fees.
IV. 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. Lorenzen v.
Lorenzen, 294 Neb. 204, 883 N.W.2d 292 (2016). This standard of review applies to the trial
court’s determinations regarding custody, child support, division of property, alimony, and
attorney fees. Id.Child custody and parenting time determinations are matters initially entrusted to the
discretion of the trial court, and although reviewed de novo on the record, the trial court’s
determination will normally be affirmed absent an abuse of discretion. See State on behalf of
Maddox S. v. Matthew E., 23 Neb. App. 500, 873 N.W.2d 208 (2016).
An abuse of discretion occurs when a trial court bases its decision upon reasons that are
untenable or unreasonable or if its action is clearly against justice or conscience, reason, and
evidence. Id. A judicial abuse of discretion requires that the reasons or rulings of the trial court be
clearly untenable insofar as they unfairly deprive a litigant of a substantial right and a just result.
Id.In child custody cases, where the credible evidence is in conflict on a material issue of fact,
the 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. Id.-4-
V. ANALYSIS
1. OPTION TO PURCHASE
(a) Background
In early 2009, Erik approached his maternal grandmother, LaVaughn Larson, about
farming her land. In February of that year, Erik and Claire signed a promissory note to Larson for
$580,000, and received a joint tenancy warranty deed from Larson for her property in Phelps
County, Nebraska. In 2009 and 2010, Erik and Claire attempted to get a loan through First Dakota
National Bank (hereafter referred to as Dakota MAC) to finance the land purchase, but the loan
was rejected. So, in April 2010, Erik and Claire deeded the land back to Larson, and the parties
entered into a lease agreement with an option to purchase (Agreement) that same land.
The Agreement (exhibit 47) states in relevant part:
LEASE AGREEMENT WITH OPTION TO PURCHASE
This Agreement, made and entered into by and between LaVaughn F. Larson, a
single person, (“Larson”); and Erik Holen and Claire Holen, (“Tenant”);
1. Larson hereby rents to Tenant and Tenant rents from Larson the following
agricultural real estate, to wit:
[Legal description of property given.]
2. Tenant agrees to pay $20,000.00 per year rent to Larson. Rent to be due and
payable on or before November 15 of each year beginning November 15, 2010, for a period
of ten years. Rent shall be paid directly to Larson. If rent is unpaid when due, Larson may
terminate this agreement after thirty (30) days’ notice and take action for possession. Any
rental payment more than 10 days past due shall be assessed a $25 late fee. This agreement
may be terminated by either party upon notice in writing on or before September 1 for the
next year; or upon any breach according to the terms of this agreement.
....
Option to Purchase
9. In consideration of the mutual promises contained herein, Tenant is hereby
granted an Option to Purchase the property for 10 years after this lease is executed. If
Tenant exercises the option, the following terms and conditions shall apply and are hereby
agreed to by the parties:
....
b. The purchase price of the property shall be $580,000.00. Tenant may receive
credit against this amount for the $20,000.00 annual rental payments if it is made timely.
This amount shall accumulate during the term of this agreement, i.e. if the rent is paid
timely for 4 years prior to exercise of the Option to Purchase, the purchase price will be
reduced by $80,000.00.
In February 2013, the parties and Larson signed an “Amendment to Lease Agreement with
Option to Purchase” (exhibit 47), reducing the purchase price to $480,000. The amendment stated,
“All the remaining terms, conditions and provisions of the original agreement are hereby
confirmed and ratified.”
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In November 2013, Erik and Claire attempted to get a $485,000 loan from Dakota MAC
in order to exercise the option to purchase the property, but their loan was denied. David Boyd
Mignery, the loan officer from Dakota MAC, testified the loan was denied because of the “overall
credit worthiness of the application that we were presented.” The parties continued to lease the
land and made a timely rent payment in 2013. In 2014 the parties made a timely rent payment of
$18,000, and Larson forgave the other $2,000.
According to Erik, he and Claire had some farm debt at Dakota MAC/Agri-Access secured
by Larson’s land, and in September 2014, that debt was nearing its limit and was refinanced. Claire
said it was her understanding the loan to operate the farm was up for renewal or extension.
Regardless, the evidence shows the loan was refinanced in September; the refinance occurred after
Erik had moved out of the marital home in August and before the divorce proceedings were filed
in October.
To refinance, the parties and Larson applied to Dakota MAC for a loan of $750,000. The
“Promissory Note/Loan Agreement Revolving Line of Credit,” states that Erik, Claire, and Larson
were the “borrower[s],” and Dakota MAC was the “lender”; the agreement was signed by both
parties, Larson, and loan officer Mignery. The loan was secured by a Deed of Trust issued by
Larson to the bank for her land. And as part of the refinancing agreement, Erik and Claire were
required to subordinate their Agreement. The September 2014 subordination agreement shows the
Agreement was to be subordinate and junior to the lien of the deed of trust securing the refinance
loan. The September refinance summary was signed by both parties, Larson, and a representative
from the title company. The document shows $352,776.11 in total debt, including a payoff for the
first mortgage to Agri-Access of $266,597.43, other expenses paid (e.g. credit card, fertilizer,
irrigation equipment), and expenses associated with the refinance. The refinance was a line of
credit for $750,000, so almost $400,000 remained available in the line of credit after paying off
the first mortgage and other noted expenses.
Erik testified he was no longer living in the marital home at the time of the September 2014
refinancing, and it was “very possible” he had borrowed another $150,000 as of December 31,
2014. The order for temporary child and spousal support commenced December 1. He agreed the
balance of the Dakota MAC debt by December 31 was approximately $504,000. When asked what
he did with $150,000 in less than 3 months, he responded, “The loan that was near its max, the
cost of farming, with the farming, there were bills payable. I had invoices paid.” He added,
“Farming is not cheap.” Erik said he used this line of credit to pay farming expenses (harvesting
costs, fertilizer bills, “machinery hire”), attorney fees, and “living” expenses, including
“supporting the family” and writing “Claire many checks before the end of the year.”
On August 1, 2016 (6 weeks before the parties’ divorce trial), Larson’s attorney sent a letter
(exhibit 63) titled “Notice to Terminate Tenancy and Option” (termination letter) to Erik and
Claire, giving them “formal notice” their lease with Larson would terminate on February 28, 2017.
The termination letter also stated the option to purchase became unenforceable in September 2014,
when the property was pledged at Erik and Claire’s request to secure their debt and obligations up
to an amount of $750,000, because “the circumstances were irreparably changed from their
original state.” It continues, “Therefore, the only right you [Erik and Claire] have to the property
is the lease, which will be in effect until the end of February, 2017, at which time it will expire and
you will have no further interest in the real estate.”
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The termination letter also pointed out the following. Larson entered into the original
agreement to help Erik start his farming career at a level of rent and an option price which were
both below the market price, and the underlying assumption of all parties was if the option were
exercised, Larson would receive the price as calculated in accordance with the Agreement. In 2011,
Larson was awarded the Nebraska Pioneer Farm Award which recognizes 100 years of continuous
family ownership. The reason for granting the original option was to continue ownership of the
farm in the family through Erik, but Larson had since been informed through a review of the
deposition of a valuation expert that it may be the parties’ intention to exercise the option and then
sell the property. “This clearly would end a long history of family ownership and is contrary to
[Larson’s] intentions and the underlying assumptions when the Option to Purchase was granted.”
The valuation expert referred to in the termination letter is Reed Samson, a certified public
accountant, with certifications in business valuation and financial forensics. He was retained by
Claire to assist with valuing the option contained in the lease. Samson valued the option at
$1,088,061, as of December 31, 2014, but determined that if the option was exercised, the property
would likely have to be sold to satisfy the debt because the farm operations alone would be unlikely
to sustain the payments. He stated, “[I]n looking at the results of operations over the last several
years, and in particular would liken it to changes in commodity prices and otherwise, that it would
be a very difficult task to service the debt if they did exercise it given the way the farm economy
ebbs and flows.” He added, “[I]t didn’t appear that the operations themselves were going to be
sufficient to sustain both standard of living as well as repay the debt.”
Also, since Samson concluded the only way to repay the debt attached to the property was
if the property was sold, he included tax consequences in his evaluation to avoid “overstating the
value of that option.” In valuing the option, Samson said he used “a very commonplace
methodology of valuing real options.” He noted that other approaches, such as Black-Scholes and
other methodologies are “more useful in situations where you’re valuing securities that are to be
valued upon a certain event or series of events[,]” and those “methodologies although are common
in valuing options themselves, they are very rarely used in valuing real options.” “[T]hose options
are really more akin to securities or other advanced financial instruments.” He pointed out that
“[r]eal options are significantly different than financial options in that their value is based on a
physical asset versus a stock or other security.” He noted that land options, such as this Agreement,
“are a type of call option commonly used in real estate,” and a “call option is the right but not the
obligation to purchase an underlying asset for a predetermined price (the ‘strike’ price).”
As for valuing the option to purchase in the present matter, Samson said “[t]his is a very
straightforward real property option.” Samson considered what the “strike price” or “exercise
price” was as compared to the fair market value of the property. “In this situation the appraisal that
was prepared in August of 2015 certainly reflected a fair market value in excess of the strike point.”
Samson said the adjusted strike price used in this instance would be $442,000 to reflect the option
price of $480,000 less the two payments of rent ($20,000 and $18,000). According to the August
2015 appraisal relied upon by Samson, the fair market value of the real estate was $1,530,061, so
the option, before any consideration for income tax, had a value “to the tune of a little over a
million dollars,” specifically, $1,088,061. (Subtracting the adjusted strike price of $442,000 from
the $1,530,061 fair market value of the real estate equals $1,088,061.) Samson further opined that
if the property were held for a year and a day before selling, a long-term capital gain tax rate could
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be used instead of a short-term capital gain rate, a difference of “almost 20 percentage points.”
Samson calculated the long-term capital gain to result in $283,558 in federal and state taxes.
On cross-examination, Samson was asked why he did not subtract the debt of $504,000
(existing as of December 31, 2014) from the appraised value. He responded, “The value of the
option is one matter. The value of the debt is another matter. So it would be offsetting in the
property statement.” However, Samson did agree he was not aware of any cases that addressed the
method employed to value an option to purchase real estate, nor was he aware of any case in any
other jurisdiction regarding the valuation of options to purchase real estate. Samson acknowledged
that in his 41-year career, he had never prepared a report on an option to purchase real estate “for
a court setting.” He further acknowledged he had not been apprised “that the parties subordinated
their option to purchase agreement to the operating capital lender.” Samson had not seen the
September 2014 subordination agreement until it was presented to him at trial on
cross-examination, and after taking time to review it during a court recess, Samson agreed the
subordination document required the Holens to obtain permission from Dakota MAC to exercise
the option to purchase the land. Samson acknowledged exercising the option would require a
coordinated effort, specifically, “If one were to try to effectuate the option, you’d have to get the
approval of all the parties, whoever is going to loan you the money for the option price as well as
the existing lien holder in that regard.”
Erik testified he and Claire never talked about or considered exercising the option to
purchase after refinancing in September 2014. According to Erik, in September 2014, the option
was still in full force and effect, and as of December 31 of that year, he had not done anything to
jeopardize his rights under the lease.
Erik testified he had been notified he would not be farming Larson’s land the next year
(2017). When asked if he expected to farm the land in the next 5 years, Erik, responded, “I have
no idea what [Larson’s] plans are.” He did not know if the land would go back to him when the
divorce was over; he stated, “I have no idea what [Larson’s] intentions are. She’s the land owner.
It’s not up to me.” Erik said it is important to Larson that the land be kept in the family. He would
never exercise the option, knowing the property would have to be sold, if that was contrary to
Larson’s wishes.
Larson, who was 96 years old at the time of trial, testified she and her late husband bought
the farm from his father in the 1970’s, and that it has been in the family for more than 100 years.
She recently received the Pioneer Farm Award, which is awarded to individuals who have
possessed agricultural real estate for more than 100 years. Erik came back to Nebraska in 2008 to
farm the ground she owns. He initially cash-rented the land, and in 2010 the parties and Larson
entered into the lease agreement with option to purchase. Under the lease agreement, the rent was
$20,000 per year and Erik always made timely payments; one year he paid $18,000, and Larson
gave him a break on the rent because he needed some money. According to Larson, the $20,000
rent was below market cost. The option to purchase was originally set at $580,000, but later
reduced to $480,000. When asked why she reduced the price, Larson responded, “because [Erik’s]
my grandson,” “he wanted [the land] to farm,” and “I want to keep [the land] in the family.” She
does not want the land sold to a stranger, and affirmed she consulted with her attorney to terminate
the lease because she wanted to keep the farm in the family name. On cross-examination, Larson
acknowledged that Erik is the only one in her direct line of descendants who farms. When asked
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if she planned for Erik to eventually have the farm, Larson replied, “At this point I’ve not decided.”
When counsel continued, “But if the idea is that you don’t want it to go to anyone outside the
family, Erik is the only one who could have it?” Larson answered, “Probably.” Larson also
acknowledged she spoke with Erik about terminating the lease or option “maybe a month” before
she asked her attorney to send the letter dated August 1, 2016, and she thought Erik “was in favor”
of terminating the lease and option. There was also evidence that on July 28, 2016, Erik’s attorney
charged him for revising the letter sent to the parties by Larson’s counsel.
In the decree, the district court addressed the termination letter when making its decision
to award the option to Erik and to use Claire’s proposed value for that option. The decree contained
the following statements: “[n]owhere in Larson’s letter does she cite to any breach of the
[Agreement]”; “[t]here is nothing in the [Agreement] that indicates the landlord has the right to
terminate the [Agreement] for the reasons given in Larson’s letter”; “[i]t seems apparent from the
record that Larson was likely encouraged by [Erik] to terminate the [Agreement],” “[w]hat other
reason would there be for giving her Samson’s deposition?”; [i]t also does not appear that Larson
had a legal basis to terminate the [Agreement] and therefore, [Erik] would have a legal right to
enforce the [Agreement]”; and “[b]ecause the option had value on the date of valuation and
because the Court believes the termination of the lease/option is a sham and is the result of [Erik]
violating the non-hypothecation order, the Court has used [Claire’s] value.”
Claire’s proposed value was $1,023,061 (which was based on Samson’s valuation of
$1,088,061 less the value of two center pivots owned by the parties). The district court allocated a
value of $1,023,061 to Erik for the option, but also gave him a deduction of $283,558 for the
“deferred land tax” calculated by Samson for capital gains taxes that would be incurred if the
property was sold (assuming the property was held for one year and one day to minimize the tax
consequences). The court also allocated solely to Erik the balance of the Dakota MAC debt, which,
as of December 31, 2014, was $504,929.
(b) Analysis
Erik contends the option to purchase had no value, and to award “a non-existent
hypothetical asset to either party is tantamount to a punitive damage award.” Brief for appellant at
16. Erik argues the parties were unable to obtain a loan to exercise the option, and “[i]t was the
inability to perform that rendered the option to purchase worthless on December 31, 2014, and
every day thereafter.” Id. at 18. He claims the court abused its discretion by adopting Claire’s
expert’s opinion as to the value of the option, and by awarding the option to Erik. He also contends
the district court lacked personal and subject matter jurisdiction for matters related to the lease
because Larson was not made a party to the action. Finally, he claims the court erred in determining
he violated the non-hypothecation order regarding termination of the lease agreement with option
to purchase.
(i) Option to Purchase Was Marital Asset
The primary issue here is whether or not the unexercised option to purchase Larson’s real
estate was a marital asset which could be valued and then awarded to just one party. Erik claims
the option was a “hypothetical asset” with no value because the parties were not in a financial
position to exercise the option. We conclude the problem here is not the district court’s
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classification of the option as a marital asset; rather, the problem, or inequity, stems from allocating
a million dollar value for that asset to only one spouse based on the facts present in this case;
specifically, the financial circumstances of the parties and the uncertainty of whether the option
could still be exercised.
Under Neb. Rev. Stat. § 43-365 (Reissue 2016), the equitable division of property is a
three-step process. Marshall v. Marshall, 298 Neb. 1, 902 N.W.2d 223 (2017).
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 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 § 43-365.
Marshall v. Marshall, 298 Neb. at 16, 902 N.W.2d at 236.
Further, dissolution of marriage cases are equitable in nature, and the purpose of a property
division is to distribute the marital assets equitably between the parties. See Marshall v. Marshall,
supra. The ultimate test for determining the appropriateness of the division of property is fairness
and reasonableness as determined by the facts of each case. Id. There is no mathematical formula
by which property awards can be precisely determined. Id. In equity, there is rarely one tidy answer
that fits every size and type of problem that courts are called upon to resolve. Id.The option to purchase was acquired by the marital estate when the agreement was signed
by both parties in April 2010, and the option remained part of the marital estate at the time of the
court-ordered valuation date of December 31, 2014. Even according to Erik, in September 2014,
the option was still in full force and effect, and as of December 31 of that year, he had not done
anything to jeopardize his rights under the Agreement. The option to purchase was therefore a
marital asset at the time of the valuation date. See Schuman v. Schuman, 265 Neb. 459, 685 N.W.2d
30 (2003) (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).
As for valuing the option, Samson opined the option had a value of $1,088,061. Samson’s
report indicates this amount was arrived at by taking the appraised value of the real estate
($1,530,061) and subtracting the adjusted strike price of $442,000. However, Samson
acknowledged he was not aware of any cases addressing the method employed to value an option
to purchase real estate, nor was he aware of any case in any other jurisdiction addressing the
valuation of options to purchase real estate. In his 41-year career, Samson had never prepared a
report on an option to purchase real estate “for a court setting.” However, we need not decide
whether Samson’s method of valuation was appropriate because the value of the option is not
relevant given our conclusion that the most equitable way to handle the option is to award it to
both parties, as discussed next.
Notably, the option to purchase was never exercised either before the parties separated or
after, and as Erik asserts, the parties were not in a financial position to exercise the option. As
noted previously, in early 2009, Erik and Claire signed a promissory note to Larson for $580,000
and received a joint tenancy warranty deed for her property. However, the parties’ attempt to get
a loan through Dakota MAC to finance the land purchase was rejected, and they had to deed the
land back to Larson. The parties then entered into the Agreement with Larson in April 2010. In
November 2013, about a year prior to separation, Erik and Claire attempted to get a $485,000 loan
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from Dakota MAC to exercise the option to purchase the property, but their loan was denied. The
loan officer testified the loan was denied because of the “overall credit worthiness of the
application that we were presented.” In September 2014, just before the parties separated, they
refinanced their debts and obtained a line of credit for $750,000 (secured by Larson’s real estate),
which left $400,000 available in that line of credit after paying off the first mortgage and other
noted expenses. Nevertheless, there is no evidence the parties attempted to exercise the option to
purchase at this point in time or anytime thereafter. Importantly, as part of the refinancing
agreement, Erik and Claire were required to subordinate the Agreement; it was subordinate and
junior to the lien of the deed of trust securing the refinance loan. It was not until almost 2 years
later, on August 1, 2016, that Larson’s attorney sent a letter terminating the Agreement as of
February 28, 2017; at no time prior to that did the parties attempt to exercise the option since their
failed attempt in November 2013. There is no evidence that one party or the other interfered with
or frustrated any such attempt to exercise the option.
Accordingly, given the financial circumstances of the parties, we conclude it was an abuse
of discretion for the court to award the option to purchase solely to Erik and to assign a value of
$1,023,061 to Erik for that option. There was no evidence the parties, either jointly or individually,
could have obtained the financing to exercise the option, especially considering the option to
purchase was now subordinate and junior to Dakota MAC’s lien of the deed of trust securing the
refinancing loan. It was also unclear whether the option could be exercised in light of Larson’s
August 1, 2016, termination letter, or whether Erik or Claire could separately enforce the
Agreement since it referred to them as “Erik Holen and Claire Holen, (‘Tenant’),” and the “Tenant”
was granted the option to purchase. A large part of the district court’s reasoning for allocating the
option to Erik and valuing it at $1,023,061, pertained to the role the court perceived Erik played
in Larson’s decision to terminate the Agreement. However, as will be discussed in the next section
dealing with the district court’s jurisdiction over the Agreement, matters related to termination or
enforceability of the Agreement were not proper issues for resolution in the divorce action in which
Larson was not a party.
Because appeals in domestic relations matters are reviewed de novo on the record, an
appellate court is empowered to enter the order which should have been made as reflected by the
record. Schuman v. Schuman, supra. Accordingly, we conclude that as a matter of equity based on
the circumstances described above, as well as for the preservation of any contract rights the parties
may still have in the option (despite Larson’s termination letter), the option should have been
awarded to both parties. Accordingly, we reverse that portion of the decree awarding the option to
Erik, and remand with directions to award the option to both parties. Awarding the option to both
parties eliminates the need to determine or assign a value to either party for the option. And to the
extent the parties are able to coordinate their efforts with the bank and Larson to find a way to still
exercise the option, their continued joint interest in the option will make such an occurrence more
feasible. Further, if the option is no longer available as a result of Larson’s termination letter, that
is a consequence that should be borne by both parties unless it can be proved Erik wrongly
influenced that outcome. However, as discussed in the next section on jurisdiction, these are issues
to be decided in a separate legal action, if it comes to that, with Larson included as a necessary
party.
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By awarding the option to both parties, another adjustment will have to be made to the
district court’s property division contained in “Exhibit ‘D’” attached to the decree. Specifically,
the district court included a “deferred land tax” of $283,558 as a liability associated with the option
assigned to Erik. This is the capital gains tax calculated by Samson that would be incurred if the
property was sold (assuming the property was held for one year and one day to minimize the tax
consequences). Because we have awarded the option to both parties, any tax associated with the
sale of the land will also be equally shared by the parties to the extent the option is ever exercised
and the property sold. Therefore, this amount is no longer a liability to be listed in the parties’
property division and must be deleted as a liability allocated to Erik.
Removing both the value of the option to purchase and the deferred land tax from the
property division set forth in the decree, results in a division of assets and debts as follows:
ERIK CLAIRE
TOTAL ASSETS $216,831.00 $259,978.00
TOTAL LIABILITIES (524,242.00) (149,046.00)
NET ($307,411.00) $110,932.00
The revised allocation results in Claire owing an equalization payment of $209,171 to Erik.
However, as Erik acknowledges in his brief, Claire has barely enough income to meet her house
and car payments, “let alone make a payment towards a judgment of $209,171.00.” Brief for
appellant at 14. Also, Claire suggests in her brief that approximately $150,000 of the $504,929
Dakota MAC debt attributed to Erik should not be considered marital debt (which would reduce
the equalization amount owed to Erik). While it is true Erik testified it was “very possible” he had
borrowed another $150,000 between the time of refinancing and December 31, 2014, for farming
expenses, attorney fees, and living expenses, Claire did not cross-appeal this issue. Nor did Erik
appeal the amount of the Dakota MAC debt allocated to him.
However, it is clear the district court allocated the entirety of the $504,929 debt to Erik
because it was also allocating the $1,023,061 option value to him, and this resulted in Erik owing
a property equalization amount of $160,580 to Claire. Erik had no reason to appeal the court’s
determination that $504,929 of the Dakota MAC debt was marital since the higher marital liability
resulted in a lower property equalization amount he would owe to Claire. As for Claire, she was
awarded a $160,580 property equalization judgment despite testifying on examination from her
own attorney that she did not want an equalization (although her responses were confusing on this
issue during cross-examination). Claire stated she did not want any of the Dakota MAC debt
allocated to her; therefore, the court’s allocation of that debt entirely to Erik was her desired
outcome. There was no particular reason for her to challenge the amount of debt since it was fully
allocated to Erik and she was being awarded a $160,580 equalization judgment despite testifying
she did not want one.
Since we are reversing the allocation of the option to be awarded to both parties, we must
also reverse the allocation of the debt associated with it. And in doing so, the parties should not be
prohibited from raising any challenges to the $504,929 figure used by the district court for the
reasons discussed above. Additionally, the equalization judgment in the decree must be reversed.
Therefore, we reverse and remand the following matters for the district court’s consideration and
determination: (1) the amount of the marital portion of the Dakota MAC debt to be included in the
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final division of assets and liabilities; whether it should be the balance of the debt as of the
September 2014 refinancing ($352,776.11) or the balance at the time of the marital equalization
date ($504,929); (2) should the marital portion of the Dakota MAC debt remain allocated solely
to Erik or should it be allocated between the parties to eliminate an equalization payout by either
party; and (3) is an equalization payment necessary under the circumstances of the case, and if so,
is there a reasonable option for how it could be paid given the only asset with equity is the residence
awarded to Claire, and possibly the option to purchase the Larson land to the extent the parties
elect to and can still pursue that option, as discussed further in the next section.
The district court’s consideration of these matters should be based on evidence contained
in the trial record, however, it is certainly in the court’s discretion to decide whether it would be
helpful to schedule a hearing or require briefing for purposes of arguments and proposals from the
parties. Further, we want to be clear that nothing in this opinion should be construed to suggest an
absolutely equal division of assets and liabilities must be accomplished on remand. Rather, we
reiterate the principle that “the division of property is not subject to a precise mathematical
formula,” and “the general rule is to award a spouse one-third to one-half of the marital estate, the
polestar being fairness and reasonableness as determined by the facts of each case.” Liming v.
Liming, 272 Neb. 534, 547, 723 N.W.2d 89, 99 (2006).
(ii) Jurisdiction
For the sake of completeness, and because the district court did make findings and
determinations related to Larson’s termination letter and the enforceability of the Agreement, we
address Erik’s argument related to jurisdiction. He contends, “The district court abused its
discretion in making findings of fact and conclusions of law with regard to the lease agreement
and its termination because the court did not have personal or subject matter jurisdiction with
regard to the lease and all of the parties thereto.” Brief for appellant at 5 and 18.
In the decree, the district court made several findings related to the option and its
termination. The court stated:
Nowhere in Larson’s letter does she cite to any breach of the [Agreement]. There is nothing
in the [Agreement] that indicates the landlord has the right to terminate the [Agreement]
for the reasons given in Larson’s letter.
....
. . . It also does not appear that Larson had a legal basis to terminate the [Agreement]
and therefore, [Erik] would have a legal right to enforce the [Agreement].
The court further found that Erik precipitated the termination of the Agreement and that such
termination was a sham and the result of Erik violating the non-hypothecation order. Erik argues,
The validity of the lease with an option to purchase was not an issue raised by the pleadings
in the marital dissolution action. Nor was there any pre-trial order identifying that as an
issue before the court. Moreover, . . . Larson was not joined as a party to the dissolution
action. Not only did the trial court lack subject matter jurisdiction, it lacked personal
jurisdiction over the landlord, . . . Larson.
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Brief for appellant at 20. Erik cites to Reed v. Reed, 277 Neb. 391, 763 N.W.2d 686 (2009), to
support his position that the district court lacked jurisdiction because not all necessary parties were
joined. He contends Larson was a necessary party to certain matters related to the Agreement. We
agree.
In Reed v. Reed, supra, the Nebraska Supreme Court stated that the presence of necessary
parties is jurisdictional, and the absence of necessary parties deprives a district court of
jurisdiction. Reed considered whether a husband’s parents were necessary parties in the context of
the wife’s allegations of a fraudulent transfer within the meaning of the Uniform Fraudulent
Transfer Act (UFTA). In Reed, the husband and wife formed a company to purchase and operate
a jewelry store. They obtained bank financing, and the husband’s parents agreed to act as sureties
on the loans, executing an agreement setting forth each party’s rights and obligations. The
agreement specified the parents could take title to all of the company’s stock if the husband or wife
failed to discharge their obligations as owners of the company to the satisfaction of the parents.
The parents subsequently paid the bank debt and became the sole financiers of the couple’s
business. Over the next several years, the couple paid very little toward the principal or interest on
the loan, and each conceded that constituted a “default” within the meaning of the agreement with
the husband’s parents. After the husband informed his father he intended to get a divorce, his
parents notified their attorney that they wanted to exercise their option to take title of the couple’s
company, and letters were sent to the couple informing them that the husband’s parents were
transferring all shares of the company to themselves. The parents later sold the business, but were
unable to sell it for enough money to cover the outstanding debt.
The wife claimed the transfer of company stock was a fraudulent transfer; however, the
parents were not made parties to or formally notified of the fraudulent transfer claim. The district
court rejected the wife’s arguments, reasoning that the couple was in default on their payments to
the husband’s parents, giving his parents the right to transfer company stock, a secured property
pursuant to the financing agreement. Jurisdiction was raised at the appellate level because of the
absence of potentially necessary parties.
The Nebraska Supreme Court stated:
An indispensable or necessary party is one whose interest in the subject matter of
the controversy is such that the controversy cannot be finally adjudicated without affecting
the necessary party’s interest or which is such that not to address the interest of the
necessary party would leave the controversy in such a condition that its final determination
may be wholly inconsistent with equity and good conscience. A court may determine any
controversy between parties before it when it can be done without prejudice to the rights
of others or by saving their rights; but when a determination of the controversy cannot be
had without the presence of other parties, the court must order them to be brought in. The
presence of necessary parties is jurisdictional, and the absence of necessary parties deprives
the district court of jurisdiction.
....
Of course, the problem in this case is that [the wife’s] fraudulent transfer claims
implicate the interests of [the husband’s parents] who ended up with the assets that [the
wife] claims were fraudulently transferred. Because those interests would be affected if the
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transfers were set aside or the assets attached, [the husband’s parents] were necessary
parties to that extent.
But [the wife’s] counsel asserted, at oral argument on rehearing, that [the wife]
was not seeking to have the transfers set aside; rather, she had only sought to have
the value of the transferred assets included in the marital estate for purposes of
equitable division. It has been held that if an action is brought for wrongful transfer and it
is possible to fashion relief which does not adversely affect the transferee’s interest, then
the transferee may not need to be joined in an action for judgment of damages against a
defendant. And we have held that the determination of one of the parties to a marriage to
place property beyond the reach of the other party, and thus forestall a division of the
property, does not operate to deprive the district court of jurisdiction to determine an
equitable division of those assets--i.e., to award the value of a share of the disputed assets.
Reed v. Reed, 277 Neb. at 398-400, 763 N.W.2d at 692-94 (emphasis in italics in original, emphasis
in bold supplied).
Reed goes on to note that because the wife waived any interest in pursuing the dissipated
assets (her UFTA claim), the court determined she was not seeking any remedy that was not
available to her in a dissolution action as an alleged dissipation of marital assets. And the court
determined that the husband’s parents were not necessary parties to a claim for dissipation of
marital assets.
To summarize: To the extent that [the wife] sought to set aside the disputed
transfers, the trial court lacked jurisdiction because of [the wife’s] failure to join necessary
parties. But [the wife] now disclaims any interest in setting aside the transfers. So her claim
is best characterized as a claim for dissipation of marital assets, which she also presented,
and which requires only [the wife] and [the husband] as parties.
Reed v. Reed, 277 Neb. at 401-02, 763 N.W.2d at 694-95.
In the present matter, there was no claim of a fraudulent transfer of assets; rather, Claire
claimed, and the court concluded, that Erik had encouraged Larson to terminate the Agreement.
The district court determined it did “not appear that Larson had a legal basis to terminate the
[Agreement] and therefore, [Erik] would have a legal right to enforce the [Agreement].” The court
further concluded Larson’s termination of the Agreement was “a sham” and was the result of Erik
violating the court’s non-hypothecation order. However, whether Larson had proper grounds to
terminate the Agreement (including whether she was improperly influenced by Erik), and whether
Erik could enforce the Agreement against Larson, could not be decided without affecting Larson’s
interests and rights to her real estate. And as set forth in Reed v. Reed, supra, a necessary party is
one whose interest in the subject matter of the controversy is such that the controversy cannot be
finally adjudicated without affecting the necessary party’s interest or which is such that not to
address the interest of the necessary party would leave the controversy in such a condition that its
final determination may be wholly inconsistent with equity and good conscience. And when a
determination of the controversy cannot be had without the presence of other parties, the court
must order them to be brought in, and the presence of necessary parties is jurisdictional. See id.Accordingly, the district court was without jurisdiction to determine the validity of Larson’s
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termination of the Agreement and Erik’s ability to enforce the Agreement without bringing Larson
into the action as a necessary party. Those are matters which can be raised by Erik and Claire in a
separate action against Larson to the extent they should acquire the financial means and desire to
exercise the option, and to the extent further legal action is necessary to resolve their claims.
We likewise do not address the concern raised by Erik as to whether the Agreement’s
reference to “Tenant” requires both Erik and Claire to exercise the option together or whether the
option could be exercised by either of them individually. Again, the resolution of this issue by a
court requires the inclusion of Larson as a necessary party in a legal proceeding. For the same
reason, we do not address Erik’s arguments about the language in paragraph 2 of the Agreement
which states the Agreement “may be terminated by either party upon notice in writing on or before
September 1 for the next year.” Claire argues paragraph 2 applies only to the lease and not the
option to purchase. However, once again, this presents an issue of contract affecting Larson’s
interests which cannot be determined in these divorce proceedings, since Larson is not a party.
Accordingly, all findings and conclusions made by the district court in the decree related
to Larson’s motivations and decision to terminate the Agreement and Erik’s (and/or Claire’s)
ability to enforce the Agreement are reversed and vacated.
2. MONEY REMOVED AFTER VALUATION DATE
Erik argues the court erred when it failed to require Claire to account for $23,373.42
removed from the Home Federal account (funded by the Dakota MAC revolving credit line) after
the court-ordered dated of valuation.
Claire acknowledged that on November 19, 2015, she withdrew $20,000 from a Home
Federal commercial checking account, and a check was issued by the bank to her attorney’s office.
She also acknowledged a November 20 “EPAY” of $3,373.42 from that checking account to her
credit card.
In the decree, the district court noted Claire’s use of the Home Federal funds to pay her
attorney, and cited that as one reason Claire would not receive “additional attorney’s fees.”
Accordingly, the district court did not ignore Claire’s removal of funds and we find no abuse of
discretion in its handling thereof.
3. CUSTODY
(a) Physical Custody and Parenting Time
The district court awarded physical custody of the parties’ children to Claire, subject to
Erik’s specified parenting time. Erik’s parenting time includes every other weekend from 3:30
p.m. on Friday until 8 a.m. on Monday; midweek parenting time every Monday from 3:30 p.m. to
7:30 p.m. when Claire works, and “if [Claire] works a second weekday evening each week, then
[Erik] shall have the children from 3:30 - 7:30 p.m. that evening too”; 4 weeks every summer; and
4 weeks every winter commencing with his second weekend of parenting time in January.
Erik argues the district court erred when it failed to award joint physical custody to both
parties or, in the alternative, to adopt Dr. John Meidlinger’s recommended parenting time plan.
Dr. Meidlinger, a certified clinical psychologist, conducted a custody evaluation in this
case. The parties stipulated to the admissibility of his deposition and report (exhibit 43) in lieu of
his testimony at trial. Dr. Meidlinger stated both Erik and Claire are good parents, and he
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recommended they share joint legal custody. However, Dr. Meidlinger believed “it would be better
to have Claire be the primary physical custodian of the children at this time.” He believed “Claire
is better equipped at managing the children’s day-to-day life.” He noted under the temporary order,
Erik had parenting time every other weekend (from Friday at 3:30 p.m. to Sunday at 5 p.m.) and
two evenings each week (Mondays from 4 to 8 p.m., and Thursdays from 5 to 8 p.m.). Dr.
Meidlinger recommended Erik continue to have those two evenings of parenting time, and that
one of those evenings be an overnight on the Thursday after his weekend parenting time. Dr.
Meidlinger also recommended Erik have one month of parenting time during the summer and one
month of parenting time during the winter (under the temporary order Erik was getting 4 weeks of
parenting time during only the summer).
Erik testified he was “very active in [the children’s] full day schedule from the time they
were born,” and believed he had taken on 50-percent of the responsibilities related to the children.
But he later acknowledged he was the primary bread winner and Claire was the primary caretaker.
Erik asked the court to award joint physical custody, stating, “[A]ll I’ve ever wanted was equal, to
share our children. They’re our children.” His proposed parenting plan (exhibit 117) was for the
parties to have alternating weekly parenting time with exchanges occurring on Sundays at 7 p.m.,
and for the children to spend Wednesday evenings from 5 to 8 p.m. with the parent who is not
exercising parenting time that week.
Claire testified she was the primary caretaker of the parties’ three children during the
marriage. For the first 3 or 4 years of farming, Erik “would be gone very early in the morning and
I wouldn’t get to see him again until later in the day, much later in the day. Like I’d feed the kids
and put them to bed and wait to have dinner with him when he got home.” She said Erik did have
more flexibility and spent more time at home when it was not planting or harvest season, but he
still frequently left home early in the morning and came home after the children were in bed or
came home to kiss them good night. Claire is the one who organizes the children’s play dates. She
takes the children to their medical and dental appointments. She is also the one who attends to their
religious development by taking them to church services, Sunday school, and Wednesday evening
programs. She did acknowledge that she and Erik go to parent/teacher conferences together.
Claire stated she loves her children and they love her, and Erik loves the children and they
love him. She agreed it would be appropriate for the parties to share joint legal custody. However,
Claire did not believe joint physical custody, as requested by Erik, was in the children’s best
interests because “they have an established comfortable routine and environment” and she is “best
suited” to handle their needs. Furthermore, the children “have dealt with a lot of different
transitions over the past two years, and [trading living arrangements every week] would be
traumatic.” Her proposed parenting plan (exhibit 108) was for Erik to have parenting time every
other weekend from Friday at 3:30 p.m. to Sunday at 5 p.m., and Mondays from 3:30 to 7:30 p.m.
(to accommodate bedtime). She also proposed each parent receive two weeks of extended summer
parenting time.
Each party had witnesses testify on his or her behalf. Erik’s sister-in-law and a long-time
family friend testified Erik is “a great dad . . . a loving dad,” and is involved with his children.
Claire’s mother and two of Claire’s friends described Claire as a very involved mother, “extremely
competent,” and very loving. One of Claire’s friends testified she has been present at Claire’s home
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when the children have returned from parenting time with Erik; upon return the children are “out
of sorts,” “acting up,” and “off their schedule.”
Keeping the evidence and the court’s findings in mind, we now consider the legal
principles governing custody and parenting time matters. When deciding custody issues, the
court’s paramount concern is the child’s best interests. Citta v. Facka, 19 Neb. App. 736, 812
N.W.2d 917 (2012). The best interests inquiry has its foundation in both statutory and case law.
Neb. Rev. Stat. 43-2923(6) (Reissue 2016) provides that in determining custody and
parenting arrangements:
[T]he court shall consider the best interests of the minor child, which shall include, but not
be limited to, consideration of . . . :
(a) The relationship of the minor child to each parent prior to the commencement
of the action or any subsequent hearing;
(b) The desires and wishes of the minor child, if of an age of comprehension but
regardless of chronological age, when such desires and wishes are based on sound
reasoning;
(c) The general health, welfare, and social behavior of the minor child;
(d) Credible evidence of abuse inflicted on any family or household member . . . ;
and
(e) Credible evidence of child abuse or neglect or domestic intimate partner
abuse. . . .
Other pertinent factors include the moral fitness of the child’s parents, including sexual
conduct; respective environments offered by each parent; the age, sex, and health of the child and
parents; the effect on the child as a result of continuing or disrupting an existing relationship; the
attitude and stability of each parent’s character; and parental capacity to provide physical care and
satisfy educational needs of the child. Robb v. Robb, 268 Neb. 694, 687 N.W.2d 195 (2004).
Based on the evidence, the court’s findings, and the foregoing legal principles, we cannot
say the district court abused its discretion in awarding physical custody to Claire. Similarly, we
cannot say the district court abused its discretion in its award of parenting time to Erik. There is
one difference between the decree and Dr. Meidlinger’s recommendation: pursuant to the decree,
Erik gets parenting time a second weekday evening from 3:30 to 7:30 p.m. if Claire works a second
weekday evening; whereas, Dr. Meidlinger recommended that Erik have two evenings of parenting
time each week, and that one of those evenings be an overnight on the Thursday after his weekend
parenting time. The district court’s decision not to follow Dr. Meidlinger’s recommendation in
that regard was not an abuse of discretion.
Erik points out that the court’s parenting plan creates different midweek parenting time
allowances for him and Claire. The parenting plan provides that when Claire has midweek
parenting time, she is to have such time two evenings from 3:30 to 7:30 p.m. He “submits that at
a minimum, his mid-week [parenting time] should replicate [Claire’s] mid-week [parenting time].”
Brief for appellant at 26. However, Claire will only have midweek parenting time during the
limited times when Erik has the children for a full week, which will only happen for a short time
during the summer, a short time during the winter, and during an occasional holiday parenting
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time. Accordingly, we cannot say the district court abused its discretion when it awarded Erik a
second midweek evening of parenting time only if Claire works a second weekday evening.
(b) Right of First Refusal for Daycare
Erik argues the district court erred when it failed to award him the first right of refusal for
daycare. Claire points out that the district court did grant Erik a second evening of parenting time
if she is working, and that “[t]his is essentially a right of first refusal[.]” Brief for appellee at 35.
The decree and parenting plan are silent regarding the first right of refusal. However, the
issue was raised at the hearing on the parties’ motions for new trial or to alter or amend the
judgment. At the hearing, Claire’s counsel said she would not oppose a right of first refusal with
respect to daycare, but the children do not really go to daycare and she would not want to see either
party obligated to call the other for some short amount of time (e.g. when Claire takes the children
to the YMCA childcare center while she works out for an hour). The district court did not alter or
amend its judgment to include a right of first refusal. After our de novo review of the record, we
cannot say the district court abused its discretion in failing to award Erik the first right of refusal
for daycare.
4. CHILD SUPPORT AND ALIMONY
Erik claims the district court abused its discretion by failing to use Claire’s earning capacity
when determining child support and by failing to annualize his monthly child support obligation.
On cross-appeal, Claire assigns error to the district court for failing to average Erik’s income for
purposes of child support and alimony, and for capping Erik’s reimbursement for daycare and
medical expenses at $113 per month.
(a) Each Party’s Income
In general, child support payments should be set according to the Nebraska Child Support
Guidelines. Freeman v. Groskopf, 286 Neb. 713, 838 N.W.2d 300 (2013). The guidelines provide
that “[i]f applicable, earning capacity may be considered in lieu of a parent’s actual, present income
and may include factors such as work history, education, occupational skills, and job opportunities.
Earning capacity is not limited to wage-earning capacity, but includes moneys available from all
sources.” Freeman v. Groskopf, 286 Neb. at 721, 838 N.W.2d at 307. See, also, Neb. Ct. R. § 4-204
(rev. 2016). Use of earning capacity to calculate child support is useful “when it appears that the
parent is capable of earning more income than is presently being earned.” Freeman v. Groskopf,
286 Neb. at 721, 838 N.W.2d at 307.
(i) Claire’s Income
Erik argues the district court erred by failing to use Claire’s earning capacity when
determining child support. He points out that in the past Claire has earned as much as $65,000 per
year. And he “submits that [her] earning capacity is at least equal to or greater than his earning
capacity.” Brief for appellant at 27.
It is true Claire earned $65,000 per year when she worked for Club Assist, as their
marketing manager for North America. However, Claire became a stay-at-home mother in the
summer of 2009, in part because her position at Club Assist was being relocated to Los Angeles
and would have required her to move, and in part because it was more important for her to stay at
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home with their premature son. She did not work outside of the home again until shortly before
the divorce proceedings were filed, when she obtained a part-time job at the YMCA earning $11
per hour. She works every Monday night from 4 to 8 p.m., and had taken on Thursday evenings
from 5 to 8 p.m. when Erik had the children. She also made herself available to work weekends
when the children were with Erik; if scheduled to work weekends, the shifts are for 5 hours.
Since February 2016, she has also done some marketing consulting work for NorthStar
Battery; she works from home and the hours she works are project dependent. She has received
only one payment from NorthStar Battery; a total of $4,000 on April 30, which covered three
projects. At the time of trial, she was working on another project for NorthStar Battery, and had
accrued a total of 20 hours since May, at a rate of $40 per hour. Claire has an opportunity for a
full-time position at NorthStar Battery, but would have to relocate to Springfield, Missouri;
something she is not trying to do at this point.
Even though Claire does not work full-time, she stated she was a “physically able person,”
and agreed she was capable of earning $10.25 an hour at a full-time job (the approximate earning
capacity attributed to her in the temporary child support order). Claire was asked if she believed
she was earning as much as she could without incurring daycare expenses, and she replied, “Yes.”
If she has to get a full-time job, she would seek employment elsewhere because when she recently
looked online, there was nothing she “could apply [her] skill set to” in Holdrege or Kearney,
Nebraska; she “would imagine” that Lincoln, Nebraska, or Omaha, Nebraska, would have “more
corporate level” businesses that she could “fit into.”
In its calculation of child support in the decree, the court used an income of $11 per hour
for a 40-hour work week for Claire. The court stated “[a]lthough [she] occasionally has part-time
income which pays more than $11.00 per hour, it is not income that is available to her on a regular
or full-time basis and therefore, given her current circumstances, the Court finds her earning
capacity to be $11.00 per hour.” Accordingly, the district court determined Claire’s total income
was $1,907 per month, which equates to $22,884 per year. Having reviewed the record, we find
no abuse of discretion in the district court’s decision to use an income of $11 per hour for a 40-hour
work week for Claire.
(ii) Erik’s Income
Claire argues on cross-appeal that the district court erred by not averaging Erik’s income
for purposes of child support and alimony because “he had substantial fluctuations in income.”
Brief for appellee on cross-appeal at 40. She also points out that in Erik’s support calculation
(exhibit 129), he put his income at $4,177 per month.
Claire is correct that Erik represented his income as $4,177 per month in exhibit 129; this
equates to $50,124 per year. At trial, while offering this exhibit into evidence, Erik’s counsel said
“the Court can figure out how I attributed income to the parties.” However, we have not been able
to determine how Erik’s counsel came up with that income for Erik. We have tried averaging
income for periods of 4, 5, and 6 years, and cannot get an income anywhere close to $50,000 per
year. In fact, all of our calculations have resulted in an income lower than the $35,365 yearly
income used by the district court, as discussed below.
Because Claire did not work outside of the home after the summer of 2009, until late
summer 2016, income information from the parties’ tax returns from 2010 to 2015 would be
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wholly attributed to Erik. Tax returns received into evidence show that in 2010, the parties’ total
income (not adjusted gross income) was $32,229; this included $23,520 in net farm income, $2,360
in “rents received,” and $6,349 from other wages. In 2011, the parties’ total income was $32,304,
which consisted entirely of net farm income. In 2012, the parties’ total income was $141,278; this
included $118,927 in net farm income and $22,351 from other wages. In 2013, the parties’ total
income was $136,900; this included $97,779 in net farm income and $39,121 from other wages.
In 2014, there was a negative total income of $21,278; this included a net farm loss of $62,329,
$19,804 from other wages, $10,025 from the sale of business property (a pickup truck), and
$11,222 from an IRA distribution. In 2015, there was a negative total income of $149,547; this
included a net farm loss of $117,121, a carryforward net operating loss from farming operations
in 2014 of $42,183, $9,692 from other wages, and a $65 taxable “refunds, credits, or offsets of
state and local income taxes.”
As discussed previously in this opinion, Larson sent a letter dated August 1, 2016,
terminating the parties’ lease agreement. And Erik testified he had been notified he would not be
farming Larson’s land the next year. He discussed his other sources of income as well. Erik worked
as a mortgage broker in Holdrege; he started sometime in 2014, but in June 2015 the company did
not renew his contract because he was not meeting performance expectations. He was also a seed
dealer for NuTech, but was only a dealer to “get the discount,” and he never sold seed to anyone
but himself. At the time of trial, Erik was also doing seasonal work (spraying and harvesting) for
someone else making $17 per hour, but the work was “as needed” and not a set 40 hours per week.
In its calculation of child support in the decree, the court used an income of $17 per hour
for a 40-hour work week for Erik. The court stated it “is aware that [Erik’s] income at the time of
the temporary hearing was calculated to be much higher than the figure used by the Court.” But,
“[t]hat figure included farm income from profitable years[,]” and “[c]ircumstances have changed
and [Erik] indicated that he will be working as a farm laborer for $17.00 per hour.” Accordingly,
the district court determined Erik’s total income was $2,947 per month, which equates to $35,365
per year. Having reviewed the record, we find no abuse of discretion in the district court’s decision
to use an income of $17 per hour for a 40-hour work week for Erik.
(b) Annualizing Monthly Child Support Obligation
Erik was ordered to pay $686 per month in child support, but child support “shall abate by
50% during the months of June and January each year commencing in 2017.” Erik argues the
district court erred by failing to annualize the monthly child support obligation. He “submits[s]
that the trial court should annualize any child support abatement permitting future equal wage
withholding, if applicable, or equal monthly automatic electronic child support deposits.” Brief for
appellant at 27. While it would certainly make the automatic withholding more convenient to have
the same amount owed each month as Erik asserts, we cannot say the district court’s unwillingness
to annualize the June and January abatements constitutes an abuse of discretion by the court in this
regard. See Neb. Ct. R. § 4-210 (rev. 2008) (adjustment in child support may be made at discretion
of court when visitation or parenting time substantially exceeds alternating weekends and holidays
and 28 days or more in any 90-day period.)
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(c) Reimbursement for Daycare and Medical Expenses
The district court ordered Erik to be responsible for 59-percent of any employment or
education-related daycare expenses for the minor children. Erik was also ordered to pay 59-percent
of unreimbursed medical, dental, and optical expenses for the minor children after Claire pays the
first $480 per child per year. However, the decree states, “The total daycare and/or unreimbursed
medical expenses may not exceed $113.00 per month due to the poverty guidelines.”
Claire argues on cross-appeal that the district court erred when it capped Erik’s
reimbursement for daycare and medical expenses at $113 per month. She claims “the Court should
instead order simply that ‘Payment of medical expenses and day care expenses may not place Erik
below the minimum subsistence level in any given month,’” otherwise she would have the burden
of requesting a formal modification every time there is a change in the federal subsistence level.
Brief of appellee on cross-appeal at 43.
Neb. Ct. R. § 4-218 (rev. 2016) provides for a basic subsistence limitation and states in
relevant part, “A parent’s support, child care, and health care obligation shall not reduce his or her
net income below the minimum of $990 net monthly for one person, or the poverty guidelines
updated annually in the Federal Register[.]” Although the district court did not provide details on
how it arrived at the $113 per month cap on child care and medical expenses, the amount is
consistent with the figures contained on the child support worksheet. Erik’s monthly net income
is $2,247 after taxes and his own health insurance premium. If we subtract the cost for the
children’s health insurance premium ($458) and his child support obligation ($686), he is left with
income of $1,103 per month. Subtracting the 2016 basic subsistence amount of $990 leaves only
$113 available for child care and medical costs as set forth in § 4-218. There was certainly no error
in the district court’s decision to cap these costs in accordance with the restrictions contained in
§ 4-218.
Claire’s argument that she would have the burden of requesting a formal modification
every time there is a change in the federal subsistence level is curious, since historically, annual
adjustments to the basic subsistence level have increased. Thus, assuming no change in Erik’s
income, an increase in the basic subsistence level would further reduce the cap on Erik’s
contributions to child care and medical costs. Nevertheless, to avoid either party from having to
seek modification of this provision from year-to-year as the federal poverty basic subsistence level
changes, we modify the decree to add the following italicized language to the current language as
noted:
The total daycare and/or unreimbursed medical expenses may not exceed $113.00 per
month due to the poverty guidelines. This monthly cap shall be recalculated by the parties
annually if requested by either party, if, and after, the Nebraska Child Support Guidelines
are amended to reflect a change in the federal basic subsistence level set forth in Neb. Ct.
R. § 4-218.
(d) Alimony
Claire argues the circumstances in this case justify an award of alimony, and she is
requesting that support continue for two years, or until the parties’ youngest child enters
kindergarten in the fall of 2018.
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In considering alimony, a court should weigh 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 party seeking support to engage in gainful employment without interfering with
the interests of any minor children in the custody of each party. Brozek v. Brozek, 292 Neb. 681,
874 N.W.2d 17 (2016). See, also, Neb. Rev. Stat. § 42-365 (Reissue 2016). In addition to the
specific criteria listed in § 42-365, a court should consider the income and earning capacity of each
party and the general equities. Brozek v. Brozek, supra.The testimony at trial reveals Claire gave up her position with Club Assist, where she
earned $65,000 per year, to stay in the Holdrege area and to be a stay-at-home mother to the parties’
children. Claire testified she plans to stay in Holdrege if she has the “financial stability” to do so.
However, if she has to get a full-time job, she would seek employment elsewhere because when
she recently looked online, there was nothing she “could apply [her] skill set to” in Holdrege or
Kearney; she “would imagine” that Lincoln or Omaha would have “more corporate level”
businesses that she could “fit into.”
Claire testified that even with the temporary alimony and Erik’s payment of the mortgage,
she has had to get supplemental help from her parents. She needs alimony to be able to continue
to provide for the children and stay in the area. Exhibit 97 is a summary of Claire’s monthly living
expenses, and presumes that she will keep the house and pay the mortgage. According to the
exhibit, her monthly expenses total $4,806.54, which includes expenses such as $1,113.54 for the
mortgage, property taxes, and home owner’s insurance, $442 for “City of Holdrege” utilities, $125
for “source gas,” a $500 car payment, and $300 for attorney fees.
Claire anticipated an inheritance from her father, who had recently passed away in May
2016. She said, “it was explained to me that I would inherit somewhere in the realm of $400,000,”
but she did not know when the generation skipping trust would be funded. Later testimony
indicated the trust might be funded in a spendthrift trust, which would have restrictions on how it
could be used.
Erik’s income and employment history has been previously discussed in this opinion.
Exhibit 123 is an estimate of Erik’s monthly living expenses totaling $4,699.
Claire had been receiving temporary alimony of $1,250 per month since December 2014.
In its decree, the court stated, “The dilemma in this case is that although the Court may be inclined
to award [Claire] alimony for some additional period of time, [Erik] simply does not have the
income to sustain the award.” The court did later amend the decree to award Claire alimony of $1
per year for 3 years. After a de novo review of the record and considering the circumstances of
this case, we conclude the court’s award of nominal alimony was not an abuse of discretion.
5. HEALTH INSURANCE
Erik claims the district court abused its discretion by failing to order both parties to provide
health insurance for the minor children. The district court ordered only Erik to “provide, maintain
and pay for health insurance coverage on said minor children as long as it is available to him
through his employer, with the same deductible and the same coverage as that currently in force,”
until the children reach 19 years of age, are no longer eligible for coverage under Erik’s insurance
plan, or until further order of the Court, whichever occurs first. The court also ordered both parties
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to inform the Clerk of the District Court when they have obtained access to employer-related health
insurance.
At the time of trial, neither party had health insurance coverage available through their
respective employers. However, Erik was paying for an insurance policy with family coverage. He
argues the district court should have entered “a prospective order” requiring both parties to
provide, maintain, and pay for health insurance coverage on the minor children as long as it is
available to them through their respective employers. While Erik’s suggestion is reasonable, we
cannot say the district court abused its discretion by ordering Erik to be responsible for the
children’s health insurance coverage since at the time of trial Claire was only working part time
and such coverage was not available to her.
We note in his brief Erik argues but does not assign error to the sufficiency of the evidence
regarding Claire’s health insurance premium (for which she received a deduction on the child
support calculation). However, 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.
Waldron v. Roark, 298 Neb. 26, 902 N.W.2d 204 (2017). We therefore do not address this
argument.
6. ATTORNEY FEES
Claire argues on cross-appeal that the district court erred in failing to award her attorney
fees, “particularly if the decision with respect to the Home Federal advance is reversed.” Brief for
appellee on cross-appeal at 44.
In awarding such fees, a court should consider the nature of the case, the amount involved
in 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. Garza v. Garza, 288 Neb. 213, 846 N.W.2d
626 (2014).
Claire’s attorney’s affidavit in support of fees, with copies of bills attached, was admitted
into evidence. The affidavit shows that as of August 23, 2016, Claire had incurred $42,964.37 in
attorney fees and expenses (this does not include appraisal and valuation expert fees), with an
additional $8,850 in additional attorney fees anticipated for trial preparation and trial. Pursuant to
the temporary order in December 2014, Erik was ordered pay attorney fees of $3,500 and expert
witness fees of $5,000. Claire asked the court to award her some amount of additional attorney
fees.
As discussed previously in our opinion, Claire acknowledged at trial that on November 19,
2015, she withdrew $20,000 from a Home Federal commercial checking account, and that a check
was issued by the bank to her attorney’s office. In the decree, the district court noted Claire’s use
of the Home Federal funds to pay her attorney, and cited that as one reason Claire would not
receive “additional attorney’s fees.” We find no abuse of discretion in the district court’s decision
to not award attorney fees.
VI. CONCLUSION
We reverse the portion of the decree which awards the option to purchase to Erik, and
remand with directions to award the option to purchase to both parties and to reconfigure the final
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division of marital assets, liabilities, and equalization as discussed herein. We also reverse and
vacate all portions (findings and conclusions) of the decree addressing the motivations for, and the
validity of, Larson’s termination letter, as well as those portions of the decree addressing the
enforceability of the Agreement. We modify the language capping Erik’s contributions to child
care and medical costs as set forth herein. In all other respects, we affirm the district court’s decree.
AFFIRMED IN PART, AFFIRMED IN PART AS MODIFIED,
REVERSED AND REMANDED IN PART WITH DIRECTIONS,
AND IN PART REVERSED AND VACATED.
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