Bock v. Dalbey

19 Neb.App. 210

809 N.W.2d 785

Matthew John BOCK, appellee,

v.Jennifer Lynn DALBEY, appellant.

No. A–10–973.

Court of Appeals of Nebraska.

Sept. 27, 2011.

Syllabus by the Court

1. Divorce: Property Division: Appeal and Error. In an action for the dissolution of marriage, an appellate court reviews de novo on the record the trial court's determination of property division; this determination, however, is initially entrusted to the trial court's discretion and will normally be affirmed absent an abuse of that discretion.

2. Judgments: Words and Phrases. 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.

3. Divorce: Property Division. If premarital property can be identified, it is typically set off to the spouse who brought the property into the marriage.

4. Constitutional Law: Statutes. Under the Supremacy Clause of the U.S. Constitution, state law that conflicts with federal law is invalid.

5. Divorce: States. The whole subject of domestic relations is generally considered a state law matter outside federal jurisdiction.

6. Divorce: Taxation. It is within the discretion of the trial court in a dissolution of marriage proceeding to order the parties to file a joint income tax return.

Amy Sherman Geren for appellant.

Brent M. Kuhn, of Harris Kuhn Law Firm, L.L.P., Omaha, for appellee.

IRWIN, CASSEL, and PIRTLE, Judges.

CASSEL, Judge.

INTRODUCTION

The district court dissolved the marriage of Matthew John Bock to Jennifer Lynn Dalbey, divided the marital estate, and ordered the parties to file joint income tax returns for 2008 and 2009. We find no abuse of discretion in the court's determination and division of the marital estate. We further conclude that federal tax law does not preclude a trial court from exercising its discretion to order parties to file a joint income tax return. Accordingly, we affirm.

BACKGROUND

Prior to the parties' marriage in June 2006, each party owned a home. After marriage, Dalbey moved into Bock's home and began renting out her house after unsuccessfully trying to sell it. The parties subsequently purchased a house in 2009. Shortly thereafter, on July 6, Bock filed a complaint to dissolve the marriage.

In January 2009, the parties signed a contract for the purchase of a house on South 185th Circle in Omaha, Nebraska, and they closed on the house in late April. The $289,000 purchase price was “a hundred percent financed” by a first mortgage of approximately $235,000 and a second mortgage of approximately $55,000. As of November 2009, the balance of the first mortgage was $230,227.41.

Bock also acquired a $130,000 line of credit to help pay for renovations on the parties' house. Soon after moving in, he used the line of credit to pay off the second mortgage. The line of credit was also used to make $40,000 to $45,000 in repairs and to pay other debts of Bock: approximately $2,300 was used to make a payment on Bock's furniture store account, $8,466 was applied to Bock's credit card, and $28,447.72 was applied to the line of credit Bock had secured with his premarital home and used to pay for living expenses. To Dalbey's knowledge, Bock did not use the line of credit to pay any of her debt. The balance on the line of credit was $118,778.06 on July 7, 2009; $128,790.96 as of November 27; and nearly $129,000 at the time of trial.

Bock requested to be awarded the house on South 185th Circle and its corresponding debt. He believed that the house was worth $335,000 at the time of trial. By that time, he had spent $333,076.83 on the purchase price, closing costs, and repairs. He believed that the debt exceeded the value of the house by $30,000. Bock testified that when he moved into the house, it had an assessed value of approximately $487,000; that he protested the valuation; and that it was reduced to $385,000. Bock protested the $385,000 assessment and asked that it be valued at $335,000. But in a personal financial statement signed by Bock on May 6, 2009, he valued the home at $525,000. A bank's May 28 loan memorandum for Bock's equity line of credit request contained a collateral analysis on the property in which the bank determined that the net value of the property for purposes of lending money against it was $487,000. The memorandum lists the valuation source as “Tax Assessed.” A licensed real estate appraiser valued the property at $335,000 on August 6, using a comparable sales approach. The appraiser noted that the renovation was incomplete and testified that he was unable to find any houses in the neighborhood that had sold which were in worse condition than the subject property.

On August 6, 2010, the district court entered a decree dissolving the marriage. The court valued the house on South 185th Circle at $370,000 and determined that the equity in the house was $19,447.63. With regard to the parties' premarital homes, the court stated that it was “unable to find that either of these properties have equity that experienced a gain during the term of the parties' marriage.” In order to equalize the marital estate, the court assigned all the marital debts to Bock. The court ordered the parties to file joint tax returns for 2008 and 2009.

Dalbey timely appeals. Pursuant to authority granted to this court under Neb. Ct. R.App. P. § 2–111(B)(1) (rev.2008), this case was ordered submitted without oral argument.

ASSIGNMENTS OF ERROR

Dalbey alleges that the district court erred in (1) entering judgment contrary to the evidence and the law, (2) determining the marital estate, (3) valuing and dividing the marital estate, and (4) ordering the parties to file joint tax returns for 2008 and 2009.

STANDARD OF REVIEW

In an action for the dissolution of marriage, an appellate court reviews de novo on the record the trial court's determination of property division; this determination, however, is initially entrusted to the trial court's discretion and will normally be affirmed absent an abuse of that discretion. See Reed v. Reed, 277 Neb. 391, 763 N.W.2d 686 (2009).

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. Davis v. Davis, 275 Neb. 944, 750 N.W.2d 696 (2008).

ANALYSIS

Premarital Homes.

Dalbey argues that the court erred in determining that the homes the parties owned prior to the marriage were nonmarital assets. Specifically, she claims that Bock failed to provide proof of his home's value at the time of marriage or at the time the parties separated.

Bock testified that he purchased his premarital home for $182,000, using a first and second mortgage totaling $160,000 to $165,000. He also took out a line of credit secured with the home, and the balance at the time of trial was around $20,000 to $25,000. As of July 8, 2009, the balance of the first mortgage on this house was $134,451.44 and the balance of the second mortgage was $20,889.51. During the marriage, Bock made minor improvements costing $4,000 to $5,000 to the home. The improvements included new carpeting in the basement and two rooms, drywall work in the basement, and a kitchen countertop replacement. The money for the improvements came out of Bock's individual checking account. In a personal financial statement signed by Bock on May 6, 2009, he valued the home at $195,000. Dalbey subtracted from that figure the approximately $155,340 of mortgage debt and asserted that there was $39,660 in marital equity in the home.

Dalbey believed that the value of her premarital home at the time of marriage was $117,700. She had two mortgages on the home which exceeded its value by $14,634.48. She tried to sell her house prior to the marriage without success, so she began renting it after the marriage. The rental price was about $50 less than the mortgage payment. Bock testified that during the marriage, he paid some of the expenses of Dalbey's premarital home, which amounted to $9,732.31. At the time of trial, Dalbey believed that the value of her home was $132,500 and that she had $10,000 in equity in the property.

The law is that if premarital property can be identified, it is typically set off to the spouse who brought the property into the marriage. Charron v. Charron, 16 Neb.App. 724, 751 N.W.2d 645 (2008). Each party's premarital house still exists, can easily be identified, and should be set off to the party who owned it prior to marriage. Although marital funds were used to make mortgage payments and repairs on each house during the parties' 3–year marriage, we cannot say that the district court abused its discretion in finding that neither property had equity that experienced a gain during the marriage.

Marital House.

Dalbey next argues that the court erred in valuing and determining the equity in the house the parties purchased during the marriage. She points out that the home was in disrepair at the time of the appraisal and otherwise would likely have been appraised higher.

The court found that the house's fair market value was $370,000 and that it had secured debt of $359,018.37—which appears to be the combination of the debts owed in November 2009 on the first mortgage and the line of credit, which were $230,227.41 and $128,790.96, respectively. The court reduced that amount by $8,466—the amount of the line of credit that Bock used to make a payment on his credit card. Thus, the court determined that the house's equity was $19,447.63. Dalbey asserts that the court should have valued the house at $487,000 with debt of $319,130. Dalbey also quarrels about Bock's use of the $130,000 line of credit. Bock applied $28,447.72 of that line of credit to the line of credit secured with his premarital home, but Bock testified that that money was typically used for living expenses.

Here, the court valued the property at an amount...