Opinion
No. A-11-062
02-07-2012
LORI LYNN TENBENSEL, NOW KNOWN AS LORI LYNN HEYEN, APPELLANT, v. KENNETH ROY TENBENSEL, APPELLEE.
Patricia E. Dodson, of Dodson & Dodson, for appellant. Jeffrey S. Armour, of Lane & Williams, P.C., L.L.O., for appellee.
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
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).
Appeal from the District Court for Furnas County: JAMES E. DOYLE IV, Judge. Affirmed.
Patricia E. Dodson, of Dodson & Dodson, for appellant.
Jeffrey S. Armour, of Lane & Williams, P.C., L.L.O., for appellee.
IRWIN, MOORE, and CASSEL, Judges.
MOORE, Judge.
INTRODUCTION
The district court for Furnas County entered a decree dissolving the marriage of Kenneth Roy tenBensel (Ken) and Lori Lynn tenBensel, now known as Lori Lynn Heyen. Lori has appealed to this court, assigning error to the district court's determination and division of the marital estate. We conclude that the trial court did not abuse its discretion in dividing the property between the parties, and we affirm.
BACKGROUND
Lori and Ken were married on March 23, 1996. No children were born of the marriage. After they married, the couple lived in Lori's premarital home for 2 months prior to selling the house and moving into an apartment owned by Roy tenBensel, Ken's father, in May 1996. Approximately 8 to 9 months later, the parties moved into a farmhouse also owned by Roy, Ken's childhood home, referred to as the "Pywell Property." The Pywell Property consists of a house and a barn, approximately 96 acres of cropland, and 60 acres of pasture.
The parties paid Roy rent until 1999, when Roy deeded the property to Ken. Neither Ken nor Lori paid Roy for the interest in the property. Roy testified that he deeded the property because of "love and affection" as a gift to Ken. Lori's name was never included on the title to the Pywell Property.
When they moved into the home, Lori and Ken removed Roy's personal property from the home, repaired or contracted repair to the plaster walls, painted the walls, and installed an air conditioner. Insurance also paid for a new roof for the house. Ken testified that there was a hot tub spa installed on the deck of the house after the marriage, but prior to separation, which hot tub cost approximately $7,000. There was no evidence of any other significant improvements or additions to the Pywell Property.
Ken is a full-time farmer with 2 years of college education from the University of Nebraska-Lincoln. Ken worked for the family farming corporation, H.J. tenBensel & Sons, and farmed his own land. Ken was paid by the corporation once per year. Ken's income from the corporation and from his personal farming operations were deposited into Ken's farming account.
Ken's personal farming operations had net operating losses for 5 of the 8 tax years in evidence, even when depreciation was added back. During the relevant time period, the most Ken ever earned from his personal farming operation was $11,731 after depreciation was added back to his net income. The record shows that Ken's annual income from the corporation ranged from $5,414 to $10,828 during the marriage. Ken testified that there was less work for him to do for the corporation during the drought which lasted 6 to 7 years of the marriage. During that time, the corporation focused more on its cattle operations, and Ken did not receive any proceeds from the sale of the corporation's calves. Similarly, the corporation showed a loss 3 of the past 11 years according to tax returns from 1997 through 2007. During the last 5 years of the marriage, the corporation did not earn more than $23,000 per year, and its highest income of $54,000 was earned in 1997.
Ken's farming operation required him to rent equipment from the corporation. Ken would use proceeds from his personal crop sales to pay back the corporation for the rent expense, which expense item also included payments for fertilizer and fuel. There was no written rental or lease agreement between Ken and the corporation. Roy and Ken testified that the amount of rent was determined at the end of the year depending on the value of the crop and how many hours Ken used the equipment. Lori testified that Ken was taking the income from his personal farming operation and putting it into the corporation to "help support his dad." Lori and Ken filed joint tax returns each year. Lori never voiced concern about unreasonable or extraordinarily high expenses not supported by the rent arrangement.
During the course of the marriage, Roy gradually transferred 200 shares of the corporation to Ken. No monetary payments or transfers of property were made by Ken for these shares. Ken testified the shares were gifted to him to reduce Roy's estate. Roy testified he would give Ken the number of shares each year that he could gift without paying taxes. Ken and Roy are the corporation's sole shareholders, and Roy remains the majority shareholder and decisionmaker for the company. At the time of trial, Roy was 88 years old.
Prior to the marriage, Ken and his brother bought a piece of property named the "Hog Farm." The Hog Farm consists of 140 acres of dryland farm ground and 280 acres of pasture. The mortgage owed on this property was paid off during the course of the marriage. Lori provided documentation showing payments she made from her income toward the Hog Farm debt. Other than fencing maintenance, there was no evidence of any significant improvements made to this property during the marriage. Ken never added Lori's name to the title on this property.
In 1992, Roy granted Ken and his brother each a one-half interest in the property referred to as the "Lyons Quarter." The Lyons Quarter consists of 160 acres of dryland farm ground and grassland. Roy testified that this transfer was made as a gift. Ken confirmed that there were no discussions, promises, or agreements with Roy to provide labor in exchange for the property. During the marriage, no structures were added or improvements made to the property and Lori's name was never added to the title.
In July 2005, Roy purchased the "Wellfleet Property." Lori testified that she and Ken spent 2 to 3 months "hauling junk and garbage" off of the property. However, because Lori worked full time, her involvement was limited to the weekends. The house and pasture were then rented out for $500 per month. In December 2005, Roy transferred a one-half interest to Ken as a gift. Ken did not pay Roy any money in return.
Throughout the marriage, Lori maintained full-time employment and her income was used for the parties' living expenses. During the busy seasons, she often worked overtime on the weekends. Through her employment, Lori obtained health and dental insurance for the parties and also participated in a mandatory retirement plan and contributed to a voluntary 401K plan. Lori testified that her earnings during the marriage totaled $309,705.
Lori has a bachelor's degree in accounting and provided bookkeeping services for Ken's personal farming operations, the corporation, and Roy's personal accounts. Lori's duties included classifying and recording income and expenses. Lori was not paid monetarily for her services by the corporation, but she did receive proceeds from the sale of calves as compensation. This compensation averaged $1,200 per year.
Lori testified that she helped provide labor on all of Ken's farming operations, as well as on the corporation's land. She testified that, among other things, she helped "work" the field, irrigate, load and set pipe, check oil in the irrigation engine, run the combine, and feed cattle.
Roy testified that Lori mostly worked outside of the farm and was "always gone." Further, Roy disputed Lori's testimony that she operated the tractor. Roy acknowledged that once a year Lori assisted with branding the calves by slipping the bar behind the calf in the chute. According to Roy, Lori assisted with moving the cattle an average of twice a year which would take 2 to 3 hours. She may have also helped fix or erect fence four times over the course of the marriage. Finally, she may have helped load pipe up until 1997, when they stopped irrigating. Ken summarized Lori's work as "incidental and secondary" to the farming operations.
The parties separated on August 14, 2006. On August 25, Lori filed for divorce in the district court for Furnas County. The trial took place over 6 days in 2009 and 2010, with delays occasioned by illness of counsel and a brief attempt at reconciliation. The focal points of the trial were Ken's personal farming operations, the corporation's farming operations, and what of their value, if any, Lori was entitled to as part of the marital estate. Other than the real property, Lori did not submit evidence of any other substantial assets acquired by Ken. Appraisals of Ken's real estate were received in evidence, showing a total value for the four properties at $594,000. Lori did not separately appraise the value of the corporate shares; however, on the property statement, Lori valued the stock at $1,772.51 per share based on the corporation's 1996 through 2007 tax returns.
On October 6, 2010, the district court entered its decree of dissolution of marriage. The district court determined that the corporate stock and real estate given to Ken by Roy were true gifts and were not intended as, nor made as, compensation for any service, labor, or work performed by Ken. These assets were therefore treated as Ken's separate, nonmarital property. The district court also found that Ken's purchase of the Lyons Quarter and the Hog Farm occurred prior to the parties' marriage, and these parcels were awarded to Ken as his separate, nonmarital property. However, the court found that the debt on these properties was paid off during the marriage. The court included $35,048.41 in the marital estate based upon Lori's documented payments on Ken's real estate from her separate income. However, the district court found that Lori provided insufficient evidence to ascertain the value of her other contributions, their significance to the overall farming operations, or the value of the corporate stock. Finally, the district court declined to order a Grace award to Lori and found the facts and rationale in Grace distinguishable from those presented at trial. See Grace v. Grace, 221 Neb. 695, 622 N.W.2d 410 (2001). The district court valued the total net marital estate at $98,315. The net marital estate awarded to Lori and Ken totaled $20,599 and $77,717, respectively. The district court ordered a "property settlement payment" from Ken to Lori in the amount of $39,000.
Lori filed a motion for new trial or, in the alternative, a motion to amend or alter the decree of dissolution of marriage. The district court entered an order altering and amending the decree of dissolution on December 22, 2010. On the subject of Lori's request for income-producing property, such as farmland or corporate stock, the district court did not make any changes to its findings in the original order. Likewise, the district court declined to amend or alter the decree with respect to Lori's financial contributions to the reduction of Ken's debt on his properties, beyond that which the court had already included in the marital estate. Finally, the district court did not amend or alter the decree with respect to Lori's claims concerning her contribution to the value of the corporate stock or to the family and corporate farming operations. The district court determined the evidence supported its finding that the corporate stock was gifted to Ken by Roy as part of Roy's estate plan. Additionally, the district court did not believe that Lori established that her contributions directly or indirectly contributed to the value of the corporate stock even if her valuation of it was correct.
With respect to Lori's request for a Grace award, the district court stated:
A reexamination of the evidence convinces the court a Grace award is not warranted. While the court can do the mathematical calculations to determine Lori's salary over the ten years the parties lived together, to estimate tax rates, to estimate a monthly budget for the parties' monthly living expenses, to make other necessary estimates to derive a likely amount of disposable income that could have been amassed during such time, and to reduce such amount by the value of Lori's contribution to the payment of debts on the hog farm properties, such an exercise would rely too heavily upon speculation and guesswork.
However, the district court was persuaded by the evidence to alter its finding concerning the division of the net marital estate between Lori and Ken and increased the "property settlement payment" in its amended order to require Ken to pay Lori $43,300 to "more accurately reflect the monetary and nonmonetary contributions made by Lori, which were greater than those of Kenneth." Lori then appealed to this court.
ASSIGNMENT OF ERROR
Lori assigns, as consolidated, reordered, and restated, that the district court erred in (1) failing to include corporate stock and land owned by the corporation in the marital estate and (2) failing to give her a Grace award.
We note that several of Lori's assignments of error are not properly before this court for disposition. First, most of the "errors" were not separately identified, but, rather, they were included in a discussion format which made them difficult to ascertain. Neb. Ct. R. App. P. § 2-109(D)(1)(e) (rev. 2008) requires that briefs include a separate, concise statement of each error a party contends was made by the trial court and that each assignment of error be separately numbered and paragraphed. The function of assignments of error is to direct the attention of the reviewing court to precisely what error was allegedly committed by the lower court and to advise the nonappealing party of specific issues on appeal. In re Estate of Soule, 248 Neb. 878, 540 N.W.2d 118 (1995).
Second, Lori also assigned error to several issues which were not addressed in the argument portion of her brief. Consideration of alleged errors in this court is limited to those errors that are both assigned and discussed in the argument section of the brief on appeal. See § 2-109(D)(1)(e). To be considered by an appellate court, an alleged error must be both specifically assigned and specifically argued in the brief of the party assigning the error. See State v. McGhee, 280 Neb. 558, 787 N.W.2d 700 (2010). We consider, therefore, only those assignments of error which are properly assigned and argued.
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; this standard of review applies to the trial court's determinations regarding division of property. Gangwish v. Gangwish, 267 Neb. 901, 678 N.W.2d 503 (2004).
An abuse of discretion exists when a judge, within the effective limits of authorized judicial power, elects to act or refrains from acting, and the selected option results in a decision which is untenable and unfairly deprives a litigant of a substantial right or a just result in matters submitted for disposition through the judicial system. Bauerle v. Bauerle, 263 Neb. 881, 644 N.W.2d 128 (2002); Heald v. Heald, 259 Neb. 604, 611 N.W.2d 598 (2000).
When evidence is in conflict, an appellate court considers, and may give weight to, the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Millatmal v. Millatmal, 272 Neb. 452, 723 N.W.2d 79 (2006).
ANALYSIS
In a divorce action, the purpose of a property division is to distribute the marital assets equitably between the parties. Tyma v. Tyma, 263 Neb. 873, 644 N.W.2d 139 (2002); Neb. Rev. Stat. § 42-365 (Reissue 2008). Equitable property division under § 42-365 is a three-step process. The first step is to classify the parties' property as marital or nonmarital. The second step is to value the marital assets and 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 § 42-365. Tyma, supra. The ultimate test in determining the appropriateness of the division of property is fairness and reasonableness as determined by the facts of each case. Id.; Heald, supra.
Corporate Land and Stock.
Lori urges this court to find, pursuant to equitable principles, that the corporation is an alter ego of Ken and that assets titled in the corporation's name should be considered in dividing the marital estate. Furthermore, Lori requests an award of property or the value of the corporate shares to equitably account for her contributions to the farming entities.
In an action for dissolution of marriage, a court may divide property between the parties in accordance with the equities of the situation, irrespective of how legal title is held. Medlock v. Medlock, 263 Neb. 666, 642 N.W.2d 113 (2002). A corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears. Id. However, in equity, the corporate entity may be disregarded and held to be the mere alter ego of a shareholder or shareholders in various circumstances where necessary to prevent fraud or other injustice. Id.
When a corporation is or becomes the mere alter ego, or business conduit, of a person, it may be disregarded. Id. Among the factors which are relevant in determining to disregard the corporate entity are diversion by the shareholder or shareholders of corporate funds or assets to their own or improper uses and the fact that the corporation is a mere facade for the personal dealings of the shareholder and that the operations of the corporation are carried on by the shareholder in disregard of the corporate entity. Id. When applying these equitable principles to the dissolution of marriage and the division of the marital estate, it has generally been concluded that the assets of a spouse's corporate alter ego may be considered to be, and distributed as, part of the marital estate. Id.
Lori compares the facts of this case to those in Medlock, supra. In Medlock, the husband made extensive personal use of corporate funds and assets, and he carried on personal dealings in the name of the corporation. The record showed a nearly complete unity of interest between the husband and the corporation. The husband regularly purchased vehicles, travel, and other goods and services in the corporate name for his family's personal use. Additionally, the court found that the Medlocks did not acquire personal property in their own names because all of the property that would ordinarily have been acquired over the 18-year marriage was instead acquired under the corporation's name. In that case, the Nebraska Supreme Court concluded that the corporation was the husband's alter ego and that its assets were included in the marital estate.
Similarly, Lori also compares this case to Gangwish v. Gangwish, 267 Neb. 901, 678 N.W.2d 503 (2004). In Gangwish, the Nebraska Supreme Court pierced the corporate veil to determine the husband's income for child support purposes. The corporation in Gangwish owned the parties' home and paid for utilities, real estate taxes, homeowner's insurance, yard care, and pool maintenance. The corporation also purchased the family's groceries and a number of household furnishings. After the divorce, the husband was the sole owner of the corporation's shares. Further, evidence was submitted to show that the husband had the ability to earn considerably more income than what he received as "salary" from the corporation.
The facts supporting the decision to disregard the corporate entity in the Medlock and Gangwish cases are simply not present in this case. Ken earned a salary from the corporation, albeit a meager one due to the lack of significant income by the corporation. The corporation did not pay for the parties' living expenses. Ken did not carry on personal dealings in the name of the corporation. While Ken was able to use corporate equipment and take advantage of the bulk buying power of the corporation for things like fertilizer and fuel, Ken paid the corporation back for these items as rent expense from the profits of his personal farming operation. Additionally, Roy is the majority shareholder in the corporation, not Ken.
There is no authority which would allow us to make the leap required to apply the alter ego theory under these circumstances. Therefore, we decline to pierce the corporate veil in order to assign Lori an additional award of property or the value of the corporate stock.
Further, our de novo review of the record leads us to conclude that the district court did not abuse its discretion in awarding Ken the corporate stock and his real estate as his separate, nonmarital property. The district court determined that Ken's shares of corporate stock and his interests in the Lyons Quarter, Pywell Property, and Wellfleet Property were true gifts given by Roy with no expectation of compensation or future aid in return. Property acquired by inheritance or gift during the marriage ordinarily is set off to the individual receiving the inheritance or gift and is not considered part of the marital estate. Van Newkirk v. Van Newkirk, 212 Neb. 730, 352 N.W.2d 832 (1982). An exception to this rule is where both spouses have contributed to the improvement or operation of the property or the spouse not receiving the inheritance or gift has significantly cared for the property during the marriage. Id.
In this case, Lori failed to adduce sufficient evidence that she improved or significantly cared for Ken's separate property. Unlike her documented financial contributions to the reduction of debt on Ken's real estate, which the district court accounted for, Lori did not provide a "sufficiently sound evidentiary foundation" from which the district court could ascertain the value of her other contributions or their significance. Further, the district court found Lori's claims "blunted" by testimony from Ken and Roy that Lori's labor contributions were not significant, could not be traced to any assets, and could not be valued.
When evidence is in conflict, an appellate court considers, and may give weight to, the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Millatmal v. Millatmal, 272 Neb. 452, 723 N.W.2d 79 (2006). The record supports the district court's findings, and we find no abuse of discretion. This assignment of error is without merit. Grace Award.
Lori argues that the district court should have given her a Grace award as first set out in Grace v. Grace, 221 Neb. 695, 380 N.W.2d 280 (1986). We discussed the concept of a Grace award at length in our decision in Walker v. Walker, 9 Neb. App. 834, 622 N.W.2d 410 (2001). In Walker, we described a Grace award as "a device to fairly and reasonably divide marital estates where the prime asset in contention is one spouse's gifted or inherited stock or property in a family agriculture organization." 9 Neb. App. at 843, 622 N.W.2d at 417. Further, in Medlock v. Medlock, 263 Neb. 666, 679, 642 N.W.2d 113, 125-26 (2002), the Nebraska Supreme Court used the following description of its decision in Grace, supra: "[W]e ordered a cash award as compensation for the inadequacy of the marital estate."
We further explained this concept in Charron v. Charron, 16 Neb. App. 724, 730, 751 N.W.2d 645, 650 (2008):
The inadequacy of the marital estate in cases of this nature involves a typical factual pattern where the wife devotes herself to running the household and caring for the children and where the husband's labors are devoted to a family farming or ranching corporation in which he owns stock, usually owned prior to the marriage or gifted solely to him during the marriage. Hence, under our cases, the stock is treated as the husband's separate property. Additionally, in the typical situation where the issue arises, the husband receives a rather nominal cash salary in exchange for his labor devoted to his family's farm or ranch but also receives such things as housing, utilities, vehicles, fuel, beef, use of the corporation's land for his private livestock herd, et cetera. As a result of the low cash earnings of the husband, the couple often has an inconsequential marital estate. This typical factual backdrop helps explain the Supreme Court's reference in Medlock, supra, to a Grace award as compensation for the inadequacy of the marital estate.
Here, the district court found the facts and rationale in Grace distinguishable and thus denied Lori's request for a Grace award. We review the district court's denial of a Grace award de novo on the record for an abuse of discretion. Unlike the description set forth in Medlock and Charron, Ken and Lori did not live off of the corporation's assistance. There were no children of the marriage, and Lori worked full time outside of the home. Ken and Lori lived modestly and were not provided with a higher standard of living at the hands of the corporation. Although Ken and Lori did not acquire many assets during their marriage, it was not the result of their assets being titled under the corporation's name. Finally, the corporation in this case was much smaller than the $1.5 million corporation in Grace, supra. Here, the corporation did not regularly earn a profit during Ken and Lori's marriage.
Based on the facts presented to the district court, we find no abuse of discretion in its decision declining a Grace award.
CONCLUSION
The district court did not abuse its discretion in its determination and division of the marital estate. We affirm the decree of dissolution in all respects.
AFFIRMED.