Meints v. Meints

• Citation: 258 Neb. 1017,608 N.W.2d 564
• Decision Date: 17 March 2000
• Docket Number: No. S-98-278.,S-98-278.
• Parties: Kathryn E. MEINTS, appellee, v. Donald F. MEINTS, appellant.
• Court: Supreme Court of Nebraska

608 N.W.2d 564

258 Neb. 1017

Kathryn E. MEINTS, appellee, v. Donald F. MEINTS, appellant.

No. S-98-278.

Supreme Court of Nebraska.

March 17, 2000.

Lynne R. Fritz, of Butler, Galter & O'Brien Law Firm, Lincoln, for appellant.

William J. Panec, Fairbury, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

GERRARD, J.

Donald F. Meints (husband) appeals from the dissolution decree rendered by the district court, which dissolved his marriage with Kathryn E. Meints (wife). The husband contends that the district court abused its discretion in dividing the marital estate, arguing that the distribution was not fair and equitable. The primary issue on appeal is whether an income tax liability incurred by one of the parties, when both parties filed separate tax returns during the marriage, should be treated as a marital debt. The district court did not treat the tax liability incurred by the husband as a marital debt and proceeded to divide the remaining marital estate accordingly. Because we hold that income tax liabilities incurred during the marriage are one of the costs of producing marital income, and thus should be treated as a marital debt, we reverse in part the judgment of the district court and remand the cause with directions.

FACTUAL AND PROCEDURAL BACKGROUND

The Meintses were married on May 13, 1972. The evidence relevant to this appeal reveals that at the time of trial, the wife had been employed by the State of Nebraska for over 10 years, working at the Beatrice State Developmental Center, where she earned an estimated gross monthly income of $1,427.79. Over her 10 years of employment, she had accumulated $27,208.94 of retirement benefits in the Nebraska Public Employees Retirement System. The husband worked at Stan's Electronics, earning approximately $1,760 per month and had no retirement savings. The husband supplemented his income by painting and had earned between $400 and $2,000 annually for the 3 years prior to trial.

During their marriage, the couple purchased a home in 1973 for $12,500, as joint tenants. The home was valued at $23,675 and had an outstanding mortgage of approximately $1,475 at the time of the trial.

The husband testified that he was self-employed in 1990 and that from 1991 through May 1995, he worked for Tieman Construction. Between 1990 and 1996, the husband incurred a federal income tax liability of $19,162.31, plus an additional $11,235.36 in statutory penalties for late filing, for a total Internal Revenue Service (IRS) liability amounting to $30,397.67. During those years, the husband and the wife filed separate income tax returns. The husband testified that he spent the funds that he failed to withhold from his income for IRS tax purposes on family expenses, and the wife did not dispute this claim. As a result of the IRS liability, the husband's wages were garnished in the amount of $650 a month. The wife also incurred debt during the marriage, and in 1997, she filed a chapter 7 bankruptcy, which discharged some of her debts.

The district court entered a decree of dissolution on February 4, 1998, which was later modified by a nunc pro tunc order dated February 27. As modified, the decree awarded the wife custody of the minor child of the parties and divided the marital estate as follows:

Assets Wife Husband Real estate $20,000.00 Marital property 753.00 Wife's retirement benefits 27,208.94 Other marital property $ 4,650.00 __________ __________ Total value of assets awarded $47,961.94 $ 4,650.00 Liabilities GMAC debt 3,578.00 Bank of America debt 1,475.00 Attorney fees (bankruptcy) 350.00 IRS past taxes (wife) 120.00 IRS liability (husband) 30,398.00 Spady-Runcie debt 1,600.00 MBNA credit card debt 3,000.00 Total liabilities $ 5,523.00 $34,998.00 __________ __________ Net value of property received $42,438.94 ($30,348.00)

The district court calculated the marital estate by subtracting the husband's total of $30,348 from the wife's total of $42,438.94 and rounded the $12,090.94 result to $12,091. The court determined that the husband was entitled to one-half thereof or $6,046 and entered a Qualified Domestic Relations Order (QDRO). Pursuant to the QDRO, the wife was required to pay $6,046 of her retirement benefits to the husband. Thus, the final disposition of the marital estate was as follows:

Wife Husband House $20,000.00 Personal property $ 4,650.00 Personal property 753.00 QDRO, retirement __________ __________ Retirement benefits 21,162.94 benefits 6,046.00 Total $41,915.94 $10,696.00

The wife received $41,915.94 in assets and was responsible for $5,523 of debt, whereas the husband received $10,696 in assets and was responsible for $34,998 of debt. Neither party was awarded alimony.

The husband filed a motion for new trial on February 13, 1998. At the hearing on the motion for new trial, the husband's counsel questioned the court's division of the property and debts. The court explained its rationale in dividing the marital estate as follows:

You have to start with the basic proposition that if you add up all of the assets of both parties and you subtract all of the debts of both parties, you have a marital estate of something over $12,000. Now, that's your starting point. Now, the main question now comes, "How should assets and debts be allocated?"

Now, it is suggested here that if Mr. Meints is going to have to pay all of that IRS debt, that he ought get a big share of the petitioner's QDRO, namely, almost twice as much as he suggests she ought to get. That isn't how you make these divisions. Debts are assigned basically to the person who incurred them and who has the responsibility of paying them. Of course, the big item here is the IRS indebtedness that he incurred on his separate return over some six years when he didn't pay any income tax.

Now, the record reflects that during those years each party was filing a separate return. So these are attributable to him and him alone. It is his responsibility and his failure to pay any tax when he knew or should have been [sic] known that he had it owed; that results in this deficiency. I don't see any equitable basis to say that she has to pay any portion of that.

The husband's motion for new trial was overruled, and this appeal followed.

ASSIGNMENT OF ERROR

The husband alleges, restated, that the district court erred in failing to make a fair and equitable distribution of the marital estate.

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, alimony, and attorney fees. Parde v. Parde, 258 Neb. 101, 602 N.W.2d 657 (1999). In a review de novo on the record, an appellate court reappraises the evidence as presented by the record and reaches its own independent conclusions with respect to the matters at issue. Id.; Hajenga v. Hajenga, 257 Neb. 841, 601 N.W.2d 528 (1999).

A judicial abuse of discretion exists when the reasons or rulings of a trial judge are clearly untenable, unfairly depriving a litigant of a substantial right and denying just results in matters submitted for disposition. Parde v. Parde, supra.

ANALYSIS

GENERAL PRINCIPLES

The purpose of a property division is to distribute the marital assets equitably between the parties. Neb.Rev. Stat. § 42-365 (Reissue 1998). The ultimate test for determining the appropriateness of the division of property is reasonableness as determined by the facts of each case. Hajenga v. Hajenga, supra. The division of property is not subject to a precise mathematical formula, but the general rule is to award a spouse one-third to one-half of the marital estate. Thiltges v. Thiltges, 247 Neb. 371, 527 N.W.2d 853 (1995). In dividing property and considering alimony upon a dissolution of marriage, a court should consider four factors: (1) the circumstances of the parties, (2) the duration of the marriage, (3) the history of contributions to the marriage, and (4) the ability of the supported party to engage in gainful employment without interfering with the interests of any minor children in the custody of each party, the polestar being fairness and reasonableness as determined by the facts of each case. See § 42-365. See, also, Hajenga v. Hajenga, supra. Further, the debts of the parties should be considered in making a property division pursuant to a divorce. Black v. Black, 221 Neb. 533, 378 N.W.2d 849 (1985). We have consistently spoken of dividing the net marital estate. Id.

INCOME TAX LIABILITY

Before we address the division of property in a broader context, it is imperative that we first resolve the narrower issue regarding the allocation of the husband's income tax liability. In the district court, the wife argued that during the marriage, the parties filed separate tax returns, and the wife paid her taxes in a timely fashion, unlike the husband. The wife further claimed that it would be unfair to require her to pay $15,198.83, or one-half, of the outstanding income tax liability which was the direct result of the husband's failure to timely pay his share of the taxes. The husband claimed that the fact the parties filed separate tax returns during their marriage is irrelevant because the tax liability incurred was a marital debt. The husband further asserted that he spent the funds that he failed to withhold from his income for tax purposes on family expenses. The wife did not dispute this assertion.

The district court's calculation of the net marital estate suggests that it characterized the IRS liability as marital debt, but did not allocate it as such. The husband claims that the district court erred in not allocating the IRS liability between the parties. The husband is only partially correct.

Equitable property division under § 42-365 is a three-step...