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Nebraska A dvance Sheets
291 Nebraska R eports
COUFAL v. COUFAL
Cite as 291 Neb. 378
Dale J. Coufal, appellant, v.
Lavon M. Coufal, appellee.
___ N.W.2d ___
Filed July 17, 2015. No. S-14-591.
1. Divorce: Appeal and Error. 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.
2. Judges: Words and Phrases. 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 mat-
ters submitted for disposition.
3. Divorce: Child Custody: Child Support: Property Division: Alimony:
Attorney Fees: Appeal and Error. In actions for dissolution of mar-
riage, an appellate court reviews the trial court’s determinations regard-
ing custody, child support, division of property, alimony, and attorney
fees de novo on the record to determine whether there has been an abuse
of discretion.
4. Divorce: Property Division: Pensions. In dissolution actions, district
courts have broad discretion in valuing pension rights and dividing such
rights between the parties.
5. Divorce: Property Division. In a divorce action, the purpose of a
property division is to distribute the marital assets equitably between
the parties.
6. ____: ____. As a general rule, all property accumulated and acquired by
either spouse during a marriage is part of the marital estate.
7. Divorce: Property Division: Pensions. Only that portion of a pension
which is earned during the marriage is part of the marital estate.
8. ____: ____: ____. Generally, amounts added to and interest accrued on
such pensions or retirement accounts which have been earned during the
marriage are part of the marital estate. Contributions to pensions before
marriage or after dissolution are not assets of the marital estate.
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COUFAL v. COUFAL
Cite as 291 Neb. 378
Appeal from the District Court for Buffalo County: William
T. Wright, Judge. Affirmed in part, and in part reversed and
remanded with directions.
Kent A. Schroeder, of Ross, Schroeder & George, L.L.C.,
for appellant.
Gregory G. Jensen, P.C., L.L.O., for appellee.
Heavican, C.J., Wright, Connolly, Stephan, McCormack,
Miller-Lerman, and Cassel, JJ.
Wright, J.
NATURE OF CASE
This is an appeal from a decree of dissolution of marriage
in which the district court included in the marital estate the
increase in value of the premarital portion of the husband’s
public employees’ retirement account. Prior to the marriage,
the increase in value was fixed and guaranteed by statute, but it
accrued during the marriage. The court found that the increase
in value was “‘earned’ or accumulated during the marriage”
and that it should be included in an equitable division of the
marital estate pursuant to Neb. Rev. Stat. § 42-366(8) (Reissue
2008). We find that the increase in value of the premarital
portion of the husband’s retirement account was not the result
of the efforts or contributions of either spouse and, therefore,
was not earned during the marriage.
SCOPE OF REVIEW
[1,2] 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. Molczyk v. Molczyk, 285 Neb. 96, 825 N.W.2d 435
(2013). A judicial abuse of discretion exists when the reasons
or rulings of a trial judge are clearly untenable, unfairly depriv-
ing a litigant of a substantial right and denying just results in
matters submitted for disposition. Tyma v. Tyma, 263 Neb. 873,
644 N.W.2d 139 (2002).
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COUFAL v. COUFAL
Cite as 291 Neb. 378
FACTS
Dale J. Coufal (Appellant) and Lavon M. Coufal (Appellee)
were married on June 11, 2004. Each had one prior marriage,
and no children were born during this marriage.
Appellant has been employed by the Nebraska Department
of Roads since April 1986, including the time during the
marriage. He participates in the Nebraska Public Employees
Retirement Systems (NPERS), which is not a defined benefit
plan that would apply to some state employees. Before the
marriage, the balance of Appellant’s retirement account was
$76,271.45. Under Neb. Rev. Stat. § 84-1301(17) (Reissue
2014), members of NPERS are guaranteed a rate of return on
their retirement plans of not less than 5 percent or the appli-
cable federal midterm rate plus 1.5 percent. Appellant claimed
that the premarital portion of the retirement account should be
valued so as to include the statutorily guaranteed interest on
the principal.
Appellant offered the testimony of David Rosenbaum as an
expert witness for the purpose of establishing the present value
of the premarital portion of Appellant’s retirement account.
Rosenbaum has a Ph.D. in economics from the University
of Wisconsin-Madison. He has been employed in various
teaching and administrative positions with the University of
Nebraska-Lincoln for almost 30 years and is the owner of an
economic consulting firm. Rosenbaum testified that as of May
6, 2013, the adjusted value of the premarital portion of the
retirement account ($76,271.45) was $120,010.82. His calcula-
tion was based upon the statutory rate of return which the State
must provide on the principal. After Rosenbaum determined
his formulas, he verified with NPERS that his methodology
was correct. The adjusted value of this part of Appellant’s
retirement account is not disputed.
The district court issued a decree of dissolution on May 5,
2014, in which it valued the retirement account at $219,830.07.
The court concluded that the increased value of the premari-
tal estate was accumulated and acquired during the course
of the marriage through the joint efforts of the parties and
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COUFAL v. COUFAL
Cite as 291 Neb. 378
that, therefore, it was part of the marital estate. The court
found that the interest accruing on the premarital portion of
the retirement account did not fit into any exception to the
general rule that property acquired by either party during the
marriage is included in the marital estate.
Appellant contends that the district court abused its discre-
tion in including the interest accruing on the premarital por-
tion of the retirement account as part of the marital estate. He
asserts that because the increased value on the premarital prin-
cipal of the retirement account was guaranteed by § 84-1301,
it was not due to the joint efforts of the spouses and, therefore,
was not “‘earned during the marriage.’” See brief for appel-
lant at 4. We granted Appellant’s petition to bypass to address
this issue.
ASSIGNMENTS OF ERROR
Appellant claims that the district court abused its discretion
by not excluding from the marital estate the interest accrued
on the nonmarital portion of the retirement account. Appellant
asserts the court should have excluded the statutorily guaran-
teed appreciation of $43,739.37, because the increase resulted
solely from the appreciation under § 84-1301 and was not the
result of the joint efforts of the parties.
ANALYSIS
[3-5] Our reasoning and conclusion are specific to the facts
presented in this case. 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. Molczyk v. Molczyk, 285 Neb. 96, 825
N.W.2d 435 (2013). This standard of review applies to the
trial court’s determinations regarding custody, child support,
division of property, alimony, and attorney fees. See, Binder
v. Binder, ante p. 255, ___ N.W.2d ___ (2015); Reed v. Reed,
275 Neb. 87, 744 N.W.2d 444 (2008). In dissolution actions,
district courts have broad discretion in valuing pension rights
and dividing such rights between the parties. Tyma v. Tyma,
263 Neb. 873, 644 N.W.2d 139 (2002). In a divorce action,
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COUFAL v. COUFAL
Cite as 291 Neb. 378
the purpose of a property division is to distribute the marital
assets equitably between the parties. 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. Tyma, supra.
In dissolution actions, § 42-366(8) confers upon the court
the power to equitably divide the marital estate and to include
any pension or retirement plans, annuities, and other deferred
compensation as part of the marital estate.
If the parties fail to agree upon a property settlement
which the court finds to be conscionable, the court shall
order an equitable division of the marital estate. The court
shall include as part of the marital estate, for purposes
of the division of property at the time of dissolution,
any pension plans, retirement plans, annuities, and other
deferred compensation benefits owned by either party,
whether vested or not vested.
Id.
[6-8] As a general rule, all property accumulated and
acquired by either spouse during a marriage is part of the
marital estate. Reed, supra. Applying this general rule to pen-
sions, we have held that only that portion of a pension which
is earned during the marriage is part of the marital estate.
See Blaine v. Blaine, 275 Neb. 87, 744 N.W.2d 444 (2008).
Generally, amounts added to and interest accrued on such pen-
sions or retirement accounts which have been earned during
the marriage are part of the marital estate. Contributions to
pensions before marriage or after dissolution are not assets of
the marital estate. See Shockley v. Shockley, 251 Neb. 896, 560
N.W.2d 777 (1997).
In the case at bar, Appellant claims that the district court
abused its discretion by including as part of the marital estate
the increase in value of the premarital portion of the account.
The question presented is whether the increase in value of the
premarital portion of the retirement account should be consid-
ered as part of the marital estate.
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COUFAL v. COUFAL
Cite as 291 Neb. 378
Other courts have concluded that an increase in value of
such property during the marriage is not a marital asset when
it is not caused by marital efforts or funds. “Appreciation in
separate property is marital property to the extent that it was
caused by marital funds or marital efforts; otherwise, it remains
separate property.” 1 Brett R. Turner, Equitable Distribution of
Property § 5:54 at 546 (3d ed. 2005). As early as 1983, one
annotation stated:
[C]ourts in the vast majority of cases in which the issue
has arisen have held or recognized that an increase in
value in the separate property of a spouse, not attribut-
able in any manner to any contribution of funds, property,
or effort by either of the spouses, constitutes separate
property . . . .
Annot., 24 A.L.R.4th 453, 456-57 (1983).
Some courts have referred to this dichotomy in the apprecia-
tion of separate property as “active” appreciation versus “pas-
sive” appreciation. Some states have codified this principle.
See, e.g., Ala. Code § 30-2-51(b)(2) (1998); Ark. Code Ann.
§ 9-12-315(b)(5) (2008); Del. Code Ann. tit. 13, § 1513(b)(4)
(2009); D.C. Code § 16-910(a) (2008); 750 Ill. Comp. Stat.
Ann. 5/503(b)(2) (LexisNexis Cum. Supp. 2009); Me. Rev.
Stat. Ann. tit. 19-A, § 953(2)(E) (Cum. Supp. 2004); Mo.
Ann. Stat. § 452.330(5) (West 2003); N.Y. Dom. Rel. Law
§ 236(B)(d)(3) (McKinney 2010).
In order to determine what portion of Appellant’s retirement
account is nonmarital property, we examine to what extent the
appreciation in the separate premarital portion of the retire-
ment account was caused by the efforts of either spouse. In this
context, we held that where appreciation of a wife’s separate
asset was due principally to inflation and market forces and
not to any “significant efforts” by the husband, the apprecia-
tion should not have been included in the marital estate. See
Van Newkirk v. Van Newkirk, 212 Neb. 730, 734, 325 N.W.2d
832, 834 (1982).
In Buche v. Buche, 228 Neb. 624, 423 N.W.2d 488 (1988),
we held that certain shares of stock should not have been
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COUFAL v. COUFAL
Cite as 291 Neb. 378
included in the marital estate, because the parties were mar-
ried 3 years after the husband began receiving stock; neither
spouse contributed money to acquire the stock; the wife did
not contribute to the improvement or operation of the stock,
nor significantly care for the property during the marriage;
and the stock was readily identifiable and traceable to the
husband. In these decisions, some level of indirect or direct
effort was required by the nontitled spouse—not just inflation
or market forces—in order to include the increase in value in
the marital estate.
The instant case is analogous to having a certificate of
deposit with a fixed rate of interest that was owned by one
spouse before the marriage. Both the principal and interest
remain separate property because the certificate of deposit was
acquired before the marriage, though the full economic value
is not realized until after the parties were married. There is no
marital effort or contribution during the marriage that affects
the accrual of interest on the certificate of deposit.
Similarly, the appreciation of the premarital portion of
Appellant’s retirement account was guaranteed prior to the
marriage. No effort from either spouse directly or indirectly
affected the appreciation. The interest accrued solely by opera-
tion of § 84-1301. Therefore, the appreciation was not earned
during the marriage by the joint efforts or contributions of the
parties, because Appellant was legally entitled to the increase
in value prior to the marriage.
Other courts have reached similar conclusions. In Baker
v. Baker, 753 N.W.2d 644 (Minn. 2008), the Minnesota
Supreme Court held that where a husband did not devote
significant effort to managing his retirement funds and no
significant effort was diverted from the marriage to generate
the increase in the account, the appreciation in the nonmarital
portion of the funds remained separate property. Similarly,
a court in Illinois held that the value of a wife’s individual
retirement account as of the date of marriage, and any sub-
sequent appreciation in value of that amount, was the wife’s
separate property upon dissolution of the marriage. But the
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COUFAL v. COUFAL
Cite as 291 Neb. 378
amount contributed to the retirement account during the
marriage, and any subsequent appreciation in value of that
amount, constituted marital property. See In re Marriage of
Raad, 301 Ill. App. 3d 683, 704 N.E.2d 964, 235 Ill. Dec.
391 (1998).
In the case at bar, the district court concluded that the
interest accumulated on the premarital portion of the retire-
ment account was a form of marital income earned during
the marriage by virtue of Appellant’s continued employment.
Previously, this court has held that a spouse’s income which
accumulates during the parties’ marriage is a marital asset.
Harris v. Harris, 261 Neb. 75, 621 N.W.2d 491 (2001). In
Davidson v. Davidson, 254 Neb. 656, 578 N.W.2d 848 (1998),
we held that employee stock options and stock retention shares
were acquired during the marriage through the husband’s
employment during the marriage and were part of the mari-
tal estate.
However, in the present case, the increase in value of
the premarital portion of Appellant’s retirement account was
not contingent on Appellant’s continued employment with the
State, but instead was guaranteed by statute prior to the mar-
riage. The increase in value of the premarital portion of the
account was not derived from contributions by the parties dur-
ing the marriage.
We also reject the suggestion that the premarital funds in the
retirement account were commingled and, therefore, should
be treated as marital property. “‘[S]eparate property becomes
marital property [by commingling] if inextricably mingled
with marital property or with the separate property of the other
spouse. If the separate property continues to be segregated or
can be traced into its product, commingling does not occur
. . . .’” Snodgrass v. Snodgrass, 295 S.W.3d 240, 256 (Tenn.
2009). Such commingling occurred in Heald v. Heald, 259
Neb. 604, 611 N.W.2d 598 (2000), where we set aside from
the marital estate the amount of a downpayment made on
the purchase of a home prior to the marriage, but not to any
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COUFAL v. COUFAL
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interest accrued on the amount because the mortgage payments
were made by the parties during the marriage.
In the instant case, the increase in value of the premari-
tal portion of the retirement account is readily identifiable
and traceable to Appellant’s premarital portion of the retire-
ment account.
Finally, we note that Rosenbaum’s calculation of the
increase in value of the premarital portion of the retirement
account included a present value date of May 6, 2013, which
was neither the date the parties separated nor the date of the
dissolution decree. Instead, May 6 was the date Rosenbaum
issued his report, and the parties do not dispute the value of
the premarital portion of the retirement fund as of that date,
nor do they assert that an alternative date should have been
used. Therefore, we conclude that the value of the nonmarital
portion of Appellant’s retirement account should be valued as
of May 6, 2013.
CONCLUSION
The district court abused its discretion by including as a
marital asset the increase in value of the nonmarital portion of
the retirement account. Such increase in value was not due to
the efforts or contribution of marital funds by the parties dur-
ing the marriage, and it was readily identifiable and traceable
to the nonmarital portion of the account.
Therefore, we reverse the portion of the divorce decree that
included the increase in value of the nonmarital portion of the
retirement account as determined on May 6, 2013, and we
remand the cause with directions to exclude this amount from
the marital estate. In all other respects, the judgment of the
district court is affirmed.
A ffirmed in part, and in part reversed
and remanded with directions.