Summary
The Nebraska Supreme Court reviews the classification and division of agricultural real estate in a marital dissolution action. It holds that the active appreciation rule applies to farmland, that appreciation is presumed marital unless the owning spouse proves it was traceable to nonmarital property and not caused by either spouse’s active efforts, and that Arlan Parde failed to meet that burden for the disputed parcels.
Topics
Practice areas
Questions Presented
- Whether Nebraska's active-appreciation rule applies to agricultural land in dividing marital property.
- Whether Arlan proved that appreciation in the Fertilizer Plant, Lenard's Farm, and Holmesville Farm was not caused by the active efforts of either spouse and therefore should be classified as nonmarital.
- Whether the premarital equity in Lenard's Farm and Rademacher Farm should be set aside as Arlan's nonmarital property in calculating the marital value of later-held property.
- Whether the Home Place land and improvements should be treated as marital property or whether Arlan was entitled to a separate-property setoff for the land's appreciation.
- Whether Arlan was entitled to a $20,000 setoff relating to the gift or inheritance from his mother in connection with Grandma's Farm, and whether that amount represented 25 percent of the property's value.
Holdings
- Nebraska's active-appreciation rule applies to agricultural land. Appreciation of a nonmarital asset during the marriage is marital to the extent it was caused by the active efforts of either spouse.
- The spouse seeking to classify appreciation or income from a nonmarital asset as nonmarital bears the burden to prove that the growth is readily identifiable and traceable to the nonmarital portion and was not caused by the active efforts of either spouse.
- An asset may contain both marital and nonmarital interests; the original value or premarital equity may be nonmarital while some or all appreciation during the marriage is marital.
- The proper marital and nonmarital values were: Fertilizer Plant, $333,750 marital and $70,000 nonmarital; Lenard's Farm, $129,000 marital and $24,000 nonmarital; Holmesville Farm, $691,500 marital and $42,500 nonmarital; Home Place, $385,000 marital and no separate-property setoff; and Grandma's Farm, $216,000 marital and $20,000 nonmarital.
Key quotations
“In a marital dissolution action, the equitable division of property is a three-step process. The first step is to classify the parties’ property as either marital or nonmarital, setting aside the nonmarital property or nonmarital portion of the property to the party who brought the property to the marriage. The second step is to value the marital assets and marital liabilities of the parties. And the third step is to calculate and divide the net marital estate equitably between the parties.” (at 789)
“We agree. The Court of Appeals properly applied the active appreciation rule to agricultural land.” (at 790)
“We affirm the Court of Appeals’ decision as modified to decrease the marital value of Grandma’s Farm determined by the Court of Appeals by $20,000. We remand the cause to the Court of Appeals with directions to remand to the district court for an equitable division of the marital estate using marital values determined in this decision.” (at 797-798)
Factual background
Arlan and Cynthia Parde married in 1994 and separated in 2019 after a 26-year marriage. Arlan operated a farming business before and during the marriage, and both spouses contributed to the farming operation; marital funds were used in connection with farming proceeds, expenses, loans, and property transactions. The dispute concerned the marital and nonmarital portions of five agricultural properties, including premarital land, property acquired through exchanges involving premarital assets, the marital home, and land purchased from Arlan's mother. The district court largely adopted Arlan's proposed classifications, including treating much of the appreciation as nonmarital, and the appellate courts determined that Arlan had not proven that the appreciation was passive rather than caused by either spouse's active efforts.
Procedural history
After a February 2021 trial, the Gage County District Court classified and divided the parties' agricultural properties and awarded Arlan an equalization payment. Cynthia appealed. The Nebraska Court of Appeals reversed the property-classification portion and remanded with directions, applying the active-appreciation rule to agricultural land. The Nebraska Supreme Court granted Arlan's petition for further review, affirmed the Court of Appeals as modified, and remanded through the Court of Appeals to the district court for an equitable division using specified marital and nonmarital values.
Remand instructions
The Nebraska Supreme Court remanded the cause to the Court of Appeals with directions to remand it to the district court for an equitable division of the marital estate using the specified marital and nonmarital property values.