## Facts

- Paula J. Malin and Brian M. Loynachan began dating in August 1988, lived together for about three years, and married on February 6, 1999.
- Malin attended medical school from 1996 to 1999, completed a 4-year residency, and at the time of trial worked as a psychiatry director earning about $135,000 per year.
- Loynachan worked for Auburn Consolidated Industries, Inc. (ACI) from 1997 to October 2004, when his employment ended and he received a severance package that included cash payments (severance, vacation pay, bonus, and an “outsource assistance” payment) and a company vehicle; after tax withholdings, he received about $71,000 in cash (excluding the vehicle) and deposited it into the parties’ joint Charles Schwab investment account.
- Shortly after the marriage, the parties purchased a home using a $20,000 down payment funded by two $10,000 checks from Loynachan’s parents (one payable to each spouse).
- In October 2004, the parties sold the first home and purchased a larger home, using a down payment reflected in the closing documents (funded by sale proceeds and the earlier parental gift).
- Malin reviewed Loynachan’s credit-card statements from July 2002 through January 2005 and identified about $12,500 in charges (including lingerie, jewelry, and trips) that she claimed were not for marital purposes.
- Malin filed for dissolution in January 2005. At trial, Loynachan admitted that he spent about $9,000 in marital funds on his relationship with a paramour.
- The district court dissolved the marriage, divided the marital estate essentially equally, and declined to require Loynachan to repay or be charged with the paramour-related spending. Malin appealed the property division.

## Issues

1. Whether the district court erred by failing to treat Loynachan’s approximately $9,000 in paramour-related expenditures as dissipation of marital assets to be included in the marital estate and allocated to him.
2. Whether the district court properly classified and divided Loynachan’s severance-related payments and employment benefits as marital property.
3. Whether the overall property division (including treatment of Malin’s student loan debt) was equitable.

## Decision

- The Nebraska Court of Appeals reviewed the dissolution decree de novo on the record and considered whether the trial court abused its discretion in the property division.
- The court held that expenditures of marital funds for a nonmarital purpose, made when the marriage was undergoing an irretrievable breakdown, are dissipation and must be accounted for in the marital estate by charging the dissipating spouse.
- The court rejected the view that irretrievable breakdown requires physical separation or formal estrangement, and concluded that the record supported a finding that the marriage was irretrievably broken during the period when Loynachan spent marital funds on the paramour.
- The court modified the decree to treat the approximately $9,000 spent on the paramour as dissipated marital assets and to allocate that amount to Loynachan in the division (thereby adjusting the equalization).
- The court generally agreed with classifying Loynachan’s severance-related payments and related employment items as marital property based on their connection to employment during the marriage and the fact that the cash proceeds were placed into a joint account, and it affirmed the trial court’s treatment subject to the appellate court’s numerical adjustments.
- The court largely upheld the treatment of Malin’s student loan debt within the overall division and concluded that, after modification for dissipation and related adjustments, the property division was equitable.
- Disposition: affirmed as modified.

## Legal Principles

- In a dissolution action, the court (1) classifies property as marital or nonmarital, (2) values marital assets and liabilities, and (3) divides the net marital estate in an equitable manner; a roughly equal division is commonly approved absent reasons for a different result.
- “Dissipation of marital assets” is a spouse’s use of marital property for a selfish purpose unrelated to the marriage at a time when the marriage is undergoing an irretrievable breakdown.
- When dissipation is shown, the dissipated amount should be included in the marital estate and assigned to the spouse who spent the funds, rather than ignored in the division.
- Irretrievable breakdown is a fact question and is not limited to periods when spouses are physically separated or openly estranged.
- Severance-related payments and employment benefits may be treated as marital property when they are tied to employment during the marriage and are received and handled as part of the marital finances.
- Educational loan debt may be allocated to the spouse who incurred it, especially when the education produced increased earning capacity that factors into the overall fairness of the property division.

## Conclusion

The Court of Appeals affirmed the dissolution decree but modified the property division by treating Loynachan’s admitted $9,000 in paramour-related spending as dissipation that occurred during irretrievable marital breakdown, adding that amount back into the marital estate and charging it to him; the court also approved the general classification of severance-related benefits as marital property and upheld the remaining division, including the handling of Malin’s student loans, as equitable after the modification.


Malin v. Loynachan, 736 N.W.2d 390 (2007)