Opinion
No. 4-727 / 03-1798
Filed February 9, 2005
Appeal from the Iowa District Court for Linn County, L. Vern Robinson, Judge.
Both parties appeal the economic provisions of their dissolution decree. AFFIRMED AS MODIFIED AND REMANDED.
Daniel Bray of Bray Klockau, P.L.C., Iowa City, for appellant.
Robert Sudmeier of Fuerste, Carew, Coyle, Juergens Sudmeier, P.C., Dubuque, for appellee.
Heard by Huitink, P.J., and Mahan, Miller, Vaitheswaran, and Eisenhauer, JJ.
I. Background Facts Proceedings
Charles and Mary Jo Rohde were married in 1991. They have two children, Catherine, born in 1992, and Anna, born in 1996. At the time of the marriage Charles had assets worth slightly more than $1 million, while Mary Jo's assets were nominal.
Charles is the president of Dakota Red Corporation, a holding company for Hawkeye Ready-Mix, Inc. and King's Materials, Inc. He owns approximately twenty-five percent of the stock in Dakota Red, a closely owned family-held corporation. Charles also owns fifty percent of R S Properties, L.L.C., Builders Transportation, Inc., and Stone Concepts, L.L.C. In 2002 Charles's salary, including bonuses, was $284,000. Charles was forty-four years old and in good health at the time of trial.
Catherine and Anna each own .623% of the stock, which Charles also effectively controls, bringing the total amount of stock he controls to 26.6%. The estate of Charles's father holds 46.7% of the stock, and Charles's sister, Sara Sauter, controls about 26.6%.
Charles's brother-in-law, James Sauter, owns the other fifty percent of these companies.
Mary Jo was a dental assistant when she married Charles. She left her job when she became pregnant with the parties' oldest child. Mary Jo did not work outside the home during most of the marriage. She has been taking classes at Kirkwood Community College. Mary Jo testified she would like to obtain a college degree and become a counselor for young girls with eating disorders. Mary Jo was forty years old. She has a history of bulimia, but is otherwise in good health.
The district court entered a dissolution decree for the parties on October 8, 2003, which incorporated the parties' agreement to share physical care of the children. The court ordered Charles to pay child support of $2500 per month for the two children. Mary Jo was awarded alimony of $7500 per month for a period of sixty months.
Mary Jo was awarded assets valued at approximately $1,003,000, which included Charles's 401(k), miscellaneous investments, a home, and her vehicles. Charles was awarded assets valued at approximately $735,000, which included miscellaneous investments, a home, and his vehicle. Charles was awarded the business interests he acquired by gift or inheritance. Because Charles's stock in these corporations had increased 2.5 to three times during the parties' marriage, he was ordered to pay Mary Jo $1 million as a cash property settlement, payable in ten annual installments of $100,000.
Charles had another vehicle which was provided to him by Dakota Red, which was not included in the division of marital assets.
Charles and Mary Jo both filed motions pursuant to Iowa Rule of Civil Procedure 1.904(2). Before the district court ruled on the motions, Charles filed a notice of appeal, thereby waiving his pending motion. See IBP, Inc. v. Al-Gharib, 604 N.W.2d 621, 628 (Iowa 2000). The district court nevertheless considered the motions, and overruled both. Mary Jo appealed following that ruling.
II. Standard of Review
Our scope of review in this equitable action is de novo. Iowa R. App. P. 6.4. In equity cases, especially when considering the credibility of witnesses, the court gives weight to the fact findings of the district court, but is not bound by them. Iowa R. App. P. 6.14(6)( g).
III. Child Support
At trial, Charles asked to have his child support obligation set at $1710 per month. He also testified that he expected to continue to pay for the children's extra expenses, such as Montessori school, club fees, sports fees, and horseback riding lessons. As noted above, the district court ordered Charles to pay child support of $2500 per month. On appeal, Charles asks us to adopt his proposal, or to order Mary Jo to pay one-half of the extra expenses. In her cross-appeal, Mary Jo asserts the child support award is too low, and suggests that it be set in the range of $5000 to $7000 per month. She points out that neither party asked for an expense sharing provision at trial.
Both parties have an obligation to support their children in proportion to their abilities and circumstances. In re Marriage of Byall, 353 N.W.2d 103, 108 (Iowa Ct.App. 1984). To ascertain a party's income for the purpose of determining child support, we must determine the parent's current monthly income from the most reliable evidence presented. In re Marriage of Powell, 474 N.W.2d 531, 534 (Iowa 1991). The income of a person employed by a family corporation, especially a Subchapter S corporation, may be difficult to ascertain. In re Marriage of Titterington, 488 N.W.2d 176, 178 (Iowa Ct.App. 1992).
Dakota Red is a subchapter S corporation. As a result, the parties' reported income includes income retained by the corporation, as well as Charles's salary. Under these circumstances, we determine Charles's child support obligation should be based on his corporate salary plus bonuses, excluding retained corporate earnings. See In re Marriage of McCurnin, 681 N.W.2d 322, 329 (Iowa 2004) (finding regular bonuses should be considered income for purposes of calculating child support).
Charles's salary plus bonuses in 2002 was $284,000. Charles is accordingly within the income category where his child support obligation "is deemed to be within the sound discretion of the court" as long as the amount ordered is not less than $1710 per month. See Iowa Ct. Rule 9.12. We find the district court did not abuse its discretion in ordering Charles to pay child support of $2500 per month. Charles's net monthly income is substantially more than $6000 per month, and it would be inequitable to limit his obligations to the minimum amount required by the guidelines.
If Charles had net monthly income of $6000 per month and Mary Jo had no income, Charles's child support obligation would be $1710 per month. Under Iowa Court Rule 9.12, Charles's child support obligation cannot be less than this amount.
We make this finding despite the fact the parties have a shared physical care arrangement. Charles testified he did not expect Mary Jo to make an off-setting payment of child support.
The child support guidelines take into account the reasonable costs of living, including educational expenses for children. In re Marriage of Gordon, 540 N.W.2d 289, 292 (Iowa Ct.App. 1995). Expenses for clothes, school supplies and recreation activities are considered under the guidelines, and a separate support order covering such expenses is improper absent a finding that the guidelines amount would be unjust or inappropriate. Id. The child support order here is neither unjust nor inappropriate. We therefore make no provisions for the children's extra expenses described earlier.
IV. Property Division A.
Charles contends the trial court's property division is inequitable. He claims Mary Jo did not contribute to the increase in value of his Dakota Red stocks and should therefore receive no part of its increased value during the marriage.
The partners in a marriage are entitled to a just and equitable share of the property accumulated through their joint efforts. In re Marriage of Russell, 473 N.W.2d 244, 246 (Iowa Ct.App. 1991). Iowa courts do not require an equal division or percentage distribution. In re Marriage of Miller, 473 N.W.2d 244, 246 (Iowa Ct.App. 1991). The determining factor is what is fair and equitable in each particular circumstance. In re Marriage of Hoak, 364 N.W.2d 185, 194 (Iowa 1985). Generally, when a district court's valuation of assets is well within the permissible range of the evidence we are not inclined to disturb it. Id. at 192-93.
Under Iowa Code section 598.21(2) (2003), property received by a party as an inheritance or gift is not subject to division in a dissolution decree, unless the failure to divide the property would be inequitable. The appreciated value of assets may be divided, however, where the increase is due to the talent, time, and effort of the marital partners. In re Marriage of Friedman, 466 N.W.2d 689, 693 (Iowa 1991).
We consider several factors in determining whether to divide the appreciation in value of one party's assets. See In re Marriage of Grady-Woods, 577 N.W.2d 851, 852 (Iowa Ct.App. 1998). We first consider whether the increase is "a function of the tangible contributions of each party and not the mere existence of the marital relationship." In re Marriage of Lattig, 318 N.W.2d 811, 815 (Iowa Ct.App. 1982). Homemaking may be considered a tangible contribution to a marriage. Grady-Woods, 577 N.W.2d at 853. In considering a homemaker's contributions, we have stated:
Although Lizabeth did not work at the business, she did contribute to the marital home, taking care of home tasks Gilbert would have had to do had he lived alone. Her efforts made Gilbert's life outside work easier, allowing him to concentrate his efforts on his work. She provided marital companionship and contributed to the marriage in every way she was capable. It cannot fairly be said she contributed nothing to the growth of the business, even if her contribution was indirect. To hold otherwise needlessly diminishes the marriage.
Id. Next, we consider whether the appreciation of the property is attributable to fortuitous circumstances or the efforts of the parties. Lattig, 318 N.W.2d at 815. We also consider the length of the parties' marriage. Id. at 815-16. Additionally, we consider the statutory factors, such as the age and health of the parties, the earning capacity of each party, and their economic circumstances. See Iowa Code § 598.21(1); Grady-Woods, 577 N.W.2d at 853.
During this twelve-year marriage, Mary Jo assumed most, if not all of the parties' domestic burdens. Her contributions as homemaker, child care provider, and supportive spouse served as a valuable compliment to Charles's successful management of his business assets. We find that any increase in the value of Charles's gifted or inherited property is attributable to the parties' combined efforts as well as favorable economic conditions.
We also note that while Charles received most of his Dakota Red stock by gift, during the marriage he purchased 531 of his 4563 shares of stock. Charles claimed these shares were "sourced in gift" because the corporation made stockholder distributions which allowed him to purchase the stock. These stockholder distributions were deposited in the parties' checking account and Charles used funds from the parties' checking account to pay for the stock. By the same token, Charles claims his interests in R S Properties, Stone Concepts and Builders Transportation were "sourced in gift" because he used money he received as stockholder distributions to invest in these companies. R S Properties and Stone Concepts were created after the parties' marriage, and again, Charles used funds from the marital checking account to invest in the companies. We conclude Charles's interests in Red Dakota, R S Properties and Stone Concepts are based in part on marital funds.
Considering all of these factors, we find no inequity in the trial court's decision to award Mary Jo a share of the appreciation of Charles's gifted and inherited property during the course of the marriage.
B.
Charles claims an Amerus money market account contains proceeds of a life insurance policy he received after the death of his father, C.P. Rohde. The district court awarded this account to Mary Jo. Charles asserts the account should have been considered inherited property and set aside to him.
Generally, life insurance proceeds received by a party as a beneficiary are considered a gift or inheritance. See In re Marriage of Goodwin, 606 N.W.2d 315, 319 (Iowa 2000). Here, however, C.P. Rohde owned the policy, but the premiums were paid with marital funds. We agree with the district court's inclusion of this account in the parties' property subject to division.
C.
Charles argues the trial court's property division fails to sufficiently credit him for his premarital net worth. We disagree. To the extent Charles deserves credit for this premarital accumulation, he has received it in the value of gifted and inherited property set aside to him.
D.
Mary Jo asks to receive interest on the installment judgment. Mary Jo was awarded $1 million, payable in ten payments of $100,000 annually. The district court specifically ordered, "The judgment shall be without interest." Based on the balancing of equities in this case, we agree with the district court's determination. See In re Marriage of Pittman, 346 N.W.2d 33, 37 (Iowa 1984) (authorizing noninterest bearing awards); In re Marriage of Richards, 439 N.W.2d 876, 883 (Iowa Ct.App. 1989) (same). We conclude the property division, as set forth by the district court, is equitable.
V. Children's Insurance Policies and Trusts
During the dissolution trial, Charles testified several life insurance policies and accounts had been transferred to the children under the Iowa Uniform Transfers to Minors Act, Iowa Code chapter 565B (2003). The district court included these assets in the division of marital property. Charles asks to have the assets set aside to the children.
Charles created a trust in 1996 with the purpose to transfer certain assets to the trust for the benefit of the children. The evidence shows Amerus Life Insurance policy #1613282, Amerus Life Insurance policy #1572202, Dain Rauscher accounts for the children, and a SCI Group Division account had been transferred to the trust. These accounts are worth a total of $214,144. We determine these accounts should be set aside for the children. We modify the parties' dissolution decree to make this change. We also remand to the district court for consideration of the appointment of a trustee and other matters regarding the trust, with the intent to insure that these assets are used for the benefit of the children.
The evidence does not support Charles's claims that other assets had been transferred to the children. Charles admitted that he had intended to transfer two other Amerus Life Insurance policies to the trust, but had not done so. Charles also admitted he was technically the owner of two Northwestern Mutual Life Insurance policies. We conclude these policies were properly included in the division of marital property.
With our modification, Mary Jo will receive assets worth $979,975, plus the cash property settlement of $1 million payable over ten years. Charles's property award is reduced to $538,859, excluding gifted and inherited property set aside to him.
VI. Alimony
Charles contends the alimony award is too large. He claims Mary Jo should only be entitled to alimony of $6500 per month for a period of five years, or less if either party dies, Mary Jo remarries or cohabits with an unrelated male. Mary Jo asks to have the alimony award of $7500 per month extend for a period of ten years.
Alimony is not an absolute right; an award depends upon the circumstances of each particular case. In re Marriage of Kurtt, 561 N.W.2d 385, 387 (Iowa Ct.App. 1997). The discretionary award of alimony is made after considering those factors found in section 598.21(3). We consider the length of the marriage, the age and health of the parties, the parties' earning capacities, the levels of education, and the likelihood the party seeking alimony will be self-supporting at a standard of living comparable to the one enjoyed during the marriage. In re Marriage of Clinton, 579 N.W.2d 835, 839 (Iowa Ct.App. 1998). When reviewing an alimony award, we give the district court considerable latitude and disturb its ruling only when there is a clear failure to do equity. In re Marriage of Spiegel, 553 N.W.2d 309, 319 (Iowa 1996).
The district court determined Mary Jo was entitled to rehabilitative alimony. Rehabilitative alimony was conceived as a way of supporting an economically dependent spouse through a limited period of further education or retraining following a dissolution, thereby creating incentive and opportunity for a spouse to become self-supporting. In re Marriage of Francis, 442 N.W.2d 59, 63 (Iowa 1989).
After considering the factors in section 598.21(3), we concur in the district court's conclusion that Mary Jo is entitled to rehabilitative alimony. Mary Jo had started taking classes during the marriage. She testified she wanted to obtain a college decree and become a counselor for people with eating disorders. We determine the alimony award of $7500 adequately balances Charles's ability to pay alimony with Mary Jo's needs. We also find the duration of the alimony award, for five years, to be equitable because this will allow Mary Jo time to complete her degree and find a job in her intended profession. The district court specifically ruled the alimony obligation would terminate earlier only upon Mary Jo's death. We affirm this provision of the decree.
VII. Attorney Fees
Mary Jo claims she should have been awarded trial attorney fees. She states that although she was awarded substantial assets, she was not awarded much liquidity. She points out that Charles has the ability to pay her attorney fees. The decision to award attorney fees rests within the sound discretion of the court, and we will not disturb its decision absent a finding of abuse of discretion. In re Marriage of Maher, 596 N.W.2d 561, 568 (Iowa 1999). Both parties left this marriage with substantial assets, and we determine the district court did not abuse its discretion by ordering each party to pay his or her own attorney fees.
Mary Jo also asks for attorney fees for this appeal. An award of appellate attorney fees is not a matter of right, but rests within the court's discretion. In re Marriage of Kurtt, 561 N.W.2d 385, 389 (Iowa Ct.App. 1997). We consider the needs of the party making the request, the ability of the other party to pay, and whether the party making the request was obligated to defend the district court's decision on appeal. Maher, 596 N.W.2d at 568. Here, each party appealed, and we determine each party has the ability to pay his or her appellate attorney fees.
Finally, Mary Jo seeks appellate attorney fees in conjunction with two motions filed by Charles while this case was pending on appeal. The supreme court has directed us to consider these requests with the appeal. We order Charles to pay Mary Jo $1000 for appellate attorney fees based on these motions.
We affirm, except for our modification of setting aside to the children property which had been transferred to them under the Uniform Transfer to Minors Act. We remand for further order regarding the trust for the children. Costs of this appeal are assessed one-half to each party.