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concluding where the husband “failed to file a child support guideline worksheet” and spouse testified reported income did not include many cash transactions, the district court “did not have sufficient information to accurately calculate [husband's] current income, ... a child support review hearing [would] be held [later]”
Summary of this case from In re DuranOpinion
No. 5-811 / 05-0174
Filed February 15, 2006
Appeal from the Iowa District Court for Pottawattamie County, James Heckerman, Judge.
Dan Claar appeals from the property division and child support provisions of the decree dissolving the parties' marriage. Kelley Claar cross-appeals from the property division provisions of the decree. AFFIRMED AS MODIFIED.
Michael Winter, Council Bluffs, for appellant.
Norman Springer of McGinn, McGinn, Jennings Springer, Council Bluffs, for appellee.
Considered by Zimmer, P.J., and Miller and Vaitheswaran, JJ.
Dan Claar appeals from the property division and child support provisions of the decree dissolving his marriage to Kelley Claar. Dan asserts the property division was inequitable and the court erred in ordering him to pay child support. Kelley cross-appeals contending she should receive a greater share of the parties' assets. We modify the district court's property division. The remainder of the court's decree is affirmed.
I. Background Facts and Proceedings.
Dan and Kelley Claar were married in 1997. Their marriage was Dan's third and Kelley's second. Two children were born during the marriage. The parties' son Austin was born in 1998. Their daughter Gracey was born in 2000.
Dan and Kelley signed an antenuptial agreement the day before their wedding. The agreement provided that all property owned by each party at the time of the marriage would remain the separate property of each party. Dan had been a self-employed contractor for ten years before he married Kelley. The bulk of his assets consisted of equipment used in the operation of his business, Claar Construction. Kelley was employed by Dan at the time of the marriage.
Following their marriage both Kelley and Dan participated in the operation of Claar Construction. The parties invested significant money in the company, including a large percentage of $290,000 in insurance proceeds received when the family home was damaged by fire. The parties purchased several rental properties during the marriage and started a manufactured home sales business.
Dan filed a petition for dissolution of marriage in July 2004. The parties stipulated that custody and physical care of their children would be joint, but they could not reach an agreement regarding the division of their assets and debts or child support. As a result, a trial was held in November 2004.
In December 2004, the district court issued a dissolution decree which awarded Dan assets with a net value of $417,200. Dan's award included Claar Construction, which the court valued at $53,400. The court awarded Kelley assets with a net value of $159,500 and ordered Dan to make an equalization payment to Kelley of $128,850. The court then assigned the parties' remaining debts: $9,850 to Kelley and $150,142 to Dan. Using the numbers provided by the trial court, Kelley received a net property award of $278,500, while Dan received a net award of $138,208. In making its property division the court gave "no meaning and effect" to the parties' antenuptial agreement, "in view of the passage of time since the execution . . . as well as the extent of the commingling of assets . . . during [the] marriage." The court ordered Dan to pay Kelley $250 per month in child support, but retained jurisdiction to review the child support award in April 2005.
Dan filed a motion for an amended and modified judgment pursuant to Iowa Rule of Civil Procedure 1.904(2), which was overruled by the district court. Dan then filed an appeal, and Kelley filed a cross-appeal. On appeal, Dan contends the district court's division of assets and debts was inequitable. He also maintains the court should not have ordered him to pay any child support, as there was no evidence his income was any higher than Kelley's income. On cross-appeal Kelley contends the district court significantly undervalued Claar Construction, and argues she should receive an even greater share of the parties' assets.
II. Scope of Review.
Our scope of review is de novo. Iowa R. App. P. 6.4; In re Marriage of Wagner, 604 N.W.2d 605, 608 (Iowa 2000).
III. Property Division.
In allocating the parties' assets and debts, the court strives to make a division that is fair and equitable under the circumstances. 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; rather, the decisive factor is what is fair and equitable in each particular case. Id. In determining what division would be equitable, courts are guided by the criteria set forth in Iowa Code section 598.21(1) (2003) These include the property brought to the marriage by each party, the length of the marriage, and the contributions to the marriage made by each party. Id.
The record demonstrates the parties ignored their antenuptial agreement after their marriage, and Dan does not seriously challenge the district court's refusal to consider the agreement. However, he argues that when making its property division the trial court should have given consideration to the fact he brought significantly more assets to the marriage than Kelley, particularly in view of the relatively short duration of this marriage. In her cross-appeal, Kelley asserts the trial court should have valued Claar Construction at $250,000 rather than $53,400. She argues her net property award should be increased to reflect this higher value. For the reasons which follow, we conclude the parties' complaints about the division of property and debts have at least some merit.
We first address Kelley's contention that the court undervalued Claar Construction. We uphold a district court's valuation of property when it is accompanied by supporting credibility findings or corroborating evidence. See In re Marriage of Vieth, 591 N.W.2d 639, 640 (Iowa Ct.App. 1999). Upon review of the record in this case, we conclude the value assigned to Claar Construction by the district court is not within the permissible range of the evidence.
The district court did not state the basis for its decision to value Claar Construction at $53,400; however, we note that $53,435.92 is the "Total Equity" listed on the company's 2003 statement of assets and liabilities. As explained by Ronald Anderson, the parties' accountant, this number represents only the tax basis of company assets less company liabilities; it is not representative of the company's fair market value. Anderson testified that to calculate fair market value it was necessary to know the actual value of the various items of equipment owned by the company, rather than the depreciated values utilized for tax purposes. While the record does not contain an appraisal of the company or its equipment, the evidence, including Dan's own testimony, indicates the company is worth significantly more than $53,400.
In 1997, Dan prepared a list of premarital assets and liabilities which indicated Claar Construction had net assets in excess of $200,000 at the time of the parties' marriage. The parties purchased a substantial amount of equipment for the business during the marriage. The record contains a list of equipment purchased between 1998 and 2004, with a combined purchase value in excess of $750,000. Kelley also introduced a "Confidential Memorandum" prepared by a broker in early 2004, prior to the parties' separation. The memorandum lists the fair market value of the business equipment at $499,200. This estimate may well be inflated for the purpose of obtaining an optimum price for the business, and does not indicate whether it includes the $108,000 in liabilities the company owed at the end of 2003. Nevertheless, it provides support for the conclusion the district court undervalued the construction company. Finally, Dan testified that he would sell the company for $250,000, but not for $200,000.
In light of the foregoing, we believe Claar Construction is more appropriately valued between $200,000 and $250,000. However, our analysis does not end with this conclusion.
Dan points out that the trial court made no mention of and apparently gave him no credit for the significant differential in assets the parties brought to this marriage. The record indicates Dan had a net worth of approximately $250,000 at the time of the marriage while Kelley had a net worth of $24,000. This was a marriage of relatively short duration. We believe equity requires that some consideration be given to the fact that Dan brought substantial assets to this marriage of relatively short duration, while Kelley brought few. After considering all relevant factors, we conclude the equalization payment Dan was ordered to make to Kelley should be reduced from $128,850 to $50,000. The remainder of the court's property division is affirmed.
IV. Child Support.
As we have mentioned, the trial court ordered Dan to pay Kelley child support in the amount of $250 per month. In its decree, the court stated it believed Dan had a greater income than Kelley; however, because it concluded it did not have sufficient information to accurately calculate Dan's current income, the court ordered that a child support review hearing be held in April of 2005. On appeal, Dan contends he should not have been ordered to pay any child support because his income does not exceed Kelley's.
In Iowa, there is a rebuttable presumption that application of the Child Support Guidelines, which utilize a party's actual net income, results in the correct amount of child support. Iowa Code § 598.21(4)(a); Iowa Ct. Rs. 9.4, 9.5. In cases of joint physical care, it is appropriate to calculate the support each party would be entitled to receive as the custodial parent, then offset the amounts. See In re Marriage of Fox, 559 N.W.2d 26, 28 (Iowa 1997); In re Marriage of Swanson, 586 N.W.2d 527, 529 n. 1 (Iowa Ct.App. 1998), overruled on other grounds by In re Marriage of Denly, 590 N.W.2d 48, 50 (Iowa 1999).
Looking to the guidelines, and utilizing Kelley's income of $30,000 per year, the $250 in "offset" child support the district court ordered Dan to pay to Kelley is consistent with Dan earning a yearly gross income of approximately $48,000 to $49,000.
Dan failed to file a child support guideline worksheet with the district court. To support his contention that he earns no more than Kelley, he points to the parties' income tax returns for the years 1997 through 2003, which reflect a yearly adjusted gross income of between $29,647 and a loss of $113,069. Standing alone, these figures are of little value in calculating child support, since they include significant yearly deductions for what appear to be accelerated equipment depreciation, two years of substantial net operating loss carryovers, and operating losses from rental property ordered sold in the dissolution decree. It would be inappropriate to include all these deductions in calculating the gross yearly income from Claar Construction. See In re Marriage of Gaer, 476 N.W.2d 324, 326 (Iowa 1991) (noting extent depreciation should be included in income calculation depends on the particular circumstances of each case). Moreover, Kelley testified that the parties' reported income did not include a number of cash and barter transactions, and their actual income was sufficient to support their comfortable lifestyle, which included a new home, vacations, and domestic help.
Kelley's contentions find some support in a report prepared by accountant Ron Dickinson. After reviewing the parties' financial information, Dickinson concluded that the "[tax] returns are not an accurate reflection of the true economic income earned during these periods," because "it is hard to believe that [the parties] have lived on virtually nothing over these years." While Dan asserts the parties' lifestyle was funded by borrowed money, the record indicates the loans obtained by the parties were not in and of themselves sufficient to both operate the business and support the family.
Upon a review of the totality of the record, we find no reason to set aside the child support amount ordered by the court. We accordingly affirm the child support provisions of the district court's decree. Costs of this appeal are assessed equally between the parties.
Since neither party has challenged the trial court's decision to review the amount of child support in a hearing to be held several months after trial, we do not address the propriety of including such a provision in the dissolution decree.