Opinion
No. 2-545 / 01-1514
Filed October 16, 2002
Appeal from the Iowa District Court for Linn County, William L. Thomas, Judge.
Husband appeals and wife cross-appeals from financial portions of the parties' dissolution decree. AFFIRMED AS MODIFIED.
James W. Affeldt and Robert M. Hogg of Elderkin Pirnie, P.L.C., Cedar Rapids, for appellant.
Lori L. Klockau, Daniel L. Bray, and Chad A. Kepros of Bray Klockau, P.L.C., Iowa City, for appellee.
Considered by Vogel, P.J., and Miller and Vaitheswaran, JJ.
Kerry Mann appeals the property division and alimony provisions of the decree dissolving his marriage to Carol Mann. Carol cross-appeals on the same two issues. We affirm the district court's awards, but with a modification to the allocation of the retirement funds and to the timing of the termination of the alimony.
Background Facts and Proceedings. The thirty-year marriage of Kerry and Carol Mann was dissolved when each was fifty-two years of age. Carol was awarded the marital residence and any indebtedness thereon and all of the parties' individual retirement and pension funds. Kerry was awarded Professional Financial Solutions (PFS), his insurance sales/financial planning business, as well as any indebtedness thereon. He was further ordered to pay Carol $10,000 towards the outstanding balance of the mortgage on the marital residence in recognition that approximately $20,000 of the indebtedness had been used for the benefit of Kerry's business. He was also directed to pay for a $6,771.15 buy-back to Carol's Iowa Public Employees Retirement System (IPERS) plan. Each party was awarded their own personal property and/or the personal property in their possession, including vehicles, life insurance, securities, cash and bank accounts, and household contents, and assessed their individual indebtedness. As part of that assignment Carol was held responsible for debt owed to Shannon Shaw, C.P.A., Carol's retained expert.
Kerry interprets the district court's award to Carol of "the Ohio National pension (company account) #C6312662," as awarding her only the employer contribution to this fund, in the amount of $59,293.93, implicitly retaining to him personal contributions of $5,531.41. However, such an interpretation conflicts with Kerry's own trial testimony of his wish that Carol receive the "Ohio National pension plan that was accumulated over the fifteen years from 1975 to 1990. . . . [T]here is [sic] two parts to it. It adds up to $64,825.34." It is also contrary to his own post-trial request for a specific finding that "the value of Petitioner's Ohio Life Pension is $64,825.34."
Carol was also awarded $2,000 per month in alimony, to be reduced by any social security retirement benefits she might receive. The alimony was ordered to cease upon the earlier of Carol's death or Kerry's death, provided that, in the event of Kerry's death, he had obtained and maintained a life insurance policy with a death benefit of not less than $250,000, payable to Carol directly or to an alimony trust. Kerry was ordered to pay Carol $5,000 to assist with her attorney fees.
Scope of Review . Our review of this matter is de novo. See Iowa R.App.P. 6.4. We have a duty to examine the entire record and adjudicate rights anew on those issues properly presented. In re Marriage of Vieth, 591 N.W.2d 639, 640 (Iowa Ct.App. 1999). We give weight to the fact findings of the district court, especially in determining the credibility of witnesses, but are not bound by them. Iowa R.App.P. 6.14(6)( g).
Property Division . Kerry challenges the property distribution as being inequitable. However, at the heart of both his argument and Carol's cross-appeal as to the property division, is a fundamental disagreement about the valuation of two particular items — Kerry's business and Carol's IPERS plan. The parties appear to agree that, once appropriate values are assigned, the actual distribution should be roughly equal. Although "generally assets acquired during a marriage are nearly equally divided," see In re Marriage of Van Regenmorter, 587 N.W.2d 493, 496 (Iowa Ct.App. 1998), the goal is to assure a just and equitable, rather than equal, distribution. In re Marriage of Dean, 642 N.W.2d 321, 323 (Iowa Ct.App. 2002)
1. Valuation of PFS. Kerry's expert, Dennis Redmond, valued Kerry's business at $100,000, while Carol's expert, Shannon Shaw, set the value at $272,543. Although both methods estimated value from the perspective of a hypothetical investor in the business, the calculations differed in a number of particulars. The district court rejected Carol's higher estimate and adopted Kerry's $100,000 valuation. It found Shaw's use of a normalized compensation amount to be an insufficient recognition of Kerry's contribution to the company, given his thirty years of experience, contacts, and local knowledge, as well as the unique burdens of a sole proprietorship. It also rejected Shaw's lower tax rate, because the lower rate presumed the hypothetical owner would have income only from PFS, whereas Redmond's higher rate presumed income from other sources. Finally, it found Redmond's discount for marketability to be appropriate, given the fact the business was a small, sole proprietorship dependent upon its relationship with a single, large corporate entity.
We agree with the court's observations. We also find it significant that, when Kerry purchased the company in 1995, he did so for just over $30,000. Based upon all the foregoing findings, the $100,000 valuation is clearly within the permissible range of evidence, and we will not disturb it on appeal. See In re Marriage of Vieth, 591 N.W.2d 639, 640 (Iowa Ct.App. 1999) (noting that, even in de novo review, we defer to trial court valuations when accompanied by supporting credibility findings or corroborating evidence).
While this is roughly $10,000 more than the prior owner paid for the business in 1990, only about a third of Kerry's purchase price was for the business's physical assets, including client files. The remaining $20,000 was a personal payment to the prior owner for continuation in the business during the transitional period.
2. Carol's IPERS Plan . Kerry challenges the district court's valuation of Carol's IPERS plan at $25,000. Kerry urges instead an adoption of the present value as determined by his expert, Redmond, of $64,043. Redmond's valuation, which took into account a buy-back of the funds Carol had cashed out of the plan in the early seventies, was reached by applying an eight percent discount rate to the expected stream of income generated by a retirement age of sixty-two. Redmond testified he traditionally applied an eight percent rate to more diversified and conservative investments, such as retirement accounts.
Shaw generally agreed with Redmond's method of calculation, but found the discount rate to be too low. Acknowledging an eight percent rate might be appropriate for certain guaranteed streams of income, Shaw contended a twelve percent discount rate gave appropriate recognition to the risk presented by Carol's death. The district court was dubious of whether the higher percentage was necessary to account for the risk of death, noting part of that risk was reflected in the life expectancy tables, and expressed doubts as to whether a future stream of income method was the appropriate means for valuing the plan, as it "deals with a stream of income to be determined at a future time, based on credit for some of the pension that is `earned' after the dissolution of the marriage." It nevertheless found that $25,000 was "a good approximation of the properly calculated value of that stream of income." As with the valuations of PFS, we find the valuation of Carol's IPERS account to be within the permissible range of the evidence and decline to disturb it on appeal. Vieth, 591 N.W.2d at 640.
See In re Marriage of Benson, 545 N.W.2d 252, 255 (Iowa 1996) ("[C]are must be taken . . . so that the recipient spouse does not become entitled to any post-dissolution increases in pension benefits. . . . [A]ny increase in the pension benefits accrued after a dissolution decree cannot be considered marital property.").
3. Equitability of Property Division . Having found the district court valuations of the business and IPERS plan to be within the permissible range of evidence, we turn to the actual property distribution and whether equity was achieved as between the parties. See Dean, 642 N.W.2d at 323. We are somewhat hampered in our review as the district court, although requested to do so by both parties in post-trial motions, failed to set forth any specific values beyond those assigned to PFS and the IPERS plan. Nor, unfortunately, did it set forth net distribution figures. See In re Marriage of Bonnette, 584 N.W.2d 713, 714 (Iowa Ct.App. 1998) (noting importance of assigning values and setting forth the net property distributions, as it enables review of the equitability of the property division, and aids the parties in understanding their awards, which could obviate need for appeal). However, based upon the trial court's ruling, the testimony of the parties, the exhibits, and the parties' apparent stipulation as to values in their post-trial motions, we presume the property distribution made by the district was approximately as follows:
Kerry Receives Carol Receives
Description Martial Residence 0 63,808
Vehicles 9,345 4,115
Life Insurance, Cash Value 14,216 262
Securities 5,023 0
Cash Bank Accounts 20,500 240
Household Contents 5,000 5,000
Business/PFS 100,000 0 Mortgage Indebtedness (10,000) 10,000
Pension/Retirement Funds
Ameritas IRA 0 52,071
Ohio National 0 64,825
IPERS 0 25,000
IPERS buy-back (6,771) 0
Vanguard 403(b) 0 2,942
Securities America Roth IRA 0 3,217
Net Distribution 137,312 231,480
Carol also urges us to consider credit card and other similar debts of the parties, which were assigned but not valued by the district court. In support of this she directs us to a trial exhibit, but not to portions of the transcript or evidentiary record that would verify the claimed debt amounts. Kerry does not even attempt to value his credit card debt. Carol asserts, but fails to document, that this is due to those cards carrying a zero balance. Moreover, neither party found these various debts to be of sufficient significance to request precise valuations in their post-trial motions. Given the parties' failure to establish an adequate record on the issue, we decline to assign a value to these small debts. See Iowa R.App.P. 6.14(1)( d). For the purpose of the net distribution, we presume the debts to be roughly equal.
It appears the district court's distribution was indeed rather lopsided. The court gave no reason for the roughly $94,000 difference in the net allocations, and we see no justification in the record for the disparity. See id. Kerry suggests we allocate him the Ameritas IRA in an effort to equalize the property distribution. This seems to be a reasonable and acceptable method of balancing the distribution, particularly in light of the fact he was not awarded any established retirement or pension fund. We therefore modify the property distribution to award Kerry the Ameritas IRA account, which reduces the net disparity. Spousal Support. The district court's award to Carol of $2,000 per month in spousal support was based on a gross annual income for Kerry of $120,000, a gross annual salary for Carol of approximately $32,000, and a recognition that the couple's decision to have Carol remain at home for a large part of the marriage substantially impacted Carol's earning capacity. Kerry concedes an award was appropriate. See In re Marriage of Geil, 509 N.W.2d 738, 742 (Iowa 1993) (noting that, in marriage of long duration, award of both alimony and a substantially equal property distribution may be appropriate, especially where there is a great disparity in earning capacity). He and Carol differ only as to the amount and duration of the award.
We reject Kerry's contention that we should equalize the property distribution by relieving him of his obligation to pay for Carol's IPERS buy-back, or that his estimated, disputed tax liability and his payment of Carol's attorney fees should deducted from his net property distribution.
Kerry argues his support obligation should be decreased to $1,500 per month, as the additional $500 per month places Carol in a better financial position than she enjoyed during the marriage. We cannot agree, particularly in light of the substantial increase in Kerry's income since he purchased PFS in the mid-1990s, which was partially due to Carol's contributions in establishing the business and sacrifices made during the parties' lengthy marriage. See Iowa Code § 598.21(3) (2001). We reject as excessive, however, Carol's claimed need for $3,500 per month in support. Balancing pre- and post-dissolution standards of living, the parties' respective earning capacities and needs, as well as Kerry's ability to pay, we find $2,000 per month was a reasonable support amount. See In re Marriage of O'Rourke, 547 N.W.2d 864, 867 (Iowa Ct.App. 1996).
We further find there should be a modification to the termination provision of the spousal support award, but not to the nature and extent urged by Kerry. We reject Kerry's claims that termination should be tied to the parties' ages and/or retirement status. Given the disparity in the parties' incomes and earning capacities, a permanent alimony award, reduced by any social security benefits, is entirely appropriate. See In re Marriage of Bell, 576 N.W.2d 618, 623 (Iowa Ct.App. 1998) abrogated on other grounds by In re Marriage of Wendell, 581 N.W.2d 197, 200 (Iowa Ct.App. 1998). While we similarly decline to modify the obligation so that it will end upon Carol's remarriage, we note the high burden Carol would face in a modification action to establish a continuing need for support. In re Marriage of Wendell, 581 N.W.2d 197, 200 (Iowa Ct.App. 1998).
We agree, however, that Kerry's obligation to maintain a life insurance policy should be eliminated. The general presumption is that a support obligation terminates upon the obligor's death. In re Marriage of Weinberger, 507 N.W.2d 733, 736 (Iowa Ct.App. 1993). Although it is possible to provide for an award that continues beyond the obligor's death, such an award is dependent upon the facts of each particular case and made only after consideration of the factors outlined in Iowa Code section 598.21(3). Id. We find the facts of this case do not warrant continuation of Kerry's support obligation after his death. See, e.g., In re Marriage of Hettinga, 574 N.W.2d 920, 922 (Iowa Ct.App. 1997) (reversing obligation on paying spouse's estate to purchase annuity, in order to guarantee lifetime alimony to spouse wholly incapable of self-support); In re Weinberger, 507 N.W.2d at 736 (reversing provision requiring husband to maintain life insurance to guarantee alimony payments after his death). We therefore modify the alimony award to terminate upon the death of either party, eliminating the requirement that Kerry maintain a life insurance policy to provide for a lump sum pay-out to Carol or establish an alimony trust following his death.
Attorney and Expert Witness Fees. Carol argues the district court should have awarded her $2,000 for the expert witness fee of Shaw. This case, however, involved complicated valuations of the assets of both parties, and each by necessity retained an expert. We see no abuse of discretion in requiring each party to shoulder the costs of his or her own expert witness. See Neubauer v. Newcomb, 423 N.W.2d 26, 27-28 (Iowa Ct.App. 1988) ("in an equity action the trial court has a large discretion in the matter of taxing costs and we will not ordinarily interfere therewith").
Carol also requests appellate attorney fees. Such an award is discretionary and made in consideration of the needs of the requesting party, the other party's ability to pay, and whether the requesting party was obligated to defend the district court's decision on appeal. In re Marriage of Davis, 608 N.W.2d 766, 773 (Iowa 2000). Applying these considerations in light of the facts in this case, we decline to make an award of appellate attorney fees to Carol. Each party shall pay their own appellate attorney fees, and the costs of appeal are assessed to the parties equally.