Opinion
No. 2-948 / 01-0645.
Filed June 25, 2003.
Appeal from the Iowa District Court for Woodbury County, Michael S. Walsh, Judge.
The parties appeal the alimony and property division portions of their dissolution decree. AFFIRMED.
Bradford Kollars, Sioux City, for appellant.
Michael Ellwanger and Jeffrey Garreans of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs Mohrhauser, L.L.P., Sioux City, for appellee.
Heard by Sackett, C.J., and Zimmer and Vaitheswaran, JJ.
Craig and Ralane Probasco appeal the alimony and property provisions of their dissolution decree. We affirm.
I. Background Facts and Proceedings
Craig and Ralane met in college in 1983 and began living together in 1985. They had a child, graduated from college, and ultimately married in 1991. Neither party brought appreciable assets to the marriage.
The parties stipulated that based on their cohabitation, it would be fair to treat the marriage as if it had begun in November 1985.
In 1990, the parties decided to open a restaurant. Craig and his father formed two entities to facilitate this goal: CGP, Inc. and Probasco Properties. In 1993, CGP, Inc. obtained a twenty-year Perkins franchise agreement. Probasco Properties leased land and a building to CGP, Inc. to operate the Perkins restaurant. The business opened and became one of the most successful Perkins franchises in the country.
Craig's expert witness testified the franchise "has been the second highest grossing Perkins in the nation . . . ."
Craig ultimately decided to obtain two additional Perkins franchises, known as Eastgate and Norfolk. He formed two entities, CPRO and ProProp, L.C. to own and operate these franchises.
By 1999, the marriage had deteriorated and Craig filed a dissolution petition. The parties stipulated to custody and child support. Following trial on property and alimony issues, the district court awarded Ralane a total of $780,000 in alimony to be paid over thirteen years and $580,250 to compensate her for her interest in CGP, Inc. and Probasco Properties. Ralane appealed and Craig cross-appealed.
II. Alimony
The fighting issue is whether the district court should have ordered reimbursement alimony. Craig argues on cross-appeal that the district court's award was not reimbursement alimony and was excessive. Ralane responds that the alimony award was an equitable option, given the court's decision not to award her a one-half interest in Probasco Properties. We agree with Ralane.
In awarding $60,000 a year in alimony for thirteen years, the district court reasoned:
The alimony award is compensation for Ralane's contribution to Craig's obtaining the downtown Perkins franchise, which, like a professional license, is an ongoing benefit to Craig, which Ralane reasonably relied on as a benefit to her future but for the interruption of this dissolution.
Contrary to Craig's assertion, we believe this rationale is sound. The alimony award is warranted based on a consideration of the following statutorily prescribed spousal support factors: the financial or service contributions of Ralane, the nature of the property distribution, and Ralane's earning capacity. See Iowa Code §§ 598.21(3)(c), (e), (h) (2001).
A. Ralane's Contributions. Iowa Code section 598.21(3)(h) authorizes a court to consider "[a]ny mutual agreement made by the parties concerning financial or service contributions by one party with the expectation of future reciprocation or compensation by the other party." With Craig's approval, Ralane made both financial and service contributions which aided in the success of the Perkins restaurant.
After graduating from college with a significantly higher grade point average than Craig, Ralane stayed at home to care for the children, manage the household finances, assist Craig with his early insurance business, and chauffeur Craig when he was without a license. She also helped with the preliminary exploration of restaurant franchises when Craig expressed unhappiness with his insurance job. Later, she found work to provide the parties with a source of income while the restaurant got off the ground.
After the franchise was purchased, Ralane learned the job duties of the various positions at the restaurant, helped interview managers, assisted with the parties' home office, continued her outside employment, and worked at the restaurant. She eventually took over the accounting functions of the restaurant in an effort to correct cash control problems, performing these functions for over four years.
Ralane made all these contributions despite having no ownership interest in the corporations that were associated with the franchise. These contributions indirectly and directly enhanced the success of the Perkins franchise, entitling Ralane to alimony.
B. Nature of the Property Distribution . Iowa Code section 598.21(3)(c) authorizes a court to consider the property distribution in connection with a request for alimony. The parties agreed to a division of all their assets and liabilities other than the Perkins restaurant and the Eastgate and Norfolk properties. The district court valued the CGP, Inc. and Probasco Properties at $1,480,500 and ordered Ralane to receive fifty percent, or $740,250.00. After crediting against this sum the value of a home Craig purchased for Ralane, the court found Craig owed Ralane $580,250. Craig contends this amount fully compensated Ralane for her interest in the property. He argues the alimony award in essence gave Ralane a double recovery. We disagree.
Ralane was compensated for the current value of the Perkins restaurant. As the district court noted, however, the decree terminated her "future expectations" from the restaurant. We are not convinced all these future expectations were subsumed in the current value of the property. As property and alimony awards are interrelated, we believe the district court acted equitably in using alimony to fully compensate Ralane for her relinquishment of all interest in the franchise operation. See In re Marriage of Bethke, 484 N.W.2d 604, 607-08 (Iowa Ct.App. 1992); In re Marriage of Hogeland, 448 N.W.2d 678, 681 (Iowa Ct.App. 1989).
C. Earning Capacity. Iowa Code section 598.21(3)(e) authorizes a court to consider the earning capacity of the spouse seeking support. Additionally, our courts have consistently held that an increase in future earning capacity of the supporting spouse is an asset for division. See, e.g., In re Marriage of Francis, 442 N.W.2d 59, 63-64 (Iowa 1989); Hogeland, 448 N.W.2d at 681; In re Marriage of Berger, 431 N.W.2d 387, 388-90 (Iowa Ct.App. 1988). An alimony award is a means of compensating a spouse for this expected increase in earning capacity. Francis, 442 N.W.2d at 64. It is "predicated upon economic sacrifices made by one spouse during the marriage that directly enhance the future earning capacity of the other. . . ." Id. In our view, this rationale is not limited to cases involving contributions to a spouse's advanced degree, as Craig contends. Together with the other cited factors, we believe Ralane's earning capacity of $24,000 to $36,000 relative to Craig's earning capacity of from $176,000 to well over $200,000 entitle Ralane to alimony. This differential earning capacity also justifies the amount of the alimony award.
Craig's financial statement filed in March 2000 reflects that he received gross income from CGP, Inc. and Probasco Properties of $297,711.58. His net income was $176,208.56.
III. Property Division A. Valuation of Probasco Properties. Ralane argues that the district court undervalued Probasco Properties. She seeks an additional $210,000 as part of the property division.
The district court considered the opinions of the parties' respective valuation experts and determined that the appraisal and analysis performed by Craig's expert, Russ Manternach, was "more realistic and credible." Specifically, the court noted that Ralane's expert did not perform a comparable rent analysis as Manternach did. In light of this omission, the court stated, "Manternach's analysis is more realistic in terms of a potential buyer assessing the risk involved in maintaining the contract rent that now exists between CGP, Inc., and Probasco Properties." We see no reason to disturb this portion of the court's ruling. In re Marriage of Goodwin, 606 N.W.2d 315, 319 n. 1 (Iowa 2000).
B. Security for Judgment. Ralane asks that we modify the decree to secure the property and alimony judgments. Craig responds that this issue was not preserved for review. We agree with Craig. Accordingly, we decline to address this issue.
C. Contributions to Eastgate and Norfolk Properties. Ralane contends the district court acted inequitably in finding she did not significantly contribute to the Eastgate and Norfolk properties. She seeks royalty payments from the entities that were formed to develop those sites.
On our de novo review of the record, we find evidentiary support for the court's findings. However, even if we assume Ralane contributed to the development of these properties, we believe the district court's economic award to Ralane, viewed in its entirety, is equitable. In re Marriage of Trickey, 589 N.W.2d 753, 756 (Iowa Ct.App. 1998).
D. Asserted Waste of Assets. Ralane contends Craig dissipated assets after the parties' separation. She seeks an equitable award of $100,000 to compensate her for "her portion of dissipated receipts, income, assets, dividend and distributions." Craig responds that Ralane failed to preserve error on this issue. Bypassing the error preservation concern, we conclude Ralane is not entitled to the relief she seeks.
We note Ralane raised the issue in a trial brief and in her motion pursuant to Iowa Rule of Civil Procedure 1.904, although not in the precise fashion as it is raised here. The district court overruled this portion of her Rule 1.904 motion.
A preliminary order enjoined the parties from "concealing, or in any way disposing of property of the parties, except in the usual course of business or for the necessities of life, the latter to be justified by proof of such necessities and to be considered during any subsequent hearings conducted." Craig admitted he liquidated some jointly owned Gateway stock valued at $77,000 and spent other income on "living expenses." Those expenses were documented in a summary exhibit. They included temporary support payments to Ralane, expenses for charity, dining, entertainment, automobiles, home improvements, recreation, and items that reasonably could be characterized as living expenses. Based on this exhibit, we conclude Craig did not violate the preliminary order and Ralane is not entitled to compensation for waste of assets.
IV. Filing of Joint Income Tax Returns
Ralane asks that we order the parties to file a joint income tax return for the year 2000 and divide the tax refunds equally for that year. We believe Ralane's economic award is equitable and see no reason to award this relief.
V. Appellate Attorney Fees
Ralane seeks appellate attorney fees. An award rests within our sound discretion. In re Marriage of Benson, 545 N.W.2d 252, 258 (Iowa 1996). We believe the district court's economic award affords Ralane sufficient funds to pay her attorney fees.
AFFIRMED.
Zimmer, J., concurs; Sackett, C.J., concurs in part and dissents in part.
I concur in part and dissent in part. Ralane has appealed contending (1) the district court failed to correctly value the parties' interest in Probasco Properties, (2) the district court made incorrect findings as to her contributions to two developments; (3) the district court did not properly consider assets Ralane contends were wasted while the dissolution action was pending, (4) the district court should have ordered the parties to file a joint federal income tax return for the calendar year 2000; and (5) the district court did not secure her property and alimony awards. Craig challenges the district court's award of reimbursement alimony.
I believe, as the majority seems to imply, that the valuation of the Probasco Properties established by the district court was low and I would increase it $200,000 thereby increasing the judgment Craig is ordered to pay from $580,250 to $780,250. I would, as did the district court, order that $100,000 be paid before May 1, 2001, but I would spread the payment of the balance over ten years at the interest rate established by the district court. I concur with the majority and find no reason to reverse on the challenge to the district court's findings on Ralane's contributions to the two developments or her claim that there were wasted assets not included in the property division. I agree with the majority's decision not to order the parties to file a joint federal income tax return as I do not believe with all the ramifications of a joint return that this is relief a court can or should ever order.
I depart from the majority's decision not to secure the property settlement to be paid by Craig. I would order that any unpaid amount be made a lien on Probasco Properties until paid.
The majority has affirmed an award of reimbursement alimony. I would reverse the award of reimbursement alimony. I agree with Craig that facts of this case do not support an award of reimbursement alimony. Reimbursement alimony is a unique form of alimony that does not terminate on remarriage. It is limited to situations where there are not assets to balance the inequities of the marriage, such as frequently occurs when one party has made sacrifices to see that the other party obtains education which will result in that person having an increased, but not yet realized, earning capacity. See In re Marriage of Francis, 442 N.W.2d 59, 64 (Iowa 1989). With the modifications I would make Ralane would receive one-half of the parties' assets, such half having a value of over one million dollars.
The parties are about the same age. They have similar educations. Ralane has worked in various businesses and is very employable. Craig is paying child support. Both parties have made sacrifices in the marriage; neither is at a disadvantage as a result of those sacrifices, as they are leaving the marriage with approximately the same net worth. The majority has sought to justify alimony, finding that Craig's earning capacity is greater than Ralane's. What this conclusion fails to address is that Craig earnings came from a business and, while his management skills were important to the business, unlike a professional where the business earns because of the professional's expertise, here the business earned because of the investment in it. Craig is losing one half of his equity and Ralane is receiving it. As a result, Craig's future income will be less. Ralane will have the same capital and she has substantially the same education as Craig and numerous experiences working in businesses. This is not a case where alimony of any kind or type should be awarded. I would reverse the reimbursement alimony award.
I would therefore affirm in part, modify to increase the property division, provide that it be secured, and extend the term of its payment. I would delete the alimony award. I would order all modifications to the district court order be retroactive to the time of the original decree.