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In re the Marriage of Ceilley

Court of Appeals of Iowa
Feb 28, 2003
662 N.W.2d 374 (Iowa Ct. App. 2003)

Opinion

No. 2-922 / 02-0434.

Filed February 28, 2003.

Appeal from the Iowa District Court for Polk County, Robert A. Hutchison, Judge.

Respondent appeals the economic provisions of the parties' dissolution of marriage decree. AFFIRMED.

Diane Stahle and Patricia Shoff of Davis, Brown, Koehn, Shors Roberts, P.C., Des Moines, for appellant.

William Fanter and Ann Spellman of Bradshaw, Fowler, Proctor Fairgrave, P.C., Des Moines, for appellee.

Heard by Sackett, C.J., Huitink, J., and Harris, S.J.

Senior Judge assigned by order pursuant to Iowa Code section 602.9206 (2003).


The facts in this review of economic provisions of a dissolution of marriage decree involve a long-time marriage and extensive wealth. A trial court order equally dividing the assets leaves both parties with ample means for a comfortable lifestyle. The wife's most serious challenge on appeal is to the denial of permanent alimony. Although there is certainly an ability to pay, we affirm.

Here is a depressing script we see all too often involving fabulously successful people. Roger and Kay were married in 1968 and were both fifty-six years old at the time of trial. They started dating in high school and attended college together. They then married and moved to Iowa City where Roger attended medical school. For the first three years, Kay was the principal wage earner, teaching during the school year and doing office work during the summer. Roger worked part-time.

During his senior year, Roger and Kay decided to start a family and jointly decided Kay would stay home to care for the children. Kay undoubtedly sacrificed much to become a full-time mother, wife, and homemaker, and the reward to the family was great indeed. There were three children, all now emancipated. Elizabeth, born in 1971, is a physician who at the time of trial was in her last year of a five-year radiation oncology residency. John, born in 1974, is also a physician and was in a second year of psychiatric residency. Paul, born in 1978, is a business major graduate and was living and working in Denver.

Roger's professional career has been remarkable. Following his graduation from medical school, completion of a residency, and serving on the medical school faculty, he established a highly successful dermatology practice in Des Moines. He specializes in MOHR surgery, which we are told is a technique of microscopic-controlled surgery for skin cancer. He is a recognized and highly respected national leader in his chosen field and a past president of the American Academy of Dermatology. He is a clinical professor at the University of Iowa College of Medicine, an unpaid position that on occasion requires him to travel to Iowa City. His earnings have been phenomenal. In 1999 his wages were $1,180,871, and in 2000 were $1,418,900. He anticipated his earnings in 2001 would exceed $1,600,000.

The couple has accumulated vast wealth. They have no debt. By investing in growth rather than income property, at trial they had accumulated a net worth of $13.6 million. There is surprisingly little dispute over the division of property, ordered pursuant to Iowa Code section 598.21(1) (2001). Both Roger and Kay requested an essentially equal division, which is proper when, as here, the property was acquired during the marriage. In re Marriage of Conley, 284 N.W.2d 220, 223 (Iowa 1979).

I. On appeal, Kay raises only two challenges to the property division. One has to do with past income from a farm she and her sister inherited from their father in 1981. At that time, the farm was mortgaged to pay inheritance taxes owed on it. Kay's fifty-percent income from the farm, reported on Roger and Kay's income tax return, was used to retire the mortgage and also to accumulate a fund of $51,000. The trial court correctly set aside to Kay her interest in the inherited farm. See Iowa Code § 598.21(2). Retirement of the mortgage was ignored, but the court included the $51,000 in the marital estate subject to the equal division. Kay challenges this treatment of the farm income, contending it should be set aside to her along with her interest in the farm. We think the ruling was correct. The farm income was kept in a separate account and invested in bank certificates so that it can be traced. But we agree that it would be unfair on these facts to consider the farm income as part of the inheritance. It was marital property.

II. In fixing the value of the marital estate, the trial court found Roger's share of his medical practice to be worth $303,000. Kay challenges this finding because the figure was based only on hard assets, with no allowance for good will. Kay points out that good will can exist in a professional practice for purposes of setting alimony. In re Marriage of Bethke, 484 N.W.2d 604, 607 (Iowa Ct.App. 1992); In re Marriage of Hogeland, 448 N.W.2d 678, 681 (Iowa Ct.App. 1989). Kay's initial difficulty with this challenge is with the record, which is overwhelming that medical practices in Des Moines are routinely bought and sold with no allowance for good will. Kay confronts this initial difficulty by distinguishing between equity good will, that is good will as we commonly understand it, and personal good will. Citing cases form other jurisdictions, Kay asks us to recognize "equity good will," and distinguish from "personal good will" as a marital asset subject to property division. Frazier v. Frazier, 737 N.E.2d 1220, 1225 (Ind.Ct.App. 2000); Prahinski v. Prahinski, 582 A.2d 784, 786-87 (Md. 1990); Hanson v. Hanson, 738 S.W.2d 429, 434 (Mo. 1987).

But once again Kay is confronted with the record. Roger paid nothing for good will when he acquired an interest in the practice; he is under a contract with his partner associate that specifies good will should carry no value in the event, for buy-in purposes, of the retirement, debts, or disability of either partner. Both Roger and his partner testified they have an oral agreement that the same provision would apply if either of them leaves the practice for any other reason. Because of Roger's contract with his partner, any "personal good will" that might be assigned to his medical practice is nothing more than a part of his remarkable earning capacity, a matter we have already noted. Although Kay's expert witness assigned an equity good will value to the practice, on our de novo review we agree with the trial court finding that good will has no value as an asset in Roger's medical practice. Because it has no factual basis in the evidence, we need not and do not decide the legal principle the case suggests.

III. Because it determined Kay had not shown a need for it, the trial court refused Kay's request for permanent alimony. Kay challenges the refusal, contending Roger's enormous earning capacity proves he could readily pay the $300,000 annually she says would be required to maintain the lifestyle she enjoyed during the last years of the marriage. No doubt Roger has the ability to pay. Kay points out that a $300,000 award would, after tax consequences are factored, "cost" Roger only $209,501 which is thirteen percent of his current income. Kay reminds us of her limited earning capacity after so many years she spent for the family and of her poor health conditions. As mentioned, she has been a full-time wife, mother and homemaker for more than thirty years. She is no longer certified to teach and has none of the computer skills necessary to teach in her former field of business education.

Alimony is derived from a duty to support. It arises from the ability of one former spouse to pay, and the need of the other to receive. The need exists when necessary to enjoy the standard of living that existed during the marriage. Once that standard is assured, alimony becomes inappropriate. In re Marriage of Grady-Woods, 577 N.W.2d 851, 854 (Iowa Ct.App. 1998); In re Marriage of Misol, 445 N.W.2d 411, 413 (Iowa Ct.App. 1989); In re Marriage of Hayne, 334 N.W.2d 347, 351 (Iowa Ct.App. 1983). In former times, alimony served a punitive function, and might have been awarded accordingly without a showing of need. This is no longer true. See Rosemary Shaw Sackett Cheryl K. Munyon, Alimony: A Retreat from Traditional Concepts of Spousal Support, 35 Drake L. Rev. 297, 303-06 (1986).

The record is clear that Kay has no need of alimony. Her average monthly expenditures during the three months prior to trial were less than $9000. The trial court pointed out that earnings from her half of the marital estate, invested conservatively, would yield several times that — after taxes. When she reaches the age of sixty, the added disposable income from retirement plans will increase dramatically, and will do so again when she reaches sixty-five.

The equal division of the vast marital estate, unchallenged on this appeal, was certainly appropriate. It left Kay extremely wealthy. Because nothing more was required to maintain her comfortable lifestyle, alimony was correctly refused.

IV. Kay also assigns error in the trial court's refusal to order Roger to pay her mediation and trial attorney fees. Both Kay and Roger asked for an award of attorney fees on appeal. We find the trial court order correct and order that both parties pay their own attorneys' fees on appeal. Costs on appeal are taxed one fourth to Roger and three-fourths to Kay.

AFFIRMED.

Huitink, J., concurs; Sackett, C.J., concurs in part and dissents in part.


I concur in part and dissent in part.

I concur with the majority's decision to consider the farm income as inherited property. I also concur with the majority's decision not to establish a value for the goodwill of Roger's office practice. In so doing, however, I must disagree with the majority's decision also to deny Kay alimony.

This case bears many of the markings of a case meriting a traditional alimony award. This was a long-term marriage. At the outset Kay worked to assist Roger with his medical education. She gave up her career and any advancement she might have had to raise their children. She was the primary caretaker of the children, and she had primary responsibility for the family home and social obligations, among other things. It was with the agreement of both parties that she assumed these responsibilities, and she carried them out exceptionally well. In addition, with Kay's help Roger has advanced in his profession. The income he produced has afforded his family a high standard of living, and it has enabled him and Kay to amass a substantial net worth. Furthermore, as the majority recognizes, Roger has the ability to pay Kay substantial alimony.

The majority has concluded Kay does not need alimony to achieve a standard of living similar to the one enjoyed during the period the parties were husband and wife. I agree with this conclusion. What I disagree with is the majority's conclusion that because Kay has not shown a need, she is not entitled to alimony. I might well have agreed with the conclusion that Kay should be denied alimony had it not been for the fact that no value has been placed on the goodwill of Roger's practice.

We are to consider future earning capacity in considering the equities of the economic provisions of dissolution. See In re Marriage of Hogeland, 448 N.W.2d 678, 681 (Iowa Ct.App. 1989). In denying Kay both credit for the goodwill that exists in Roger's business as well as alimony, the majority ignores any consideration of Roger's future earnings. This in not in accord with In the Marriage of Bethke, 484 N.W.2d 604, 609 (Iowa Ct.App. 1992), where although we did not consider the goodwill of the wife's medical practice in valuing the parties' assets, we did consider it in assessing alimony. In Hogeland we disagreed with the trial court's decision to treat goodwill of a dental practice as an asset in valuating assets, but we did consider the future or goodwill of the professional practice as a factor in assessing the economic issues in the dissolution. Hogeland, 448 N.W.2d at 681. We further reasoned that where one party would be continuing a professional practice, professional goodwill was a factor to consider in assessing future earning capacity of the professional. Id. In Hogeland, the substantial alimony award was based largely on the husband's future earnings as a dentist. Id.

The economic provisions of a dissolution decree are not a computation of dollars and cents, but a balancing of equities. In a marriage of long duration, alimony can be used to compensate a spouse who leaves the marriage at a financial disadvantage, especially where the disparity in earning capacity is great. See In re Marriage of Geil, 509 N.W.2d 738, 742 (Iowa 1993); Marriage of Clinton, 579 N.W.2d 835, 839 (Iowa Ct.App. 1998); In re Marriage of Earsa, 480 N.W.2d 84, 86 (Iowa Ct.App. 1991). That did not happen here.

Society would probably be best served if alimony were awarded primarily in those cases where the only source for equitable division is from the future income of the advantaged spouse. See In re Marriage of Wendell, 581 N.W.2d 197, 202 (Iowa Ct.App. 1998). And while the equities could have been balanced here without the award of alimony, that did not happen.

There was a nearly equal division of the net worth the couple accumulated during the marriage. While Iowa is an equitable division state, we most frequently arrive at close to an equal division of the net worth acquired by the couple during a long-term marriage.

Yet while Roger's medical degree was not included in determining the net worth to be divided, it is a source of income. Not to consider it in some fashion is contrary to prior cases and does not sound in equity.

Understandably, both parties have substantial assets, absent unforeseen circumstances, to allow them to live in luxury the balance of their lives. But this is not the issue. Roger and Kay deserve to be treated equitably in the financial portion of the decree. This can only occur if Kay benefits from Roger's future earnings which were made possible in part because of her past sacrifices. Under the record, I find the most reasonable manner of accomplishing this is to award Kay alimony. Consequently, I would modify the district court's decision to award Kay alimony of $10,000 a month from the date of the dissolution until the time Roger reaches sixty-five years of age. In all other respects I concur with the majority.


Summaries of

In re the Marriage of Ceilley

Court of Appeals of Iowa
Feb 28, 2003
662 N.W.2d 374 (Iowa Ct. App. 2003)
Case details for

In re the Marriage of Ceilley

Case Details

Full title:IN RE THE MARRIAGE OF ROGER I. CEILLEY and KATHERINE L. CEILLEY. Upon the…

Court:Court of Appeals of Iowa

Date published: Feb 28, 2003

Citations

662 N.W.2d 374 (Iowa Ct. App. 2003)