Opinion
No. 3-339 / 02-1784
Filed July 10, 2003
Appeal from the Iowa District Court for Linn County, Kristin L. Hibbs, Judge.
Appellant Joseph Greif, Jr. appeals the district court's increase of his child support obligation. AFFIRMED AS MODIFIED.
Douglas Meyer of Ackley, Kopecky Kingery, L.L.P., Cedar Rapids, for appellant.
Sherry Schulte of Howes Law Firm, P.C., Cedar Rapids, for appellee.
Considered by Sackett, C.J., and Huitink and Vogel, JJ.
Appellant Joseph Greif, Jr. appeals, challenging the district court's increase of his child support obligation which he contends should have been decreased. We affirm in part and modify.
Our review of this proceeding to modify a marriage dissolution decree is de novo. In re Marriage of Barker, 600 N.W.2d 321, 323 (Iowa 1999); In re Marriage of Walters, 575 N.W.2d 739, 740-41 (Iowa 1998); In re Marriage of Bolick, 539 N.W.2d 357, 359 (Iowa 1995).
The marriage of Joseph and Marni R. Greif was dissolved in January of 2000. The parties agreed they would have joint legal custody of their five children. Adam, born February 14, 1983, was placed in Joseph's primary physical care. Richard, born September 7, 1984; Benjamin, born April 18, 1980; Joseph, born March 17, 1994; and Josetta, born March 17, 1994, were placed in Marni's primary physical care. Joseph was ordered to pay Marni child support of $1200 a month, the amount to be reduced by one fourth as each child in her care was no longer eligible for support. Marni was not ordered to pay child support to Joseph for Adam.
In May of 2001 Joseph sought modification of the decree, asking among other things that he have shared physical care of Richard and that his child support obligation be reduced. He contended Richard had lived with him 145 out of the last 242 days. Marni advanced certain counterclaims, including a request that the child support be reviewed because Adam, who initially had been placed in Joseph's care, now was over eighteen years of age and had graduated from high school. She also asked that Joseph be found in contempt of court for his failure to pay child support.
At the time of the modification trial the parties agreed Joseph should have Richard's physical care. The modification court found Marni's support obligation for Richard should be offset from the support Joseph owed Marni for the other three children. The court increased Joseph's support obligation, finding he should pay $1275.97 a month for the three children in Marni's care, and she should pay him $282.89, resulting in Joseph paying $993.08 until Richard graduated from high school.
Joseph contends his child support should have been modified. He contends the modification court incorrectly considered his annual earning capacity to be $59,917.
Joseph was farming at the time of the dissolution hearing in November of 1999. He owned no farmland but rented three tracts from his parents. In determining Joseph and Marni's income for purposes of computing child support, the dissolution court looked to income reported by the couple on their federal income tax return in the 1998 calendar year. The trial was held in November of 1999, and the dissolution court used the 1998 reported income. In arriving at what the dissolution court determined to be Joseph's actual annual income of $23,732 for 1998, the dissolution court made certain adjustments to reflect treatment of Commodity Credit loans and repayments and added an amount it determined the depreciation taken by Joseph exceeded straight line depreciation.
The dissolution court found, but did not consider, that as of the date of trial Joseph had a $14,215.59 operating loss in 1999.
After finding Joseph's annual income was $23,732 and Marni's was $12,106, the dissolution court said that while it agreed with Joseph's calculation of his income, Marni should have child support. The dissolution court went on to say that although the depreciation fund was a legitimate deduction and a source of funds to replace worn-out machinery, it was not an out-of-pocket fund, and a portion of it, which was determined by the dissolution court to be $56,960, should be allocated to the children's support. While it is not entirely clear what this fund was or how it played into computing the child support owed, apparently the dissolution court considered this then to be a deviation for child support to be raised upwards in awarding Marni $1200 a month, which would then be reduced as each child left home, not considering Marni's support obligation for Adam.
At the time of the modification hearing, Joseph had gone to work for his parents' family farm corporation as a farm laborer at $9.00 an hour, working thirty-five hours a week after attempting, without success, employment in a series of other jobs. Joseph also had transferred farm machinery to his parents to discharge debts that he owed them, and he sold other machinery. His parents leased their farmland which Joseph had farmed to a son-in-law.
The modification court found Joseph had an earning capacity at the time of trial of $59,917 based on what it found the dissolution court determined was Joseph's earning capacity. The modification court also found Joseph's change in employment was voluntarily done together with the assignment of assets to his parents in an effort to avoid paying child support. The modification court further found Joseph's support should be based on annual income of $59,917.
Joseph argues he currently makes $15,000 a year, and that the dissolution court found him to make $23,732 as a farmer, not the $59,917 used by the modification court. We agree with Joseph that the dissolution court found his actual earnings after certain adjustments, including discounting accelerated depreciation for 1998, to be $23,732. The dissolution court also found that as of the date of the November trial in 1999, Joseph was operating at a loss. There being no evidence to support a finding Joseph did or can earn $59,917 a year, we must disagree with the modification court's determination of Joseph's earnings.
Joseph further contends the modification court was incorrect in finding that he transferred his machinery to his parents to avoid paying child support. Marni argues the transfer of assets was to preclude her from levying for child support, and Joseph's parents formed a farm corporation to prevent her levying. At the time of the modification hearing, Joseph had paid $30,000 support and was delinquent in paying an additional $6,000 owed. Marni also contends that in reviewing the child support, we need to consider that in addition to Joseph's salary, he receives free rent and other benefits. Joseph argues he does not receive free rent; rather, he owes his parents rent for the home where he lives but has not been able to pay it. Marni argues that when the children are raised Joseph will get something back from the farm corporation. She advances Joseph's parents have assets and spend considerable money on things that are not necessary.
At the time of the dissolution, Joseph was farming 725 acres he rented from his parents. He filed a financial statement showing he and Marni had a net worth of approximately $173,000. Included in this net worth were about $144,000 in crops and livestock which when sold would be reportable income. There was equipment valued at $228,300. Liabilities included notes of $154,362, accrued interest of $8486, and 1999 farm rent of $47,401 due Joseph's parents. Marni was also obligated on these debts. Pursuant to a settlement agreement, Joseph made an $80,000 cash payment to Marni. He borrowed all or a substantial portion of that amount from a bank. Additionally, as part of the settlement he assumed the farm assets and the parties' liabilities. It was December of 2000 when Joseph settled his obligations with his parents, releasing himself and Marni from any further obligation to them. A financial statement made in August of that year showed that Joseph had a net worth of $4,800.
The machinery Joseph transferred to his parents had been purchased from them in 1998. The obligation to his parents was in part for that purchase. Joseph also sold some items to pay off the $61,000 note at the bank that he had taken out to settle with Marni.
Joseph was not making $59,917 at the time of the dissolution. He has lost the lease to some 700 acres of farmland. He is a high school graduate and has one year of college. He was forty-one years old at the time of the modification action. His 2001 return showed wages of $14,779. There is no showing he has the ability to get into farming, as he has no land owned or rented and he has no machinery. He has tried other jobs with little success.
The modification court found Joseph's settlement with his parents was an effort to avoid paying child support. The agreement made about a year after the dissolution left Joseph with essentially no debts or assets. Marni seems to argue he should yet have $80,000, an amount similar to what she took from the marriage.
Marni argues Joseph valued the machinery in August of 2000 at $197,000, while it was valued at the time of the dissolution some six months earlier at $265,000. At the time of the dissolution Joseph showed he owed his parents $210,249. Interest would have continued to accrue on this amount between January and December of 2000. Also, Joseph sold some machinery to pay the note taken out to pay Marni. Subsequently, giving the required deference to the modification court's credibility findings, we affirm the modification court's finding that the value of the machinery transferred was in excess of the debt owed.
We reject Marni's argument that in assessing child support we should consider the fact Joseph's parents have assets and some day they may give these assets to Joseph. We do recognize Joseph's income was not sufficient for him to pay all the ordered child support and live, so obviously he used some of his assets to discharge that and other debts. It is difficult, therefore, to determine the exact portion of the decrease in Joseph's net worth attributable to transfer of assets and that attributable to using assets to discharge other expenses. The amount of his net worth is relevant on the issue of child support only to the extent that would have increased his income. Even if Joseph were to realize a ten percent return on $80,000, or $8000, his annual income would continue to be $23,000, or the amount that the dissolution court determined he earned. See In re Marriage of Will, 602 N.W.2d 202, 205 (Iowa Ct.App. 1999). Marni's income from wages has increased since the dissolution so that she now earns about $20,000 annually.
Marni does not report income on the $80,000 she took from the marriage.
There was no basis to increase Joseph's child support obligation. Consequently, with the change in Richard's primary physical care from Marni to Joseph, Joseph's support obligation to Marni decreases to $900. Marni did not appeal from the support she was ordered to pay for Richard of $282.92. Consequently that amount shall be offset against the monthly amount that Joseph owes her, and until Richard is no longer eligible for support, Joseph shall pay her $617.08, after which time Joseph shall pay $900 a month.