Summary
finding it would be inequitable to not allow deduction for spousal support where not deducting the payments would increase income on which child support obligation was based by about $110,000 and overall support obligation by about $20,000
Summary of this case from Grask v. & Concerning William Thomas GraskOpinion
No. 1-747 / 00-0617.
Filed August 14, 2002.
Appeal from the Iowa District Court for Linn County, WILLIAM L. THOMAS, Judge.
Petitioner appeals from the economic provisions of the parties' dissolution decree and the respondent cross-appeals. AFFIRMED AS MODIFIED.
Benjamin W. Blackstock of Blackstock Law Offices, Cedar Rapids, for appellant.
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 EISENHAUER, JJ.
We filed our opinion in this case on July 19, 2002, but subsequently granted respondent-appellee/cross-appellant Brenda Milton's petition for rehearing. Our July 19, 2002 decision is therefore vacated and this opinion replaces it.
Petitioner Kevin Milton appeals the property division, alimony, child support, and attorney fees provisions of the decree dissolving the parties' marriage. Respondent Brenda Milton cross-appeals the property division and alimony provisions of the decree. Brenda seeks an award of appellate attorney fees. We affirm, as modified on one issue, and award no attorney fees.
I. Background facts.
Kevin and Brenda were married April 27, 1978, the first marriage for each. At the time of trial after a twenty-one year marriage Kevin was forty-four years of age and Brenda was forty-three. They are the parents of one child, Jessica, born December 2, 1987.
When the parties married Kevin had a bachelor of science degree in electrical engineering, and had started working on a master's degree at Iowa State University while working at Rockwell International (Rockwell). His 1979 income was $22,301. Rockwell had and continues to have an educational reimbursement program for employees. It paid most or all of the costs for classes and degree programs. While employed at Rockwell Kevin completed the master's degree and began working on a master of business administration degree.
Kevin continued working for Rockwell until about one month before the January 2000 trial in this case. He then began working for Conexant, a "spin off" of Rockwell. When he left Rockwell his base salary was about $100,000 per year. His salary at Conexant is $124,800 per year.
When the parties married Brenda was employed as an expediter at Rockwell where she remains employed, now as a software assistant. Her 1979 income was $8644. She acquired an associate of arts degree while employed, with the costs apparently paid by Rockwell. For the period of time from about 1995 to 1998 she worked part-time so she could be home with Jessica before and after school. The parties agreed to this arrangement. She returned to full-time work in December 1998 when Kevin moved out of the parties' residence and filed for dissolution.
Brenda's salary at Rockwell is now $27,756 per year. She believes that at her current skills and educational levels she will receive only annual cost of living increases of three to four percent and she will need more training through Rockwell or a bachelor's degree in order to more substantially increase her income. She believes acquiring a bachelor's degree will require seven years of part-time attendance while she continues working full-time. We note also that she will have responsibility for Jessica's physical care for the substantial majority of the seven years beginning with the February 2000 dissolution decree.
Brenda testified that she has been diagnosed with fibromyalgia and has some arthritis, anxiety, and panic disorders. She acknowledged she has nevertheless been able to work full-time and does not expect her health to affect her full-time employment in the future.
Based upon Kevin's net income of $6,671.42 per month and Brenda's net income of $1,711.80 per month the trial court ordered Kevin to pay Brenda 17.9% of his net income, $1194 per month, for Jessica's support. The trial court ordered Kevin to pay Brenda $1500 per month alimony, "primarily rehabilitative" alimony, to automatically terminate upon the first of (1) Brenda's death or remarriage, (2) Kevin's death, or (3) Kevin having paid monthly alimony for seven years. The trial court ordered Kevin to pay $5000 toward Brenda's attorney fees.
In dividing property the trial court set aside certain assets to each party before dividing remaining property. It set aside to Kevin three older vehicles of small value that he had brought to the marriage and a vehicle and residence he had recently inherited from his mother. It set aside to Brenda jewelry that Kevin estimated to have a value of $3000 to $4000. It ordered their Rockwell pension plans of undetermined value divided equally between them by way of qualified domestic relations order (QDRO).
It would appear likely those pensions are of considerable value, as both parties had worked for Rockwell for over twenty years.
In dividing the parties' remaining property the trial court ordered that their residence be sold (the parties had apparently agreed it should be sold and had listed it for sale), the net proceeds be divided equally between them, and that Kevin receive certain unvested Conexant stock options.
Kevin's financial affidavit states the residence has a market value of $239,500 and an encumbrance of $133,000. In attempting to determine the approximate amount of property awarded to each party by the trial court we have estimated net proceeds of approximately $90,000 to be divided.
Our review of the record and trial court ruling indicates that in addition to the assets set aside to each party, the equally divided Rockwell pensions of undetermined value, and the unvested Conexant stock options awarded to Kevin, the trial court awarded Kevin net property of $315,000 to $320,000 and awarded Brenda net property of $285,000 to $290,000. These amounts are subject to qualifications we note in later discussion of specific issues.
II. Scope and standards of review.
In this equity case our review is de novo. Iowa R. App. P. 6.4. We examine the entire record and adjudicate rights anew on the issues properly presented. In re Marriage of Smith, 573 N.W.2d 924, 926 (Iowa 1998). We give weight to the fact-findings of the trial court, especially when considering the credibility of the witnesses, but are not bound by them. Iowa R. App. 6.14(6)(g). This is because the trial court has a firsthand opportunity to hear the evidence and view the witnesses. In re Marriage of Will, 489 N.W.2d 394, 397 (Iowa 1992).
III. Merits. A. Property division.
Kevin earned $67,000 by exercising vested options in Rockwell stock in 1999. Taxes withheld and transaction fees reduced the amount received to $43,000 which he placed in a Commercial Credit account. He argues the trial court erred in awarded Brenda one-half of the $43,000 because the parties owed an additional $4200 in income taxes on the amount received and because he had paid $8500 of tuition to the University of Iowa from the account.
Kevin received some $10,000 to $15,000 more than one-half of the parties' property, plus unvested Conexant stock options. Under those circumstances the fact the trial court did not take into consideration the $4200 potential additional tax liability and award Brenda $2100 less does not result in inequity or require a modification of the property division. The $8500 of pre-paid tuition is itself an asset. Further, Conexant will reimburse Kevin up to $7500 of the $8500 if he passes the course for which the tuition was paid and remains employed by Conexant for one year. We find nothing inequitable about the trial court treating the Commercial Credit account has having a value of $43,000 rather than reducing it by the amount of the prepaid tuition.
Prior to trial the parties divided United States savings bonds with a value of $16,000, each receiving about one-half. Kevin complains he listed the bonds in his possession at $8000 on his financial affidavit, Brenda listed the bonds on her financial affidavit but listed no value for them, and the value of the bonds going to her should be included in the division of assets. We have done so in our estimate of the net property awarded to each party by the trial court.
Upon joining Conexant Kevin received a stock option grant of 10,000 shares which would vest over a four-year period at twenty-five percent per year, assuming he remains employed at Conexant. The trial court noted that none of the options had vested and did not further consider them in its property distribution. Brenda asserts the trial court awarded Kevin about $22,000 more property than her. She claims the trial court should have ordered Kevin to exercise the stock options as they vest and pay her the first $22,000 of net proceeds to "equalize" property division, and thereafter pay her one-half of remaining net proceeds from the exercise of the options.
The record contains no evidence of the value, if any, of the options at the time of trial. The options were entirely unvested and vesting was contingent upon Kevin's continued employment by Conexant. It appears somewhat doubtful that these unvested, contingent rights would have significant value at the time of trial, about one month after Kevin joined Conexant. Further, an order such as Brenda proposes, that Kevin be ordered to exercise the options as they vest, would run the risk of economic loss because of the possibility of the price of the stock declining over time and the option price exceeding market price at the time Kevin could exercise the options.
The partners to a marriage are entitled to a just and equitable share of the property accumulated through their joint efforts. 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. Id. The ultimate question is whether the distribution of property is equitable under the specific facts of the particular case. Id. Property division and alimony must be considered together in evaluating their individual sufficiency. In re Marriage of Trickey, 589 N.W.2d 753, 756 (Iowa Ct.App. 1998). In view of the unvested, contingent nature of the stock options, the probability they did not have significant value at the time of trial, the possibility of economic loss resulting from an order such as Brenda proposes, and the substantial award of rehabilitative alimony we later discuss and affirm, we find no inequity in the trial court's decision concerning the stock options.
B. Alimony.
Kevin argues that no alimony should have been awarded to Brenda, due to the significant amount of property awarded to her. He particularly objects to the "large sum" of the monthly award and the "long period of time" for which alimony was awarded. Brenda, on the other hand, argues that the trial court's award of $1500 per month should continue until she reaches age sixty-five. She emphasizes the length of the marriage; her contributions as homemaker and Jessica's primary caretaker, at some cost to her career; disparities between the parties' educations, incomes, and earning capacities; and the lifestyle the parties enjoyed during the marriage.
"Alimony is an allowance to the spouse in lieu of the legal obligation for support." In re Marriage of Sjulin, 431 N.W.2d 773, 775 (Iowa 1988). Any form of spousal support is discretionary with the court. In re Marriage of Ask, 551 N.W.2d 643, 645 (Iowa 1996). Spousal support is not an absolute right; an award depends on the circumstances of each particular case. In re Marriage of Dieger, 584 N.W.2d 567, 570 (Iowa Ct.App. 1998). The discretionary award of spousal support is made after considering the factors listed in Iowa Code section 598.21(3) (2001). Id. Property division and alimony should be considered together in evaluating their individual sufficiency. Trickey, 589 N.W.2d at 756.
When determining the appropriateness of spousal support, a court must consider, among other things, (1) the earning capacity of each party, and (2) the present standards of living and ability to pay balanced against the relative needs of the other. In re Marriage of Bell, 576 N.W.2d 618, 622 (Iowa Ct.App. 1998), abrogated on other grounds by In re Marriage of Wendell, 581 N.W.2d 197, 200 (Iowa Ct.App. 1998). In marriages of long duration where the earning disparity between the parties is great, both spousal support and nearly equal property division may be appropriate. In re Marriage of Weinberger, 507 N.W.2d 733, 735 (Iowa Ct.App. 1993).
An alimony award will differ in amount and duration according to the purpose it is designed to serve. In re Marriage of Francis, 442 N.W.2d 59, 62 (Iowa 1989). Traditional alimony analysis may be used in long-term marriages where life patterns have largely been set and the earning potential of both spouses can be predicted with some reliability. In re Marriage of Kurtt, 561 N.W.2d 385, 388 (Iowa Ct.App. 1997). Traditional or permanent alimony is usually payable for life or for so long as a spouse is incapable of self-support. In re Marriage of Hettinga, 574 N.W.2d 920, 922 (Iowa Ct.App. 1997).
Rehabilitative alimony was conceived as a way of supporting an economically dependent spouse through a limited period of education or retraining following divorce, thereby creating incentive and opportunity for that spouse to become self-supporting. Francis, 442 N.W.2d at 63; see also In re Marriage of O'Rourke, 547 N.W.2d 864, 866 (Iowa Ct.App. 1996). Because self-sufficiency is the goal of rehabilitative alimony, the duration of such an award may be limited or extended depending on the realistic needs of the economically dependent spouse, tempered by the goal of facilitating the economic independence of the ex-spouses. Francis, 442 N.W.2d at 64.
Kevin received some $10,000 to $15,000 more than one-half of the parties' property, plus the right to the Conexant stock options. His much greater earning capacity and income will allow him, after a twenty-one year marriage, to enjoy a relatively high standard of living. He has the ability to pay substantial spousal support. While Brenda furthers her education and increases her earning capacity, she needs an award of spousal support to allow her and Jessica to enjoy a standard of living reasonably approaching that enjoyed during the marriage. The trial court viewed its award of spousal support as "primarily rehabilitative," that is primarily but not exclusively designed to give Brenda the incentive and opportunity to become self-supporting at a standard of living higher than she would have without the award. We agree with an award of rehabilitative alimony under the facts of this case. Although the amount awarded is rather large, based on Kevin's earning capacity and income we do not find it an abuse of the trial court's discretion. Although the duration is rather lengthy, because Brenda will need to continue working and will be responsible for Jessica's physical care it may take her a period of part-time attendance approaching seven years to acquire a bachelor's degree. We therefore conclude the duration of the award does not constitute an abuse of the trial court's discretion.
Brenda is forty-three years of age. She has what appears to be a secure job with salary of $27,756 per year. She is interested in and capable of acquiring further education and increasing her earning capacity and income. Her earning potential is not set and limited for the rest of her life and the lengthy award of rehabilitative alimony will allow her to acquire whatever further education she deserves and increase her earning capacity. She is capable of self-support, and with the additional education facilitated by rehabilitative alimony will be capable of self-support at a higher standard of living. The goal of the alimony award in this case should be and is economic independence. The award will allow achievement of that goal. We conclude the trial court did not abuse its discretion or act inequitably in not awarding permanent alimony.
C. Child support.
Kevin claims that if alimony is awarded it is inequitable to not deduct the alimony when determining his net income for child support purposes.
There is a rebuttable presumption that the amount of child support determined in accordance with Iowa's child support guidelines is the correct amount of child support to be awarded. Iowa Ct. R. 9.4; In re Marriage of Brown, 487 N.W.2d 331, 333 (Iowa 1992). The guidelines enumerate the items that can be deducted from gross income in arriving at the "net monthly income" which is to be used for calculating child support. Iowa Ct. R. 9.5; In re Marriage of Miller, 475 N.W.2d 675, 678-79 (Iowa Ct.App. 1991). The guidelines provide deductions for prior obligations of child support and spousal support actually paid pursuant to court or administrative order, but do not provide a deduction for spousal support paid under the present decree. Iowa Ct. R. 9.5; In re Marriage of Lalone, 469 N.W.2d 695, 697 (Iowa 1991). Deduction of present spousal support from a child support payor's gross income thus constitutes a variance from the guidelines. It is a variance that is within the discretion of the trial court. Lalone, 469 N.W.2d at 697; In re Marriage of Russell, 511 N.W.2d 890, 892 (Iowa Ct.App. 1993). Such a variance requires a finding that the amount of child support which would result from application of the guidelines would be unjust or inappropriate under criteria listed in the guidelines. Iowa Ct. R. 9.9.
The district court did not deduct the alimony to be paid by Kevin when determining his net monthly income. Over the period of approximately six years until child support ends when Jessica will be eighteen and presumably graduate, not deducting alimony payments increases the income on which Kevin's child support obligation is based by about $110,000 and his support obligation by about $20,000. Because of the substantial monthly amount and lengthy duration of the alimony, we conclude it would be inequitable not to allow the deduction. See Russell, 511 N.W.2d at 891-92 (modifying trial court decree to allow deduction of alimony where child support payor was ordered to pay $1000 per month alimony for five years); In re Marriage of Allen, 493 N.W.2d 273, 275 (Iowa Ct.App. 1992) (modifying trial court decree to allow deduction of alimony where child support payor was ordered to pay $750 per month alimony for six years). We conclude that not allowing the deduction would result in substantial injustice to Kevin. See Iowa Ct. R. 9.9(1). We allow the deduction, reduce his present net monthly income for child support purposes from $6,671.42 per month to $5,172.42 per month, and modify his child support obligation to $926 per month until his spousal support obligation to Brenda ends. Beginning on the first day of the first month after Kevin's spousal support obligation ends Kevin shall pay child support of $1194 per month.
D. Trial attorney fees.
Kevin asserts the trial court abused its discretion in awarding Brenda attorney fees. He points to her significant property award, including liquid assets, and her salary of $27,756 per year. He also argues that her refusal, apparently at the suggestion of her attorney, to discuss possible settlement with him, and her seven-week delay in responding to a settlement proposal by him, unnecessarily increased her attorney fees.
An award of trial attorney fees rests in the sound discretion of the trial court and will not be disturbed on appeal in the absence of an abuse of discretion. In re Marriage of Romanelli, 570 N.W.2d 761, 765 (Iowa 1997). The court should make an attorney fee award which is fair and reasonable in light of the parties' financial positions. In re Marriage of Grady-Woods, 577 N.W.2d 851, 854 (Iowa Ct.App. 1998). Based on Brenda's income and the trial court's award of property and alimony the trial court might have awarded less or none. However, given the disparity between the parties' present earning capacities and incomes, and the number, nature, and substantiality of the issues involved in this case, we are unwilling to find an abuse of trial court discretion in the award actually made.
E. Appellate attorney fees
Brenda seeks appellate attorney fees from Kevin. An award of appellate attorney fees is not a matter of right but rests within our discretion. In re Marriage of Kurtt, 561 N.W.2d 385, 389 (Iowa Ct. App. 1997). We consider the needs of the party making the request, the ability of the other party to pay, and whether the party making the request was obligated to defend the trial court's decision on appeal. Id. Brenda was obligated to defend the trial court's decision due to Kevin's appeal, and has done so successfully except as to one issue. She did, however, cross-appeal, Kevin was obligated to defend the trial court's decision on the issues she appealed, and he has done so successfully. After considering the relevant factors we conclude each party should be responsible for their own appellate attorney fees.
IV. Disposition.
We modify the trial court's decree to allow Kevin a deduction for alimony paid and set his child support obligation at $926 per month until his spousal support obligation ends. We affirm on all other issues on both the appeal and cross-appeal. We deny Brenda's request for an award of appellate attorney fees.
AFFIRMED AS MODIFIED.