Opinion
No. 2-735 / 02-0165
Filed February 12, 2003
Appeal from the Iowa District Court for Polk County, Douglas F. Staskal, Judge.
Beverly Goode-Kanawati appeals a district court decision interpreting the parties' dissolution decree regarding funds held for the parties' children under the Iowa Uniform Transfers to Minors Act. Martin Rosenfeld cross-appeals on the issue of his responsibility for a child's postsecondary educational expense. AFFIRMED AS MODIFIED.
Jill Southworth, Urbandale, for appellant.
Stacey Warren of Babich, Goldman, Cashatt Renzo, Des Moines, for appellee.
Considered by Sackett, C.J., and Vogel and Mahan, JJ.
Beverly Goode-Kanawati, formerly Beverly Rosenfeld, appeals a district court decision interpreting the parties' dissolution decree regarding funds held for the parties' children, Natalie and Andrew, for their education. She claims: (1) Martin Rosenfeld held trust funds which should be used only for Natalie's college education; (2) he improperly invaded the trust and should be required to reimburse the funds; (3) Martin created an educational trust for Andrew; (4) Martin should be removed as trustee of these funds; and (5) he should pay attorney fees and costs. Martin cross-appeals on the issue of his responsibility for Andrew's postsecondary educational expenses. We affirm as modified.
Beverly and Martin are the parents of Natalie, born on November 20, 1981, and Andrew, born on December 27, 1987. Natalie is over the age of eighteen and graduated from high school in May 2000. Andrew is in the physical care of Beverly. See In re Marriage of Rosenfeld, 524 N.W.2d 212, 216 (Iowa Ct.App. 1994). Beverly and Martin are both doctors of osteopathy.
A dissolution decree was entered for the parties on December 14, 1990. The decree provided the court would not divide between the parties certain property that had been set aside for the children. There was no specific finding by the district court concerning which assets had been set aside for the benefit of the children. On appeal, the dissolution decree was affirmed by operation of law. In re Marriage of Rosenfeld, No. 91-0014 (Iowa Ct.App. Oct. 29, 1991).
At a hearing in October 1991, Martin testified he purchased four zero coupon bonds that were expected to pay $25,000 a year for four years beginning in 2000, for the purpose of paying Natalie's college expenses. Martin also bought a mutual fund for Natalie. The bonds and mutual fund were given to Natalie under the Iowa Uniform Transfers to Minors Act (UTMA), Iowa Code chapter 565B (1989). When questioned about Andrew, Martin testified, "I set money aside for his college education, but because of the change in the tax laws, it's just been left in my name." Previously, during the dissolution discovery process, Martin stated he spent $20,000 to purchase Iowa Finance Authority Sewage Bonds for Andrew's education.
The transfers in this case were made at the time the Iowa Uniform Gifts to Minors Act (UGMA), Iowa Code chapter 565A, was in effect. Chapter 565A was repealed in 1986 and the UTMA was enacted. The UTMA applies to gifts made under chapter 565A under the facts of this case. See Iowa Code § 565B.22.
The bonds in Natalie's account were called by the issuer in January 1995, and as custodian, Martin received $40,311. He did not reinvest this money, but placed $40,000 in his checking account. He spent some of these funds for the benefit of Natalie and Andrew.
In July 2000 Martin filed an application for modification of his child support obligation because Natalie was over the age of eighteen and no longer eligible for child support. Martin also asked the court to determine the parties' respective responsibilities for Natalie's college expenses because she planned to begin attending the University of North Carolina in the fall of 2000. Beverly responded by filing a petition for an accounting of the funds held by Martin for the children's education, and asked that he be ordered to pay Natalie's college expenses from her educational fund. These actions were consolidated.
The district court found Martin had violated the UTMA by commingling Natalie's funds with his own and by failing to keep adequate records of transactions. The court determined Martin had improperly used $14,280.21 of Natalie's funds to purchase items for other family members. The court determined this amount would have grown at five percent annually, and ordered Martin to restore $20,000 to Natalie's funds. Beverly was made custodian of the restored funds, while Martin was permitted to remain custodian of the mutual fund, which was then worth about $27,500. The court found Natalie's educational funds should cover her college expenses, and did not order the parties to further contribute to her college expenses.
The district court noted that the dissolution decree awarded Martin "TJH Iowa Finance, four $5000 bonds." The court determined these were the same bonds Martin stated he had set aside for Andrew. The court concluded the language of the decree was not specific enough to impose a trust on the bonds in favor of Andrew. Martin was ordered to pay child support of $1735 per month for Andrew. Beverly was awarded $150 for an expert witness fee and $500 in attorney fees.
Both parties filed motions pursuant to Iowa Rule of Civil Procedure 1.904(2). These motions were denied. As noted above Beverly appealed, and Martin cross-appealed.
I. Standard of Review
Our scope of review in this equitable action is de novo. Iowa R.App.P. 6.4. In equity cases, especially when considering the credibility of witnesses, the court gives weight to the fact findings of the district court, but is not bound by them. Iowa R.App.P. 6.14(6)( g).
II. Uniform Transfer to Minors Act
A. Beverly first contends Martin should only have been permitted to use the UTMA funds for Natalie's college education. She asserts the funds were held in trust for Natalie's education and "the purpose of a trust governs its administration and enforcement." See Eldred v. Merchants Nat'l Bank, 468 N.W.2d 221, 223 (Iowa 1991).
Once property is gifted to a minor under the UTMA, the donor no longer has title to the property. See In re Marriage of Hoak, 364 N.W.2d 185, 189 (Iowa 1985) (discussing UGMA). The purpose of the UTMA is to establish a legal mechanism to handle instances where minors receive money and property by gift and where it is not desirable to establish a guardianship or trust. In re Marriage of Hendricks, 681 N.E.2d 777, 781 (Ind.Ct.App. 1997) (emphasis added). We conclude a transfer under the UTMA does not create a trust. A transfer under the UTMA is governed by the terms of the UTMA. See id. at 782.
Section 565B.14(1) provides:
A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to:
a. The duty or ability of the custodian personally or of any other person to support the minor; or
b. Any other income or property of the minor which may be applicable or available for that purpose.
A custodian may use his or her discretion to make expenditures on behalf of the minor. Sutliff v. Sutliff, 489 A.2d 764, 773 ( Pa. Super. 1985). Although Martin could have decided to use the UTMA funds solely for Natalie's education, see In re Marriage of Boehlje, 443 N.W.2d 81, 84 (Iowa Ct.App. 1989) (noting UGMA funds may be used for college expenses when the fund was set up for that purpose), under UTMA, he was not restricted to using the funds only for this purpose. See Hendricks, 681 N.E.2d at 782 (noting that although custodian stated funds were to be used for educational purposes, under UTMA funds could be used for "the support, maintenance, education, and benefit" of the child).
B. Beverly next contends Martin made improper expenditures from Natalie's UTMA funds. The custodian of a UTMA account
may not use funds in the account to pay or reimburse herself either for expenditures which she makes for her own benefit or for expenditures which she is legally obligated to make from her own funds for the benefit of the minor who is the beneficiary of the custodial account.
Cohen v. Cohen, 609 A.2d 57, 69 (N.J.Super.Ct.App.Div. 1992) (discussing UGMA). The UTMA does not relieve a parent of the separate duty to support his or her children. See In re Marriage of Wolfert, 598 P.2d 524, 526 (Colo.Ct.App. 1979); see also Hoak, 364 N.W.2d at 189 ("Ordinarily, a parent who has sufficient means will not be entitled to compensation for a child's support from the child's estate."). The UTMA does not allow custodial funds to be used to benefit the custodian. See Sutliff, 489 A.2d at 772.
Martin submitted an accounting showing payments of $51,264.86 for the benefit of the children. The court determined the only permissible payments were those specifically for Natalie, and not payments for Martin, Andrew, or the family as a whole. As custodian, Martin had discretion to use Natalie's funds for her benefit, such as for her bat mitzvah and camp tuition. See Cohen, 609 A.2d at 58 (finding custodian could use UGMA funds for child's camps and schools). The district court found payments of $25,719.79 were made for Natalie's benefit. Subtracting this amount from $40,000, the court concluded Martin improperly spent $14,280.21 of custodial property.
We agree with the district court that it would be futile to remand for a more detailed accounting because Martin provided such records as he had.
In ruling on the parties' motions pursuant to rule 1.904(2), the court stated it had not allowed Martin any credit for expenses that were paid before the proceeds of the bonds were placed in his account. Some of the expenses permitted by the court, however, had occurred prior to January 1995. For instance, Natalie's bat mitzvah was in 1994, and Martin claimed payments for Natalie's taxes in 1992, 1993, and 1994. Also, we do not allow expenses which are considered within the concept of support, such as travel expenses and dental expenses. Looking at Martin's accounting, we find only $5819.54 of legitimate expenses which were paid for Natalie's benefit after January 1995. We conclude $34,180.46 of Martin's claimed expenses were improper. Assuming an annual growth rate of five percent, by 2001 these funds would be worth $45,805.08.
C. Inherent in the UTMA is the jurisdiction and authority to protect the child's financial interests. Shinkosky v. Shinkosky, 19 P.3d 1005, 1009 (Utah Ct.App. 2001). This means that where a custodian has misappropriated funds held under the UTMA, the custodian is responsible to reimburse the child for those funds. Buder v. Sartore, 774 P.2d 1383, 1390 (Colo. 1989); Cohen, 609 A.2d at 59. We determine Martin should pay Beverly $45,805.08, which she should place in an UTMA fund for Natalie's benefit. Beverly is the custodian of this account.
D. Beverly claims Martin should have been removed as the custodian of Natalie's other UTMA account, which was held in a mutual fund. Clearly, a custodian who has improperly removed funds from a child's custodial account may be removed as custodian. Iowa Code § 565B.18(6) (custodian may be removed "for cause"); Rolek v. Iowa Dist. Court, 554 N.W.2d 544, 545 (Iowa 1996). We note, however, that a custodian is not automatically removed in these circumstances. Sutliff, 489 A.2d at 777 (holding custodian should not be removed in circumstances where there was nothing to show the "custodian did not hold a good-faith belief that his conduct was permissible under the UGMA.").
The district court noted there was no reason to remove Martin as custodian of the mutual fund held for Natalie's benefit. Martin did not improperly spend any of this fund, but had invested it for Natalie's benefit. No allegations have been brought in regard to this fund. We agree with the district court's conclusion on this issue.
III. Funds for Andrew
A. Beverly asserts the district court improperly placed the burden upon her to show Martin held certain funds in trust for Andrew. She points out that once a trust is established, the guardian has the burden of accounting for his stewardship. In re Guardianship of Cavin, 333 N.W.2d 840, 842 (Iowa 1983). We find Beverly has the initial burden of proof, however, to show that a trust has been established. See Iowa R.App.P. 6.14(6)( e).
B. Beverly contends that whether or not the Iowa Finance Authority Sewage Bonds were awarded to Martin in the dissolution decree, by Martin's statements he created an express trust for Andrew's benefit.
In order to determine the status of the Sewage Bonds, we must interpret the language of the parties' dissolution decree. When interpreting dissolution decrees, we look to the intent of the trial court as gathered from the decree and other proper evidence. In re Marriage of Romanelli, 570 N.W.2d 761, 763 (Iowa 1997); In re Marriage of Trickey, 589 N.W.2d 753, 758 (Iowa Ct.App. 1998). Every word should have force and effect, and be given a consistent, effective and reasonable meaning. In re Marriage of Russell, 559 N.W.2d 636, 637 (Iowa Ct.App. 1996).
In the dissolution decree, the district court stated:
In addition, Martin has invested certain amounts in trust for the benefit of his children by a former marriage and for Natalie and Andrew. These trust funds are for the benefit of the children and the Court makes no order as to these.
The court did not make any disposition of the funds held for Natalie in her UTMA accounts. The court, however, awarded to Martin the four Iowa Finance Authority Sewage Bonds. In order to give effect to all parts of the decree, we conclude that by making this award, the district court must have concluded Martin did not hold these bonds "in trust" for Andrew. We determine the question of whether the bonds were held by Martin for Andrew's benefit was determined at the time of the parties' dissolution, and may not now be revisited. Iowa Code § 598.21(11) ("Property divisions made under this chapter are not subject to modification."); In re Marriage of Martin, 641 N.W.2d 203, 204 (Iowa Ct.App. 2001).
Although not entirely clear from the record, it appears Martin also held funds "in trust" for his children from a previous marriage, and these funds were not included in the division of property in the dissolution decree.
IV. College Expenses
A. Beverly claims the amounts in Natalie's UTMA accounts will not cover her college expenses, and she asks to have Martin made responsible for some of these excess expenses. The district court found Natalie's college expenses were about $7725 per year for tuition, room, board, fees and books. Beverly claims it costs about $14,000 per year to send Natalie to college, but includes costs such as a car, gasoline, clothing, and telephone.
Generally, a parent's responsibility has been limited to the costs of tuition, room, board, and books. In re Marriage of Maher, 596 N.W.2d 561, 564 (Iowa 1999); In re Marriage of Dolter, 644 N.W.2d 370, 373 (Iowa Ct.App. 2002). Usually we do not require a parent to pay a child's personal expenses, such as clothing or telephone bills. See Dolter, 644 N.W.2d at 373; In re Marriage of Springer, 538 N.W.2d 897, 901 (Iowa Ct.App. 1995). We find the district court properly found Natalie's college expenses were $7725 per year, and this amount may be paid from her UTMA funds. We conclude there is no need for an order addressing the issue of parental contribution for Natalie's college expenses at this time.
B. In his cross-appeal, Martin asserts the district court erred by finding the parties' obligations for Andrew's postsecondary education expenses were not controlled by section 598.21(5A). The supreme court has determined section 598.21(5A) applies only to dissolution decrees postdating the statute's enactment in 1997. In re Marriage of Sojka, 611 N.W.2d 503, 505 (Iowa 2000). The parties' dissolution decree was filed in 1990, and we agree with the district court's conclusion that section 598.21(5A) does not apply to these parties.
V. Attorney Fees
As noted above, the district court awarded Beverly $500 for trial attorney fees. She asks to have this amount increased. An award of attorney fees rests within the sound discretion of the district court, and will not be disturbed on appeal absent a showing of an abuse of discretion. Romanelli, 570 N.W.2d at 765. We find no abuse of discretion under the facts of this case.
Beverly also seeks attorney fees for this appeal. An award of appellate attorney fees is not a matter of right, but rests within the court's 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. Maher, 596 N.W.2d at 568. We determine Martin should pay $1000 toward Beverly's appellate attorney fees.
We affirm the decision of the district court, except that we modify to increase the amount Martin must reimburse Natalie's UTMA account. Costs of this appeal are assessed to Martin.
AFFIRMED AS MODIFIED.
Vogel, J., concurs specially; Sackett, C.J., concurs in part and dissents in part.
I concur with the result reached by the majority, but disagree with two of its broad statements: first, "[a] custodian may use his or her discretion to make expenditures on behalf of the minor," citing Sutliff v. Sutliff, 489 A.2d 764, 773 (Pa.Super.Ct. 1985), and second, "under UTMA funds could be used for `the support, maintenance, education, and benefit' of the child," citing In re Marriage of Hendricks, 681 N.E.2d 771, 782 (Ind.Ct.App. 1997).
Both the trial court and the majority construe Iowa Code section 565B.14(1)(a) to allow expenditures, "without regard to the duty or ability of the custodian personally . . . to support the minor . . . ." However, that code section is modified by section 565B.14(3) which states, "[a] . . . payment or expenditure under this section is in addition to, not in substitution for, and does not affect any obligation of a person to support the minor." The expenses disallowed by the majority are all "obligations" of the parent, not the child, under section 565B.14(3) and therefore could not be shifted to the child, even under the broader language of section 565B.14(1) and despite case law from other jurisdictions that suggests otherwise. I would submit these are all expenses the Iowa legislature expects parents to bear under our marriage dissolution decrees.
I concur in part and dissent in part.
While apparently not raised, I question Beverly's standing to challenge the expenditure of Natalie's funds and whether it is properly raised in a modification action. Natalie is now an adult not shown to be under any disability. That said, I concur with the majority opinion on the appeal and would affirm.
I would modify on the cross-appeal and set support at the amount fixed by section 598.21(5A). I agree with Martin In re Marriage of Socka, 611 N.W.2d 503, 505 (Iowa 2000), should not apply as college expenses were not fixed prior to the enactment of the statue.