In RE the Marriage of Kenneth R. Michael and Melissa J. Michael Upon the Petition of Kenneth R. Michael , 2013 Iowa Sup. LEXIS 118 ( 2013 )

IN THE SUPREME COURT OF IOWA
No. 12–0912
Filed November 15, 2013
IN RE THE MARRIAGE OF KENNETH R. MICHAEL
AND MELISSA J. MICHAEL
Upon the Petition of
KENNETH R. MICHAEL,
Appellant,
And Concerning
MELISSA J. MICHAEL,
Appellee.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Black Hawk County,
Andrea J. Dryer, Judge.
Ex-husband sought, and we granted, further review of a court of
appeals decision reversing in part the district court’s modification of his
spousal support obligation. DECISION OF COURT OF APPEALS
VACATED IN PART AND AFFIRMED IN PART; DISTRICT COURT
JUDGMENT AFFIRMED AS MODIFIED.
Steven H. Lytle and Ryan G. Koopmans of Nyemaster Goode, P.C.,
Des Moines, for appellant.
Ashley A. Tollakson of Hartung & Schroeder, LLP, Des Moines, for
appellee.
2
HECHT, Justice.
The district court modified Kenneth Michael’s obligation to pay
Melissa Michael traditional alimony, concluding the payments should
cease when Kenneth reaches age sixty-seven. The court’s order also
terminated immediately Kenneth’s obligation to pay for Melissa’s health
insurance. The court of appeals affirmed the termination of Kenneth’s
health insurance obligation, but found no substantial change of
circumstances justifying the termination of the alimony obligation prior
to Melissa’s remarriage or death. On further review, we vacate the
decision of the court of appeals, modify the decision of the district court,
and affirm.
I. Background Facts and Proceedings.
Kenneth and Melissa Michael were married in April 1971. Both
are now sixty-three years old, and they are the parents of two adult
children who are not involved in this appeal. Melissa worked as a
homemaker and stay-at-home mother for the duration of the parties’
twenty-three year marriage. Melissa secured part-time work outside the
home shortly after Kenneth initiated a dissolution proceeding in
September 1993. She worked in various jobs during the course of the
proceeding, but when the dissolution decree was entered in June 1994,
she was temporarily unemployed and without any expectation of
retirement or pension benefits. At the same time, Kenneth had just
begun a new job at Brown & Brown—a construction company in
Kansas—at an annual salary of approximately $47,000.
The decree required Kenneth remain responsible for: (1) the
student loans of the children, up to $20,000 exclusive of interest for each
child; (2) medical and hospital insurance for the children until they
completed postsecondary education; (3) a life insurance policy for as long
3
as he was obligated to contribute to the costs of postsecondary education
for the children; (4) medical insurance coverage for Melissa; and (5)
weekly spousal support payments of $450 for fifty-two weeks, followed by
payment of one-third of his annual gross salary and bonuses thereafter
until Melissa died, remarried, or cohabited.
Kenneth sought modification of the spousal support obligation in
December 1996. By the time of the trial on the modification in November
1997, Kenneth had married his current wife, Barbara, and had
established a new home with her. He had continued working at Brown &
Brown and had seen his salary increase to $1500 weekly, or
approximately $78,000 annually. He had earned annual bonuses of
$1500, $7000, and $20,000 in 1994, 1995, and 1996, and he had
consistently made his support payments based on his gross earnings
including weekly wages and bonuses. After fifty-two weekly payments of
$450, his obligation had been reduced briefly to $397 weekly, but the
obligation thereafter increased as his salary increased. By November
1997, Kenneth was paying Melissa $500 per week plus one-third of his
annual bonus. Beyond the spousal support obligation, Kenneth was also
making monthly loan payments of approximately $440 on a debt of
nearly $45,000 incurred in part for the cost of the children’s
postsecondary education. Barbara was then employed full-time, making
approximately $10.35 per hour. Melissa had secured full-time
employment with Principal Mutual Life Insurance Company at an annual
salary of $17,551, exclusive of bonus and overtime.
After the 1997 trial on modification, the district court noted
various changes had occurred since the entry of the original decree but
nonetheless denied Kenneth’s request for relief, explaining the changes
were not substantial or material and would have been within the
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contemplation of the district court at the time of the decree. In August
1998, while an appeal of the court’s order was pending, the parties
stipulated to and the court entered an order modifying Kenneth’s spousal
support obligation, setting the amount at $480 weekly until Melissa died,
remarried, or cohabited. The other provisions, including the medical
insurance support provision, were neither litigated nor mentioned in the
stipulated modification and remained unchanged.
Kenneth filed a second petition for modification in July 2011,
requesting termination or significant reduction of his weekly support and
monthly medical insurance payments to Melissa. The district court held
a trial on the matter in February 2012. Although Kenneth had earned
$111,399 in the 2010 calendar year at Hall Brothers, he had been laid off
in early 2011 as part of a reduction in the employer’s workforce.1 After
three weeks of job search, he had secured new full-time employment as a
project manager with Venture Corporation at an annual salary of
$85,020, or approximately $1635 per week. At the 2012 modification
trial, Kenneth expressed doubt that he would receive bonuses with his
new employer. He also testified that despite his receipt of steadily
increasing bonuses prior to the 1998 proceeding, he had not received a
substantial bonus in any of the years following the 1998 proceeding.2 He
was making payments on a credit card debt of approximately $44,000,
some of which remained from the obligations allocated to him in the
1994 decree, and some of which was attributable to Kenneth’s and
1Hall
Brothers acquired Brown & Brown in 2008. Kenneth remained with the
company as vice president of operations through that transition and until the layoff in
2011.
2He did, however, receive a special $5000 bonus at the beginning of 2011 for his
work relating to the Hall acquisition of Brown & Brown.
5
Barbara’s increasing medical expenses. Kenneth owned an individual
retirement account with a value of $90,614. Barbara had remained in
the same full-time employment since the 1998 modification and her
annual income had approximately doubled over the years. Her gross
earnings in 2010 were $43,530 and she earned $39,749 in 2011.
Melissa had remained with the same employer, now called
Principal Financial Group (Principal), since the 1998 modification. By
2011, her pension benefits had vested, and she had accumulated
approximately $190,000 in retirement funds. With wages of $29,201,3
Kenneth’s weekly support payments totaling $24,960 for the year, and
$333 in interest and dividend income, Melissa’s reportable income in
2010 was $54,494.
Kenneth testified at the 2012 modification trial that he had
growing concerns about his and Barbara’s medical expenses. Kenneth
and Barbara are smokers, and Kenneth is a recovering alcoholic.
Kenneth had received treatment for his alcoholism once during the
marriage in 1982. He suffers from degenerative spondylitis and
underwent back surgery to repair two herniated discs in 2008. He
entered treatment for alcoholism again voluntarily in 2009 following the
back surgery. He now takes Aleve® for his back pain, but he does not
currently take any prescription medications. He has also dealt with
various neck and knee problems. His job as project manager at Venture
Corporation requires a 160-mile roundtrip commute, longer on-the-job
hours, and more daily physical exertion than his previous job. He did
3Melissa’s rate of pay since 2007 has been $17 per hour, or $35,638 annually,
exclusive of overtime and bonuses. Her pay has been capped for the past four years
and she does not expect a raise in the foreseeable future. The discrepancy between her
gross wages and her reportable income is apparently due to her pre-tax contributions to
her retirement accounts.
6
not testify at the trial that he was incapable of performing these tasks,
but he speculated that he might not be capable for much longer, based
on his physician’s advice and his own perception of his condition.
Barbara testified at the trial that she suffers from inflammatory
neuropathy, chronic pain, and numbness in her feet. She takes Lyrica®
for the chronic pain, after having tried several other medications, each of
which brought various side effects. The Lyrica® affects Barbara’s vision
and has contributed significantly to an increase in Barbara’s and
Kenneth’s out-of-pocket medical expenses. The prognosis for her
condition is uncertain, but she presently plans to continue working full-
time and has no plans for retirement.
Melissa raised medical concerns of her own at the trial. She
suffers from osteoarthritis and takes prescription medication for joint
inflammation. She wears eye glasses and incurs optometry expenses
each year. She has also experienced shingles and migraines. She has,
however, characterized her medical concerns and expenses as routine.
After considering the evidence, the district court determined the
increase in Melissa’s income, her continued employment with Principal,
and the pension and other resources that would be available to her upon
retirement were circumstances not contemplated by the district court at
the times the 1994 decree and 1998 modification were entered. Further,
the court explained, these changes were substantial and more or less
permanent. The court found inequitable the requirement that Kenneth
continue making weekly support payments indefinitely. Accordingly, the
court modified the decree to require instead that Kenneth continue
making weekly payments of $480 until he reaches age sixty-seven, or
until Melissa remarries or either party dies. Finding Melissa’s continued
employment with Principal had allowed her to obtain medical, dental,
7
and vision insurance coverage, the court further modified the decree by
eliminating the requirement that Kenneth subsidize Melissa’s monthly
health insurance premium. The court ordered that the parties pay their
own attorney fees and split the court costs of the modification action.
Melissa appealed and we transferred the case to the court of
appeals. The court of appeals reversed the modification of Kenneth’s
weekly support obligation, concluding Kenneth had failed to demonstrate
a substantial change in the parties’ financial circumstances not
contemplated by the court at the time of the 1998 modification. The
court of appeals found any disparities in savings and debt obligations
between the parties had been self-inflicted and could not constitute
grounds for a reduction in Kenneth’s spousal support obligation. The
court of appeals affirmed, however, the termination of Kenneth’s monthly
health insurance payment obligation and the allocation of attorney fees
and costs. We granted Kenneth’s application for further review of the
court of appeals decision.
II. Scope of Review.
We review de novo a decision modifying the terms of a marriage
dissolution decree. In re Marriage of Johnson, 781 N.W.2d 553, 554
(Iowa 2010). We will not disturb the trial court’s conclusions “unless
there has been a failure to do equity.” In re Marriage of Wessels, 542
N.W.2d 486, 490 (Iowa 1995). We review a district court’s decision on
attorney fees for abuse of discretion. See In re Marriage of Goodwin, 606
N.W.2d 315, 324 (Iowa 2000).
III. Discussion.
Kenneth raises two issues on appeal, contending (1) the district
court erred in failing to eliminate or substantially reduce his weekly
support obligation before he reaches the age of sixty-seven, and (2) the
8
district court erred in failing to award him reasonable attorney fees as
the prevailing party below. Melissa cross-appeals, assigning as error the
district court’s elimination of Kenneth’s weekly support obligation at age
sixty-seven and the court’s immediate elimination of his monthly health
insurance payment obligation. Both parties request appellate attorney
fees.
A. The Spousal Support Obligations. The parties dispute the
soundness of the district court’s determination that Kenneth established
a substantial change in circumstances has occurred since the 1998
modification. Kenneth argues that because Melissa now supports herself
and has accumulated substantial retirement savings, no justification for
a continuing traditional alimony payment remains. Further, Kenneth
contends, his decrease in real earnings from employment after his
transition from Hall Brothers to Venture Corporation, his significant
health issues, his inability to accumulate significant retirement
resources in part due to his spousal support and debt service obligations
arising from the original decree, and his advancing age, when taken
together, constitute a substantial change in circumstances justifying
immediate modification of his support obligations, instead of prospective
relief delayed five years as the district court ordered. Melissa responds
that the facts Kenneth presents, regardless whether taken in isolation or
in combination, cannot constitute a change in circumstances justifying
modification. She also contends that regardless whether Kenneth has
demonstrated a substantial change, she has demonstrated a need for
continuing support until her death or remarriage. Therefore, she argues,
the district court erred in making any further modification beyond that
agreed to by the parties in 1998.
9
Our marriage dissolution statute provides that a district court
“may subsequently modify child, spousal, or medical support orders
when there is a substantial change in circumstances.” Iowa Code
§ 598.21C(1) (2009). The statute adds that the court shall consider a
number of specific factors in determining whether there has been a
substantial change. Among the factors relevant here are:
(a) Changes in the employment, earning capacity,
income, or resources of a party.
(b) Receipt by a party of an inheritance, pension, or
other gift.
(c) Changes in the medical expenses of a party.
....
(e) Changes in the physical, mental, or emotional
health of a party.
....
(l) Other factors the court determines to be relevant in
an individual case.
Id.
In reviewing an earlier version of this provision, which enumerated
substantially the same list of factors, we explained that we examine the
factors in conjunction with several “other well-established principles
governing modification.” See In re Marriage of McCurnin, 681 N.W.2d
322, 329 (Iowa 2004). The party seeking modification, for example, bears
the burden of establishing by a preponderance of the evidence the
substantial change in circumstances. Wessels, 542 N.W.2d at 489–90.
A substantial change justifying a modification must be permanent or
continuous rather than temporary in nature. McCurnin, 681 N.W.2d at
329–30. We have also consistently explained the substantial change
must not have been within the contemplation of the district court when
the decree was entered, and we presume the decree is entered with a
10
“view to reasonable and ordinary changes that may be likely to occur.”
Wessels, 542 N.W.2d at 490; see also McCurnin, 681 N.W.2d at 329–30.4
Several additional principles from our prior modification cases
guide our analysis. We may consider the unrealized but existing earning
potential of a party at the time of the decree and contrast that with a
later established earning potential as part of our determination of
whether a substantial change in circumstances has been demonstrated.
See McCurnin, 681 N.W.2d at 330; see also In re Marriage of Sjulin, 431
N.W.2d 773, 777 (Iowa 1988). We have cautioned that while changes in
earning capacity or earning potential may constitute substantial changes
for purposes of the statutory determination, the changes will not justify a
modification if they result from an improper intent to deprive an obligee
of support. In re Marriage of Rietz, 585 N.W.2d 226, 229–30 (Iowa 1998).
In addition, in certain modification cases, we have distinguished
rehabilitative alimony from permanent alimony awards and explained
that the rationale underlying the award may have some bearing on the
determination of whether modification is justified. See Wessels, 542
N.W.2d 489–90. Finally, regardless the type of award, we have often
observed that a change in an obligee spouse’s ability to or potential for
self-support may be an important consideration in our determination.
See id. at 490 (affirming modification extending duration of award in case
where obligee had been unable to meet rehabilitative goal of self-
support); cf. In re Marriage of Francis, 442 N.W.2d 59, 64 (Iowa 1989)
(explaining, in reviewing an initial dissolution decree, that traditional
4In developing that principle in the context of modification of child support
orders, we have emphasized we examine what the court entering the decree actually
knew, as opposed to what the parties knew or should have known at the time of the
earlier proceeding. See Mears v. Mears, 213 N.W.2d 511, 515 (Iowa 1973).
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alimony is “payable for life or so long as a spouse is incapable of self-
support”).
The parties have raised various significant equitable considerations
for our analysis here. Addressing Kenneth’s present circumstances first,
we note the district court found Kenneth failed to establish that his
current salary at Venture Corporation is permanent and raised the
possibility that his salary might soon approach his previous
compensation level at Hall Brothers. We view Kenneth’s current position
somewhat differently. Kenneth reached his 2009 and 2010
compensation levels at Hall Brothers after more than ten years of service
as a vice president at the company, and after having previously served
for several years as a project manager for the company Hall Brothers
later acquired. He now works again as a new project manager, not a vice
president, at Venture Corporation, and the record suggests he has had
no indication thus far of any prospect for advancement. He has not
received a substantial bonus since the 1998 modification and has had no
indication that bonuses—a very significant component of his
compensation prior to the 1998 modification—will be paid by his new
employer. Moreover, despite his advancing age and his deteriorating
health and physical condition, he now works in a more physically
demanding role than the one he had performed for the previous twelve
years, casting significant doubt on his potential for longevity and
advancement at the company.5 See Iowa Code § 598.21C(1)(a) (requiring
consideration of changes in both income and earning capacity in
determining whether modification is appropriate); see also In re Marriage
5The record does not suggest Kenneth has any desire to retire or choose a course
of employment for the purpose of reducing his support obligation; rather, it merely
suggests he has significant uncertainty regarding his future at the company.
12
of Wegner, 434 N.W.2d 397, 399 (Iowa 1988) (noting distinction between
changes in present income and changes in earning potential and
explaining both were relevant in affirming modification of obligee’s
award).
Melissa notes that regardless whether Kenneth has the potential
for advancement with Venture Corporation, his current salary is actually
greater than the salary he received at the time the 1998 decree was
entered, but we find this contention unpersuasive. Kenneth’s annual
salary of $85,000 in 2011 is nominally greater than his 1998 base salary
of $78,000, but we think it important to note again that Kenneth
received significant year-end bonuses from Brown & Brown in the years
preceding the 1998 modification—bonuses that rendered his total
compensation for those years greater than his 2011 compensation. In
addition, we have often explained that we may consider the effects on
income of inflation and increasing costs of living—both of which render
Kenneth’s 2011 compensation significantly smaller in real terms than his
1998 compensation. See, e.g., Page v. Page, 219 N.W.2d 556, 558 (Iowa
1974) (concluding a twenty percent decrease in income at a time when
the cost of living had increased constituted a substantial decrease in the
obligee’s income and affirming the district court’s modification of the
obligor’s support obligation).6 Taken together, Kenneth’s new
uncertainty regarding his employment longevity and earning potential
and his significantly smaller income relative to his income at the time of
the 1998 modification strongly influence our determination of whether a
substantial change has been established and modification is appropriate.
6We note these considerations will also inform our analysis of Melissa’s position,
and we consider the relative impact of these factors on the positions of both parties.
See Page v. Page, 219 N.W.2d 556, 558 (Iowa 1974).
13
See Iowa Code § 598.21C(1)(a); see also Rietz, 585 N.W.2d at 231
(affirming district court’s modification when record revealed obligor was
no longer likely to be employed at the high income level he had enjoyed
at the time of the original decree); cf. American Law Institute, Principles
of the Law of Family Dissolution § 5.08 cmt. d, at 970 (2000) [hereinafter
Principles] (explaining modification may be appropriate when “the former
spouses’ living standards are less disparate than expected because of a
decline in the obligor’s income”).
Our modification analysis also requires consideration of Melissa’s
current financial position. As Kenneth contends, and as the district
court found, Melissa now earns more than twice what she earned at the
time of the 1998 modification and she is more than capable of supporting
herself. Her position now provides significant medical, dental, and vision
insurance coverage. She has minimal debt, she holds an undergraduate
degree in business, and she has remained employed at Principal for the
past seventeen years. Her pension at Principal has now vested and will
yield her an estimated payment of approximately $774 monthly upon her
retirement. The district court observed, and we think it important to
note, she had been at Principal just three years at the time of the 1998
modification, and her pension had not yet vested. We agree with the
district court’s finding that her longevity at the company, her substantial
increase in income, and her accrual of significant retirement benefits
were not likely within the contemplation of the district court at the time
the 1998 modification was entered. See McCurnin, 681 N.W.2d at 330
(explaining change from an unrealized earning potential to an
established earning potential may be an important consideration in the
modification analysis); Sjulin, 431 N.W.2d at 777 (same).
14
We acknowledge Melissa’s current income remains significantly
less than Kenneth’s, but we think it important to emphasize, as the
district court did, that our equitable analysis must also account for
changes in the relative positions of the parties. See, e.g., McCurnin, 681
N.W.2d at 330–31 (affirming modification of award extending payment
obligation despite finding obligee’s income had nearly doubled, in part
because obligor’s income had nearly tripled and his financial position
had “vastly improved” since the decree); see also Principles § 5.08(1)(a), at
963 (recommending modification when the living standards of the
spouses are “substantially more or substantially less disparate than
contemplated by the prior order” as a result of a decline in the obligor’s
income); cf. Wegner, 434 N.W.2d at 399 (“[B]oth parties, if they are in
reasonable health, need to earn up to their capacities . . . and not lean
unduly on the other party for permanent support.”). Given Melissa’s
current financial position as compared to her position in 1998, the
change in Melissa’s financial position relative to Kenneth’s position at
present as compared to her position relative to Kenneth’s position in
1998, and Melissa’s present ability to support herself, we conclude
Kenneth has established a substantial change in circumstances and is
entitled to a modification of his weekly support obligation. In addition,
we conclude Kenneth has established a substantial change with respect
to Melissa’s medical support requirements, given the advent of her
employer-sponsored insurance coverage, which she had not obtained at
the time of the dissolution and was not addressed at the time of the 1998
modification. We therefore turn to the question of what modification of
Kenneth’s obligations is justified by this record.
Giving due account to our various equitable considerations,
including the parties’ respective financial positions and the change in the
15
income gap between the parties, we conclude Kenneth’s weekly support
obligation should be reduced to $285 per week.7 Cf. Rietz, 585 N.W.2d at
228–29, 231 (affirming district court’s modification of an obligation from
$4000 monthly to $1000 monthly when obligor’s expected annual
income declined from approximately $200,000 to approximately $50,000
and obligee’s earning capacity remained stable). We do not disturb that
portion of the 1998 modification requiring that the obligation persist
until Melissa’s remarriage, cohabitation, or death.8 We agree with the
district court’s determination that the changed circumstances dictate
Kenneth’s monthly medical insurance payment obligations should cease
now.
B. Attorney Fees. As we have already noted, Kenneth contends
the district court erred in ordering the parties to pay their own attorney
fees incurred in the district court proceedings, and he requests this court
order Melissa to pay his appellate attorney fees. Melissa responds that
7We note that at the time of the 1998 modification, Kenneth earned $98,000
($78,000 base pay plus a bonus of $20,000) per year. Melissa earned $17,551 per year.
The 1998 modification established a spousal support obligation of $24,960 per year
($480 per week)—a figure equivalent to approximately thirty-one percent of the
difference between the parties’ annual employment earnings at the time (24,960 ÷
80,449 = .3102). The reduction of Kenneth’s support obligation to $285 per week
($14,820 per year) will maintain Kenneth’s support obligation at approximately thirty-
one percent of the difference between Kenneth’s current annual earnings of $85,020
and Melissa’s current earnings of $37,413 (14,820 ÷ 47,607 = .3113).
8Although the district court concluded the support obligation should terminate
when Kenneth reaches the age of sixty-seven, equitable considerations lead us to a
different result. Whether Kenneth’s obligation to pay traditional spousal support
should terminate at that future date will depend on the circumstances of the parties
prevailing at that time. See, e.g., In re Marriage of Rietz, 585 N.W.2d 226, 231 (Iowa
1998) (affirming modification setting support obligation “based on [obligor’s] present
actual income”); In re Marriage of Geil, 509 N.W.2d 738, 743 (Iowa 1993) (striking
portion of modification that “prejudge[d]” obligee’s right to modification and noting
“future events” would “determine the parties’ relative rights”); cf. In re Marriage of
Schlenker, 300 N.W.2d 164, 165 (Iowa 1981) (“[T]rial courts should make final
disposition of [dissolution] cases on the circumstances then existing.”).
16
the district court’s order was reasonable and within its discretion, but
she requests an award of her appellate attorney fees. The court of
appeals affirmed the district court’s order on attorney fees below, and
denied both parties’ requests for attorney fees incurred in the appeal.
Section 598.36 addresses attorney fee awards in modification
proceedings. The section provides that the district court “may award
attorney fees to the prevailing party in an amount deemed reasonable by
the court.” Iowa Code § 598.36. We have emphasized that the language
of the provision is permissive and that we give the district court
considerable discretion in determining whether it should award fees at
the district court level. See In re Marriage of Maher, 596 N.W.2d 561,
568 (Iowa 1999). We have similar discretion in awarding appellate
attorney fees. See id. We have often explained the controlling
considerations in the attorney fee determination are the parties’
respective abilities to pay. See Wessels, 542 N.W.2d at 491; Francis, 442
N.W.2d at 67. We may also consider whether a party resisting the
modification petition was successful, and whether a party has been
obliged to defend the trial court’s decision on appeal. In re Marriage of
Bolick, 539 N.W.2d 357, 361 (Iowa 1995).
Here, we note both parties may be deemed to have prevailed to
some extent in the proceedings below. While neither party is affluent,
both parties have resources with which to pay their fees, and we find
their respective abilities to pay comparable. Accordingly, we cannot find
the district court erred in ordering the parties pay their own attorney
fees, and we decline to award either party appellate attorney fees.
IV. Conclusion.
We modify the parties’ dissolution decree by reducing Kenneth’s
obligation to pay weekly spousal support and terminating his monthly
17
obligation to contribute to the cost of Melissa’s health insurance.
Accordingly, we vacate in part and affirm in part the decision of the court
of appeals, and affirm as modified the judgment of the district court.
Each party shall pay half the costs of the appeal.
DECISION OF COURT OF APPEALS VACATED IN PART AND
AFFIRMED IN PART; DISTRICT COURT JUDGMENT AFFIRMED AS
MODIFIED.