In RE the Marriage of Diana L. Kimbro and Steven C. Kimbro Upon the Petition of Diana L. Kimbro , 826 N.W.2d 696 ( 2013 )

IN THE SUPREME COURT OF IOWA
No. 11–1398
Filed February 8, 2013
IN RE THE MARRIAGE OF DIANA L. KIMBRO
and STEVEN C. KIMBRO
Upon the Petition of
DIANA L. KIMBRO,
Appellee,
And Concerning
STEVEN C. KIMBRO,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Linn County, Robert E.
Sosalla, Judge.
A spouse seeks further review of a court of appeals opinion
affirming, as modified, a decree of dissolution. COURT OF APPEALS
DECISION VACATED IN PART AND AFFIRMED IN PART; DISTRICT
COURT JUDGMENT AFFIRMED.
Karen A. Volz of Ackley, Kopecky & Kingery, Cedar Rapids, for
appellant.
Matthew J. Brandes and Kerry A. Finley of Simmons, Perrine,
Moyer, Bergman, P.L.C., Cedar Rapids, for appellee.
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WIGGINS, Justice.
On further review, a spouse asks us to determine the fairness of a
property distribution and the denial of attorney fees. The court of
appeals affirmed the district court decision by upholding the award of an
equalization payment, but modified the decision by reducing the amount
of the equalization payment from $45,468 to $5000. Additionally, the
court of appeals upheld the district court’s denial of attorney fees. The
court of appeals also denied appellate attorney fees. On the issue of the
property distribution, we vacate the court of appeals opinion and affirm
the district court decision, because we agree with the district court’s
calculation of the equalization payment at $45,468. On the denial of
trial and appellate attorney fees, we affirm both the court of appeals
opinion and the district court decision.
I. Prior Proceedings.
This appeal involves the dissolution of marriage between Steven
and Diana Kimbro. The district court entered the decree dissolving the
Kimbro marriage. To equalize the property distribution, the district court
required Steven to make an equalization payment to Diana totaling
$50,060. The district court later amended the decree and reduced the
amount to $45,468 to reflect Diana’s tax obligation. Second, the district
court awarded Diana physical custody of the parties’ two minor
daughters and granted her child and spousal support.
Steven appealed, arguing the property distribution with the
equalization payment was inequitable, because Diana dissipated her
share of a joint bank account, which Steven unilaterally divided upon the
parties’ separation. Diana cross-appealed, contending the district court
erred by denying attorney fees. We transferred the case to the court of
appeals. The court of appeals affirmed as modified the district court
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decision on the property distribution by reducing the equalization
payment from $45,468 to $5000. Finally, the court of appeals affirmed
the district court by denying trial and appellate attorney fees.
Diana then sought further review, which we granted.
II. Issues.
This appeal involves two issues. Diana claims the court erred by
decreasing the equalization payment and by refusing to award attorney
fees.
III. Standard of Review.
We review appeals regarding dissolution of marriage de novo,
because such actions are equitable proceedings. Iowa Code § 598.3
(2009); Iowa R. App. P. 6.907; In re Marriage of Schenkelberg, 824 N.W.2d
481, 484 (Iowa 2012). Under this standard, we defer to the factual
findings of the district court. Schenkelberg, 824 N.W.2d at 484.
However, those findings are not binding upon us. Id.; see also Iowa R.
App. P. 6.904(3)(g). We will disturb the district court ruling “when there
has been a failure to do equity.” In re Marriage of Schriner, 695 N.W.2d
493, 496 (Iowa 2005) (citation and internal quotation marks omitted).
We review the denial of attorney fees for an abuse of discretion.
Schenkelberg, 824 N.W.2d at 484. We reverse the district court’s ruling
only when it rests on grounds that are clearly unreasonable or
untenable. Id. A ruling is clearly unreasonable or untenable when it is
“not supported by substantial evidence or when it is based on an
erroneous application of the law.” Id. (citation and internal quotation
marks omitted).
IV. Facts.
On our de novo review, we make the following findings of fact.
Steven and Diana Kimbro married in Des Moines on August 21, 1993.
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Over the course of their seventeen-year marriage, they raised three
children. These proceedings only affect two minor children, age fourteen
and sixteen.
When the couple had their first daughter, they jointly decided
Diana, who had graduated with a bachelor’s degree in education from the
University of Northern Iowa, would stay home to care for the children.
Steven’s role would be to support the family financially. Steven received
his bachelor’s degree from Iowa State University and has worked as a
sales representative for various pharmaceutical companies throughout
the marriage.
One position Steven held was for the pharmaceutical company,
Genentech. His benefits package included corporate stock options.
Genentech bought out Steven’s stock options in March 2009, paying him
$351,682 after federal and state withholdings. The Kimbros placed the
proceeds into a jointly held account at Bankers Trust.
By the end of March 2010, Steven accepted a position in sales with
his current employer, Response Genetics. Steven earns a salary of
$115,000 per year plus commissions. He received guaranteed
commissions of $4000 per month for the first three months of his
employment. He now averages $4200 per month. Steven is also eligible
for bonuses with an estimated total of $36,000. At the time of trial, his
projected earnings were approximately $170,400 per year.
During the marriage, Diana made little to no income. In fact, she
allowed her teaching certificate to lapse. However, after separating from
Steven, she successfully renewed her teaching certificate and began
substitute teaching during the 2010–2011 school year for $114 per day.
In 2010, she earned $3167. In 2011, she made $5400. Diana estimates
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that if she were able to substitute teach for the full, forty-week school
year, she would earn approximately $22,800 annually.
On January 18, 2010, Diana informed Steven she had consulted
an attorney and was filing for divorce. By that time, the Genentech stock
options in the Bankers Trust account had appreciated from $351,682 to
$444,053.
The day after Diana told him about the pending divorce, Steven
unilaterally removed $226,518 from the Bankers Trust account and
placed it in a Bank Iowa account under his name alone. He left the
remaining balance of $217,535 in the Bankers Trust account for Diana.
At trial, Steven explained his intent for dividing the Bankers Trust
account:
I didn’t want to fight about it any further, so I took half of it
and put it in there; and I came back and told her I took half
out today and your other half is still there and so I didn’t
want her to be decimated and have nothing. I just said
equally right down the middle. That’s yours, this is mine.
(Emphasis added.)
On the same day he transferred the funds, Steven informed Diana
of what he had done. Steven admitted he divided the Bankers Trust
account without consulting Diana. He also testified that the parties had
no agreement concerning how to spend the money.
At the time of trial, Diana had $49,000 remaining from her share
of the Bankers Trust account. Steven had $179,000 left.
V. Property Distribution.
A. Agreement to Divide the Bankers Trust Account. The court
of appeals reduced the equalization payment by finding Steven and
Diana had a predissolution agreement to equally divide the funds in the
Bankers Trust account. Diana contends the court of appeals erred by
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decreasing the equalization payment on this basis, because no such
agreement existed. On our de novo review, we conclude the record does
not support the finding of an agreement.
Steven testified he did not consult Diana before dividing the
Bankers Trust account. Instead, he admitted to acting on his own. He
further testified there was no agreement with Diana as to how she could
spend the money from that account. Steven never alleged such an
agreement existed before the district court entered the dissolution
decree. The first time Steven claimed any agreement existed was in his
rule 1.904(2) motion. There, he stated the only agreement between the
parties regarded splitting the tax liability. However, on appeal, Steven
did not argue an agreement existed.
Diana’s testimony confirmed there was no agreement. She
indicated that “Steve made the decision” to divide the account, and she
“didn’t know that he did it until later.” Furthermore, when asked as to
whether there was any agreement regarding the use of the money once
Steven divided it, Diana responded the parties had no such agreement.
Accordingly, we find no evidence of an oral or written agreement to
substantiate Steven’s claim that the parties agreed to divide the Bankers
Trust account. See In re Marriage of Johnson, 350 N.W.2d 199, 202
(Iowa 1984) (finding the spouses had an oral agreement to divide the
property prior to dissolution). There being no agreement relevant to an
equitable property division, we find the court of appeals opinion rests on
a finding not supported by the evidence. See Iowa Code § 598.21(5)(k)
(allowing the court to consider “[a]ny written agreement made by the
parties concerning property distribution”); id. § 598.21(5)(m) (permitting
the court to consider other relevant factors, including an oral agreement).
The record demonstrates Steven unilaterally divided the account between
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himself and Diana. Therefore, we cannot treat the Bankers Trust
account as being subject to an agreement made by the parties when
distributing the Kimbro marital estate.
B. Dissipation of Marital Assets Doctrine. Second, the court of
appeals reduced the equalization payment upon deciding Diana
dissipated marital assets by spending, during the separation period, the
majority of the money Steven gave her from the Bankers Trust account.
In doing so, the court of appeals adopted Steven’s argument that his
unilateral division of the Bankers Trust account transformed those funds
into the separate property of the respective spouses and resultantly,
barred Diana from double-dipping into Steven’s remaining funds at the
time of dissolution. Diana contends the court of appeals erred by
embracing this rationale and subsequently finding the dissipation
doctrine applied. We agree with Diana.
A court may generally consider a spouse’s dissipation or waste of
marital assets prior to dissolution when making a property distribution.
In re Marriage of Burgess, 568 N.W.2d 827, 828 (Iowa Ct. App. 1997).
The dissipation doctrine applies when a spouse’s conduct during the
period of separation “results in the loss or disposal of property otherwise
subject to division at the time of divorce.” Id. If improper loss occurs,
the asset is “included in the marital estate and awarded to the spouse
who wasted the asset.” In re Marriage of Fennelly & Breckenfelder, 737
N.W.2d 97, 106 n.6 (Iowa 2007). However, the doctrine does not apply if
the spending spouse used the monies for “legitimate household and
business expenses.” Id. at 106.
There is a two-pronged test for courts to use in analyzing claims
arising under the dissipation doctrine. Id. at 104. Under the first prong,
a court must decide “ ‘whether the alleged purpose of the expenditure is
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supported by the evidence.’ ” Id. (quoting Lee R. Russ, Annotation,
Spouse’s Dissipation of Marital Assets Prior to Divorce as Factor in Divorce
Court’s Determination of Property Division, 41 A.L.R. 4th 416, 421 (1985)
[hereinafter Spouse’s Dissipation of Marital Assets]). When a spouse
claims the other party dissipated assets and can identify the assets
allegedly dissipated, the burden shifts to the spending spouse to “show
how the funds were spent or the property disposed of by testifying or
producing receipts or similar evidence.” Id. It is not enough for a spouse
to merely show the incurrence of expenditures during the period of
separation. Id. The spouse also must show a nexus between the
payment of the expenses and the use of the marital assets at issue. Id.
If the record sufficiently establishes the evidentiary basis for the
expense, the court advances to the second prong, which asks “ ‘whether
that purpose amounts to dissipation under the circumstances.’ ” Id. at
104 (quoting Spouse’s Dissipation of Marital Assets, 41 A.L.R. 4th at
421). A court identifies dissipation by utilizing the following factors:
“(1) the proximity of the expenditure to the parties’
separation, (2) whether the expenditure was typical of
expenditures made by the parties prior to the breakdown of
the marriage, (3) whether the expenditure benefited the ‘joint’
marital enterprise or was for the benefit of one spouse to the
exclusion of the other, and (4) the need for, and the amount
of, the expenditure.”
Id. at 104–05 (quoting Spouse’s Dissipation of Marital Assets, 41 A.L.R.
4th at 421).
Turning to the first prong, we find Diana satisfies the evidentiary
standard. Id. at 104. Below are Diana’s documented expenses from the
date upon which the parties separated and Steven divided the Bankers
Trust account (January 19, 2010), to the date the district court entered
the dissolution decree (June 17, 2011):
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Family vacations $6700
Daughter’s non-refundable airline ticket $745
Car purchases, taxes, licenses, and repairs $10,694
Son’s college tuition (two semesters) $14,869
Loan to son $500
Daughters’ high school and activity costs $4235
Gutter and patio cleaning (marital home) $317
House cleaning (marital home) $1041
Real estate and income taxes $10,500
Down payment (Diana’s home) $40,000
Renovations (Diana’s home) $27,055
Home furnishings (Diana’s home) $19,978
Rent (Diana’s home) $16,200
These expenses total approximately $152,834. Diana also
supplied the district court with bank statements and financial affidavits
to prove her expenditures on groceries, restaurants, gasoline, medical
fees, utilities, insurance, clothing, hardware store charges, and other
living expenses. These bank statements and affidavits itemize expenses
exceeding $15,000. Combining these documents and the itemization
above, Diana has sufficiently documented how she spent her portion of
the Bankers Trust funds during the period of separation. Hence, this is
far different from the situation confronting us in the case of In re
Marriage of Williams, 421 N.W.2d 160 (Iowa 1988), where there were no
records verifying the spouse’s expenditures. Williams, 421 N.W.2d at
165 (identifying dissipation of assets where “[w]e find no accounting of
the money”).
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Still under the first prong, Diana also satisfies the nexus element
by sufficiently demonstrating she made those expenditures using the
funds in the Bankers Trust account. In re Marriage of Goodwin, 606
N.W.2d 315, 322 (Iowa 2000) (requiring a spouse to demonstrate
payment of the expenses using the funds in the disputed account). She
introduced exhibits documenting that she paid separation expenses,
including the costs of gas, groceries, lunch money for the children,
clothing, and family vacations, with the funds Steven left behind when he
split the couple’s liquid assets. Diana also testified that she used the
funds in the Bankers Trust account to make the down payment on the
new home for her and the minor children, as well as the renovations to
that property. Thus, we find the first prong, requiring sufficient evidence
of the spouse’s expenditures, is satisfied.
We next turn to the second prong and consider the purpose for
Diana’s expenditures, as well as whether her use of the funds constituted
dissipation under the circumstances. Using the factors articulated in
Fennelly, we find Diana’s expenditures were for legitimate living expenses
and did not constitute dissipation. 737 N.W.2d at 104–05.
Under the first factor, Diana incurred these expenses over the
course of almost seventeen months. Id. We recognize this is a lengthy
period, such that expenditures will naturally accumulate to a substantial
sum. The second factor requires us to consider the typicality of Diana’s
expenditures. Id. A majority of Diana’s expenses stem from her role as
the primary custodial parent for the two minor daughters. She bore the
expense of the children’s school and extracurricular activity fees. She
also took the children on family trips the couple had planned prior to
their separation. Moreover, she provided supplementary financial
support to her son in college. As for the remainder of her expenditures,
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we find they are typical of her preseparation lifestyle, given the couple
had assets of almost one million dollars.
Pursuant to the third factor, we consider the benefits to the joint
marital enterprise that arose from Diana’s expenditures. Id. Certainly,
the fees expended to care for the couple’s children in their schooling and
social activities benefitted both. There is a joint parental responsibility to
support children financially. In re Marriage of Hoak, 364 N.W.2d 185,
189 (Iowa 1985). Moreover, Diana used the funds to pay the parties’
mutual obligations, including expenses Steven had promised to pay, but
later did not. She paid half of Steven’s income taxes, thereby ensuring
his financial stability. See In re Marriage of Sullins, 715 N.W.2d 242, 252
(Iowa 2006) (finding a wife is not liable for a husband’s tax debts and
penalties upon dissolution, because such tax problems are “self-
imposed”). She paid to have the marital home cleaned and prepared for
sale, in addition to paying half the real estate taxes on the property.
These expenditures increased the value of the jointly held, marital home.
Moreover, the funds Diana expended to purchase and renovate the new
house for her and the children was to the advantage of both marriage
partners, because it increased Diana’s own net worth, making her less
financially dependent on Steven for support.
The final factor under the second prong requires us to consider
Diana’s need for the expenditures. Fennelly, 737 N.W.2d at 104–05.
Diana, as primary custodial parent, had to pay the day-to-day living
expenses for herself and two children. She had to obtain new housing
because Steven refused to move out of the marital home. His refusal to
leave created a stressful environment for the children, so Diana acted in
the children’s interest by locating alternate living arrangements. Diana
also needed to purchase vehicles for her children because she was
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looking for full-time employment and could no longer transport them.
Furthermore, she incurred the high costs that naturally flow from having
a child in college, as well as two high-school-age children who attend
private school and participate in extracurricular activities. Moreover, the
necessity of Diana’s reliance on the Bankers Trust account is reasonable,
considering she was earning little to no salary during the separation. Id.
In addition, Steven instructed Diana to use her share of the Bankers
Trust account to cover household bills during the separation period.
Although we recognize $168,535 is a significant sum to spend, we
find such expenditures over a year and a half do not amount to
dissipation under these circumstances, where the spending spouse has
essentially no salary, remains responsible for marital obligations,
purchases a new home and makes renovations to ensure the home is
comfortable for the children, supports three children financially—one in
college and the other two in private school with costly extracurriculars—
and finally, maintains the lifestyle of a marriage with dissolution assets
of almost one million dollars. Moreover, we note there is no evidence in
the record to support Steven’s allegations that Diana dissipated, hid,
depleted, or diverted cash. See, e.g., In re Marriage of Cerven, 335
N.W.2d 143, 146 (Iowa 1983) (finding the husband’s transfer of $40,000
to his son was a sham gift in an attempt to avoid paying his wife spousal
support). Therefore, we affirm the district court’s finding that Diana’s
expenditures were reasonable under the circumstances and consistent
with the lifestyle to which she was accustomed. Accordingly, we count
the remainder of Steven’s share of the Bankers Trust account as marital
assets, subject to division.
C. Equalization Payment. Concluding the court of appeals
lacked a basis supported by substantial evidence to reduce the
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equalization payment, we find the district court’s award of an
equalization payment totaling $45,468 is equitable. We find this matter
merits the award of an equalization payment to Diana for several
reasons.
First, without the payment, Diana receives approximately $57,000
less in assets than Steven. Such an outcome conflicts with our equitable
principles in Iowa Code section 598.21(5), which guides courts in
framing property distributions. An equitable distribution of marital
property, based upon the factors in 598.21(5), does not require an equal
division of assets. Schriner, 695 N.W.2d at 499. However, “ ‘it is
generally recognized that equality is often most equitable.’ ” Fennelly,
737 N.W.2d at 102 (quoting In re Marriage of Rhinehart, 704 N.W.2d 677,
683 (Iowa 2005)). This court has often approved the equal or nearly
equal division of marital assets. See, e.g., In re Marriage of Duggan, 659
N.W.2d 556, 562 (Iowa 2003) (requiring modification of a decree to
“accomplish an equal division” of the couple’s assets); In re Marriage of
Hitchcock, 309 N.W.2d 432, 438 (Iowa 1981) (recognizing our
jurisprudential tradition of affirming awards of “substantial, nearly equal
property distribution, especially where the disparity in earning capacity
was great”). Accordingly, in applying the factors, we find the $57,000
disparity in the property distribution award is inequitable without the
equalization payment to Diana.
To illustrate, we recognize the parties were married for seventeen
years, which establishes sufficient commitment to award an equal
division of property. Iowa Code § 598.21(5)(a); Fennelly, 737 N.W.2d at
104 (finding that because the parties were married for nearly fifteen
years, an equal division upon dissolution of the appreciation in value of
the parties’ premarital assets was equitable). Next, taking into
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consideration the economic situation of the parties, there is a vast
disparity in incomes between Steven and Diana. Id. at § 598.21(5)(f).
Steven currently earns a salary, not including commissions and other
bonuses, of $115,000 annually. The most Diana has earned during the
marriage is $5400. Such disparity leads to inequity, unless the court
imposes some form of equalization. See Schenkelberg, 824 N.W.2d at
488 (awarding additional spousal support to the wife after considering
the vast disparity in the husband’s $400,000 income and the wife’s
negligible earnings).
For these reasons, we find the equalization payment ordered by the
district court was appropriate and necessary to achieve equity in making
the property distribution.
VI. Attorney Fees.
An award of attorney fees is discretionary. Sullins, 715 N.W.2d at
255. “Whether attorney fees should be awarded depends on the
respective abilities of the parties to pay.” Id. (citation and internal
quotation marks omitted). To determine the ability to pay, we review the
parties’ entire financial picture, “including their respective earnings,
living expenses, and liabilities.” In re Marriage of Willcoxson, 250 N.W.2d
425, 427 (Iowa 1977).
We conclude both parties have the ability to pay their respective
trial and appellate attorney fees. Steven has a substantial income, but
also bears the cost of paying his own legal expenses, child support,
tuition for the children, spousal support, and the equalization payment.
Although Diana has minimal income, she can now afford to pay her own
fees upon receipt of the equalization payment. She also obtained an
equal share of the marital assets, valued at almost one million dollars.
Accordingly, in exercising our discretion, we affirm the district court’s
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decision and the court of appeals opinion by denying Diana trial and
appellate attorney fees.
VII. Disposition.
We vacate the court of appeals opinion regarding the reduction of
the equalization payment. We affirm the district court by ordering
Steven to pay Diana an equalization payment of $45,468. We affirm the
court of appeals opinion and the district court decision on the denial of
trial and appellate attorney fees.
COURT OF APPEALS DECISION VACATED IN PART AND
AFFIRMED IN PART; DISTRICT COURT JUDGMENT AFFIRMED.