In re the Marriage of Freudenberg ( 2018 )

IN THE COURT OF APPEALS OF IOWA
No. 17-1569
Filed December 5, 2018
IN RE THE MARRIAGE OF CHRISTINE Y. FREUDENBERG
AND MARK WILLIAM FREUDENBERG
Upon the Petition of
CHRISTINE Y. FREUDENBERG,
Petitioner-Appellant/Cross-Appellee,
And Concerning
MARK WILLIAM FREUDENBERG,
Respondent-Appellee/Cross-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Black Hawk County, Linda M.
Fangman, Judge.
Christine Freudenberg appeals, and Mark Freudenberg cross-appeals, a
decree of dissolution of marriage. AFFIRMED AS MODIFIED.
Kevin D. Engels of Correll, Sheerer, Benson, Engels, Galles & Demro, PLC,
Cedar Falls, for appellant.
Terry D. Parsons of Olsen & Parsons Law Firm, Cedar Falls, for appellee.
Heard by Tabor, P.J., and Mullins and Bower, JJ.
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MULLINS, Judge.
Christine Freudenberg, n/k/a Christine Seres, appeals, and Mark
Freudenberg cross-appeals, from the spousal-support and property-distribution
provisions of a dissolution decree. Christine challenges the spousal-support award
and property-distribution provisions as inequitable. Mark argues that if this court
modifies any of the economic provisions of the dissolution decree, the entire
decree must then be reevaluated and adjusted accordingly. Christine seeks an
award of appellate attorney fees.
I. Background Facts and Proceedings
On March 3, 2001, Christine and Mark married. Christine was thirty-eight
years old and Mark was forty. No children were born of this marriage. Both parties
have children from prior marriages1 who at various times lived with Christine and
Mark. Christine filed for dissolution in November 2016.
At the time of the marriage, Christine worked at PDCM Insurance. She quit
her job five or six months after marrying Mark. Christine has a high school diploma
and has attended some computer classes. She has worked as a secretary, word
processor, and in the information technology (IT) field since she graduated from
high school. She began working at RSM Insurance in May 2002. She maintained
this employment through the time of trial. Her job requires her to attend
professional improvement courses for work, but none of the classes have provided
her credit toward a post-secondary degree. At the time of trial, Christine worked
part-time (twenty hours per week) and mainly from home as an IT consultant for
1
Christine has one son and Mark has one son and two daughters.
3
RSM. Her main task consists of social engineering testing, which requires her to
make phone calls. Christine’s gross monthly salary is approximately $3300 and
she is eligible to earn an end-of-the-year bonus and spot bonuses throughout the
year. On occasion, Christine works full time at RSM and sought a full-time position
within the company.
Prior to this marriage, Christine worked at Waterloo Industries, where she
had a retirement account. After Waterloo Industries shut down, she rolled the
account into a new account at PDCM. After leaving PDCM, she then rolled the
account into a 401(k) (American Funds), which she still had at the time of trial.
Christine added to the retirement account during the five to six months she worked
at PDCM after the initiation of the marriage, but after she left PDCM and rolled the
funds into the 401(k), she added no other funds to the account. At the time of the
marriage, Christine also had a TIAA/CREF account from a previous employer. She
made no contributions to that account over the course of the marriage. Through
her work at RSM, Christine has an additional 401(k) (Fidelity).2
At the time of the marriage, Mark had worked for John Deere for
approximately ten years as a drive-train engineer. At the time of trial, he was the
manager of the drive-train engineering division. Before starting at John Deere, he
received a degree in mechanical engineering, and while in the United States Navy,
he received experience and skills relating to mechanical engineering. At the time
of trial, Mark’s annual base salary was $136,488.3 Mark also earns bonuses based
2
At the time of trial, Christine’s accounts had the following balances: American Funds,
approximately $26,440; TIAA/CREF, approximately $108,000; and Fidelity, approximately
$77,459. The record does not reveal the time-of-marriage values of the accounts.
3
Mark’s gross monthly salary is $11,374.
4
on the company’s productivity. His 2016 bonus was approximately $35,000.
Through John Deere, Mark had a pension, health savings account (HSA), and
savings and investment plan (SIP).4 Mark’s pension account is a defined benefits
plan consisting of funds contributed solely from John Deere. Mark’s pension was
fully vested at the time of marriage, but the expected benefit continues to increase
with his years of service. Mark established the SIP and HSA accounts after his
marriage to Christine, and began participation in an investment fund (Deere
Millionaire’s Club) with other couples that worked at Deere. Each participant
contributed an amount of money to invest in certain stocks and then received
shares of the investment.5
After the parties married, Christine sold her house and she and her son lived
with Mark and his son in Mark’s farmhouse for a short time. They used the
proceeds from the sale of Christine’s house as a down payment on the current
family home, to purchase furniture, and to establish a college-savings account for
Christine’s son.
During their marriage, Christine deposited her paycheck into her own bank
account while Mark deposited his into their joint account. Mark paid most of the
household expenses during the marriage and the majority of the utilities.
Christine’s employer covered one-half of the couple’s internet fees since most of
her job duties required her to make phone calls. Christine identified her main
hobby as shopping on QVC, estimating that she made $38,000 in purchases over
4
At the time of trial, the balance of the HSA was approximately $15,552 and the SIP plan
was approximately $258,000, both accumulated after the initiation of the marriage.
5
At the time of trial, the value of Mark’s share of the fund was $1253.
5
the last three years, minus any returns. She owed QVC for past purchases at the
time of trial. One of Mark’s hobbies is hunting and he hunted in the Bloomfield
area. The couple purchased farm land in that area in 2012 for Mark’s hunting.
Christine filed a petition for dissolution of marriage on November 15, 2016.
At trial, Christine and Mark contested the equitable distribution of property and
spousal support. The court entered the dissolution decree on September 1, 2017.
The court awarded Christine assets in the amount of $418,823 and made her
responsible for liabilities of $6429, resulting in a property award of $412,394.
Included in the property award was the marital home, the bank accounts in her
name, and the entirety of her interest in her retirement accounts. Mark was
awarded assets totaling $193,164 and liabilities totaling $8290 for a total property
award of $184,874. This award included the farm land near Bloomfield, the entire
interest in his Deere Millionaire’s Club Fund, and the entirety of his John Deere
pension. The court awarded Mark’s pension solely to him “in light of the overall
property settlement.” The property settlement included the division of Mark’s John
Deere SIP account pursuant to a qualified domestic relations order (QDRO) using
the Benson6 formula. The court awarded no attorney fees to either party. Christine
appeals and Mark cross-appeals.7
6
See In re Marriage of Benson, 545 N.W.2d 252, 257 (Iowa 1996).
7
After the filing of the dissolution decree, Christine filed motion to enlarge, amend, or
modify the decree pursuant to Iowa Rule of Civil Procedure 1.904(2) on issues unrelated
to this appeal. The district court granted Christine’s motion after she filed her notice of
appeal.
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II. Standard of Review
Dissolution-of-marriage actions are tried in equity, thus our review is de
novo. In re Marriage of McDermott, 827 N.W.2d 671, 676 (Iowa 2013).
“Accordingly, we examine the entire record and adjudicate anew the issue of the
property distribution.” Id. “[W]e give weight to the factual findings of the district
court, [but] we are not bound by them.” In re Marriage of Mauer, 874 N.W.2d 103,
106 (Iowa 2016). We give the trial court significant latitude in determining spousal
support. In re Marriage of Gust, 858 N.W.2d 402, 406 (Iowa 2015). We will affirm
a district court determination unless “there has been a failure to do equity.” Mauer,
874 N.W.2d at 106.
III. Analysis
A. Retirement Plans
“In dissolution-of-marriage cases, marital property is to be divided equitably
considering the factors outlined in Iowa Code section 598.21([5]) [(2016)].
Equitable distribution depends upon the circumstances of each case. An equitable
division is not necessarily an equal division.” In re Marriage of Hansen, 733
N.W.2d 683, 702 (Iowa 2007) (citations omitted). What is fair and equitable
depends upon the particular circumstances of the case and parties. In re Marriage
of Keener, 728 N.W.2d 188, 193 (Iowa 2007). “Equality is, however, often most
equitable; therefore, we have repeatedly insisted upon the equal or nearly equal
division of marital assets.” McDermott, 827 N.W.2d at 682.
While the court “may assign varying weight to premarital property, . . . [it]
should not automatically award it to the spouse who owned the property prior to
the marriage.” Id. at 678. “Property brought into the marriage by a party is merely
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a factor to consider by the court, together with all other factors, in exercising its
role as an architect of an equitable distribution of property at the end of the
marriage.” Id. (quoting In re Marriage of Sullins, 715 N.W.2d 242, 247 (Iowa
2006)).
In her brief, Christine questions the trial court’s valuations of certain
property, but concedes on appeal her only challenge to the property distribution
concerns the court’s decision to award Mark the entirety of his John Deere pension
plan. She contends the court should have divided both Mark’s pension and her
Fidelity account using the Benson formula. She further argues Mark should be
required to elect the joint and survivor annuity option under his pension and name
her as the recipient. On his cross-appeal, Mark maintains that if we grant the relief
requested by Christine, we should make adjustments to the retirement assets
awards to Christine in order to accomplish an equitable property division.
“Retirement plans should be considered in framing the financial clauses of
a dissolution decree” and the trial court “must recognize the future retirement
needs of divorcing persons.” In re Marriage of Fall, 593 N.W.2d 164, 167 (Iowa
Ct. App. 1999). Under Iowa law, pensions are characterized as marital assets,
“subject to division in dissolution actions just as any other property.” Benson, 545
N.W.2d at 255. “There are two principal types of private pension plans: defined
benefit plans and defined contribution plans. These plans are similar in that both
may be funded by contributions made either solely by the employer
(noncontributory) or by both the employer and the employee (contributory).” Id. at
254. The courts have accepted two “methods of dividing pension benefits: the
present-value method and the percentage method.” Sullins, 715 N.W.2d at 248.
8
However, “a division of pension benefits is not an absolute requirement. The
allocation of a pension, like the allocation of all other property interests, comes
only after the pension has been considered in the overall scheme of an equitable
division.” Fall, 593 N.W.2d at 167.
Mark enrolled and became fully vested in the pension plan, a defined-
benefit plan funded only by John Deere, before the marriage. Mark did not
contribute any funds into the plan, but his plan benefits increased during the
marriage. Neither party presented evidence of the value of the John Deere
pension at any time during the marriage or the value at the time of trial. Neither
party presented evidence of the value of Christine’s premarital retirement accounts
at the time of the marriage or the increases in the value of those assets during the
marriage. The only evidence of the values of those accounts are dated near the
time of trial.
Ultimately, in its decree, the court awarded Christine the entirety of her
TIAA-CREF, Fidelity, and American Funds plans. It divided Mark’s John Deere
SIP plan using the Benson formula. It also awarded Mark the entirety of his John
Deere pension. The court stated in its reasoning for this distribution that it
specifically chose to award to Chris her Fidelity 401k, her TIAA-
CREF, and her American Funds Retirement Assets not because the
Court believes they are premarital assets not to be divided but,
rather, as part of the overall property settlement in this case. In
addition, the Court specifically chose to leave the John Deere
pension with Mark in light of the overall property settlement. In
addition, had the Court divided the John Deere Pension using the
Benson Formula, the Court would have also divided the Fidelity
401k, the TIAA-CREF, and the American Funds using the Benson
Formula.
9
The property division without Mark’s pension and SIP fund is weighted
toward Christine. Further, with the SIP being divided between the parties, Mark’s
pension is his only other significant retirement asset. It
would be inappropriate to award the entire pension to [Mark] simply
because [Christine] is receiving [a large portion] of the other marital
property, without regard to the respective values of that pension and
the parties’ other assets. However, it would also be inappropriate to
divide that pension without taking into account the allocation of the
other assets.
In re Marriage of O’Brien, No. 11-1551, 2012 WL 7656669, at *2 (Iowa Ct. App.
Sept. 21, 2012). During this sixteen-year marriage, Christine’s premarital
retirement accounts have increased fortuitously, presumably significantly. Such
increases should normally have been considered by the district court in making an
equitable property distribution. In re Marriage of Fennelly, 737 N.W.2d 97, 103–
04 (Iowa 2007). But, our record is devoid of the values of those accounts at the
time of the marriage. Further, an equitable distribution could have included the
premarital value of Christine’s retirement assets. Upon our de novo review, the
lack of a record of the value of Christine’s premarital retirement accounts or any
changes in the values of those accounts during the marriage, and the lack of record
of the valuation of the John Deere pension, make it impossible to mathematically
evaluate whether the district court’s distribution of those assets is equitable.
Although we are sympathetic to the district court’s efforts to achieve equity with the
limitations of the evidence it had before it, we determine a modification in the
property distribution is necessary.
On this record, we believe the better approach is to divide the John Deere
pension using the Benson formula, and to divide equally the increases in the
10
values of Christine’s TIAA/CREF, American Funds, and Fidelity retirement funds
which occurred during the marriage.8 The values of the TIAA/CREF, American
Funds, and Fidelity accounts at the time of marriage are awarded to Christine.9
With these adjustments, using the values and distribution plan otherwise ordered
by the district court but excluding all retirement and pension accounts, Christine
will receive net assets of approximately $197,114 and Mark will receive net assets
of approximately $184,874. By way of the Benson formula, Mark will receive value
attributable to premarital employer contributions and earnings in his John Deere
pension, and each party will share one-half the value attributable to the period of
marriage. Christine will receive the value of her retirement accounts attributable
to premarital contributions and earnings, and each party will share one-half the
value of the increases during the marriage. With these modifications, we find the
net overall distribution of assets and liabilities is equitable. Mark’s attorney shall
prepare the QDRO for the pension and Christine’s attorney shall prepare the
QDROs for the retirement accounts in her name, following the directions outlined
by the district court in paragraph number seven of its decree.10
Christine also requests to be designated as the “surviving spouse” through
a joint and survivor annuity under Mark’s pension plan. “[T]he circumstances
under which that designation should occur depend on the facts of each case and
whether the allowance of survivorship rights effectuates an equitable distribution
8
This will include the additional contributions Christine made to the Fidelity account during
the marriage.
9
As previously indicated in this opinion, those values are not in the record but we assume
each fund can provide account values as of the date of marriage.
10
Distribution of the John Deere SIP account remains as ordered by the district court.
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of the parties’ assets.” In re Marriage of Duggan, 659 N.W.2d 556, 560 (Iowa
2003). Though “spouse survivorship rights may be awarded to ensure the spouse
receives a share of the pension plan in the event of the employee spouse’s
untimely death”, such an award is not “normal and typical.” In re Marriage of Dow,
No. 17-0534, 2018 WL 1858299, at *7 (Iowa Ct. App. Apr. 18, 2018). Requiring
Mark to choose a spousal survivorship benefit for Christine would reduce the
benefit to which he is otherwise entitled under the Benson formula. In order to
ensure he receives the entire amount of the property awarded to him, Mark should
be allowed to assign the full amount of any survivor benefits as he see fits. See In
re Marriage of Klinghammer, No. 02-0112, 2003 WL 21070599, at *4 (Iowa Ct.
App. May 14, 2003). Therefore, we decline Christine’s request to require Mark to
select a joint and survivor annuity option and name her as beneficiary.
B. Spousal Support
Christine challenges the spousal-support award of $1000 per month for
thirty-six months as inequitable and inadequate both in amount and duration. She
contends the court should have ordered traditional alimony rather than
rehabilitative considering the length of the marriage, her age, Mark’s earnings
compared to hers, and her lack of intent to return to school. She further challenges
the trial court’s use of $79,000 as her salary if she worked full time as she has
never earned that amount of money and only worked full time for two short periods
of time with her current employer. She requests Mark pay $1750 per month for
seven years or, in the alternative, $1000 per month plus twenty-five percent of
Mark’s annual bonus for seven years.
In its award of spousal support, the court reasoned:
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In this particular case the Court has considered that the
parties were married for 16 years, a moderate-length marriage.
During this second marriage of both parties, Chris has worked part-
time by her own choice throughout the marriage. Chris makes
approximately $40,000 a year working part-time and makes over
$79,000 working full time at this particular job. While the testimony
is she would prefer to stay working with her current employer, this is
a choice she is making which is not reflective of her earning capacity.
The testimony supports rehabilitative alimony because there are
classes and tests Chris can study for and prepare for to become
more marketable. In addition, Chris has at her disposal [her son’s]
529 account in the amount of $17,000 which she could use for
educational training for herself since [her son] is in the military full
time in California. The Court is also considering the property
distribution in finding rehabilitative alimony is appropriate.
Though “[o]ur review of the spousal support award is de novo[,] we afford
the district court considerable latitude in making a spousal support determination
and ‘[w]e will disturb that determination only when there has been a failure to do
equity.’” In re Marriage of Witherly, 867 N.W.2d 856, 859 (Iowa Ct. App. 2015)
(third alteration in original) (quoting In re Marriage of Anliker, 694 N.W.2d 535, 540
(Iowa 2005)). “Alimony may also be awarded to a spouse in addition to the
distribution of property.” Hansen, 733 N.W.2d at 702. It is not an absolute right;
whether the court awards alimony and the amount awarded depends on the
specific circumstances of each case. Id. at 704. There is no fixed or mathematical
formula to apply in determining spousal support. Mauer, 874 N.W.2d at 107.
Rather, the courts must equitably award spousal support by considering all the
factors delineated in Iowa Code section 598.21A(1). Id. These factors, in pertinent
part, include:
a. The length of the marriage.
b. The age and physical and emotional health of the parties.
c. The distribution of property made pursuant to section
598.21.
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d. The educational level of each party at the time of marriage
and at the time the action is commenced.
e. The earning capacity of the party seeking maintenance,
including educational background, training, employment skills, work
experience, length of absence from the job market, responsibilities
for children under either an award of custody or physical care, and
the time and expense necessary to acquire sufficient education or
training to enable the party to find appropriate employment.
f. The feasibility of the party seeking maintenance becoming
self-supporting at a standard of living reasonably comparable to that
enjoyed during the marriage, and the length of time necessary to
achieve this goal.
g. The tax consequences to each party.
....
j. Other factors the court may determine to be relevant in an
individual case.
Iowa Code § 598.21A(1).
“Alimony is awarded to accomplish one or more of three general purposes.”
In re Marriage of O’Rourke, 547 N.W.2d 864, 866 (Iowa Ct. App. 1996). Of those
three, two are pertinent to the current case. “Rehabilitative alimony serves to
support an economically dependent spouse through a limited period of education
and retraining. Its objective is self-sufficiency. . . . Traditional alimony is payable
for life or for so long as a dependent spouse is incapable of self-support.” Id.(citations omitted). “The amount of alimony awarded and its duration will differ
according to the purpose it is designed to serve.” Id. at 866–67. Traditional
spousal support is often granted in a long-term marriage and particularly when the
parties agree one spouse should stay home to raise children, as the resulting
absence from the workplace can result in substantial economic consequences.
See Gust, 858 N.W.2d at 410. “Generally speaking, marriages lasting twenty or
more years commonly cross the durational threshold and merit serious
consideration for traditional spousal support.” Id. at 410–11. “The goal of
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rehabilitative spousal support is self-sufficiency and for that reason ‘such an award
may be limited or extended depending on the realistic needs of the economically
dependent spouse.’” In re Marriage of Becker, 756 N.W.2d 822, 826 (Iowa 2008)
(quoting In re Marriage of Francis, 442 N.W.2d 59, 64 (Iowa 1989)). “We consider
alimony and property distribution together in assessing their individual sufficiency.
They are neither made nor subject to evaluation in isolation from one another.” In
re Marriage of Hettinga, 574 N.W.2d 920, 922 (Iowa Ct. App. 1997).
Here, the parties were married for a moderate amount of time, sixteen
years. The parties are close in age and both are in relatively good physical health.
There were no children of the marriage, though both parties had children from
previous marriages who lived with them at varying points during their marriage.
The parties disagreed as to whether it was a mutual arrangement that Christine
would only work part time, but the trial court found it was her own choice to remain
part time with her current employer. Christine also chose to limit her job search
for full-time employment to her current employer. The court consequently
determined her choices were not reflective of her earning capacity. Because of
these choices and the availability of classes and tests she could take to increase
her marketability, the court found rehabilitative alimony for a short period of time
was appropriate.
Upon our de novo review, and applying the factors contained in section
598.21A(1), we believe Christine is entitled to an award of spousal support. We
agree with the trial court that Christine’s current salary does not reflect her earning
capacity given her experience, ability to take classes, and choice to both remain
employed part time and only search for full-time work through her current
15
employer. Though Christine may wish to remain with her current employer, her
part-time position is not reflective of her earning capacity, and she “has an
obligation to earn up to her capacity, ‘even though she might have to take a job
she did not prefer.’” In re Marriage of Robert, No. 11-0876, 2012 WL 2122310, at
*7 (Iowa Ct. App. June 13, 2012) (quoting In re Marriage of Wegner, 434 N.W.2d
397, 399 (Iowa 1988)). Considering Christine’s current income, her realistic
income potential, and her current expenses, we determine the current spousal
support award of $1000 per month for thirty-six months does not fail to do equity,
and will provide for Christine during a transitional period of time to become self-
sufficient at her maximum earning capacity. We therefore affirm the district court’s
spousal-support determination.
C. Appellate Attorney Fees
Christine requests appellate attorney fees in the amount of $3000.
“Appellate attorney fees are not a matter of right, but rather rest in this court’s
discretion.” In re Marriage of Okland, 699 N.W.2d 260, 270 (Iowa 2005). We
consider “the needs of the party seeking the award, the ability of the other party to
pay, and the relative merits of the appeal.” Id. In consideration of these factors,
we award $1500 in appellate attorney fees to Christine.
Costs on appeal are assessed equally between the parties.
IV. Conclusion
We affirm the district court’s decree, but modify it with respect to the
distribution of the parties’ retirement accounts. We modify the decree to divide
Mark’s John Deere pension using the Benson formula, and to divide equally the
increases in the values of Christine’s TIAA/CREF, American Funds, and Fidelity
16
retirement funds which occurred during the marriage. We award the values of the
TIAA/CREF, American Funds, and Fidelity accounts at the time of marriage to
Christine. We decline Christine’s request to require Mark to select a joint and
survivor annuity option on his pension and name her as beneficiary. We affirm the
court’s award of spousal support. We award Christine $1500 in appellate attorney
fees. Costs on appeal are assessed equally between the parties.
AFFIRMED AS MODIFIED.