In Re the Marriage of Nancy D'Ann Brown and Terry Lee Brown Upon the Petition of Nancy D'Ann Brown, and Concerning Terry Lee Brown ( 2016 )

IN THE COURT OF APPEALS OF IOWA
No. 15-0059
Filed February 10, 2016
IN RE THE MARRIAGE OF NANCY D’ANN BROWN
AND TERRY LEE BROWN
Upon the Petition of
NANCY D’ANN BROWN,
Petitioner-Appellee,
And Concerning
TERRY LEE BROWN,
Respondent-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Greene County, Joel E. Swanson,
Judge.
A husband appeals the spousal support provisions in the parties
dissolution decree. AFFIRMED AS MODIFIED.
Vicki R. Copeland of Wilcox, Polking, Gerken, Schwarzkopf, Copeland
& Williams, P.C., Jefferson, for appellant.
Scot L. Bauermeister of Fitzgibbons Law Firm, L.L.C., Estherville, for
appellee.
Considered by Potterfield, P.J., and Doyle and Tabor, JJ. Danilson, C.J.
takes no part.
2
POTTERFIELD, Presiding Judge.
A husband appeals the spousal support provisions in the parties’
dissolution decree. Contrary to the husband’s assertion, the district court did not
explicitly rely on the opinion of an expert in determining the husband’s income,
and on our de novo review, we make our own determination of his income. The
court properly ordered the husband to pay spousal support of $3500 per month.
We modify the dissolution decree to reduce the husband’s spousal support
obligation to $1500 per month when the husband turns seventy years old. The
husband is responsible to pay $2000 toward the wife’s appellate attorney fees.
I. Background Facts & Proceedings
Terry and Nancy Brown were married in 1969. They are the parents of
four adult children who are not affected by the economic provisions of the parties’
dissolution decree.
After the parties married they moved to Chicago, Illinois, where Nancy
worked as a dental assistant while Terry attended the Illinois College of
Optometry. Terry completed his degree in 1973, and the parties purchased an
optometry practice in Jefferson, Iowa. For the most part, Nancy did not work
outside the home after the parties moved back to Iowa. She was the primary
caretaker of the parties’ four children.
Terry was successful in his optometry business. In addition to owning
100% of the business in Jefferson, the parties purchased 100% of an optometry
practice in Osceola, 65.5% of practices in Denison and Ida Grove, and 51% of
practices in Grinnell, Manchester, and Carroll. They borrowed money to make
these purchases and are still making payments on the debt. The parties also
3
own 100% of the practice buildings in Jefferson, Denison, Ida Grove, Osceola,
and Carroll, and 50% of the building in Grinnell. Again, they borrowed money to
make the purchases and are still paying for the buildings.1 In 2006 the parties
purchased Marcella Optical, P.C., a company in Cedar Rapids which surfaced
and finished optometric lenses, and have debt associated with the purchase.
They sold the use of Marcella’s client list and equipment for a period of five
years, ending in January 2015.
Terry works at the optometric practices in Jefferson and Osceola. The
remainder of the interest in the other practices is owned by optometrists who
work at those practices. The practices in Jefferson and Denison are organized
as C corporations, while the other practices are S corporations. Terry created a
sole proprietorship, T.L. Brown Management, to oversee the management of the
practices. The parties’ share of the profits from the optometry practices is paid to
T.L. Brown Management,2 which has two employees—a manager and a
bookkeeper. For the optometry practices that are S corporations, the profits are
shown on the parties’ tax returns as distributions from the practices. The parties
also receive rental income from the practice buildings they own. During the
marriage Nancy received $1000 per month from T.L. Brown Management.
Terry inherited 140 acres of farmland, which had about 120 acres of
tillable ground. He anticipated receiving rental income from the farmland. Before
he inherited the farmland he received $1000 per month from the rental income as
1
The parties have debt associated with the purchase of all of the buildings, except the
building in Jefferson.
2
The optometry practices not solely owned by the parties also pay a monthly
management fee to T.L. Brown Management.
4
a gift from his mother. Farm rent in Iowa is generally between $250 to $350 per
acre. At $250 per acre for 120 acres, Terry could receive $30,000 per year in
farm rental income.
Nancy filed a petition for dissolution of marriage on March 7, 2014. The
parties entered into a stipulation on all issues except spousal support. The
parties agreed Nancy would be awarded assets worth $712,058. Nancy was
responsible for any credit card debt solely in her name. Terry was awarded the
interest in the optometry practices, the practice buildings, and the other marital
assets.3 He also agreed to assume the parties’ debts.4 The parties agreed to
sell the marital residence and divide the proceeds.5 They agreed T.L. Brown
Management would continue to pay Nancy $1000 per month and the premiums
for her health insurance and long-term care insurance until February 28, 2016.
Terry agreed to pay $5000 for Nancy’s trial attorney fees.
The dissolution hearing commenced on December 4, 2014. Nancy
presented the testimony of James Nally, a certified public accountant and the
vice-president of BCC Advisors, a company that performed business valuations.
Nally looked at the parties’ financial information and determined that over a five-
year period Terry earned an average of $168,626 per year, or $14,052 per
month. Nally considered income from the optometry practices, interest income,
3
The district court did not make a finding concerning the value of the assets awarded
to Terry under the parties’ stipulation. From our review of the values used by the parties
on the pretrial stipulation, Terry was awarded assets worth around $2.14 million, which
does not include the farmland he inherited.
4
The district court found the parties had total debts of over $1,220,382.
5
The parties agreed Terry would pay Nancy $75,000. After the house was sold, Terry
would be reimbursed $75,000 and the remaining profits, if any, would be divided equally.
5
dividends, rental income, and business losses. He did not consider farm rental
income.
Nancy was sixty-three years old at the time of the dissolution hearing.
She received $525 each month in Social Security benefits, and at the time the
dissolution was finalized would receive $1290.50 each month. Under the parties’
stipulation, Nancy received $1000 each month from T.L. Brown Management
until February 28, 2016. Nancy has helped a friend at her fabric store a few
times and received about fifty dollars per year, which was paid to her either in
cash or fabric. Nancy testified she hoped to be able to get part-time employment
at the fabric store, but no specific arrangements had been made. She also
testified she hoped to make quilts to sell. Nancy has heart disease, depression,
and arthritis.
At the time of the hearing Terry was sixty-five years old. He worked four
days a week as an optometrist in Jefferson and Osceola, and stated he had
gross income of about $6350 per month from his work. Terry testified he
planned to resume working five days a week as an optometrist. He testified he
expected to receive rental income on the farmland he inherited. Terry stated he
received very little income from his interest in the optometry practices in Denison,
Grinnell, Ida Grove, Manchester, and Carroll because the profits went to T.L.
Brown Management and were used to pay the management company’s two
employees and to pay down the debts incurred in purchasing the properties. He
also stated he received no income from the rental properties because all of the
rental income was used to pay the mortgages on the properties. Terry was in
6
good health. He testified that ideally he would never retire, but also stated that
by the time he was seventy he may no longer be interested in seeing patients.
The district court issued a dissolution decree for the parties on December
18, 2014, which incorporated the parties’ stipulation. The court noted,
The parties have developed a lifestyle that Nancy refers to as a
“privileged lifestyle.” Clearly Terry Brown has done this financially
through his optometric practices and related businesses. His
lifestyle includes working three days a week, a lake home in the
Ozarks along with a boat, gambling, golf and other leisure activities.
It would appear from exhibits and testimony that Terry has been
able to maintain the lifestyle and pay expenses, manage debt
repayment.
The court found, “Nancy has currently no marketable skills to maintain her
lifestyle since marriage.” The court concluded:
This is a long term marriage with one spouse at a financial
disadvantage. Nancy and Terry have a good lifestyle which may
not be manageable by Terry in the future. Creating a situation
where the same income will now be used for two households is
unrealistic. Terry’s continued requirement to repay loans greatly
reduces this disposable income. It is also true that continued
maintenance of a lake home and other leisure activities may need
to be reduced. Additionally, Terry may not be able to continue a
reduced work schedule.
Nancy will receive substantial liquid assets which will enable
her to continue the lifestyle she has enjoyed for many years. Terry
will need to increase his work hours, meet outstanding debt
obligations and continue payments to Nancy.
The court ordered Terry to pay spousal support of $3500 per month until Nancy
or Terry dies, or until Nancy remarries. Terry appeals the spousal support
provision of the parties’ dissolution decree.
II. Standard of Review
Our review in dissolution cases is de novo. Iowa R. App. P. 6.907; In re
Marriage of Fennelly, 737 N.W.2d 97, 100 (Iowa 2007). We examine the entire
7
record and determine anew the issues properly presented. In re Marriage of
Rhinehart, 704 N.W.2d 677, 680 (Iowa 2005). We give weight to the factual
findings of the district court, but are not bound by them. In re Marriage of Geil,
509 N.W.2d 738, 741 (Iowa 1993).
III. Spousal Support
Terry appeals both the amount and duration of the award of spousal
support, but does not dispute that Nancy should be awarded spousal support.
He claims Nancy should be awarded $500 per month until February 28, 2016.
After that date, when she is no longer receiving $1000 per month from T.L.
Brown Management, Terry proposes that Nancy receive $1000 in spousal
support per month until he turns seventy years old or retires from full-time
employment, whichever occurs first. At that time, Terry believes Nancy’s spousal
support should be reduced to $500 per month. He states that in any event, the
spousal support should terminate upon the death of either party or on Nancy’s
remarriage.
Spousal support is not an absolute right; an award depends on the facts
and circumstances of the case. In re Marriage of Schenkelberg, 824 N.W.2d
481, 486 (Iowa 2012). Iowa Code section 598.21A(1) (2013) provides the
relevant factors in considering whether spousal support is appropriate, including
(1) the length of marriage; (2) the age and emotional and physical health of the
parties; (3) the property distribution; (4) the educational level of the parties at the
time of marriage and when the dissolution action is commenced; (5) the earning
capacity of the party seeking alimony, including educational background, training,
employment skills, work experience, and length of absence from the job market;
8
and (6) the feasibility of the alimony-seeking party to become self-supporting with
a reasonably comparable standard of living to that enjoyed during the marriage.
See also In re Marriage of Hansen, 733 N.W.2d 683, 704 (Iowa 2007).
We consider the property division and spousal support together in
evaluating their individual sufficiency. In re Marriage of Debler, 459 N.W.2d 267,
269 (Iowa 1990). A district court has considerable latitude in making an award of
spousal support, and we will disturb the court's award only if it is inequitable.
Schenkelberg, 824 N.W.2d at 486.
A. Terry contends the district court improperly relied upon the opinion
of Nally in determining his income. Terry claims Nally should not have imputed
the income from the S corporations to him, although Terry reported this income
on his tax returns, because the income was used for the management of the
companies and to pay down debt. He also claims he did not receive any rental
income from the practice buildings because the money received from rent was
used to pay the mortgages on the buildings. He states Nally did not consider
business losses or the parties’ ongoing debt obligations. Terry also contends
Nally improperly used a five-year average of his income. He asserts his income
has been decreasing in recent years, and so claims the five-year average
artificially inflates his income.
The district court did not explicitly rely upon the opinion of Nally. The court
stated, “From the exhibits received and the testimony offered it is not possible to
determine exactly what amounts of ‘net income’ are available to pay spousal
support.” The court noted Nancy had offered the testimony of Nally, while Terry
offered extensive financial information, including evidence of the parties’ debts.
9
The court made the common sense conclusion that during the marriage Terry
earned sufficient income for the parties’ to maintain their lifestyle and pay their
expenses, including debt repayment.
On our de novo review, we note Terry testified he had been making $5500
per month from the optometry practice in Jefferson and $850 per month from the
optometry practice in Osceola, a total of $6350 per month. He also stated he
had been working four days a week, but planned to increase his work schedule
to five days a week, which he believed would increase his income by twenty
percent. Thus, Terry’s income from working as an optometrist was expected to
increase to $7620 per month. Also, after February 28, 2016, Terry will receive
the $1000 per month from T.L. Brown Management, which had previously been
paid to Nancy. Even without considering the income from the other optometry
practices, the rental income from the practice buildings, or farm rental income,
Terry will have income of $8620 per month, or $103,440 per year. We conclude
his income is actually greater than $8620 per month.
B. Terry claims the district court improperly set the amount of alimony
at $3500 per month. He asserts the court did not carefully examine the needs of
both parties. In particular, he claims the alimony award does not leave him with
sufficient income to pay down the sizable amount of the parties’ debts, which he
assumed in the stipulation. Terry disputes the amount of Nancy’s anticipated
monthly expenses.
There was evidence that once the dissolution was finalized Nancy would
receive Social Security benefits of $1290.50 each month. After February 28,
2016, she will no longer receive $1000 each month from T.L. Brown
10
Management. Nancy testified she would like to obtain part-time employment at a
fabric store or sell quilts. It is unknown whether either of these plans will come to
fruition, but at best she would probably earn only minimal income. The district
court found, “Nancy has currently no marketable skills to maintain her lifestyle
since marriage.” The court also found Nancy could invest the assets she
received in the parties’ stipulation, which “could provide a comfortable income.”
In total, Nancy has income of $1290.50 per month, plus possibly some amount
from employment and interest payments.
We conclude the district court equitably determined the amount of spousal
support should be $3500 per month. If we consider Terry’s income of $8620 per
month alone, he will still have $5120 per month to spend as he sees fit.6 His
income is greater than $8620 per month, giving him a greater amount of
disposable income. Nancy will have $1290.50 in Social Security benefits plus
$3500 in spousal support payments, which will give her a total of $4790.50 each
month. We find the district court carefully considered the income and anticipated
expenses of both parties in setting the proper amount of spousal support.
C. Finally, Terry asserts his spousal support obligation should
decrease when he reaches the age of seventy or when he retires, whichever
occurs first. He defines retirement as working less than thirty hours per week. In
his appellate brief, he states he would like to retire and instead he will have to
increase his work hours. He claims it is inequitable to require him to continue his
6
As noted during the dissolution hearing, by paying down the debt on the assets
awarded to him, Terry increases his equity in those assets. We also note the value of
the assets awarded to Terry exceed the amount of the parties’ debts. Thus, Terry could
sell the assets, repay the debt, and invest the profits, which would give him interest
income.
11
employment until his death in order to pay the amount of spousal support
ordered by the district court.
During the dissolution hearing Terry was asked, “[W]hen would you like to
retire?” He answered, “Ideal would be never, but that isn’t ideal. That isn’t
reality. If I could get to sixty-seven, now that would be good.” Later he stated he
did not want to continue to see patients when he was seventy. Terry testified
that if he retired when he was seventy, he would receive about $3350 per month
in Social Security benefits.
In the division of assets in the parties’ stipulation, Nancy received an IRA
valued at $129,639 and a 401K valued at $424,513. Terry was not awarded any
retirement accounts. Although Nancy will be receiving less in Social Security
benefits than Terry, she will have a greater amount of retirements funds due to
the assets awarded to her. When he retires, Terry should have some increased
equity in his non-liquid assets, but will not have a comparable amount of
retirement income. Unlike the retirement funds received by Nancy, Terry did not
receive any liquid assets, and therefore, it will be more difficult for him to convert
his assets to a fund to be used for his retirement. The assets awarded to Terry
consist of his interest in the optometry practices, the practice buildings, real
estate, and vehicles. We determine that at the time Terry becomes seventy
years old his spousal support obligation should be reduced to $1500 per month.
This obligation will continue until the death of either party or until Nancy
remarries, whichever occurs first.
12
IV. Attorney Fees
Nancy seeks attorney fees of $4000 for this appeal. This court has broad
discretion in awarding appellate attorney fees. In re Marriage of Okland, 699
N.W.2d 260, 270 (Iowa 2005). An award of appellate attorney fees is based
upon the needs of the party seeking the award, the ability of the other party to
pay, and the relative merits of the appeal. In re Marriage of Berning, 745 N.W.2d
90, 94 (Iowa Ct. App. 2007). Because Terry was partially successful in his
appeal, we determine he should pay $2000 toward Nancy’s appellate attorney
fees.
We affirm the decision of the district court, but modify to reduce Terry’s
spousal support obligation to $1500 per month when he turns seventy years old.
Costs of this appeal are assessed to Terry.
AFFIRMED AS MODIFIED.