In re Marriage of Marasco ( 2023 )

IN THE COURT OF APPEALS OF IOWA
No. 22-0847
Filed June 7, 2023
IN RE THE MARRIAGE OF ALBERT PHILLIP MARASCO
AND JULIE MARASCO
Upon the Petition of
ALBERT PHILLIP MARASCO,
Petitioner-Appellant/Cross-Appellee,
And Concerning
JULIE MARASCO,
Respondent-Appellee/Cross-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Celene Gogerty, Judge.
Albert Marasco appeals and Julie Marasco cross-appeals the property-
division provisions of the decree dissolving their marriage. AFFIRMED AS
MODIFIED ON APPEAL; AFFIRMED ON CROSS-APPEAL.
David J. Hellstern of Sullivan & Ward, P.C., West Des Moines, for
appellant/cross-appellee.
Nathan A. Russell of Elverson Vasey Law Firm, Des Moines, for
appellee/cross-appellant.
Considered by Vaitheswaran, P.J., and Ahlers and Buller, JJ.
2
AHLERS, Judge.
Albert and Julie Marasco divorced after almost seventeen years of
marriage. Over the course of the marriage, Julie worked for the State of Iowa,
bringing in steady income and providing health insurance for the couple. 1 This
allowed Albert to work as an entrepreneur, and eventually three of his business
ventures became successful. One business—InfoNet Corporation, doing business
as Summit Products (Summit)—was started prior to the parties’ marriage.2 Two
additional businesses—Fresco Windows, Inc. (Fresco) and MarazCo Holding LLC
(MarazCo)—were started during the marriage. At the dissolution trial, both parties
presented expert witnesses who opined on the value of the three businesses. The
district court issued a decree that awarded the businesses to Albert and ordered a
property equalization payment to Julie, which was to be paid in monthly
installments over the course of fifteen and one-half years. As they did at trial, the
parties disagree on appeal as to how to equitably divide their property.3
We review dissolution-of-marriage actions 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. We
are not bound by the district court’s findings, but we will only disturb its ruling if we
find it failed to do equity. Id. Additionally, we will affirm the court’s valuation of
1 Julie also provided health insurance for Albert’s child from a prior marriage.
2 Albert and his wife from a prior marriage filed articles of incorporation for Summit
in 1996. Albert bought out his prior wife’s interest as part of their divorce in 2000.
3 Albert appealed from the dissolution decree, raising several challenges to the
property distribution. Julie cross-appealed and claims the district court failed to
consider the value of a loan payable to one of the businesses when it valued the
business.
3
assets if it is within the range of permissible evidence. Id. at 679.
We first address Albert’s claims that the district court should not have
considered Summit in the property division because it is premarital property or, at
the very least, the premarital value of Summit should have been set aside as
Albert’s separate property. Premarital property is divisible in a dissolution. See
Iowa Code § 598.21(5) (2020) (“The court shall divide all property, except inherited
property or gifts received or expected by one party, equitably . . . .” (emphasis
added)); In re Marriage of Schriner, 695 N.W.2d 493, 496 (Iowa 2005) (recognizing
the requirement to divide all property “means the property included in the divisible
estate includes not only property acquired during the marriage by one or both of
the parties, but property owned prior to the marriage by a party”). And “[t]he district
court ‘may not separate [a premarital] asset from the divisible estate and
automatically award it to the spouse that owned the property prior to the marriage.’”
In re Marriage of Fennelly, 737 N.W.2d 97, 102 (Iowa 2007) (second alteration in
original) (quoting In re Marriage of Sullins, 714 N.W.2d 242, 247 (Iowa 2006)).
The above being said, the property brought into the marriage is a factor to
consider in determining an equitable property division. See Iowa Code
§ 598.21(5)(b) (listing “[t]he property brought to the marriage by each party” as a
factor to consider in determining property division). This factor can be used to
essentially set aside the premarital value of property to the spouse bringing the
property into the marriage when it is equitable to do so. See, e.g., In re Marriage
of Wendell, 581 N.W.2d 197, 199 (Iowa Ct. App. 1998) (noting that consideration
of the value of premarital property “may justify a full credit, but it is not required”).
But equity is determined on a case-by-case basis, as it is a fact-intensive inquiry.
4
Here, we see no inequity in the district court declining to carve out any
portion of the value of Summit as Albert’s separate property. When Albert divorced
his prior wife in 2000, he paid her $10,000 for her fifty-one percent ownership in
Summit, suggesting it was not a thriving business. And there is no persuasive
evidence that business was booming at Summit when these parties married in
2005. Summit’s balance sheet at year-end 2005 shows equity of $61,227, and
Summit’s 2005 tax return shows ordinary business income of $26,449. The parties
were struggling to pay their bills. Around 2008, things had not turned around, as
Albert came to Julie and informed her that things were so grim that he was
considering closing the Summit business. The couple toughed it out, kept Summit
open, and reaped the rewards of doing so. In stark contrast to the bleak numbers
from Summit’s 2005 tax return, the company’s 2020 tax return shows ordinary
business income of $971,251, and the evidence suggests that 2021 was an even
better year for the company.4 This tremendous growth in the company led to the
parties’ experts valuing Summit at between $3,748,000 (by Albert’s expert) and
$5,979,800 (by Julie’s expert). Given the length of the marriage; Julie’s
contributions to the marriage; the comparably inconsequential value of Summit at
the time of the marriage and the early years of it; and the value of Summit at the
4 As part of Albert’s effort to set aside part of the value of Summit as nonmarital
property, Albert’s expert placed a premarital value on Summit by considering its
start-up value in 1996, considering its time-of-trial value in 2022, and then
extrapolating a value at the time of the marriage in 2005 as if the growth in the
company’s value from 1996 to 2022 was linear. As noted in the above description,
Summit’s growth was anything but linear. The company struggled for many years
before and during the marriage until hitting its stride around 2018 to build up to the
valuable company it is today. For this reason, we afford no meaningful weight to
Albert’s expert’s time-of-marriage valuation.
5
time of trial, we find the district court was correct in not treating any part of the
value of Summit as Albert’s separate property for purposes of determining an
equitable property division.
We turn to Albert’s backup argument—that the district court incorrectly
valued Summit. In so doing, Albert first claims the district court made several
incorrect factual findings. Some of the purported factual inaccuracies would not
impact the court’s valuation of Summit.5 Others relate to a loan of roughly $1.8
million from Summit to Fresco and whether the parties’ respective experts properly
considered it when opining on Summit’s value. Julie’s cross-appeal also relates
to the loan. She claims the district court should have considered the loan an asset
of Summit, which would have raised its value by the amount of the loan.6
We conclude the district court accurately valued Summit at $5,979,800.
This is the fair-market value established by Julie’s expert. When considering the
valuations proposed by the parties’ respective expert witnesses, the court found
Julie’s expert’s “conclusions more consistent with the credible evidence [and]
g[ave] it more weight.” The court explained it agreed with Julie’s expert that
Summit’s own ability to secure a loan for capital improvements in excess of
$10 million supports Julie’s expert’s higher valuation of Summit than that of Albert’s
5 Albert complains that the court stated MarazCo purchased two adjoining lots
instead of three, the court found Fresco to be profitable at the time of dissolution
even though “it was being propped up financially by Summit,” and the court stated
Julie moved out of the marital home in 2019 instead of 2018. Albert goes on to
claim that Summit’s financial gains between Julie’s 2018 move and the date of the
dissolution decree should not be distributable to Julie. But that argument goes to
the equitable division of property as opposed to the court’s valuation of Summit.
6 Julie does not address that this would simultaneously reduce the value of Fresco
in equal measure.
6
expert. The district court also questioned the reliability of Albert’s expert given the
expert’s phrasing in his report, which the court described as “fawning terms,” when
describing Albert’s businesses and the expert’s use of two separate valuation
methodologies without explanation as to why one was more reliable than the other.
We defer to the district court’s credibility determination favoring Julie’s expert’s
valuation of Summit. See In re Marriage of Schildberg, No. 05-0081, 2005 WL
3115872, at *2 (Iowa Ct. App. Nov. 23, 2005) (“Normally, we defer to a district
court’s assessment of ‘dueling’ expert witnesses because that court is in a better
position to judge the credibility of witnesses.”).
In crediting the district court’s decision to adopt Julie’s expert’s valuation,
we take no issue with the expert’s approach to the loan between Fresco and
Summit. When valuing Summit, Julie’s expert did not consider the loan to Fresco
as a receivable. Likewise, when valuing Fresco, the expert did not consider the
loan as a debt, so it was a wash between the two companies. Because both
Summit and Fresco were divisible as part of the marital assets, we think this was
an acceptable approach to simplify this complex division of assets. We reject both
parties’ contentions that the loan from Summit to Fresco was not properly
considered when valuing the marital assets. As such, we affirm as to Julie’s cross-
appeal.
We turn to Albert’s final fallback position that the district court simply did not
divide the parties’ property in an equitable manner. When reviewing the division
of property “we accord the trial court considerable latitude in making this
determination and will disturb the ruling only when there has been a failure to do
equity.” In re Marriage of Okland, 699 N.W.2d 260, 263 (Iowa 2005) (citation
7
omitted). “Although an equal division is not required, it is generally recognized that
equality is often most equitable.” In re Marriage of Rhinehart, 704 N.W.2d 677,
683 (Iowa 2005). With these principles in mind, we turn to Albert’s specific
complaints about the property division.
First, we address Albert’s complaint that the district court should have
reduced the marital estate by $404,430 to reflect debt held by MarazCo. We reject
Albert’s challenge because that debt was already accounted for in the valuation of
MarazCo that was agreed upon by both experts and adopted by the district court.7
Next, we turn to Albert’s arguments about various assets that impact the
value of the marital estate. Albert points out the district court undervalued Julie’s
new residence by $500; included $2500 for fishing boats that did not belong to the
parties;8 and included $5000 for Julie’s wedding ring, which was a gift to her and
should not have been included in the marital property. These sums are relatively
minor in a marital estate that the district court valued at $9,321,291.26.9
Nonetheless, we adjust the value of the parties’ property awards to correct these
discrepancies. After this adjustment, the total value of the marital estate is reduced
to $9,314,291.26. After adding in $500 for Julie’s residence and subtracting the
value of the wedding ring from Julie’s portion of the assets, her property award
equals $1,267,796.06. As for Albert, after subtracting the value of the boats
erroneously included, his property award totals $8,046,495.20. Additionally, the
7 The two experts applied different discounts to MarazCo’s valuation to account for
the lack of marketability, and the district court applied a discount that it reached by
averaging the two discounts presented by the experts.
8 The parties agree the fishing boats actually belong to Albert’s parents.
9 This figure and the figures that follow as to the respective division of property are
taken from the recapitulation statement attached to the district court’s decree.
8
parties agree that the district court inadvertently awarded Albert a 401(k) account
valued at $180,746 that does not exist. We reduce the value of the assets awarded
to Albert by $180,746 to lower his property award to $7,865,749.20.10 Even taking
these corrections into account, an equalization payment to Julie remains
necessary. We must determine the amount of such payment.
Albert argues the district court’s errors in accounting should lead us to
conclude “the entire distribution in this matter was incorrectly determined and
inequitable” and invites us start fresh. But we think Albert is too quick to throw the
baby out with the bathwater. He again complains that the district court did not
credit his expert’s valuation of Summit. However, we take no issue with the district
court’s decision to credit only Julie’s expert as to Summit’s value. And Albert
complains that all three businesses—Summit, Fresco, and MarazCo—will require
improvements to remain competitive in the future. While that may be true, it does
not mean equity requires him to leave the marriage with significantly more than
Julie. Albert also claims that Summit has not historically produced excess
discretionary income and, when it did, it was reinvested, so he does not have the
cash flow to pay a sizable equalization payment. We note the district court was
aware of the realities of cash flow and ordered the equalization payment be made
over fifteen and one-half years. We find this lengthy repayment period equitable,
as it helps reduce the impact of the cash flow requirements that come with Albert’s
sizable equalization-payment obligation. We also note that, even by Albert’s more
conservative valuation of Summit, which the district court and we have rejected, it
10This adjustment also reduces the total net worth of the marital estate from
$9,314,291.26 to $9,133,545.26.
9
remains a multimillion-dollar company that he received in the decree.11 Equity
requires Julie be compensated with an equalization payment.
As previously discussed, we reject Albert’s contention that equity requires
the premarital value of Summit be set aside as if it is nonmarital property. Likewise,
we reject his argument that we should only consider Summit’s value as of the
parties’ separation date instead of the dissolution trial. See In re Marriage of
Campbell, 623 N.W.2d 585, 587–88 (Iowa Ct. App. 2001). In doing so, we are
cognizant that Albert makes no such request with respect to the other businesses
or the parties’ investment accounts and seeks to value Summit when it was less
valuable. See id. (considering the fact that the husband was asking that only his
retirement account be valued at time of separation—when it was less valuable—
in deciding when to value account).
We also reject his notion that Julie did not contribute to the success of the
businesses so she should not get a significant property-equalization payment.12
Julie remained employed during the marriage and provided the family with reliable
income and health insurance. With this contribution, Albert was able to focus on
his entrepreneurship and take risks knowing the family had separate steady
income provided by Julie. It is only equitable that Julie benefits now from providing
that stability over the course of the marriage.
After reviewing Albert’s various arguments, we agree with the district court’s
11 The parties’ briefs discuss the ownership of Summit at great length and whether
Julie owns any shares in the company. Julie’s ownership of shares does not
impact our analysis because, no matter the distribution of shares between them,
the entire company is a marital asset that was awarded to Albert in the decree.
12 Albert alluded to this argument in his brief section challenging the valuation of
Summit.
10
decision to award Julie with an equalization payment that would result in the parties
leaving the marriage with nearly equal net worths.13 However, we revisit the
amount of the equalization payment due to the adjustments previously discussed.
As noted above, the total value of the marital estate after corrections is
$9,133,545.26. Julie received $1,267,796.06 in marital net worth. Albert received
$7,865,749.20. For the parties to leave on exactly equal footing, Albert would be
required to pay Julie an equalization payment of $3,298,976.57. However, the
district court chose to award Julie about $40,000 less than what would have
evened up the parties’ balance sheets. We follow course and order Albert to pay
Julie $3,258,000 at $17,516.13 per month for 186 months. All other terms in the
dissolution decree remain the same.
Finally, we address Julie’s request for appellate attorney fees. “Appellate
attorney fees are not a matter of right, but rather rest in this court’s discretion.”
McDermott, 827 N.W.2d at 687 (quoting Okland, 699 N.W.2d at 270). When
considering an appellate-attorney-fee request, we consider the needs of the
requesting party, the other’s ability to pay, and the merits of the claims. Id. Here,
Julie was unsuccessful on her cross-appeal while Albert was partially successful
on appeal. And while Albert has resources to pay, Julie does as well. We decline
to award her any appellate attorney fees.
AFFIRMED AS MODIFIED ON APPEAL; AFFIRMED ON CROSS-
APPEAL.
13The district court determined for Julie and Albert to leave with equal net worths,
Albert would need to pay Julie $3,388,349.57. However, it ultimately ordered
Albert to pay Julie an equalization payment of $3,348,000.