In Re the Marriage of Melissa Jo Mihm and Scott Anthony Mihm, Upon the Petition of Melissa Jo Mihm N/K/A Melissa Jo Weber

IN THE SUPREME COURT OF IOWA
No. 12–1928
Filed January 24, 2014
IN RE THE MARRIAGE OF MELISSA JO MIHM
AND SCOTT ANTHONY MIHM,
Upon the Petition of
MELISSA JO MIHM n/k/a MELISSA JO WEBER,
Appellant,
And Concerning
SCOTT ANTHONY MIHM,
Appellee.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Winneshiek County,
David F. Staudt, Judge.
Ex-wife seeks further review of a court of appeals decision
affirming a trial court judgment finding there was no substantial change
in circumstances justifying modification of a child support order.
DECISION OF COURT OF APPEALS VACATED IN PART AND
AFFIRMED IN PART; DISTRICT COURT JUDGMENT REVERSED IN
PART, AFFIRMED IN PART, AND REMANDED.
Judith M. O’Donohoe of Elwood, O’Donohoe, Braun, White, LLP,
Charles City, for appellant.
Dale L. Putnam of Putnam Law Office, Decorah, for appellee.
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ZAGER, Justice.
After Scott Mihm filed a petition to modify their divorce decree, his
former wife Melissa counterclaimed seeking an increase in child support.
As part of the original stipulation, the parties agreed to a child support
amount below that provided by the child support guidelines. The district
court incorporated this stipulation into its decree of dissolution without
noting that the child support was not consistent with the child support
guidelines and without any explanation as to why application of the
guidelines would be unjust or inappropriate. After a modification trial,
the district court concluded that there had been no substantial change in
circumstances justifying a modification of Scott’s child support
obligation. The district court further concluded that an agreement as to
child support made by the parties with full knowledge that the child
support was not based upon the child support guidelines should not be
modified at a later date “unless for the direst of needs.” The court of
appeals affirmed, and we granted further review. For the reasons set
forth below, we reverse and remand on the issue of modification of child
support.
I. Background Facts and Proceedings.
Scott and Melissa Mihm were married in November 1997. They
have three children. In September 2008, Melissa filed a petition for
dissolution of the marriage.
In October 2008, the district court entered a temporary order on
custody and visitation, child and spousal support, and other financial
matters. As part of the temporary order, Melissa was awarded a bank
account with a balance of about $45,000, and Scott was ordered to pay
spousal support of $2500 per month. Based on its finding of the parties’
respective incomes, which included $1557.25 of net monthly income
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imputed to Melissa, the district court ordered Scott to pay $2459.15 in
temporary monthly child support. According to the order, the district
court reached the amount using the child support guidelines then in
effect.
In January 2009, Scott and Melissa entered into a stipulation and
agreement for dissolution of the marriage. The stipulation divided the
former couple’s property and resolved, among other things, issues of
spousal support, child custody, and child support. As part of the
property settlement, Scott agreed to pay Melissa $500,000, with
$100,000 due one week after entry of the decree and $400,000 paid over
eight annual installments. Scott also agreed to pay Melissa $500 per
month in spousal support for sixty months. The stipulation also
provided Scott would pay $1500 per month in child support, an amount
below the temporary child support earlier established by the child
support guidelines. Under the stipulation, the parties agreed to joint
legal custody of the three minor children, with primary physical
placement remaining with Melissa. Melissa also agreed not to move more
than sixty miles from Fort Atkinson, Iowa, without prior application to
the court and court approval. On January 27, the court entered the
decree, which incorporated the parties’ stipulation. The district court did
not note that the child support was lower than that established by the
child support guidelines or make a written finding that it was deviating
from the guidelines as the amount set by the child support guidelines
would be unjust or inappropriate.
In June 2009, Scott petitioned to modify the decree, arguing there
had been a substantial change in circumstances because Melissa moved
more than sixty miles from Fort Atkinson. After initially filing an answer,
Melissa amended her answer and added a counterclaim. Her
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counterclaim sought to have the child support recalculated because
there had been a substantial change in circumstances. Scott later
amended his petition to include a claim seeking termination of spousal
support based on Melissa’s remarriage, which occurred in April 2011.
Before the modification trial, Scott and Melissa reached a partial
stipulation. They agreed Melissa would retain physical custody of the
two younger children, and Scott would assume physical custody of the
oldest child, who had already returned to live with Scott. The two
remaining issues, the termination of spousal support and the
recalculation of child support, proceeded to trial in September 2012.
After the trial, the district court issued its order. First, the district
court confirmed that Melissa had remarried. The district court also
found that Melissa had shown no extraordinary circumstances justifying
a continuation of spousal support. Accordingly, the court ordered that
the spousal support of $500 per month terminate effective November 1,
2011.1 It also ordered that Scott be credited with eleven spousal support
payments made since that date.
The district court next addressed whether to recalculate Scott’s
child support obligation based on a substantial change in circumstances.
The district court noted that two children remained in Melissa’s physical
custody as a result of the partial stipulation. The district court found
Melissa accepted a $500,000 property settlement at the time of the
decree. The district court also found the parties agreed in the stipulation
to an amount of child support that was not based on the child support
guidelines. Scott and Melissa had agreed that Scott would pay $1500
1Melissa testified she and Scott agreed orally that the spousal support would
terminate effective November 1, 2011.
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per month in child support, even though both parties were aware that
the court’s temporary order, which relied on the child support guidelines,
established Scott’s child support obligation as $2459.15 per month. The
district court also noted that Melissa offered evidence of Scott’s current
income and evidence showing that if Scott’s child support obligation were
recalculated under the latest guidelines his support obligation would be
substantially higher.
The district court also cited specific parts of Melissa’s testimony at
the trial. Melissa testified that she signed the stipulation in January
2009 against the advice of two attorneys. She signed it, however,
because she felt harassed by Scott and wanted the dissolution
proceedings to end, so long as she could have her children. Melissa
conceded that she wanted to modify the child support obligation because
she made a “bad deal” in the stipulation.
The district court concluded Melissa failed to show a substantial
change in circumstances. First, the district court dismissed the notion
that a party who agreed to an amount of child support, with knowledge
that the amount was less than that provided by the child support
guidelines, should later be permitted to modify the agreed-upon amount,
except under rare circumstances. The district court next reasoned that a
dissolution decree’s child support determination is final as to
circumstances that were known or should have been known through
reasonable diligence at the time of the decree. The district court
concluded that nothing showed that Scott’s job or income had changed
in a way that could not have been known at the time of the original
decree.
In addition, the district court did not find wrong or injustice in
continuing to enforce the stipulated amount of child support. Melissa
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received a large property settlement in the decree, she had remarried
since then, and her new husband was employed. Finally, the district
court found no evidence was offered to show that the children would be
adversely affected if the child support were not modified. Accordingly,
the court denied Melissa’s request to modify the child support.
Melissa appealed, and we transferred the case to the court of
appeals. The court of appeals affirmed. Rejecting all of Melissa’s
arguments, and for the same reasons articulated by the district court, it
held she had not shown a substantial change in circumstances to justify
modifying the amount of child support under the decree. Melissa sought
further review, which we granted.
II. Standard of Review.
We review de novo a decision to modify a dissolution decree. In re
Marriage of Michael, 839 N.W.2d 630, 635 (Iowa 2013). Although the
district court’s fact findings are not binding upon us, we do give them
weight. In re Marriage of McDermott, 827 N.W.2d 671, 676 (Iowa 2013).
We will not disturb a district court’s ruling on a modification unless that
ruling failed to do equity. Id.
III. Discussion.
The issue on further review is whether there has been a
substantial change in circumstances justifying a modification of the child
support amount under the original divorce decree. Under Iowa Code
section 598.21C, a court may modify a child support order “when there
is a substantial change in circumstances.” Iowa Code § 598.21C(1)
(2011). The statute contains numerous factors a court may consider
when deciding whether to modify the order, such as changes in a party’s
employment or income, changes in a party’s number of dependents,
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changes in a party’s residence, a party’s remarriage, and other factors
relevant in the case. See id.
We have identified principles courts should also consider when
deciding whether to modify a decree. See, e.g., Michael, 839 N.W.2d at
636 (explaining principles to consider in deciding whether there has been
a substantial change in circumstances justifying a change in a spousal
support obligation); In re Marriage of Rietz, 585 N.W.2d 226, 229 (Iowa
1998) (noting principles to consider when deciding to modify child
support under a divorce decree). The change in circumstances must not
have been within the district court’s contemplation when the decree was
entered. Michael, 839 N.W.2d at 636; In re Marriage of Vetternack, 334
N.W.2d 761, 762 (Iowa 1983) (explaining one principle that emerges from
modification caselaw is that the change in circumstances must not have
been within the trial court’s contemplation “when the original decree was
entered”). Also, “ ‘it must appear that continued enforcement of the
original decree would, as a result of the changed conditions, result in
positive wrong or injustice.’ ” In re Marriage of Walters, 575 N.W.2d 739,
741 (Iowa 1998) (quoting Vetternack, 334 N.W.2d at 762). Finally, the
party seeking modification must prove by a preponderance of the
evidence the substantial change in circumstances. Rietz, 585 N.W.2d at
229.
Melissa contends the transfer of the former couple’s oldest child
from her physical custody to Scott’s was a substantial change in
circumstances. As the court of appeals acknowledged, a change in the
physical custody of a child is often a substantial change that justifies
refiguring child support. See In re Marriage of Titterington, 488 N.W.2d
176, 180 (Iowa Ct. App. 1992); In re Marriage of Green, 417 N.W.2d 252,
254 (Iowa Ct. App. 1987). The court of appeals declined to increase
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Scott’s child support obligation on this basis, however, because taking
physical custody of one child would typically be accompanied by a
decreased child support obligation, not an increased obligation. That
might be true in a typical case, but in this case, the amount Scott paid
for three children under the original decree, $1500 per month, is
substantially below the amount Scott would pay even for two children if
his obligation were recalculated under the child support guidelines. In
short, the reason for the increase, in spite of Scott taking physical
custody of one child, is that Scott was paying such a small amount of
child support to begin with.
Even if the change in custody of one child were not on its own a
substantial change in circumstances, other facts support finding a
substantial change in circumstances. Because Melissa remarried, she
lost $500 per month in spousal support before the end of the sixty
month period specified in the original stipulation. As the district court
correctly found, remarriage of an ex-spouse does not automatically
terminate spousal support; it shifts the burden to the support recipient
to show extant extraordinary circumstances that justify continuing the
support. In re Marriage of Shima, 360 N.W.2d 827, 828 (Iowa 1985).
Melissa did not make any showing that would justify continued receipt of
alimony. See In re Marriage of Johnson, 781 N.W.2d 553, 558 (Iowa
2010) (explaining the failure to show any extraordinary circumstances
warrants termination of spousal support after remarriage). Accordingly,
Melissa’s spousal support was appropriately terminated.
Melissa’s remarriage and the consequent loss of spousal support
alone may not be a substantial change in circumstances justifying
modification of child support. See Mears v. Mears, 213 N.W.2d 511, 516
(Iowa 1973) (holding remarriage of ex-spouse and loss of income not to
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be a substantial change in circumstances). But they are clearly factors
the court shall consider. Iowa Code § 598.21C(1)(a), (g), (l). Here, the
loss of spousal support results in a decrease in the amount of money
available each month with which Melissa can support the former couple’s
two children remaining in her physical custody. It is reasonable to
conclude from the record that when Melissa accepted the original
amount of $1500 per month in child support for three children, which
was just sixty-one percent of the amount set by the temporary order, the
receipt of $500 per month in spousal support figured in her evaluation of
her ability to support herself and her children. Now, in light of the
elimination of spousal support, Melissa has experienced a twenty-five
percent reduction in the amount of money available each month with
which to support herself and her two children from her first marriage.
The loss of the spousal support has had a significant effect on
Melissa’s income. See In re Marriage of Lalone, 469 N.W.2d 695, 697
(Iowa 1991) (considering amount of spousal support paid as one factor in
child support determination). Melissa’s gross income in 2009 was
$7495, in 2010 it was $6252, and in 2011 it was $7075. In each of these
years, $6000 of Melissa’s gross income was spousal support paid by
Scott. Melissa and her new husband Jeff had combined gross incomes of
$45,691 in 2010 and $46,185 in 2011. Although Jeff has only a limited
financial obligation to Melissa’s children from her first marriage, we do
consider his income as it relates to Melissa’s financial condition and
ability to support her children. See, e.g., In re Marriage of Gehl, 486
N.W.2d 284, 287 (Iowa 1992) (“[T]he new spouse’s income can be
considered as it relates to the divorced custodial parent’s overall financial
condition and ability to support the child.”); Page v. Page, 219 N.W.2d
556, 558 (Iowa 1974) (considering income of noncustodial parent’s
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spouse in deciding the appropriate amount of child support). Melissa
and Jeff also have a child of their own, whom they must support on the
couple’s income. This new dependent is a consideration in deciding
whether there has been a substantial change in circumstances. See
Iowa Code § 598.21C(1)(d).
There was significant disagreement at the modification trial about
Scott’s income. Scott presented evidence that his net yearly income,
averaging the years 2009 through 2011, was $138,056, or about $11,505
monthly. See In re Marriage of Knickerbocker, 601 N.W.2d 48, 53 (Iowa
1999) (explaining that when a person’s income fluctuates, the court must
average the person’s income over a reasonable period of years). Melissa
argues Scott’s income is higher. She presented evidence that Scott’s net
income, again averaging the years 2009 through 2011, was $284,889, or
about $23,741 monthly. The disparity results from a dispute over
whether to calculate Scott’s income using straight-line or accelerated-
depreciation deductions under the Internal Revenue Code. See I.R.C.
§ 168 (2006). Notably, our caselaw favors the straight-line method of
depreciation. See Knickerbocker, 601 N.W.2d at 52 (holding court of
appeals properly recalculated income under straight-line method of
depreciation); In re Marriage of Gaer, 476 N.W.2d 324, 329 (Iowa 1991)
(holding that the ex-spouse “should be allowed a deduction for
depreciation determined under the straight line method of depreciation
rather than under the accelerated method”). In the 2008 temporary child
support order, the district court found Scott’s net monthly income to be
$13,654.76.2 Applying the straight-line method of depreciation, as this
2Although the parties disputed the income figure at the time of the temporary
order, both rely on it here to compare Scott’s income at that time to his income now.
The temporary order takes into account the expenses of both parties and the decreases
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court has done in the past, Scott’s net monthly income has increased
about seventy-four percent since just before the decree was entered.
Scott argues that it was within the contemplation of the district
court when it entered the decree that his income would change from
year-to-year. That may be true, but a district court’s knowledge that a
person’s income fluctuates does not mean that a significant increase in
that person’s income cannot result in a finding of a substantial change in
circumstances. Changed income remains one factor to consider in
deciding whether there has been a substantial change in circumstances.
See Iowa Code § 598.21C(1)(a). Moreover, mere knowledge of a
fluctuating income is not the same as knowledge of income increases,
especially significant income increases. We conclude the significant
increase in Scott’s income was not within the contemplation of the
district court at the time of the decree. See In re Marriage of Guyer, 522
N.W.2d 818, 821 (Iowa 1994) (finding a significant increase in income not
within district court’s contemplation at the time of the decree); cf. In re
Marriage of Bergfeld, 465 N.W.2d 865, 867, 870 (Iowa 1991) (finding a
change in income was not within the court’s contemplation where spouse
worked at different jobs that paid varying wages and received
unemployment before divorce, then afterward was rehired at his former
job and received a significant increase in pay).
Unlike the district court and the court of appeals, we find that the
evidence, when viewed as a whole, supports the conclusion that Melissa
______________________________________
in income Scott likely would experience because of rising gas prices affecting the
profitability of his business. We give weight to a district court’s factual determinations.
See In re Marriage of Fennelly & Breckenfelder, 737 N.W.2d 97, 101 (Iowa 2007)
(affirming district court decision to award liberal visitation based on record “replete with
evidence of parties’ devotion toward their children”). Given the care the court took in
reaching a reasonable figure for Scott’s net monthly income, we rely on it here.
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has shown a substantial change in circumstances since the entry of the
original decree, warranting a modification of child support. Likewise, we
disagree with the conclusion that continued enforcement of the decree
would not result in injustice to the children. It is true that Melissa
agreed to a level of child support, which “becomes a final contract when
it is accepted and approved by the court.” In re Marriage of Lawson, 409
N.W.2d 181, 182 (Iowa 1987). When “merged in the dissolution decree,”
the stipulation “is interpreted and enforced as a final judgment of the
court.” Prochelo v. Prochelo, 346 N.W.2d 527, 530 (Iowa 1984). But
“[p]arents cannot lightly contract away or otherwise modify child support
obligations.” In re Marriage of Zeliadt, 390 N.W.2d 117, 119 (Iowa 1986).
Iowa Code section 598.21B makes clear there is “a rebuttable
presumption that the amount of child support which would result from
the application of the guidelines . . . is the correct amount of child
support to be awarded.” Iowa Code § 598.21B(2)(c). The purpose of the
child support guidelines is to provide for the children’s best interests
after considering each parent’s proportional income. See Iowa Ct. R.
9.3(1); see also McDermott, 827 N.W.2d at 684 (explaining the purpose of
the child support guidelines is to provide for the children’s best interests
“after consideration of each parent’s proportional income”). Even with
just two children in Melissa’s custody, Scott’s current child support
obligation is significantly below the amount set by the guidelines.
Considering Melissa’s income figures for Scott utilizing straight-line
depreciation, her loss of alimony, $600 in interest income reported by
Melissa, and $20,000 in imputed annual income which reflects what
Melissa could expect to earn with her skills and experience, and which
Melissa agreed to have imputed to her, the guidelines worksheet
submitted by Melissa at the modification trial sets a monthly support
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amount of $3342. In view of these calculations, we cannot conclude that
when Scott and Melissa stipulated to the monthly child support figure,
they did so with the best interests of three children in mind.
Melissa testified at the modification trial about her motivation for
agreeing to the below-guidelines child support amount. She testified that
she wanted her children and wanted the divorce proceedings to end; she
acknowledged making a “bad deal” with respect to child support. There
is no reason to doubt the truth of this testimony. However, it is not for
the parties to determine an appropriate level of child support. By
statute, establishing an appropriate level of child support is ultimately
the responsibility of the district court after being fully advised of the
circumstances of the parties.
Iowa Code section 598.21B prohibits a court from considering a
variation from the child support guidelines “without a record or written
finding, based on stated reasons, that the guidelines would be unjust or
inappropriate.” Iowa Code § 598.21B(2)(d). We have repeatedly noted
that courts must comply with this requirement. See State ex rel. Nielsen
v. Nielsen, 521 N.W.2d 735, 737 (Iowa 1994) (explaining a “court has no
authority to vary from the guidelines without a written finding that the
guideline amount would be unjust or inappropriate”); Guyer, 522 N.W.2d
at 820 n.1 (noting the requirement and that a decree “fell woefully short
of this statutory requirement”); see also In re Marriage of Brown, 487
N.W.2d 331, 333 (Iowa 1992) (“Our child support guidelines are to be
strictly followed unless their application would lead to an unjust or
inappropriate result.”).
On January 27, 2009, the district court was presented with a
stipulation signed by the parties and a decree prepared by counsel. The
district court signed the decree that same date. There is nothing in the
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record that discloses the district court was advised by counsel that the
child support deviated from the child support guidelines. Accordingly, it
is not surprising that the district court did not make a record on the
reasons for the deviation from the guidelines or make written findings
that the application of the guidelines would be unjust or inappropriate
under the circumstances. But this is precisely the purpose of the
statute.
The written findings and reasons are vital to a later determination
by the court about whether there has been a substantial change in
circumstances. That is the case whether the child support modification
is sought under Iowa Code section 598.21C(1) or under section
598.21C(2)(a).3 If the parties want the district court to deviate from the
child support guidelines, and also want to avoid subsequent modification
of that award based on an evaluation of changed circumstances or the
ten percent deviation, counsel and the district court need to insure that
the dissolution decree explains the reasons for the deviation and that
those reasons are factually and legally valid. See Iowa Ct. R. 9.11; see
also In re Marriage of Nelson, 570 N.W.2d 103, 108 (Iowa 1997)
(explaining a modification order that deviated from the child support
guidelines without explanation could not be used as a basis to determine
whether there had been a substantial change in circumstances). Absent
compliance with the statute and our rules, there is no reason to assume
that the initial child support amount set forth in the decree has any
3Iowa Code section 598.21C(2)(a) provides that “[s]ubject to 28 U.S.C. § 1738B,
but notwithstanding [section 598.21C(1)], a substantial change of circumstances exists
when the court order for child support varies by ten percent or more from the amount
which would be due pursuant to the most current child support guidelines.”
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proper basis, or that it should be used as the basis for subsequent
modification proceedings.
IV. Disposition.
The original child support order was not consistent with the
statute or our rules governing child support and, as such, does not
provide a proper basis on which to base a decision on modification of
child support. However, based on this record, Melissa has shown that
there has been a substantial change in circumstances since the entry of
the underlying decree warranting a modification of child support under
both Iowa Code section 598.21C(1) and section 598.21C(2)(a). This case
is remanded to the district court for a determination of an appropriate
order for child support. We affirm the holding of the court of appeals
denying Scott’s request for attorney fees. Court costs associated with
this appeal are assessed against Scott.
DECISION OF COURT OF APPEALS VACATED IN PART AND
AFFIRMED IN PART; DISTRICT COURT JUDGMENT REVERSED IN
PART, AFFIRMED IN PART, AND REMANDED.