In Re the Marriage of Mary Kay Frary and Daniel L. Knipper Upon the Petition of Mary Kay Frary, and Concerning Daniel L. Knipper

IN THE COURT OF APPEALS OF IOWA
No. 14-1398
Filed January 13, 2016
IN RE THE MARRIAGE OF MARY KAY FRARY
AND DANIEL L. KNIPPER
Upon the Petition of
MARY KAY FRARY,
Petitioner-Appellant,
And Concerning
DANIEL L. KNIPPER,
Respondent-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Linn County, Ian K. Thornhill,
Judge.
Mary Kay Frary appeals the district court’s ruling on Daniel Knipper’s
motion to enforce the parties’ dissolution decree and stipulation. REVERSED
AND REMANDED.
Benjamin W. Blackstock of Blackstock Law Offices, Cedar Rapids, for
appellant.
Charles A. Hallberg of Hallberg Law Office, Cedar Rapids, for appellee.
Heard by Potterfield, P.J., and Doyle and Tabor, JJ.
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DOYLE, Judge.
Mary Kay Frary appeals the district court’s ruling on Daniel Knipper’s
motion to enforce the parties’ 2010 dissolution decree and stipulation. Mary Kay
contends the district court’s order “invalidat[es] portions of the prenuptial
agreement entered into by the parties.” Upon our review, we reverse the order of
the district court and remand.
I. Background Facts and Proceedings
Mary Kay Frary and Daniel Knipper married in 1996. Prior to their
marriage, Mary Kay and Daniel entered into a premarital agreement, providing in
part that in the event their marriage was dissolved, each party would “retain and
manage his or her own property” as set forth in the attached Schedule “A” and
Schedule “B.” The agreement stated in relevant part:
1. This agreement is intended to bind the parties and their
heirs, assigns, and personal representatives, and limit the right of
each party to participate in the property of the other in the event the
intended marriage is terminated by a dissolution of marriage,
altered by a Decree of Separate Maintenance, or affected by any
other judgment, decree or legal proceeding that relates to the
respective property rights of the parties, or the parties separate,
die, or the occurrence or nonoccurrence of any other event in which
the ownership of the property of the parties is to be determined.
....
3. It is the agreement and stipulation of both parties hereto
that in the event of a dissolution of marriage that the property
distribution and settlement shall be made precisely in accordance
with this Agreement and that the property listed on Schedule “A”
and Schedule “B”, attached hereto and by this reference made a
part hereof, remain the property of the person listing the property
and who owned such property before the marriage.
4. It is the desire of the parties that this Agreement be given
full force and effect by a court of law in the event of the initiation by
either party of a dissolution of marriage, separate maintenance
proceeding, separation, or any other legal proceeding relating to
the respective property rights of the parties, or upon the death of
either party. It is the intent of this Agreement that each party retain
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ownership of the property listed by that party in Schedule “A” and
Schedule “B” attached. In addition thereto, the parties agree:
....
(d) In case of a divorce or death, Dan shall have no interest
in any inheritance or gift to Mary Kay from her parents, or from any
other source, or in any asset acquired prior to the marriage to Dan.
(e) In case of a divorce or death, Mary Kay shall have no
interest in any inheritance or gift to Dan from his parents, or from
any other source, or in any asset acquired prior to the marriage to
Mary Kay.
The parties acknowledged in the agreement that they were “aware” of the Iowa
Code provisions relating to division of property upon dissolution of marriage and
premarital agreements.
Schedule “A” set forth the assets of Mary Kay the parties agreed would
remain with Mary Kay, including: “IRA at 1st Nat. of Oelwein Prime Vest (First
Trust) from divorce settlement [qualified domestic relations order] QDRO
& previous Hall & Hall IRA Plan, $36,000”; “Mass. Fidelity IRA (Aegon) from
divorce settlement, $36,000”; and “401k at Hall & Hall (18,000.00) of which was
rolled over from divorce [from Denny Frary] QDRO, $22,000.00.”
In 2009, Mary Kay filed a petition for dissolution of marriage. The parties
reached a stipulation resolving property distribution and spousal support.
Paragraph 9 of the stipulation provided:
Savings Accounts, Stocks, Bonds, Retirement Plan or
Other Investments. Each party shall receive any savings, stocks,
bonds and other investments in their name.
Any pension plans of a party shall be divided by way of a
Qualified Domestic Relations Act Order (QDRO) for the
contributions of each party to their pension plans during the term of
the marriage and each party shall sign all documents necessary to
carry out this provision. Petitioner shall prepare any QDRO for her
pension plans and Respondent shall prepare any QDRO for his
pension plans and such QDROs shall be submitted to counsel for
the other party for approval, and said QDROs shall be submitted to
the plan administrator for approval and to the court for approval.
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The only mention of the parties’ premarital agreement in the stipulation was in
paragraph 1, with regard to real estate (e.g., “The above real estate is the
property of Mary Kay Frary pursuant to . . . the Prenuptial Agreement signed by
Mary Kay and Daniel on June 18, 1996 . . . .”). Both parties and their respective
witnesses signed the stipulation. In May 2010, following a hearing, the district
court entered a dissolution decree that approved and incorporated the parties’
stipulation.
In January 2014, Daniel filed a motion to enforce decree and stipulation.1
The motion alleged in part, “No QDRO has been submitted by [Mary Kay].”
Daniel requested the court “enter appropriate Order compelling [Mary Kay] to file
a QDRO in accordance with the agreement of the parties, and award [Daniel]
attorney’s fees for failing to do so under this decree, and enter other relief as is
just and equitable under these circumstances.”
Mary Kay filed a response to Daniel’s motion and a request to enforce the
premarital agreement. Mary Kay thereafter filed several additional responses to
Daniel’s motion, requesting the court enter an order “that she has no pension
plan to be divided with the Respondent, Daniel Knipper, and to enforce the
prenuptial agreement signed by both parties.” Several more responsive
pleadings were filed by the parties before a hearing took place on June 4, 2014.
On July 2, 2014, the district court entered an order granting Daniel’s
motion to enforce decree and stipulation. The court found in part:
1
We question why Mary Kay did not take action to prepare a QDRO to divide her
Advantage Sales plan—the sole plan Daniel’s attorney requested her to QDRO—which
Mary Kay conceded was subject to division. Mary Kay’s inaction for more than three
years after the dissolution decree was entered led to this proceeding.
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Applying the governing law, the court finds that the parties’
May 2010 stipulated settlement, and not the provisions of the 1996
prenuptial agreement, governs the division of the parties’ retirement
accounts because the settlement agreement, as written and agreed
to by the parties, is a valid modification of their earlier premarital
agreement. Said differently, the court finds the parties, in
negotiating their stipulated settlement, modified certain terms of
their earlier agreement. Such action is sanction by the common
law of contracts, as well as Iowa Code section 596.7(1).[2]
If the parties had wanted to be bound by the entirety of the
prenuptial agreement as part of their divorce, they could have
simply set forth a wholesale incorporation of the prenuptial
agreement into their stipulated settlement. They did not do this.
They did, however, specifically make reference to the prenuptial
agreement in section 1 of their Stipulation regarding real estate. No
similar specific reference is included in section 9. Without a
specific reference to the prenuptial agreement in section 9, the
court finds the plain language of this section establishes that the
parties agreed to equally divide “[a]ny pension plan of a party” then
existing “for the contributions of each party to [such] plans during
the term of their marriage.” See Stipulation date May 11, 2010, p.
5, section 9. Moreover, the fact that section 9 also directs
Petitioner to prepare “any QDRO for her pension plans” indicates
the parties contemplated the division of more than one pension
plan held by Petitioner at the time of the divorce. This reference
also amplifies the court’s skepticism as to Petitioner’s instant
position that she has no pension plan to be divided with
Respondent as a result of the prenuptial agreement.
The court ordered Mary Kay to prepare a QDRO “for all pension plans
held by her as of the May 11, 2010, equally dividing the pension plan with
[Daniel] after the value of the pension plan as of June 28, 1996, is subtracted.”
The court further ordered: “If any pension plan held by [Mary Kay] on May 11,
2010, has been transferred to another plan or plans, a QDRO for the current plan
2
We note that this provision of the Iowa Uniform Premarital Agreement Act refers only to
revocation of premarital agreements, not amendments thereto. Iowa Code § 596.7
(2013) (“After marriage, a premarital agreement may be revoked only as follows: . . . .”).
This provision differs from the corresponding provision of the Uniform Premarital
Agreement Act, section 5, which provides: “After marriage, a premarital agreement may
be amended or revoked only by a written agreement signed by the parties. The
amended agreement or the revocation is enforceable without consideration.” (Emphasis
added.)
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traceable to the plan in existence on May 11, 2010, shall be prepared under the
same criteria listed above,” and, “If any pension plan held by Petitioner on May
11, 2010, has been liquidated, [Daniel] may request further hearing to seek
equitable relief.”
Mary Kay filed a motion pursuant to Iowa Rule of Civil Procedure 1.904(2),
alleging the court’s order “in effect, holds that Mary Kay abandoned the
Prenuptial Agreement,” which she did not do. Mary Kay claimed “the premarital
Gazette ESOP of $89,697.81 she received in a prior divorce [from Denny Frary]
should be set aside to her and not be divided by QDRO in the divorce from
[Daniel].” She further argued:
It was the intent of the parties that the QDRO of any pension plan
of the parties would include only a pension plan subject to division
by QDRO. Mary Kay had two pension plans at the time of the
divorce that could be subject to division by QDRO. One was her
pension plan with her employer, Hall and Hall Engineering, which
was reduced to a negative value after withdrawals were made
during the marriage and after deduction of the Gazette ESOP
funds. The other pension plan, and the one the parties eventually
agreed to divide by QDRO, was Mary Kay’s $2,663.96 pension plan
with Advantage & Marketing that she acquired during the marriage.
The Prenuptial Agreement provided that Mary Kay would retain all
ownership rights in her Gazette ESOP and the pension plans she
had prior to her marriage to Daniel. The only plan to be divided by
QDRO, by agreement of the parties, was the Advantage plan.
Mary Kay further claimed:
As urged to the court during oral argument in chambers at
the hearing on June 4, 2014, the QDRO should be only of Mary
Kay’s $2,663.96 Advantage pension. This would conform to the
statement made by Daniel’s attorney in his June 2, 2010 letter (sent
immediately after the Stipulation was entered and filed with the
court) that the only QDRO of Mary Kay’s pension funds should be
of the Advantage pension.
WHEREFORE the Petitioner, Mary Kay Frary, prays for an
order of court to enlarge or amend the “Order re: Motion to Enforce
Decree and Stipulation” filed July 2, 2014, to apply the Prenuptial
7
Agreement to the division of Mary Kay’s pension plan and to divide
the Advantage pension plan by QDRO with half of that plan,
$1,331.98, set aside to Daniel from Mary Kay’s Jackson annuity.
Daniel resisted Mary Kay’s motion and filed a motion to strike her post
ruling submissions. Daniel claimed:
[T]he Court based its ruling without taking evidence after hearing
arguments of counsel in chambers at the date last set for hearing
on June 4th 2014. Both parties agreed to allow the Court to enter a
ruling on the record on that date. Since then Counsel for [Mary
Kay] has filed responses and affidavits in reply to [Daniel]’s
resistance to [Mary Kay]’s motion to enlarge and expand the
Court’s Ruling of July 2nd 2014.
This is an obvious effort by [Mary Kay] to introduce new
evidence into the record and should be stricken as superfluous and
irrelevant material in the Court’s record. The Court clearly based its
decision on the state of the record at the time of the decree in 2010,
and no further submissions or record by the parties are necessary
for the Court to base its original decision, or reconsideration of the
same, in this case.
In August 2014, after considering the some seven post-ruling filings by the
parties, the district court entered an order denying Mary Kay’s rule 1.904(2)
motion. The court stated:
After having carefully considering [Mary Kay]’s Rule 1.904(2)
Motion and all relevant portions of the litany of pleadings that
followed, the court DENIES Petitioner’s Motion in its entirety. Given
the extent of the post-Ruling pleadings and the time the court took
to enter the instant Ruling, the court finds it prudent to reset the
thirty-day clock originally imposed in its July 2, 2014, Order, for
Petitioner to prepare and submit a QDRO. [Mary Kay] shall have
thirty (30) days from today to prepare the QDRO.
Mary filed a notice of appeal.3
3
Daniel claims Mary Kay’s appeal was untimely because her rule 1.904(2) motion did
not toll the time to file a notice of appeal “when the court ma[de] a decision as a matter
of law.” A notice of appeal is timely if it is filed within thirty days of the filing of the district
court’s ruling on a proper rule 1.904(2) motion. Baur v. Baur Farms, Inc., 832 N.W.2d
663, 668 (Iowa 2013). When a rule 1.904(2) motion is used to obtain a ruling on an
issue the district court may have overlooked, or to request the court enlarge or amend its
findings when it fails to comply with rule 1.904(1), the motion is proper and will toll the
8
The flurry of paper continued. Both parties filed motions to stay the
requirement that they prepare QDROs dividing retirement assets. Following
another hearing, the district court entered an order granting the motions.
However, the court denied Daniel’s additional request to stay other provisions of
the dissolution decree with regard to his spousal support and property settlement
obligations.
In October 2014, with her appeal pending, Mary Kay filed an application to
the district court to settle and approve her statement of evidence or proceedings
pursuant to Iowa Rule of Appellate Procedure 6.806. The district court entered
an order approving Mary Kay’s statement of evidence or proceedings, noting
Mary Kay’s application “appear[ed] to be unresisted.” Daniel thereafter filed a
motion, pursuant to Iowa Rule of Appellate Procedure 6.807, to correct or modify
the record with the Iowa Supreme Court challenging the statement of evidence or
proceedings approved by the district court.
In March 2015, the Iowa Supreme Court entered an order finding “the
statement of evidence was unnecessary in this appeal as a rule 6.806 statement
is utilized when a transcript is unavailable,” and “[a] rule 6.806 motion is not a
tool to admit exhibits into the record that were previously not part of the record.”
The court ordered the district court to vacate is ruling approving the statement of
evidence. The court further ordered:
time for appeal. See In re Marriage of Okland, 699 N.W.2d 260, 266-67 (Iowa 2005).
Here, Mary Kay’s motion amounted to more “than a rehash of legal issues previously
raised”; it requested the court to make, enlarge, or amend findings of fact. See Baur,
832 N.W.2d at 669. Accordingly, we conclude Mary Kay’s notice of appeal was timely
because it was filed within thirty days after the court’s ruling on the 1.904(2) motion. See
Iowa R. App. P. 6.101(1). We have jurisdiction in this appeal.
9
Regarding [Daniel’s] 6.807 motion, the court finds that
exhibits 8, 20, 22, and 23 are part of the district court record on
appeal as these items were filed in district court before the notice of
appeal was filed. However, the parties shall not cite or refer to
[Daniel’s] attorney’s statement in chambers at a hearing held on
April 4, 2014, and [Mary Kay’s] exhibit 25, as these items are not
part of the district court record on appeal.
In considering this appeal, we do not consider those portions of evidence
indicated by the supreme court as not being part of the district court record.
II. Standard of Review
We review this marital dissolution appeal de novo. In re Marriage of
Morris, 810 N.W.2d 880, 885 (Iowa 2012).
III. Discussion
Mary Kay challenges the district court’s ruling on Daniel’s motion to
enforce the parties’ dissolution decree and stipulation. She raises several claims
to support her contention, but the crux of her appeal is that the court’s ruling
“invalidat[ed] portions of the prenuptial agreement entered into by the parties.”
Specifically, Mary Kay takes issue with the court’s ruling that her rollovers from a
premarital retirement account should be divided with Daniel by QDRO.
As a general rule, premarital agreements are favored and should be
construed liberally to carry out the intention of the parties. In re Marriage of
Christensen, 543 N.W.2d 915, 918 (Iowa Ct. App. 1995). “The purpose of such
contracts is to fix the interests of the respective parties in the property of the
other.” See In re Marriage of Pillard, 448 N.W.2d 714, 715 (Iowa Ct. App. 1989).
The decree in question incorporated the parties’ property settlement
stipulation.
10
Although a stipulation of settlement in a dissolution proceeding is a
contract between the parties, it becomes a final contract when it is
accepted and approved by the court. When the stipulation is
merged in the dissolution decree it is interpreted and enforced as a
final judgment of the court, not as a separate contract between the
parties.
In re Marriage of Lawson, 409 N.W.2d 181, 182 (Iowa 1987) (internal citations
and quotation marks omitted). In construing a decree of dissolution of marriage,
our supreme court has previously stated:
The decree should be construed in accordance with its evident
intention. Indeed the determinative factor is the intention of the
court as gathered from all parts of the decree. Effect is to be given
to that which is clearly implied as well as to that which is expressed.
Of course, in determining this intent, we take the decree by its four
corners and try to ascertain from it the intent as disclosed by the
various provisions of the decree.
In re Marriage of Goodman, 690 N.W.2d 279, 283 (Iowa 2004).
Daniel and Mary Kay married in 1996. Prior to their marriage, they
entered into a premarital agreement which provided that, in the event their
marriage was dissolved, each would “retain and manage his or her own property”
as set forth in the attached Schedule “A” and Schedule “B.” Schedule “A” set
forth “Information on Mary Kay Frary,” including: “IRA at 1st Nat. of Oelwein
Prime Vest (First Trust) from divorce settlement QDRO & previous Hall & Hall
IRA Plan, $36,000”; “Mass. Fidelity IRA (Aegon) from divorce settlement,
$36,000”; and “401k at Hall & Hall (18,000.00) of which was rolled over from
divorce QDRO, $22,000.00.”
During the marriage, Mary Kay rolled over the proceeds of her premarital
retirement accounts and funds from retirement plans she received via QDRO
from her divorce from Denny Frary, including $89,697.81 from a Gazette ESOP,
11
into her existing Hall & Hall plan. For example, Exhibit 20 shows Mary Kay’s Hall
& Hall retirement account included $18,736.34 in “rollover” with gains as of June
1996; Exhibit 24 shows Mary Kay’s Hall & Hall account included $79,699.20 in
“rollover” with gains as of March 1998; and Exhibit 24 shows Mary Kay’s Hall
& Hall account included $90,622.38 in “rollover” with gain/loss as of September
2000.
Mary Kay was employed by Hall & Hall at the time of her marriage to
Daniel until that employment was terminated in 2002. Exhibit 24 shows Mary
Kay’s Hall & Hall account included $5902.77 in “401k Elective” and $5119.42 in
“Employer Match” as of September 2000.
During the course of the marriage, Mary Kay removed funds from her Hall
& Hall account. For example, in 1997, she took out a loan in the amount of
$23,000. In 2000, Mary Kay and Daniel made a “hardship” withdrawal in the
amount of $10,000. The withdrawals were used to pay for marital expenses.
In May 2010, the time of the parties’ dissolution, the value of Mary Kay’s
Hall & Hall account was $70,758.36. This number represented the cumulative
value of rollovers from Mary Kay’s premarital retirement accounts, marital
contributions to the account from Mary Kay’s employment between 1996 and
2002, and deductions for the loan and hardship withdrawals during the marriage.
In May 2010, Mary Kay also had a retirement plan with Advantage Marketing
& Sales with a value of $2663.96.
In May 2010, prior to the parties’ dissolution of marriage, Daniel filed an
affidavit of financial status. With regard to the parties’ retirement accounts,
Daniel listed an “Advantage Sales 401k” valued at $2663.96, and an “IPC 401k”
12
valued at $62,060.24. These plans were in Mary Kay and Daniel’s names,
respectively, but listed as “joint” assets. The affidavit of financial status did not
list Mary Kay’s Hall & Hall account. The parties entered a stipulation for division
of their marital assets, which provided in relevant part: “Any pension plans of a
party shall be divided by way of a Qualified Domestic Relations Act Order
(QDRO) for the contributions of each party to their pension plans during the term
of the marriage . . . .” On May 27, 2010, the district court entered a dissolution
decree that approved and incorporated the parties’ stipulation.
On June 2, 2010, Daniel’s attorney, Marty Hagge, sent a letter to Mary
Kay’s attorney, Benjamin Blackstock, stating as follows:
The divorce was finalized on May 27, 2010. Enclosed you
will find copies of the Stipulation, the Decree, and the Affidavit of
Financial Status. You will need to prepare a Qualified Domestic
Relations Order regarding Mary Kay’s account with Advantage
Sales. I will prepare one regarding Dan’s account with IPC.
Neither party, however, prepared a QDRO.
Upon our review, we find the parties’ stipulation, as incorporated into the
decree, to be unambiguous as to the retirement account funds to be divided
between the parties. The parties agreed to divide “[a]ny pension plans of a
party . . . for the contributions of each party to their pension plans during the term
of the marriage.” We do not consider Mary Kay’s rollovers of premarital
retirement funds to her Hall & Hall plan to be “contributions” to the plan that the
parties intended to divide. Mary Kay did make contributions to the Hall & Hall
plan as a result of the efforts of her six years’ employment during the marriage. It
is these contributions that would be subject to division, but these contributions
were essentially dissipated by the parties’ loan and hardship withdrawals from
13
the account during the marriage which they used to pay marital expenses; the
plan itself would have been reduced to a negative but for Mary Kay’s rollovers.
Daniel argues the fact that the stipulation directs Mary Kay “to prepare
‘any QDRO for her pension plans’ indicates the parties contemplated the division
of more than one pension plan held by [Mary Kay] at the time of the divorce.” We
note the stipulation required Daniel to also “prepare any QDRO for his pension
plans.” Daniel had only one plan. We are not persuaded that the reference to
plans—in the plural—indicates the parties intended to deviate from their
premarital agreement.
Indeed, Mary Kay stated the parties agreed in the stipulation that the only
retirement plan of hers to be divided by QDRO was her Advantage Sales plan.
Daniel’s actions and the statements of his attorney support the existence of such
an agreement. The parties’ premarital agreement setting aside their premarital
assets (including Mary Kay’s retirement plans) as not being subject to division
lends support to this conclusion. And the actions of both parties following the
entry of the dissolution decree are consistent with this conclusion.
On our de novo review, we conclude that the only pension plan of Mary
Kay’s to be divided by QDRO is her Advantage Sales plan. The district court
incorrectly interpreted the parties’ stipulation incorporated into the decree and,
accordingly, we reverse the court’s ruling on Daniel’s motion to enforce the
parties’ dissolution decree and stipulation. We remand for further proceedings
consistent with this opinion. Costs of this appeal are assessed equally to each
party.
REVERSED AND REMANDED.