In re the MARRIAGE OF Deborah Catherine RHINEHART and Richard Scott Rhinehart, Upon the Petition of Deborah Catherine Rhinehart, Appellee, and Concerning Richard Scott Rhinehart, Appellant.
No. 04-0494.
Supreme Court of Iowa.
Oct. 7, 2005.
704 N.W.2d 677
TERNUS, Justice.
B. Harmless Error
In the alternative, the State contends any error in admitting evidence of Martin‘s prior cocaine possession conviction was harmless. We disagree. The evidence against Martin was not overwhelming. The crack pipe was found in the bed of a pick up truck, an area open to any passing stranger who may have discarded the crack pipe. The jury was also presented with conflicting evidence as to whether Martin threw his keys in the bed of the truck or both his keys and a glass crack pipe in the bed of the truck. Testimony of a “tink” sound could relate to either breaking glass or a set of car keys landing on a pillow. It cannot fairly be said the admittance of Martin‘s prior possession conviction did not improperly influence the jury and injuriously affect his rights. Therefore, the State has not affirmatively established Martin did not suffer prejudice. See State v. Moorehead, 699 N.W.2d 667, 672 (Iowa 2005) (outlining principles of harmless-error review in cases of non-constitutional error). We reverse and remand for a new trial without evidence of Martin‘s prior drug conviction.
III. Conclusion
The district court abused its discretion when it allowed the prosecutor to impeach Martin by questioning him about his prior conviction for possession of cocaine with intent to deliver. We vacate the decision of the court of appeals, reverse the district court judgment, and remand for a new trial without use of the prior conviction. Because reversal is required, it is unnecessary to address the remaining issues Martin has raised on appeal.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT REVERSED; REMANDED FOR NEW TRIAL.
Barbara F. Orzechowski of Klass Law Firm, L.L.P., Sioux City, for appellee.
The appellant, Richard Scott Rhinehart (Scott), was granted further review of the court of appeals decision modifying the district court‘s decree in this dissolution-of-marriage action. At this stage in the proceedings, the dispute between Scott and his former wife, appellee Deborah Catherine Rhinehart (Deborah), centers primarily on whether the trial court gave sufficient consideration to Deborah‘s interest in a family trust when the court awarded alimony to Deborah and divided the marital assets. Scott criticizes the trial court‘s refusal to attribute any value to Deborah‘s interest in the undistributed earnings of the trust when the court allocated the parties’ property. Scott also contends Deborah‘s interest in trust income should have been reflected in a reduced alimony award. Finally, Scott claims the trial court overestimated Deborah‘s financial needs when it considered Deborah‘s liability for college expenses.
This case was transferred to the court of appeals, which affirmed the trial court with certain modifications. The principal modification concerned a valuation error in the district court‘s ruling. After Scott filed his notice of appeal, it was discovered that the trial court had placed a value of $6700 on a retirement account awarded to Scott, whereas the undisputed value of that account was actually $67,000. The court of appeals divided the extra $60,300 equally between the parties.
After considering the arguments of the parties, we agree with the trial court‘s disposition of the parties’ property, as well as its alimony award. Accordingly, we disagree with the court of appeals’ modification, awarding $30,150 from the Prudential retirement account to Deborah. Because we think under all the circumstances the entire account should be awarded to Scott, we do not disturb the trial court‘s decision awarding this asset to him.
I. Background Facts and Proceedings.
Prior to trial, the parties stipulated to many issues, including custody, visitation, child support, and post-secondary education subsidies. The remaining issues—alimony and division of marital assets—generated several disputes, but we limit our discussion to the facts pertinent to those matters that remain contested on further review.
The parties were married in 1979 after Scott had finished one year of law school. Deborah was then employed as an elementary school teacher, and she has continued to teach to the present time. Scott completed law school and currently practices law with his father and another attorney. Deborah was forty-eight years old at the time of trial; Scott was forty-seven. Both are in good health. The couple has three daughters, Rachelle, Melissa, and Erika. At the time of trial, Rachelle had graduated from college and was self-sufficient; Melissa was twenty years old and a junior at the University of South Dakota; Erika was eighteen years old and a senior in high school.
The district court determined that Deborah had net annual earnings of $25,181 after various deductions, plus approximately $1546 in annual payments from the family trust. Scott‘s annual earnings varied from year to year, so the trial court used a five-year net earnings average of $122,527. After considering the financial needs of the parties and their income, the court awarded Deborah traditional alimony of $1800 per month for five years, and then $1100 per month until she reaches age sixty-five. (Deborah was also awarded child support, but that ruling is not challenged on appeal.)
The proper allocation of the marital assets was also contested at trial. In rejecting an equal division of the parties’ property, the court relied primarily on the
Scott appealed, challenging the alimony award and the property division. In addition, the parties agreed the trial court had erroneously valued one of Scott‘s Prudential retirement accounts. This asset, listed in the decree at a value of $6700, was actually worth $67,000. Scott and Deborah disagreed on who was entitled to the unallocated value.
The court of appeals affirmed the amount of alimony awarded by the district court,1 but modified the property division to account for the additional value of the Prudential account. The court of appeals concluded it was equitable to divide the extra $60,300 in the Prudential account equally, awarding $30,150 to each party. Scott‘s application for further review was granted. He continues to claim the alimony award to Deborah is excessive. He also challenges the property award, claiming (1) Deborah‘s interest in the undistributed earnings of the trust that accrued during the marriage should be subject to division, and (2) the entire Prudential account should be awarded to him.
II. Scope of Review.
Our review is de novo. See Zinger v. Zinger, 243 N.W.2d 639, 640 (Iowa 1976). In undertaking our review, we examine the entire record and decide anew the issues properly presented. See In re Marriage of Steenhoek, 305 N.W.2d 448, 452 (Iowa 1981). Although this court is not bound by the findings of the trial court, we give weight to them. Id.
III. Alimony.
Scott‘s principal challenge to the alimony award is the failure of the district court to consider Deborah‘s “vested interest” in the trust in setting the amount of alimony. He also complains that the court considered Deborah‘s obligation to pay an educational subsidy for the two younger children in determining how much financial support she needed. We address each contention separately.
A. Trust income. To decide whether the alimony was set too high in view of Deborah‘s interest in the family trust, it is first necessary to determine the nature of Deborah‘s interest. In 1969, Deborah‘s parents, Richard and Maxine Collison, established a discretionary support trust. Maxine was the trustee, and Deborah and her eight siblings were designated as beneficiaries. After Maxine passed away in 1991, Richard and his nine children executed an amended trust agreement. Four of Deborah‘s siblings were named as successor co-trustees. The co-trustees have discretion to pay out income from the trust to the beneficiaries after payment of any taxes and assessments on that income. Any payout must be in equal proportions to each of the beneficiaries. In addition, any income not distributed is to be reinvested in the principal of the trust. By its terms, the trust will not terminate during Richard‘s lifetime, and will continue in existence thereafter for no longer than twenty-five years. Upon termination, the remaining corpus is to be divided equally among the surviving bene-
Records were introduced showing that trust income was customarily allocated to the beneficiaries each year, but only part of the income was actually distributed to the beneficiaries. For example, for the tax years 1990 through 2002, the schedule K-1 tax forms for Deborah showed a total of $210,976 of trust income allocated to her, but only $87,876 was actually distributed to her. The majority of the income received from the trust was used to pay income taxes attributable to the trust income and income tax penalties due to the trust‘s failure to make estimated payments. Only the remainder, an average of approximately $1500 annually, was disposable income to Deborah and Scott. Income that was not distributed to the beneficiaries was used to pay trust expenses or was added to the trust principal and reinvested.
Scott argues Deborah‘s interest in the trust fund “was the equivalent of a vested pension account.” He claims she has a current vested interest in the trust in the form of the reinvested income, and that interest warrants a reduction in alimony to $400 per month. He relies on our cases stating that inherited and gifted property can be considered on the issue of alimony. See, e.g., In re Marriage of Moffatt, 279 N.W.2d 15, 20 (Iowa 1979). We reject Scott‘s argument, as did the court of appeals and district court.
Deborah‘s interest in the trust is not vested. The trust can be unilaterally amended by her father at any time, a power that allows him to change the beneficiaries. Scott cites
In addition to the possibility that Deborah could be removed as a beneficiary, payment of trust income is at the discretion of the co-trustees, and income not distributed is added to the principal. Therefore, Deborah has no right to the allocated, but undistributed, income from the trust. Consequently, it would not be appropriate to treat the undistributed income from the trust as a current source of financial support that would alleviate Deborah‘s need for alimony.2 We conclude there is no basis to modify the alimony award based on Deborah‘s interest in the income generated by the family trust fund.3
IV. Property Division.
Two issues remain with respect to the division of the parties’ marital property. First, Scott claims the district court should have included the undistributed, reinvested trust income allocable to Deborah as a marital asset, subject to division by the court. Second, Scott disagrees with the court of appeals’ decision to give Deborah $30,150 from the retirement fund awarded to him by the trial court. Again, we address each matter separately.
A. Undistributed trust income. As we noted earlier, Deborah has no present right to the undistributed income that has been added to the principal of the trust. Therefore, it is not her property so as to be subject to division by the court. Even if this income could be distributed to Deborah upon her demand, it does not automatically become a marital asset.
B. Unallocated retirement account. The trial court awarded a Prudential retirement account to Scott, but listed this asset in the decree at a value $60,300 less than its actual value. This error has caused the parties to dispute whether the trial court actually intended to give Scott an asset with a value of $67,000. Because our review is de novo, it is not necessary for this court to ascertain the intent of the district court. Based upon our own review of the statutory factors relevant to an equitable distribution of marital property, we conclude the district court‘s decision to award this asset to Scott should not be disturbed.
Iowa law requires that marital property be divided “equitably between the parties,” considering several factors.
The trial court, whose property division resulted in the same $13,000 difference, justified awarding more marital property to Scott on the basis that “Deborah is reasonably likely to receive substantial funds from her father‘s trust [at] about the time she would retire from teaching.” It noted that Scott, on the other hand, would “have to earn and save any funds he intends to use in his retirement years.” We agree with these observations and rely on them in deciding to award the entire $60,300 to Scott.
In explaining our decision, we first note the trust currently has a value in excess of $5 million. Deborah has a future interest in one-ninth of this fund, an interest with a present value of more than $550,000. See In re Will of Uchtorff, 693 N.W.2d 790, 793 (Iowa 2005) (stating remainder interest in trust fund is a future interest); Henkel v. Auchstetter, 240 Iowa 1367, 1380, 39 N.W.2d 650, 657 (1949) (same). The principal of this trust has appreciated considerably since it was established, and there is nothing in the record to suggest that it will not continue to increase in value in future years. Although Deborah‘s father has the power to change the beneficiaries of the trust, there is no evidence indicating he is likely to do so.
Clearly, it is permissible to consider Deborah‘s future interest in this trust in determining an equitable division of the parties’ property.
In the present case, then, we do not ignore the economic reality of the parties’ relative financial futures. Although Deborah has contributed to the parties’ accumulation of assets, her future need for those assets is considerably less than Scott‘s need. Therefore, we think it most equitable to award Scott the full value of the Prudential account. Although this decision gives Scott $73,895 more in marital property than Deborah receives, we are confident Deborah‘s retirement income will be supplemented generously by her remainder interest in the family trust fund. Because the trial court awarded the Prudential account to Scott, we find no reason to modify the trial court‘s judgment.
V. Summary.
Deborah has no present right to be paid income from the trust or to demand that the undistributed income from prior years be distributed to her. Therefore, her interest in the trust does not lessen her need for financial support from Scott. In addition, we do not think the trial court set alimony at such a level that it improperly shifted Deborah‘s responsibility for post-secondary education expenses to Scott. Therefore, we refuse Scott‘s request that we reduce the alimony award made by the district court.
We also reject Scott‘s claim that Deborah‘s interest in undistributed trust income should be included as a marital asset subject to division by the dissolution court. Deborah has no enforceable right to that income. Because we think Deborah‘s future interest in the trust is substantially certain to be realized, however, we affirm the trial court‘s decree awarding a greater share of marital property to Scott. The fact the district court erroneously listed one of the Prudential accounts at $60,300 less than its actual value does not convince us that the trial court‘s disposition of the parties’ property should be modified.
We vacate the decision of the court of appeals and affirm the judgment of the district court.
DECISION OF COURT OF APPEALS VACATED. DISTRICT COURT JUDGMENT AFFIRMED.
All justices concur except CADY and STREIT, JJ., who dissent.
CADY, J. (dissenting in part).
I respectfully dissent from the majority‘s division of the Prudential retirement account and, in turn, the division of marital assets that awards one spouse $75,000 more than the other spouse. The decision of the majority to award a greater share of the marital property to one spouse casts a dark cloud over the principle of equitable distribution of property in this state, and subverts, if not denigrates, the core concept of a marriage as an equal partnership. The approach adopted by the majority is not only a step back toward the dark ages of marital rights; it improperly intrudes into the legislative arena by undermining the legislative declaration to exclude inherited property from the divisible estate.
By all accounts, save a single factor relied upon by the majority in this case, the circumstances of the marriage between Deborah and Scott support an equal division of marital property. Deborah and Scott were married twenty-five years. They raised three children and were attentive to their needs. Each spouse contributed to the marriage in endless ways. Deborah is an elementary school teacher, and Scott is a lawyer. They were married when Scott was still in law school. They both enjoy good health, are relatively young, and are successful in their professions. The property accumulated during the twenty-five years of their marriage—nearly $600,000—was, undeniably, the result of their joint efforts throughout the marriage. The alimony award to Deborah was not structured to compensate for an unequal distribution of property.
The single factor identified by the majority to support awarding Scott $75,000 more in property than awarded to Deborah is that Deborah has a future beneficial interest of $550,000 in a trust fund established by her father. This future interest, of course, is not marital property subject to the property division, but is excluded as a divisible asset. See
Clearly, “the economic circumstances of each party” is a factor courts may consider in determining an equitable distribution of property. See
The important point is this: future economic circumstances involving nonmarital property of one spouse are properly considered in the division of property only when there is some circumstance of the marriage that makes it fair to do so. It is not the presence or the expectation of nonmarital property that justifies an unequal equitable distribution, but it is the circumstances within the marriage that justify consideration of the nonmarital property in making a property award. In Boyer, the circumstances that made it fair to consider nonmarital property related directly to the joint-efforts concept of a marriage and the variant roles assumed by the parties.
In this case, there are no circumstances of the marriage that make it equitable for the court to consider the expected future inheritance of Deborah in dividing the marital property. Clearly, the future economic circumstances of Deborah do not address or define “Scott‘s need.” Such circumstances have nothing to do with the needs of Scott. In truth, Scott has no special needs of his own that a divorce court must address to reach an equitable distribution of the property accumulated during the marriage.
The relative-need standard articulated by the majority is totally detached from the concept of equity in the dissolution of a marriage. See In re Marriage of Probasco, 676 N.W.2d at 184 (“Property division is based on each spouse‘s ‘right to “a just and equitable share of the property accumulated as the result of their joint efforts.““” (quoting In re Marriage of Francis, 442 N.W.2d 59, 62 (Iowa 1989))). As this case illustrates, this standard will necessarily lead to injustice. In this case, the existence of an inheritance only explains the nature of the economic circumstances; it does not explain the fairness of using an inheritance to divide the marital property. That explanation must come from the circumstances of the marriage. A standard that fails to consider such an analysis is inherently unfair and indirectly considers property, or a mere uncertain expectation of
The concept of an equitable division of property has taken on a new meaning in Iowa as a result of this case, far removed from the concept declared by our legislature and articulated by this court in the past. It means that future inheritance has now been injected as a factor in the division of property in all cases. It means a spouse may be deprived of the right to share in an equal distribution of the property of the marriage at the time of the divorce when the spouse is expected to receive an inheritance in the future. It means, in this case, Deborah will not share equally with her husband in the property she equally helped to accumulate during the marriage. This is inequitable and contrary to statute.
STREIT, J., joins this dissent.
STATE of Iowa, Appellee, v. Timothy Will KUKOWSKI, Appellant.
No. 05-0068.
Supreme Court of Iowa.
Oct. 7, 2005.