In re the MARRIAGE OF Julianne R. SCHENKELBERG and Gary W. Schenkelberg. Upon the Petition of Julianne R. Schenkelberg, Appellant, and Concerning Gary W. Schenkelberg, Appellee.
No. 10-1919
Supreme Court of Iowa
Oct. 26, 2012
824 N.W.2d 481
WIGGINS, Justice.
Gregory J. Siemann of Green, Siemann & Greteman, P.L.C., Carroll, for appellee.
WIGGINS, Justice.
On further review, a spouse asks us to determine the validity of a premarital agreement, the fairness of a property settlement, the sufficiency of the spousal support, and the denial of expert fees incurred by a spouse‘s attorney in preparation of the case for trial. The court of appeals
I. Prior Proceedings.
This appeal involves the dissolution of marriage between Gary and Julianne Schenkelberg. In a bifurcated trial, the district court found the parties’ premarital agreement was valid under
Julianne appealed, contending the premarital agreement was void, the property settlement was inequitable, the spousal support was inadequate, and the denial of expert fees was improper. We transferred the case to the court of appeals. The court of appeals affirmed the district court on all issues. It also denied her appellate fees. Julianne then sought further review, which we granted.
II. Issues.
In this appeal, Julianne raises four issues. She claims (1) the court erred in finding the premarital agreement was valid; (2) the court distributed the property inequitably, considering the terms of the premarital agreement and provisions of the IUPAA; (3) the court awarded an insufficient amount of spousal support; and (4) the court erred by not requiring Gary to pay the expert fees incurred by her attorney.
In considering an application for further review, we have the discretion to review all or part of the issues raised on appeal or in the application for further review. In re Marriage of Becker, 756 N.W.2d 822, 824 (Iowa 2008). In exercising our discretion, we choose only to review the support award and the expert fees. Therefore, we will let the court of appeals’ affirmance of the district court‘s decision concerning the premarital agreement and the property distribution stand as the final decision of this court. See Hills Bank & Trust Co. v. Converse, 772 N.W.2d 764, 770 (Iowa 2009).
III. Standard of Review.
Appeals regarding the dissolution of marriage are equitable proceedings.
We review an award of attorney fees that includes expert fees for an abuse of discretion. In re Marriage of Maher, 596 N.W.2d 561, 568 (Iowa 1999); see also In re Marriage of Muelhaupt, 439 N.W.2d 656, 662-63 (Iowa 1989). An abuse of discretion occurs when the district court exercises its discretion “on grounds or for reasons that are clearly untenable or to an extent clearly unreasonable.” State v. Nelson, 791 N.W.2d 414, 419 (Iowa 2010); Graber v. City of Ankeny, 616 N.W.2d 633, 638 (Iowa 2000). “A ground or reason is untenable when it is not supported by substantial evidence or when it is based on an erroneous application of the law.” Graber, 616 N.W.2d at 638.
IV. Facts.
On our de novo review, we make the following findings of fact. Gary and Julianne Schenkelberg married on July 4, 1994. Both were previously married to others and obtained their respective dissolutions in 1993. Julianne had four children from her first marriage. Gary had six children by his first wife. All of their children have attained majority. Prior to their nuptials, Gary and Julianne entered into a binding premarital agreement.
The couple‘s Iowa tax returns for the years 2005-2009 show Julianne made little to no income. However, the records indicate that Gary‘s wage, income, and dividend income for those years was as follows:
| 2005 | $182,329 |
| 2006 | $174,654 |
| 2007 | $187,068 |
| 2008 | $250,603 |
| 2009 | $287,311 |
Additionally, the records reveal that his subchapter-S corporation gave Gary a schedule K-1, and that on the K-1, he received the following taxable distributions:
| 2005 | $134,824 |
| 2006 | $159,916 |
| 2007 | $200,381 |
| 2008 | $243,701 |
| 2009 | $444,921 |
Gary claimed his income was limited to his wages and that the K-1 distributions were not actually available to him. The district court agreed and found Gary‘s average income for computing spousal support for the years 2005-2009 was $208,000.1 In reaching this conclusion, the court disregarded all distributions from the subchapter-S corporation. Based on this finding, the court awarded Julianne spousal support in the amount it did.
We disagree with the court‘s calculation of Gary‘s income for the years 2005-2009 and find his income was substantially higher. We base our finding on the following evidence presented at trial.
The accountant for Gary and the subchapter-S corporation explained that the corporation sometimes distributed additional money to the shareholders, including Gary, in the form of loans. Gary testified that he had received distributions from the corporation, which he used to pay back his loans arising from business and tax liabili-
Gary‘s individual tax returns, as well as the corporation‘s tax returns and balance sheets, also suggest Gary‘s income was higher. Gary‘s tax returns show he paid federal and state taxes for the years 2005-2009 as follows:
| 2005 | $88,482 |
| 2006 | $91,474 |
| 2007 | $115,102 |
| 2008 | $167,097 |
| 2009 | $233,091 |
Gary could not have afforded to pay this amount of taxes unless he received a distribution from the corporation. Gary argues that if he did receive any such funds, the distribution was in the form of a loan that he was obligated to pay back. However, the evidence shows that even if these were loans, he paid them back in full by 2009.
The subchapter-S tax returns indicate the outstanding loans to shareholders for the years 2005-2009 were as follows:
| 2005 | $1,529,501 |
| 2006 | $1,462,556 |
| 2007 | $1,123,155 |
| 2008 | $902,287 |
| 2009 | $0 |
These figures demonstrate that even if he received a loan from the corporation, there were no loans outstanding as of 2009. Therefore, the corporation either forgave the debt or made distributions to him to retire the loan. In other words, he had sufficient income to pay his taxes in full for the years 2005-2009 without sacrificing his lifestyle or incurring any debt. It is logical to conclude that Gary must have received more than just wages from the corporation, because his only source of income was from the corporation.
The corporate balance sheets also support our conclusion that Gary received more income from the corporation than just his wages. The tax records of the corporation indicate that the total schedule K-1 distribution to all the shareholders2 for the years 2005-2009 was as set forth below:
| 2005 | $607,392 |
| 2006 | $720,044 |
| 2007 | $926,522 |
| 2008 | $1,224,804 |
| 2009 | $1,931,793 |
Additionally, the balance sheets for the subchapter-S corporation indicate that the shareholders’ equity in the corporation for the years 2005-2009 was as follows:
| 2005 | $1,403,588 |
| 2006 | $1,447,195 |
| 2007 | $1,447,195 |
| 2008 | $1,447,195 |
| 2009 | $1,401,523 |
If the corporation was retaining distributions as Gary argued, the shareholders’ equity should have increased dramatically. As illustrated above, it did not.
From these documents, the figures contained therein, and the testimony of Gary and the accountant, it is apparent that Gary was getting substantial distributions from the corporation above his wages. This evidence leads us to find that Gary‘s average income for the years 2005-2009 was more than $400,000 per year, not just $208,000 as found by the district court.
V. Spousal Support.
Spousal support “is not an absolute right, and an award thereof depends upon the circumstances of a particular case.” In re Marriage of Olson, 705 N.W.2d 312, 315 (Iowa 2005) (quoting In re Marriage of Spiegel, 553 N.W.2d 309, 319 (Iowa 1996)) (internal quotation marks omitted). “[P]rior cases are of little value in determining the appropriate alimony award.” In re Marriage of Becker, 756 N.W.2d at 825-26.
The amount of spousal support is always calculated equitably based upon “all of the following” factors contained in
- The length of the marriage.
- The age and physical and emotional health of the parties.
- The distribution of property made pursuant to
section 598.21 . - The educational level of each party at the time of marriage and at the time the action is commenced.
- The earning capacity of the party seeking maintenance, including educational background, training, employment skills, work experience, length of absence from the job market, responsibilities for children under either an award of custody or physical care, and the time and expense necessary to acquire sufficient education or training to enable the party to find appropriate employment.
- The feasibility of the party seeking maintenance becoming self-supporting at a standard of living reasonably comparable to that enjoyed during the marriage, and the length of time necessary to achieve this goal.
- The tax consequences to each party.
- Any mutual agreement made by the parties concerning financial or service contributions by one party with the expectation of future reciprocation or compensation by the other party.
- The provisions of an antenuptial agreement.
- Other factors the court may determine to be relevant in an individual case.
A trial court has considerable latitude when making an award of spousal support. Olson, 705 N.W.2d at 315. Therefore, we will only disturb the trial court‘s award of spousal support if it fails to do equity between the parties. Id. In reviewing the record and the factors contained in
Gary and Julianne were married for sixteen years, and thus, the length of the marriage merits support payments. See Fenchel v. Fenchel, 268 N.W.2d 207, 210 (Iowa 1978) (upholding award of spousal support for marriage lasting sixteen years).
The parties had a mutual agreement that Gary would be the breadwinner and Julianne would stay home. The comparative income of the spouses is another factor for the court to consider when evaluating an award of spousal support. See, e.g., In re Marriage of Hansen, 733 N.W.2d 683, 704 (Iowa 2007) (considering comparative income of the parties at $46,300 versus $18,900 as evidence that
Gary also received a substantial property award from the court because of the premarital agreement. It would be improper to increase the spousal support award solely to penalize him for the premarital agreement. However, we believe that in calculating spousal support, it is proper to look at the assets each party received. We do so to determine the income potential of the property distributed to each party. In this case, Gary received assets that will continue to generate substantial income. The assets the court awarded Julianne will not. These assets, together with his wages, will give Gary the ability to pay a substantial amount of support indefinitely into the future.
Finally, the report prepared by the expert hired by Julianne‘s attorney indicates that the tax consequence of awarding Julianne substantial spousal support will only minimally affect Gary. This is true because of Gary‘s high income and tax rate, coupled with the fact that any support payments he makes are deductible from his gross income.
The district court stopped Julianne‘s support payments at age seventy. We find that it should be payable for Julianne‘s life. As long as Gary has an interest in the corporation, there is no reason to believe that he will not be receiving a substantial cash distribution from the corporation, even if he no longer receives a salary from it. Moreover, if he divests himself from his ownership in the corporation, we believe the value he will receive for his interest in the corporation will generate sufficient funds to reinvest in another asset that will provide him with substantial income.
On the other hand, Julianne was fifty-seven years old at the time of the dissolution. She received no assets that will produce a significant stream of income to keep her in the lifestyle she had become accustomed to while married to Gary. Her only retirement account had a fair market value of $1328. Based on the property distribution, her past work record, and age, we have no reason to believe if her support payments were to stop at age seventy, she would have significant income or assets to maintain the lifestyle she had with Gary. Realistically, her only source of income other than spousal support would be a share of Gary‘s social security payments.
Consequently, under the circumstances of this case, we find Julianne is entitled to traditional spousal support, which is “payable for life or so long as a spouse is incapable of self-support.” In re Marriage of Becker, 756 N.W.2d at 826 (citation and internal quotation marks omitted). Therefore, we modify the district court‘s decree and order Gary to pay Julianne spousal support in the sum of $7000 per month until her death or her remarriage.
VI. Expert Fees.
Julianne‘s attorney hired an expert to assist him with trial preparation. The expert is a certified public accountant practicing in a large firm in West Des Moines. The expert is qualified to give opinions regarding forensic accounting in dissolution of marriage actions.
The expert submitted a bill for services rendered in valuing the subchapter-S corporation, preparing schedules dealing with the tax consequences involving various
The district court awarded Julianne $30,000 in attorney fees, but refused to reimburse her for the amount her attorney expended to pay the $17,050 expert bill. The district court denied expert fees, because it found the expert‘s report “was not necessary and contributed nothing to the determination of spousal support.”
The court has considerable discretion in awarding attorney fees. In re Marriage of Maher, 596 N.W.2d at 568. A court may consider expert fees in an award of attorney fees. See In re Marriage of Muelhaupt, 439 N.W.2d at 662-63; see also Tydings v. Tydings, 567 A.2d 886, 891 (D.C.1989) (upholding award of expert fees for accountant to value husband‘s corporate interest where husband was in the best financial position to pay); Stansberry v. Stansberry, 580 P.2d 147, 150 (Okla. 1978) (granting expert fees to wife for appraisers who valued the marital estate).
We disagree with the district court‘s finding that the expert‘s services were not necessary or useful in determining the spousal support award. The value of the assets received by Gary, the sums he obtained from the subchapter-S corporation, and the tax consequences of awarding spousal support were important considerations in making our award of spousal support. Accordingly, we find the district court decision in this regard is clearly untenable and unreasonable. Therefore, we modify the district court‘s decree and award Julianne an additional $17,050 towards her attorney fees for the expert‘s services. We do not make an award for appellate attorney fees.
VII. Disposition.
We affirm the court of appeals opinion and the district court decision concerning the premarital agreement and the distribution of property. The court of appeals opinion on these issues will stand as our final decision. However, we vacate the court of appeals opinion as to the spousal support award and expert fees. Accordingly, we modify the district court decision on spousal support to order Gary to pay Julianne spousal support in the sum of $7000 per month until her death or her remarriage. We also modify the award of attorney fees and require Gary to pay Julianne an additional $17,050 in fees for the expert services provided to her attorney. We tax the costs of this action equally between the parties.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED AS MODIFIED.