Opinion ID: 2025844
Heading Depth: 1
Heading Rank: 5

Heading: Other Property

Text: First, Ray complains the distribution scheme by the district court gave him a credit of $7687 for funds in a trust account that did not belong to him. Ray testified that the money represented client funds he obtained as a lawyer that have never been withdrawn from the trust account. Client funds in a trust account are property of the client, not the lawyer. See Iowa Sup.Ct. Bd. of Prof'l Ethics & Conduct v. Apland, 577 N.W.2d 50, 55 (Iowa 1998). Only property of the parties is divisible in a dissolution. Iowa Code § 598.21(1). Thus, the district court erred in considering the trust account funds in its property distribution.
Ray also contends the district court erred in considering the Saturn vehicle to be Ray's property and giving him a credit of $6250 (minus a $3366 loan) representing the value of the vehicle. We agree. It was undisputed that Ray purchased the car for Deborah. It is owned by Deborah and titled in her name. Consequently, it should have been excluded from the divisible estate. See id. (stating the court shall divide the property of the parties  (emphasis added)).
Ray argues the district court overvalued the 1992 Buick Park Avenue awarded to him. The district court valued it at $3000. Ray claims it was worth only about $2000. Donna valued it at $4000. There was no other evidence offered on the value of the car, and we consequently defer to the judgment of the district court. See In re Marriage of Witten, 672 N.W.2d at 773 (Although we decide the issues raised on appeal anew, we give weight to the trial court's factual findings, especially with respect to the credibility of the witnesses.); In re Bare's Marriage, 203 N.W.2d 551, 554 (Iowa 1973) (stating we will not disturb the district court's valuation of assets if it was within the permissible range of the evidence).
We have said that the allocation of marital debts inheres in the property division. In re Marriage of Johnson, 299 N.W.2d 466, 467 (Iowa 1980). In this case, the district court held Ray responsible for the entire $3042 debt to Rowat Cut Stone. Ray argues the loan was used to pay family expenses and therefore should be divided between him and Donna. Even though a debt may have been incurred by a party for family expenses, it is not inequitable to order that party to be responsible for the entire amount of the debt as long as the overall property distribution is equitable. Debts of the parties normally become debts of the marriage, for which either party may be required to assume the responsibility to pay. 24 Am.Jur.2d Divorce and Separation § 571, at 730. However, we recognize that Donna will be responsible for most of the marital debts, and that Ray's earning capacity is greater than Donna's. See Iowa Code § 598.21(1)( f ), ( i ), ( k ). These factors, as well as all other factors, including the allocation of all the debt between the parties, are considered in determining the equitable division of all property and debts.
Ray claims he borrowed money from his father before his father died, and that he was required to pay his brothers $18,000 to satisfy this debt. He claims the debt should have been divided between the parties. It was undisputed that Ray's father loaned Ray and Donna money. The evidence included a letter from Ray's father, dated June 27, 1988, indicating Ray and Donna owed him $26,100 at 9% interest. However, Donna testified she thought the debt had been paid, and she was unaware of Ray's obligation to his brothers. The district court found the evidence did not support Ray's claim, and we decline to disturb the district court's credibility judgment. See In re Marriage of Witten, 672 N.W.2d at 773 (Although we decide the issues raised on appeal anew, we give weight to the trial court's factual findings, especially with respect to the credibility of the witnesses.).
Ray asserts Donna should be responsible for some of his income tax liability for 2003 and 2004. Donna filed separate tax returns in 2003 and 2004. Ray owed $14,000 in income taxes for these years because he failed to pay his quarterly self-employment taxes. We conclude it would be inequitable for Donna to share in the responsibility for Ray's tax obligation under the circumstances. Ray's tax problems are self-imposed and largely the result of imprudent business practices adopted to minimize the amount of funds available to satisfy a personal judgment against him. While Ray neglected his tax obligations, Donna paid her tax obligations from her wages. Cf. Duckett v. Duckett, 27 Mass.App.Ct. 1164, 539 N.E.2d 556, 557 (1989) (holding the judge could reasonably decide to leave each marital party to his or her debts in view of the finding that the husband had been profligate in incurring personal and business debts, while the wife had been fiscally responsible); Carter v. Carter, 261 Neb. 881, 626 N.W.2d 576, 580 (2001) ([A]n innocent spouse who has filed separate tax returns, and paid his or her taxes in a timely fashion, should not be forced to share in any statutory penalties for the late filings of a dilatory spouse. (citing Meints v. Meints, 258 Neb. 1017, 608 N.W.2d 564 (2000)). The tax debt assigned to Ray, which ultimately inheres in the division of all the property, is only part of the overall debt distribution, and the particular circumstances of the tax obligation become a factor that benefits Donna in ultimately determining an equitable distribution of all the property.
The foregoing conclusions regarding the district court's property distribution require us to modify the overall property distribution. We direct that Donna's IPERS be divided under the percentage method using a qualified domestic relations order. We also remove the trust account funds and Deborah's Saturn vehicle from the distribution scheme. In order to make the property division equitable, we find Donna should be responsible for the entire amount of the joint debt for the burial plots and the entire amount of the debt to the funeral home. In addition, taking into account that Donna has already paid Ray an equalizing payment of $61,673.54, we modify the district court's division of the Pacific Mutual TSA to award Donna $24,391.03 and to award Ray $21,154.97. [4] Ray shall remain solely responsible for his $750,000 malpractice judgment, as agreed by the parties.