Opinion ID: 2186120
Heading Depth: 1
Heading Rank: 2

Heading: Property division and alimony. Neither party is satisfied with the trial court's division of the property and the award of alimony. Ronald is also dissatisfied with the changes rendered by the court of appeals in the division of property. We will consider the award of alimony and the division of property as they relate to each other.

Text: Although alimony on one hand and allocation of property rights on the other are distinguishable and have different purposes in marriage dissolution proceedings, they are still closely related in the matter of determining the amount to be allowed. Thus, the question boils down to whether the property division and alimony taken together are equitable to both.... In re Marriage of Cooper, 225 N.W.2d 915, 919 (Iowa 1975) (citations omitted). Turning first to the property award, we find some agreement; however, it is limited to the accuracy of the record on valuation. Both parties concede the trial court's finding of valuation was made on the record. The trial court found the net worth of the parties to be $900,000 and that two-thirds of such net worth is represented by the parties as vendees in two real estate contracts for the purchase of 387 acres of farmland. Ronald claims that this valuation is high, however, and the record would have sustained a determination of a net worth of $502,340. On appeal the real issue is whether the property should have been divided or sold, as Donna claims, or whether she should have received a property settlement of $35,000 to $45,000 as her share of the home eighty and the sum of $100,000 contingent upon when and if Ronald is able to complete the payments or refinance the contracts on the 387 acres, which Ronald contends would be equitable. Donna challenges the property division of the trial court and claims that it was unfair to use the present value of the real estate to arrive at a future award, especially when an allowance was made of interest at the rate of 5% when the legal rate on a judgment is 7%. She maintains that the present value should have been discounted because of the deferred award. She argues that a more equitable result would be obtained by selling all the property and making an equitable distribution, or, in the alternative, by dividing the real estate and awarding her 160 acres. Ronald maintains that a sale of the property would be inequitable and contrary to the best interests of the parties. He maintains that a forced sale would result in severe and substantial income tax and legal consequences, with the possibility of forfeiture of the contract on the 377-acre tract because the contract provides that it is not assignable. At the very least, he maintains, it would subject the parties to more years of burdensome and expensive litigation. He claims that his efforts in the farming operation resulted in the financial condition of the parties on the date of the dissolution decree. He also contends that the 377-acre tract must be paid off in fifteen annual installments. With his obligation of support, alimony, and interest under the decree, plus the installment contract obligations, he maintains that it is necessary that he have the entire farm to meet such payments or to refinance. The distribution of assets of the parties in a dissolution proceeding must be based on the guidelines set out in Schantz v. Schantz, 163 N.W.2d 398, 405 (Iowa 1968), excluding fault, In re Marriage of Williams, 199 N.W.2d 339, 345 (Iowa 1972). [1] In addition, the property division and alimony provisions of a dissolution decree must be equitable to both parties. In re Marriage of Cooper, 225 N.W.2d at 919. In Cooper we rejected rules based on percentage division of the assets of the parties and stated: The question is always what is an equitable and just award in a given set of circumstances. Id. Our de novo review of the evidence causes us to conclude that the property division of the trial court, when considered with the alimony award, is correct. After pointing out that two-thirds of the net worth of the parties was represented by the real estate contracts that will be completed in 1985 and 1993, the trial court stated: Energetic farming practices will be required to perform the contracts. There is some risk that the contracts cannot be performed despite the best efforts of respondent. It is equitable to order a property division in a manner which recognizes the risk of forfeiture and the considerable efforts which must be expended by respondent in avoidance of same. Accordingly, the Court finds that petitioner is entitled to receive the sum of $225,000 as her equitable share of the net worth of the parties at the time of trial, together with interest on such sum at 5% per annum. . . . We have previously recognized the reasonableness of a trial court awarding a farm to the spouse who operated it and in fixing the awards and schedule of payments to the other spouse without reaching equality so the farmer-spouse might retain ownership of the farm. In re Marriage of Andersen, 243 N.W.2d 562, 564 (Iowa 1976); see In re Marriage of Briggs, 225 N.W.2d 911, 913 (Iowa 1975); cf. In re Marriage of Conley, 284 N.W.2d 220, 223 (Iowa 1979) (farm held as investment by veterinarian and his wife was subject to equal division). Here, as in Andersen and Briggs, the principal asset of the parties is farmland, which was the source of the family's livelihood and wealth. Not only was farming Ronald's vocation, but he brought into the marriage considerable farm assets and was the exclusive operator and manager of the farm business. We do not discount Donna's contribution as a housewife and parent, however. Further consideration must be given to the fragile financial situation that surrounds the two real estate contracts. The contract for the ten-acre tract limits the amount of prepayment that may be made, and the contract for the 377-acre tract prohibits prepayment. The amounts of the payments are substantial, at the present time almost $90,000 annually. The variance between contract sale price and present value and the forfeiture attempt by the vendor give ample warning of things that may happen without care, planning, and adequate cash. Forfeiture would decimate the assets of the parties. We believe the trial court was correct in taking into consideration the risk of forfeiture and the considerable effort that must be expended by Ronald. Donna argues that the trial court improperly considered the nonassignment and forfeiture clauses, as they affect the transferability of the real estate. She refers to the previously quoted statements by the court regarding the risk of forfeiture. The trial court did not mention the assignment clause and we interpret the trial court's reference to risk of forfeiture to refer to performance of the installment payments. Although we do not rely on the problem of assignability in arriving at our decision, it may be a source of litigation if transfer is attempted. We find no merit in this contention. We also find no merit in Donna's claim that the trial court assigned a present value to a future award. The award of $225,000 is a present award to be paid at a future time with interest. We likewise find no merit in Donna's claim that the 5% interest rate is illegal. In Briggs we held that failure to allow interest on deferred annual payments was considered by the trial court and was a factor in fixing the amount awarded. 225 N.W.2d at 913. Donna's reliance on In re Marriage of Conley, 284 N.W.2d at 223-24, in which we modified a decree that did not provide for interest payments and allowed the legal rate of 7%, is misplaced. In Conley we were achieving an equitable property division by the amount of interest. Here, as in Briggs, Ronald's burden during the next several years will not be an easy one if he is to pay off the existing indebtedness and contribute to the support of Donna and the children. Awarding the home eighty acres and another eighty acres to Donna would take away from Ronald an important source of income and his only obvious source of refinancing. It would sever a farming unit embraced in one contract of sale and provide additional problems if one party defaulted on the contract. Forced sale of the property also raises questions concerning income tax liabilities. Furthermore, it would have serious effects on Ronald's ability to farm on his present scale. We now consider the alimony provisions in relation to the property division. We find the determination made by the trial court to be fair and equitable. The trial court correctly pointed out that Ronald's earning capacity was superior to Donna's. She had been out of the work force for sixteen years and apparently her skills have diminished. We believe the trial court correctly tied in the property settlement with the alimony provision. With her earning capacity, she should be able to live comfortably on $300 alimony per month and the accrued interest each year of $11,250. Although she will not have the present use of the property awarded to her under the property settlement, she will have an annual income of $14,850 under the decree. If she desires, she may supplement this by employment outside of the home. Ronald complains bitterly, however, that the alimony is excessive in relation to his earning capacity as shown by his last five tax returns, which show net losses. We find no merit in this contention. The evidence is clear that he has the opportunity to make substantial income from the farm or his other known abilities. We hold that the trial court's division of property and award of alimony were correct.