Court Opinion

ID: 9374219
Source: CourtListenerOpinion
Date Created: 2023-02-22 17:03:53.615297+00
Date Added: 2024-06-11T17:16:50.532145
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                  No. 21-1877
                            Filed February 22, 2023

IN RE THE MARRIAGE OF CHRISTOPHER N. RUHLAND
AND SHAUNA L. RUHLAND

Upon the Petition of
CHRISTOPHER N. RUHLAND,
      Petitioner-Appellee,

And Concerning
SHAUNA L. RUHLAND, n/k/a SHAUNA L. HONN,
     Respondent-Appellant.
________________________________________________________________

      Appeal from the Iowa District Court for Woodbury County, Patrick H. Tott,

Judge.

      Shauna Honn appeals the property division provisions of the parties’

dissolution-of-marriage decree. AFFIRMED

      John S. Moeller of John S. Moeller, P.C., Sioux City, for appellant.

      Glenn Metcalf of Metcalf & Beardshear, Moville, for appellee.

      Considered by Ahlers, P.J., and Chicchelly and Buller, JJ.
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AHLERS, Presiding Judge.

       The district court dissolved the 2016 marriage of Shauna Honn (f/k/a

Shauna Ruhland) and Christopher Ruhland via a dissolution-of-marriage decree

following trial in 2021. The decree divided the parties’ assets and debts. It also

required Christopher to pay an equalization payment to Shauna of $23,170 after

awarding the family house and business to Christopher. Shauna appeals. She

asserts that the court misvalued the house and business and, if those assets were

accurately valued, she should receive an equalization payment of $174,207.

I.     Standard and Scope of Review

       We review dissolution-of-marriage actions de novo.            In re Marriage of

McDermott, 827 N.W.2d 671, 676 (Iowa 2013). “Accordingly, we examine the

entire record and adjudicate anew the issue of the property distribution.” Id. We

are not bound by the district court’s findings, but we will only disturb its ruling if we

find it failed to do equity. Id. Additionally, we will affirm the court’s valuation of

assets if it is within the range of permissible evidence. Id. at 679.

II.    Analysis of the Property Division

       In dissolution-of-marriage cases, marital property is to be divided equitably

after considering the factors listed in Iowa Code section 598.21(5) (2019). Id. at

678. A court’s task is to identify and value all property subject to division. Id. Here,

the district court did just that. The division resulted in an unequal and inequitable

division in Christopher’s favor, so the district court ordered an equalization

payment to balance the scales. We are asked to review the equalization payment

calculation.
                                           3

         The equalization payment of $23,170 ordered by the district court was

calculated by adding together three determined values: (1) $3800 for Shauna’s

share of the marital equity in the house awarded to Christopher; (2) $15,000 for

Shauna’s share of the equity in the construction business awarded to Christopher;

and (3) $4370 owed to Shauna to equalize the values of all other assets and debts

divided between the parties.       Neither party disputes the values, division, or

equalization payment amount regarding the all-other-assets-and-debts division

(i.e., the third of the listed calculations). Nor does either party dispute the decision

to award the house and construction business to Christopher along with the

responsibility for the debts associated with those assets. The rub comes with

respect to the valuation of those two assets.

         A.    The House

         The issue over the value of the house is complicated in two ways. First,

Christopher owned the house before the marriage. Second, the parties dispute its

value.

         As to the premarital issue, we note that the premarital nature of the house,

or the equity in it, does not preclude division of the house as marital property. See

In re Marriage of Fennelly, 737 N.W.2d 97, 102 (Iowa 2007).               Instead, the

premarital nature of the property is merely one factor to consider in the property

division. Id. The district court recognized this principle and decided that Shauna

should receive some share of the equity in the house, especially in light of her

contribution—both by her labor and her investment of premarital funds—toward

improvement of it. Christopher purchased the house in 2002, fourteen years

before the parties married. Based on the length of time Christopher owned the
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house before the parties married, coupled with the respective contributions the

parties made, the court determined that twenty percent of the equity in the house

should be considered marital property, so Shauna should receive one-half of that

marital property (i.e., ten percent of the equity in the house). Based on our de

novo review, we find no inequity in this reasoning or calculation. See McDermott,

827 N.W.2d at 676 (noting that appellate courts do not disturb property division

rulings unless there is a failure to do equity).

       As we agree with the district court that Shauna should receive ten percent

of the equity in the value of the house, the issue becomes determining the equity.

Neither party challenges the district court’s finding that the first mortgage on the

house had a balance of $112,000 at the time of trial, so the only remaining issue

is the house’s value. Shauna asserts the value is the house’s assessed value at

the time of trial of $187,800.      Christopher highlights the house’s problems,

including its need for new cupboards, carpet, and trim; its problems with the septic

system; and the estimated $30,000 cost of connecting the house to the city sewer

system. He values the house at $150,000—a value accepted by the district court.

       Contrary to Shauna’s argument, we find ample evidence supporting the

district court’s decision to value the house at $150,000, and we find no equitable

reason to disturb it following our de novo review. See id. Subtracting the balance

of the mortgage from the value of the house yields equity of $38,000. We agree

with the district court’s decision to award ten percent of that figure—$3800—to

Shauna as additional equalization payment.
                                          5

       B.     The Construction Business

       During the marriage, the parties started a construction business set up as

a limited liability company (LLC). Both parties invested premarital funds in the

business, with Christopher contributing significantly more premarital funds than

Shauna.1 When the parties separated, Shauna withdrew approximately $21,000

from the LLC’s bank account, almost draining the account. During the course of

the dissolution, the district court granted an injunction prohibiting Shauna from

having any managerial authority of the LLC; contacting any employees or

customers of the LLC; having any signature authority over accounts; acting on

behalf of the LLC; and interfering with the operation of the LLC. Christopher was

given authority to operate the LLC, with certain spending limitations, and Shauna

was to receive $2500 per month from the LLC or Christopher as temporary

support.

       The parties continued under the terms of the injunction for approximately

one year, but each party claimed the other party violated the terms of the injunction

and the court’s temporary support order. Shortly before trial, Christopher withdrew

from operation of the LLC. He started doing the same type of construction work

for a business started in his adult daughter’s name.2

       At trial, the court found that both parties shared responsibility for the

downturn in the fortunes of the business, “Christopher due to his management

style and Shauna due to her inability not to interfere in the operation of the business

1 The evidence shows Christopher invested about $66,000 of premarital funds in
the LLC while Shauna invested about $8000 of premarital funds.
2 Christopher’s daughter is not Shauna’s daughter.
                                          6

despite the existence of the injunction.” The court found that Shauna maintained

a business relationship with one of the LLC’s employees despite the injunction and

“did what she could to make life as difficult as possible for Christopher and his

operation of the business.” The court also found that “Christopher did not help the

situation by his failure to be completely above board with Shauna” during the time

he had control of the business. Due to the behavior of both parties harming the

business, the court determined that the business had no value as a going concern

and the best solution would be to liquidate the assets, pay off the debt, and

distribute what was left. Christopher advocated for this solution. However, the

court declined to implement this solution, largely because of the evidence

suggesting that Christopher had not returned all assets belonging to the LLC. As

a solution to the problem of the missing assets, the court awarded the LLC to

Christopher and placed a value on it that included the value of assets Christopher

was alleged to have taken or hidden. After taking into account the amount of

premarital funds invested by both parties and Shauna’s taking of $21,000 from the

business’s bank account upon separation, the court awarded Shauna $15,000 of

additional equalization payment to account for her ownership interest in the LLC.

       On appeal, Shauna does not challenge the value placed on the LLC at the

time of trial. Instead, she challenges the date of trial as the proper valuation date.

She contends that, due to Christopher’s mismanagement of the business and his

actions in competing against the LLC after turning over control to Shauna, the

business should be valued at an earlier date. She contends that the highest value

placed on the LLC by a court-appointed special master should be used. That value
                                           7

is $309,353.     She contends she should receive one half of this amount

(approximately $154,677) as her equity in the LLC.

       We reject Shauna’s contention. First, we value property as of the date of

trial. In re Marriage of Keener, 728 N.W.2d 188, 193 (Iowa 2007). This is not a

concrete rule, see In re Marriage of Driscoll, 563 N.W.2d 640, 642 (Iowa Ct. App.

1997), but we see no equitable reason to deviate from it in this case. We agree

with the district court that both parties contributed to any decline in the value of the

business, so we see no equity in using some arbitrary alternative valuation date

now that it has been settled that Christopher receives the LLC.

       Second, we reject Shauna’s proposed valuation of the LLC, even at an

earlier date. As noted, Shauna relies on the report of a court-appointed special

master for her valuation. There is some measure of irony in this because, at trial—

when Shauna proposed that she receive the LLC—Shauna objected to the

introduction of the special master’s report. She noted that it was not a final report

and it did not account for the LLC’s loss of key customers.3 In addition, in her post-

trial written arguments, Shauna again proposed that she receive the LLC and that

its value be placed at zero. In making this argument, she explained at great length

why the special master’s report was misguided, how the value of the business had

declined, and why she believed the LLC had no value. Now that Christopher is

receiving the LLC, Shauna sees the special master’s report in a whole new light

and thinks the special master’s opinions are spot on—especially the opinion that

3While the district court admitted the report over Shauna’s objection, the district
court noted that it gave little weight to the report for the very reasons cited in
Shauna’s objection.
                                          8

places the highest possible value on the LLC. We are not persuaded by Shauna’s

about-face. The report is labeled as a “discussion draft” and contains little in the

way of explanation of how the figures in the report were calculated. The special

master did not testify to explain the calculations, and they are not self-explanatory.

As a result, we place no weight on the report. Instead, we agree with the district

court—and with Shauna’s points made in her post-trial written arguments—that the

business has no value beyond the liquidation value. The conclusion that the

business has no value beyond liquidation value is supported by the fact that

Christopher was able to start a nearly identical competing business immediately

after withdrawing from the LLC.

       Turning to the liquidation value, the court used a report from an appraiser

that valued the LLC’s assets at $164,700. Neither party meaningfully challenges

this figure, and we find no fault with it, so we agree that $164,700 is a proper value

for the LLC’s assets. As to the LLC’s debts, the evidence establishes that the

remaining balance on the LLC’s loan is $150,000. Subtracting the loan balance

from the value of the assets yields a net liquidation value of the LLC of $14,700. If

each party received half of this amount, Shauna should have only received an

addition to the equalization payment owed to her of $7350. Instead, the district

court awarded Shauna $15,000 of additional equalization payment to account for

her half interest in the LLC. Given the LLC’s liquidation value, coupled with the

fact that the liquidation value does not account for Christopher’s infusion of

approximately $58,000 more in premarital funds than Shauna or account for the
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$21,000 Shauna took from the LLC’s account upon separation,4 we cannot find

that the district court’s award to Shauna for her half of the value of the LLC to be

inequitable to Shauna.

III.   Conclusion

       We find no inequity in the manner in which the district court valued the

parties’ house or LLC in arriving at an equalization payment owed by Christopher

to Shauna. Accordingly, we affirm the district court’s ruling in its entirety. Costs

on appeal are assessed to Shauna.

       AFFIRMED.

4 Although we note the fact that Shauna’s diverting of this $21,000 is not accounted
for directly, it may not have any meaningful impact on the final outcome. Due to
the fungible nature of money, that $21,000 is presumably accounted for in the other
assets and debts that were valued and divided because the diverted money would
have still been available for division, resulted in the accumulation of other assets,
resulted in the pay down of debt, or been used to pay bills, thus avoiding the need
to use other assets to pay those bills or the accumulation of more debt. Any
combination of these uses of the diverted money would increase marital net worth
subject to division. See In re Marriage of Van Voorst, No. 21-0228, 2021 WL
5106054, at *2 (Iowa Ct. App. Nov. 3, 2021) (discussing the fungibility of dollars
and the futility of trying to separately account for funds accumulated or spent during
the marriage). Absent dissipation—an allegation that has not been made or
established by this record—the withdrawn money is accounted for in some
indeterminate manner in the entire marital estate nest egg being divided.