Court Opinion

ID: 4250151
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:23:32.88368+00
Date Added: 2024-06-11T14:44:09.284191
License: Public Domain

IN THE SUPREME COURT OF IOWA
                           No. 23 / 05-1765

                           Filed July 20, 2007

IN RE THE MARRIAGE OF MICHELE RENEE FENNELLY
AND TED ERNST BRECKENFELDER

Upon the Petition of
MICHELE RENEE FENNELLY,

      Appellee,

And Concerning
TED ERNST BRECKENFELDER,

      Appellant.
________________________________________________________________________
      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Scott County, Michael R.

Mullins, Judge.

      Former husband seeks further review of dissolution decree.
DECISION OF THE COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART;

CASE REMANDED.

      Frank Steinbach III of McEnroe, Gotsdiner, Brewer, Burdette &

Steinbach, P.C., West Des Moines, and Arthur Buzzell, Davenport, for

appellant.

      Lori L. Klockau and Chad A. Kepros of Bray & Klockau, P.L.C.,

Iowa City, for appellee.
                                      2

STREIT, Justice.

      What is equitable in a divorce is an endless source of debate.

Michele Fennelly and Ted Breckenfelder divorced after nearly fifteen

years of marriage.    They have two children.       The district court gave

Michele primary physical care of the children and Ted liberal visitation.

The district court equally divided all of their property except property the

parties brought to the marriage.

      Ted argues he should have been awarded primary physical care or

at least joint physical care of the children.    Ted also complains of the

district court’s disparate treatment of their premarital property. Michele

kept her premarital property which had significantly appreciated whereas

Ted merely got the premarital value of his property. Because Michele is a

competent and loving caretaker and both parties testified against joint

physical care, we affirm the district court’s award of primary physical

care to Michele. We reverse the district court’s property division because

we find it equitable to equally divide the appreciation of all of the parties’

premarital assets.     However, because Ted dissipated marital assets

through unexplained cash advances on his credit cards, we set aside

$22,000 of debt for him. After setting aside the value of their premarital

property at the time of the marriage and the $22,000 in cash advances,

we order the parties’ remaining assets and debts to be divided equally.

We vacate the decision of the court of appeals. We remand to the district

court so it may modify the decree in accordance with this decision.

      I.    Facts and Prior Proceedings

      Michele and Ted were married in December 1990. At the time of

the marriage, Michele had obtained a bachelor’s degree in management

information systems and Ted had obtained a bachelor’s degree in finance
                                      3

and a law degree.      Michele was a systems engineer at IBM and Ted

practiced law at a Moline law firm.

        Both parties owned assets at the time of the marriage. Ted owned

an encumbered home located on Fairview Drive in Bettendorf, Iowa.

Michelle owned IBM stock and an IBM tax deferred savings plan (TDSP).

        Early on, the parties lived in the home on Fairview Drive. In 1993,

they moved to a home on Barcelona Terrace in Bettendorf. The parties

kept the Fairview Drive home as rental property. About this time, Ted

started his own law firm.       In 1994, Michele began working at Lee

Enterprises where she currently is the director of technical support.

        Michele and Ted have two children: Kevin, born November 25,

1991 and Caroline, born August 9, 1996. The parties utilized day care

and baby sitters throughout the children’s lives.

        Michele filed for dissolution of marriage in 2001.      The parties

reconciled and Michele dismissed her petition.       Thereafter, Ted began

spending more time at home and became more involved in the children’s

care.    In particular, Ted assumed a greater role in supervising the

children after school and preparing meals. Ted also began devoting less

time to his law practice.

        Michele filed a second petition for dissolution in September 2004.

Trial was held in June 2005. Michele was forty-two years old and Ted

was forty-four.

        At the time of trial, Michele’s annual salary was $101,000 with the

potential of earning another $30,000 in bonuses. In 2004, Ted earned

$18,454 in net income from his law practice. Ted’s average net income

between 2001 and 2004 was just under $25,000 per year.

        The district court awarded physical care of the children to Michele.

Ted was awarded liberal visitation. The court also divided the parties’
                                          4

assets and debts.       The court set aside for Michele the IBM stock she

owned prior to the marriage and the portion of the IBM TDSP traceable to

the premarital value of the account along with appreciation.                   These

assets were worth $116,094 on the date of trial.                 Ted was given a

$12,000 credit for the premarital net equity in the Fairview Drive home.1

Thereafter, the court equally divided the parties’ remaining debts and

assets.      In all, the net distribution was $446,326 for Michele and

$354,244 for Ted.

       Ted appealed.       He argued the district court erred (1) by not

awarding him physical care of the children; (2) by not considering joint

physical care in the alternative; and (3) by not treating the parties’

premarital assets similarly.

       The court of appeals affirmed the district court’s order in its

entirety. On further review, Ted reasserts the arguments he made before

the court of appeals. For the reasons that follow, we affirm the district

court’s award of primary care to Michele and reverse the district court’s

division of property.

       II.     Scope of Review

       We review dissolution cases de novo. In re Marriage of Sullins, 715
N.W.2d 242, 247 (Iowa 2006). “ ‘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.’ ” Id. (quoting

In re Marriage of Witten, 672 N.W.2d 768, 773 (Iowa 2003)). “Precedent is

of little value as our determination must depend on the facts of the

       1Although  the district court made a specific finding that Ted should receive a
$12,000 credit for his premarital equity in the Fairview Drive home, the court did not
implement this finding in the final distribution of property. Thus, in response to a
motion to enlarge or amend, the court gave Ted an additional $12,000 from Michele’s
Lee Enterprises retirement fund.
                                     5

particular case.”    In re Marriage of White, 537 N.W.2d 744, 746 (Iowa

1995) (citing In re Marriage of Sparks, 323 N.W.2d 264, 265 (Iowa Ct.
App. 1982)).

      III.     Merits

      A.       Physical Care of the Children

      Iowa law distinguishes custody from physical care.         Custody

concerns the legal rights and responsibilities toward the child, including

decisions “affecting the child's legal status, medical care, education,

extracurricular activities, and religious instruction.”    Iowa Code §

598.1(5) (2005).     Physical care, on the other hand, is “the right and

responsibility to maintain a home for the minor child and provide for the

routine care of the child.” Id. § 598.1(7). When considering the issue of

physical care, the child’s best interest is the overriding consideration.

We are guided by the factors set forth in Iowa Code section 598.41(3) as

well as those identified in In re Marriage of Winter, 223 N.W.2d 165, 166–

67 (Iowa 1974). If joint physical care is not appropriate, “the court must

choose one parent to be the primary caretaker, awarding the other

parent visitation rights.” In re Marriage of Hynick, 727 N.W.2d 575, 579

(Iowa 2007).

      Ted argues the district court should have awarded him physical

care so the children may continue to live in the Barcelona Terrace home,

which was awarded to him. Additionally, Ted argues he is better suited

to be the primary physical caretaker because he spends less time

working in comparison to Michele.

      The district court found both parents to be suitable caretakers for

the children.     We agree.   The record is replete with evidence of both

parties’ love and devotion to their children. At the end of the trial, the

court noted the conundrum it faced in deciding who should be awarded
                                    6

physical care because both parties are great parents. The district court

had the opportunity to observe the witnesses and concluded primary

care should be awarded to Michele. The district court awarded Ted the

following visitation schedule: every third weekend (Friday 5 p.m. through

Sunday 5 p.m.) and weekly “mid-week” visitation (Sunday 5 p.m. through

Tuesday morning while school is in session and 5 p.m. when it is not).

We see no reason to disturb the district court’s decision. Ted conceded

Michele is a competent caretaker and acknowledged plans to “ramp up”

his law practice.

      Alternatively, Ted claims the district court erred by not awarding

the parties joint physical care of the children. Under Iowa Code section

598.41(5)(a),

      the court may award joint physical care . . . upon the
      request of either parent. If the court denies the request for
      joint physical care, the determination shall be accompanied
      by specific findings of fact and conclusions of law that the
      awarding of joint physical care is not in the best interest of
      the child.

Contrary to Ted’s assertion on appeal, this passage does not create a

presumption in favor of joint physical care. In re Marriage of Hansen,

733 N.W.2d 683, 692 (Iowa 2007). Rather, our statutory scheme simply

makes joint physical care a viable option if it is in the child’s best

interest.   We recently said “[t]he critical question in deciding whether

joint physical care is . . . appropriate is whether the parties can

communicate effectively on the myriad of issues that arise daily in the

routine care of a child.” Hynick, 727 N.W.2d at 580.

      The parties dispute whether Ted requested joint physical care in

the original proceedings. Ted’s answer to Michele’s petition sought “the

parties’ joint shared physical custody of their children.” In his opening

statement at trial, Ted’s attorney stated the court needed to decide
                                           7

“whether shared physical custody is appropriate in this case.” Since the

parties previously agreed to joint legal custody, we find it obvious Ted

was requesting “joint physical care” even though he did not use those

exact words.      Moreover, the term “physical” connotes something more

than the right to make legal decisions. We have never held a party must

use magic words to convey a desire for “joint physical care.” Nor are we

interested in creating a trap for the unwary with respect to something so

paramount.

       Because the court did not award joint physical care, it normally

would be required to specifically explain why joint physical care is not in

the children’s best interest.        Iowa Code § 598.41(5)(a).          However, no

specific finding was required in the present case because Ted abandoned

his request for joint physical care during the trial. In his testimony, Ted

asked for primary physical care of the children. He stated joint physical

care was not appropriate due to Michele’s “tremendous amount of

unresolved anger towards [him].”               Similarly, Michele testified joint

physical care was not appropriate because communication with Ted was

“nearly impossible.”2      She also stated she believed joint physical care

would be too disruptive and worried Ted would not provide a structured
environment for the children.            In sum, both parties conceded joint

physical care was not preferable. Given the parties’ apparent difficulty in

communicating, joint physical care would not have been suitable. See

Hynick, 727 N.W.2d at 580 (finding joint physical care inappropriate due

to the parties’ lack of mutual respect and inability to communicate).

       2As evidence of their communication difficulties, Michele testified most of their

discussions were in writing.
                                     8

      B.    Premarital Property

      Under our statutory distribution scheme, the first task in dividing

property is to determine the property subject to division. In re Marriage

of Schriner, 695 N.W.2d 493, 496 (Iowa 2005).       The second task is to

divide this property in an equitable manner according to the enumerated

factors in section 598.21 of the Iowa Code.       Id.   “Although an equal

division is not required, it is generally recognized that equality is often

most equitable.” In re Marriage of Rhinehart, 704 N.W.2d 677, 683 (Iowa

2005) (citing In re Marriage of Conley, 284 N.W.2d 220, 223 (Iowa 1979)).

      Section 598.21(1) requires “all property, except inherited property

or gifts received by one party,” to be equitably divided between the

parties.   We have previously held “[t]his broad declaration means the

property included in the divisible estate includes not only property

acquired during the marriage by one or both of the parties, but property

owned prior to the marriage by a party.” Schriner, 695 N.W.2d at 496

(citing In re Marriage of Brainard, 523 N.W.2d 611, 616 (Iowa Ct. App.

1994)). The district court “may not separate [a premarital] asset from the

divisible estate and automatically award it to the spouse that owned the

property prior to the marriage.” Sullins, 715 N.W.2d at 247. Instead,

“property brought to the marriage by each party” is merely one factor

among many to be considered under section 598.21.            Other factors

include the length of the marriage, contributions of each party to the

marriage, the age and health of the parties, each party’s earning

capacity, and any other factor the court may determine to be relevant to

any given case. Iowa Code § 598.21(1).

      In the present case, the parties agreed to equally divide all property

acquired during the marriage. However, the parties disagreed on how to

divide their premarital property. Prior to the marriage, Ted owned the
                                          9

Fairview Drive home and Michele owned 118 shares of IBM stock and an

IBM tax deferred savings plan (TDSP). All of these assets increased in

value during the marriage:
          ASSET                 PREMARITAL VALUE               VALUE AT TRIAL

 Fairview Drive home (Ted)         $12,000 (equity)             $29,900 (equity)

    IBM stock (Michele)               $13,334                       $37,894

   IBM TDSP (Michele)                 $12,311                      $78,2003

       Ted approved of the court setting aside the value of the parties’

premarital contributions. However, Ted advocated the equal division of

any appreciation that occurred during the marriage.                Michele, on the

other hand, asked the court to set aside her premarital assets as well as

any appreciation in value during the marriage.

       The district court found it “equitable that Ted receive credit for the

premarital value of the equity in [the Fairview Drive home],4 and Michele

receive the premarital value of the IBM stock and IBM retirement plan

and each party should receive the benefit or burden of any change in the

respective values over which they had no particular control and to which

neither made any particular contributions.” Michele was awarded both
her premarital assets and their appreciation (worth $116,094 on the date

of trial) while Ted only received $12,000 for the premarital value of the

Fairview Drive home.         The court found it was justified in dividing the

appreciation of the Fairview Drive home because the parties serviced the

mortgage and maintained the home during the marriage while Michele’s

       3The   total value of Michele’s IBM TDSP at trial was $153,084. Michele
acknowledged $74,884 was either contributed during the marriage or was appreciation
of contributions made during the marriage. Thus, she asked for $78,200 to be set aside
for her and agreed to split $74,884 with Ted.

      4At the parties’ request, Michele was awarded the Fairview Drive home and Ted

was awarded the Barcelona Terrace home.
                                      10

premarital assets increased “as a result of factors entirely beyond the

control of the parties.”

      The court of appeals upheld the district court’s disparate treatment

of the parties’ premarital assets. It stated:

            In this marriage of moderate length, it is Michele who
      has made the greatest tangible contributions, undertaking
      primary responsibility for the home, the children, and the
      parties’ finances. In addition, it appears that, overall, she
      has made greater financial contributions to the marriage.
      Moreover, the record is clear that Michele’s IBM stock and
      IBM TDSP, which have been kept separate from the family
      finances,    appreciated    purely    due    to     fortuitous
      circumstances.     In contrast, during the marriage the
      Fairview Drive home was used as rental property. Unlike a
      purely financial asset, an encumbered home must be
      maintained and its mortgage must be serviced. . . . In light of
      the foregoing circumstances, we find the property division to
      be equitable.

      We do not find the parties’ respective contributions to the marriage

justify treating the parties differently. Michele’s biggest criticism of Ted

is his “failure without good cause to contribute financially to the

marriage consistent with his earning capacity.” However, we have never

held or even insinuated that spouses should maximize their earning

potential or risk being punished in the distribution of the parties’

property. Iowa is a no-fault state. In re Marriage of Williams, 199 N.W.2d
339, 345 (Iowa 1972).

      It is important to remember marriage does not come with a ledger.

See In re Marriage of Miller, 552 N.W.2d 460, 464 (Iowa Ct. App. 1996).

Spouses agree to accept one another “for better or worse.” Each person’s

total contributions to the marriage cannot be reduced to a dollar amount.

Many contributions are incapable of calculation, such as love, support,

and companionship.         “Financial matters . . . must not be emphasized
                                       11

over the other contributions made to a marriage in determining an

equitable distribution.” Id. at 465.

      In the present case, both parties contributed in countless ways to

the marriage.    Both worked outside the home, cooked, cleaned and

looked after the children. We presume they found solace in one another,

at least in the earlier years of their marriage.     Although each party’s

contribution to a marriage is an appropriate factor affecting property

division, it is not “useful to analyze the exact duties performed by the

marriage partners.”    In re Marriage of Grady-Woods, 577 N.W.2d 851,

853 (Iowa Ct. App. 1998). Suffice it to say, neither party shirked his or

her duties so as to justify disparate treatment.

      Nor do we find it appropriate when dividing property to emphasize

how each asset appreciated—fortuitously versus laboriously—when the

parties have been married for nearly fifteen years.       Property may be

“marital” or “premarital,” but it is all subject to division except for gifts

and inherited property. Iowa Code § 598.21(1).

      Considering all of the facts and circumstances of this case, we find

it equitable to equally divide the appreciation of the parties’ premarital

assets.   We need not decide whether it was appropriate to award the

parties the value of their premarital contributions because both parties

requested at least the value of their respective premarital property to be

set aside. See In re Marriage of Wendell, 581 N.W.2d 197, 199 (Iowa Ct.

App. 1998) (noting some circumstances may justify a full credit for

premarital property but such a credit is not required). Thus, $12,000

should be set aside for Ted and $25,645 should be set aside for Michele.

These figures represent the value of their premarital property on the date

of their marriage.
                                     12

      C.    Dissipation of Assets

      Michele urges us to take into account Ted’s “unreasonable

accumulation of debt.” The district court found Ted’s spending “behavior

does not rise to the level of ill will or inappropriate conduct sufficient to

justify variance” from an equal property division.

      We have previously held dissipation of assets is a proper

consideration when dividing property.       In re Marriage of Olson, 705
N.W.2d 312, 317 (Iowa 2005) (citing In re Marriage of Goodwin, 606
N.W.2d 315, 321 (Iowa 2000)). In determining whether dissipation has

occurred, courts must decide “(1) whether the alleged purpose of the

expenditure is supported by the evidence, and if so, (2) whether that

purpose amounts to dissipation under the circumstances.” Lee R. Russ,

Spouse’s Dissipation of Marital Assets Prior to Divorce as Factor in Divorce

Court’s Determination of Property Division, 41 A.L.R. 4th 416, 421 (1985).

The first issue is an evidentiary matter and may be resolved on the basis

of whether the spending spouse can show how the funds were spent or

the property disposed of by testifying or producing receipts or similar

evidence. See id. The second issue requires the consideration of many

factors, including

      (1) the proximity of the expenditure to the parties’
      separation, (2) whether the expenditure was typical of
      expenditures made by the parties prior to the breakdown of
      the marriage, (3) whether the expenditure benefited the
      “joint” marital enterprise or was for the benefit of one spouse
      to the exclusion of the other, and (4) the need for, and the
      amount of, the expenditure.

Id.; see In re Marriage of Burgess, 568 N.W.2d 827, 829 (Iowa Ct. App.

1997) (stating when one spouse has dissipated marital assets, the critical

question is “whether the payment of the obligation was a reasonable and

expected aspect of the particular marriage”). Courts may also consider
                                          13

“[w]hether the dissipating party intended to hide, deplete, or divert the

marital asset.” Kondamuri v. Kondamuri, 852 N.E.2d 939, 952 (Ind. Ct.

App. 2006); see In re Marriage of Cerven, 335 N.W.2d 143, 146 (Iowa

1983) (holding property transferred by a spouse to avoid support

obligation may be considered on the issue of property distribution as well

as alimony).

       Michele alleges Ted indirectly dissipated their marital assets—

rather than depleting the parties’ assets, Ted accumulated large amounts

of debt. Nevertheless, the result is the same. The parties’ assets will

eventually be needed to repay Ted’s debt.

       The parties kept their respective earnings and debt separate for the

last several years of their marriage. Ted maintained a line of credit and

several credit cards which were all in his name alone. Michele was not

aware of the extent of Ted’s debt until shortly before she filed her second

dissolution petition.      At trial, Ted owed approximately $85,633.5              Ted

acknowledged his debt had substantially increased since the first time

Michele filed for dissolution in 2001. He said his debt was necessitated

by his firm’s obligations and household expenses.                 He attributed the

increase to his need to borrow money to service his debt. However, Ted
did not provide any evidence concerning his firm’s expenses and

obligations, nor did he specify his contributions to the household by way

of this debt.

       While Ted asserted about half of the debt is related to the family

household, the record shows Michele paid the vast majority of those

expenses for the last several years.             Moreover, Ted’s claim that he

       5This does not include a substantial loan which is listed on petitioner’s exhibit
40 (First MW Line of Credit in the amount of $80,100). There is no discussion of this
loan in the decree. Since the parties have not addressed it on appeal, we likewise do
not address it.
                                          14

“ha[s]n’t been able to make enough money from the course of [his]

practice . . . to cover current expenses and additionally retire the debt on

top of that” is contrary to his assertion that his law firm is profitable.

       Nevertheless, it is not unexpected Ted could not account for

exactly how this money was spent considering the debt accumulated over

several years. Ted, however, should have been able to explain how he

spent the $22,000 he took out on his credit cards after Michele filed her

second petition for dissolution. Ted offered no explanation why his debt

suddenly accelerated at the end of the marriage although he taunted

Michele she was going to have to pay it all. Ted’s living expenses did not

increase because the parties remained in their home on Barcelona

Terrace while the dissolution action was pending.                 We also know the

cash advances were not used to pay Ted’s legal expenses because the

district court ordered Michele’s attorney to transfer half of Michele’s

$15,000 retainer to Ted’s attorney.

       It is not appropriate to label all of Ted’s debt as waste because we

find Ted’s testimony credible to prove at least some of this debt benefited

the family or Ted’s firm. Given the timing of the cash advances and Ted’s

vague explanation, we find it equitable to set aside $22,000 of debt for

Ted.    This amount should not be included in the distribution of the

parties’ assets and debts.6 Ted failed to prove the cash advances were
the result of legitimate household and business expenses. Although all

debt is not wasteful, we find this amount unreasonable because he failed

to adequately explain it.         See Goodwin, 606 N.W.2d at 322 (holding

$9,000 which the wife spent but could not account for should be

       6Typically,a dissipated asset is included in the marital estate and awarded to
the spouse who wasted the asset. See, e.g., Goodwin, 606 N.W.2d at 322. However,
where the dissipation is debt, it is appropriate to set aside the debt for the spouse who
incurred the debt and not include it in the marital estate.
                                     15

included in the division of the parties’ assets); In re Marriage of Hunter,

639 P.2d 489, 492–93 (Mont. 1982) (holding $51,000 husband withdrew

from joint bank account should be included in the marital estate because

he produced no evidence to support his claim that the money was spent

on business and living expenses). In other words, Michele made a prima

facie case for dissipation and Ted failed to rebut it.

      In summary, the value of the parties’ premarital contributions

should be set aside. Ted should receive a $12,000 credit and Michele

should receive a $25,645 credit. Additionally, $22,000 of debt should be

set aside for Ted.    That leaves $866,750 worth of marital assets and

$81,824 worth of marital debts to be equally divided.           All together,

Michele should receive $418,108 and Ted should receive $382,463 based

on the following calculations:

                                   Michele                  Ted
        Premarital assets    $      25,645.00      $       12,000.00
        Marital assets       $    433,375.00       $     433,375.00
        Marital debt         $     (40,912.00)     $      (40,912.00)
        Dissipation debt     $             -       $      (22,000.00)
                    Totals   $    418,108.00       $     382,463.00

The district court shall enter an order in conformance with these findings
modifying the original decree as follows: the appreciation of Michele’s

premarital assets should be included in the division of marital property

and $22,000 of Ted’s debt should be excluded from the division of

marital property. These modifications give Michele $28,218 less than the

district court’s original decree. The district court shall hold a hearing to

determine how the parties’ property should be redistributed in light of

our holdings.
                                     16

      IV.   Conclusion

      We find no reason to disturb the district court’s decision to award

primary care of the parties’ children to Michele. We set aside the value of

the parties’ premarital contributions because both parties asked for at

least that much to be set aside. Because Ted dissipated marital assets

through unexplained cash advances on his credit cards at the end of the

marriage, we set aside $22,000 worth of debt to Ted.        We order the

parties’ remaining assets and debts, including appreciation of the parties’

premarital assets, to be divided equally. Costs of this appeal shall be

split equally between the parties.

      DECISION OF THE COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART;

CASE REMANDED.

      All justices concur except Hecht, J., who takes no part.