Court Opinion

ID: 2687702
Source: CourtListenerOpinion
Date Created: 2014-07-31 21:43:04.328775+00
Date Added: 2024-06-11T09:48:54.329096
License: Public Domain

IN THE SUPREME COURT OF IOWA
                               No. 12–1928

                          Filed January 24, 2014

IN RE THE MARRIAGE OF MELISSA JO MIHM
AND SCOTT ANTHONY MIHM,

Upon the Petition of
MELISSA JO MIHM n/k/a MELISSA JO WEBER,

      Appellant,

And Concerning
SCOTT ANTHONY MIHM,

      Appellee.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Winneshiek County,

David F. Staudt, Judge.

      Ex-wife seeks further review of a court of appeals decision

affirming a trial court judgment finding there was no substantial change

in circumstances justifying modification of a child support order.

DECISION OF COURT OF APPEALS VACATED IN PART AND

AFFIRMED IN PART; DISTRICT COURT JUDGMENT REVERSED IN

PART, AFFIRMED IN PART, AND REMANDED.

      Judith M. O’Donohoe of Elwood, O’Donohoe, Braun, White, LLP,

Charles City, for appellant.

      Dale L. Putnam of Putnam Law Office, Decorah, for appellee.
                                       2

ZAGER, Justice.

      After Scott Mihm filed a petition to modify their divorce decree, his

former wife Melissa counterclaimed seeking an increase in child support.

As part of the original stipulation, the parties agreed to a child support

amount below that provided by the child support guidelines. The district

court incorporated this stipulation into its decree of dissolution without

noting that the child support was not consistent with the child support

guidelines and without any explanation as to why application of the

guidelines would be unjust or inappropriate. After a modification trial,
the district court concluded that there had been no substantial change in

circumstances   justifying     a   modification   of   Scott’s   child   support

obligation. The district court further concluded that an agreement as to

child support made by the parties with full knowledge that the child

support was not based upon the child support guidelines should not be

modified at a later date “unless for the direst of needs.”         The court of

appeals affirmed, and we granted further review.          For the reasons set

forth below, we reverse and remand on the issue of modification of child

support.

      I. Background Facts and Proceedings.

      Scott and Melissa Mihm were married in November 1997.                They

have three children.   In September 2008, Melissa filed a petition for

dissolution of the marriage.

      In October 2008, the district court entered a temporary order on

custody and visitation, child and spousal support, and other financial

matters. As part of the temporary order, Melissa was awarded a bank

account with a balance of about $45,000, and Scott was ordered to pay
spousal support of $2500 per month. Based on its finding of the parties’

respective incomes, which included $1557.25 of net monthly income
                                       3

imputed to Melissa, the district court ordered Scott to pay $2459.15 in

temporary monthly child support.        According to the order, the district

court reached the amount using the child support guidelines then in

effect.

          In January 2009, Scott and Melissa entered into a stipulation and

agreement for dissolution of the marriage.      The stipulation divided the

former couple’s property and resolved, among other things, issues of

spousal support, child custody, and child support.          As part of the

property settlement, Scott agreed to pay Melissa $500,000, with
$100,000 due one week after entry of the decree and $400,000 paid over

eight annual installments.      Scott also agreed to pay Melissa $500 per

month in spousal support for sixty months.            The stipulation also

provided Scott would pay $1500 per month in child support, an amount

below the temporary child support earlier established by the child

support guidelines.      Under the stipulation, the parties agreed to joint

legal custody of the three minor children, with primary physical

placement remaining with Melissa. Melissa also agreed not to move more

than sixty miles from Fort Atkinson, Iowa, without prior application to

the court and court approval.       On January 27, the court entered the

decree, which incorporated the parties’ stipulation. The district court did

not note that the child support was lower than that established by the

child support guidelines or make a written finding that it was deviating

from the guidelines as the amount set by the child support guidelines

would be unjust or inappropriate.

          In June 2009, Scott petitioned to modify the decree, arguing there

had been a substantial change in circumstances because Melissa moved
more than sixty miles from Fort Atkinson. After initially filing an answer,

Melissa amended her answer and added a counterclaim.                    Her
                                         4

counterclaim sought to have the child support recalculated because

there had been a substantial change in circumstances.                   Scott later

amended his petition to include a claim seeking termination of spousal

support based on Melissa’s remarriage, which occurred in April 2011.

       Before the modification trial, Scott and Melissa reached a partial

stipulation.      They agreed Melissa would retain physical custody of the

two younger children, and Scott would assume physical custody of the

oldest child, who had already returned to live with Scott.                 The two

remaining      issues,   the   termination    of   spousal    support     and    the
recalculation of child support, proceeded to trial in September 2012.

       After the trial, the district court issued its order. First, the district

court confirmed that Melissa had remarried.              The district court also

found that Melissa had shown no extraordinary circumstances justifying

a continuation of spousal support. Accordingly, the court ordered that

the spousal support of $500 per month terminate effective November 1,

2011.1 It also ordered that Scott be credited with eleven spousal support

payments made since that date.

       The district court next addressed whether to recalculate Scott’s

child support obligation based on a substantial change in circumstances.

The district court noted that two children remained in Melissa’s physical

custody as a result of the partial stipulation. The district court found

Melissa accepted a $500,000 property settlement at the time of the

decree. The district court also found the parties agreed in the stipulation

to an amount of child support that was not based on the child support

guidelines. Scott and Melissa had agreed that Scott would pay $1500

       1Melissa  testified she and Scott agreed orally that the spousal support would
terminate effective November 1, 2011.
                                       5

per month in child support, even though both parties were aware that

the court’s temporary order, which relied on the child support guidelines,

established Scott’s child support obligation as $2459.15 per month. The

district court also noted that Melissa offered evidence of Scott’s current

income and evidence showing that if Scott’s child support obligation were

recalculated under the latest guidelines his support obligation would be

substantially higher.

      The district court also cited specific parts of Melissa’s testimony at

the trial.    Melissa testified that she signed the stipulation in January
2009 against the advice of two attorneys.          She signed it, however,

because she felt harassed by Scott and wanted the dissolution

proceedings to end, so long as she could have her children.               Melissa

conceded that she wanted to modify the child support obligation because

she made a “bad deal” in the stipulation.

      The district court concluded Melissa failed to show a substantial

change in circumstances. First, the district court dismissed the notion

that a party who agreed to an amount of child support, with knowledge

that the amount was less than that provided by the child support

guidelines, should later be permitted to modify the agreed-upon amount,

except under rare circumstances. The district court next reasoned that a

dissolution    decree’s   child   support   determination    is   final    as   to

circumstances that were known or should have been known through

reasonable diligence at the time of the decree.             The district court

concluded that nothing showed that Scott’s job or income had changed

in a way that could not have been known at the time of the original

decree.
      In addition, the district court did not find wrong or injustice in

continuing to enforce the stipulated amount of child support. Melissa
                                    6

received a large property settlement in the decree, she had remarried

since then, and her new husband was employed.         Finally, the district

court found no evidence was offered to show that the children would be

adversely affected if the child support were not modified. Accordingly,

the court denied Melissa’s request to modify the child support.

      Melissa appealed, and we transferred the case to the court of

appeals.    The court of appeals affirmed.     Rejecting all of Melissa’s

arguments, and for the same reasons articulated by the district court, it

held she had not shown a substantial change in circumstances to justify
modifying the amount of child support under the decree. Melissa sought

further review, which we granted.

      II. Standard of Review.

      We review de novo a decision to modify a dissolution decree. In re

Marriage of Michael, 839 N.W.2d 630, 635 (Iowa 2013).        Although the

district court’s fact findings are not binding upon us, we do give them

weight. In re Marriage of McDermott, 827 N.W.2d 671, 676 (Iowa 2013).

We will not disturb a district court’s ruling on a modification unless that

ruling failed to do equity. Id.

      III. Discussion.

      The issue on further review is whether there has been a

substantial change in circumstances justifying a modification of the child

support amount under the original divorce decree.       Under Iowa Code

section 598.21C, a court may modify a child support order “when there

is a substantial change in circumstances.”       Iowa Code § 598.21C(1)

(2011).    The statute contains numerous factors a court may consider

when deciding whether to modify the order, such as changes in a party’s
employment or income, changes in a party’s number of dependents,
                                     7

changes in a party’s residence, a party’s remarriage, and other factors

relevant in the case. See id.

       We have identified principles courts should also consider when

deciding whether to modify a decree. See, e.g., Michael, 839 N.W.2d at

636 (explaining principles to consider in deciding whether there has been

a substantial change in circumstances justifying a change in a spousal

support obligation); In re Marriage of Rietz, 585 N.W.2d 226, 229 (Iowa

1998) (noting principles to consider when deciding to modify child

support under a divorce decree). The change in circumstances must not
have been within the district court’s contemplation when the decree was

entered. Michael, 839 N.W.2d at 636; In re Marriage of Vetternack, 334
N.W.2d 761, 762 (Iowa 1983) (explaining one principle that emerges from

modification caselaw is that the change in circumstances must not have

been within the trial court’s contemplation “when the original decree was

entered”).   Also, “ ‘it must appear that continued enforcement of the

original decree would, as a result of the changed conditions, result in

positive wrong or injustice.’ ” In re Marriage of Walters, 575 N.W.2d 739,

741 (Iowa 1998) (quoting Vetternack, 334 N.W.2d at 762). Finally, the

party seeking modification must prove by a preponderance of the

evidence the substantial change in circumstances. Rietz, 585 N.W.2d at

229.

       Melissa contends the transfer of the former couple’s oldest child

from her physical custody to Scott’s was a substantial change in

circumstances. As the court of appeals acknowledged, a change in the

physical custody of a child is often a substantial change that justifies

refiguring child support. See In re Marriage of Titterington, 488 N.W.2d
176, 180 (Iowa Ct. App. 1992); In re Marriage of Green, 417 N.W.2d 252,

254 (Iowa Ct. App. 1987).       The court of appeals declined to increase
                                   8

Scott’s child support obligation on this basis, however, because taking

physical custody of one child would typically be accompanied by a

decreased child support obligation, not an increased obligation.    That

might be true in a typical case, but in this case, the amount Scott paid

for three children under the original decree, $1500 per month, is

substantially below the amount Scott would pay even for two children if

his obligation were recalculated under the child support guidelines. In

short, the reason for the increase, in spite of Scott taking physical

custody of one child, is that Scott was paying such a small amount of
child support to begin with.

      Even if the change in custody of one child were not on its own a

substantial change in circumstances, other facts support finding a

substantial change in circumstances.    Because Melissa remarried, she

lost $500 per month in spousal support before the end of the sixty

month period specified in the original stipulation. As the district court

correctly found, remarriage of an ex-spouse does not automatically

terminate spousal support; it shifts the burden to the support recipient

to show extant extraordinary circumstances that justify continuing the

support.   In re Marriage of Shima, 360 N.W.2d 827, 828 (Iowa 1985).

Melissa did not make any showing that would justify continued receipt of

alimony.   See In re Marriage of Johnson, 781 N.W.2d 553, 558 (Iowa

2010) (explaining the failure to show any extraordinary circumstances

warrants termination of spousal support after remarriage). Accordingly,

Melissa’s spousal support was appropriately terminated.

      Melissa’s remarriage and the consequent loss of spousal support

alone may not be a substantial change in circumstances justifying
modification of child support. See Mears v. Mears, 213 N.W.2d 511, 516

(Iowa 1973) (holding remarriage of ex-spouse and loss of income not to
                                     9

be a substantial change in circumstances). But they are clearly factors

the court shall consider. Iowa Code § 598.21C(1)(a), (g), (l). Here, the

loss of spousal support results in a decrease in the amount of money

available each month with which Melissa can support the former couple’s

two children remaining in her physical custody.         It is reasonable to

conclude from the record that when Melissa accepted the original

amount of $1500 per month in child support for three children, which

was just sixty-one percent of the amount set by the temporary order, the

receipt of $500 per month in spousal support figured in her evaluation of
her ability to support herself and her children.       Now, in light of the

elimination of spousal support, Melissa has experienced a twenty-five

percent reduction in the amount of money available each month with

which to support herself and her two children from her first marriage.

      The loss of the spousal support has had a significant effect on

Melissa’s income.   See In re Marriage of Lalone, 469 N.W.2d 695, 697

(Iowa 1991) (considering amount of spousal support paid as one factor in

child support determination).      Melissa’s gross income in 2009 was

$7495, in 2010 it was $6252, and in 2011 it was $7075. In each of these

years, $6000 of Melissa’s gross income was spousal support paid by

Scott. Melissa and her new husband Jeff had combined gross incomes of

$45,691 in 2010 and $46,185 in 2011. Although Jeff has only a limited

financial obligation to Melissa’s children from her first marriage, we do

consider his income as it relates to Melissa’s financial condition and

ability to support her children.    See, e.g., In re Marriage of Gehl, 486
N.W.2d 284, 287 (Iowa 1992) (“[T]he new spouse’s income can be

considered as it relates to the divorced custodial parent’s overall financial
condition and ability to support the child.”); Page v. Page, 219 N.W.2d
556, 558 (Iowa 1974) (considering income of noncustodial parent’s
                                         10

spouse in deciding the appropriate amount of child support).                Melissa

and Jeff also have a child of their own, whom they must support on the

couple’s income.      This new dependent is a consideration in deciding

whether there has been a substantial change in circumstances.                    See

Iowa Code § 598.21C(1)(d).

       There was significant disagreement at the modification trial about

Scott’s income.      Scott presented evidence that his net yearly income,

averaging the years 2009 through 2011, was $138,056, or about $11,505

monthly. See In re Marriage of Knickerbocker, 601 N.W.2d 48, 53 (Iowa
1999) (explaining that when a person’s income fluctuates, the court must

average the person’s income over a reasonable period of years). Melissa

argues Scott’s income is higher. She presented evidence that Scott’s net

income, again averaging the years 2009 through 2011, was $284,889, or

about $23,741 monthly.          The disparity results from a dispute over

whether to calculate Scott’s income using straight-line or accelerated-

depreciation deductions under the Internal Revenue Code.                 See I.R.C.

§ 168 (2006).      Notably, our caselaw favors the straight-line method of

depreciation.      See Knickerbocker, 601 N.W.2d at 52 (holding court of

appeals properly recalculated income under straight-line method of

depreciation); In re Marriage of Gaer, 476 N.W.2d 324, 329 (Iowa 1991)

(holding that the ex-spouse “should be allowed a deduction for

depreciation determined under the straight line method of depreciation

rather than under the accelerated method”). In the 2008 temporary child

support order, the district court found Scott’s net monthly income to be

$13,654.76.2 Applying the straight-line method of depreciation, as this

       2Although  the parties disputed the income figure at the time of the temporary
order, both rely on it here to compare Scott’s income at that time to his income now.
The temporary order takes into account the expenses of both parties and the decreases
                                            11

court has done in the past, Scott’s net monthly income has increased

about seventy-four percent since just before the decree was entered.

       Scott argues that it was within the contemplation of the district

court when it entered the decree that his income would change from

year-to-year. That may be true, but a district court’s knowledge that a

person’s income fluctuates does not mean that a significant increase in

that person’s income cannot result in a finding of a substantial change in

circumstances.        Changed income remains one factor to consider in

deciding whether there has been a substantial change in circumstances.
See Iowa Code § 598.21C(1)(a).                   Moreover, mere knowledge of a

fluctuating income is not the same as knowledge of income increases,

especially significant income increases.               We conclude the significant

increase in Scott’s income was not within the contemplation of the

district court at the time of the decree. See In re Marriage of Guyer, 522
N.W.2d 818, 821 (Iowa 1994) (finding a significant increase in income not

within district court’s contemplation at the time of the decree); cf. In re

Marriage of Bergfeld, 465 N.W.2d 865, 867, 870 (Iowa 1991) (finding a

change in income was not within the court’s contemplation where spouse

worked at different jobs that paid varying wages                          and    received

unemployment before divorce, then afterward was rehired at his former

job and received a significant increase in pay).

       Unlike the district court and the court of appeals, we find that the

evidence, when viewed as a whole, supports the conclusion that Melissa

______________________________________
in income Scott likely would experience because of rising gas prices affecting the
profitability of his business. We give weight to a district court’s factual determinations.
See In re Marriage of Fennelly & Breckenfelder, 737 N.W.2d 97, 101 (Iowa 2007)
(affirming district court decision to award liberal visitation based on record “replete with
evidence of parties’ devotion toward their children”). Given the care the court took in
reaching a reasonable figure for Scott’s net monthly income, we rely on it here.
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has shown a substantial change in circumstances since the entry of the

original decree, warranting a modification of child support. Likewise, we

disagree with the conclusion that continued enforcement of the decree

would not result in injustice to the children.     It is true that Melissa

agreed to a level of child support, which “becomes a final contract when

it is accepted and approved by the court.” In re Marriage of Lawson, 409
N.W.2d 181, 182 (Iowa 1987). When “merged in the dissolution decree,”

the stipulation “is interpreted and enforced as a final judgment of the

court.”   Prochelo v. Prochelo, 346 N.W.2d 527, 530 (Iowa 1984).        But
“[p]arents cannot lightly contract away or otherwise modify child support

obligations.” In re Marriage of Zeliadt, 390 N.W.2d 117, 119 (Iowa 1986).

      Iowa Code section 598.21B makes clear there is “a rebuttable

presumption that the amount of child support which would result from

the application of the guidelines . . . is the correct amount of child

support to be awarded.” Iowa Code § 598.21B(2)(c). The purpose of the

child support guidelines is to provide for the children’s best interests

after considering each parent’s proportional income.      See Iowa Ct. R.

9.3(1); see also McDermott, 827 N.W.2d at 684 (explaining the purpose of

the child support guidelines is to provide for the children’s best interests

“after consideration of each parent’s proportional income”).     Even with

just two children in Melissa’s custody, Scott’s current child support

obligation is significantly below the amount set by the guidelines.

Considering Melissa’s income figures for Scott utilizing straight-line

depreciation, her loss of alimony, $600 in interest income reported by

Melissa, and $20,000 in imputed annual income which reflects what

Melissa could expect to earn with her skills and experience, and which
Melissa agreed to have imputed to her, the guidelines worksheet

submitted by Melissa at the modification trial sets a monthly support
                                    13

amount of $3342. In view of these calculations, we cannot conclude that

when Scott and Melissa stipulated to the monthly child support figure,

they did so with the best interests of three children in mind.

      Melissa testified at the modification trial about her motivation for

agreeing to the below-guidelines child support amount. She testified that

she wanted her children and wanted the divorce proceedings to end; she

acknowledged making a “bad deal” with respect to child support. There

is no reason to doubt the truth of this testimony. However, it is not for

the parties to determine an appropriate level of child support.        By
statute, establishing an appropriate level of child support is ultimately

the responsibility of the district court after being fully advised of the

circumstances of the parties.

      Iowa Code section 598.21B prohibits a court from considering a

variation from the child support guidelines “without a record or written

finding, based on stated reasons, that the guidelines would be unjust or

inappropriate.” Iowa Code § 598.21B(2)(d).      We have repeatedly noted

that courts must comply with this requirement. See State ex rel. Nielsen

v. Nielsen, 521 N.W.2d 735, 737 (Iowa 1994) (explaining a “court has no

authority to vary from the guidelines without a written finding that the

guideline amount would be unjust or inappropriate”); Guyer, 522 N.W.2d

at 820 n.1 (noting the requirement and that a decree “fell woefully short

of this statutory requirement”); see also In re Marriage of Brown, 487
N.W.2d 331, 333 (Iowa 1992) (“Our child support guidelines are to be

strictly followed unless their application would lead to an unjust or

inappropriate result.”).

      On January 27, 2009, the district court was presented with a
stipulation signed by the parties and a decree prepared by counsel. The

district court signed the decree that same date. There is nothing in the
                                         14

record that discloses the district court was advised by counsel that the

child support deviated from the child support guidelines. Accordingly, it

is not surprising that the district court did not make a record on the

reasons for the deviation from the guidelines or make written findings

that the application of the guidelines would be unjust or inappropriate

under the circumstances.          But this is precisely the purpose of the

statute.

       The written findings and reasons are vital to a later determination

by the court about whether there has been a substantial change in
circumstances. That is the case whether the child support modification

is sought under Iowa Code section 598.21C(1) or under section

598.21C(2)(a).3 If the parties want the district court to deviate from the

child support guidelines, and also want to avoid subsequent modification

of that award based on an evaluation of changed circumstances or the

ten percent deviation, counsel and the district court need to insure that

the dissolution decree explains the reasons for the deviation and that

those reasons are factually and legally valid. See Iowa Ct. R. 9.11; see

also In re Marriage of Nelson, 570 N.W.2d 103, 108 (Iowa 1997)

(explaining a modification order that deviated from the child support

guidelines without explanation could not be used as a basis to determine

whether there had been a substantial change in circumstances). Absent

compliance with the statute and our rules, there is no reason to assume

that the initial child support amount set forth in the decree has any

       3Iowa Code section 598.21C(2)(a) provides that “[s]ubject to 28 U.S.C. § 1738B,
but notwithstanding [section 598.21C(1)], a substantial change of circumstances exists
when the court order for child support varies by ten percent or more from the amount
which would be due pursuant to the most current child support guidelines.”
                                   15

proper basis, or that it should be used as the basis for subsequent

modification proceedings.

      IV. Disposition.

      The original child support order was not consistent with the

statute or our rules governing child support and, as such, does not

provide a proper basis on which to base a decision on modification of

child support. However, based on this record, Melissa has shown that

there has been a substantial change in circumstances since the entry of

the underlying decree warranting a modification of child support under
both Iowa Code section 598.21C(1) and section 598.21C(2)(a). This case

is remanded to the district court for a determination of an appropriate

order for child support. We affirm the holding of the court of appeals

denying Scott’s request for attorney fees.   Court costs associated with

this appeal are assessed against Scott.

      DECISION OF COURT OF APPEALS VACATED IN PART AND

AFFIRMED IN PART; DISTRICT COURT JUDGMENT REVERSED IN

PART, AFFIRMED IN PART, AND REMANDED.