Court Opinion

ID: 4250001
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:22:32.234512+00
Date Added: 2024-06-11T14:44:11.977494
License: Public Domain

IN THE SUPREME COURT OF IOWA
                           No. 125 / 05–2115

                         Filed September 5, 2008

IN RE THE MARRIAGE OF ELIZABETH A.
BRIDDLE AND DAVID J. BRIDDLE

Upon the Petition of
ELIZABETH A. BRIDDLE,

      Appellee,

And concerning
DAVID J. BRIDDLE,

      Appellant.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Polk County, Arthur E.

Gamble (enforcement of settlement agreement) and Jerrold W. Jordan

(decree), Judges.

      Further review of a dissolution of marriage action in which the court

of appeals ordered enforcement of a settlement agreement reached through

mediation. DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED AS MODIFIED, AND CASE REMANDED.

      Patricia A. Schoff, David Swinton, and Margaret C. Callahan of Belin

Lamson McCormick Zumbach Flynn, a Professional Corporation, Des

Moines, for appellant.

      John C. Conger, West Des Moines, for appellee.
                                      2
HECHT, Justice.

      After engaging in contentious discovery disputes for more than two

years, the parties spent a long day negotiating a settlement of their

dissolution action with the assistance of a mediator.          The mediator

summarized the terms of the accord in a letter to the parties’ counsel, but

the parties were subsequently unable to agree upon a proposed decree. The

district court refused to enforce the mediated settlement, a trial was held on

all disputed issues, and a dissolution decree was entered. The court of
appeals affirmed the dissolution of the parties’ marriage but reversed the

balance of the district court’s decision, concluding the settlement should be

enforced.   We vacate the decision of the court of appeals, affirm the

dissolution decree as modified herein, and remand to the district court for

entry of a decree consistent with the terms of the settlement reached by the

parties.

      I.    Factual Background and Proceedings.

      Elizabeth and David Briddle met while they were employed as real

estate agents. They were married on September 12, 1992. Elizabeth and

David are the parents of three minor children.
      David acquired minority-shareholder interests in several corporations

that lease space and provide management services to antique dealers. The

five corporations do business under the name of “Brass Armadillo” in Des

Moines, Omaha, Kansas City, Phoenix, Denver and Cincinnati. Three of the

corporations are Iowa corporations, and the others are incorporated in

Nevada.

      Elizabeth finished her undergraduate degree after the marriage and

resumed selling real estate.    She interrupted her real estate career to

become a stay-at-home mother. Marital discord arose, and Elizabeth filed a

petition for dissolution on October 23, 2002. She returned to school at Des
                                      3
Moines Area Community College in the fall semester of 2002 and completed

her training in medical sonography at Mercy College of Health in May 2005.

Although she was diagnosed with Crohn’s disease during the marriage, the

evidence establishes that the disease is controlled with medications. She is

employed in the medical field in Iowa City and earns $46,000 per year.

      Elizabeth requested production of documents evidencing David’s

income and the value of his minority interests in the several Brass

Armadillo corporations. On several occasions during the litigation, the
district court held hearings calculated to resolve the parties’ protracted

discovery disputes.      Unsatisfied with David’s claims that he was not

authorized as a minority shareholder to produce the corporations’ financial

records, Elizabeth filed a series of motions to compel production of

documents.

      David eventually filed suit against the corporations to obtain the

requested information under Iowa Code section 490.1602(2)(b) (entitling

shareholder to inspect and copy the corporations’ accounting records “at a

reasonable location specified by the corporation”). Elizabeth intervened in

that litigation, and the court entered an order on August 14, 2004, directing
only the Iowa corporations to produce their check ledgers, general ledgers,

certified financial statements, profit and loss statements, and tax returns no

later than September 25, 2004. The court’s order did not, however, resolve

the discovery dispute.

      The Iowa corporations sought a protective order on the ground that

the discovery of their records ordered by the court in the August 14 order

exceeded the definition of “accounting records” contemplated by section

490.1602.    Elizabeth filed another motion to compel production of

documents and served on the corporations’ custodian of records a notice of

deposition and subpoena duces tecum demanding access to “any and all
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books and records regarding the Nevada corporations” and “all credit card

statements for the last 2 years.” The Nevada corporations sought an order

quashing the subpoena, contending the documents exceeded the scope of

discovery previously ordered by the court. Yet another hearing was held by

the court to address pending discovery motions on January 4, 2005. The

court extended the discovery deadline to allow time for the production of

documents and completion of depositions, and ordered David to produce

“all information in his possession related to the out-of-state corporations.”
       Elizabeth’s counsel deposed David in early January of 2005. David’s

deposition testimony disclosed the location of the corporations’ accounting

records in Ankeny and generally described the companies’ accounting

practices.     Thereafter, Elizabeth’s counsel again invoked the court’s

authority to gain access to the corporations’ records at the Ankeny office

location. On January 18, 2005, the district court ordered the corporations

to produce their records “at the facility where they [were] located” or at some

other place agreed upon by counsel.1                The corporations produced to

Elizabeth’s counsel on January 21, 2005 a disk containing accounting

records and supporting data for all of the Brass Armadillo corporations for
the years 2003 and 2004.2

       1The court’s order expressed considerable frustration with the protracted and

ongoing discovery disputes and scolded David for his “lack of candor” and for engaging in a
“charade” of attempting to gain access to the corporations’ documents through a lawsuit
when, all the while, they were under his control and located in an Ankeny office. The court
did not, however, deem David’s conduct worthy of any sanction.

       2The  disk contained approximately 250,000 pages of the requested accounting and
financial data stored by the companies using Quick Books software. Among the records
produced were profit and loss statements, balance sheets, cash flow statements, accounts
receivable and payable reports, general ledgers, and check registers. On the same day,
David’s counsel produced hard copies of the general ledgers for 2003 and 2004, periodic
internal financial statements, and adjusting entries prepared by the corporations’ certified
public accountant for 2003.
                                              5
       Despite the corporations’ production of their voluminous accounting

records, Elizabeth’s counsel insisted he be allowed to inspect the records at

the corporations’ Ankeny office. Another subpoena duces tecum was served

on the corporations’ custodian of records demanding production of the

records at that office on January 31, 2005. The corporations sought a

protective order, claiming they had satisfied their obligation to respond to

Elizabeth’s discovery requests. After yet another hearing, the court filed an

order on February 1, 2005 generally directing Brass Armadillo, Inc. to fully
comply with the court’s prior discovery orders.3

       The scheduled trial date of Tuesday, February 8, 2005 was drawing

near. Having previously reached a stipulation resolving their disputes as to

child custody and visitation matters, David and Elizabeth agreed to mediate

the issues of child support, spousal support and property division on

Saturday, February 5, 2005. After eleven hours of negotiations, the parties

reached an accord on all issues. In relevant part, the agreement called for

David to pay child support in the amount of $2200 per month, a property

settlement of $425,000 in ten annual installments, and spousal support in

an amount equal to five percent of the declining unpaid balance of the

property settlement. David also agreed to pay Elizabeth $61,300 for the

fees charged by her attorneys and expert witnesses. In a thorough letter to

counsel for the parties on February 8, the mediator detailed the terms of the

agreement and noted his understanding that counsel for the parties would

draft the documents necessary to complete the dissolution.4 Counsel for

the parties notified the district court that a settlement had been reached.

       3This ruling did not address whether the corporations were obligated to permit

Elizabeth or her counsel access to the corporate office, and did not detail in what particular
the corporations’ production of records was then incomplete.

         4The agreement also (1) required David to provide health insurance for the children,

(2) allocated one parcel of Des Moines residential property to each party, (3) awarded to
                                             6
       On February 9, 2005, David’s counsel faxed a proposed decree and

supporting child support worksheets to Elizabeth’s counsel.                     Elizabeth

withheld her approval of the proposed decree, contending it constituted an

admission by David that his earnings were more substantial than he

claimed before and during the mediation session.5 David filed a motion

requesting enforcement of the agreement reached with the assistance of the

mediator. Elizabeth opposed enforcement of the agreement, claiming it was

induced by David’s misrepresentation of his actual income. The district

court held the agreement was not enforceable because David’s failure “to

disclose his actual income to [Elizabeth] before and during the mediation

constituted a misrepresentation of fact” that “placed [Elizabeth] at a

substantial disadvantage in the mediation” and impeded the court’s

evaluation of whether the settlement agreement was fair under the

circumstances.

       This court denied David’s application for interlocutory appeal and the

matter proceeded to trial. The district court adopted with minor exceptions,

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David his one-third ownership interest in a parcel of commercial real estate located near
Kansas City, but promised to Elizabeth payment of fifty percent of the net proceeds from
any future sale, (4) allocated a 1998 Pontiac Transport Van to Elizabeth and a 1977 Ford
pickup to David, (5) set aside to Elizabeth an Edward Jones mutual fund account valued at
$14,998, (6) divided equally between the parties three retirement accounts with a total
value of $41,428, and (7) awarded to David his minority interest in the five Brass Armadillo
corporations.

       5David   claimed before and during the mediation that his actual income was
$72,800, the amount of his W-2 earnings disclosed in the parties’ 2003 tax return.
Although the parties’ tax returns for the years 2000 through 2003 consistently showed
“flow-through” distributions of income or loss from the Brass Armadillo corporations to
David as fully detailed below, he claimed he did not actually receive payment for such
distributions in 2003 or 2004. The child support worksheets prepared by David’s counsel
and presented to Elizabeth’s counsel after the mediation, however, assumed David’s income
was $200,000 per year and Elizabeth’s income was $42,000 per year. In the cover letter
transmitted with the proposed decree and worksheets, David’s counsel explained he made
the income numbers inserted in the worksheets “jive” with the amount of child support the
parties agreed upon during the mediation.
                                       7
the proposed findings of fact, conclusions of law and decree submitted by

Elizabeth’s counsel. David was ordered in relevant part to pay $3000 per

month for child support, $1000 per month for thirty-six months for spousal

support, $250,000 per year for four years as a property division, and

$207,783.05 to reimburse Elizabeth for attorney fees and expert witness

fees.   David appealed, assigning as error the district court’s failure to

enforce the mediation agreement, and, in the alternative asserting the

financial obligations imposed under the decree are inequitable and
oppressive. The court of appeals affirmed the dissolution of the parties’

marriage, reversed the district court’s refusal to enforce the settlement

agreement, and remanded to the district court for entry of an order

consistent with that agreement. We granted Elizabeth’s application for

further review.

        II.    Scope of Review.

        Our review of dissolution-of-marriage cases is de novo. In re Marriage

of Jones, 653 N.W.2d 589, 592 (Iowa 2002). We adjudicate anew the issues

properly preserved by the parties. Id. We are not bound by the trial court’s

findings of fact, but we give them weight especially when considering the
credibility of witnesses. Iowa R. App. P. 6.14(6)(g).

        III.   Discussion.

        We begin our analysis with a review of the applicable legal principles.

This court has recognized the validity of agreements resolving issues in

domestic relations cases. In re Marriage of Ask, 551 N.W.2d 643, 645–46

(Iowa 1996). “A stipulation and settlement in a dissolution proceeding is a

contract between the parties.” Jones, 653 N.W.2d at 593. A party to such

an agreement “is not entitled as a matter of right” to rescind such a

stipulation. Ask, 551 N.W.2d at 646. Settlement stipulations are entitled

“ ‘to all of the sanctity of an ordinary contract if supported by legal
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consideration.’ ” Id. (citations omitted). The court does, however, retain the

power to reject the parties’ stipulation if it is unfair or contrary to law. Id.
      At the outset, we note Elizabeth did not deny in the district court that
the parties reached agreement on all disputed issues during the mediation
conference. She opposed enforcement of the agreement in the district court
solely on the ground David misrepresented his actual income before and
during the mediation and thereby fraudulently induced her to reach a
settlement. The claimed misrepresentation was clearly established, she
asserts, by contrasting the amount of actual income claimed by David
against the documents drafted by David’s attorney following the mediation
conference.     As we have noted, David claimed before and during the
mediation his actual income was only $72,800, but the child support
worksheets prepared by David’s attorney in support of the proposed
dissolution decree assumed David’s income was $200,000. Upon our de
novo review of the record, we conclude the district court erred in finding
David misrepresented his actual earnings before and during the mediation
and fraudulently induced Elizabeth to enter the mediation agreement.
      We now turn to a review of the financial information known to
Elizabeth prior to the mediation conference on February 5, 2005. She and
her attorney were in possession of the parties’ tax returns for the years
2000 through 2003. Each of those returns disclosed David’s W-2 income
and, on Schedule E, reported supplemental “flow-through” income or loss
based in part on distributions from the Brass Armadillo Subchapter S
corporations:
      Year                W-2 earnings               Flow-through income
      2000                   $66,800                       $ 24,298
      2001                   $66,800                      ($ 8,795)
      2002                   $66,093                       $ 67,723
      2003                   $72,800                       $134,861
                                       9
The parties’ 2004 tax return was not prepared before the mediation

conference because the parties had sought an extension to file it after the

corporations’ tax returns were prepared. Consistent with their historical

pattern, the corporations’ returns for the 2004 tax year were not prepared

until September of 2005.

      Elizabeth’s assertion, and the district court’s finding, that David

misrepresented his actual income are not supported by the evidence.

Although the parties’ 2003 joint income tax return reported total taxable
income in excess of $200,000 from David’s W-2 earnings and from the

“flow-through”    distributions   reported    by   the   corporations,   David

consistently maintained he did not actually receive payment of the

$134,861 distribution reported on Schedule E of the parties’ tax return for

that year.6 We find no evidence—other than the child support worksheets

prepared by David’s counsel after the mediation to support the amount of

child support agreed to by the parties—tending to prove that distribution

was actually paid to David by the corporations in 2003.             Under the

circumstances presented here, we find completely unpersuasive Elizabeth’s

claim of shock and surprise after viewing the child support worksheets
attributing to David income of $200,000.           As David’s counsel’s post-

mediation cover letter of February 9, 2005 clearly communicated, the

worksheets assumed David had annual income of $200,000 in order to

make the numbers “jive” and support a child support award of $2200 per

month. We find no misrepresentation occurred because David’s actual

income was in fact what he had represented it to be, $72,800 per year.

      We also reject the district court’s finding that the settlement

agreement reached by the parties in the mediation conference should not be

       6David also consistently maintained he did not receive a payment from the

corporations during 2004.
                                          10
enforced because Elizabeth and her counsel were disadvantaged by the

recalcitrance of David and the corporations in their responses to discovery

requests. In addition to the parties’ tax returns produced by David long

before the mediation occurred, Elizabeth, her counsel, and her experts were

also in possession of the voluminous accounting records produced by the

Brass Armadillo corporations on January 21. Although these records were

produced by the corporations only after litigation was commenced against

them and the court entered several orders mandating their production,
Elizabeth, her counsel, and her valuation experts did have access to the

records approximately two weeks prior to the mediation conference.7 We

find that although David and the corporations may be justly criticized for

their recalcitrant approach to discovery matters, Elizabeth was in

possession of the relevant financial information sufficiently in advance of

the mediation conference to engage in meaningful negotiations during the

mediation conference that lasted eleven hours.

       A stipulation will be enforced if it constitutes an appropriate and

legally approved method of disposing of the contested issues. See Jones,

653 N.W.2d at 593–94. As we have noted, the decree ultimately entered by
the district court on October 27, 2005 was significantly more favorable to

Elizabeth than the terms of the mediation agreement. This fact is not

controlling, however, in our determination of the validity of the settlement

agreement. The validity of the solutions reached in the parties’ settlement

agreement need not be those the court itself would have adopted if it were

adjudicating the controversy. Ask, 551 N.W.2d at 646.

       7Elizabeth continued to claim David and the corporations had failed to produce all
of their records until the trial began on September 13, 2005. We find it significant,
however, that the experts who opined at trial as to the value of David’s interests in the
Brass Armadillo corporations relied on the accounting records produced by David and the
corporations on January 21, 2005, more than two weeks before the mediation conference.
                                         11
       We find the terms of the settlement agreement were in all respects

within the range of the evidence presented in the record. An equitable

division of the parties’ assets depends primarily on the hotly contested value

of two assets: David’s minority shareholder interest in the Brass Armadillo

corporations and his interest in FLD Land Company which owns a parcel of

commercial real estate near Kansas City.             Although Elizabeth’s expert

valued David’s interest in the Brass Armadillo corporations at $1,740,000,

David’s expert valued it at only $478,000. And while Elizabeth’s expert
valued David’s interest in the commercial real estate at $433,000, David’s

expert placed a value of only $63,350 on that asset. Although the values

placed on these key assets by the district court after trial were the higher

values allocated to them by Elizabeth’s experts, credible and compelling

countervailing evidence from David’s highly qualified experts supported the

much lower valuations.

       Upon our de novo review of the record, we find the settlement reached

in the mediation conference constitutes an appropriate and legally approved

method of disposing of the contested issues in the dissolution action. Given

David’s actual income of $72,800 per year at the time of the mediation and
the range of the evidence as to the value of the two key assets owned by the

parties, David’s agreement to pay Elizabeth the sum of $425,000 over ten

years as a property settlement, spousal support calculated at five percent

per annum of the declining unpaid balance of the property settlement, and

child support of $2200 per month constituted a fair resolution of the

dispute.8 Accordingly, we vacate the decision of the court of appeals. We

       8The parties did not agree in their mediated settlement that David had income of
$200,000 per year. The parties’ mediation agreement that David shall pay $2200 per
month as child support is based on his actual annual income of $72,800. Although this
child support obligation agreed upon by the parties is higher than the child support
guidelines would require given the parties’ incomes, we find an upward adjustment is
                                          12
affirm the dissolution decree as modified and remand to the district court

for entry of a decree consistent with the terms of the settlement reached by

the parties.

       DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT

JUDGMENT AFFIRMED AS MODIFIED, AND CASE REMANDED.

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

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“necessary to provide for the needs of the children and to do justice between the parties
under the special circumstances of this case.” Iowa Ct. R. 9.4.