In Re the Marriage of Cathy J. Klemme and Thomas W. Klemme Upon the Petition of Cathy J. Klemme, and Concerning Thomas W. Klemme

• Court: Court of Appeals of Iowa
• Decided: October 15, 2014
• Docket: 14-0087
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 14-0087 Filed October 15, 2014

IN RE THE MARRIAGE OF CATHY J. KLEMME AND THOMAS W. KLEMME

Upon the Petition of CATHY J. KLEMME, Petitioner-Appellee,

And Concerning THOMAS W. KLEMME, Respondent-Appellant. ________________________________________________________________

Appeal from the Iowa District Court for Scott County, Mark D. Cleve,

Judge.

Thomas Klemme appeals from the economic provisions of the decree

dissolving his marriage to Cathy Klemme. AFFIRMED AS MODIFIED.

Lauren M. Phelps, Davenport, for appellant.

John R. Newman, Davenport, for appellee.

Considered by Doyle, P.J., McDonald, J., and Sackett, S.J.*

*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2013). 2

SACKETT, S.J.

Thomas Klemme appeals from the economic provisions of the decree

dissolving his marriage to Cathy Klemme. He contends the property distribution

is inequitable. He also contends Cathy is not entitled to an award of spousal

support. If spousal support is awarded, Thomas argues it should be for a smaller

amount and a shorter duration.

I. Background Facts and Proceedings.

Thomas and Cathy were married in 1977. During the marriage, Thomas

obtained his commercial driver’s license, which he still maintains, though he has

never relied on it for his primary income. For approximately thirteen years,

Thomas worked as a supervisor for Bowater and earned about $38,000 per year.

Cathy earned a cosmetology degree, but her cosmetology license has expired.

Cathy testified that she would need approximately 1500 hours of continuing

education to become licensed in Iowa.

In 1989, Cathy was injured in an automobile accident that prevents her

from lifting her arms for long period of times. The parties agree she is

permanently disabled as a result. In 1991, Cathy and Thomas entered a

settlement agreement regarding all potential personal-injury claims stemming

from the accident whereby they received $111,563.78. The settlement

agreement does not allocate the proceeds to particular categories of damages

that may have been claimed.

With the proceeds from the settlement, the parties purchased a home in

Davenport for $58,000. The settlement proceeds also helped defray living 3

expenses. Then in 1994, Thomas began a motorcycle repair business. The

couple made a $25,000 down payment on a building for the business. Cathy

began working full-time for the business in 1996, doing ordering, pricing,

inventory, and banking. Neither party received a salary from the business,

though as the only shareholder, Thomas received corporate distributions. He

also supplemented that income with money earned from racing motorcycles and

commercial driving. Cathy supplemented their income with part-time work as

well, working approximately six hours per week from 2001 to 2012. For the years

2010 through 2012, the parties reported income of between $6000 and $8600

from the business. Thomas cashed in a 401(k) in the amount of $25,586.86 in

December 2012 to pay income taxes and insurance, as well as some of Cathy’s

expenses.

Cathy filed a petition to dissolve the marriage in January 2013. The

parties stipulated to the sale of all marital assets aside from clothing, personal

property, and one vehicle each. Trial was held in December 2013. The court

was to determine the value of the parties’ property, how the property was to be

distributed, whether Cathy should receive a credit for her personal injury

settlement, and whether Cathy should be awarded spousal support and in what

amount.

The district court entered its decree dissolving the parties’ marriage on

December 17, 2013. Although both parties were unemployed at the time, the

court found Thomas was capable of earning $50,000 per year as a commercial

driver, whereas that Cathy was only able to make minimum wage. Because of 4

the disparity in potential earnings, the court ordered Thomas to pay Cathy $650

per month in spousal support for a period of ten years.

The court valued the parties’ assets and divided them equally between the

parties. For instance, the court awarded Thomas a Wells Fargo account valued

at $1000 and ordered him to pay Cathy $500 to equalize the distribution. It

awarded Cathy a First Midwest Bank account valued at $308 and ordered her to

pay Thomas $154 to equalize the distribution. This equal distribution was made

for all assets save two. With regard to the marital home, the court ordered that

the first $58,000 received from its sale be distributed to Cathy “to reimburse her

for the settlement proceeds used in the purchase of the home,” and ordered the

remaining proceeds be divided between the parties. Likewise, it ordered that the

first $25,000 in proceeds from the sale of the business building be distributed to

Cathy “to reimburse her for her personal injury settlement proceeds used as a

down payment on the building,” with the remaining proceeds divided equally.

II. Scope of Review.

We review dissolution of marriage cases de novo. In re Marriage of

McDermott, 827 N.W.2d 671, 676 (Iowa 2013). We review the entire record and

adjudicate rights anew. Id. We give deference to the district court’s findings,

especially those concerning witness credibility, but are not bound by them. Id.

III. Analysis.

Thomas appeals the property distribution and spousal support provisions

of the decree. Specifically, he contends the court erred in setting aside $83,000

to reimburse Cathy for the proceeds from her personal-injury settlement that 5

were used to purchase the marital home and make a down payment on the

business property. He also contends Cathy should not receive spousal support,

or that the amount paid and duration of support should be reduced. We consider

the property division and spousal support provisions together to determine their

sufficiency. In re Marriage of Hazen, 778 N.W.2d 55, 59 (Iowa 2009).

Iowa Code section 598.21 sets forth the criteria for property distribution. It

states that the court shall equitably divide “all property, except inherited property

or gifts received or expected by one party.” Iowa Code § 598.21(5) (emphasis

added). With regard to gifted or inherited property, it states:

Property inherited by either party or gifts received by either party prior to or during the course of the marriage is the property of that party and is not subject to a property division under this section except upon a finding that refusal to divide the property is inequitable to the other party or to the children of the marriage.

Id. § 598.21(6). In other words, the only property that is not subject to division is

property that is inherited or gifted exclusively to one party before or during the

marriage. However, even that property is divisible if failing to include it in the

property distribution would be inequitable. The legislature did not explicitly

exclude personal-injury settlements from property division.

Our supreme court has analyzed the omission of proceeds from personal-

injury settlements from the list of items expressly excluded from property

distribution in section 598.21 and determined such proceeds are marital assets.

In re Marriage of McNerney, 417 N.W.2d 205, 207-08 (Iowa 1987). It held

settlement proceeds “do not automatically belong to either party”; rather, the

court must determine whether to divide the property on a case-by-case basis. Id. 6

The McNerney court found it was equitable to award the wife $13,112 of

the $54,954 in settlement proceeds and interest from the husband’s personal

injury settlement. Id. at 206-07. As in the case before us, both the husband and

wife were party to the settlement agreement, which did not set forth the

categories of damages being compensated. Id. at 208. However, the husband

in McNerney was injured eight years into a thirteen-year marriage, id. at 206,

whereas Cathy was injured twelve years into a thirty-six year marriage. While

the McNerneys invested their settlement proceeds in a certificate of deposit that

remained untouched during the marriage, id., the Klemmes’s settlement

proceeds were spent on property and other expenses to benefit the marriage and

were depleted before the marriage’s end.

Under the facts of this case, it is inequitable to set aside $83,000 from the

property settlement to “reimburse” Cathy for the use of the proceeds of her

personal injury settlement. According to Cathy’s own estimates, the anticipated

proceeds from the sale of that real estate after costs would be $150,000 to

$189,000. Setting aside the $83,000 for Cathy results in a distribution of

between $116,500 and $136,000 to Cathy and between $33,500 and $53,000 to

Thomas. While an equal distribution is not required, an equitable distribution is.

Hazen, 778 N.W.2d at 59. Considering the factors set forth in Iowa Code section

598.21(5)—especially the length of the marriage, the more than twenty years that

passed between the receipt of the settlement proceeds and the divorce, and the

manner in which the proceeds were spent—we find an equal distribution of the

property is equitable. Accordingly, we modify the property distribution to 7

eliminate the provisions requiring the first $58,000 of the proceeds from the sale

of the home and the first $25,000 from the sale of the building be awarded to

Cathy, and instead order an equal division of all the proceeds from those sales.

We then turn to the spousal support provisions of the decree. Although

our review is de novo, we afford the trial court considerable latitude in

determining spousal support awards. In re Marriage of Schenkelberg, 824

N.W.2d 481, 486 (Iowa 2012). We only disturb such an award where there has

been a failure to do equity. Id.

Alimony and property distribution are distinguishable and have different

purposes in marriage dissolution proceedings. McNerny, 417 N.W.2d at 209.

It is anticipated that spousal support will be paid from future income whereas property distributions are designed to sort out property interests acquired in the past. A property division divides the property at hand and is not modifiable while a spousal support award is made in contemplation of the parties’ future earnings and is modifiable. [A spouse]’s future income can change or disappear and his alimony obligation can decrease or be eliminated. Furthermore, spousal support has different income tax implications than a property settlement. It is true that some distinctions between property division and alimony have become blurred with the growth of equitable distribution principles. However, disregarding the differences between property division and alimony when determining the economic provisions of a divorce decree may cause an inequitable result.

Hazen, 778 N.W.2d at 89-90 (citations and footnote omitted). Therefore,

property division and spousal supports awards are closely related in determining

the amount to be awarded of either. McNerny, 417 N.W.2d at 209. “The

question is whether the property division and alimony taken together are

equitable to both parties.” Id. 8

Spousal support is not an absolute right, and whether such an award is

justified depends on the facts of each case. Hazen, 778 N.W.2d at 61. The

criteria for awarding spousal support is set forth in Iowa Code section 598.21A.

In addition to the property distribution, we are to consider the length of the

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

other factors relevant to an individual case. Iowa Code § 598.21A(1)(a)-(c), (e),

(j).

Thomas contends Cathy should not receive any spousal support. In the

alternative, he contends the spousal support award should be substantially lower

and shorter in duration. He also notes the court failed to specify the type of

spousal support it was awarding.

At the time of dissolution, neither party was employed. Consequently, the

court used the parties’ earning capacity to determine whether an award of

spousal support was appropriate. Cathy’s ability to find employment is limited by

her education and the physical disability caused by her personal injury. As a

result, the district court found she is limited to minimum wage positions. Thomas

disputes this finding, arguing that Cathy earned around $13.30 per hour from

2001 until 2012, while working part-time as a bookkeeper for Malik’s Super

Sweep. The evidence that Cathy earned more than minimum wage in a position

she worked for six hours per week does not support a finding that she could find

full-time employment at this rate. We agree the evidence shows Cathy is

capable of earning minimum wage in a full-time position, and therefore has an

earning capacity of approximately $15,000 per year. 9

The district court found Thomas had an earning capacity of $50,000 per

year. We agree with Thomas that this figure is too high. The evidence shows

that Thomas has never worked full-time as a commercial driver. Thomas

testified his nephew earns $50,000 per year driving, but he owns his own semi-

truck. While the parties bought a semi-truck at one point, they sold it because

they were losing money. Thomas has taken driving jobs to supplement the

parties’ income, and he testified he earned approximately $400 per two-day trip.

If calculated as $200 per day1 and assuming a five-day workweek, Thomas

would be capable of earning $50,000 per year as determined by the district court.

However, Thomas testified he has never been offered full-time employment at

that rate. There is evidence that Thomas was offered $700 per week as a driver,

which would amount to $36,400 per year. The evidence further shows that

Thomas was earning $38,000 per year as a supervisor before starting his

business in 1994. Accordingly, we find the evidence more appropriately supports

a finding Thomas’s earning capacity at present is $38,000 per year. 2 Given the

disparity between the parties’ earning capacities, we find an award of spousal

support is justified. See In re Marriage of Hettinga, 574 N.W.2d 920, 922 (Iowa

1 This figure does not take into account Federal Motor Carrier Safety Administration rules regarding daily-driving limit. See generally 49 C.F.R. § 395.3 (2013). There is no evidence to support a finding this type of employment is either available to Thomas or feasible. 2 If Thomas earns more than $38,000 per year, Cathy can bring a modification action to increase the amount of spousal support she receives. See Iowa Code § 598.21C(1)(a) (listing “[c]hanges in the employment, earning capacity, income, or resources of a party” as a factor to be considered in modifying spousal support); In re Marriage of Sisson, 843 N.W.2d 866, 870-71 (Iowa 2014) (noting that in order to support a modification in spousal support, the changed circumstances must not have been within the contemplation of the court at the time of the decree). 10

Ct. App. 1997) (“Following a marriage of long duration, we have affirmed awards

of both alimony and substantially equal property distribution, especially where the

disparity in earning capacity has been great.”).

We must then consider what type of spousal support is appropriate, and

the amount and duration of spousal support to be paid. There are three types of

spousal support—traditional, rehabilitative, and reimbursement—and the purpose

of each is different. See In re Marriage of Becker, 756 N.W.2d 822, 826 (Iowa

2008). Traditional spousal support is payable for life or for as long as a spouse is

incapable of self-support. Id. The goal of rehabilitative spousal support is

support an economically-dependent spouse through a limited period or re-

education and retraining, to allow the spouse to become self-supporting. Id.

Finally, reimbursement spousal support is awarded to compensate a spouse for

contributions to the other spouse’s earning capacity. Id.

We find an award of traditional support is appropriate given the parties’

thirty-six-year marriage. Considering Cathy’s age, education, and disability, it is

unlikely she will be able to become self-supporting. The property distribution will

leave Cathy with between approximately $75,000 and $94,500. We find an

appropriate award of spousal support to be $300 per month until Catchy reaches

the age of sixty-five, remarries, or cohabitates with a non-related male. The

spousal support provision of the decree is modified accordingly.

We decline to award attorney fees on appeal. Costs of the appeal are

split equally between the parties.

AFFIRMED AS MODIFIED.