CourtListener 2750852

IN THE COURT OF APPEALS OF IOWA

No. 13-2066
Filed November 13, 2014

IN RE THE MARRIAGE OF LORI LYNN HATCH
AND TIMOTHY LOREN HATCH

Upon the Petition of
LORI LYNN HATCH, n/k/a LORI LYNN SCHWEER,
Petitioner-Appellee/Cross-Appellant,

And Concerning
TIMOTHY LOREN HATCH,
Respondent-Appellant/Cross-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Bremer County, Paul W. Riffle,

Judge.

Tim Hatch appeals and Lori Hatch (now Lori Schweer) cross-appeals from

the district court’s decree of dissolution of their marriage. AFFIRMED AS

MODIFIED.

Kevin D. Engels of Correll, Sheerer, Benson, Engels, Galles & Demro,

P.L.C., Cedar Falls, for appellant.

G.A. Cady III, Hampton, for appellee.

Considered by Potterfield, P.J., and Tabor and Mullins, JJ.
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POTTERFIELD, P.J.

Tim Hatch appeals and Lori Hatch (now Lori Schweer) cross-appeals from

the district court’s decree of dissolution of their marriage, claiming the economic

divisions in the decree failed to do equity between the parties.

I. Factual and Procedural Background

Tim and Lori married in 2001. They have no children together. While

together, they lived in a house Lori purchased prior to the marriage. Tim started

a trucking business during the marriage. The parties separated in February

2012. At that time, Tim was in a relationship with another woman with whom he

has fathered a child. Lori was terminated from her employment and began

attending classes at the University of Northern Iowa full time. She has taken on

student loan debt in order to enable her to do so.

Lori petitioned the district court for dissolution of the marriage on February

12, 2013. The trial court issued its decree dissolving the marriage on November

25, 2013. Both parties made post-trial motions requesting the district court to

enlarge, amend, or modify its ruling on the economic issues. Tim filed his notice

of appeal and Lori filed her notice of cross-appeal while the post-trial motions

were pending. The district court ruled on the parties’ post-trial motions on

January 30, 2014. Our supreme court granted permission to move forward as an

interlocutory appeal in a July 24, 2014 order and transferred the case to our

court.

II. Standard of Review

A dissolution action is a case of equity, and we therefore review de novo.

Iowa R. App. P. 6.907. “We give weight to the findings of the district court,
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particularly concerning the credibility of witnesses; however, those findings are

not binding upon us.” In re Marriage of McDermott, 827 N.W.2d 671, 676 (Iowa

2013).

III. Applicable Law

Iowa is an equitable distribution jurisdiction, meaning courts “equitably

divide all of the property owned by the parties at the time of divorce.” In re

Marriage of Keener, 728 N.W.2d 188, 193 (Iowa 2007); see Iowa Code § 598.21

(2013). “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). Courts determine what is equitable “in light of the particular

circumstances of the parties.” In re Marriage of Schriner, 695 N.W.2d 493, 496

(Iowa 2005). “Before dividing the marital property, a court must identify all of the

assets held in the name of either or both parties as well as the debts owed by

either or both of them.” Keener, 728 N.W.2d at 193. “The purpose of

determining the value is to assist the court in making equitable property awards

and allowances.” In re Marriage of Moffatt, 279 N.W.2d 15, 19 (Iowa 1979).

III. Discussion of Issues Raised on Appeal

A. Marital Equity in Real Estate. The trial court’s valuation of the parties’

real estate as a marital asset was limited to the value of improvements made on

the house during the course of the marriage because Lori purchased the house

prior to the marriage. Those improvements were valued at $30,000, and neither

party contests that figure.

However, Tim asserts Lori did not own the house unencumbered. He

claims the house was subject to a mortgage held by Lori’s grandmother. To
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support his claim, Tim relies on a document Lori created with a header reading

“LS Mortgage” and a series of checks with notes that read “house” or “house

loan.” Based on these documents, he claims they together paid $33,124.83

towards the mortgage on the house during the course of the marriage. When

added to the value of the improvements on the house, Tim asserts a marital

value of $63,124.83 in the home.

Lori testified the “LS Mortgage” document she prepared was a record of

money owed on loans for trailers for Tim’s trucking business. She explained she

possessed only a layman’s understanding of finance terminology and her use of

the term “mortgage” on the document was not meant to denote an interest in real

estate. She testified and the district court found she wrote the checks to pay a

loan to her parents borrowed to purchase a trailer used for Tim’s business. Lori

notes there is no documentation the house was purchased subject to a mortgage

and no mortgage on the house was recorded.

This issue is a matter of credibility. Tim asserts the house was subject to

a mortgage while Lori asserts it was not. There is no definitive evidence in the

record that answers the question. Though the district court’s findings are not

binding on this court, we nevertheless give its findings particular weight when it

comes to the credibility of witnesses. See McDermott, 827 N.W.2d at 676. The

district court found “the real estate was unencumbered at the time of the parties’

marriage” and stated, “Lori was keeping the books for the business and the Court

gives greater weight to her testimony.” We find nothing in the record that

contradicts the district court’s credibility determination. We affirm the district

court’s valuation of the marital portion of the house as $30,000 in improvements.
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B. Marital Equity in Tim’s Truck. Tim purchased a truck that was

encumbered by a $19,035 loan at the time of purchase. The court awarded the

truck to Tim. The value of the truck ($47,000) less the encumbrance left Tim with

$27,965 in equity. At the time of dissolution proceedings, the encumbrance had

ballooned to $35,990.38. Tim believes the truck is therefore worth less than the

value ascribed to it by the trial court.

Lori notes Tim has not explained why he presently owes more on the truck

than he did at the time of purchase. Tim responds that he does not need to

provide an explanation because Lori did not contest the amount owed. He

asserts that the law requires a categorical reliance on the “value established at

the time of trial” rather than “the value asserted at the time of separation.” See

Locke v. Locke, 246 N.W.2d 246, 252 (Iowa 1976) (“[T]he date of trial is the only

reasonable time at which an assessment of the parties’ net worth should be

undertaken.”).

However, the district court did not rely on the encumbrance on the truck at

the time of separation. Instead it calculated the value of the truck by considering

the additional debt incurred as dissipation of assets, which is “a proper

consideration when dividing property.” See In re Marriage of Fennelly, 737

N.W.2d 97, 104 (Iowa 2007). “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.” Id.

We agree with the district court that the unexplained increase in debt is a

dissipation of assets because Tim has asserted no “alleged purpose” for the
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additional encumbrance on the vehicle. We affirm the district court’s valuation of

the truck.

C. Student Loan Debt as Marital Debt. Lori accumulated $42,584 in

student loan debt and $8968 in debt to her parents to support her during her

schooling. The district court assigned all of that debt as marital debt, significantly

affecting the court’s calculation of the parties’ net assets. Tim asserts and Lori

does not deny the debts were undertaken unilaterally by Lori after the two had

separated. Tim therefore claims all the debt should be considered Lori’s

personal debt rather than marital debt. Lori responds the debt should be

considered marital because Tim would nevertheless have been responsible for

paying Lori for temporary support—accounting for “half” of the debt according to

Lori. The other half of the debt, Lori asserts, was beneficial to Tim because it will

allow Lori to provide for herself in the future because her education will increase

her employability.

Lori generally referred to Tim’s obligation to provide her with support

during the pendency of the dissolution proceedings in her resistance to Tim’s

post-trial motion, but the district court did not rule on this argument. “[I]ssues

must ordinarily be both raised and decided by the district court before we will

decide them on appeal.” Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002).

Even if Lori’s claim were within the scope of this appeal, she may not

prospectively and unilaterally off-set theoretical future temporary support from

Tim by borrowing money for her continuing education.

Tim cites several of this court’s cases as examples of circumstances in

which student loan debts or other personal debts should be excluded from the
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marital estate, particularly during a period of separation. See In re Marriage of

Johnson, 499 N.W.2d 326, 328 (Iowa Ct. App. 1993) (excluding personal debts);

In re Marriage of Smith, 351 N.W.2d 541, 543 (Iowa Ct. App. 1984) (holding

family debts incurred after separation are individual debts);1 see also In re

Marriage of Fiedler, No. 10-0271, 2011 WL 227647, at *5 (Iowa Ct. App. 2011)

(holding student loans obtained prior to marriage are outside the marital estate);

In re Marriage of Nutting, No. 99-1381, 2000 WL 766254, at *4 (Iowa Ct. App.

2000) (upholding district court order requiring spouse to assume her own student

loans in their entirety); cf. In re Marriage of Deol, No. 09-0909, 2010 WL

2925147, at *2–3 (Iowa Ct. App. 2010) (holding student loan debt is a shared

marital liability when accrued during the marriage relationship, used for family

expenses, and incurred with the approval of the non-borrowing spouse).

There is no evidence before us that Lori’s education serves to benefit Tim.

Lori anticipates her yearly wages will not increase over her last full-time position

as a result of her education, so it will not lower Tim’s support obligations. We

disagree that the district court’s award of half of Lori’s student debt to Tim is fair

and equitable. We therefore modify the order by subtracting the debt—

$51,522—from the district court’s calculation of Lori’s net marital assets and

liabilities and modify the equalization payment calculations accordingly.

IV. Discussion of Issues Raised on Cross-Appeal

A. Snowmobile Debt as Marital Debt. On cross-appeal, Lori claims the

district court should not have assigned $5350 of debt owed against Tim’s

1
Lori argues the cases to which Tim cites are not “authority for the proposition[s] cited.”
We agree the cases do not establish a firm rule of law that applies in this case, but we
find their facts sufficiently analogous to guide us toward an equitable outcome.
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snowmobile as marital debt. She argues Tim had enough money at the time of

the purchase to have been able to purchase the snowmobile without borrowing.

Tim testified he had documentation that shows his parents paid the purchase

price to a lender and he now owes the debt to his parents. The district court

found his testimony credible, and we give weight to such a determination where,

as here, nothing in the record undermines it. See McDermott, 827 N.W.2d at

676. We affirm the district court’s valuation of the snowmobile debt as a marital

debt.

B. Dissipation of Assets. Lori’s second claim on cross-appeal is that Tim

dissipated assets in excess of those found by the district court. See generally

Fennelly, 737 N.W.2d at 104. The district court found that Tim dissipated assets

in various ways, “including the 2012 Ford F250 and the 2000 Peterbilt truck and

the inclusion of the four-wheeler and the $9,000 cash withdrawal.”

Lori now claims Tim dissipated an additional amount in excess of $20,000

between the parties’ separation and dissolution. Tim describes the expenditures

as costs of living and doing business during that time. Lori asserts this

explanation is not credible. The district court nevertheless found Tim’s

explanation satisfactory, and after giving the district court’s credibility

determinations proper weight, we agree. The district court found Tim dissipated

assets in multiple ways, and the court’s inclusion of those assets in its calculation

was equitable despite Lori’s belief the amount should have been higher. We

affirm the district court’s calculation of dissipated assets.

C. Attorney Fees. Lori lastly asserts the trial court should have and this

court should require Tim to pay her attorney fees. An award of attorney fees
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rests in the sound discretion of the trial court and will not be disturbed on appeal

in the absence of an abuse of discretion. In re Marriage of Romanelli, 570

N.W.2d 761, 765 (Iowa 1997).

Lori claims Tim has paid all of his own attorney fees from the marital

estate while Lori has been forced to pay her attorney fees from her student loan

proceeds. However, the record does not demonstrate with any clarity that Tim’s

attorney fees were paid from the marital estate. On the record before us, we find

the district court was within its discretion to assign each party its own attorney

fees, and we therefore affirm. In exercising our discretion to assign appellate

fees and costs, we order each party to bear its own costs of appeal and appellate

attorney fees in light of the relative success of each party on the merits of their

issues on appeal.

V. Conclusion

The district court rulings on the marital value of the real estate, truck loan,

snowmobile loan, dissipation of assets were equitable, and we affirm them. The

assignment of attorney fees and costs was within its discretion. However, we

modify the order in one respect. Lori’s student loans should not have been

considered marital debt, and the district court’s equalization payment was

miscalculated as a result. After removing those debts from the district court’s

calculations, the equalization payment owed to Lori is $86,876.50. We do not

disturb the district court’s payment plan contained in the decree.

AFFIRMED AS MODIFIED.