In Re the Marriage of Tamara D. Veit and Gregory H. Veit Upon the Petition of Tamara D. Veit , 797 N.W.2d 562 ( 2011 )

IN THE SUPREME COURT OF IOWA
No. 09–1312
Filed March 18, 2011
IN RE THE MARRIAGE OF TAMARA D. VEIT
AND GREGORY H. VEIT
Upon the Petition of
TAMARA D. VEIT,
Appellee,
And Concerning,
GREGORY H. VEIT,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Adair County, Gregory A.
Hulse, Judge.
On further review, petitioner contends court of appeals erred in
reversing the district court’s order requiring respondent to fulfill terms of
dissolution decree. DECISION OF THE COURT OF APPEALS
VACATED; DISTRICT COURT DECISION AFFIRMED.
Rodney H. Powell of The Powell Law Firm, P.C., Norwalk, for
appellant.
Willard W. Olesen of Olesen Law Firm, PLC, Greenfield, for
appellee.
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HECHT, Justice.
On further review, we are asked to determine whether a Qualified
Domestic Relations Order (QDRO) fulfilled the terms of a property
division prescribed in a dissolution decree. Because we conclude the
QDRO did not fulfill the terms of the decree, we vacate the court of
appeals’ decision and affirm the district court.
I. Background Facts and Proceedings.
Tamara Veit filed a petition for the dissolution of her marriage to
Gregory Veit. On the day of trial, February 15, 2008, the parties reached
an agreement resolving all pending issues in their dissolution, including
the division of property. A stipulation detailing the agreement provided
“[a] monetary property settlement has been reached wherein [Gregory]
shall pay [Tamara] the amount of $127,000.00 for her rights to any of the
marital property not specifically set out by this Stipulation.” The court
approved the stipulation and incorporated it in the dissolution decree,
requiring Gregory to make the property settlement payment within sixty
days of the entry of the decree. Neither party appealed.
About a month after the decree was entered, Gregory’s attorney
contacted Tamara’s attorney and offered to pay the $127,000 property
division with funds from Gregory’s Cemen Tech employee stock
ownership account.1 The attorneys discussed the possibility of tax
consequences attendant to this solution. Gregory’s attorney assured
Tamara’s attorney there would be no tax consequences. Gregory’s
1Gregory had an ownership interest in two retirement accounts at the time of the
dissolution. One of the accounts was derived from Gregory’s employment with
Firestone and the other from his employment with Cemen Tech. The decree allocated to
Tamara fifty percent of the Firestone account, but the Cemen Tech account was not
mentioned in the decree.
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attorney drafted a QDRO which Tamara’s attorney signed on her behalf.
The QDRO provided, in pertinent part,
WHEREAS, the Decree awards the amount of
$127,000 to [Tamara] to be paid by [Gregory]; and
WHEREAS, the parties have agreed that the
$127,000.00 award to [Tamara] shall be paid through a
Qualified Domestic Relations Order (QDRO) from [Gregory’s]
vested interest in Cemen Tech, Inc., Employee Stock
Ownership Plan;
....
NOW, THEREFORE, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED as follows:
....
4. [Tamara] shall be and is hereby awarded one hundred
twenty-seven thousand dollars ($127,000) of
[Gregory’s] vested interest in [Gregory’s] account,
however, the same may not be increased by earnings
nor decreased by losses from this date until
distribution is made by the Plan.
....
7. [Tamara] shall be fully responsible for any and all tax
consequences resulting from the award and payment
of Plan benefits to [Tamara].
The QDRO was approved by the court on March 17, 2008. When
Tamara tried to withdraw the funds from the plan, however, she
discovered that a tax in excess of $27,000 would be imposed. Upon
advice of counsel, she did not withdraw the money and instead filed a
motion to set aside or modify the QDRO or in the alternative to enforce
the dissolution decree. She argued the parties had been mutually
mistaken as to the tax consequences of the withdrawal. Gregory resisted
the motion. Although the parties stipulated that the attorneys had been
mistaken about the tax consequences of the withdrawal of funds from
the Cemen Tech account, Gregory maintained the QDRO was a property
settlement that could not be modified. Gregory relied in part upon an
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email message he sent to his attorney during the dissolution negotiations
indicating his awareness of potential tax consequences of a withdrawal
from the Cemen Tech account. The email message indicates Gregory had
completed a property settlement worksheet at the request of his attorney,
proposing values for various items of property and suggesting how the
assets and liabilities should be divided. Gregory’s message included the
following reference to his Cemen Tech account: “if she is going to take
half early she can also pay the taxes and penalties.”
The district court concluded the disposition proposed in the QDRO
did not fulfill Gregory’s obligation to Tamara under the divorce decree.
The court ordered Gregory to perform the obligation within sixty days,
leaving it to Gregory’s discretion whether to reform the QDRO and pay
the full amount due to Tamara from the Cemen Tech account or to utilize
other assets of Gregory’s choice.
Gregory appealed, and the court of appeals reversed the district
court, concluding Tamara had not proved a mutual mistake in the
formation of the QDRO and had borne the risk of mistake by agreeing, in
the QDRO, to be responsible for any tax consequences. We granted
Tamara’s application for further review.
II. Scope of Review.
Our review of dissolution cases is de novo. In re Marriage of
Brown, 776 N.W.2d 644, 647 (Iowa 2009).
III. Discussion.
Tamara urges on further review that the district court correctly
determined the QDRO did not fulfill Gregory’s obligation under the
decree. Gregory, however, contends the parties entered into an oral
agreement that the QDRO would satisfy his obligation under the decree,
and the court of appeals correctly determined that under the terms of the
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oral agreement, as evidenced by the QDRO, Tamara assumed the risk of
any tax burden.
Although Gregory argued to the district court and on appeal that
the QDRO was a property settlement not subject to modification, he has
abandoned that claim in the wake of our decision in In re Marriage of
Brown, filed shortly after the district court issued its ruling on Tamara’s
motion to modify the QDRO. The parties now agree the QDRO is not
itself a property settlement, but is merely a method of effectuating the
property division contained in a dissolution decree and may be modified
later without affecting the finality of the underlying decree. Brown, 776
N.W.2d at 648–49.
The decree provided Gregory “shall pay [Tamara] the amount of
$127,000 for her rights to any property not specifically set out by this
Stipulation.” Neither party appealed the decree, and the property
division contained therein is not subject to modification. Iowa Code
§ 598.21(7) (2007). Notably, the decree does not specify a source of the
funds for the payment to Tamara. The clear implication of this provision
is that if any tax consequences were incurred as Gregory liquidated
assets to obtain the funds to make the payment to Tamara, Gregory
would bear them. See In re Marriage of Goodman, 690 N.W.2d 279, 283
(Iowa 2004) (in construing a dissolution decree “ ‘[e]ffect is to be given to
that which is clearly implied as well as to that which is clearly
expressed’ ” (quoting In re Roberts’ Estate, 257 Iowa 1, 6, 131 N.W.2d
458, 461 (1964))). Under the decree, Tamara is entitled to $127,000—
nothing more, nothing less.
Gregory, however, does not seek to modify the terms of the decree
directly. Instead, he asserts the parties reached an oral agreement that
the payment from his Cemen Tech account would fulfill his obligation
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under the decree—specifically that Tamara agreed to accept less than she
was entitled to by accepting the risk of any tax consequences of a
withdrawal from the stock ownership plan. The party seeking to
establish the existence of a contract, oral or otherwise, bears the burden
of proving the existence of a contract. Anderson v. Douglas & Lomason
Co., 540 N.W.2d 277, 283 (Iowa 1995). Our review of the record
indicates Gregory has not sustained his burden. At the hearing on
Tamara’s motion to modify or set aside the QDRO, the parties stipulated
as to their understanding at the time the QDRO was formed. The
stipulation established that prior to the formation of the QDRO,
Gregory’s attorney represented to Tamara’s attorney there would be no
tax consequences to either party if Tamara were to withdraw $127,000
from the Cemen Tech account, and Tamara’s attorney believed this
representation was true.
Gregory argues his email message to his attorney, dated a month
before the property settlement was entered and two months before the
parties first discussed the QDRO, demonstrates he personally knew there
would be tax consequences and he expected Tamara to bear them if she
took money out of the Cemen Tech account. This argument fails,
however, because the parties’ stipulation binds Gregory to the contrary
understanding that Tamara would suffer no adverse tax consequence if
the Cemen Tech account were used to fund Tamara’s share of the
property under the dissolution decree. Bales v. Murray, 186 Iowa 649,
651, 171 N.W. 747, 748 (1919).
Gregory contends the language of the QDRO itself is evidence that
Tamara agreed to accept less than that to which she was entitled under
the decree because the QDRO states that Tamara would be responsible
for any tax consequences. Again, however, the stipulation established
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that the parties shared a mutual understanding there would be no tax
consequences upon the withdrawal from the Cemen Tech account.
Accordingly, we conclude the language of the QDRO does not establish
that Tamara agreed to accept less than the $127,000 that was due her
under the property settlement.
As the allocation contemplated in the QDRO does not fulfill
Gregory’s obligation under the decree, the district court correctly granted
Tamara’s motion and allowed Gregory to determine how to pay the full
amount due to Tamara, either by reforming the QDRO or by utilizing
other assets. Accordingly, we vacate the opinion of the court of appeals
and affirm the district court’s decision enforcing the dissolution decree.
DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT DECISION AFFIRMED.