In Re the Marriage of Sara Rose Crandall and Jonathan Christian Crandall Upon the Petition of Sara Rose Crandall, N/K/A Sara Rose Rieger, and Concerning Jonathan Christian Crandall, Jonathan Christian Crandall v. Iowa District Court for Linn County ( 2016 )

IN THE COURT OF APPEALS OF IOWA
No. 15-1783
Filed September 14, 2016
IN RE THE MARRIAGE OF SARA ROSE CRANDALL
AND JONATHAN CHRISTIAN CRANDALL
Upon the Petition of
SARA ROSE CRANDALL, n/k/a SARA ROSE RIEGER,
Petitioner-Appellee,
And Concerning
JONATHAN CHRISTIAN CRANDALL,
Respondent-Appellant.
JONATHAN CHRISTIAN CRANDALL,
Plaintiff,
vs.
IOWA DISTRICT COURT
FOR LINN COUNTY,
Defendant.
________________________________________________________________
Appeal from the Iowa District Court for Linn County, Ian K. Thornhill,
Judge.
Jonathan Crandall appeals the physical care and economic provisions of
the dissolution decree. On certiorari, he challenges the court’s contempt ruling.
AFFIRMED AS MODIFIED, WRIT SUSTAINED.
David D. Burbidge of Johnston, Stannard, Klesner, Burbidge & Fitzgerald,
P.L.C., Iowa City, for appellant.
Karen A. Volz of Ackley, Kopecky & Kingery, Cedar Rapids, for appellee.
Considered by Danilson, C.J., and Vaitheswaran and Tabor, JJ.
2
TABOR, Judge.
Jonathan Crandall contests the decree dissolving his eleven-year
marriage to Sara Crandall on three issues: (1) the denial of joint physical care,
(2) the visitation schedule, and (3) the distribution of assets. He also brings a
certiorari challenge to the district court’s order finding him in contempt. Sara
defends the decree and contempt order and asks for appellate attorney fees.
Because we agree with the district court’s assessment that joint physical
care would not serve the best interests of the five Crandall children, we affirm the
grant of physical care to Sara. We also conclude the extraordinary visitation
awarded by the district court assures the children continuous physical and
emotional contact with both parents.
On the economic issues, we modify in part. We order Jonathan to pay
Sara $39,144 to equalize the distribution of the parties’ property, including an
equal distribution of the assets Jonathan liquidated before trial for attorney fees
and taxes. And in an abundance of caution, we modify the court’s “no fault”
provision applicable to Jonathan’s unvested restricted stock grants to address
concerns raised by Jonathan on appeal.
As to Jonathan’s certiorari challenge to the court’s contempt ruling, we
sustain the writ. Finally, we award appellate attorney fees to Sara.
I. Facts and Prior Proceedings
Sara and Jonathan married in December 2003 and divorced in July 2015.
They have five children—ranging in age from three to ten years. The couple met
at church while students at Iowa State University. Jonathan pursued studies in
engineering, earning both bachelor’s and master’s degrees. Despite taking time
3
off to care for their first child, Sara earned her bachelor’s degree. The couple
purchased their first home in Huxley assisted by a $10,000 gift from Sara’s
grandmother.
During their marriage, Jonathan worked full-time as an electrical engineer,
while Sara acted as the primary caretaker for the children. The couple belonged
to a church that encouraged them to pursue traditional gender roles and to
provide home-schooling for their children. Home-schooling was important to
Jonathan because that was how he received his education growing up. Sara
home-schooled the three oldest children while caring for their fourth child and
managing the family’s day-to-day finances. Jonathan engaged in many activities
with the children on weekends, including church-related functions. Shortly after
their fourth child was born in 2009, the family moved from Huxley to Marion.
After the move, Jonathan worked as an engineer for Rockwell Collins but
continued to help with the children in the evenings and on weekends. In August
2010, Jonathan transferred to Skyworks Solutions, where his hours were more
demanding. On top of his work schedule, Jonathan devoted time to repairing
and updating a rental home in Cedar Rapids the parties bought as an investment
in 2011. When their fifth child was born in March 2012, Sara found it impossible
to keep up with the home-schooling and the mounting responsibilities of the busy
household. In March 2013, she approached Jonathan about enrolling the
children in public school. Jonathan was disappointed about the decision, but he
agreed they needed the support of the public school system.
The parties separated in the summer of 2013. The separation followed
Jonathan’s Fourth-of-July arrest for operating while intoxicated and his
4
subsequent revelations to Sara that he had not been truthful about time spent at
bars and strip clubs. Sara filed a petition for dissolution on October 15, 2013.
After she filed for divorce, Sara noticed Jonathan started to engage more in
hands-on childrearing, to the extent she perceived him trying to “beat her to the
punch” in completing certain chores. Jonathan also took the step of applying for
a “temporary writ of injunction” preventing either party from disposing of marital
assets; the district court granted the injunction on October 31, 2013.
For almost one year after Sara filed for divorce, she and Jonathan lived
under the same roof. During this time, Sara started classes at the University of
Iowa to earn her teaching certificate. By the summer of 2014, Sara found the
cohabitation “unbearable” and asked Jonathan to move out. He refused, so Sara
moved into a house purchased by her grandmother. Sara applied for temporary
orders on custody, physical care, visitation, child support, and attorney fees. On
August 8, 2014, the court issued an order on temporary matters, rejecting a fifty-
fifty shared care arrangement because Jonathan’s schedule was not flexible and
routinely required more than a forty-hour work week, while Sara’s class schedule
took her away from home less than twenty hours a week. The temporary order
did afford Jonathan time with the children that exceeded the threshold for
extraordinary visitation.
Also while the dissolution proceedings were pending, Jonathan’s parents
moved from Dubuque to Cedar Rapids, so they could be more available to help
babysit for their grandchildren. Sara was not in favor of their move and “sat
down with them to explain that this made [her] very uncomfortable.” She testified
5
she believed Jonathan and his parents maintained a “much more conservative
and rigid value system” than she had come to follow.
Sara filed an application to show cause in February 2015, alleging
Jonathan violated the temporary injunction by selling stock and depleting marital
assets.
The district court held the dissolution trial on April 15 and 16. The parties
disputed physical care, visitation, child support, spousal support, and distribution
of assets. The court also heard testimony concerning Sara’s contempt
allegations. In the decree issued on July 22, 2015, the court granted the parties
joint legal custody and placed physical care with Sara with extraordinary
visitation for Jonathan. The court directed Jonathan to pay $1933.81 in monthly
support for the five children and $1600 in monthly spousal support for five years.
Before dividing the parties’ assets, the court set aside the $10,000 gift from
Sara’s grandmother, received in 2005, as exclusively Sara’s property. Jonathan
does not dispute the gift on appeal. The court then divided the parties’ major
assets and ordered Jonathan to make an equalization payment to Sara in the
amount of $25,771.41.
The court also found Sara proved beyond a reasonable doubt that
Jonathan failed to obey the court’s October 31, 2013 injunction by liquidating
$62,586 in stock in 2014 and another $16,946 in stock in 2015.
The parties filed motions under Iowa Rule of Civil Procedure 1.904(2),
which the district court granted in part on October 12, 2015. Jonathan then filed
a notice of appeal, as well as a petition for writ of certiorari on the court’s
6
contempt finding. The supreme court granted his petition. This opinion will
address both Jonathan’s direct appeal and his certiorari claim.
II. Scope and Standards of Review
We review dissolution proceedings de novo. In re Marriage of Sullins, 715
N.W.2d 242, 247 (Iowa 2006). While we decide the appellate issues anew, we
give weight to the district court’s findings of fact. Id. When it comes to witness
credibility, “[t]here is good reason for us to pay very close attention to the trial
court’s assessment.” In re Marriage of Vrban, 359 N.W.2d 420, 423 (Iowa 1984).
The trial judge “is greatly helped in making a wise decision about the parties by
listening to them and watching them in person.” In re Marriage of Callahan, 214
N.W.2d 133, 136 (Iowa 1974). On appeal, we must rely on the transcript and
necessarily forfeit the impressions created by the parties’ demeanors. Vrban,
359 N.W.2d at 423.
We review Jonathan’s allegations concerning the contempt finding for
errors at law. See Ary v. Iowa Dist. Ct, 735 N.W.2d 621, 624 (Iowa 2007). We
find error if the district court’s factual findings are not supported by substantial
evidence or if the court has not properly applied the law. Id.III. Analysis of Jonathan’s Appeal Issues
A. Joint Physical Care
The first question in Jonathan’s appeal is whether the district court should
have honored his request for joint physical care of their five children. Physical
care is a distinct concept from legal custody. Legal custody requires parents to
make significant decisions about their children’s legal status, medical care,
education, extracurricular activities, and religious instruction. Iowa Code
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§ 598.1(3), (5) (2015); see also In re Marriage of Hansen, 733 N.W.2d 683, 690
(Iowa 2007). Physical care involves the parents’ obligation and opportunity to
maintain a home and provide routine care for their children. Iowa Code
§ 598.1(7); Hansen, 733 N.W.2d at 690–91 (explaining physical-care parent
must navigate “the myriad of details” associated with everyday childrearing,
including what clothes the children wear, when they go to bed, and with whom
they associate).
An award of joint physical care requires divorced parents to work closely
together to coordinate the myriad of everyday details. That is why when deciding
if joint physical care is in the children’s best interests, we must consider the
continuity of caregiving, the ability of the divorced parents to communicate and
show mutual respect, the degree of conflict between them, and the degree to
which they are in general agreement about their approach to daily parenting
matters.1 See Hansen, 733 N.W.2d at 696–99.
Sara and Jonathan agreed to joint legal custody and the district court
determined that designation was in the best interests of the children. The point
of disagreement was Jonathan’s request for joint physical care (often referred to
as shared care). When the court denies a parent’s request for joint physical
care, its denial must be accompanied by specific findings of fact and conclusions
of law explaining why shared care is not in the children’s best interests. Iowa
Code § 598.41(5)(a).
1
In deciding appropriate physical care, we also consider the factors listed in Iowa Code
section 598.41(3).
8
The district court provided that glimpse into its thought process, calling the
question of joint physical care “both difficult and close.” In the court’s opinion,
“[b]oth parents love the children very much and both parents adequately provide
for the physical care needs of the children.” The court had “no concerns about
the physical well-being of the children while they are in the custody of either
parent.” But the court ultimately decided the Hansen factors tipped the scales
away from a shared-care arrangement, pointing to the parties’ difficulty in
successfully communicating and their differing philosophies “as to the role of
each spouse in a marriage and in the raising and caring for children.” The court
also concluded, “Sara’s perception that Jonathan does not respect her as an
equal is not unwarranted.” After denying Jonathan’s request for shared care, the
court awarded physical care to Sara, continuing the extraordinary visitation
afforded Jonathan since the temporary order.
On appeal, Jonathan renews his request for joint physical care. He does
not alternatively ask for physical care to be placed with him. Jonathan contends
he and Sara have effectively communicated about their children since the
separation, their parenting philosophies are not that different, and isolated
incidents of his disrespect toward Sara are not indicative of their ongoing
relationship.
Although the record confirms both Sara and Jonathan are loving and
capable parents, we agree with the district court’s insightful conclusions and
ultimate decision that joint physical care is not in the best interests of their five
children. The children will experience greater stability and continuity in the
physical care of Sara with liberal visitation for Jonathan; this arrangement most
9
closely approximates the proportion of time spent with each parent before the
separation. See Hansen, 733 N.W.2d at 683 (focusing on historical patterns of
caregiving as one factor in joint-physical-care decision). We acknowledge
Jonathan’s point that both he and Sara have made concerted efforts at
communicating for the sake of their children, especially regarding academic and
extracurricular activities. But we are concerned Jonathan has not consistently
accorded Sara the same level of respect she has shown him. See id. at 698(“Evidence of controlling behavior by a spouse may be an indicator of potential
problems.”). Specifically, we find it telling that after the parties separated,
Jonathan changed the password on their financial accounts, implemented a
process where he would designate and deposit “a lump sum into the checking
account for groceries and gas and things for the kids,” and had members of their
church “go through [her] bank accounts to see how she was spending every
dime.”
We also credit Sara’s testimony that they did not agree about their
approach to daily parenting matters. She testified: “[W]e have different values
about discipline. I have had time with the kids to sort of develop the skills of
dealing with five small children . . . . [H]e tends to be permissive until he blows
up.” See id. at 699 (noting “parents must generally be operating from the same
page on a wide variety of routine matters”). Considering all the pertinent factors,
we reach the same decision as the district court concerning joint physical care.
B. Visitation
Given our decision to affirm the district court’s denial of joint physical care,
Jonathan asks for additional visitation comparable to his proposal for the children
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to alternate between three- and four-day stretches with each parent. Sara urges
us not to disturb the visitation in the decree. She notes the schedule proposed
by Jonathan relies heavily on his parents to take care of the children at times
when Sara is available to care for them.
Continuing the extraordinary visitation provided to Jonathan in the
temporary order, the decree provides:
Jonathan shall have physical care of the children every other
weekend from Thursday after school (or 3:30 p.m.) until the
following Monday morning at the start of school (or 8:30 a.m.); and,
during the alternate week, every Wednesday from after school (or
3:30 p.m.) until the following morning at the start of school (or 8:30
a.m.).
The decree’s alternating midweek and weekend visitation schedule, in addition to
alternating holidays and spring breaks, is in the children’s best interests and
provides them meaningful and sustained time in their father’s care. See In re
Marriage of Thielges, 623 N.W.2d 232, 238 (Iowa Ct. App. 2000) (noting chapter
598’s supposition that it is generally in children’s best interests to have the
opportunity for maximum continuous physical and emotional contact with both
parents can be satisfied by liberal visitation in various forms). All the witnesses
at the dissolution hearing testified the children are doing well under the existing
schedule. We affirm the district court’s visitation schedule.
C. Property Division
Jonathan also challenges the economic provisions of the dissolution
decree. He claims the court erred in valuing and distributing vested and
unvested assets associated with his employment at Skyworks. Concerning his
equalization payment to Sara, Jonathan contends the court should have ordered
11
the sale of his property and allowed him to deduct taxes and costs. He also
faults the court for granting Sara access to his financial information.
1. Property and Jonathan’s Vested Stock
The district court must divide marital property “equitably between the
parties,” in consideration of the thirteen factors listed in Iowa Code section
598.21(5). The division does not need to be equal or follow a certain percentage;
rather, the court should make a just award under the circumstances. In re
Marriage of Hoak, 364 N.W.2d 185, 194 (Iowa 1985).
Most of the information regarding assets and liabilities came from
Jonathan. The valuation and distribution of the parties’ real estate2 and cars is
not disputed. The court awarded Sara her Roth IRA.3 At trial, Jonathan
proposed the court value his vested stock assets (stock options, restricted stock
grants, ESPP stock) at market value at the time of trial, divide the value of his
stock assets equally as shown in his Exhibit BBB, and order him to pay $31,877
to Sara to equalize the property distribution.
The court adopted Jonathan’s valuations and also adopted his proposal to
equally split his vested stock assets4 based on the market value Jonathan
2
Jonathan’s father holds the $44,000 mortgage on the rental property.
3
Jonathan proposed splitting equally his IRA ($50,155.94) and 401K ($107,894.86).
The court agreed, ordered those assets divided by QDRO, and neither party appeals
that resolution. See In re Marriage of Veit, 797 N.W.2d 562, 564 (Iowa 2011) (“[T]he
QDRO is not itself a property settlement, but is merely a method of effectuating the
property division.”).
4
Jonathan testified his Employee Stock Purchase Plan (ESPP) account held shares of
Skyworks stock that he owned and he could immediately sell these shares. As to
Jonathan’s separate account holding restricted stock, he explained:
The company issues stock awards based on company
performance, as well as personal performance in my job, and it’s an
award that tries to motivate [me] to keep doing a good job and stay at the
company because it vests between a three- and four-year period. So
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provided. When we exclude Jonathan’s stock options, which the court awarded
separately in its later ruling on Jonathan’s rule 1.904(2) motion, the following
table shows the valuation and division of the these assets:
Asset Sara Jonathan
Homestead 223,000
Homestead Debt -153,300
Rental 47,000
Rental Debt -44,000
2006 Odyssey 8741
2000 CRV 1710
Sara Roth 24,326
J’s Restricted Stock 65,289 65,289
J’s ESPP 9410 9410
Net Assets 107,766 149,109
Equalization 20,671 -20,671
Property Division 128,437 128,438
The court also set aside the $10,000 gift Sara had received from her
grandmother and ordered Jonathan to pay Sara the $10,000 as a part of the
equalization payment. Therefore, when we add the $10,000 gift to the above
valuation and distribution, we conclude Jonathan should pay Sara $30,671,5 an
amount lower than the $31,877 he proposed paying at trial.
On appeal, Jonathan first claims the court inequitably distributed his
vested stock assets (restricted stock and ESPP stock). Without citation to
authority, he argues the distribution “must explicitly state that the parties are not
each stock grant . . . is a grant of a certain number of [Skyworks] shares,
and [then] a certain number of shares are released as a percentage of the
total each year. And so as the shares vest, they get credited to my
account, and I have the freedom to sell them immediately for income or
hold them as an asset and sell them much later for capital gains.
5
The court ordered Jonathan to pay Sara $25,771.41, which total included the $10,000
gift. The court did not explain its calculation. We conclude the appropriate equalization
payment for these accounts plus the gift is $30,671. In our discussion of the contempt
action below, we increase the overall equalization payment to $39,144, based on
Jonathan’s liquidation of assets in 2015.
13
awarded a specific dollar amount but are awarded one-half of the stocks existing
at the time of trial regardless of whether their value has increased or decreased
from the values at the time of trial.” In making this argument on appeal, Jonathan
abandons the dollar values assigned to the stock in his own property distribution
proposal and also abandons his proposal that the value of the those assets be
split equally to determine an appropriate equalization payment.
We recognize “the general rule that stock should be valued at market
value if it can be ascertained.” Id. at 192. When the district court’s valuation is
within the permissible range of evidence, we will accept it. Id. at 192–93. Upon
our de novo review, we accept the district court’s valuations based on Jonathan’s
evidence. See In re Marriage of Moffatt, 279 N.W.2d 15, 19 (Iowa 1979) (“We
need not arrive at an exact value. The purpose of determining value is to assist
the court in making equitable property awards and allowances.”). We modify the
decree to order Jonathan to pay Sara $30,671 to equalize the asset distribution.
See Hoak, 364 N.W.2d at 194 (declining request to transfer stock shares as a
part of the distribution of property).
Second, Jonathan argues the district court failed to properly account for
the tax implications of his equalization payment because the court did not order
him to sell an asset. Jonathan asserts the only assets available to him for this
payment are his vested stock grants or vested stock options. He asks us to
modify the decree to order the sale of stock options in the amount of the
equalization payment. He proposes to then pay Sara “the net amount after
taxes.” Sara responds Jonathan is not limited to those assets and can make this
payment by refinancing the home mortgage.
14
In making a property division we consider the tax consequences a party is
expected to face in satisfying a property settlement. See Iowa Code
§ 598.21(5)(j). Our supreme court has instructed: “‘[W]here there is no evidence
to support a discounting based on a sale and the trial court has not ordered a
sale, the effect of considering income tax consequences on a sale’ diminishes
the value of the asset to the nonowning spouse.” In re Marriage of McDermott,
827 N.W.2d 671, 684 (Iowa 2013) (quoting In re Marriage of Friedman, 466
N.W.2d 689, 691 (Iowa 1991)) (stating if a dissolution court orders a sale of an
asset, it may then consider the tax consequences in its property distribution);
Friedman, 466 N.W.2d at 691 (stating tax consequences are not considered
when there is no evidence “a sale was pending” and the district court “has not
ordered a sale”); In re Marriage of Hogeland, 448 N.W.2d 678, 680–81 (Iowa Ct.
App. 1989) (stating where equalization payment will require the liquidation of
capital assets, the income tax consequences of the sale should be considered).
The district court presumably believed Jonathan had sufficient cash flow to
make the mortgage payments and satisfy the equalization payment. Jonathan
has not shown he is unable to refinance the mortgage ($67,000 equity) and make
the equalization payment. Jonathan also could use a portion of his salary and
incentives (as of March 3, 2015—$100,656 base salary; 2014—$97,639 base
salary plus $71,000 performance bonus). Further, Jonathan included in his
monthly expenses the children’s taekwondo lessons, new hefty allowances for
the children, and their piano lessons. We also note his 2014 purchase of new
Samsung Galaxy tablets for the children. On cross-examination, Jonathan
admitted those costs “are not necessary monthly expenses.” By spending this
15
money and including these costs as necessary monthly expenses, Jonathan
artificially lowered his cash flow. Because Jonathan has not shown he is unable
to refinance the mortgage, the evidence does not support Jonathan’s assertion
he would be forced to exercise and liquidate vested stock assets to pay Sara,
and we decline Jonathan’s request.
2. Jonathan’s Stock Options.
Jonathan’s vested stock options, granted when he started work in August
2010, allow him to buy 2500 shares of company stock at the strike price ($17.13).
At trial, Jonathan explained exercising the options would be a taxable event
because he owned the options, not the shares of stock. Jonathan asked the
court to order him to exercise all the options, obtain the net value, and split the
net value with Sara.
While the decree assigned Jonathan’s proposed value as his profit in the
stock options ($198,450) and divided that value equally between the parties, the
court failed to further specify distribution of this asset. In Jonathan’s rule
1.904(2) motion, he asked the court to modify the decree,6 asserting his vested
stock options “are not a retirement account and cannot be split by a QDRO.
They can only be distributed to [Sara] by [Jonathan] exercising them, and then
paying income taxes on the amount received.” Jonathan asked the court to
award each party 1250 stock options. According to Jonathan, the court should
further order him “to exercise [Sara’s] 1250 shares, have an accountant
determine the amount of income taxes [Jonathan] shall pay on this amount, and
6
Jonathan’s 1.904(2) motion did not address his two other vested assets—the vested
restricted stock ($130,578) and the ESPP ($18,819).
16
pay [Sara] this net amount.” Finally, Jonathan asked the court to order him “to
provide to [Sara] all needed access to the relevant records of the plan
administrator, the account, and the accountant.”
The court’s October 12, 2015 order granted Jonathan’s motion in part,
noting its intent for the parties to share equally “any transaction costs, including
tax liability, incurred by exercising these options.” The court ordered Jonathan to
accomplish “an equal division in one of two ways: First, if possible, [Jonathan]
shall transfer one-half of the actual vested units to Sara.” Second, if not possible,
Jonathan “shall complete all paperwork necessary to allow [Sara] access to all
information regarding the vested stock option account(s).” Under the second
option, the court gave Sara sixty days to obtain information and advice and to
“elect to either (A) require [Jonathan] to exercise the option on one-half of the
units and give [her] the net proceeds” or “(B) continue to hold all the vested stock
options jointly and be entitled to one-half of the net proceeds of each option unit
as it is exercised.” The court specified, if Sara picked option (B), then she had
“the continued right to complete access to the account information.”
On appeal, Jonathan asks us to modify the district court’s orders regarding
Sara’s access to his financial information to state: “Jonathan will provide Sara
with all quarterly statements of the vested stock options, vested stock grants, and
unvested stock grants that existed at the time of the decree. He shall be
permitted to redact from such statements, any and all financial information
regarding post-decree financial information.”
We decline his request. The district court’s rulings make it clear Sara only
has access to information concerning Jonathan’s financial assets at the time of
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dissolution. No modification is needed for Jonathan to redact information
regarding his later-acquired assets.
3. Jonathan’s Unvested Restricted Stock Grants.
Jonathan’s restricted stock vests on a deferred timetable set at the time
his employer granted the shares to him. The final vesting will occur on
November 10, 2018, four years after the November 2014 grant of shares.
Regarding both Jonathan’s vested restricted stock grants (included in the
equalization analysis above) and his unvested restricted stock grants, his exhibit
provided:
Grant Shares Traded
Date Status Granted Sellable Unvested Vested for Taxes
09/06/2011 N/A 1000 479 0 1000 383
11/10/2011 Accepted 1000 479 250 750 217
11/08/2012 Accepted 1250 395 624 626 231
11/10/2014 Accepted 1000 0 1000 0 0
Thus, the restricted stock at issue was granted to Jonathan by his
employer during the marriage, but some shares, though already granted, were
unvested at the time of the dissolution. In general, “[v]esting provisions vary
considerably” as to “the point in time at which vesting will occur (immediately vs.
deferred).” In re Marriage of Benson, 545 N.W.2d 252, 254 (Iowa 1996). At trial,
Jonathan testified to his willingness to divide the unvested restricted shares
equitably with Sara if a means to do so existed:
Q. If you could give them to Sara, would you give them to
Sara? A. I would divide them with Sara equitably.
Q. If they’re worth nothing, would you give them to Sara? A.
. . . . You’re saying if there was a legal means to divide an asset
like . . . an unvested stock grant? I would divide them with Sara, as
I’ve proposed dividing every asset in this case, 50/50.
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The district court adopted Jonathan’s valuation of the unvested restricted
shares ($180,859.74) and devised a plan to equitably divide this asset:
Jonathan is ordered to identify the individual number of
shares in unvested stock grants he holds as of the date of this
decree. Hereafter, each year when a number of these grants vest,
Jonathan shall transfer half the value to Sara. This pattern will
continue until all identified stock grants vest, or until the grants no
longer exist through no fault of Jonathan. Jonathan is ordered to
keep Sara informed of the status of these stock grants and to
provide her copies of all documentation he is provided by his
employer regarding these grants.[7]
Thus, the district court granted Sara an equal portion of the unvested restricted
stock only if the shares granted during the marriage actually vested in the future.
(a) Marital Estate. On appeal, Jonathan first claims this asset is not a
part of the marital estate, pointing out he could not cash out the unvested
restricted shares at the time of trial and will only obtain these stock shares “if he
continues to work there at the preset vesting date.”
We divide the property the parties own at the time of the dissolution, and
his employer granted him these restricted shares during his pre-dissolution
employment. Thus, the facts of the existing grants, their value at the time of trial
(from Jonathan’s exhibit), and their potential for vesting in the future are
undisputed. Jonathan has not cited any authority for his claim we must reverse
the district court and rule this asset is not a part of the marital estate. See Iowa
R. App. P. 6.903(2)(g)(3) (“Failure to cite an authority in support of an issue may
7
Based on the $180,859.74 value and on describing the asset as unvested, it is clear
the court is discussing the unvested stock grants in this paragraph. But the court
inadvertently used the phrase “unvested stock options.” As Jonathan testified, all of his
2010 stock options have now vested. We have corrected the court’s inadvertent
phrasing without notation.
19
be deemed waiver of that issue.”). Thus, he has failed to show us why the
district court’s inclusion of this property was wrong.
The following treatise contravenes Jonathan’s position:
To the extent the employee does not receive an unvested
benefit if the employee leaves the employer after the divorce, the
remedy is not to refuse to divide the benefit, but rather to divide it
on a deferred percentage basis, so that the nonowning spouse
receives a stated percentage of any value which does ultimately
vest. If a . . . contract right acquired during the marriage does not
ultimately produce value, no value should be divided; but the fact
that such a contract right might not produce value is no basis for
concluding in advance that the contract right will not produce value.
The uncertainties . . . should affect only the method of distribution;
they should not be sufficient to prevent the court from considering
the [contract right] as potentially divisible property.
2 Brett R. Turner, Equitable Distribution of Property § 6:48 (3d ed. 2015). Courts
from other jurisdictions have treated similar unvested benefits as marital
property. See, e.g., In re Marriage of Miller, 915 P.2d 1314, 1319–20 (Colo.
1996) (en banc) (stating because husband had already earned the right to
receive the restricted shares in the future, the shares are “a form of deferred
compensation and thus constitute marital property”); Chebhab v. Hamilton-
Chehab, 45 So. 3d 533, 535 (Fla. Dist. Ct. App. 2010) (noting wife’s shares of
restricted stock granted during the marriage vest and expire at different times,
including post-decree, and unvested shares are “in the nature of deferred
compensation” and “a marital asset”). But see Davidson v. Davidson, 578
N.W.2d 848, 853–56 (Neb. 1998) (“Stock retention shares are stock shares that
are unvested when granted” and unvested shares vesting only upon continued
employment “are not a part of the marital estate”).
20
Iowa case law also has recognized future interests may be included in the
marital estate. See In re Marriage of Schriner, 695 N.W.2d 493, 498–99 (Iowa
2005) (stating, similar to pensions, “a future interest is properly considered as a
marital asset subject to distribution”); In re Marriage of White, 537 N.W.2d 744,
747 (Iowa 1995) (stating a court may divide future book royalties conditioned on
author-spouse’s performance of post-decree promotional services by a decree
that “divides the funds when received”); In re Marriage of Howell, 434 N.W.2d
629, 632 (Iowa 1989) (stating Iowa law normally views pensions as property
because they are a form of deferred compensation accrued during the marriage);
In re Marriage of Duggan, No. 01-1887, 2002 WL 31423683, at *2 (Iowa Ct. App.
Oct. 30, 2002) (including husband’s deferred compensation in the marital estate).
Jonathan acquired a right to the restricted shares during the marriage, and
he has not convinced us the district court erred in considering these shares a
part of the marital estate.
(b) “No fault” provision. Noting the last stock grant will vest on
November 10, 2018, Jonathan also challenges the court’s “no fault” language in
its distribution of this asset. He points out the provision seems to account for
unvested restricted stock grants that do not eventually vest on the preset
timetable due to (1) his employer revoking the grant, (2) Jonathan being laid off
due to company issues, or (3) “Jonathan being unable to work for some no-fault
reason.” We agree the court’s language encompasses these situations. But,
Jonathan also claims the court has made him an “indentured servant to his
current employer” until November 10, 2018. He asks us to eliminate the court’s
21
“fault” provision and instead order him to pay Sara only if “they actually do vest
regardless of the reason.”
We do not believe the court’s “no fault” language precludes Jonathan from
switching employers if he has the opportunity to improve his employment
situation before the November 2018 vesting date. Similarly, if Sara moves away
and then Jonathan follows and moves to be near his children, Jonathan obtaining
new employment in those circumstances would not trigger the court’s “no fault”
language. We decline Jonathan’s request to completely strike the court’s “fault”
provision. But to the extent the court’s “no fault” phrasing is unclear, in an
abundance of caution we modify the decree by expanding the provision to
specify it encompasses (1) Jonathan’s employer revoking these grants,
(2) Jonathan being laid off due to company issues, (3) “Jonathan being unable to
work for some no-fault reason,” (4) Jonathan moving to be near his children if
Sara moves away, causing Jonathan to seek and obtain new employment, and
(5) Jonathan switching employers because he has the opportunity to improve his
employment situation before the final November 2018 vesting date.
IV. Analysis of Certiorari Challenge to Contempt Order
Jonathan alleges the district court acted illegally or exceeded its
jurisdiction in finding him in contempt for liquidating $62,586 in stock in 2014,
given the fact that at trial Sara limited her contempt claim to $16,946 in stock
withdrawals in 2015. Jonathan also contests the finding that he willfully defied a
court order in making the 2015 withdrawals. We agree with Jonathan and
sustain the writ.
22
Shortly after Sara filed for dissolution, Jonathan sought and received a
temporary injunction prohibiting the sale of assets. The court order prohibited the
parties from:
Selling, spending, disposing of, encumbering, destroying,
damaging, transferring to third parties, or converting any asset . . .
except each party may make expenditures needed for regular and
ordinary living expenses, reasonable legal fees, and expenses for
this case. Each party may make expenditures for ordinary
expenses in the normal course of the parties’ business.
Sara filed a rule to show cause when Jonathan’s 2014 documents showed
the receipt of over $60,0000 above his salary, believing he had cashed out stock
holdings in violation of the injunction. At trial Jonathan testified $62,586 in
shares vested in 2014, resulting in a tax obligation, but he did not request or
receive a $62,586 cash payout. He also admitted making two smaller
liquidations in January and March 2015. After Jonathan provided additional
information, Sara agreed he did not cash out more than $60,000 in 2014, and
during the trial she amended her contempt allegations to Jonathan’s liquidation
and withdrawal of $2898 in January 2015 and $14,048 in March 2015, or
$16,946.
In his certiorari challenge, Jonathan asserts he used the 2015 withdrawals
to pay his attorney fees for the dissolution action and the 2014 income taxes he
owed. He contends these expenditures were allowed by the injunction. Sara
argues Jonathan did not present evidence he was unable to pay his living
expenses and attorney fees without selling the stock and did not apply for court
permission to liquidate these assets for these purposes.
23
Based on the language of the injunction “excepting” reasonable legal fees
and ordinary living expenses, such as paying one’s income taxes, we conclude
Jonathan’s liquidation did not constitute a willful violation of the injunction.
Accordingly, we sustain the writ. But that determination does not fully conclude
the matter. Sara also owed attorney fees and had ordinary household expenses
during this time, and Jonathan did not include his liquidated assets in his
valuations and did not split these assets equally upon liquidation. Therefore, we
conclude Jonathan must pay Sara $8473 (one-half of $16,946) in his equalization
payment. Thus, Jonathan’s equalization payment to Sara now totals $39,144
($30,671 + $8473).
V. Appellate Attorney Fees
Sara asks for appellate attorney fees in the amount of $6810. Such an
award rests in our discretion and is based on the merits of the appeal, the
parties’ needs, and their ability to pay. See Sullins, 715 N.W.2d at 258. After
considering all appropriate factors, we order Jonathan to pay $5000 of Sara’s
appellate attorney fees. Jonathan is assessed the costs of this appeal.
AFFIRMED AS MODIFIED, WRIT SUSTAINED.