In re Marriage of Probasco, 01-0645.

• Decision Date: 22 January 2004
• Docket Number: No. 01-0645.,01-0645.
• Citation: 676 N.W.2d 179
• Parties: In re the MARRIAGE OF Craig G. PROBASCO and Ralane R. Probasco Upon the Petition of Craig G. Probasco, Appellee, and Concerning Ralane R. Probasco, Appellant.
• Court: Iowa Supreme Court

676 N.W.2d 179

In re the MARRIAGE OF Craig G. PROBASCO and Ralane R. Probasco

Upon the Petition of Craig G. Probasco, Appellee, and

Concerning Ralane R. Probasco, Appellant.

No. 01-0645.

Supreme Court of Iowa.

January 22, 2004.

Rehearing Denied March 23, 2004.

Michael E. Ellwanger and Jeffrey D. Garreans of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, L.L.P., Sioux City, for appellee.

Bradford Kollars, Sioux City, and Daniel L. Bray of Bray & Klockau, P.L.C., Iowa City, for appellant.

LAVORATO, Chief Justice.

Ralane R. Probasco appealed the alimony and property division of her dissolution decree. Craig G. Probasco cross-appealed. We transferred the case to the court of appeals which affirmed on the appeal and cross-appeal. We granted Craig's application for further review in which he challenged the court of appeals decision affirming the district court's award of reimbursement alimony.

Because we conclude reimbursement alimony was not warranted in the circumstances of this case, we vacate the court of appeals decision and reverse the district court judgment on this issue. We modify the district court judgment by allowing Ralane to keep as rehabilitative alimony any payment Craig has made on the reimbursement alimony award. We affirm the court of appeals decision and the district court judgment on the remaining issues raised in the appeal. We remand with directions.

I. Background Facts and Proceedings.

Ralane and Craig met in 1983. At the time both were attending Morningside College. Eventually they developed an intimate relationship, resulting in the birth of their child, Kally, on October 30, 1985. The parties then began living together.

Ralane had a child, Kallen, from a previous marriage. Kallen was three years old when Ralane and Craig began living together. Kallen lived with the parties until they separated. At the time of trial Kallen was attending college in Alabama.

The parties formally married on February 12, 1991. However, for purposes of this action, they stipulated that they have been married since November 1985. Neither party brought property of appreciable value into the marriage.

In May 1986, Craig graduated from college with a Bachelor's degree in business administration. His grade point average was 2.52. Ralane graduated in December 1986 also with a Bachelor's degree in business administration. Her grade point average was 3.71. Neither party contributed to the education of the other, and both intended to pursue careers in business.

Following his graduation, Craig began working for New York Life Insurance Company as a salesperson. Following her graduation, Ralane worked in the home, caring for the children. She also handled all of the household finances and assisted Craig in keeping track of his business with New York Life.

Throughout 1987 and 1988, the parties lived primarily on borrowed money from a number of sources because Craig's income from New York Life was low. Ralane continued to work in the home, caring for the children, handling family finances, and preparing reports for Craig's insurance work.

In 1989, because Craig was without a driver's license, Ralane had to drive Craig to his business appointments. Craig's income that year was $5,118.

It was at this time that the parties thought about opening a restaurant. They were looking for a family-type restaurant and began considering a Perkins franchise. Craig focused his efforts on the acquisition and development of such a franchise. Ralane worked for the Census Bureau in 1990 and eventually landed a permanent position with Wilson Trailer of Sioux City in January 1991. She also assisted Craig in the evenings on the Perkins franchise project. Because Craig's insurance income was substantially reduced, the family had to rely on Ralane's income over the next four years.

In 1990, Craig's father, Gene, who was an attorney, formed CGP, Inc. to own and operate the "Perkins Family Restaurant" franchise in downtown Sioux City.

On August 22, 1991, Craig and Gene completed an application to corporate Perkins for a franchise. The application stated that Gene would be a shareholder. Gene had to submit a separate application. In that application, Gene stated he had a special interest in helping Craig operate a family restaurant. Gene paid the initial fee of $5000 and had to provide financial information about himself because Craig could not meet the financial requirements to obtain the franchise.

In August 1992, Craig and Gene formed a partnership, known as Probasco Properties, to own the land and building at the downtown location. Gene made an initial loan of $250,000 to Probasco Properties.

Ralane and Craig acquired the downtown property through Sioux City's tax increment financing plan. Later they transferred the real estate to Probasco Properties.

At this point, Craig needed start up capital for CGP, Inc. Ted Waitt, a person of substantial means and chief executive officer of a corporation, came to Craig's rescue. Waitt had substantial financial resources and financial influence with lenders. Waitt contributed $200,000 in return for 40% of the stock in CGP, Inc. Craig received 60% of the stock for his sweat equity in the corporation.

Eventually, CGP paid a $30,000 fee to corporate Perkins for a Perkins franchise that ran for 20 years. Perkins granted CGP, Inc. a license agreement on September 7, 1993, and on that day, CGP, Inc. opened for business at the downtown location. Without Waitt's investment and influence, CGP, Inc. would not have been able to obtain the franchise.

In March 1993, Probasco Properties leased the downtown property to CGP, Inc. for 20 years with four five-year options. At the time of trial, thirteen years were left on the lease. The license agreement has the equivalent term balance.

CGP, Inc. pays a monthly franchise fee of six percent to corporate Perkins. CGP, Inc. also pays a monthly rental to Probasco Properties of eight percent of CGP, Inc.'s monthly sales with a minimum monthly lease payment of $11,000.

When the restaurant opened, Ralane continued her employment with Wilson Trailer to maintain health insurance for the family. In the beginning, Craig and Ralane used their home for an office. In January 1994, Ralane terminated her employment with Wilson Trailer and became accounts payable coordinator at the restaurant. Her initial salary was $18,000 per year and that later increased to $32,000 per year. The business was so successful that it became the highest volume Perkins in the system with annual sales in excess of $3,800,000.

Ralane worked in the restaurant from January 1994 through late October 1998, when the serious marital problems the parties had been experiencing came to a head. After October 1998, Ralane no longer worked in the restaurant. In March 1999, Craig filed this dissolution of marriage action. At the time the parties were living in a home they had purchased in 1986 with a loan of $60,000. Since then, contrary to Ralane's wishes, Craig borrowed over $400,000 to remodel the house. At the time of trial, the homestead had a market value of $350,000 and an encumbrance in excess of $433,000. The parties agreed that Ralane should move. She located a house she liked. Craig borrowed $160,000 to purchase the home for her and had the property deeded to her without any encumbrance.

After Craig filed this dissolution action, he pursued two additional Perkins franchises known as Eastgate and Norfolk. Eastgate was located on the east edge of Sioux City on Highway 20. Norfolk was in Norfolk, Nebraska. In June 1999, Craig formed a corporation, CPRO, Inc., to own the franchises and operate the restaurants. At the same time, Craig formed a limited liability corporation, ProProp, L.C., to own the real estate for the two new restaurants.

Craig owned eighty percent of CPRO, Inc., and Lynn McQuillen owned the other twenty percent. Craig hired McQuillen to assist with operational management and expansion. McQuillen had experience with corporate Perkins and had restaurant management experience. Craig owned ninety-nine percent of ProProp and the parties' daughter, Kally, owned one percent.

Craig applied for the Eastgate franchise in July 1999. In May 2000, corporate Perkins issued Craig a franchise commitment for Eastgate following which Craig started construction of the Eastgate Perkins. Perkins granted Craig the license agreement for the restaurant on December 11, 2000, and the next day Craig opened the restaurant for business.

Problems developed with the acquisition of the real estate for the Eastgate franchise. Although ProProp had executed a purchase agreement for $525,000, title problems prevented consummation of the transaction. At the time of trial, ProProp had not taken title and had not paid the $525,000.

Craig applied for the Norfolk franchise in March 1999 and received a franchise commitment from corporate Perkins in May 2000. By this time ProProp had acquired the real estate for the Norfolk franchise and an adjacent parcel of real estate for a total of $1.5 million. However, at the time of trial, the Norfolk franchise commitment had expired because construction of the restaurant had not started as the commitment had required. Craig testified at trial that he was rethinking whether to proceed with the Norfolk project.

As he did with CGP, Inc., Ted Waitt guaranteed ProProp and CPRO, Inc. debt in an amount exceeding $3 million.

Following a trial on property and alimony issues, the district court dissolved the marriage, awarded Ralane alimony, and divided the property and debts.

Ralane appealed and Craig cross-appealed.

In her appeal, Ralane raised the following issues: (1) whether the district court erred in its $711,500 valuation of the parties' interest in Probasco Properties, (2) whether the district court should have secured Ralane's property division and alimony judgment, (3) whether the district court erred in finding that Ralane made no...