In re Marriage of Keener

• Decision Date: 09 February 2007
• Docket Number: No. 05-1257.,05-1257.
• Citation: 728 N.W.2d 188
• Parties: In re the Marriage of Jody L. KEENER and Connie H. Keener. Upon the Petition of Jody L. Keener, Appellant, and Concerning Connie H. Keener, Appellee.
• Court: Iowa Supreme Court

728 N.W.2d 188

In re the Marriage of Jody L. KEENER and Connie H. Keener Upon the Petition of Jody L. Keener, Appellant and Concerning Connie H. Keener, Appellee.

No. 05-1257.

Supreme Court of Iowa.

February 9, 2007.

Robert F. Wilson, Cedar Rapids, for appellant.

Daniel Bray of Bray & Klockau, P.L.C., Iowa City, for appellee.

STREIT, Justice.

When two people cannot get along, sometimes it is better for both of them to just pick up their toys and leave. Unfortunately in this case, that was not so easy. During their marriage, Jody and Connie Keener founded a very successful toy company. The district court awarded all of the stock in the company to Connie but required her to pay Jody nearly $7 million over eleven years in order to equalize the property division. Jody complained the court should have awarded interest and provided security for this judgment. The court of appeals agreed, awarding Jody interest at the statutory rate and giving him an equitable lien on the business and all of its assets. On further review, we find Jody did not prove the value of certain intangible assets of the corporation. We find the value of the corporate stock to be $10,169,171 and order Connie to pay Jody $4,280,650 over six years. We further order interest be paid on the judgement rendered herein and Connie's obligation to her ex-husband be secured by a UCC lien on the corporate stock.

I. Facts and Prior Proceedings

Connie and Jody were married in 1992 in Cedar Rapids, Iowa. They do not have any children together. Jody filed for dissolution in 2002.

Connie is fifty-eight years old. She was born in Hong Kong and lived there until she came to the United States in 1975. In Hong Kong she worked as a cashier, in hotel management, in the travel agency business, in an employment agency, and finally at a bank. While living in California, she worked as a secretary and a commercial bank loan assistant. She has two children. This is her second marriage.

Jody is fifty-two years old and a native of Iowa. He has five children and this is his third marriage. Jody has an unusual background. He quit school at the age of twelve to work for various carnivals. While in the carnival business, Jody began buying and selling closeout toys and furniture. He left the carnival business around the age of twenty and began manufacturing and distributing furniture. In 1988, Jody was charged with and pled guilty to felony conspiracy to defraud the United States and two violations of misdemeanor willful failure to file federal income taxes for 1981 and 1982. While in prison, Jody completed his GED. Upon his release in May 1991, Jody worked for the Dove Imports company which was formed by a group of pastors and friends in Marion, Iowa. The business bought and sold furniture and toys.

While on a business trip to California for Dove Imports, Jody met Connie. After a short courtship, Connie moved to Cedar Rapids, the two were married, and they started their own business. In July 1992, the day before they were married, Jody and Connie incorporated Alpha International. Connie was the sole shareholder.¹ However, the business was their joint venture from the beginning. Jody was responsible for purchasing merchandise, sales, marketing, contract negotiations, and arranging toy manufacturing. Connie was involved in the financial aspects of the business—invoicing, writing checks, keeping the books and tracking finances. The company started in the couple's garage but grew rapidly and became very successful. At its peak, Alpha employed approximately one hundred people. Originally, Alpha was primarily involved in the wholesale distribution of closeout toys and collectibles. After acquiring two other companies, Alpha began manufacturing and designing toys as well. During their marriage, the Keeners purchased a great deal of real estate, all of which was placed in Connie's name alone. Alpha does not own any real estate although it rents office and warehouse buildings from Connie.

In late 2001, the Keeners began experiencing marital difficulties. In May 2002, Alpha's board fired Jody. Thereafter, Jody reactivated and incorporated a company called J. Lloyd International. J. Lloyd is in the business of reselling close-out inventories and also consults on toy manufacturing.

Trial was held between March 23, 2004 and April 8, 2004. The district court issued its dissolution decree on March 14, 2005. The value of Alpha was the biggest point of contention. The district court valued Alpha at $15,169,171 and awarded the business to Connie. The court awarded Connie all of the real estate used by Alpha. The district court valued J. Lloyd at $1 million and awarded it to Jody. Connie also received the marital home. Jody was awarded most of the remaining real estate.

The property division was heavily skewed in Connie's favor. Connie received $18,086,095 in property whereas Jody's property award was worth $4,524,786. Thus, "[i]n order to equalize the property division," the district court ordered Connie to pay Jody $6,780,650 in installments. The court ordered Connie to pay Jody $600,000 per year by May 1 of each year beginning in 2006, until the amount is paid in full.

Both parties filed motions to enlarge. In response, the court clarified its characterization of the payments Connie owes Jody by amending the decree with this additional language:

Because the total judgments ordered herein to be paid by Connie Keener to Jody Keener involve periodic payments, judgments for the periodic payments, as ordered by the court, will become judgments of record as the periodic payments (or installments) are due. [Jody] shall be paid judgment interest on due and unpaid installments.

The court otherwise denied Jody's request for interest on the $6,780,650. The district court refused Jody's request for a lien on Alpha and the company's assets. The court also declined Connie's request to lower its valuation of Alpha.

Both parties appealed. Jody argued for interest and security on the payments Connie owes him. Connie argued the district court overvalued Alpha. The court of appeals ruled in Jody's favor. It concluded the cash payments to Jody from Connie should bear annual interest from the date of the decree at a rate set by Iowa Code sections 535.3(1) and 668.13(3) (2005), "because Jody will otherwise be inequitably deprived of the use of his payments equalizing the property division." The court of appeals also concluded "it is inequitable to deny Jody's security in the property division" and granted an equitable lien against Alpha and its corporate assets. The court denied Connie's request to decrease the valuation of Alpha and increase the valuation of J. Lloyd. On further review, Connie argues (1) the trial court's valuation of Alpha is in part "speculative in nature," (2) an equitable lien is inappropriate in this case, (3) interest on the cash award is also inappropriate, and (4) the court of appeals erred by not considering the tax consequences caused by the equitable lien and interest award.

II. Scope of Review

We review dissolution cases de novo. In re Marriage of Sullins, 715 N.W.2d 242, 247 (Iowa 2006). "`Although we decide the issues raised on appeal anew, we give weight to the trial court's factual findings, especially with respect to the credibility of the witnesses.'" Id. (quoting In re Marriage of Witten, 672 N.W.2d 768, 773 (Iowa 2003)).

III. Merits

Iowa is an equitable distribution state. Id. (citing In re Marriage of Schriner, 695 N.W.2d 493, 496 (Iowa 2005)). This means our courts equitably divide all of the property owned by the parties at the time of divorce except inherited property and gifts received by one spouse. Id.; see Iowa Code § 598.21. Courts determine what is fair and equitable based on the particular circumstances of the parties. Schriner, 695 N.W.2d at 496. The Iowa Code provides a list of factors that must be considered. See Iowa Code § 598.21(1). "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) (citing In re Marriage of Conley, 284 N.W.2d 220, 223 (Iowa 1979)).

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. In re Marriage of Hagerla, 698 N.W.2d 329, 333 (Iowa Ct.App.2005). The assets should then be given their value as of the date of trial. Id. "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).

As we have already alluded, the parties owned substantial assets (with some corresponding debts) which were divided by the district court. For purposes of this appeal, we need not detail each asset. The important thing is each party was awarded property worth approximately $11,305,400 taking into account the cash award Connie is to pay Jody. We agree with the district court it was equitable to divide the property equally because both parties were instrumental in making Alpha a success. We now turn to the issues Connie raises on further review.

A. Valuation of Alpha

Each party had an expert testify regarding the value of Connie's stock in Alpha²—Shannon Shaw, C.P.A. for Connie and accredited senior appraiser Wayne Brown for Jody. Both concluded the appropriate method for valuing the stock was the asset approach. Both assessed Alpha's worth as a going concern, meaning the business would stay in operation as opposed to being ordered to dissolve and liquidate. The district court found Brown's testimony much more credible than Shaw's.

The district court adopted Brown's opinion of the value of Alpha's tangible assets, which was $10,169,171. Connie does not dispute this valuation. However, she argues the district court's valuation of Alpha's intangible assets (i.e. trademarks and other...