Marriage of Baculis, In re

Decision Date19 October 1988
Docket NumberNo. 87-1495,87-1495
Citation430 N.W.2d 399
PartiesIn re The MARRIAGE OF Stamatina S. BACULIS and George J. Baculis, Upon the Petition of Stamatina S. Baculis, Appellant, And Concerning George J. Baculis, Appellee.
CourtIowa Supreme Court

James L. Chipokas, Cedar Rapids, for appellant.

Margaret T. Lainson of Meardon, Sueppel, Downer & Hayes, Iowa City, for appellee.

Considered by McGIVERIN, C.J., and CARTER, LAVORATO, SNELL, and ANDREASEN, JJ.

McGIVERIN, Chief Justice.

Respondent George J. Baculis (George) filed an application for interpretation of decree and determination of interest, requesting that the district court determine whether petitioner Stamatina S. Baculis (Tina) was entitled to prejudgment interest on her property distribution award computed from the date she filed her original petition for dissolution of marriage. The district court ruled adversely to Tina, stating that interest would accrue from the date of entry of the dissolution decree. She now appeals. We affirm.

I. Background facts and proceedings. Tina and George were married on July 10, 1965. At the time of their marriage, the parties owned an undeveloped lot located on North Summit Street in Iowa City. The parties subsequently acquired other adjacent real estate. All of the lots were acquired or purchased from George's father.

The couple established their marital homestead at 1011 North Summit. On January 14, 1983, Tina filed a petition for dissolution. At that time, the homestead had a fair market value of approximately $65,000 and an outstanding mortgage of approximately $32,000. Approximately $1,200 in property taxes were owed on the real estate.

The remaining lots were located on the east side of North Summit Street and together encompassed approximately three acres. By the time Tina filed her petition for dissolution, there were located on these lots two houses, a six-unit apartment building, and an eight-unit apartment building. All of these structures were utilized as rental properties. The parties agreed that the approximate value of the four parcels totalled $400,000. The outstanding indebtedness on these parcels was approximately $73,000. Property tax totalling approximately $9,000 was owed on this real estate. In October 1983, while the dissolution action was pending, George and Tina established an agency agreement with the Hills Bank & Trust Company for the management of the rental properties.

In addition to the real estate, the major assets of the marriage included seven vehicles and various pieces of maintenance equipment. During the course of their marriage, George and Tina also accumulated a substantial indebtedness exceeding $100,000.

Evidence was admitted during the dissolution trial concerning the marketability and the divisibility of the rental properties. The testimony indicated that several of the rental properties shared joint plumbing, sewer and electrical lines. Furthermore, the evidence showed that the driveways and parking lots for the buildings were constructed without reference to the property lines. In short, the evidence established that the separate properties were maintained and operated as a single unit and that division of the properties along existing lot lines could not be accomplished without substantial impairment to the overall value of the land.

The parties agreed that Tina would be awarded the marital residence situated at 1011 North Summit. It was George's position that the remaining four lots were so intertwined that they could not be separated. Therefore, George proposed that he be awarded the remaining real estate and Tina be awarded a $100,000 judgment lien against the property. Tina contended that it was possible to divide the property and that she should be awarded two of the rental buildings.

A decree of dissolution was entered on October 15, 1985. It was noted in the decree that the property division plan proposed by Tina divided the rental units and other property more or less equally. The court found, however, that actually separating the rental properties could not be done without hampering their future marketability or substantially impairing their current value. Thus, the district court, Judge Paul J. Kilburg presiding, found that "the best disposition of this property is to award the same to the respondent [George] and award the petitioner [Tina] a judgment lien against the property to equalize the net values awarded to each party."

After making its division of the real and personal property, as well as the debts of the parties, the court found that Tina was awarded a net equity of $5,000. George was awarded a net equity of $290,000. In an effort to "equalize" the awards, the court awarded Tina a judgment against George of $140,000 which was to be a lien against the realty. The decree set forth a ten-year schedule for payment of this sum "with statutory interest." This decision was affirmed on appeal. In re Marriage of Baculis, 409 N.W.2d 715 (Iowa App.1987) (table).

Subsequent to the court of appeals decision, a dispute arose between the parties as to the amount of the cash award, specifically the awarded interest. George contended that the award was for $140,000 plus interest at ten percent from the date of the decree, October 15, 1985. Tina, on the other hand, sought interest on the $140,000 judgment from the date she filed her petition, January 14, 1983. The claimed prejudgment interest, presumably allowed under Iowa Code section 535.3, totalled an additional $38,500.

On August 17, 1987, George filed an application for interpretation of decree and determination of interest in the district court. After hearing, the court issued its order denying Tina's demand for prejudgment interest, ruling that interest would accrue on the judgment from the date of the dissolution decree. Tina brings this appeal seeking review of the court's order.

II. The Prejudgment Interest Statute, Iowa Code section 535.3. At issue is whether Iowa Code section 535.3 applies to a monetary award as a part of the property distribution in a dissolution action. That section in part provides:

Interest shall be allowed on all money due on judgments and decrees of courts at a rate of ten percent per year.... The interest shall accrue from the date of the commencement of the action.

Iowa Code § 535.3 (1985). Tina contends that the section is mandatory and the district court erred in not awarding interest on her $140,000 property award from the date she filed her petition.

In Arnold v. Arnold, 258 Iowa 850, 140 N.W.2d 874 (1966), we construed the predecessor of the current section which at that time simply stated in part, "Interest shall be allowed on all money due on judgments and decrees of courts at the rate of five cents on the hundred by the year ..." Iowa Code § 535.3 (1962). It was observed that "[i]t is at once apparent that this statute makes no distinction between judgments entered in law actions and those entered in equity cases. Furthermore, we find no basis for differentiation." Arnold, 258 Iowa at 854, 140 N.W.2d at 877. Based upon this observation, and the fact that Iowa courts had traditionally enforced monetary awards in divorce actions similar to judgments at law, we held in Arnold that "fixed awards of money for child support, alimony, and property settlement draw interest at five percent per annum from the date of judgment, or in the case of specified periodic payments from the date each payment becomes due and owing." Id. at 844-45, 140 N.W.2d at 877.

Tina contends that Arnold dictates that the court should apply section 535.3 as amended to this action in equity. Therefore, the $140,000 property settlement award in her dissolution action should draw interest from the date of the commencement of her action. George argues that Arnold is not controlling on that issue; rather, only the interest rate provided in section 535.3 is obligatory and equity courts should continue to exercise discretion in determining when interest should begin to accrue.

Section 535.3 was amended by the Sixty Eighth General Assembly. 1980 Iowa Acts ch. 1170, § 1. The amendment not only changed the interest rate, but also added the final sentence of that section, advancing the interest accrual date to the date the action was commenced. The amended section applied to all judgments entered of record after January 1, 1981. Janda v. Iowa Indus. Hydraulics, Inc., 326 N.W.2d 339, 344 (Iowa 1982). Since the time of its amendment, we have not been called upon to determine whether the section applies to a monetary award as part of the property settlement in a dissolution action.

One of the primary purposes for the amendment to section 535.3 was to prevent persons obligated to pay money to another from profiting through delays in litigation. Dillon v. City of Davenport, 366 N.W.2d 918, 926 (Iowa 1985). The statute is intended to discourage delay in trials and appeals. Beeck v. Aquaslide 'N' Dive Corp., 350 N.W.2d 149, 169 (Iowa 1984); Janda, 326 N.W.2d at 344. In general, prejudgment interest is not awarded as a penalty, but rather it reflects the lost value of the use of the money awarded. In re IBP Confidential Business Documents Litig., 755 F.2d 1300, 1320 (8th Cir.1985); Glamann v. St. Paul Fire and Marine Ins. Co., 140 Wis.2d 640, 657, 412 N.W.2d 522, 529 (Ct.App.1987).

We have held that an award of interest under section 535.3 is obligatory on the district court, Iowa State Commerce Comm'n v. Manilla Grain Terminal, Inc., 362 N.W.2d 562, 565 (Iowa 1985), and that interest should be awarded even where interest has not been requested. Oskaloosa Food Prods. Corp. v. Aetna Casualty &amp Sur., 337 N.W.2d 521, 523 (Iowa 1983). Nevertheless, appellate courts, including our own, have not applied section 535.3 mechanically in all circumstances, but have identified certain instances from which the coverage of the statute is excepted.

A. Exceptions to awarding prejudgment interest. "It is well settled in...

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  • Gilster v. Primebank
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • August 14, 2012
    ...896 (Iowa 1990). Because “prejudgment interest ... reflects the lost value of the use of the money awarded,” In re Marriage of Baculis, 430 N.W.2d 399, 401 (Iowa 1988), pre-judgment interest on awards of future damages is not appropriate. Thus, I award pre-judgment interest on the jury's aw......
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    ...when interest has not been requested." Hughes v. Burlington N. R.R. Co., 545 N.W.2d 318, 321 (Iowa 1996) (citing In re Marriage of Baculis, 430 N.W.2d 399, 401 (Iowa 1988)). Prejudgment interest is awarded not as a penalty, but "to prevent persons obligated to pay money to another from prof......
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    ...891, 896 (Iowa 1990). Because "prejudgment interest . . . reflects the lost value of the use of the money awarded," In re Marriage of Baculis, 430 N.W.2d 399, 401 (Iowa 1988), pre-judgment interest on awards of future damages is not appropriate. Thus, I award pre-judgment interest on the ju......
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