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In re Marriage of Cherny

Court of Appeals of Iowa

June 6, 2018

IN RE THE MARRIAGE OF EUGENE JOSEPH CHERNY AND RUTH ANN CHERNY Upon the Petition of EUGENE JOSEPH CHERNY, Petitioner-Appellant, And Concerning RUTH ANN CHERNY, Respondent-Appellee. Description Gene Ruth Ann District Court's Calculations Correct Calculations

          Appeal from the Iowa District Court for Polk County, David May, Judge.

         A husband appeals the transfer of stock, distribution of other assets and debts, and amount and duration of spousal support pursuant to the decree dissolving the couple's marriage. The wife requests appellate attorney fees.

          Jennifer H. De Kock, Steven P. Wandro, and Stefanie J. Thomas of Wandro & Associates, P.C., Des Moines, for appellant.

          Anjela A. Shutts and Van T. Everett of Whitfield & Eddy, P.L.C., Des Moines, for appellee.

          Heard by Vogel, P.J., and Doyle and Bower, JJ.

          VOGEL, Presiding Judge.

         Eugene Cherny appeals provisions of the district court's decree of dissolution of his marriage to Ruth Ann Cherny. He asserts the district court erred in (1) requiring Ruth Ann to transfer her entire interest in the family's closely-held corporation to him in exchange for an equalization payment; (2) calculating and distributing the couple's other assets and debts; and (3) establishing the amount and duration of spousal support awarded to her. Ruth Ann requests appellate attorney fees. We find the district court properly and equitably ordered Ruth Ann to transfer her corporate shares to Gene in exchange for cash despite the pre-dissolution distribution of the shares, the corporate bylaws, the potential impact on non-parties, and the tax and distributive consequences of selling corporate assets. We also find the district court properly and equitably assigned assets and debts, including assigning the corporate debts to the corporations, but we make a small mathematical correction to the distribution. Additionally, we find the district court properly and equitably awarded spousal support to Ruth Ann despite the health of the parties and future retirement concerns. Finally, we decline to award appellate attorney fees to Ruth Ann. Accordingly, we affirm as modified.

         I. Background Facts and Proceedings

         Eugene (Gene) and Ruth Ann Cherny were married on July 25, 1987. At the time of dissolution, Gene was sixty years old, and Ruth Ann was fifty-eight years old. The parties have three children, who were twenty-seven, twenty-five, and twenty-two years old at the time of dissolution.

         Gene completed his medical residency in 1989. The couple then moved to the Des Moines area so he could work as a surgeon specializing in plastic and reconstructive surgery. At the time of dissolution, Gene remained a surgeon at his practice, Heartland Plastic Surgery (Heartland). He worked long hours throughout the week when he began his practice. As time went on, Gene developed multiple health issues, including arthritis, spinal and rib fusions, heart disease, and an aortic aneurysm. His health prevents him from working over eighty hours per week as he has worked in the recent past. Regarding his future in practicing medicine, he testified, "I feel that my skills and judgment are at the best they've ever been, so I hate to give it up because I love the work that I do. I love the way I help people, so I'm going to keep going for another couple of years, God willing." He has made no definite plans to retire.

         Ruth Ann is a nurse who obtained certification as an emergency nurse in New Jersey in 1983 or 1984. She no longer holds a nursing license in any state. Once the couple moved to Iowa, she stayed home to take care of their children and their home. She was the primary caretaker of the children, doing "everything that goes along with children." In 2013, she began working as a retail sales associate and, at the time of dissolution, she worked for Chico's and Mainstream Boutique. At Chico's, she works twelve to twenty-eight hours per week and earns $10.42 per hour. At Mainstream Boutique, she works one Saturday per month and earns $25 per hour. She does not receive benefits from either employer.

         The parties' most substantial asset is their combined interest in JSV Community Properties, Inc. (JSV). JSV is a real estate holding company, which Gene and Ruth Ann formed during the marriage to protect their income from malpractice claims and other economic dangers affecting medical professionals. Gene owns thirty-six percent of JSV shares, Ruth Ann owns thirty-four percent, and each of their three children owns ten percent of the shares. Gene also owns a majority of the voting shares and is the primary decision-maker for JSV.

         Gene testified the couple was "in a looming financial crisis" toward the end of the marriage as their expenses consistently exceeded their income. He testified Ruth Ann spent up to $30, 000 per month on "clothes and food and stuff." After they exhausted their savings and maxed their credit cards, they began using credit lines from Heartland and JSV for personal expenses. In January 2016, the holder of the Heartland line of credit converted $375, 000 of the credit line into a term loan. Heartland makes the payments on this term loan.

         In approximately June 2013, shortly after the couple physically separated, Ruth Ann withdrew $100, 000 from the JSV bank account. She testified she used this money for living expenses, including utilities, groceries, and insurance premiums. As part of an informal agreement between the parties, she also gave a total of $1500 per month in direct support to two of their adult children. Beginning in January 2015, Gene paid $5000 to Ruth Ann in monthly support under a formal temporary agreement. She acknowledged she spent "quite a bit"-"probably" over $20, 000-on an investigation related to the separation and eventual divorce.

         James Nalley, an expert witness for Gene, calculated recent all-source income for each party as follows:

Year

Gene

Ruth Ann

2011 $475, 256 $14, 134
2012 $324, 588 $2, 601
2013 $457, 023 $11, 689
2014 $271, 795 $16, 917

         Nalley calculated the annual net incomes of both parties without spousal support of $375, 000 for Gene and $59, 500 for Ruth Ann. Gene also submitted an affidavit claiming his monthly expenses are $14, 222.71. Brian Crotty, an expert witness for Ruth Ann, calculated the annual net incomes of both parties without spousal support of $511, 916 for Gene and $15, 000 for Ruth Ann. Ruth Ann also submitted an affidavit claiming her monthly expenses are $15, 339.

         On November 25, 2014, Ruth Ann filed a petition for dissolution. On June 28 and 29, 2016, the matter came on for trial. On August 25, the district court entered its decree for dissolution of marriage. The district court found the ownership of JSV was divisible. It reduced the value of the JSV shares by twenty percent for the capital gains tax due for liquidating JSV assets, and it ordered Ruth Ann to transfer her interest to Gene with an equalization payment in return. The court declined to distribute the Heartland debt and the JSV withdrawal, finding both parties made personal draws on the corporations and the record did not establish the balance of the draws. The court distributed the couple's property, awarding most of the property by value to Gene with an equalization payment of $3, 267, 000 paid to Ruth Ann. After considering the factors of spousal support and all evidence, including the testimony of all witnesses, the district court awarded Ruth Ann $8000 per month in spousal support. The district court declined to address whether spousal support should or should not continue after retirement due to the uncertainty of when retirement may occur; instead, it directed the parties to pursue modification if and when a substantial change occurs.

         Both parties filed motions to amend the decree of dissolution. On

         November 23, the court addressed the parties' arguments and ordered the following amended distribution of property:

Description
Gene
Ruth Ann
2918 W. Logan #1E
$67, 900
500 S. 26th St.
$500, 000
308 Indianola Road
$38, 250
Ford Ranger
$1000
Toyota Corolla
$500
Windstar
$1000
GMC Savana
$2000
Cadillac
$8250
Morgan Stanley
$388, 800
Morgan IRA (Gene)
$53, 500
Morgan IRA (Ruth Ann)
$72, 500
John Hancock IRA
$1, 354, 000
West Bank
$1450
Bank Iowa
$11, 000
Household Goods
Shared
Shared
Coin collection (reduced for sales and taxes)
$1, 400, 000
Heartland
Net nil
70% of JSV (reduced for liquidation costs)
$7, 700, 000
Promissory note
$34, 000
West Bank Vivone LLC
$5000
Sum
$9, 335, 600 [sic[1]]
$2, 380, 550

         In the November order, the court increased the equalization amount to $3, 300, 000, [2] and it allowed Gene to pay the equalization under a seven-year payout schedule with interest and increasing minimum payments. Ruth Ann then filed an additional motion to amend or enlarge. On January 13, 2017, the district court entered its final order amending the decree. In this January order, the court further increased the total equalization payment to $3, 477, 525, and it adjusted the minimum payments and interest under the seven-year payout schedule.

         Gene appeals from the decree. Gene argues the district court erred by (1) ordering Ruth Ann to transfer her shares of JSV to him for an equalization payment, (2) calculating and distributing the parties' assets and debts, and (3) establishing the ...


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