IN RE THE MARRIAGE OF ELIZABETH A. BRIDDLE AND DAVID J. BRIDDLE Upon the Petition of ELIZABETH A. BRIDDLE
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IN THE SUPREME COURT OF IOWA
No. 125 / 05–2115
Filed September 5, 2008
IN RE THE MARRIAGE OF ELIZABETH A.
BRIDDLE AND DAVID J. BRIDDLE
Upon the Petition of
ELIZABETH A. BRIDDLE,
Appellee,
And concerning
DAVID J. BRIDDLE,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Arthur E.
Gamble (enforcement of settlement agreement) and Jerrold W. Jordan
(decree), Judges.
Further review of a dissolution of marriage action in which the court
of appeals ordered enforcement of a settlement agreement reached through
mediation. DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT JUDGMENT AFFIRMED AS MODIFIED, AND CASE REMANDED.
Patricia A. Schoff, David Swinton, and Margaret C. Callahan of Belin
Lamson McCormick Zumbach Flynn, a Professional Corporation, Des
Moines, for appellant.
John C. Conger, West Des Moines, for appellee.
2
HECHT, Justice.
After engaging in contentious discovery disputes for more than two
years, the parties spent a long day negotiating a settlement of their
dissolution action with the assistance of a mediator.
The mediator
summarized the terms of the accord in a letter to the parties’ counsel, but
the parties were subsequently unable to agree upon a proposed decree. The
district court refused to enforce the mediated settlement, a trial was held on
all disputed issues, and a dissolution decree was entered. The court of
appeals affirmed the dissolution of the parties’ marriage but reversed the
balance of the district court’s decision, concluding the settlement should be
enforced.
We vacate the decision of the court of appeals, affirm the
dissolution decree as modified herein, and remand to the district court for
entry of a decree consistent with the terms of the settlement reached by the
parties.
I.
Factual Background and Proceedings.
Elizabeth and David Briddle met while they were employed as real
estate agents. They were married on September 12, 1992. Elizabeth and
David are the parents of three minor children.
David acquired minority-shareholder interests in several corporations
that lease space and provide management services to antique dealers. The
five corporations do business under the name of “Brass Armadillo” in Des
Moines, Omaha, Kansas City, Phoenix, Denver and Cincinnati. Three of the
corporations are Iowa corporations, and the others are incorporated in
Nevada.
Elizabeth finished her undergraduate degree after the marriage and
resumed selling real estate.
She interrupted her real estate career to
become a stay-at-home mother. Marital discord arose, and Elizabeth filed a
petition for dissolution on October 23, 2002. She returned to school at Des
3
Moines Area Community College in the fall semester of 2002 and completed
her training in medical sonography at Mercy College of Health in May 2005.
Although she was diagnosed with Crohn’s disease during the marriage, the
evidence establishes that the disease is controlled with medications. She is
employed in the medical field in Iowa City and earns $46,000 per year.
Elizabeth requested production of documents evidencing David’s
income and the value of his minority interests in the several Brass
Armadillo corporations. On several occasions during the litigation, the
district court held hearings calculated to resolve the parties’ protracted
discovery disputes.
Unsatisfied with David’s claims that he was not
authorized as a minority shareholder to produce the corporations’ financial
records, Elizabeth filed a series of motions to compel production of
documents.
David eventually filed suit against the corporations to obtain the
requested information under Iowa Code section 490.1602(2)(b) (entitling
shareholder to inspect and copy the corporations’ accounting records “at a
reasonable location specified by the corporation”). Elizabeth intervened in
that litigation, and the court entered an order on August 14, 2004, directing
only the Iowa corporations to produce their check ledgers, general ledgers,
certified financial statements, profit and loss statements, and tax returns no
later than September 25, 2004. The court’s order did not, however, resolve
the discovery dispute.
The Iowa corporations sought a protective order on the ground that
the discovery of their records ordered by the court in the August 14 order
exceeded the definition of “accounting records” contemplated by section
490.1602.
Elizabeth filed another motion to compel production of
documents and served on the corporations’ custodian of records a notice of
deposition and subpoena duces tecum demanding access to “any and all
4
books and records regarding the Nevada corporations” and “all credit card
statements for the last 2 years.” The Nevada corporations sought an order
quashing the subpoena, contending the documents exceeded the scope of
discovery previously ordered by the court. Yet another hearing was held by
the court to address pending discovery motions on January 4, 2005. The
court extended the discovery deadline to allow time for the production of
documents and completion of depositions, and ordered David to produce
“all information in his possession related to the out-of-state corporations.”
Elizabeth’s counsel deposed David in early January of 2005. David’s
deposition testimony disclosed the location of the corporations’ accounting
records in Ankeny and generally described the companies’ accounting
practices.
Thereafter, Elizabeth’s counsel again invoked the court’s
authority to gain access to the corporations’ records at the Ankeny office
location. On January 18, 2005, the district court ordered the corporations
to produce their records “at the facility where they [were] located” or at some
other place agreed upon by counsel.1
The corporations produced to
Elizabeth’s counsel on January 21, 2005 a disk containing accounting
records and supporting data for all of the Brass Armadillo corporations for
the years 2003 and 2004.2
1The court’s order expressed considerable frustration with the protracted and
ongoing discovery disputes and scolded David for his “lack of candor” and for engaging in a
“charade” of attempting to gain access to the corporations’ documents through a lawsuit
when, all the while, they were under his control and located in an Ankeny office. The court
did not, however, deem David’s conduct worthy of any sanction.
2The
disk contained approximately 250,000 pages of the requested accounting and
financial data stored by the companies using Quick Books software. Among the records
produced were profit and loss statements, balance sheets, cash flow statements, accounts
receivable and payable reports, general ledgers, and check registers. On the same day,
David’s counsel produced hard copies of the general ledgers for 2003 and 2004, periodic
internal financial statements, and adjusting entries prepared by the corporations’ certified
public accountant for 2003.
5
Despite the corporations’ production of their voluminous accounting
records, Elizabeth’s counsel insisted he be allowed to inspect the records at
the corporations’ Ankeny office. Another subpoena duces tecum was served
on the corporations’ custodian of records demanding production of the
records at that office on January 31, 2005. The corporations sought a
protective order, claiming they had satisfied their obligation to respond to
Elizabeth’s discovery requests. After yet another hearing, the court filed an
order on February 1, 2005 generally directing Brass Armadillo, Inc. to fully
comply with the court’s prior discovery orders.3
The scheduled trial date of Tuesday, February 8, 2005 was drawing
near. Having previously reached a stipulation resolving their disputes as to
child custody and visitation matters, David and Elizabeth agreed to mediate
the issues of child support, spousal support and property division on
Saturday, February 5, 2005. After eleven hours of negotiations, the parties
reached an accord on all issues. In relevant part, the agreement called for
David to pay child support in the amount of $2200 per month, a property
settlement of $425,000 in ten annual installments, and spousal support in
an amount equal to five percent of the declining unpaid balance of the
property settlement. David also agreed to pay Elizabeth $61,300 for the
fees charged by her attorneys and expert witnesses. In a thorough letter to
counsel for the parties on February 8, the mediator detailed the terms of the
agreement and noted his understanding that counsel for the parties would
draft the documents necessary to complete the dissolution.4 Counsel for
the parties notified the district court that a settlement had been reached.
3This ruling did not address whether the corporations were obligated to permit
Elizabeth or her counsel access to the corporate office, and did not detail in what particular
the corporations’ production of records was then incomplete.
4The agreement also (1) required David to provide health insurance for the children,
(2) allocated one parcel of Des Moines residential property to each party, (3) awarded to
6
On February 9, 2005, David’s counsel faxed a proposed decree and
supporting child support worksheets to Elizabeth’s counsel.
Elizabeth
withheld her approval of the proposed decree, contending it constituted an
admission by David that his earnings were more substantial than he
claimed before and during the mediation session.5 David filed a motion
requesting enforcement of the agreement reached with the assistance of the
mediator. Elizabeth opposed enforcement of the agreement, claiming it was
induced by David’s misrepresentation of his actual income. The district
court held the agreement was not enforceable because David’s failure “to
disclose his actual income to [Elizabeth] before and during the mediation
constituted a misrepresentation of fact” that “placed [Elizabeth] at a
substantial disadvantage in the mediation” and impeded the court’s
evaluation of whether the settlement agreement was fair under the
circumstances.
This court denied David’s application for interlocutory appeal and the
matter proceeded to trial. The district court adopted with minor exceptions,
____________________________
David his one-third ownership interest in a parcel of commercial real estate located near
Kansas City, but promised to Elizabeth payment of fifty percent of the net proceeds from
any future sale, (4) allocated a 1998 Pontiac Transport Van to Elizabeth and a 1977 Ford
pickup to David, (5) set aside to Elizabeth an Edward Jones mutual fund account valued at
$14,998, (6) divided equally between the parties three retirement accounts with a total
value of $41,428, and (7) awarded to David his minority interest in the five Brass Armadillo
corporations.
5David
claimed before and during the mediation that his actual income was
$72,800, the amount of his W-2 earnings disclosed in the parties’ 2003 tax return.
Although the parties’ tax returns for the years 2000 through 2003 consistently showed
“flow-through” distributions of income or loss from the Brass Armadillo corporations to
David as fully detailed below, he claimed he did not actually receive payment for such
distributions in 2003 or 2004. The child support worksheets prepared by David’s counsel
and presented to Elizabeth’s counsel after the mediation, however, assumed David’s income
was $200,000 per year and Elizabeth’s income was $42,000 per year. In the cover letter
transmitted with the proposed decree and worksheets, David’s counsel explained he made
the income numbers inserted in the worksheets “jive” with the amount of child support the
parties agreed upon during the mediation.
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the proposed findings of fact, conclusions of law and decree submitted by
Elizabeth’s counsel. David was ordered in relevant part to pay $3000 per
month for child support, $1000 per month for thirty-six months for spousal
support, $250,000 per year for four years as a property division, and
$207,783.05 to reimburse Elizabeth for attorney fees and expert witness
fees.
David appealed, assigning as error the district court’s failure to
enforce the mediation agreement, and, in the alternative asserting the
financial obligations imposed under the decree are inequitable and
oppressive. The court of appeals affirmed the dissolution of the parties’
marriage, reversed the district court’s refusal to enforce the settlement
agreement, and remanded to the district court for entry of an order
consistent with that agreement. We granted Elizabeth’s application for
further review.
II.
Scope of Review.
Our review of dissolution-of-marriage cases is de novo. In re Marriage
of Jones, 653 N.W.2d 589, 592 (Iowa 2002). We adjudicate anew the issues
properly preserved by the parties. Id. We are not bound by the trial court’s
findings of fact, but we give them weight especially when considering the
credibility of witnesses. Iowa R. App. P. 6.14(6)(g).
III.
Discussion.
We begin our analysis with a review of the applicable legal principles.
This court has recognized the validity of agreements resolving issues in
domestic relations cases. In re Marriage of Ask, 551 N.W.2d 643, 645–46
(Iowa 1996). “A stipulation and settlement in a dissolution proceeding is a
contract between the parties.” Jones, 653 N.W.2d at 593. A party to such
an agreement “is not entitled as a matter of right” to rescind such a
stipulation. Ask, 551 N.W.2d at 646. Settlement stipulations are entitled
“ ‘to all of the sanctity of an ordinary contract if supported by legal
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consideration.’ ” Id. (citations omitted). The court does, however, retain the
power to reject the parties’ stipulation if it is unfair or contrary to law. Id.
At the outset, we note Elizabeth did not deny in the district court that
the parties reached agreement on all disputed issues during the mediation
conference. She opposed enforcement of the agreement in the district court
solely on the ground David misrepresented his actual income before and
during the mediation and thereby fraudulently induced her to reach a
settlement. The claimed misrepresentation was clearly established, she
asserts, by contrasting the amount of actual income claimed by David
against the documents drafted by David’s attorney following the mediation
conference.
As we have noted, David claimed before and during the
mediation his actual income was only $72,800, but the child support
worksheets prepared by David’s attorney in support of the proposed
dissolution decree assumed David’s income was $200,000. Upon our de
novo review of the record, we conclude the district court erred in finding
David misrepresented his actual earnings before and during the mediation
and fraudulently induced Elizabeth to enter the mediation agreement.
We now turn to a review of the financial information known to
Elizabeth prior to the mediation conference on February 5, 2005. She and
her attorney were in possession of the parties’ tax returns for the years
2000 through 2003. Each of those returns disclosed David’s W-2 income
and, on Schedule E, reported supplemental “flow-through” income or loss
based in part on distributions from the Brass Armadillo Subchapter S
corporations:
Year
W-2 earnings
Flow-through income
2000
$66,800
$ 24,298
2001
$66,800
($ 8,795)
2002
$66,093
$ 67,723
2003
$72,800
$134,861
9
The parties’ 2004 tax return was not prepared before the mediation
conference because the parties had sought an extension to file it after the
corporations’ tax returns were prepared. Consistent with their historical
pattern, the corporations’ returns for the 2004 tax year were not prepared
until September of 2005.
Elizabeth’s assertion, and the district court’s finding, that David
misrepresented his actual income are not supported by the evidence.
Although the parties’ 2003 joint income tax return reported total taxable
income in excess of $200,000 from David’s W-2 earnings and from the
“flow-through”
distributions
reported
by
the
corporations,
David
consistently maintained he did not actually receive payment of the
$134,861 distribution reported on Schedule E of the parties’ tax return for
that year.6 We find no evidence—other than the child support worksheets
prepared by David’s counsel after the mediation to support the amount of
child support agreed to by the parties—tending to prove that distribution
was actually paid to David by the corporations in 2003.
Under the
circumstances presented here, we find completely unpersuasive Elizabeth’s
claim of shock and surprise after viewing the child support worksheets
attributing to David income of $200,000.
As David’s counsel’s post-
mediation cover letter of February 9, 2005 clearly communicated, the
worksheets assumed David had annual income of $200,000 in order to
make the numbers “jive” and support a child support award of $2200 per
month. We find no misrepresentation occurred because David’s actual
income was in fact what he had represented it to be, $72,800 per year.
We also reject the district court’s finding that the settlement
agreement reached by the parties in the mediation conference should not be
6David also consistently maintained he did not receive a payment from the
corporations during 2004.
10
enforced because Elizabeth and her counsel were disadvantaged by the
recalcitrance of David and the corporations in their responses to discovery
requests. In addition to the parties’ tax returns produced by David long
before the mediation occurred, Elizabeth, her counsel, and her experts were
also in possession of the voluminous accounting records produced by the
Brass Armadillo corporations on January 21. Although these records were
produced by the corporations only after litigation was commenced against
them and the court entered several orders mandating their production,
Elizabeth, her counsel, and her valuation experts did have access to the
records approximately two weeks prior to the mediation conference.7 We
find that although David and the corporations may be justly criticized for
their recalcitrant approach to discovery matters, Elizabeth was in
possession of the relevant financial information sufficiently in advance of
the mediation conference to engage in meaningful negotiations during the
mediation conference that lasted eleven hours.
A stipulation will be enforced if it constitutes an appropriate and
legally approved method of disposing of the contested issues. See Jones,
653 N.W.2d at 593–94. As we have noted, the decree ultimately entered by
the district court on October 27, 2005 was significantly more favorable to
Elizabeth than the terms of the mediation agreement. This fact is not
controlling, however, in our determination of the validity of the settlement
agreement. The validity of the solutions reached in the parties’ settlement
agreement need not be those the court itself would have adopted if it were
adjudicating the controversy. Ask, 551 N.W.2d at 646.
7Elizabeth
continued to claim David and the corporations had failed to produce all
of their records until the trial began on September 13, 2005. We find it significant,
however, that the experts who opined at trial as to the value of David’s interests in the
Brass Armadillo corporations relied on the accounting records produced by David and the
corporations on January 21, 2005, more than two weeks before the mediation conference.
11
We find the terms of the settlement agreement were in all respects
within the range of the evidence presented in the record. An equitable
division of the parties’ assets depends primarily on the hotly contested value
of two assets: David’s minority shareholder interest in the Brass Armadillo
corporations and his interest in FLD Land Company which owns a parcel of
commercial real estate near Kansas City.
Although Elizabeth’s expert
valued David’s interest in the Brass Armadillo corporations at $1,740,000,
David’s expert valued it at only $478,000. And while Elizabeth’s expert
valued David’s interest in the commercial real estate at $433,000, David’s
expert placed a value of only $63,350 on that asset. Although the values
placed on these key assets by the district court after trial were the higher
values allocated to them by Elizabeth’s experts, credible and compelling
countervailing evidence from David’s highly qualified experts supported the
much lower valuations.
Upon our de novo review of the record, we find the settlement reached
in the mediation conference constitutes an appropriate and legally approved
method of disposing of the contested issues in the dissolution action. Given
David’s actual income of $72,800 per year at the time of the mediation and
the range of the evidence as to the value of the two key assets owned by the
parties, David’s agreement to pay Elizabeth the sum of $425,000 over ten
years as a property settlement, spousal support calculated at five percent
per annum of the declining unpaid balance of the property settlement, and
child support of $2200 per month constituted a fair resolution of the
dispute.8 Accordingly, we vacate the decision of the court of appeals. We
8The
parties did not agree in their mediated settlement that David had income of
$200,000 per year. The parties’ mediation agreement that David shall pay $2200 per
month as child support is based on his actual annual income of $72,800. Although this
child support obligation agreed upon by the parties is higher than the child support
guidelines would require given the parties’ incomes, we find an upward adjustment is
12
affirm the dissolution decree as modified and remand to the district court
for entry of a decree consistent with the terms of the settlement reached by
the parties.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT
JUDGMENT AFFIRMED AS MODIFIED, AND CASE REMANDED.
All justices concur except Baker, J., who takes no part.
____________________________
“necessary to provide for the needs of the children and to do justice between the parties
under the special circumstances of this case.” Iowa Ct. R. 9.4.
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