In re Marriage of Bainbridge

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IN RE THE MARRIAGE OF AMANDA JANE BAINBRIDGE AND TROY DOUGLAS BAINBRIDGE Upon the Petition of AMANDA JANE BAINBRIDGE, Petitioner-Appellee, And Concerning TROY DOUGLAS BAINBRIDGE, Respondent-Appellant.

No. 22-1299

Court of Appeals of Iowa

April 12, 2023

Appeal from the Iowa District Court for Plymouth County, Tod Deck Judge.

Troy Bainbridge appeals from the decree dissolving his marriage to Amanda Bainbridge. AFFIRMED.

William H. Larson of Klass Law Firm, L.L.P., Sioux City, for appellant.

Michele Lewon of Michele Lewon, P.L.C., Sioux City, for appellee.

Considered by Bower, C.J., and Badding and Buller, JJ.

BULLER, Judge

This appeal arises from a 2021 dissolution of marriage between Amanda Bainbridge and Troy Bainbridge, centering on three disputes from the district court's decree. Troy argues that the district court erred in its valuation of his business, Bainbridge Capital, LLC (Bainbridge); the determination of his yearly income; and the award of spousal support to Amanda. Amanda requests appellate attorney fees. We find that equity was done, we affirm the dissolution decree, and we deny Amanda's request for appellate attorney fees.

I. Background Facts and Proceedings

Amanda and Troy married in November 2000 and had four children together. At the time of trial, the older two children were young adults and mostly lived independently. The two younger children-both born in 2009-lived mostly with Amanda.

Amanda is a nurse anesthetist. She started working as a nurse in 2002 and earned her doctorate in 2021. Before the dissolution, she worked part time, earning about $171,000 per year, with the potential to earn $220,000 if she switched to full time. Troy is a high school graduate and spent his entire career in construction. He runs Bainbridge.

Bainbridge is a construction company that does mostly governmental contract work. Troy began Bainbridge in 2000-after the parties' marriage. At the time of trial, Troy owned 70% of Bainbridge and Amanda owned 30%. The business grew significantly during the marriage and, over the two years preceding the divorce, Amanda and Troy began drawing large amounts from the company.

By trial, the long-term debt of the business grew to more than $2 million and the pair incurred significant personal debt.

Amanda filed the petition for dissolution of marriage in December 2020. The parties stipulated before trial to legal custody of the minor children, placing physical care with Amanda and visitation with Troy. The remaining issues included Bainbridge's valuation, Troy's annual income, and whether Troy should pay spousal support to Amanda.

Trial was in December 2021, and the district court issued its dissolution decree in April 2022. The court valued Bainbridge at $800,000 and awarded the company to Troy. In addition, the court assigned Amanda an annual income of $220,000 based on full-time employment and Troy an annual income of $300,000 based on his salary and recent history of draws from Bainbridge. Based on the marital lifestyle and Troy's significantly higher income, the court ordered Troy to pay Amanda $1000 per month for the next ten years, until one of the parties dies or until Amanda remarries. Troy appeals.

II. Standard of Review

A dissolution-of-marriage proceeding is heard in equity, and we generally review the resulting dissolution de novo. In re Marriage of Gust, 858 N.W.2d 402, 406 (Iowa 2015). "We give weight to the factual determinations made by the district court; however, their findings are not binding upon us." Id. "We will disturb the trial court's order only when there has been a failure to do equity." Id. (citation and internal quotation marks omitted).

III. Discussion

On appeal, Troy disagrees with the district court's valuation of Bainbridge, the determination of his yearly income, and the award of spousal support to Amanda. Amanda requests appellate attorney fees. We affirm and deny Amanda's request for appellate attorney fees.

A. Valuation of Bainbridge Capital

Troy first challenges the district court's valuation of Bainbridge at $800,000 and contests the valuation's effect on the division of marital property. He argues the court should have not relied on Amanda's expert and did not consider all of the relevant evidence when valuing the company.

In dissolution-of-marriage cases, courts divide martial property equitably, considering the factors outlined in Iowa Code section 598.21 (2020). In re Marriage of Hansen, 733 N.W.2d 683, 702 (Iowa 2007). What qualifies as an equitable distribution depends on the circumstances of each case, as an equitable division is not necessarily an equal division. Id.

The property's value is generally determined as of the date of trial. See In re Marriage of Driscoll, 563 N.W.2d 640, 642 (Iowa Ct. App. 1997). Even so, "[t]here may be occasions when the trial date is not appropriate to determine values. Equitable distributions require flexibility and concrete rules of distribution may frustrate the court's goal of obtaining equitable results." Id. In reviewing the trial court's determination, we will not disturb the valuation of an asset if "it is within the range of permissible evidence." In re Marriage of McDermott, 827 N.W.2d 671, 679 (Iowa 2013).

When determining the value of a closely held business like Bainbridge, courts look to the intrinsic value of the business, as the market value of the stock can rarely be ascertained. In re Marriage of Moffatt, 279 N.W.2d 15, 19 (Iowa 1979). A wide range of evidence can show intrinsic value, such as the book value of the stock or the earnings capacity of the company. Id.; In re Marriage of Dieger, 584 N.W.2d 567, 569 (Iowa Ct. App. 1998). A court need not arrive at an exact value, only an overall equitable result. Dieger, 584 N.W.2d at 569. Because valuation is difficult, the trial court is given significant flexibility, such as the ability to devise its own scheme for valuation. In re Marriage of Hitchcock, 309 N.W.2d 432, 435 (Iowa 1981).

Amanda's expert on Bainbridge's value was a certified public accountant and valuation analyst. He provided a written report opining that the value of Bainbridge was $1,020,597 and testified to his findings at trial. Amanda's expert valued Bainbridge as of December 31, 2020, because that was the last date that complete information was available. Troy did not rebut Amanda's expert with his own expert, but instead summed the values of company assets, subtracted the liabilities, and arrived at a value of $480,187 for Bainbridge as of trial.

The district court found Amanda's expert persuasive and reasoned it was appropriate to value Bainbridge as of December 31, 2020, due to incomplete information after that date. In contrast, the court found Troy's valuation too volatile and unreliable, as his valuations fluctuated wildly depending on when he valued the company. Troy also failed to provide a compelling explanation for why Bainbridge's value would drop by more than half in the year between the expert's valuation and the time of trial. To some degree, the court split the difference and adjusted Amanda's expert valuation down to $800,000 based on outstanding receivables and Bainbridge's uneven history of success. We agree with the district court's observations about the competing valuation evidence and find its ultimate conclusion about valuation was fair. See In re Marriage of McKamey, 522 N.W.2d 95, 97 (Iowa Ct. App. 1994) (taking the past several years of business activity into account when valuing a business). Because the $800,000 valuation is well within the "range of permissible evidence," McDermott, 827 N.W.2d at 679, we find no failure to do equity in the $800,000 valuation assigned to Bainbridge and reject Troy's challenge.

B. Troy's Yearly Income

Troy next contends the district court erred in finding he earned $300,000 per year, based on his $80,000 annual salary and expected annual draws of $220,000 from Bainbridge. In considering a party's income, a court must consider all circumstances relating to that party's income. In re Marriage of Powell, 474 N.W.2d 531, 534 (Iowa 1991). For instance, if a party's income is subject to substantial fluctuations, an average of that income over several years may be appropriate. Id. As a whole, however, the parties' income must be determined from the most reliable evidence presented. Id.

Troy makes two arguments surrounding this claim. First, while Troy acknowledges his salary is $80,000, he argues his expected draws are only $63,245 based on an exhibit he submitted showing draws for 2021. Yet Troy admitted at trial that he made substantial draws not shown in the exhibit, and the district court identified about $200,000 in draws Troy made in the first seven months of 2021. Amanda also submitted an exhibit showing the parties made more than $1.2 million in draws from 2016 through 2020, an average of nearly $250,000 annually. Considering the parties' recent draws from Bainbridge, Bainbridge's potential future earnings, and Troy's ownership of the company, we agree with the district court that Troy can be expected to draw $220,000 annually from Bainbridge.

Second, Troy argues the court should have subtracted the sum of the three-year cash-equalization payment amount-$120,818-from his annual income. Our precedent does not support this argument. See Hansen, 733 N.W.2d at 704 (calculating a party's income without subtracting a cash-equalization payment from it). This argument also ignores Troy's yearly fluctuations in income. Even if we were inclined toward this claim, Troy's math does not account for the drastic increase in his income after the three-year period ends. Like the district court, we decline to subtract the equalization payment from Troy's income.

C. Spousal...