                    IN THE COURT OF APPEALS OF IOWA

                                   No. 19-0466
                                Filed July 1, 2020


IN RE THE MARRIAGE OF BRIAN ANDREAS
AND ELLEN ROCKNE

Upon the Petition of
BRIAN ANDREAS, n/k/a KAI ANDREAS SKYE,
      Petitioner-Appellant,

And Concerning
ELLEN ROCKNE,
     Respondent-Appellee.
________________________________________________________________


      Appeal from the Iowa District Court for Winneshiek County, John J.

Bauercamper, Judge.



      Former husband appeals the property distribution provisions of the

dissolution decree. AFFIRMED.




      Thais Ann Folta and James Burns of Miller, Pearson, Gloe, Burns, Beatty &

Parrish, P.L.C., Decorah, for appellant.

      Allison M. Heffern of Shuttleworth & Ingersoll, P.L.C., Cedar Rapids, for

appellee.



      Considered by Bower, C.J., and Doyle and Schumacher, JJ.
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BOWER, Chief Judge.

       Brian Andreas, now known as Kai Andreas Skye, appeals the property

distribution provisions of the decree dissolving his thirty-four year marriage with

Ellen Rockne.

       Skye and Rockne were married in 1984, separated in 2010, and—for about

a decade—attempted to dissolve their marriage and their interwoven business

dealings. The process was complicated by problems with the Internal Revenue

Service (IRS).

       Beginning in the 1990s, the couple produced and marketed Skye’s

copyrighted artwork via two business entities, StoryPeople, Inc. and StoryPeople

Graphics (collectively “StoryPeople”). For many years, Skye licensed his artwork

solely to StoryPeople, Inc., which sublicensed to StoryPeople Graphics for a ten

percent royalty agreement. StoryPeople Graphics produced and marketed the

artwork. Skye owned fifty-one percent and Rockne owned forty-nine percent of

those two entities. Rockne was involved with the development of products and

employed by the business. This arrangement appears to have been a profitable

venture,1 providing a very comfortable living for the couple and their two now-adult

children.

       However, a tax structure used by StoryPeople was rejected by the IRS in

2009 and Skye and Rockne were assessed tax liability for the tax years 2006,

2007, 2008, and 2009. Those unpaid liabilities increased over the next several

years due to the addition of interest and penalties, reaching more than $1.5 million.


1Testimony at trial indicates that at one point the couple’s financial portfolio was
valued at about ten million dollars.
                                          3


       In 2015, Skye created Thousand Headed Man, LLC (THM), of which Skye

is the sole owner. THM is described by Skye as a “pass-through” company, paying

all of Skye’s expenses, licensing Skye’s work, and receiving royalties from various

licensing agreements. While Skye was operating StoryPeople in 2015, Skye

entered into new licensing agreements for his artwork via THM with Jumbo Doris,

now known as Flying Edna.2 Flying Edna is solely owned by Skye’s paramour, Fia

Jack Skye, formerly known as Wendy Saver. Flying Edna began to produce and

market Skye’s artwork and used StoryPeople’s mailing lists to do so.

       On March 22, 2016, Skye filed a dissolution petition seeking an equitable

division of the parties’ property and debts. In March 2016 and May 2017, the

district court entered injunctive orders prohibiting the dissipation of marital assets.

       The dissolution trial was held on January 16–17, 2019. Skye and Rockne

testified about their marriage, their businesses, and other marital assets.

       Skye testified that he was notified in 2009 about the taxes owed by

StoryPeople for the years 2006–09. He acknowledged having sufficient resources

to pay off the debt when they received the assessments. However, he entered

into negotiations with the IRS. At one point the amount owed to the IRS had

reached $1.689 million but, using StoryPeople assets, the amount had been paid

down to $1.1 million.

       Skye testified after September 2012, he no longer licensed his work solely

to StoryPeople. At the time of trial, StoryPeople, Inc. had no more royalties coming

to it and was operating at a loss. The StoryPeople entities had interest in two


2 Under those agreements, Flying Edna pays a larger licensing fee to Skye than
the royalty previously paid by StoryPeople.
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trusts, which in turn owned four buildings in Decorah, Iowa.         Other than the

buildings, StoryPeople had few other assets.

        Skye’s suggested property division was that he receive all the copyrights to

his artwork. He asked the court to order the two trusts be dissolved and the assets

returned to the donor, StoryPeople, Inc. He also asked that the court order the

sale of one building with the proceeds being remitted to the IRS and suggested

Rockne receive the other three buildings. Finally, he suggested the IRS liability be

divided equally between him and Rockne.

        Rockne testified the last time she worked outside the family business was

in 1991. After 1991, she was actively involved in the development, marketing, and

sale of products created from Skye’s artwork until Skye asked her to step aside in

2015.    She asked the court to award her the pre-2012 copyrights and the

StoryPeople entities and to place the IRS obligation with Skye.

        The district court made the following findings of fact:

                 Following their separation and disputes with the IRS, the
        parties have had a difficult relationship.
                 Since the 2016 and 2017 injunctions were issued, the marital
        companies have suffered significant declines in value as
        summarized below:
                 (1) Companies values have declined to 1/3 of their former
        worth.
                 (2) Substantial royalties have been improperly diverted to his
        girlfriend’s company.
                 (3) Sales have been dropping and royalty payments have
        been increasing.
                 (4) The value of the product brand has been diluted.
                 On December 27, 2018, the court filed an order following a
        contempt hearing finding that [Skye] has failed to fully comply with
        the requirements of these orders by:
                 (1) Failing to provide all monthly balance sheets and income
        & expense statements for [THM].
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        (2) Failing to manage StoryPeople Inc., StoryPeople Graphics
Inc., and [THM] in a way designed to increase the value and income
of the businesses.
        (3) Entering into contractual arrangements with his girlfriend’s
company Jumbo Doris, LLC designed to shift income from the marital
companies to her solely owned firm without full compensation by
cash or services.
        (4) Hiring of his girlfriend as an employee of StoryPeople
Graphics to divert funds from the marital companies.
        At trial, [Skye] again failed to adequately explain and justify
his past transfers of assets and income to his long-time girlfriend and
putative business partner.
        His weak explanations and rationalizations regarding his
possession of false passports and use of foreign bank & investment
accounts reflects badly on his credibility and gives the court grave
concern about what he might do to avoid compliance with any award
to [Rockne].
        [Skye]’s strategy of contesting the IRS levies for back taxes
rather than paying them timely when adequate funds were available
has resulted in escalating the amount payable to the IRS with
additional penalties and interest.
        ....
        [Rockne] does not request an award of alimony, because she
believes that [Skye] would refuse to pay it and he would frustrate any
efforts by her to collect any alimony payments. The court agrees
with her assessment.
        [Skye] is no longer actively using the StoryPeople, Inc. and
StoryPeople Graphics, Inc. companies to market his artwork,
writings, and other products. He has also discontinued producing
and licensing numerous prior products associated with StoryPeople.
Instead, he is primarily using his company called [THM] and
associating with his girlfriend in her companies, including Jumbo
Doris. Additionally, he is also focusing on creating and promoting
newer products rather than the traditional ones associated with
StoryPeople.
        [Rockne] seeks an award of the StoryPeople, Inc. and
StoryPeople Graphics, Inc. companies, so that she may use their
names together with the associated copyrights to provide
employment and income for herself after the dissolution. The
liquidation of many other marital assets is needed to satisfy the
unpaid tax obligations to the IRS. In the past, [Rockne] has been
actively involved in the marketing and business part of the
businesses. She is satisfied that she can operate those companies
well enough to support herself after the dissolution. [Rockne] no
longer possesses any other current, marketable skills.
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       The court found the marital assets included the following:3




       The court found marital debts included $1,059,409.00 owed to the IRS;

$273,958 Skye had borrowed on his life insurance policy; and $68,027 Rockne

had borrowed on her life insurance policy.

       Skye was awarded personal property, a vehicle, and bank accounts held in

his name alone at the time of trial, his life insurance policy subject to loans thereon,

foreign real estate, copyrights dated after 2012, and THM. The court ordered the

Swiss Life annuity policy owned in the name of StoryPeople Graphics be liquidated

“the net proceeds to be treated as a distribution to [Skye], with those net proceeds


3 Via StoryPeople, Skye invested about four million dollars in Tumblecloud, L.L.C.,
listed in the table. Skye intended Tumblecloud to develop software. Skye testified
it had no value.
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being made payable to the [IRS] to be applied against the oldest tax liability.” The

court also ordered the Andreas Prime Trust and the Broadway Trust dissolved and

their assets transferred to StoryPeople, Inc. It ordered the Winnebago and East

Water Street buildings sold, the proceeds of which would be treated as a

distribution to Skye and made payable to the IRS “to be applied against the oldest

tax liability.” The court also ordered Skye to be solely responsible for all remaining

tax liabilities.

        Rockne was awarded personal property, a vehicle, and bank accounts held

in her name alone at the time of trial, her life insurance policy subject to loans

thereon, all copyrights prior to 2012, StoryPeople, Inc., StoryPeople Graphics,

Tumblecloud, Ligonberry LLC, and Hidden Falls LLC.

        Skye appealed, asserting the trial court’s division of assets and liabilities is

inequitable. He contends the court’s ruling improperly injects fault into its decree.

        While the appeal was pending, Rockne sought a remand, asserting she had

discovered an additional Swiss Life annuity policy and an additional tax since the

decree was entered. We granted a remand for the district court to make findings

and distributions of the additional asset and tax liability.

        On March 31, 2020, the district court entered its ruling on remand, which

provides in part:

                Evidence presented at the original trial disclosed that
        StoryPeople Graphics was the owner of an asset described as Swiss
        Life annuity valued in 2015 at $170,000 in U.S. funds. Prior to trial,
        that information had not fully been disclosed by [Skye].
                Until the court’s dissolution decree awarded [StoryPeople
        Graphics] and its assets to respondent Rockne, [Skye] was in control
        of the company and its records. After the above described assets
        were awarded to respondent Rockne, she was able to obtain access
        to company records that disclosed the existence of a second,
                                          8


       valuable Swiss Annuity not previously disclosed to her or the court
       by [Skye]. Her attorney had to request the aid of the court to compel
       [Skye] to execute a power of attorney to obtain the cooperation of the
       annuity company in granting her information about its existence and
       value. [Skye’s] remand hearing exhibit HHH dated February 10,
       2020, discloses that the second annuity has a value based upon the
       Swiss franc of CHF 135,455.00. The annuity value varies with the
       respective exchange rates of the two nations’ currencies, but it is
       apparently worth between $140,000 to $200,000 in U.S. dollars.
              [Skye] denied any knowledge of this asset at the time of trial.
              In addition to the annuity, a substantial old payroll tax debt to
       the [IRS] owed by the companies awarded to respondent Rockne
       was disclosed by [Skye] after the decree was filed. [Exhibit JJJ
       shows a liability of $17,562.66 plus interest and penalty.]
              [Skye] claimed in testimony that he thought any dispute
       regarding this tax liability had been resolved long ago and this debt
       did not exist. No documentation was provided to support his
       testimony and apparently none is available to contest the claim.
       [Skye] asserts that this debt is [Rockne’s] obligation now, because
       the companies were awarded to her.

       The district court found Skye’s testimony during the remand hearing “to be

equally lacking in credibility as was his original testimony.” The court continued:

               The additional evidence of [Skye’s] concealment of assets
       confirms the court’s prior findings that any award of alimony, lump
       sum cash payment, or attorney fees, would likely be futile in view of
       [Skye’s] conduct and lack of credibility. It further justifies the award
       of copyrights to [Rockne] as the only practical way to provide
       [Rockne] with the ability to obtain the benefit of any financial award
       in her favor.
               The additional asset and additional debt discovered since trial
       must be considered valued as of the date of trial and then conformed
       with the court’s dispositional rulings.

       The court ordered the newly-discovered annuity policy liquidated and the

proceeds divided equally between Skye and Rockne. The payroll tax debt of

$17,562.66 plus interest and penalties was to be deducted from Skye’s share and

remitted to the IRS.
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       On our de novo review, we find no reason to amend the district court’s

decree or remand ruling because we find no “failure to do equity.” See In re

Marriage of Gust, 858 N.W.2d 402, 406 (Iowa 2015).

       Skye’s cries of inequity fall flat under the circumstances. While Iowa is a

no-fault divorce jurisdiction, see id. at 407, dissipation of marital assets is properly

considered by the decretal court in distributing marital property. In re Marriage of

Fennelly, 737 N.W.2d 97, 104–05 (Iowa 2007) (“In determining whether dissipation

has occurred, courts must decide ‘(1) whether the alleged purpose of the

expenditure is supported by the evidence, and if so, (2) whether that purpose

amounts to dissipation under the circumstances.’ . . . Courts may also consider

‘[w]hether the dissipating party intended to hide, deplete, or divert the marital

asset.’” (citations omitted)).

       Skye’s testimony leaves no doubt he intended to deplete and did divert

several hundred thousand dollars of marital assets.4 He chose to enter licensing

agreements with Jumbo Doris rather than StoryPeople. He chose not to pay the

IRS debt after learning of it in 2009 even though the parties had sufficient funds to

do so.5     The parties separated in 2010 and the IRS liability has increased

dramatically since then. It is not equitable to assign half of that remaining liability

to Rockne. The court’s division of the copyrighted materials allows Rockne to

market products traditionally associated with StoryPeople. The court awarded




4Rockne testified the amount diverted totaled $694,517.69.
5Skye testified the tax liability was incurred because his father “decided not to”
comply with the requirements needed for a particular tax structure.
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Skye the copyrights to post-2012 art, which Skye testified were “more interesting

to me, so I put more energy into them.”

       Rockne requests an award of appellate attorney fees and has submitted an

affidavit in support. Appellate attorney fees are not awarded as a matter of right

but rest within the court’s discretion. In re Marriage of Sullins, 715 N.W.2d 242,

255 (Iowa 2006). In considering appellate attorney fees, we look to “the needs of

the party seeking the award, the ability of the other party to pay, and the relative

merits of the appeal.” Id. (citation omitted). We award Rockne appellate attorney

fees of $15,000.00 and assess costs of the appeal to Skye. We affirm the decision

of the district court.

       AFFIRMED.
