                     IN THE COURT OF APPEALS OF IOWA

                                    No. 18-1724
                                 Filed July 3, 2019


IN RE THE MARRIAGE OF CHAD E. DRAKE
AND LAURA A. DRAKE

Upon the Petition of
CHAD E. DRAKE,
      Petitioner-Appellant,

And Concerning
LAURA A. DRAKE,
     Respondent-Appellee.
________________________________________________________________


        Appeal from the Iowa District Court for Ringgold County, Thomas P.

Murphy, Judge.



        Chad Drake appeals the district court’s decree dissolving his marriage to

Laura    Drake.      AFFIRMED      AS   MODIFIED      AND    REMANDED        WITH

INSTRUCTIONS.



        Karen A. Taylor of Taylor Law Offices, P.C., Des Moines, for appellant.

        Lisa M. Noble of Noble Law Office, Des Moines, for appellee.



        Considered by Potterfield, P.J., and Doyle and Bower, JJ.
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DOYLE, Judge.

       Chad Drake appeals the district court’s decree dissolving his marriage to

Laura Drake. He contends the court erred in calculating his income for purposes

of determining his child support obligation. He also challenges the amount of the

equalization payment the district court determined Laura was due. Upon our

review, we affirm as modified and remand to the district court with instructions.

       I. Standard of Review.

       We review dissolution actions de novo. See In re Marriage of Larsen, 912

N.W.2d 444, 448 (Iowa 2018); see also Iowa R. App. P. 6.907. Although we

examine the entire record and adjudicate the issues anew, we give weight to the

district court’s factual findings, especially with respect to the credibility of the

witnesses. See In re Marriage of McDermott, 827 N.W.2d 671, 676 (Iowa 2013);

see also Iowa R. App. P. 6.904(3)(g). This is because the district court, in making

its credibility assessment, has the distinct advantage of listening and observing

each witness’s demeanor firsthand, while we must rely on a cold transcript. See

Albert v. Conger, 886 N.W.2d 877, 880 (Iowa Ct. App. 2016); In re Marriage of

Udelhofen, 444 N.W.2d 473, 474 (Iowa 1989); In re Marriage of Vrban, 359 N.W.2d

420, 423 (Iowa 1984).

       II. Child Support.

       “In Iowa, child support is calculated using the child support guidelines.” In

re Marriage of Erpelding, 917 N.W.2d 235, 245 (Iowa 2018); see also Iowa Code

§ 598.21B(1) (2018); Iowa Ct. R. 9.2. “The purpose of the guidelines is to provide

for the best interests of the children by recognizing the duty of both parents to

provide adequate support for their children in proportion to their respective
                                          3


incomes.” Iowa Ct. R. 9.3(1). Moreover, there is “a rebuttable presumption that

the amount of child support which would result from the application of the

guidelines prescribed by the supreme court is the correct amount of child support

to be awarded.” Iowa Code § 598.21B(2)(c).

       “To compute the guideline amount of child support,” the district court must

first compute the adjusted net monthly income of each parent. Iowa Ct. R. 9.14.

That amount is determined by first determining each parent’s gross monthly

income. See Iowa Ct. R. 9.14(1). Under the guidelines, “‘gross monthly income’

means reasonably expected income from all sources.” Iowa Ct. R. 9.5(1). The

court must determine a parent’s income from the most reliable evidence presented.

See In re Marriage of Powell, 474 N.W.2d 531, 534 (Iowa 1991).

       On appeal, Chad insists the court erred when it determined he made an

additional $45,000 annually through his farming operation. At trial, Chad testified

that, in addition to his full-time job managing two pig nurseries for Iowa Select

Farms, he also does “a little farming on the side,” explaining:

       I have twenty-seven cows; and I do sixty-three crop acres of my
       mom’s ground. So it doesn’t take up a lot of time. The fall and the
       spring are a little bit busier than the rest of the year. It’s more of a
       hobby anymore than it really is a job.

Chad claimed that “he carrie[d] about $150,000 worth of farming debt each year”

and that debt and other expenses dissipated any farm income. Laura testified she

did not believe Chad’s farm was just a hobby because “he’s in it to make money.”

       After reviewing the evidence and hearing the parties’ testimony, the court

did not find Chad to be particularly credible, noting, among other things, that “Chad

played a bit fast and loose with his financial affidavit.” It found “[m]uch of Chad’s
                                         4


testimony was self-serving.” Although the court acknowledged it was within its

discretion to deduct depreciation and expenses from Chad’s farm income, the

court did not believe the expenses should be deducted. The court found the

expenses claimed on tax returns primarily consisted of depreciation and did not

show any other significant expenses. Additionally, the court noted Chad’s exhibits

showed Chad as having a running checking account balance of around $4000;

however, “Laura’s exhibits showed Chad consistently ran a much higher balance,

anywhere from $17-$40,000.” “Given Chad’s rolling bank account balance, and

what appeared to the court to be his business savvy and drive regarding farming,”

the court found Chad’s claimed farm expenses should not be deducted from his

farming income” and determined Chad earned $45,000 annually through his farm

operation. The district court further noted that it believed the amount of the child

support award was the correct one, even if it calculated Chad’s income incorrectly,

“based on what it perceives to be a hardship” and that “a deviation would otherwise

be in order.”

       While we cannot disagree with the district court’s assessment that Chad

played fast and loose with his financial affidavit, we do disagree with the court’s

observation that Chad’s farming expenses consisted of primarily depreciation and

that his tax schedules did not show significant other expenses. In computing

Chad’s child support obligation, the court did not subtract any farm expenses from

Chad’s farming income. Chad’s Schedule F’s for the years 2013 through 2017

showed significant expenses other than depreciation. To be sure, the depreciation

figures are stunning and, except for one year, depreciation significantly exceeded

farm income each year. Just deducting the farm expenses from farm income show
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Chad’s farming operation was essentially a break-even proposition. Chad’s farm

income averaged about $43,800 per year over five years, and the farm expenses

averaged about $40,700 per year. So, over a five-year period, Chad’s annual net

farm profit averaged about $3100 sans depreciation.

      The child support guidelines define “net monthly income” as gross monthly

income less specifically enumerated deductions.       See Iowa Ct. R. 9.5.     The

guidelines do not specifically provide for a deduction for depreciation expenses,

but the Iowa Supreme Court has determined “depreciation should not categorically

either be deducted as an expense or treated as income, but rather that the extent

of its inclusion, if any, should depend on the particular circumstances of each

case.” In re Marriage of Gaer, 476 N.W.2d 324, 328 (Iowa 1991). As the court

observed:

      Depreciation is a mere book figure which does not either reduce the
      actual dollar income of the defendant or involve an actual cash
      expenditure when taken. On the contrary, it represents additional
      cash available to the defendant by permitting substantial tax
      deductions and, ultimately, tax savings. The fact that the defendant
      may use some or all of the cash represented by depreciation to pay
      off principal indebtedness on the property is of no consequence since
      such payments, in effect, increase his net worth and estate by
      increasing his equity.

Id. (quoting Stoner v. Stoner, 307 A.2d 146, 152 (Conn. 1972)).               Under

circumstances similar to the present case, we have found

      it unacceptable as a matter of public policy to allow a person in
      [respondent’s] position to generate paper losses which are then
      deducted from his primary income in order to avoid paying child
      support as determined by the child support guidelines. We are not
      required to give any consideration to those “business expenses
      reasonably necessary” to maintain a farming operation which is
      neither a business nor an occupation, but is instead a hobby or a tax
      shelter.
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In re Marriage of Starcevic, 522 N.W.2d 855, 856-57 (Iowa Ct. App. 1994).

       We have neither the record nor the resources to compute reasonable

depreciation for Chad’s farming operation under the straight-line method or any

other method. Nevertheless, under the unique circumstances and facts relevant

to the issue of child support, we believe a deduction for depreciation should not be

allowed as the primary interest is the best interests of the children. See In re

Marriage of McKenzie, 709 N.W.2d 528, 533-34 (Iowa 2006). The district court

properly refused to consider depreciation in determining Chad’s income for child

support purposes.

       A more difficult question is whether the district court erred in refusing to

consider farm expenses in determining Chad’s income for child support purposes.

In its ruling on Chad’s motion to reconsider, amend, or enlarge, concerning the

child support issue, the court stated:

             The court applied the child support guidelines using the total
       farm income, and the court still believes that is appropriate.
       Depreciable and perhaps other expenses on the parties’ tax returns
       may have included (for example) payment and repairs for a truck that
       is used in more than just farming. The court factored (for child
       support) farming income including amounts which would normally be
       deducted for federal and state taxes from employee income. Thus,
       the court did use a net, and not gross amount for farm income.
             The court believes that if it deducted what it feels were
       necessary farm expenses, instead of employee related taxes, Chad
       might pay more in child support. The court exercised its discretion
       and awarded child support based on a fair and equitable assessment
       of Chad’s income.

“Legitimate business expenses may be deducted from income for purposes of

determining child support.” In re Marriage of Hansen, 886 N.W.2d 868, 876 (Iowa

Ct. App. 2016) (citing Gaer, 476 N.W.2d at 329 (“[S]ome consideration must be

given to business expenses reasonably necessary to maintain the business or
                                          7


occupation.”)). Other than the expenses for the pickup truck that was used for

more than just farming, there is no challenge to Chad’s farm expenses.

Furthermore, Laura makes no argument that Chad cannot deduct his farm

expenses for purposes of determining his income for child support purposes. We

conclude Chad’s farm expenses should have been deducted from his farm income

for purposes of calculating his child support obligation.

       Averaging farm income may be appropriate in calculating child support.

See In re Marriage of Knickerbocker, 601 N.W.2d 48, 52 (Iowa 1999). Deducting

farm expenses from farm income averaged over the five-year period from 2013 to

2017 results in net annual farm income of $3100. We find that average should

have been used as Chad’s annual farm income, and we therefore must remand

the case back to the district court for recalculation of Chad’s child support

obligation under the guidelines while accounting for $3100 annual income

attributed to Chad’s farming operation.

       III. Property Equalization Payment.

       Laura and Chad married in 2006 and separated in 2017. Both worked

outside the home. Laura worked two jobs at times. As discussed above, Chad

had a farming operation in addition to his employment. At the time of trial, Chad

was renting eighty acres from his mother, and there he grew row crops and raised

cattle. He also rented another forty acres from another individual. He paid a

person to put in his crop and harvest it. At the time of trial, Chad owned a bull,

some twenty-seven cows, and twenty-three calves. A few of the cows were still

pregnant.   Chad’s financial affidavit shows he owned about $66,000 in farm
                                          8


equipment—although none of it was appraised. It appears that all of his farm

assets are encumbered.

       During the course of the marriage, the couple purchased Chad’s

grandfather’s farm. They sold it a few years later, in 2013, making a profit of

$108,000. Chad testified the money

       went to paying off some of the other farm debt, because I did have
       several loans for cattle at the time, some machinery at that time,
       through FSA.
              I also owed my [grandfather], oh, between I think twenty—
       around $25,000. He did pay a farm payment for me until I—I got the
       farm sold. So roughly $25,000 went right back to him.
              I paid off the vehicle that Laura was driving at the time.
              So all in all, when all of that was said and done, I didn’t really
       have much left.

Chad had no verification that the farm sale funds were applied to debt.

       During the course of the marriage, the parties had separate bank accounts

and split the payment of bills. Laura paid the rent for their home, the utilities, and

the bulk of the groceries for the family.      Laura did the laundry, the grocery

shopping, the cooking, and was the primary care giver for the children. After she

broke her back at work, Laura received a workers’ compensation settlement of

about $50,000. She “paid off a lot of debt” with the proceeds and bought the kids

some clothes and paid rent.

       Chad paid for the internet, cable TV, telephone, and car insurance. Chad

routinely took the parties’ tax refunds and deposited them in his account where

they “always made [their] way back to the farm somehow.” Chad sold a farm

implement for $49,000 and deposited the money in his account; he lived off that

money for several months, paying bills, going on vacation by himself, and

purchasing bowling and golf items. Chad bowled weekly in the winter and golfed
                                             9


weekly during the season. He owns a golf cart with another person and pays rent

for a building at the golf course to store the cart. He also hunts and fishes. As

Chad summed it up, “Me and my wife have lived separate—basically separate lives

for the majority of the time [of their marriage].”

         In his affidavit of financial status, Chad claimed assets of $66,554.90, and

debts—mostly farm loans—of $186,936.32, leaving him with a net worth of

negative $120,381.32. In her affidavit of financial status, Laura claimed assets of

$11,166.00, and debts—mostly student loans—of $39,100, leaving her with a net

worth of negative $27,934.         In the court’s property division, each party was

awarded their own bank accounts, vehicles, and personal property.1 Chad was

awarded the farm equipment and livestock. Each was saddled with their own debt.

         The district court concluded:

                 Chad would like to walk away with the farming operation and
         its debt. Despite the fact that marital property (the sale of the farm)
         contributed to Chad’s success at farming, Chad wants Laura to have
         none of the substantial value of the farm as an ongoing concern.
                 While neither party called an appraiser or valuation expert to
         testify (the court understands those are expensive), the amount of
         money Chad carried in his account (while Laura was seeking
         financial help elsewhere with Chad’s knowledge), and the fact that
         nearly all the farm’s expenses are depreciation related, the court
         concludes the farm operation is profitable. The court must, even if it
         cannot divide properly equally, divide it equitably.
                 Given the length of the parties’ marriage, the disparity of the
         parties’ incomes, and Laura’s need to establish herself, the court
         thinks an equalization payment is in order.

The district court ordered Chad to pay Laura $70,000 as an equalization payment.

The court noted its determination was “based on a $45,000 annual income from

farming. The court is awarding slightly over half of three years’ farm income,” and


1
    Both parties were upside down on their respective vehicles.
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“[t]his contemplates the sale of the [grandfather’s] farm, the tax refunds, Chad not

paying spousal support, and Laura’s work comp settlement, among other matters.”

       Chad argues the court’s farm-income determination was an error, and he

contends the court should not have included it in making its determination of an

equalization payment. He points to his tax returns as proof there was not “three

years’ worth of profit that Laura should have received by way of a property

settlement.”

       As we concluded above, the district court was in error in concluding Chad’s

farming operation netted $45,000 per year, but we cannot ignore other findings of

fact by the district court:

               The parties maintain separate checking accounts. Chad
       asserted this is because Laura is financially irresponsible. However,
       Laura pays for nearly all of the household expenses (rent, utilities,
       and groceries). She pays for the automobile she drives. Chad pays
       for things like cell phones, cable, and internet services. He seldom
       contributed to the necessary family expenses, and after he left the
       family home, when Laura was behind on the utility bill, he did not do
       anything to help her pay it. When asked if he was concerned that his
       children were in a home with no power, he responded that they could
       stay with him.
               Laura requests that Chad be responsible for one-half of the
       electric bill she incurred.
               Laura says she asked Chad often for money. Chad claimed
       to be unaware Laura needed money. The court found Laura’s
       testimony to be more credible. Laura had to seek assistance outside
       of the marriage, and the court believes Chad was aware of this.
               The parties received significant sums of money during their
       marriage. Chad sold a farm the couple bought. Laura claims she
       was unaware of how much profit was made (there was profit). The
       money was used, according to Chad, to reinvest in his farm operation
       and pay off debt.           Laura received a substantial workers’
       compensation settlement. She claims it was used to pay her debts.
               Laura asserts there should be funds left from the farm sale.
       Chad claims most of the sale proceeds were applied to farm debt.
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It is troubling that marital property, the sale proceeds of the farm, were syphoned

off to Chad’s farming operation with no apparent benefit to the family. On the other

hand, Laura’s workers’ compensation settlement was used to directly benefit the

family.

          Iowa Code section 598.21(5) requires marital property be divided equitably

in dissolution-of-marriage cases. See In re Marriage of Hansen, 733 N.W.2d 683,

702 (Iowa 2007). “The partners in the marriage are entitled to a just and equitable

share of the property accumulated through their joint efforts,” In re Marriage of

Hazen, 778 N.W.2d 55, 59 (Iowa Ct. App. 2009), but it “is important to remember

marriage does not come with a ledger,” In re Marriage of Fennelly, 737 N.W.2d 97,

103 (Iowa 2007). In determining how to equitably divide the property, an “equitable

division is not necessarily an equal division.” Hansen, 733 N.W.2d at 702. Though

“it is generally recognized that equality is often most equitable,” Fennelly, 737

N.W.2d at 102, “[e]quitable distribution depends upon the circumstances of each

case,” Hansen, 733 N.W.2d at 702. Consequently, precedent is of little value. See

McDermott, 827 N.W.2d at 682. “[K]eeping in mind there are no hard and fast

rules governing economic issues in dissolution actions,” we must apply the factors

contained in section 598.21(5) in reaching an equitable division. Id.

          Under all the circumstances presented, we agree with the district court that

“[g]iven the length of the parties’ marriage, the disparity of the parties’ incomes,

and Laura’s need to establish herself . . . an equalization payment is in order.” But

we believe the amount of the district court’s award to be flawed. The district court’s

$70,000 equalization payment award was based upon a $45,000 per annum farm

income. As pointed out previously, this was in error. We calculated, for child
                                        12


support purposes, Chad’s annual farm income to be $3100 a year. We conclude

equites entitle Laura to an equalization payment of $10,000—approximately three

years’ farm income. Chad shall pay this amount to Laura within ninety days of the

issuance of procedendo. We affirm the trial court’s equalization payment award

as herein modified.

       IV. Conclusion.

       We remand to the district court for recalculation of Chad’s child support

obligation under the guidelines while accounting for $3100 annual income

attributed to Chad’s farming operation. We affirm the district court’s award of the

equalization payment to Laura as modified. We affirm the district court’s decree in

all other respects.

       V. Appellate Attorney Fees.

       Finally, Laura requests an award of her appellate attorney fees. Such an

award is not a matter of right but rest within our discretion. See In re Marriage of

Sullins, 715 N.W.2d 242, 255 (Iowa 2006). We consider “the needs of the party

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

the appeal.”

       We decline to award Laura appellate attorney fees.

       AFFIRMED AS MODIFIED AND REMANDED WITH INSTRUCTIONS.
