In re Marriage of Naeve

IN THE COURT OF APPEALS OF IOWA

No. 23-1522
Filed March 19, 2025

IN RE THE MARRIAGE OF CRAIG ALAN NAEVE
AND TANIA RENEE NAEVE

Upon the Petition of
CRAIG ALAN NAEVE,
Petitioner-Appellant,

And Concerning
TANIA RENEE NAEVE,
Respondent-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Polk County, Dustria A. Relph,

Judge.

Craig Naeve appeals property-division provisions of the district court’s

decree dissolving the parties’ marriage. AFFIRMED.

Mark R. Hinshaw of The Law Offices of Mark R. Hinshaw, West Des Moines,

for appellant.

Cathleen J. Siebrecht of Siebrecht Law Firm, Pleasant Hill, and J.D.

Hartung of Hartung Schroeder, LLP, Des Moines, for appellee.

Considered by Greer, P.J., and Ahlers and Badding, JJ.
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AHLERS, Judge.

The district court entered a decree dissolving the marriage of Craig and

Tania Naeve, who married in 1996. Craig appeals. He raises two issues, both

related to the decree’s division of property. He contends the property division is

inequitable because the district court (1) treated part of the value of assets he

received as gifts as marital property and divided it and (2) treated him as if he still

owned money he no longer had because he dissipated it. Tania defends the

decree and requests that we order Craig to pay her appellate attorney fees.

I. Standard of Review

As dissolution-of-marriage proceedings are in equity, we review them de

novo. In re Marriage of Mills, 983 N.W.2d 61, 67 (Iowa 2022); Iowa R. App.

P. 6.907. As such, we give weight to the district court’s fact findings, especially as

to credibility determinations, but we are not bound by them. In re Marriage of

McDermott, 827 N.W.2d 671, 676 (Iowa 2013).

II. Division of Property Received as a Gift

As part of entering a decree in any dissolution-of-marriage case, the district

court must equitably divide the parties’ property. Iowa Code § 598.21(1) (2021).

While equitable division does not necessarily mean equal division, equality is often

most equitable. In re Marriage of Keener, 728 N.W.2d 188, 193 (Iowa 2007). To

equitably divide the parties’ property, the court must identify all assets and debts

of either or both parties to include in the marital estate. Id. Inherited property and

gifts received by one spouse are generally excluded from the marital estate and

are not subject to division, as they are set aside as the separate property of the

recipient. Iowa Code § 598.21(6); cf. Keener, 728 N.W.2d at 193. However, gifts
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received by one spouse can be subject to division “upon a finding that refusal to

divide the property is inequitable to the other party or to the children of the

marriage.” Iowa Code § 598.21(6); accord McDermott, 827 N.W.2d at 679.

At issue here are three rental properties Craig received as gifts from his

grandparents. The gift first came to him in 2001 in the form of being named the

beneficiary of his grandparents’ trust that owned the three properties. For the

seventeen years that followed, Craig managed the properties, including

maintaining them, improving them, and collecting rents. In return, Craig received

the income from the trust properties.

Craig owned other properties as part of a rental and flipping business, which

he held in a limited liability company (LLC) of which he was the sole member. Late

in 2018, his grandparents’ trust transferred ownership of the three rental properties

it owned to Craig’s LLC. As a result, Craig’s LLC owned all the rental properties

that he maintained, managed, and improved and from which he received income.

There is no question Craig received the three rental properties at issue as

gifts from his grandparents. Nevertheless, at trial, Tania sought to have the

properties treated as marital property subject to division. Craig sought to have the

properties set aside as his separate property that would not be subject to division.

In determining whether it is inequitable to exempt a spouse’s gift from

division, courts consider five factors: (1) the parties’ contributions to the property

and its care, preservation, or improvement; (2) whether there is an independent

close relationship between the donor and the spouse of the gift recipient;

(3) “separate contributions by the parties to their economic welfare to whatever

extent those contributions preserve the property for either of them”; (4) any special
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needs of either party; and (5) any other circumstances that would make it plainly

unfair to a spouse or child to have the property set aside for the exclusive benefit

of the recipient spouse. McDermott, 827 N.W.2d at 679. Applying those five

factors, the district court found a middle ground between the polar-opposite

positions taken by the parties. The court found the value of the properties when

ownership was transferred from the trust to Craig’s LLC in 2018 to be $252,600,

and their value to be $390,400 at the time of trial—an increase in value of

$137,800. The court awarded the properties to Craig but treated the $137,800

increase in value as marital property. As a result, $137,800 of the value of the

gifted rental properties was counted on Craig’s side of the ledger when the court

compared and generally equalized the respective net worths of the parties.

Craig does not challenge the values found by the district court. Rather, he

contends the entire value of the gifted rental properties should be excluded from

the marital estate and not accounted for on his side of the ledger. In assessing

Craig’s argument, we are mindful that, even with de novo review, we do not disturb

the district court’s property-division ruling unless it fails to do equity. See id. at

676. We find the district court’s approach to be equitable.

The district court thoroughly reviewed the five McDermott factors and

applied them to the facts, which led the district court to conclude equity required

treating the increase in value as marital property. Because we generally agree

with the district court’s reasoning, we find it unnecessary to repeat or restate it in

this opinion. Instead, we simply highlight some of the more important points.

Even before the properties were transferred from the trust to Craig’s LLC in

2018, the family reaped the benefits of the income from the properties to
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supplement the household income. The family continued to reap the benefits of

the income from the properties after the transfer. See In re Marriage of Thomas,

319 N.W.2d 209, 211 (Iowa 1982) (considering the length of the marriage and the

length of time the property was held after it was given as a factor favoring treating

gifted or inherited property as marital property).

Also, while Tania did not directly contribute much in the way of services to

maintain the properties, she was primarily responsible for tackling the tasks

needed to keep the household running and taking care of the child-rearing duties

while also maintaining employment outside the house for much of the marriage.

This freed up time and provided income that allowed Craig to maintain, improve,

manage, and flip the properties—indirectly contributing to the properties increase

in value and continuing to generate income for the family for over two decades.

See In re Marriage of Goodwin, 606 N.W.2d 315, 319–20 (Iowa 2000) (finding that

when the parties enjoyed an improved standard of living over a long period of time

as a result of gifts or inheritance, the property division should enable the parties to

continue the improved lifestyle even if doing so requires division of gifted property).

Finally, while commingling of gifted property with marital property is not

dispositive, it is a factor to consider. See In re Marriage of Soloski, No. 05-0310,

2006 WL 623583, at *5 (Iowa Ct. App. Mar. 15, 2006). Here, there was

commingling. While the gifted properties are traceable, the income generated from

them is not due to a blurring of the line between property of the LLC and property

of the marital household. Rental payments from the properties sometimes made

it into the LLC account, and sometimes they didn’t. Craig admitted to periodically

spending rent received in cash rather than depositing it. Even if the cash was not
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spent on household expenses, whatever it was spent on negated the need to use

the parties’ other assets for those expenditures. See In re Marriage of Van Voorst,

No. 21-0228, 2021 WL 5106054, at *2 (Iowa Ct. App. Nov. 3, 2021) (discussing

the fungible nature of money and its impact on the marital estate). In addition,

household bills were commonly paid from the LLC account, further blurring the line

between the gifted property and marital property.

Under these circumstances, we find nothing inequitable about the district

court’s decision to treat the post-2018 increase in value of the gifted rental property

as marital property.

III. Dissipation

About seven months after filing the dissolution petition, Craig paid his

grandmother $125,000. He contends the payment was repayment of a loan. Tania

contends it was an effort to hide assets by getting the money out of the marital

estate. In other words, she claims he dissipated it. The district court sided with

Tania and included the $125,000 on Craig’s side of the ledger for purposes of

comparing and generally equalizing the parties’ net worths in the property division.

Dissipation occurs when, during the period of separation, one of the

spouses disposes of property or spends marital funds for things other than

“legitimate household and business expenses.” In re Marriage of Kimbro, 826

N.W.2d 696, 700–01 (Iowa 2013) (citation omitted). The remedy when dissipation

occurs is to include the dissipated asset in the marital estate and award it to the

spouse who wasted it, even though that spouse no longer has the asset. Id. at 701.

Analyzing a dissipation claim has two phases. In re Marriage of Fennelly, 737

N.W.2d 97, 104 (Iowa 2007). Under the first phase, the spouse alleging dissipation
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must specifically identify the assets allegedly dissipated. Kimbro, 826 N.W.2d at

701. Then the spending spouse has the burden to “show how the funds were

spent or the property was disposed of by testifying or producing receipts or similar

evidence.” Id. (citation omitted). If the spending spouse makes the initial showing,

the second phase involves the court determining whether the spending or disposal

of assets amounts to dissipation by considering four factors: (1) the proximity in

time of the expenditures in relation to the parties’ separation; (2) “whether the

expenditure was typical of expenditures made by the parties prior to the breakdown

of their marriage”; (3) whether the expenditure benefited the marital enterprise or

was only for the benefit of the spending spouse; and (4) the need for and the

amount of the expenditure. Id.

Craig attempted to prove that he did not dissipate the $125,000 by his

testimony and that of his grandmother. Both testified the payment was for

repayment of a loan the grandmother had extended to Craig years earlier. As

Craig highlighted in his arguments to the district court, this issue largely boils down

to a credibility determination. Unfortunately for Craig, the district court found him

to be lacking in credibility generally and impliedly found the grandmother was not

credible by rejecting her testimony and commenting on her lack of recollection of

details. Even with de novo review, we give considerable weight to these credibility

determinations. See McDermott, 827 N.W.2d at 676.

In addition to the credibility determinations, the district court provided

thorough analysis of the four dissipation factors and concluded the payment was

not for a loan but, instead, was an effort to hide assets. As we agree with much of

the district court’s reasoning, we need not repeat it. It is sufficient to say that we
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agree with the district court’s reasoning and conclusion that Craig dissipated the

$125,000. But we highlight the most damning evidence that defeats Craig’s

challenge—evidence in the form of his own sworn statement. About two months

after the parties separated, Craig filed an affidavit of financial status. The affidavit

separately listed all real estate owned by the parties. For each parcel, Craig

provided information as to the parcel’s value and any encumbrance against it. The

affidavit also listed other debts he owed. Nowhere in that affidavit did he disclose

the $125,000 debt he now claims he owed to his grandmother. No such debt is

listed as an encumbrance on any of the rental properties, and no such debt is listed

under the category of “other debts.” Two months after signing and filing that

affidavit, Craig paid his grandmother $125,000 in supposed repayment of a loan

she extended to him several years earlier—a claimed loan for which the

grandmother had very little recollection as to details, a claimed loan that had never

been mentioned to Tania, and a claimed loan that did not appear on Craig’s

financial affidavit two months earlier.

On this record, including the district court’s credibility determinations

adverse to Craig, we find no inequity in applying the dissipation doctrine to the

$125,000 payment.

IV. Appellate Attorney Fees

Tania seeks an award of appellate attorney fees. An award of appellate

attorney fees rests in our discretion and is not a matter of right. McDermott, 827

N.W.2d at 687. In exercising that discretion, we consider the needs of the

requesting party, the other party’s ability to pay, and the relative merits of the
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appeal. Id. After considering these factors, we deny Tania’s claim for appellate

attorney fees.

V. Conclusion

Finding nothing inequitable about the district court’s decision to treat the

increase in value of gifted property as a marital asset and to apply the dissipation

doctrine to a $125,000 payment made by Craig to his grandmother after the parties

separated, we affirm the district court’s ruling. We also exercise our discretion to

deny Tania’s claim for appellate attorney fees.

AFFIRMED.