Opinion
No. A05-2114.
Filed September 12, 2006.
Appeal from the District Court, Aitkin County, File No. F1-04-606.
Lisa Roggenkamp Rakotz, Senior Assistant Aitkin County Attorney, (for respondent Aitkin County Health Human Services)
Cindy Kaye James, (pro se respondent)
Michael W. Jonak, Jonak Law Office, (for appellant)
Considered and decided by Ross, Presiding Judge; Shumaker, Judge; and Wright, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellant challenges the district court's order affirming a child-support magistrate's determination of appellant's past and current support obligation, arguing that the magistrate improperly considered capital gains in setting the support amount and improperly calculated his monthly income. We reverse and remand.
FACTS
Respondents Aitkin County Health Human Services and Cindy Kaye James brought an action against appellant Guy Chilton Smith to establish child support for 12-year-old Miranda Smith, the child of Smith and James, who were never married to each other.
A child-support magistrate (CSM) held an evidentiary hearing and, on May 16, 2005, ordered that Smith pay monthly support of $1,131 and $65.50 for a portion of the child's medical insurance. The CSM also determined that Smith owed $28,431 in support "arrearages" and ordered judgment in that sum. Upon Smith's motion, the district court reviewed the CSM's order and affirmed it.
Smith contends on appeal that the CSM, and the district court, erred by treating his occasional capital gains as periodic income available for child support, by failing to base the support award on his actual income, and by awarding retroactive support.
Smith testified that he had been self-employed for about 20 years in buying, selling, and renting real estate, although, as of the time of the hearing, he had "pretty much gotten out of the rental business." He submitted some income-tax returns and various exhibits. The exhibits showed capital gains of $5,742 for 2001, $21,073 for 2002, $30,667 for 2003, and $61,886 for 2004. He also indicated on the exhibits that for each of the years 2002 through 2004 he received additional income of less than $2,000. The capital gains came from contract-for-deed payments on various properties. Smith testified that nearly all of the contracts had been satisfied as of the hearing date but that he expected to receive $2,003.68 a month from a remaining property in Superior, Wisconsin, and $259 in monthly rental income from a "Summit Avenue" property. He also expected to receive about $50 annually from savings interest. Additionally, he stated that he had savings of $188,000 and a retirement annuity of $104,000 that he is not yet entitled to draw on.
Aitkin County child-support supervisor Ruth Sundermeyer testified that Smith owns 23 parcels of land in the county with an aggregate value of $310,400. There was no evidence that these properties were income-producing. Sundermeyer testified that because Smith is self-employed with fluctuating income and with monthly expenses of $4,754, "I used [his] monthly expenses as an income . . . on a monthly basis." Sundermeyer acknowledged that she had no evidence that Smith received periodic income other than the Superior contract-for-deed payment, the Summit Avenue payment, and savings interest.
Smith did not dispute that his monthly expenses are $4,754 but testified that he is having trouble meeting them and is able to do so by withdrawing savings. There was no evidence that Smith's monthly expense payments came from any sources other than his real estate and interest receipts and his savings.
The CSM determined that Smith's living expenses are $4,654 each month and that he is able to meet them, although he "does tap into his savings to make up any deficit." The CSM found that Smith "consistently reports capital gain income on his income tax returns," and is "engaged in the buying and selling of properties." The CSM found that Smith "earns an average net monthly income of $4,524.23" and made that determination after excluding any consideration of cash savings and real estate assets "other than the capital gains income generated by ongoing purchases and sales of real estate assets."
DECISION
We review a district court's affirmance of a CSM's order for an abuse of discretion. Davis v. Davis, 631 N.W.2d 822, 826 (Minn.App. 2001). An abuse of discretion occurs when child support is set in an amount that does not comport with the facts or when the court misapplies the law. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).
For purposes of child support, "income" is "any form of periodic payment to an individual. . . ." Minn. Stat. § 518.54, subd. 6 (2004). In determining income of a self-employed person, the court may consider that person's lifestyle if "the figures offered do not comport with the evidence of that person's lifestyle." Johnson v. Fritz, 406 N.W.2d 614, 616 (Minn.App. 1987). Furthermore, the court is required to consider all earnings, income, and resources of parents of a child for whom support is to be set. Minn. Stat. § 518.551, subd. 5(c)(2) (2004). When a child-support obligor is voluntarily unemployed or underemployed, an income amount may be imputed to the obligor. See Gorz v. Gorz, 552 N.W.2d 566, 569 (Minn.App. 1996) (noting that income may be imputed to obligor when income is "impracticable to determine") (quoting Beede v. Law, 400 N.W.2d 831, 835 (Minn.App. 1987)). A district court is required to make findings "concerning the amount of the obligor's income used as the basis for the guidelines calculation and any other significant evidentiary factors affecting the determination of child support." Minn. Stat. § 518.551, subd. 5(i) (2004).
The district court determined that Smith derives periodic income in "a substantial amount" from ongoing sales and purchases of real estate, as to which he consistently reports capital gains. On that basis, the district court found that, after deductions for taxes and the child's medical insurance premium, Smith "earns an average net monthly income of $4,524.33."
The record does not support the district court's findings. Although Smith had various capital-gains earnings, at least during 2001 through 2004, the amounts were not consistent from year to year and do not support a finding of monthly income of $4,524.33. Furthermore, there is no evidence of "ongoing" sales but rather Smith testified that only one contract-for-deed remains, the others having been satisfied. The monthly receipts from that contract, even coupled with Smith's rental-property income and savings interest, do not support the monthly income figure the district court arrived at.
It appears that the district court's monthly income figure was based on Smith's monthly expenses and that the district court, without finding that Smith is voluntarily underemployed, implicitly imputed to Smith sufficient income to pay those expenses. But Smith testified, and the district court found, that he is not able to meet his expenses without withdrawing savings. There was no evidence as to what Smith's monthly deficit is but the difference between the income shown in the record (approximately $2,100) and the district court's expense figure ($4,524) is about $2,400. Thus, the district court's findings as to Smith's monthly income for purposes of calculating child support are not supported by the record and a remand is necessary for either a recalculation of Smith's support obligation based on the evidence in the record or for additional findings to support the district court's determination of income as reflected in the support order.
The district court's calculation of Smith's past support obligation suffers the same infirmity. Although the district court is correct that the evidence shows that Smith had the ability to contribute child support in some amount during the period of September 1, 2002, through May 31, 2005, the amount that the district court found owing is not supported by the record and must be redetermined on remand.
Finally, because Smith is obligated to contribute to the support of his child but only to the extent of his honest ability to pay, the district court may, in its discretion, reopen the evidentiary record so as to be able to collect further reliable facts that might be of assistance.