Opinion
No. C5-02-49.
Filed July 2, 2002.
Appeal from the District Court, Dakota County, File No. F9979314.
John R. Kempe, (for respondent)
Thomas W. Tuft, Valerie A. Downing Arnold, (for appellant)
James C. Backstrom, Dakota County Attorney, Pamela L. Zielske, Assistant County Attorney, (for intervenor)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Steven Schmidt appeals the district court's application of a cost-of-living adjustment to his child-support obligation. Because the record supports the finding that Steven Schmidt had a sufficient increase in income to provide a cost-of-living adjustment and because the dissolution judgment provides for a cost-of-living adjustment in addition to step increases, we affirm.
FACTS
The judgment dissolving Lori and Steven Schmidt's 20-year marriage incorporated the terms of a marital-termination agreement that calculated child support for the Schmidts' three children. The stipulated agreement provides that Steven Schmidt will pay as support the guideline amount on the first $85,000 of his net earnings, 22% of his gross commissions or bonuses, and 24% of gross income from any other source. The dissolution judgment also provides that Steven Schmidt's child-support payments are subject to cost-of-living adjustments, and the appendix to the judgment contains a notification on the application of cost-of-living adjustments. The Schmidts, by stipulation, twice amended the original judgment and decree, but did not modify the child-support formula or cost-of-living adjustment provisions.
Steven Schmidt brought two motions, one in 1999 and one in 2001, requesting that the cost-of-living adjustments provided for in the judgment and decree not take effect. He contended that the child-support formula already takes into account a cost-of-living adjustment by providing for a percentage payment of his bonuses and salary increases over $85,000 per year. The child-support magistrate denied both motions, noting that Steven Schmidt had failed to demonstrate an insufficient increase in income to justify withholding the cost-of-living adjustment. In the 2001 order, however, the child-support magistrate increased the $85,000 salary cap by the 7.9% cost-of-living adjustment so that Steven Schmidt would pay 24% of his salary that exceeds $91,715, instead of $85,000, in child support. In that same order, the magistrate specifically found that because Steven Schmidt's income had increased by 16.5%, he had the ability to meet the adjusted child-support payments.
Lori Schmidt filed a motion for review of the child-support magistrate's increase to the salary cap. The district court reversed the child-support magistrate's increase to the salary cap, holding that the child-support magistrate had exceeded its limited scope of discretion for cost-of-living adjustment motions.
Steven Schmidt now appeals the finding that his income increased by 16.5% and the implementation of the cost-of-living adjustment or, in the alternative, the reversal of the child-support magistrate's increase in the salary cap. Lori Schmidt argues that collateral estoppel prevents the relitigation of whether the cost-of-living adjustment applies. Dakota County filed a brief as an intervenor, arguing that the district court properly applied the cost-of-living adjustment to the child-support payments.
DECISION I
We will reverse a district court order to modify child support only if "the court abused its broad discretion by making a clearly erroneous conclusion that is against the logic and the facts on [the] record." Gully v. Gully, 599 N.W.2d 814, 820 (Minn. 1999) (quotation omitted). A finding is clearly erroneous only when we are left with a "definite and firm conviction that a mistake has been made." In re Guardianship of Dawson, 502 N.W.2d 65, 68 (Minn.App. 1993) (quotation omitted), review denied (Minn. Aug. 16, 1993).
Steven Schmidt argues that the child-support magistrate erred by finding that his income had increased 16.5%, from $85,832 at the time of the first cost-of-living hearing in 1999 to $100,000 at the time of the second cost-of-living hearing in 2001. He further argues that this error forms the basis for the court's erroneous conclusion that he had a sufficient increase in income to pay the 7.9% cost-of-living increase in the base bi-monthly child-support payments. He contends that, had the child-support magistrate taken into account that $33,461 of his 1999 income was a bonus, his remaining income from 1999 to 2001 would have decreased by more than $25,000.
Steven Schmidt's argument that the child-support magistrate failed to take into account his bonus income when determining an increase in net income is not germane to the issue of the propriety of imposing the cost-of-living adjustment. Because the parties' unique child-support-calculation formula treats bonuses separately from base income, the relevant inquiry is whether Steven Schmidt's base income increased. The child-support magistrate's finding of a 16.5% increase in base income (from $85,832 to $100,000) relies on Steven Schmidt's testimony and his 1998 W-2 forms. Because the child-support magistrate's finding that a 16.5% increase in base income occurred is supported by the evidence, the magistrate did not clearly err in finding that Steven Schmidt had a sufficient increase in income to meet the 7.9% cost-of-living adjustment to the base child-support payments.
II
In reviewing a child-support magistrate's decision or a district court's decision on a cost-of-living adjustment, we apply an abuse-of-discretion standard. See Braatz v. Braatz, 489 N.W.2d 262, 264-65 (Minn.App. 1992) (noting that district court has discretion to determine whether COLA should take effect), review denied (Minn. Oct. 28, 1992) ; McClenahan v. Warner, 461 N.W.2d 509, 511 (Minn.App. 1990) (noting same). We will reverse only when the decision was outside the district court's broad discretion or was a "clearly erroneous conclusion that is against logic and the facts on the record." Id.
Minn. Stat. § 518.641, subd. 1, provides that all orders establishing, modifying, or enforcing child support "shall provide for a biennial adjustment in the amount to be paid based on a change in the cost of living." Minn. Stat. § 518.641, subd. 1(a) (Supp. 2001). The purpose of the cost-of-living adjustment is to meet the needs of the children as those needs become more expensive due to inflation. McClenahan, 461 N.W.2d at 511. But the court may waive the cost-of-living requirement if it expressly finds that the order establishing child support already contains a provision that has the same effect as a cost-of-living adjustment. Minn. Stat. § 518.641, subd. 1(b).
Steven Schmidt argues that the child-support magistrate and the district court erred by ordering him to pay an adjusted child-support payment because the parties' child-support formula already provides a mechanism that has the same effect as a cost-of-living adjustment. We reject this argument for two reasons. First, Steven Schmidt expressly agreed to the inclusion of the cost-of-living provisions in the original judgment and decree, and, despite twice stipulating to changes that resulted in amended judgment and decrees, the cost-of-living provisions remained unchanged. Second, neither the child-support magistrate nor the district court found that the formula had the same effect as a cost-of-living adjustment. See Minn. Stat. § 518.641, subd. 1(b). The failure to make this finding is not clearly erroneous because the child-support formula in the original judgment and decree only increases the child-support obligation as bonuses and income increase; it does not provide for a more general, cost-of-living adjustment based on the inflationary costs of the needs of the children. See McClenahan, 461 N.W.2d at 511; see also Minn.R.Civ.P. 52.01 (stating that only clearly erroneous finding will be set aside); Dawson, 502 N.W.2d at 68 (providing that factual findings are reviewed under standard for clear error).
In the alternative, Steven Schmidt argues that the district court erred by reversing the child-support magistrate's increase in his salary cap by the 7.9 cost-of-living percentage. Case law mandates that, on a motion to withhold the cost-of-living adjustment, the district court and the child-support magistrate's discretion is "limited to granting or denying a cost-of-living adjustment." McClenahan, 461 N.W.2d at 511 (contrasting child-support modification motion with cost-of-living adjustment motion); Braatz, 489 N.W.2d at 264 ("The district court's discretion * * * is limited to determining whether all or part of the cost-of-living adjustment should not take effect."). The district court did not err in reversing the child-support magistrate's increase of the salary cap by the cost-of-living percentage. The more appropriate vehicle to effect an increase in the salary cap is a motion to modify the child-support obligation under Minn. Stat. § 518.64 (Supp. 2001).
The district court determined the application of the cost-of-living increase on the merits. Because we affirm the district court's order, we do not reach Lori Schmidt's alternative argument that collateral estoppel bars relitigation of the issue of whether the cost-of-living adjustment applies.