Opinion
No. C2-99-563.
Filed January 18, 2000.
Appeal from the District Court, Hennepin County, File No. 222721.
Kelly M. McSweeney, Edward L. Winer, Moss Barnett, P.A., (for respondent)
Brian L. Sobol, Katz Manka, Ltd., (for appellant)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Appellant, Richard J. Papetti, challenges the district court's imputed income determination, child support award, and property distribution. Appellant contends the district court erred in imputing income retroactively to January 1, 1998, and calculating the amount using appellant's gross, rather than net income. Appellant also agrues that the district court improperly calculated his child support obligation and property distribution because it ignored his lack of income, principal mortgage payment, and visitation costs. Respondent, Molly Papetti, argues the district court incorrectly denied her attorney fees claim. Because the district court did not abuse its broad discretion, we affirm the district court's (1) imputation of income to appellant retroactive to January 1, 1998, (2) refusal to deviate downward from the child support guidelines, and (3) refusal to award respondent attorney fees under Minn. Stat. § 518.14 (1994). However, because the district court based imputed income on gross income, failed to consider appellant's mortgage principal payments, and failed to recognize that the children's needs were met out of the marital estate since the separation of the parties, we remand to the district court for reconsideration of appellant's imputed income, child support obligation, and property distribution.
FACTS Background Information
Appellant and respondent met in 1982 while both were purusing an education in Pennsylvania. The parties married on October 13, 1984, in Hopkins, Minnesota, and remained living as husband and wife until they separated on August 7, 1995. There exists an irretrievable breakdown of the parties' marital relationship within the meaning of Minn. Stat. § 518.06 (1994).
In 1984, appellant started with J.P. Morgan Investment Management at a salary of $150,000 per year, but left his position in 1988 because of job dissatisfaction and moved to Weiss, Peck, Greer (WPG), another investment firm in New York City. Before leaving WPG in June of 1994, appellant's income ranged from $400,000 to $900,000 per year. Appellant has not been employed since resigning his position at WPG.
Respondent was unemployed for nearly a year after marrying appellant, but in May of 1985, she was hired at a yearly salary of $29,000 as a banker trainee for a major bank in New York City. However, respondent resigned after two years due to job dissatisfaction. Respondent was subsequently employed as a lending officer at another major bank in New York, but again resigned due to job dissatisfaction after two years. Thereafter, before becoming pregnant with the couple's first child, respondent completed a semester of classes studying for her master's in French Literature at New York University.
In August 1995, the parties separated and respondent moved to Minnesota with the children. Appellant was subsequently diagnosed with Major Depressive Disorder-Single Episode, Severe. Dr. Hall, appellant's treating physician, prescribed medication to relieve appellant's depression in 1995 and wrote two letters in 1997 describing appellant's diagnosis, symptoms, and treatment. The doctor's September 9, 1997 letter stated that appellant exhibited some symptoms of depression regarding the future direction and outcome of the separation and therefore, should not seek a lifestyle or employment likely to involve high levels of stress. In the doctor's November 19, 1997 letter, he stated that appellant had not followed the recommended weekly outpatient therapy and that appellant's anti-depression medication dosage should not be reduced until the events surrounding his divorce have stabilized.
Vocational and Psychological Assessment
In addition, the parties agreed to have Mark Raderstorf conduct psychological and career interest testing of appellant. Raderstorf testified that although appellant had suffered a significant depressive episode and was still suffering its effects, he was selfdramatic, histrionic, and felt he was "damaged goods" incapable of returning to his career field. Even though appellant believed his depression was debilitating until November of 1997, Raderstorf opined that appellant should have recovered from the depression within one year and could have returned to work as soon as August of 1996. Raderstorf also testified that, outside of Wall Street, appellant could have made a base salary of $70,000 per year, with the potential of earning $150,000-$200,000 annually.
As evidence of his diligence and efforts in obtaining new employment, appellant submitted his resume, cover letters, and a summary of employment contacts he had made, but provided no responsive correspondence from potential employers as corroboration of his job search efforts. Moreover, appellant did not present any evidence of "headhunters" or career counselors aiding his job search process.
At trial, appellant testified that he could not handle the stresses of a private sector job and intends to complete his Ph.D. and pursue a career in academia. However, none of appellant's affidavits or submissions to the court summarizing his job search efforts ever mentioned the intent to return to academia. On the contrary, all submissions indicated an intention to seek another job in the private sector.
In its original Judgment and Decree, the district court found that appellant could continue to work in the financial field outside of Wall Street. Despite recognizing the legitimacy and difficulty of appellant's bout with depression, the district court found that appellant could have started searching for a new job in mid-1997. Considering six months reasonable time to find employment, the district court concluded that appellant could have been gainfully employed by January 1, 1998, and has been voluntarily unemployed since that date. Accordingly, the district court awarded child support retroactively to that date and utilized expert opinion to calculate appellant's imputed income as $70,000 per year, which places him at the guideline cap for purposes of determining child support. Despite appellant's request for a downward deviation from the guidelines, the court found that an award of guideline child support was appropriate.
Financial Information
Since the parties' separation, the district court found that respondent has received $480,780 in marital assets. The district court found that respondent's necessary monthly expenses were essentially equal to the amount she had received. The court found that appellant needed $22,232 to support himself after separation, but before the sale of the parties' Connecticut home, and $5,069 per month to meet his necessary monthly living expenses thereafter. Therefore, the district court found that appellant needed a total of $179,371 to support himself after separation. However, appellant has received $233,821 in withdrawals over and above the $110,300 in expenses he has incurred since the separation. In addition, appellant has received an additional $75,863 in household goods and a $28,000 sailboat. Thus, since separation, appellant has received $72,450 over and above his needs. The district court subsequently credited this excess spending against appellant's share of the parties' marital assets for distribution.
ISSUES
I. Did the district court err in imputing income to appellant retroactively to January 1, 1998?
II. Did the district court err by basing its subsequent retroactive child support determination on imputed gross income rather than net income as required by Minn. Stat. § 518.551, subd. 5(b) (1994)?
III. Did the district court err in awarding respondent a windfall of child support payments during the retroactive period of imputed income since the children's needs were met with funds from the marital estate?
IV. Did the district court err in not considering appellant's mortgage principal payments and substantial visitation expenses in determining reasonable expenses for division of the marital property?
V. Did the district court err in denying appellant's request for a downward deviation from the child support guidelines for appellant's significant visitation expenses?
VI. Did the district court err in denying an award of attorney fees to respondent under Minn. Stat. § 518.14 (1994)?
DECISION I.
Appellant argues that the district court erred in imputing income to appellant retroactively to January 1, 1998. An appellate court will not reverse a district court's determination of child support unless it is a clearly erroneous conclusion of law against logic and the facts on the record. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). Prior to 1991, courts required evidence of an obligor's bad faith attempt to decrease or eliminate income to avoid child support obligations before setting child support on an obligor's earning capacity. Franzen v. Borders, 521 N.W.2d 626, 628 (Minn.App. 1994) (citing Schneider v. Schneider, 473 N.W.2d 329, 332 (Minn.App. 1991)). However, following the 1991 amendment to Minn. Stat. § 518.551, subd. 5b(d),
voluntary unemployment that is neither (1) temporary and will ultimately lead to an increase in income nor (2) a bona fide career change that outweighs the adverse effect of the diminished income on the child, is a proper basis for imputing income.
Kuchinski v. Kuchinski, 551 N.W.2d 727, 728-29 (Minn.App. 1996). Minnesota courts have explained that imputing income is only appropriate where the obligor voluntarily chose to be unemployed or underemployed. Murphy v. Murphy, 574 N.W.2d 77, 82 (Minn.App. 1998); see Franzen, 521 N.W.2d at 629 (explaining that courts may impute income if "the support obligor chose to be unemployed or underemployed and neither statutory condition applies").
Relying on Nazar v. Nazar, 505 N.W.2d 628, 635 (Minn.App. 1993), review denied (Minn. Oct. 28, 1993), appellant argues that the district court erred in imputing income retroactively to January 1, 1998, because the court failed to make a specific finding of bad faith. However, the 1991 amendment to Minn. Stat. § 518.551, subd. 5b(d), and Minnesota caselaw make clear that a finding of bad faith is no longer required. Thus, absent a situation qualifying for one of the statutory conditions, a district court may impute income on a voluntarily unemployed or underemployed obligor. Franzen, 521 N.W.2d at 629.
Since appellant does not argue that his voluntary unemployment was intended to ultimately lead to increased income, the first exception to the statutorily required imputed income does not apply. On the issue of whether his unemployment represents a bona fide career change, appellant argued that he plans to work in academia rather than private sector employment. The record shows that appellant did not indicate his plan to return to academia until trial and all previous submissions and job applications or inquiries indicated an intention to return to work in the private sector. Therefore, appellant's unemployment cannot be characterized as a bona fide career change. Because neither statutory condition applies, appellant was voluntarily unemployed under the statute and the district court properly exercised its discretion in imputing income retroactive to January 1, 1998.
II.
Appellant also argues that the district court incorrectly based its current and retroactive child support obligation on an imputed gross income figure of $70,000. An appellate court shall not disturb a determination of net income used to calculate child support absent a finding that it has no reasonable basis in fact. Rouland v. Thorson, 542 N.W.2d 681, 685 (Minn.App. 1996). Although a district court must use net income to calculate child support, net income may be based on an obligor's earning capacity. See Minn. Stat. § 518.551, subd. 5(b) (1994) (explaining that "[t]he court shall derive * * * child support by multiplying the obligor's net income * * *"); Roatch v. Puera, 534 N.W.2d 560, 564-65 (Minn.App. 1995) (basing net income on earning capacity because it was impracticable to determine obligor's actual income). Appellant does not challenge the use of appellant's earning capacity to determine income for the purpose of setting child support. Instead, he argues that the district court improperly used his gross income for the calculation. Although a district court's net income determination will not be disturbed if it has a reasonable basis in fact, this court cannot uphold a child support award erroneously based on gross income. Minn. Stat. § 518.551, subd. 5(b); Rouland, 542 N.W.2d at 685.
In setting appellant's earning capacity at $70,000 and calculating his child support obligation accordingly, the district court did not explain whether the imputed income figure represented appellant's gross or net income. Minnesota law requires a district court to calculate child support obligations on a net income figure. Minn. Stat. § 518.551, subd. 5(b). Because it is not clear whether the district court used appellant's gross or net income, we reverse and remand the matter to the district court to reconsider appellant's child support obligation using his net income.
III.
Next, appellant argues that, even if this court deems it appropriate to impute income retroactively to January 1, 1998, the child support award produces a windfall for respondent. More specifically, because funds from the marital estate were used to meet the needs of the children during the period of retroactive support, appellant contends that the retroactive child support award requires him to reimburse respondent for her share of the child support. A district court has considerable discretion in setting child support and its decision will only be reversed if it is a clearly erroneous conclusion that is against logic and the facts on the record. Rutten, 347 N.W.2d at 50.
Although the district court found that appellant owed respondent $20,826 as retroactive child support for 1998, the district court did not issue findings of fact regarding actual 1998 child support expenses. Appellant concedes that the district court is entitled to award retroactive child support according to an imputed net income figure. However, because the children were supported throughout the period of retroactive support by marital estate funds, appellant argues that the district court is requiring him to reimburse respondent for her half of the child support. Despite the considerable discretion accorded to a district court's child support determination, it will not be upheld if it is a clearly erroneous conclusion against logic and contrary to the facts on the record. Rutten, 347 N.W.2d at 50.
Respondent withdrew $20,826 from the parties' joint marital account for child support over the period of retroactive support. Therefore, it would contravene logic to require appellant to pay that entire amount in retroactive child support. Moreover, because there are no findings of fact regarding the actual child support expenses over the period of retroactive support, we reverse and remand this matter to the district for reconsideration of appellant's retroactive child support obligation.
IV.
While appellant contends that the district court erred by not considering his mortgage principal and substantial visitation costs as reasonable expenses, respondent argues that the district court undervalued appellant's dissipation of marital assets. The district court has broad discretion in its dividing property in marriage dissolution proceedings. See Rutten, 347 N.W.2d at 50 (explaining that the district court's decision should be upheld unless it is a clearly erroneous conclusion that contravenes logic and the facts on the record). Minn. Stat. § 518.58, subd. 1 (1994), requires a just and equitable division of marital property, but courts are not mandated to provide a mathematically equal division of property. Bury v. Bury, 416 N.W.2d 133, 136 (Minn.App. 1987) (citing Olness v. Olness, 364 N.W.2d 912, 915 (Minn.App. 1985)). A spouse may not conceal, dissipate, or misuse assets in anticipation of divorce to reduce the property available for division or reduce the standard used to determine child support obligations. Bollenbach v. Bollenbach, 285 Minn. 418, 428, 175 N.W.2d 148, 155 (1970). When a party in a marriage dissolution proceeding liquidates or spends a marital asset, the court may count its full value in dividing the property. Quick v. Quick, 381 N.W.2d 5, 8 (Minn.App. 1986) (citing Swanstrom v. Swanstrom, 359 N.W.2d 634, 638 (Minn.App. 1984)).
The district court found that appellant had paid the joint obligations of the parties since separation in an amount totaling $110,300. This amount represented payments made for mortgage interest, property improvements, home care, taxes, automobile insurance, storage and moving expenses. The district court concluded that appellant needed $179,371 to support himself after the separation, but received cash withdrawals in the amount of $251,821, $75,863 in household goods, and a Dufour sailboat valued at $28,000. In summary, concluding that appellant received $72,450 in funds over and above his needs, the district court decided to credit the difference between appellant's needs and the additional funds he received from the parties' assets against his share for property distribution.
Although the district court considered his post-separation mortgage interest payments, appellant argues that it failed to consider the fall amount spent on maintaining the first and second mortgages on the Connecticut homestead. Respondent argues that the district court erred in relying on appellant's figures for calculating the excessive spending. Instead, respondent contends that her figures provide a more accurate reflection of appellant's post-separation spending because it calculates appellant's total spending from July 1996, the onset of these proceedings, to October 1998. Over that period, respondent's figures show that she spent $297,707. After deducting checks made to respondent, the amount the court found necessary to support appellant, and deductions for self-storage, auto insurance and common moving expenses, respondent contends that the evidence reflects excess spending of $117,268, not $72,450. Moreover, since respondent's figures and method for calculating appellant's post-separation expenses do not begin until after the May 1996 sale of the Connecticut homestead, appellant's argument that the district court did not credit the mortgage principal payments would not be applicable.
Despite respondent's argument that her figures more accurately reflect appellant's post-separation expenses, the district court's choice to use appellant's figures to compute the excess spending was not clearly erroneous. See Rutten, 347 N.W.2d at 50 (upholding the district court's property division determination unless it is clearly erroneous). To the extent the district court did not consider the mortgage principle payments on the first and second mortgages or include them as reasonable expenses, the district court's property distribution is flawed. See March v. March, 435 N.W.2d 569, 572 (Minn.App. 1989) (holding that the use of marital assets for necessary living expenses is not a dissipation of assets); Volesky v. Volesky, 412 N.W.2d 750, 752 (Minn.App. 1987) (explaining that dissipation is the frivolous, unjustified spending of marital assets). Because it is not clear to what extent the district court considered the first and second mortgage principal payments on the Connecticut homestead as a necessary expense, we remand the matter to the district court for reconsideration of the property distribution.
With regard to appellant's argument that his visitation expenses were not considered, the district court reviewed the figures submitted by each party and reduced each party's reasonable monthly living expenses. Specifically, the district court reduced appellant's visitation expenses from $1,339 to $640 per month. Because the district court considered appellant's visitation costs in determining his reasonable monthly living expenses and has broad discretion in its property distribution determination, we cannot say the district court abused its discretion.
V.
Next, appellant argues that the district court erred in denying his request for a downward deviation from the child support guidelines. A district court's child support determination will only be reversed upon a finding that it is clearly erroneous and against logic and the facts on the record. See State v. Hall, 418 N.W.2d 187, 188 (Minn.App. 1988) (citing Moylan v. Moylan, 384 N.W.2d 859, 864 (Minn. 1986) and Rutten, 347 N.W.2d at 50). "The statutory child support guidelines are a starting point for the determination of a support award." Hall, 418 N.W.2d at 188 (citing Moylan, 384 N.W.2d at 863). In order to depart from the guidelines, a court must make express findings regarding the reasons for the deviation pursuant to the factors enumerated in Minn. Stat. § 518.551, subd. 5(b). Hall, 418 N.W.2d at 189. A party requesting a departure from the guidelines must provide evidence regarding the parties' financial situations, the children's needs, and the standards of living to which the children are entitled. Buntje v. Buntje, 511 N.W.2d 479, 481 (Minn.App. 1994).
Since appellant lives in New York City and respondent and the children reside in Minnesota, visitation requires appellant to obtain transportation and lodging in Minnesota and provide food and entertainment for the children until they are old enough to travel to visit him. Considering his unemployed status, appellant argues he has justifiable, significant, and ongoing visitation expenses entitling him to a downward deviation from the child support guidelines. Although neither party has any special needs, appellant asserts that both parties have a desire to maintain a good relationship and develop experiences with the children. Given the financial situation of both parties, neither parent would be able to maintain a lifestyle commensurate with appellant's prior income and standard of living. In summary, appellant argues that he has presented persuasive evidence sufficient to permit a downward deviation in child support without jeopardizing the best interests of the children. See Buntje, 511 N.W.2d at 581 (requiring evidence of parties' financial situation, special needs, and standard of living).
However, since appellant did not move for amended findings of fact, the scope of review is extremely narrow. A district court has broad discretion in determining child support and its decision will only be reversed upon a finding that it is clearly erroneous and against logic and the facts on the record. Hall, 418 N.W.2d at 188. At trial, it was revealed that appellant may not have traveled to Minnesota as often as claimed and that respondent took the children east to visit appellant. Because the district court has broad discretion in setting child support and the facts on the record support its decision to reduce appellant's claimed visitation costs, it cannot be said that refusing to deviate from the guildelines was clearly erroneous.
VI.
Respondent contends that the district court erred in refusing to award her attorney fees. Awarding attorney's fees and expenses is a matter within the trial court's broad discretion. Fredericksen v. Fredericksen, 368 N.W.2d 769, 778 (Minn.App. 1985). An attorney fees determination will only rarely be overturned on appeal. Burns v. Burns, 466 N.W.2d 421, 424 (Minn.App. 1991); see Burton v. Burton, 365 N.W.2d 310, 312 (Minn.App. 1985) (explaining that discretion whether to allow attorney's fees in a dissolution proceeding is almost exclusively within the province of the trial court), review denied (Minn. May 31, 1985). In determining whether an award of attorney fees is appropriate, a court should consider the party's need for financial assistance to enable the party to protect their rights in the dissolution proceeding. Minn. Stat. § 518.14 (1994); Fredericksen, 368 N.W.2d at 778. Minn. Stat. § 518.14, subd. 1, states:
[T]he court shall award attorney fees * * * in an amount necessary to enable a party to carry on or contest the proceeding, provided it finds:
(1) that the fees are necessary for the good-faith assertion of the party's rights * * * and will not contribute unnecessarily to the length and expense of the proceeding;
(2) that the party from whom fees * * * are sought has the means to pay them; and
(3) that the party to whom fees * * * are awarded does not have the means to pay them.
The district court denied respondent attorney fees because, although neither party earned an income, each would receive sufficient assets from the property settlement to cover attorney fees. In fact, respondent received in excess of $500,000 from the property settlement. Because the record supports the conclusion that respondent has ample funds to meet her legal expenses, the district court did not abuse its discretion in denying her attorney fees.
However, respondent argues that Minnesota courts have awarded attorney fees in cases involving substantial property awards. See Lyon v. Lyon, 439 N.W.2d 18, 21 (Minn.App. 1989) (upholding an award of attorney fees because it cannot be said that "the trial court, in the exercise of its good judgment, could not have factored in the attorney fee award to the wife"); Bury, 416 N.W.2d at 138-39 (holding that the trial court did not abuse its discretion in awarding one-half of respondent's reasonable attorneys fees in light of the parties' relative financial resources, the nature of the assets awarded to each, and each parties' earning capacity). Although a sizeable award of assets does not preclude an award of attorney fees, such awards are inappropriate absent a disparity in incomes or the property awarded. Bury, 416 N.W.2d at 138 (citing Witeli v. Witeli, 392 N.W.2d 756, 758 (Minn.App. 1986)). Since the district court equally divided the property between the parties and found that neither party currently has an income, the district court did not abuse its discretion when it concluded that the significant assets received from the property settlement amply equipped respondent with the resources to pay her own attorney fees.
Nevertheless, respondent argues that a district court is also authorized to exercise its discretion in awarding additional fees against a party who unreasonably contributes to the length of the proceeding. Minn. Stat. § 518.14, subd. 1; see Dabrowski v. Dabrowski, 477 N.W.2d 761, 766 (Minn.App. 1991) (allowing attorney fees where party's behavior unjustifiably increased cost of litigation regardless of the relative financial situations of the parties). Respondent contends that Minnesota courts regularly award conduct-based attorney fees because "[flinancial resources are not the sole rationale for awards." Holder v. Holder, 403 N.W.2d 269, 271 (Minn.App. 1987). A court may award attorney fees on the basis of the impact a party's conduct had on the costs of the litigation. Id. at 271; see Burton, 365 N.W.2d at 312 (ordering husband to pay wife's fees because his conduct required opposing counsel to spend significantly more time on the dissolution than would have been required had the husband cooperated). Respondent argues that appellant's voluntary unemployment, refusal to agree to reasonable property advances, and jurisdictional challenges unnecessarily added to the cost and length of this litigation. Considering the breadth of the district court's discretion regarding attorney fees awards and the lack of any district court findings regarding conduct that would justify awarding such fees, it cannot be said that the district court abused its discretion in denying respondent attorney fees.