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reversing superior court order imputing income to parent because court did not make “a more specific inquiry into her actual present ability to earn” the amount of imputed income
Summary of this case from Sharpe v. SharpeOpinion
Supreme Court No. S-12784.
April 15, 2009.
Appeal from the Superior Court of the State of Alaska, First Judicial District, Juneau, Patricia A. Collins, Judge, Superior Court No. 1JU-02-00982 CI.
Kenneth C. Kirk, Kenneth Kirk Associates, Anchorage, for Appellant. Deborah A. Holbrook, Law Offices of Deborah A. Holbrook, Juneau, for Appellee.
Before: Fabe, Chief Justice, Matthews, Eastaugh, Carpeneti, and Winfree, Justices.
NOTICE
Memorandum decisions of this court do not create legal precedent. See Alaska Appellate Rule 214(d). Accordingly, this memorandum decision may not be cited for any proposition of law or as an example of the proper resolution of any issue.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
1. Petra Delores Gonzalez and Alejandro Reina Bernal were married in Juneau in June 1991. They had two children together. During their marriage Gonzalez and Bernal jointly owned a piece of real property in Juneau known as the "Shattuck Manor." Gonzalez used this property to operate a Medicaid-eligible assisted living business, earning a substantial income. Bernal worked for the Water Department for the City and Borough of Juneau, earning around $52,000 per year.
2. Gonzalez filed for divorce in 2002 and a divorce decree was entered in December 2004. Gonzalez and Bernal negotiated a 50/50 joint custody agreement for their two children. Gonzalez's income from the Shattuck Manor business was found to exceed the $100,000 Civil Rule 90.3(c)(2) cap, and she was ordered to pay $1,048.92 per month in child support to Bernal, based on a $100,000 income for Gonzalez and a $53,958.41 income for Bernal.
3. A property division trial was held in January 2006 before Superior Court Judge Patricia A. Collins. In a February 2006 decision, the superior court valued the Shattuck Manor real property at $475,000 and the Shattuck Manor business operation at $242,000 and awarded both to Gonzalez. The superior court found that "Shattuck Manor has more value as an ongoing business than as a single family residence and that it has significant income-producing capacity." The $242,000 business value was based on the testimony of a certified public accountant who did not perform a formal business valuation.
4. During the property division trial, Gonzalez had expressed her intent to move to Anchorage. In response, when valuing Shattuck Manor the superior court added:
[T]o accommodate Ms. Gonzalez' wish to sell and to insure that the estimated "good will" value of the business is not overstated, the court will allow Ms. Gonzalez up to 90 days to market the property through an independent real estate agent for the highest and best sales price. If that sales price is less than the total of the appraised value ([$475,000]) and the business goodwill value ($242,000), or [$717,000], Ms. Gonzalez may petition the court to review the property distribution.
The superior court mistakenly used an incorrect value in this paragraph, though the correct value was used in the actual property division.
(Emphasis in original.) Neither party appealed the property division.
5. Gonzalez decided to sell Shattuck Manor. In March 2006, in concert with real estate agent Larry Spencer, Gonzalez elected to market the Shattuck Manor real property as a residence, omitting the ongoing business operation from the listing. Gonzalez and Spencer soon entered into an agreement to sell the Shattuck Manor real property and furnishings for $480,000, obtaining no value for the business operation, which the superior court had valued at $242,000. Gonzalez shut down the business, and the closing on the real property occurred in April 2006.
6. Eight months later, in January 2007, Gonzalez filed a Civil Rule 60(b) motion asking the court to modify the property division and the child support order based on the low sale price of the Shattuck Manor real property and Gonzalez's reduced income following the closure of the Shattuck Manor business. In June 2007, following an evidentiary hearing, the superior court denied Gonzalez's motion. Regarding the low sale price of Shattuck Manor, the superior court found that Gonzalez "did not meaningfully attempt to sell Shattuck Manor as a business in any way." In declining to modify the child support order, the superior court found that "it would be unreasonable . . . to find that [Gonzalez's] current income is likely to be more than temporary or is the result of changed circumstances not of her own making and unreasonable under the circumstances." Gonzalez appeals.
7. We affirm the superior court's decision not to modify the property division based on the sale price of Shattuck Manor. If Gonzalez disagreed with the $717,000 total valuation of Shattuck Manor in the February 2006 property division she had two options: (1) appeal the property division, or (2) test the accuracy of the valuation by attempting to sell Shattuck Manor in accordance with the superior court's instructions. She did neither. The superior court found that Gonzalez shut down the business component of Shattuck Manor without making an effort to sell it despite the fact that the superior court had valued it at $242,000 and found that it had "significant income-producing capacity." We cannot say that the superior court's finding that Gonzalez did not meaningfully attempt to sell the business was clearly erroneous, given that Gonzalez agreed to sell the real property alone within two weeks of the property division without ever having advertised Shattuck Manor as an ongoing business operation. Gonzalez would be in a different position if she had actively marketed Shattuck Manor as an ongoing business operation and had been unable to sell it as such, or if she had consulted with the superior court before accepting an offer for the real property alone. Yet instead, she simply shut down the business without allowing the market to test the accuracy of the superior court's valuation. Accordingly, the superior court did not err in refusing to modify the property division based on the sale price of Shattuck Manor.
See Hanson v. Hanson, 125 P.3d 299, 304 (Alaska 2005) (we review the superior court's factual findings for clear error).
8. Although Gonzalez makes a colorable argument that the original $242,000 valuation of the business component of Shattuck Manor was methodologically flawed, this argument could have and should have been raised in a direct appeal of the February 2006 property division, rather than almost a year later in a Civil Rule 60(b) motion. Civil Rule 60(b) "is neither a substitute for an appeal nor a device for obtaining an extension of time for filing an appeal."
Moreover, though discussed in Gonzalez's brief before this court, this argument was not clearly raised in Gonzalez's Rule 60(b) motion.
Rowland v. Monsen, 135 P.3d 1036, 1040 (Alaska 2006).
9. Finally, we remand for further findings on the question whether Gonzalez's child support obligation should be reduced based on her current income. The superior court found that Gonzalez's decision to close the Shattuck Manor business and thereby drastically reduce her income was unreasonable. Child support may be based on an obligor's potential income rather than her actual income "if the court finds the obligor is voluntarily and unreasonably unemployed or underemployed." Given that Gonzalez purposefully shut down her successful assisted living business for reasons that do not bear scrutiny, retaining only one patient, it was not clear error for the superior court to find that Gonzalez was voluntarily and unreasonably underemployed.
Sawicki v. Haxby, 186 P.3d 546, 550 (Alaska 2008).
10. However, given the unique circumstances of this case, it was clear error for the superior court to find that Gonzalez had a potential income of over $100,000 without making a more specific inquiry into her actual present ability to earn that amount of money. Although it may be appropriate for a trial court to use a child support obligor's past income to determine her potential income where the obligor has quit her job but could likely obtain a similar job, in this case Gonzalez's high prior income was inextricably tied to Shattuck Manor, which she no longer owns. It is unclear from the record whether Gonzalez has the ability and opportunity to earn an adjusted income of over $100,000 without Shattuck Manor. More specific evidence and findings are necessary to justify such a conclusion.
See, e.g., id. at 551 (finding that, given child support obligor's "extensive sales experience and savings," it was not error to use the salary she earned at the job she quit as her potential income).
While there is evidence in the record of a demand for assisted living services in Juneau, there is little to support a finding of the income Gonzalez could actually make in that business without Shattuck Manor. Gonzalez's testimony that her current patient pays her $5,000 per month gross, before expenses, cannot substitute for a specific analysis and breakdown of her potential income minus such expenses as rental, remodeling, and patient care costs were she to take on more patients.
We also note that because Gonzalez has fifty percent custody of the children, forcing her to pay more child support than she can actually afford could ultimately hurt the parties' children, rather than helping them.
I agree with all aspects of today's decision except the last: The conclusion that Judge Collins erred in finding that Gonzalez had a potential income of over $100,000. The superior court's finding, which we review under the deferential clear error standard, was abundantly supported by the evidence.
Sawicki v. Haxby, 186 P.3d 546, 551 (Alaska 2008) ("[I]t was not clearly erroneous for the court to impute income of $52,000 to Annie."); see also O'Connell v. Christenson, 75 P.3d 1037, 1039 (Alaska 2003) ("We review decisions to impute income for abuse of discretion. The determination of imputed income is a finding of fact that we will overturn only if clearly erroneous."); Olmstead v. Ziegler, 42 P.3d 1102, 1106 (Alaska 2002) ("In sum, the trial court's determination that Olmstead had the capacity to earn as much as Ziegler is not clearly erroneous.").
Civil Rule 90.3(a)(4) governs imputation of income to a parent that the court has found is voluntarily and unreasonably unemployed (or underemployed): It requires that potential income "will be based upon the parent's work history, qualifications, and job opportunities." Judge Collins made findings on all three, and the findings were supported by evidence that Gonzalez had a potential income substantially above $100,000. A brief examination of the evidence confirms this.
As to work history, Judge Collins found that Gonzalez had been running assisted living homes since 1999, and by 2003 had gross business income of $287,233. In 2004 this figure was $285,858. While noting that accurate calculation of the value of the business owned by Gonzalez was complicated by several factors, the court found that Gonzalez took draws from her business in 2004 of $143,964. There is no question that Gonzalez had a work history that comfortably supported applying the cap amount of $100,000 to her income-earning potential.
These included that Gonzalez "had exclusive use of the income stream from the business since separation," that she had unreasonably chosen not to pay certain bills, and that she "used income from the business to fund personal expenses." The court also found that Gonzalez was not credible: "Ms. Gonzalez has been untruthful in prior representations to the court about her business and her financial dealings. The court is unwilling to `take her word' about [a mandated house sale]." The court also noted that Gonzalez took draws from her business of $143,964 in 2004, the same year she submitted an affidavit to the court stating her annual income to be $18,000.
As to qualifications, Gonzalez was obviously highly qualified in her chosen line of work. As noted, the superior court found that Gonzalez had been running assisted living homes since 1999, and it also found that Gonzalez stated that she hoped to do so again following a planned relocation to Anchorage. (The planned relocation did not occur.) Characterized by the court as "clearly an intelligent business woman," she had the experience of locating homes suitable for assisted living, making the necessary modifications, obtaining state assisted living home licensing, obtaining certification, and dealing with Medicaid, including regulations and funding sources. The court noted Gonzalez's testimony that "when she is gone her assistants can run the business without any assistance from Ms. Gonzalez." Although she was gone for almost half of 2005 on pleasure trips, "the business made more money when she was gone in 2005 than when she was there."
As it turned out, Gonzalez did not move to Anchorage but remained in Juneau. She did, however, continue in the assisted living business.
Finally, as to job opportunities, the evidence showed that the demand for assisted living services in Juneau was high and that the supply was low. Janet Lumiansky, the care coordinator for Southeast Senior Services with Catholic Community Services in Juneau, testified as to the supply of assisted living homes in Juneau: "There is no supply. There is a great demand and there is no supply." She testified that when she received a termination notice for one of her clients (when Gonzalez was closing the facility) she "panicked." The testimony was detailed and unrebutted, and the superior court obviously accepted it when it found as follows: "I heard no evidence that Ms. Gonzalez is unable to take more than the one patient she chose to keep when she elected to close Shattuck Manor, that being a patient that pays, according to her testimony, $5,000 a month for her services." And Gonzalez testified that as of the time of trial she had just moved into a house that could accommodate more patients and was repairing and working on it to bring it up to code for assisted living.
This court's only basis for resisting the conclusion that Gonzalez had a proven income potential of at least $100,000 is its statement that "Gonzalez's high prior income was inextricably tied to Shattuck Manor, which she no longer owns. It is unclear from the record that Gonzalez has the ability and opportunity to earn an income of over $100,000 without Shattuck Manor." This statement is incorrect both factually and legally. It is incorrect factually because there was nothing magic about Shattuck Manor: It was simply a large enough residence to house five clients. Gonzalez had previously located other suitable facilities, was in the process of doing the same thing again, and, as the superior court found, there was "no evidence" that Gonzalez could not take more than the one client she chose to retain in 2006. The statement is incorrect legally because it ignores our standard of review for the trial court's factual findings — clear error — and it ignores the evidence noted above that supports the trial court's findings that Gonzalez could earn at least $100,000 per year running an assisted living business.
In short, the superior court's finding that Gonzalez's income potential was at least at the cap level of $100,000 is fully supported by the evidence and by the court's individual findings concerning job history, qualifications, and job opportunities. There is no reason to burden a busy trial court with proceedings on remand that are unnecessary and will only cost the parties more in lost time and attorney's fees. I respectfully dissent.