Opinion
No. A04-2318.
Filed August 16, 2005.
Appeal from the District Court, Hennepin County, File No. Dc 248023.
Susan M. Lach, Messerlie Kramer, P.A., (for appellant)
Andrew M. Silverstein, Andrew M. Silverstein Law Office, L.L.C., (for respondent)
Considered and decided by Peterson, Presiding Judge; Schumacher, Judge; and Minge, 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This opinion will be unpublished and may not be cited except as provided by Minn.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UNPUBLISHED OPINION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 modification of respondent's spousal maintenance and child support obligations. Because the district court did not abuse its discretion in determining that respondent was not voluntarily underemployed, we affirm in part. Because it appears that the district court made a computational error in determining child support, we reverse in part and remand.
FACTS
Appellant Marcia Maureen Mackey and respondent Christopher Evans Mackey were married in 1974. In October 1999 their marriage was dissolved. The parties have one minor child who was born on February 6, 1990. The dissolution judgment orders respondent to pay $5,500 per month for spousal maintenance for the first year and $5,000 per month after the first year and to pay $1,484 per month for child support.
Respondent has failed to meet his child support and spousal maintenance responsibilities under the 1999 judgment. He only paid $10,350 of maintenance in 2003, no maintenance in 2004, and in 2004 has been behind on his child support. As of August 2004, respondent owed appellant $101,281 in arrearages.
In 2004, appellant initiated the present proceeding, requesting that the district court find respondent in contempt for his lack of compliance with the 1999 judgment, order an accounting of respondent's retirement fund, and award her attorney fees. Respondent filed a responsive motion requesting a suspension or reduction of spousal maintenance, a reduction of child support obligations and a denial of appellant's motion. Appellant moved to deny respondent's motions and require him to comply with the judgment requirements regarding life insurance.
At the time of the dissolution, respondent was a vice president at Bankers Life and Casualty Insurance Company ("Bankers") earning $225,000 per year. As a result of changes at Bankers, respondent took a position as a branch manager until October 2003, at which point he was told he would be demoted, so he resigned his branch manager's position and became an agent. Respondent remarried. In the fall of 2003, he and his spouse set up an office to sell Bankers insurance on a commission basis. Respondent determined that he was not earning enough money to meet his expenses and investigated other business opportunities. Respondent testified that the downward spiral of his insurance career, including his inability to earn a living in insurance sales, was due to problems in the insurance industry in the aftermath of "9/11" and the bankruptcy of Conseco, Inc., the parent company of Bankers. Respondent went on to state that this high-profile corporate collapse resulted in unfavorable publicity for Bankers; about 70% of its employees were laid off in 2002 and 2003. The record indicates that together respondent and his spouse had taxable income of $75,811 in 2002 and $50,726 in 2003.
Respondent decided to open a franchise sandwich shop as a new business venture. He and his spouse had invested approximately $35,000 in the business at the time of the hearing, and he estimated that total start-up costs will be $247,550. Respondent was pursuing a $150,000 loan from the Small Business Administration, but stated that the loan was on hold until his support arrearages were resolved. Respondent stated that he probably would not be able to meet the 1999 support obligations if he only opened one franchise store, but that he hoped to open several shops over two or three years. Respondent testified that he had hired a restaurant consultant to work with him to develop a business plan and projected an operating income of about $80,000 in the first year.
At the time of the dissolution, appellant ran a daycare out of her home and had an annual gross income of about $4,800. Business improved; she had taxable income from daycare of $6,740 in 2002 and $11,668 in 2003. If home-related expenses are disregarded, her gross income was substantially greater. Appellant also is renting rooms in her house. During the summer before the hearing, appellant was receiving $900 per month in rent and was seeking additional renters.
The district court found the following: that there had been a substantial change in the financial circumstances of both parties, making the child support and spousal maintenance requirements in the judgment unreasonable and unfair; that respondent's job changes at Bankers were due to market forces; that although respondent had not made an attempt to find comparable, new employment, he made a reasonable effort to sustain his earnings at Bankers; that because respondent had been employed in positions that paid substantially less for two years, it is unlikely he could find employment comparable to the executive positions that he held at Bankers; that respondent's decision to start a new business was made in good faith to meet his support obligations; that it would be one or two years before he could possibly make child support payments comparable to those in the original judgment; and that, at best, respondent's net monthly income is $3,300; and that the guidelines child support would be $525 per month.
The district court ordered that respondent provide an accounting of his retirement fund, ordered respondent to make his life insurance policy payable to appellant, denied appellant's motion for attorney fees, reduced child support to $525 per month and spousal maintenance to $500 per month, ordered respondent to provide appellant with quarterly profit and loss statements for the new business, and denied all other motions. This appeal follows.
DECISION
A district court's modification of child support will be set aside only if it abused its broad discretion. Putz v. Putz, 645 N.W.2d 343, 347 (Minn. 2002). This occurs if the district court reaches a "clearly erroneous conclusion that is against logic and the facts on the record." Id. The district court must exercise this discretion within the limits set by the legislature. Id.; Moylan v. Moylan, 384 N.W.2d 859, 864 (Minn. 1986).
I.
The first issue is whether the district court abused its discretion by determining that respondent's decision to start a new business did not constitute voluntary underemployment. A child support order may be modified if the moving party shows a substantial change in circumstances that makes the existing support award unreasonable and unfair. Minn. Stat. § 518.64, subd. 2(a) (1) (2004); Putz, 645 N.W.2d at 348. A parent's responsibility for child support is based on net income and ability to pay. Minn. Stat. § 518.551, subd. 5 (2004); Schneider v. Schneider, 473 N.W.2d 329, 332 (Minn.App. 1991). A court can impute income to a parent for the purpose of support if the parent is voluntarily unemployed or underemployed. Minn. Stat. § 518.551, subd. 5b(d) (2004). A parent is not considered underemployed if the parent shows that the underemployment: "(1) is temporary and will ultimately lead to an increase in income; or (2) represents a bona fide career change that outweighs the adverse effect of that parent's diminished income on the child." Id.
When examining an obligor's decision to make a career change, a court examines whether the change in career was made in good faith. Giesner v. Giesner, 319 N.W.2d 718, 720 (Minn. 1982); see Putz, 645 N.W.2d at 351 (holding that a court can consider whether underemployment is in bad faith toward a party's support obligation). When determining a party's subjective good faith, it is important to look at whether there is intent to try to meet obligations, including support and maintenance obligations. See Giesner, 319 N.W.2d at 720. A court should consider such factors as the party's ability to work, opportunity to find gainful employment, disposition and will to earn money and contribute to his family's support, and diligence in seeking employment. Garcia v. Garcia, 415 N.W.2d 702, 705 (Minn.App. 1987). Bad faith is found where a party unjustifiably self-limits personal income. Schneider, 473 N.W.2d at 332. If the change is made in good faith, the child and separated spouse will share in the hardship and benefits as if the family had stayed together. Giesner, 319 N.W.2d at 720.
The district court found that respondent acted in good faith in order to meet his obligations. The court based this finding on the fact that respondent had devoted significant commitments of time and money to starting the sandwich shop business. The district court found that the venture appeared to be well planned and have a reasonable prospect of success.
Appellant argues that the finding that this was a bona fide career change that outweighed the adverse effect of any diminished income is erroneous for several reasons, including that respondent did not actively seek other employment after he lost his high-paying insurance positions as vice-president and branch manager and that respondent did not introduce evidence regarding the lack of available jobs within or outside of his field. The extent of a party's job search can be a sign of a good faith effort to find adequate replacement employment and helps to determine the availability of jobs that match the individual's qualifications. See Darcy v. Darcy, 455 N.W.2d 518, 523 (Minn. App. 1990) (finding of inadequate job search was erroneous because obligor sent out 1,500-2,000 resumes and contacted all companies that he knew had similar positions).
Here, an extensive job search would have better demonstrated opportunities available to respondent in the insurance industry. However, the district court found that respondent in this case made a good faith effort to continue employment in the insurance field by remaining with Bankers. This supports the conclusion that respondent had a disposition and will to earn money and contribute to his family's support. See Garcia, 415 N.W.2d at 705.
Although a district court should consider the parent's qualifications and the availability of jobs before concluding a parent has not made a sufficient effort to maintain employment, Schneider, 473 N.W.2d at 332, this does not mean that the court must exhaustively consider these factors before finding that a career change was made in good faith. In any event, the district court concluded that respondent's continued work at Bankers after two substantial demotions as a result of market forces indicated that it was unlikely that there were significant opportunities elsewhere within the industry. The district court indicated that if there were such opportunities, respondent would have taken them. Respondent's testimony about the downturn in the insurance industry and the disastrous events at Bankers supports this finding, explains why respondent suffered considerable decreases in earnings, and supports the finding that respondent continued to try to earn enough money to meet his obligations.
Appellant contends that there is insufficient evidence to support a finding that respondent's business venture will lead to an increase in income. Respondent is only required to show that he has in good faith made a bona fide career change because that is the basis of the district court's decision determining that respondent is not voluntarily underemployed. See Minn. Stat. § 518.551, subd. 5b(d); cf. Putz, 645 N.W.2d at 352-53 (stating that an obligor claiming that underemployment is temporary and will lead to increased earnings must provide evidence to overcome his burden by showing the certainty of increased earnings). Appellant argues that respondent's statement that the loan from the Small Business Administration was on hold due to arrearages until the child support matter was resolved means that respondent's business venture could not proceed as long as he owed the arrearages. Respondent made this statement, but did not contest his duty to pay arrearages. The district court could have justifiably believed that respondent could obtain the loan from another source or believed that the lender would still make the loan even if that amount was owed, but wanted to make sure that there were not additional amounts for which respondent would be liable. Respondent in this case presented both a business plan drawn up with the help of an experienced restaurant consultant and the franchise agreement, which showed that appellant's venture had a substantial chance of being profitable and providing him with enough income to meet his support and maintenance obligations. The issue is not whether the appellate court or the appellant would invest in a sandwich shop venture; it is whether there is substantial evidence in the record that supports the district court's findings. We conclude that, based on the record, the district court's finding that respondent's business venture was made in the good faith belief that it would produce sufficient income to meet his obligations was not clearly erroneous.
Appellant further contends that the district court erred because it failed to explicitly address the adverse effect of reduced support on the child. Minn. Stat. § 518.551, subd. 5b (d), states that voluntary underemployment does not exist if the underemployment "represents a bona fide career change that outweighs the adverse effects of that parent's diminished income on the child." The effect on a child of a change in careers appears to be built into a finding of good faith, because the finding of good faith in making the career change includes a consideration of whether a parent is trying to adequately meet obligations to support the spouse and any children. See Giesner, 319 N.W.2d at 720; Garcia, 415 N.W.2d at 705. In this case, respondent is currently unable to earn enough money to meet his obligations under the 1999 judgment. The district court found that with this new business respondent would probably be able to make comparable payments to those under the 1999 judgment within one to two years. The business plan and respondent's testimony indicate that the business venture has a reasonable chance of succeeding and providing income of approximately $80,000 within the first year, allowing respondent to provide support for his child. In the meantime, because respondent is required to pay child support based on an income of $50,000 and because appellant has income, there will be funds to provide for the minor child.
II.
The next issue is whether the district court erred in its computation when setting child support. The district court found that, based on an annual income of $50,000 in 2003, respondent's net monthly income would be $3,300 and the amount of support required under the guidelines is $525. Actually, the guidelines provide that respondent's net monthly income should be multiplied by 25%, which would set respondent's child support obligation at $825. Minn. Stat. § 518.551, subd. 5(b) (2004). The district court made no findings stating reasons for deviating from the guidelines, as required by the statutes. See id., subd. 5(i). When the district court makes a clerical error in computing child support, the appellate court can correct the error and affirm as modified. Svenningsen v. Svenningsen, 641 N.W.2d 614, 617 (Minn.App. 2002). However, in this case there is ambiguity regarding the earnings of respondent's current spouse and the part, if any, that her earnings contribute to the $50,000 annual income. Also, the district court's determination of spousal maintenance was based on balancing the parties' budgets after requiring respondent to pay $525 per month of child support. Therefore, increasing the amount of monthly child support by $300 may disturb the equipoise that the district court was attempting to achieve. On remand, the district court shall determine if there is a computational error and, if so, make an appropriate correction. If not, it shall make written findings as required by law.
Before concluding, we note a consideration that neither the parties nor the district court addressed. That is the alternative of a temporary modification of obligations. Such an approach was recognized in a similar situation in the Giesner case. See 319 N.W.2d at 720. In the present case, respondent's current income is expected to improve as respondent's new business becomes established. The district court found that it would probably be one to two years before respondent's business venture would be able to make support and maintenance payments comparable to those that he was ordered to make under the 1999 judgment. However, the district court did not make a temporary reduction of child support and spousal maintenance, but rather reduced both. Under the statute, when respondent's income changes, as expected, appellant will have the burden to show that a substantial change in circumstances has occurred to justify a modification of child support and spousal maintenance. Minn. Stat. 518.64, subd. 2(a), (b). Given the district court's findings regarding respondent's income prospects, temporary relief may be appropriate. This would require review of the financial situation of the parties without placing the burden on appellant. On remand, the district court has the discretion to consider such a limited adjustment in respondent's obligations and, if so, the terms of such a limited adjustment.