Opinion
No. C3-00-692.
Filed January 16, 2001.
Appeal from the Washington County District Court, File No. F6961969.
Barbara May, (for respondent)
Alan J. Albrecht, (for appellant)
Considered and decided by Klaphake, Presiding Judge, Harten, Judge, and Anderson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Respondent Susan Quance moved to find appellant Michael Quance in contempt for failure to pay court-ordered child support and maintenance. Appellant moved to decrease his child support and maintenance obligations and to remove the district court judge for bias. The district court judge declined to remove herself from this case, found appellant in contempt, and declined to modify maintenance or child support.
On appeal, we affirm the court's removal decision, but reverse and remand its contempt order because the district court failed to hold a required second-stage hearing before ordering appellant committed to jail. On remand, the district court must reconsider appellant's current income in light of the court's duty to set purge conditions and evaluate noncompliance with those conditions based on his present financial ability. Finally, because the district court is required to reevaluate appellant's income on remand, the court should also reconsider whether there has been any change in circumstances to support modification of child support or maintenance.
FACTS
On December 28, 1998, the district court dissolved the parties' 24-year marriage. A pre-dissolution order set appellant's temporary maintenance and child support obligations for the parties' three minor children, based on income imputed to appellant. The judgment and decree ordered appellant to pay monthly maintenance of $2,000 and monthly child support of $2,077.25, also based on imputed net monthly income of $8,451.67. By the time the decree was entered, appellant already owed $35,014.27 in temporary maintenance and support arrearages.
During the parties' marriage, appellant was self-employed as the sole proprietor and salesperson for a financial services company that offered life and disability insurance, and mutual and variable funds. During the marriage, respondent worked for the business as a bookkeeper, without compensation. Contemporaneously with entry of the final decree, appellant incorporated the business as Quance Financial Services, Inc., and was its sole shareholder and officer.
On November 12, 1999, respondent moved to find appellant in contempt for failure to pay maintenance and child support. Soon after, appellant moved for a downward modification of his maintenance and child support obligations and for removal of the district court judge for bias. At a December 17 hearing, appellant stipulated that he was $71,476.34 in arrears in child support and maintenance payments, from the date of the temporary order through November 30, 1999.
Respondent did not indicate the statutory basis for her contempt motion. Under Minn. Stat. § 518.64, subd. 1 (1998), a party may move for contempt of court if a maintenance or child support obligor is in arrears. Under broader contempt provisions of Minn. Stat. § 588.01, subd. 3(3) (1998), a party may be found in constructive contempt of court for "disobedience of any lawful * * * order." In regard to nonpayment of maintenance and child support, section 588 specifies that a court may punish a party for "willful disobedience" of a child support or maintenance order by requiring that party to pay "costs and a reasonable attorney's fee incurred in the prosecution of the contempt." Minn. Stat. § 588.02 (1998).
In the order emanating from the December 17 hearing, the district court judge denied appellant's motion for removal and declined to hear appellant's modification motion because the case was currently pending before this court. Four days later, this court issued an opinion affirming the dissolution court's original determinations of appellant's income, division of property, and maintenance and child support awards. See Quance v. Quance, No. C6-99-937 (Minn.App. Dec. 21, 1999).
The district court held an evidentiary hearing on the contempt motion on February 1, 2000, and a hearing on the modification motion on February 11. On March 7, 2000, the court issued an order finding appellant in civil contempt for failure to make support and maintenance payments. The court found that appellant had the continuing capacity to earn $8,459 net per month and therefore had the ability to comply with the court's order for maintenance and support, but that he chose not to comply. The court found appellant in contempt of court, ordered appellant to report to jail for an indeterminate sentence unless he paid $10,000 in child support arrearages, and "agree[d] to pay his Court ordered support and maintenance obligation" plus "20% toward arrearages." The court made no findings on appellant's present ability to pay the $10,000 or the additional monthly arrearages amount. His monthly child support and maintenance obligation, including the arrearages payment, increased to $4,892.70.
Following a stay of execution, appellant reported to jail. By a separate order dated March 20, 2000, the district court denied appellant's motion for a downward modification of child support and maintenance.
Appellant challenges the district court's contempt decision and its decision refusing to decrease maintenance and support. Appellant also challenges the district court judge's refusal to recuse herself from this case.
DECISION I. Second-Stage Hearing
Appellant claims the district court erred in committing him to jail for contempt of court without holding two separate hearings, one to determine whether he was in contempt of court and setting purge conditions, and a second hearing to address nonperformance of those purge conditions.
Since the seminal case of Hopp v. Hopp, 279 Minn. 170, 174-75, 156 N.W.2d 212, 216-17 (1968), a district court's proper exercise of its civil contempt powers has typically required two hearings before a contemnor may be jailed. In the usual case, the court initially finds "the obligor in conditional contempt and set[s] conditions to allow the obligor to purge himself of contempt." Mahady v. Mahady, 448 N.W.2d 888, 891 (Minn.App. 1989). "At a subsequent stage, the obligor is entitled to be heard on questions of performance or excusable non-performance of purging conditions." Id. (citations omitted). The time between the two hearings must include a "reasonable" period for compliance. Mower County Human Servs. v. Swancutt, 551 N.W.2d 219, 223-24 (Minn. 1996). This two-stage hearing process protects the contemnor's constitutional rights and ensures that the contempt order will serve its purpose — to compel payment, not to punish the contemnor for past conduct. See id. at 222-23.
Respondent argues that the second-stage requirement was satisfied because the December 17 hearing constituted a first-stage hearing and the February 1 hearing constituted a second-stage hearing. We disagree.
During the December 17, 1999 hearing, appellant stipulated to owing $71,476.34 in arrearages through November 1999. The main purpose of this hearing, however, was to decide appellant's removal motion and to determine the court's jurisdiction to decide appellant's motion to modify support and maintenance in light of the appeal pending before this court. The district court fully addressed those two issues in an order. By separate order, the court merely noted appellant's arrearages stipulation and set February 1, 2000 as the date for an evidentiary hearing on the contempt issue.
In Swancutt, the most recently published Minnesota Supreme Court case involving nonpayment of support, the court acknowledged that a second-stage hearing is not mandatory "in every instance of failure to comply with a court ordered child support obligation." Id., 551 N.W.2d at 223. The court suggested that as long as due process notice requirements are met, a more compressed proceeding is permissible. See id. at 223-24. Even a compressed proceeding, however, must meet the minimum Hopp requirements and insure that the contemnor is "fully aware and knowledgeable about what must be done to stay out of jail," allowed a reasonable time to comply with purge conditions, and given an opportunity to explain his noncompliance with those purge conditions. Id.
Here, based solely on the February 1 evidentiary hearing, the district court issued one order holding appellant in contempt, establishing the purge conditions, and concluding that appellant had failed to meet those conditions. This condensed procedure afforded appellant no time to comply with the purge conditions and no opportunity to explain his nonperformance of those conditions, as required by Hopp and Swancutt. We therefore conclude that the district court abused its discretion by failing to follow the two-stage contempt hearing process in this case.
II. Ability to Pay
Appellant claims the district court abused its discretion and erred in how it determined his ability to pay. Specifically, appellant claims that the district court failed to consider (1) whether he had the actual ability to make the previously ordered child support and maintenance payments before finding that his arrearages constituted contempt of court; (2) his current financial ability when setting purge conditions; and (3) his current financial ability when evaluating any failure to meet purge conditions. Appellant argues that contempt of court cannot be based on a failure to comply with a court order that was based on imputed income rather than actual income. He argues that a person cannot be in contempt of court for failure to pay what he does not actually have.
Contempt of Court
While imputed income raises some concerns in a contempt proceeding, we reject appellant's claim that an order based on imputed income cannot be enforced by the sanction of contempt. The ultimate burden of proving inability to satisfy a previously ordered obligation rests on the nonperforming party. Mahady, 448 N.W.2d at 890-91. Where an order is based on actual income, that burden may be met by showing that such income was not available during the time of nonpayment and that the proposed contemnor's financial condition made payment impossible. We recognize that it may be more difficult for an imputed income obligor to show inability to pay to justify noncompliance. Evidence that there is no current basis for imputation of income or that the total actual financial condition of the obligor precludes compliance may still be offered, however.
Here, appellant's own records demonstrate substantial gross receipts of $193,692 in 1998 and $164,641 through November 1999. While these gross amounts are less than the gross amounts originally imputed, and appellant had business expenses, and a substantial debt, including approximately $200,000 in tax liability, he also owned a substantial IRA. In addition, in 1999 appellant chose to increase his business, legal, and entertainment expenses by over $50,600, while remaining current and paying $500 per month on his credit cards. Under these circumstances, we conclude that the record supports the district court's rejection of appellant's claim that he did not have the ability to comply with the child support and maintenance orders, and the district court's finding that appellant is in contempt of court is not clearly erroneous. Accordingly, we affirm the finding of constructive civil contempt of court.
Purge Conditions
The setting of purge conditions after a finding of contempt of court, however, is more problematic. After finding a party in contempt of court, a district court must set purge conditions based on the party's financial ability to satisfy those conditions. Id. at 890. The difficulty with imputed income is that it is based on a party's "prior earnings history," and not current income. Minn. Stat. § 518.551, subd. 5b(d) (1998). Thus, in the context of contempt based on imputed income, the contemnor may not actually hold the keys to the jailhouse door, a long-recognized protection of a contemnor's liberty interests. Id. We conclude that purge conditions may be based on imputed income, but only when there exists both a current legal basis for imputation and the amount imputed is based on current, factual data.
The district court here found that appellant "persists in self limiting his income" and has "the continuing capacity to earn the net income of $8,459 per month previously found by the court * * * and has the capacity to comply with the court's order for support and maintenance." The district court also found that appellant lacked credibility and therefore rejected his detailed financial and tax data. Under these circumstances, we conclude that the district court's findings were not clearly erroneous, and the court did not abuse its discretion in determining that a legal basis for continued imputation exists.
The amount of income imputed by the district court, however, appears to be based solely on historical data from the time of the original decree. To impute income for child support purposes, the court must consider not only earnings history, but also current availability of jobs. Minn. Stat. § 518.551, subd. 5b(d) (1998). For a self-employed person, this statute requires consideration of the obligor's present ability to generate income from self-employment at the historical level. Here, while appellant's credibility is at issue, the district court did not respond to his claims of new business expenses, including a bookkeeper, a position respondent previously held without compensation, new consultation expenses, and other payroll increases, or the health insurance payments appellant is making, which were not included in the previous net income calculations. Additionally, with the close scrutiny given to appellant's financial records by the Internal Revenue Service, the district court should review whether the historical level of gross receipts forming the basis for the original imputation should be adjusted based on what appears to be actual gross receipts shown by appellant's records.
Appellant also claims that the district court set purge conditions without any finding on his ability to meet those conditions. We agree. The district court's purge conditions include payment of $10,000 in arrearages, an additional $1,815 per month in arrearages, plus current payments. No findings were made on appellant's current ability to meet these purge conditions.
We therefore reverse that portion of the contempt order that commits appellant to jail and remand for the setting of purge conditions consistent with appellant's current ability to meet those conditions. This current ability inquiry should include an opportunity for appellant to appear and present additional evidence on his current financial condition.
III.
Appellant argues that the district court did not make necessary findings on his modification motion. This court reviews maintenance and child support modification orders under the abuse of discretion standard of review. Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982) (maintenance); Kuronen v. Kuronen, 499 N.W.2d 51, 53 (Minn.App. 1993) (child support), review denied (Minn. June 22, 1993).
Because the contempt issue is remanded for the district court to consider whether appellant now has actual income from which to derive his current child support and maintenance obligations, it is premature for this court to consider whether any change in appellant's income constitutes a change in circumstances that would require modification of his child support and maintenance obligations. We thus decline to rule on the modification issue except to state that on remand, the district court must determine whether any change in appellant's income amounts to a change of circumstances for the purposes of his modification motion.
IV.
Appellant claims that the district court abused its discretion by failing to recuse herself from these proceedings for bias. Appellant did not describe the alleged bias in his appellate brief, but he did so at the December 17, 1999 hearing, at which the court considered the recusal issue. According to appellant's attorney, Thomas Lee, while both he and the district court judge were judicial candidates, the judge was overheard commenting in Lee's brother's hair salon that the only way Lee would get elected was "if the electorate gets his name confused * * * with Judge [Thomas] Mott's."
This alleged statement does not require the judge's recusal from this case. A judge who has presided over proceedings in a case may be removed only for an "affirmative showing of prejudice" on the part of the judge, and the showing of prejudice must demonstrate bias of the type that would disqualify a juror. Minn.R.Civ.P. 63.03. A judge is not prohibited from presiding over a proceeding if a party's allegations do not demonstrate prejudice. Uselman v. Uselman, 464 N.W.2d 130, 139 (Minn. 1990) (quotation omitted). This judge's alleged conduct, an off-hand comment related to a party's attorney's candidacy as a judge, does not constitute an affirmative showing of prejudice. See State v. Kramer, 441 N.W.2d 502, 505 (Minn.App. 1989) (trial judge's finding party's attorney in contempt in earlier proceeding not sufficient to show prejudice to party requiring judge's disqualification in present proceeding), review denied (Minn. Aug. 9, 1989). Further, the form of the allegation, double hearsay, also calls into question whether the allegation, on its face, constitutes an affirmative showing of prejudice. We conclude that the district court judge did not abuse her discretion in declining to recuse herself from this case. See Durell v. Mayo Foundation, 429 N.W.2d 704, 705 (Minn.App. 1988), review denied (Minn. Nov. 16, 1988).