Opinion
No. A-10-1160
10-18-2011
MICHAEL LEFFERS, APPELLEE, v. MOLLY LEFFERS, APPELLANT
Timothy C. Phillips, P.C., L.L.O., for appellant. Mark A. Johnson, of Johnson, Morland, Easland & Lohrberg, P.C., and, on brief, Charles L. Caskey for appellee.
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
Appeal from the District Court for Lancaster County: KAREN B. FLOWERS, Judge. Affirmed as modified.
Timothy C. Phillips, P.C., L.L.O., for appellant.
Mark A. Johnson, of Johnson, Morland, Easland & Lohrberg, P.C., and, on brief, Charles L. Caskey for appellee.
INBODY, Chief Judge, and SIEVERS and MOORE, Judges.
SIEVERS, Judge.
Molly Leffers appeals from a November 3, 2010, order of the district court for Lancaster County which modified and reduced the child support of her ex-husband, Michael Leffers, for the parties' minor child. Molly asserts that the modification was improper because there was not a material change in circumstances or, alternatively, because Michael had unclean hands. She also asserts that Michael's unclean hands should have precluded him from receiving the modification retroactively and that he should not have received a reduction in child support for a prior child because that child reached the age of majority less than 6 months after the modification hearing occurred.
FACTUAL AND PROCEDURAL BACKGROUND
The marriage of Michael and Molly was dissolved by a decree of dissolution entered on September 5, 2001, in the district court for Madison County. Pursuant to the decree, Michael was ordered to pay child support for the parties' minor child, Paige, born in June 1995, in the sum of $624 per month. Attached to the decree as appendix B is the child support calculation, which shows that Michael was given a $352 monthly deduction in the calculation of support for Paige for "[c]hild support previously ordered for children not of this marriage." The record reflects that the deduction is for Michael's daughter from another relationship, Ciera, born in November 1991.
We digress to recount that in a May 20, 2010, order of the district court for Madison County, Michael was found guilty of willful contempt for failure to pay Ciera's child support. Michael was ordered to pay $296 per month until Ciera reached the age of majority and $200 per month thereafter until all arrearages were paid. As of the day before the order, May 19, Michael was in arrears for Ciera's child support in the amount of $21,256.26, a fact of consequence as explained below. The arrearage figure is the most recent amount provided.
On February 21, 2008, Michael filed an application for the modification of child support for Paige in the district court for Lancaster County. The application alleges that there has been a material change in circumstances justifying a modification in that Michael is now working as a car salesman averaging approximately $2,000 per month, whereas he was earning $60,000 to $80,000 per year in September 2001 when the decree was entered ordering him to pay $624 per month in child support. Michael also asserts that Molly's income has increased since the decree was entered. In his prayer for relief, Michael requests that the court reduce his monthly child support payment in accordance with Nebraska guidelines retroactive to January 1, 2008.
The record reveals that a Lancaster County sheriff attempted to serve Molly regarding Michael's application for modification of child support four times from April 24 through May 15, 2008. The process service return was received into evidence at the modification hearing, and "AVOIDING SERVICE" appears on the return. Service was also attempted by certified mail. A copy of the certified letter also appears in evidence with "Refused" handwritten on the front. Molly was finally served via publication, giving her 30 days to respond, but she did not.
On May 5, 2010, while this application for modification was pending, a finding of contempt was entered against Michael in the district court for failure to pay his child support obligation for Paige. The court's order provides that Michael admitted to being in willful contempt for failure to pay Paige's child support, is currently in arrears, and has had the ability to pay the amount of support so ordered. The order was entered upon Michael's stipulation.
Molly eventually filed her answer to the modification application on May 20, 2010. In it, she denies that a material change in circumstances has occurred and alleges that Michael comes before the court with unclean hands. On July 11, a modification hearing was held before a child support referee in the district court for Lancaster County. At the hearing, Michael testified that at the time the dissolution decree was entered, he was a part owner, along with his parents, of a car dealership in Norfolk, Nebraska. He testified that he earned $60,000 to $80,000 at that time. However, the child support worksheet accompanying the September 2001 dissolution decree reflects that his monthly income at that time was $4,313, for an annual income of $51,756. At some point, the family car dealership closed, though no explanation or details regarding such were elicited at trial. Sometime thereafter, Michael moved to Denver, Colorado, and worked at another car dealership. In 2005, Michael became unemployed. In 2006, he returned to Norfolk and began working selling cars at a dealership "strictly commission," apparently not as an employee according to his tax return.
Michael's 2009 Form 1040 Schedule C was received into evidence as exhibit 3 at the hearing. It shows that Michael's gross profits for the year were $44,219. Michael took a $6,000 deduction for rent or lease for "other business property." When asked about that deduction on cross-examination at trial, Michael was ultimately unable to explain it. He testified, "As soon as I look through my receipts I'll be able to account for it." Michael's net profits for the year are reflected as $30,513, which rounds out to $2,543 per month. Michael testified that amount accurately reflects his average monthly income for 2009.
Michael admitted at trial that he has been unable to pay his full court-ordered child support for Paige. A Nebraska Department of Health and Human Services (DHHS) payment history report received into evidence provides a list of the child support payments Michael has made for Paige since November 2004. The history shows that Michael did not pay any child support for Paige from November 19, 2004, to February 28, 2006. From March 2006 through May 2010, Michael has generally made at least one payment of approximately $300 to $400 every month. In some months, however, he made significantly greater payments, and in other months, he made slightly less. Michael testified at trial that the payment amounts are inconsistent because he sent his child support for Paige and Ciera to the clerk of the district court in one lump sum and because he had no control over how that money was allocated. The record does not enable us to verify any such allocation or how such was done between the two children. The DHHS payment history in evidence reflects that on June 10, 2010, Michael was in arrears for Paige's child support, including interest, in the amount of $40,808.37. That is the most recent information provided with respect to Michael's arrears in Paige's case.
Molly testified at the modification hearing that when the dissolution decree was entered, she was employed "a little over part-time" and was making $20,000 or less annually. The child support calculation attached to the September 2001 dissolution decree reflects that her monthly income was $912 per month for an annual income of $10,944. Molly's Form 1040 individual income tax returns from 2008 and 2009 are in evidence. Those returns reflect that Molly's adjusted gross income was $22,845 in 2008 and $25,311 in 2009.
On July 15, 2010, the referee's report was entered in the district court. The referee recommended a modification in Michael's child support to $418 per month retroactive to March 1, 2008. The report found that Michael should continue to receive the $296 reduction for Ciera, noting that Molly could seek a modification to increase child support after Michael's obligation for Ciera has ended for at least 3 months. The report recites that "[t]his retroactive modification will not serve to act as a further reduction in [Paige's] ongoing support, but will act as a reduction against [Michael's] arrears [for Paige] with adjusted interest." The insertions we have made to the previous sentence is our attempt to clarify the meaning we attribute to this sentence, which is that the cumulative amount attributable to the retroactive effect of the reduction will be applied to reduce his arrearage owed for Paige rather than being credited against his ongoing obligation to support Paige. The referee's child support worksheet was filed on that same date. The referee obviously used Michael's net profit of $30,513 from his 2009 Schedule C to calculate a monthly income of $2,543. The sum of $2,007 was used for Molly's monthly income, which was evidently reached by averaging her gross adjusted income from her 2008 and 2009 Form 1040 individual income tax returns.
Molly filed an exception to the referee's report in the district court for Lancaster County on July 19, 2010. A hearing was held on August 31, wherein counsel for the parties argued before the district court. The district court took the matter under advisement and on November 3, 2010, entered its order. After a de novo review, the district court reduced Michael's child support to $418 per month retroactive to March 1, 2008, and ordered that "in all other respects the Decree previously ordered shall remain in full force and effect." No child support worksheet was attached to the district court's order, but the court adopted the referee's worksheet as detailed shortly. Molly now appeals.
ASSIGNMENTS OF ERROR
Molly alleges that the trial court abused its discretion when it found that (1) a material change in circumstances justified a modification of child support; (2) the doctrine of unclean hands did not preclude the modification; (3) the doctrine of unclean hands did not prevent the modification from being applied retroactively; and (4) a reduction in child support was proper for the support of a prior child, although such was to terminate less than 6 months from the modification hearing.
STANDARD OF REVIEW
Modification of the amount of child support payments is entrusted to the discretion of the trial court, and although, on appeal, the issue is reviewed de novo on the record, the decision of the trial court will be affirmed absent an abuse of discretion. Richardson v. Anderson, 8 Neb. App. 923, 604 N.W.2d 427 (2000). A judicial abuse of discretion exists when a judge, within the effective limits of authorized judicial power, elects to act or refrain from acting, but the selected option results in a decision which is untenable and unfairly deprives a litigant of a substantial right or a just result in matters submitted for disposition through the judicial system. Id.
ANALYSIS
Was There Material Change in Circumstances?
Molly alleges that the trial court abused its discretion by finding that a material change in circumstances warranted a reduction in Michael's monthly child support obligation. She argues that the district court should not have used Michael's net profits from his 2009 Schedule C in determining his monthly income because that amount includes deductions that were not explained at trial--in particular, a "very dubious" $6,000 deduction for rent or lease for "other business property." Brief for appellant at 9. She claims that had the district court instead used Michael's gross profits from his 2009 Schedule C--$44,219--with no reduction for Ciera's child support, a 10-percent variation in child support would not be present. Thus, she claims, under the Nebraska Child Support Guidelines, there would not have been a rebuttable presumption that a material change in circumstances had occurred.
A party seeking to modify a child support order must show a material change in circumstances which has occurred subsequent to the entry of the original decree or a previous modification and was not contemplated when the decree was entered. Sneckenberg v. Sneckenberg, 9 Neb. App. 609, 616 N.W.2d 68 (2000). Among the factors to be considered in determining whether a material change of circumstances has occurred to warrant modification of a child support obligation are changes in the financial position of the parent obligated to pay support, the needs of the children for whom support is paid, and whether the change is temporary or permanent. Id . Pursuant to the Nebraska Child Support Guidelines, application of the guidelines which would result in a variation by 10 percent or more, but not less than $25, upward or downward, of the current child support obligation, child care obligation, or health care obligation, due to financial circumstances which have lasted 3 months and can reasonably be expected to last for an additional 6 months, establishes a rebuttable presumption of a material change of circumstances. Neb. Ct. R. § 4-217.
As stated above, Molly asserts that Michael's gross income from his 2009 Schedule C should have been used in determining his total monthly income for purposes of the basic net income and support calculation, rather than his net profit. Michael's gross income in 2009 is reflected as $44,219, and his net profit is $30,513. Thus, Molly is asking not only for the $6,000 deduction she complained of at trial to be added back into his income, but she is asking for an added increase of $7,706 for Michael's other deductions. Molly's counsel did not question the additional $7,706 in deductions in the proceedings below, which she now categorizes as "unsubstantiated and unexplainable." Brief for appellant at 9. Only the validity of the $6,000 deduction was raised below, and thus, we limit our consideration of his deductions on his Schedule C to the $6,000. Appellate courts do not consider arguments and theories raised for the first time on appeal. Tolbert v. Jamison, 281 Neb. 206, 794 N.W.2d 877 (2011).
With respect to the $6,000 deduction, although Michael was unable to explain exactly what it was for at the hearing before the child support referee, he testified, "As soon as I look over my receipts I'll be able to account for it." After observing the witnesses, the child support referee accepted Michael's explanation and determined that the $6,000 deduction was proper, as is clear from its use of a monthly income figure for Michael on the child support worksheet, $2,543, which includes that deduction. Michael testified that $2,543 accurately reflects his monthly income for 2009.
Pursuant to Neb. Rev. Stat. § 43-1613 (Reissue 2008), Molly filed an exception to the referee's report in the district court for Lancaster County and prayed that the district court deny Michael's request for a child support modification and decline to adopt the referee's findings. The district court, upon receipt of the referee's findings and recommendations and Molly's exceptions, was obligated to review the referee's report and was entitled to accept or reject all or any part of the report and enter judgment based on the district court's own determination. See § 43-1613. The district court clearly accepted the $6,000 deduction because it found that "[t]he Child support worksheet prepared by the Referee and filed along with her report fairly reflects the incomes of the parties and computes child support consistently with the guidelines." After reviewing the record de novo, we cannot say that the district court's finding with respect to the parties' income was untenable and unfairly deprived Molly of a substantial right or a just result in the matter.
In sum, we agree with the district court that a material change in circumstances occurred warranting a modification in Michael's child support obligation for Paige. Michael presented ample evidence at the modification hearing that his financial position had changed for the worse since the dissolution decree was entered in 2001 and that such lasted for more than 3 months and could reasonably be expected to last for at least an additional 6 months. Molly did not substantiate her claim that Michael was capable of earning approximately the same income as when they were divorced. Uncontroverted evidence was presented that Molly's financial situation had improved since September 2001 and that her income increased from 2008 to 2009. Molly's claim that the district court abused its discretion in finding that a change of circumstances justified a modification of child support is meritless. Should Doctrine of Unclean Hands Have
Precluded Michael From Receiving
Modification in Child Support?
Molly next alleges that the modification in Paige's child support was improper because Michael had unclean hands. She argues that under Voichoskie v. Voichoskie, 219 Neb. 670, 365 N.W.2d 467 (1985) (Voichoskie II), Michael's stipulation that he was in willful and contumacious contempt for failing to pay Paige's child support should have prevented him from receiving a modification. She claims that the stipulation, effectively an admission on Michael's part that he had the ability to pay his child support but did not, was totally ignored by the child support referee and the district court.
In Voichoskie v. Voichoskie, 215 Neb. 775, 340 N.W.2d 442 (1983) (Voichoskie I), Donald R. Voichoskie appealed from the district court's dismissal of his application for modification of child support upon a showing that he was delinquent in his child support payments. The Nebraska Supreme Court remanded the cause for a hearing on the merits, stating, "If the evidence shows that [Voichoskie] is able to pay the arrearage or is unable to pay through some intentional conduct on his part, the doctrine of clean hands may be invoked to bar his claim for relief." Id. at 779, 340 N.W.2d at 445. After an evidentiary hearing, the district court again denied Voichoskie's application for modification, which resulted in the appeal in Voichoskie II.
In Voichoskie II, the Nebraska Supreme Court noted that Voichoskie was ordered to pay $500 per month for the parties' four children. Voichoskie's child support payment history was quite poor, and, at the time the application to modify was filed, he was delinquent in child support payments in the amount of $3,230.98. The opinion recites:
Throughout the years, it appears that [Voichoskie] has often been content to live on unemployment and has not made a substantial effort to obtain employment at a salary equal to the one he received at the time of his divorce.Id. at 672, 365 N.W.2d at 469 (1985). The court then affirmed the judgment of the district court denying the modification.
The record sustains the finding of the trial court that [Voichoskie] is an able-bodied man capable of being employed and capable of paying child support. Most of the child support which he has paid in recent years has been that which has been forcibly extracted from him by withholding or garnishment proceedings. When [Voichoskie] was working full time, his earnings went to others and not to his children.
We agree with the district court that Voichoskie II is factually distinguishable from the present case. Here, although Michael is significantly in arrears for Paige's child support, according to the child support payment record in evidence, he has been paying approximately $300 to $400 in child support every month since 2006. The most Michael paid in any month appears to be in June 2006, when he made a total of $1,607.19 in payments. Michael made no payments from December 2004 through August 2005, which is consistent with his undisputed testimony that he was unemployed around that time. The record reflects that Michael was making considerably more money as a part owner of his family's car dealership than he is currently selling cars on a commission basis. Michael's earnings and work history is clearly different than Voichoskie's, as the latter rarely made voluntary child support payments and never made an effort to find employment commensurate in salary to what he was making when the dissolution decree was entered.
Contrary to Molly's argument in her brief, the child support referee and the district court both considered Michael's stipulation that he was in willful contempt for failing to pay Paige's child support. The referee asked Michael's counsel during closing arguments at trial, "Can you tell me what your thinking or strategy was in not taking this case to trial on the contempt rather than just pleading contempt?" Michael's counsel replied, "That at this point we have worked out a deal with the County Attorney's office so that's that part." The referee then stated:
Well, you understand that when you agree to that . . . then you are stipulating to the facts that your client had the ability to pay, that he failed to pay, [and] that his failure to pay was willful and contumacious[?] That's the law. So that's what you agreed to.Michael's counsel responded, "Well, whatever the stipulation says." The referee's report refers to Michael's stipulation, but the referee found that Michael still presented a sufficient case for a modification and that such was proper. The district court's order follows a similar line of reasoning, finding that there was no evidence offered that Michael was financially well off when the arrearages began or that he made no payments though being financially able to do so. The district court, like the referee, found that a modification and reduction in child support was proper.
We agree with the assessment of the district court with respect to this issue. Although Michael stipulated to being in willful contempt for failing to pay Paige's child support, there was no evidence offered at the hearing to suggest that Michael was able to pay but did not, beyond the stipulation--and there were apparently other circumstances behind the stipulation--and we can imagine that such might include the avoidance of criminal prosecution for nonsupport. The rationale provided by Michael's counsel as to why he decided to stipulate to contempt rather than proceed to trial on the matter reveals that such was a condition of some agreement worked out with the county attorney's office. Furthermore, "the doctrine of [un]clean hands may be invoked to bar [a] claim for relief in an equitable action." Voichoskie I, 215 Neb. at 779, 340 N.W.2d at 445 (emphasis supplied). Equity is not a rigid concept, and its principles are not applied in a vacuum, but instead equity is determined on a case-by-case basis when justice and fairness so require. Trieweiler v. Sears, 268 Neb. 952, 689 N.W.2d 807 (2004). We find that on the record before us, it would be inequitable to preclude Michael from receiving a modification in child support based on the doctrine of unclean hands, particularly given his record of consistent payment of support after he became reemployed--albeit at a lesser pay. Accordingly, we find that the district court did not abuse its discretion in declining to apply the unclean hands doctrine to bar any modification of Michael's support obligation of Paige based on his reduced earnings. Should Doctrine of Unclean Hands Have Prevented
Michael From Receiving Reduction in
Child Support Retroactively?
Molly alleges that Michael's unclean hands should have precluded him from receiving the modification in child support retroactive to March 1, 2008. In her brief, she argues, "It would seem to fly in the face of equity and reason to reward [Michael], who admittedly has 'unclean hands,' with not only a modification of his court ordered child support but to also reward him for his contempt by making the modification retroactive to March [1,] 2008." Brief for appellant at 13.
The rule, absent equities to the contrary, is that the modification of a child support order should generally be applied retroactively to the first day of the month following the filing date of the application for modification. Riggs v. Riggs, 261 Neb. 344, 622 N.W.2d 861 (2001). The initial determination regarding the retroactive application of a child support modification order is entrusted to the discretion of the trial court, and the decision of the trial court will be affirmed absent an abuse of discretion. Id.
In its order, the district court points out that there was a significant delay between the time Michael filed his application for modification on February 21, 2008, and the filing of Molly's answer, and that such delay was apparently attributable to Molly. The record shows that a Lancaster County sheriff was unable to serve Molly with respect to the modification application after four attempts between April 24 and May 14, 2008, due to Molly apparently "AVOIDING SERVICE." She seems to have refused service by certified mail shortly thereafter. In October, Michael served Molly by publication, but she did not respond. Molly finally filed her answer on May 20, 2010, and a trial was held before the child support referee in June 2010.
Given the delay and apparent cause by Molly, the district court's order recites, "I see no reason why the modification should not be retroactive to March of 2008, the first month after the filing of the Complaint to Modify." Thus, the district court by implication found that there were not sufficient "equities to the contrary" to justify deviating from the general rule in Riggs, supra, i.e., that modifications are retroactive to the time of filing for such. Obviously, the court also found that Michael's "confession" to a finding of contempt was not such to bar retroactive effect to the modification. We cannot say that such decision was an abuse of discretion based on the circumstances earlier discussed about the unclean hands doctrine in this case.
Was Reduction for Ciera's Child Support Improper?
Molly's final allegation is that the district court abused its discretion when it reduced Paige's child support in the amount of Michael's court-ordered support for another child, Ciera. In Molly's brief, she asserts that the adjustment should have ceased, at the very least, on December 1, 2010, because "[Michael] has already reaped the benefits of this deduction when it was used to originally calculate support in 2001 and as it accrued over the years . . . and to allow such [deduction to continue] was error on the part of the District Court." Brief for appellant at 15. To the extent the referee's report and the district court's order can be read as allowing Michael to continue receiving a $296 reduction in child support after November 2010 when Ciera turned 19, we agree with Molly.
The Nebraska Child Support Guidelines provide that deductions are allowed for "Child support previously ordered for other children." Neb. Ct. R. § 4-205. In this case, Michael was ordered to pay lesser child support for Paige because of his support obligation for Ciera, as provided for in the guidelines. However, once Ciera reached the age of majority in November 2010, which has now occurred, Michael was obviously no longer required to provide child support for her, and thus, the deduction against his obligation for Paige's support because of an obligation to support Ciera clearly should come to an end. It appears from the record that Michael will continue paying Ciera's arrears in the amount of $200 per month until they are paid off. However, he should by no means receive a credit in calculating his obligation to support Paige because of payment of arrears for Ciera, which is simply child support that should have been paid, but was not. Allowing Michael to continue receiving the credit after his monthly child support obligation to Ciera ends would function as a double reduction in his support to Paige, which is quite clearly improper. We will not reward his failure to support Ciera at Paige's expense.
The referee's report entered on July 15, 2010, noted that Michael should not receive the credit for Ciera in December 2010, because Ciera turns 19 in November. However, the report recites, "If this application had been heard in a timely manner, this issue would not have been raised." The report then states that Molly may seek a modification after Michael's obligation for Ciera has ceased for 3 months. As expressed above, the district court adopted the referee's child support worksheet. It ordered that Michael's child support obligation should be reduced to $418 per month retroactive to March 1, 2008, and that otherwise the decree as previously ordered would remain in full force and effect. It is unclear, however, whether the district court adopted the portion of the referee's report which extended the $296 deduction for Ciera past her 19th birthday.
In any event, the correct result is that Michael not receive any reduction in Paige's child support because of support for Ciera after November 2010. Beginning December 1, 2010, Michael's child support obligation for Paige should be increased from $418 to $476 per month. We reach that figure by using the July 15, 2010, basic net income and support calculation, which was entered by the child support referee and adopted by the district court. We merely backed the $296 deduction for "child support previously ordered for other children" out of the calculation, leaving all of the tax deductions the same. Michael's arrears for Paige, as mentioned above, should be adjusted to reflect our decision as to how the retroactive modification will be applied.
CONCLUSION
After our de novo review, we find that the district court did not abuse its discretion in finding that a material change in circumstances occurred and that a modification in child support retroactive to March 1, 2008, was proper. However, beginning December 1, 2010, Michael is no longer entitled to a reduction in child support for support previously ordered for another child, including credit against arrearages for Paige, and at that time, his child support for Paige will be $476 per month.
AFFIRMED AS MODIFIED.