Opinion
No. C5-97-4.
Filed August 5, 1997.
Appeal from the District Court, Murray County, File No. FX-93-204.
Ruth Ann Webster, Gislason, Dosland, Hunter Malecki, P.L.L.P., (for Appellant).
Andrew E. Hagemann, Jr., Mork, H. Darling, Hagemann Kohler, (for Respondent).
Considered and decided by Willis, Presiding Judge, Crippen, Judge, and Norton, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Appellant Douglas Rupp disputes the administrative law judge's calculation of his net income and the resulting conclusion that there was cause for a 48% increase in his child support obligation. We reverse and remand for further findings of fact.
FACTS
When the parties divorced in 1994, three years after they married, their stipulation required that appellant pay monthly child support of $400, calculated by reference to net monthly income of $3,488, reduced by $1,970 appellant was paying to a prior spouse and three children of an earlier marriage. Respondent Debra Rupp initiated these child support modification proceedings early in 1996, contending that appellant's income had substantially increased.
The 1994 stipulation provided for automatic child support increases on those future occasions when each child of appellant's prior marriage became emancipated. Each of these automatic recalculations was based on the same projection of appellant's net monthly income, $3,488. When these proceedings began, one of these children had become emancipated, and appellant's $400 child support obligation had increased to $423.
The determination of appellant's net income of $3,488 also occurred in his prior divorce proceedings, first for a stipulation and judgment in 1990. When the parties in that case litigated a dispute on appellant's earnings in 1993, a trial judge denied pleas of both parties for modification of appellant's obligations.
The record shows that appellant is paid a salary by his own corporation, Dakota Road Builders, Inc., and has various other sources of business income, including gravel sales, farm and equipment rentals, and rental of commercial properties in Minnesota, South Dakota, and Arizona. In the current modification proceedings, the judge was given two alternative means to measure appellant's combined net income from all of his business activities. First, the record includes a variety of information, including accounting and income tax records, that permits examination of each portion of appellant's income. Alternatively, as appellant urged, the judge could accept the testimony of appellant's accountant that (a) the profitability of appellant's businesses had not changed during the last six years, and (b) except for asset liquidations and some unusual 1994 gravel sales, appellant's overall income probably had decreased.
The judge chose to determine appellant's income without reference to all segments of his business activity, finding instead that appellant's net income was indicated by records of his monthly salary as an employee of Dakota Road Builders, Inc. Appellant acknowledged a reported net salary of approximately $4,300, at least $800 more than the income attributed to him in 1994. Premised on the conclusion that this salary constituted appellant's net income, the judge found cause to modify the child support award and set the obligation at $628 per month, 25% of $2,512, the net sum available after reducing appellant's salary by $1,796 he then was paying on his prior support and maintenance obligations.
DECISION
A child support modification decision will not be reversed absent the administrative judge's abuse of his discretion to determine this issue. Moylan v. Moylan , 384 N.W.2d 859, 864 (Minn. 1986). Underlying fact findings of the judge will be disturbed only if they are clearly erroneous. Minn.R.Civ.P. 52.01. The judge had discretion to increase the obligation if respondent showed "substantially increased" earnings of appellant that rendered the existing obligation unjust. Minn. Stat. § 518.64, subd. 1 (1996).
Neither logic nor the evidence of record permits the conclusion that the salary reported by Dakota Road Builders, Inc., is representative of appellant's net income. If appellant has net income in an amount greater than $3,488, the income used for a stipulation of the parties in 1994, the finding of an increase will require an examination of appellant's entire business income and expense. We remand for the administrative judge's further findings of fact on appellant's current net income.
It is not wholly clear why the administrative judge declined to examine all of appellant's business activities. Most evident is the judge's repeated observation that appellant's reported 1994 net monthly income of $3,488 represented his then-current salary, permitting comparison of that sum with appellant's most recent salary report. This reasoning traces to language in the 1994 stipulation and judgment. In one sentence of the stipulation, the parties say that petitioner was "employed" by Road Builders and another corporation, and they say in the next following sentence that appellant's "net monthly income" was $3,488. It is a mistake to conclude that the 1994 figure represents only salary.
A fair and just assessment of appellant's net income, currently and in 1994, requires attention to all of his business activities. See Minn. Stat. § 518.54, subd. 6 (1996) (defining income as "any form of periodic payment to an individual"). And this is true regardless of what the parties did in 1994.
We also conclude that the record does not justify the observation that the 1994 stipulation referred only to salary. Although the observations about employment and net income are proximate to one another in the stipulation, no language ties the concepts together. And there is no evidence to dispute appellant's affidavit that his 1994 net income of $3,488 was calculated by reference to his income and expenses from all sources. This affidavit is bolstered by the undisputed testimony of appellant's accountant that appellant has received the same corporate salary for six years; given this information, together with the fact that appellant's current net monthly salary is about $4,300, it is evident that the 1994 report of $3,488 income represented a calculation of factors other than appellant's corporate salary.
The administrative judge's findings advance three additional considerations to support the ultimate finding that appellant has experienced a substantial increase in his net income. None of these factors is adequate to excuse the judge from examining all of appellant's business enterprises.
First, the court observed that (a) all of appellant's corporate salary is now paid by Dakota Road Builders, Inc., a South Dakota corporation, (b) the 1994 stipulation says that appellant was employed by Road Builders "and" Rupp Construction, Co., Inc., a Minnesota corporation; and (c) appellant may be profiting from the fact that South Dakota has no state income tax. But the record includes no information as to any reduction in appellant's income tax obligations. In addition, appellant's affidavit furnishes undisputed evidence that all of his salary has been paid through the South Dakota corporation since he formed it a number of years ago. And there is no evidence in the record to show that appellant received any salary from his Minnesota corporation in 1994, notwithstanding the evidence that he was a designated employee of that entity.
Second, the judge found that appellant's lifestyle had improved since 1994. This is evidently to imply that appellant's overall net income must be more than it was in 1994. There is no evidence to indicate whether appellant's lifestyle improvements, if any, are attributable to income or to liquidation of assets. See Beltz v. Beltz , 466 N.W.2d 765, 767 (Minn.App. 1991) (holding that the proceeds of assets are not income for purposes of determining a support obligation), review denied (Minn. Apr. 29, May 23, 1991).
Finally, when asked to reconsider the modification decision, the administrative judge noted the evidence that appellant's 1994 gravel royalties were much more than those he received in 1993. This partial exploration of appellant's non-salary experiences does not substitute for an examination of his income and expenses from all sources.
Although we conclude that the case must be remanded, we make no judgment on the ultimate question of whether appellant's overall income has increased. It is significant, we think, that the conclusory report of appellant's accountant primarily supports his view of the case. The record indicates the likelihood that more specific evidence will be considered in the judge's corrected finding on appellant's income experience.
Because we remand the case for further proceedings, we address appellant's further contention that the amount of his support obligation for his last-born child cannot be greater than the sum he pays for each of his children by his earlier marriage. The administrative judge correctly rejected this argument. In modification proceedings regarding support for earlier-born children, they normally should be awarded at least as much support as later-born children. Hayes v. Hayes , 473 N.W.2d 364, 366 (Minn.App. 1991). It does not follow that a prior obligation constitutes a ceiling on the amount that a court may order paid for a later-born child. To hold otherwise would unjustly spare an obligor from upward modification associated with income increases unless action was first initiated for earlier-born children. Consistent with the statutory child support guidelines, so long as the adjudicator reduces a calculation of the obligor's net income by the amount of an obligation currently being paid, the later obligation can be determined without further regard for the earlier award. See Minn. § 518.551, subd. 5(b)(viii) (1996).