Opinion
No. 53636-2-I
Filed: April 25, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of Island County. Docket No. 02-3-00265-8. Judgment or order under review. Date filed: 11/20/2003. Judge signing: Hon. Vickie I Churchill.
Counsel for Appellant(s), Kristina Lee Armstrong (Appearing Pro Se), 435 Wickham Fen Way, Boise, ID 83709.
Counsel for Respondent(s), Jessie Louise Valentine, Attorney at Law, PO Box 488, Langley, WA 98260-0488.
Michael Benjaminson appeals the Order on Modification of Child Support entered on September 19, 2003. His primary contention is that the trial and revision courts erred by failing to give him credit for his investment expenses incurred for the purchase of the business by which he earns his livelihood. It is true that the court did not give Benjaminson credit for his investment interest expenses, and it would have been proper for it to do so under the case law. But the court also failed to include Benjaminson's capital gains in his gross income, in violation of RCW 26.19.071(3)(m) (expressly stating that monthly gross income shall include income from any source, including capital gains). The calculation of Benjaminson's net monthly income for purposes of the schedule would be nearly the same as that found by the court commissioner if it were to be based on the father's 2002 individual income tax return, including his capital gains as required by law, giving credit for the investment expense shown on the tax return, and deducting the actual amount of tax paid rather than using the standard deduction. We think it entirely possible that the revision court realized that any error in failing to credit the investment expense was entirely offset by the failure to include the capital gains income, rendering the alleged error harmless, and denied Benjaminson's post-trial motion for revision on that basis.
In any event, we affirm the amount of the father's net income as shown on the order of support on the basis of harmless error. The trial court made a minor error in calculating the amount of health insurance that the mother pays for the minor child. If this error were to be corrected, the difference in the transfer payment would be de minimus. We decline to waste valuable resources by remanding for recalculation of the transfer payment based on harmless error and this de minimus difference. Accordingly, we affirm the child support order entered on September 19, 2003.
FACTS
Michael Benjaminson and Jennie McLean are the parents of the minor child Laura Benjaminson. In March 2003, the State filed a Summons and Petition to Modify Laura's child support, which last had been set in December 1998. The court issued a case schedule requiring the parents to answer the petition and to file their complete declarations of financial information by April 21, 2003. Trial was scheduled for July 16, 2003. Despite the case schedule and an intervening Request for Production of Documents and Interrogatories propounded to him by the State, Benjaminson provided no financial information whatsoever until July 14, two days before trial, when he produced a single pay stub. The court continued the trial until August 6, 2003, and ordered Benjaminson to provide complete financial information including his income tax returns for 2001 and 2002.
Trial by affidavit was held on August 6, 2003. Benjaminson, who attended by telephone, had failed to produce his income tax returns as ordered by the court. Accordingly, the court imputed income to him and ordered him to pay child support of $921 per month, inclusive of his share of the child's daycare expenses. The order required Benjaminson to provide his personal and business tax returns within two days, however, and if he were to fail to comply, the State was directed to commence contempt proceedings.
Benjaminson did provide portions of his 2001 and 2002 individual income tax returns, and he provided his 2000 and 2001 corporate income tax returns, but he did not include all of the schedules to his individual tax returns. Based on what he did provide, the State promptly moved for reconsideration, pointing out the obvious — that Benjaminson's imputed income had been substantially understated at the time of trial. In response to this motion, Benjaminson provided, for the first time, the remainder of the schedules to his individual income tax returns, together with a stock purchase agreement, a purchase note, and a promissory note.
These records showed that Benjaminson had purchased the corporation that employed him at the time of trial by purchasing the shares owned by the previous shareholders. Benjaminson came up with the money to close the deal by two means: he borrowed $492,000 from Key Bank to fund the bulk of the purchase price, and he borrowed an additional $150,000 from the newly purchased corporation with which to pay the remaining balance owed to one of the previous shareholders. Benjaminson was repaying Key Bank at the rate of $6,340.31 per month, inclusive of principal and interest, and he was paying interest only at the rate of $275 per month for the $150,000 loan from the corporation. Benjaminson sold his customer list from his previous business to the newly purchased corporation for $525,000, with nothing down and monthly payments in the sum of $7,245.26 per month, inclusive of principal and interest. Benjaminson services the debt to Key Bank from these payments.
Benjaminson's 2002 individual income tax return shows that that his gross salary was $60,700 — or $5,058.33 per month — notwithstanding his earlier sworn representations to the court that he was paid a gross salary of only $3,000 per month. The 2002 tax return also shows that Benjaminson received $58,302 in taxable interest income that year — the bulk of it from his corporation's payments on the note for the purchase of the customer list — together with a capital gain of $29,582 from the installment sale of the customer list. Adding these amounts, one sees that Benjaminson's gross income for 2002 was $148,584, as shown on the tax return. His adjusted gross income for that tax year was the same. He deducted $35,703 for investment interest on the debt to Key Bank, claimed the parties' daughter as his dependent, and paid actual taxes of $21,659.
The corresponding numbers for tax year 2001 are: gross salary, $40,431; taxable interest income $63,424, capital gain $10,269, total income $114,124, adjusted gross income (after a $2,000 IRA deduction) $112,124, $57,536 deduction for investment interest, actual tax paid after claiming daughter as his dependent, $7,028.
The court commissioner granted the State's motion for reconsideration. On September 19, 2003, the commissioner entered what eventually became (after two intervening revision motions) the final support order, under which Benjaminson was ordered to pay $1,165 per month, inclusive of his proportionate share of the child's day care expense.
Benjaminson first moved for revision and won a remand back to the court commissioner, where, despite his abysmal record of production of financial records, he was permitted to provide an accounting for his monthly business expenses, which the child's mother had challenged. The commissioner reviewed the one page, undocumented summary that Benjamin submitted in lieu of a true accounting, found it to lack credibility, and left the September 19 order in place. Benjaminson moved for revision again, but the trial court adopted the findings and conclusions of the court commissioner. This made the order of September 19, 2003, the final support order.
This appeal followed.
DISCUSSION
As a preliminary matter, Benjaminson claims that the trial court's findings are not sufficient to permit review by this court. We disagree. The findings, together with the explanations contained in the orders coming out of the revision motions, are sufficient to permit review. We also reject the State's invitation to affirm on the basis that a trial court does not err by refusing to consider evidence that was first submitted in response to the motion for reconsideration, and that had been available months earlier. A refusal by the trial court to consider the father's grossly late submissions likely would have been affirmable, but the court granted the State's motion for reconsideration, and granted the father extra time to submit a final accounting of his monthly business expense, considered the single-page undocumented list that was submitted for that purpose, determined that it was not credible, and rejected it on that basis. We affirm that ruling, on that stated basis.
Father's Income
The work sheets adopted by the court commissioner, and subsequently by the revision court, show Benjamin's gross monthly income to be $10,863 and his monthly deductions, inclusive of income taxes, FICA, and modest pension plan payments through his employment, to be $3,357, for a monthly net income of $7,506. These were the amounts proposed by the State in the motion for reconsideration; they were calculated by averaging Benjaminson's salary and interest income shown on his 2001 and 2002 individual income tax returns (leaving out his capital gains for both years), applying the standard deduction instead of any of the actual itemized deductions, and deducting his FICA and pension plan payments. Thus the worksheet is based on hypothetical numbers.
A more precise measure of the father's net income is shown on his 2002 individual income tax return. That return shows that Benjaminson's adjusted gross income was $148,584. This includes his gross salary of $60,700, his taxable interest income of $58,302, and his capital gain of $29,582. Benjamin's primary complaint is that the trial court failed to give him credit for the amount of investment interest that he must pay in order to service the debt for the purchase of his current corporation. He relies upon In re Marriage of Mull, 61 Wn. App. 715, 812 P.2d 125 (1991). There, the trial court allowed the father to deduct the capital contributions that he was required to make when he became a partner in his law firm. The mother appealed, and this court affirmed, ruling that "when a parent is required to make capital contributions in order to maintain his or her source of income, and when such contributions are not made to evade greater support obligations, those contributions qualify as 'normal business expenses' under [what was then] Standard 4 [of the Washington State Child Support Schedule dated July 1989]." Id. at 722. Benjaminson argues that his case is no different, because if he does not make his Key Bank note payments, the bank will foreclose on his company stock, and he will be out of a job.
The State does not argue that Benjaminson sold his former business assets and purchased the current business in order to evade greater child support. Accordingly, we will assume for purposes of this opinion that under Mull, Benjaminson is entitled to deduct his investment interest expense. But by that same token, he is required to count both his interest income and his capital gains from the sale of his customer list, as part of his gross income. See RCW 26.19.071(3)(m) (expressly providing that monthly gross income shall include income from all sources, including capital gains). Turning back to Benjaminson's 2002 individual income tax return, we observe that in addition to the salary and interest income found by the court, he earned a capital gain of $29,582 that has not previously been counted as income, and he paid investment interest on the notes for purchase of the stock of the new business of $35,703. His actual income tax for the year was $21,629 — considerably less than if he had taken the standard deduction instead of itemizing. Subtracting these actual sums from his adjusted gross income as shown on the 2002 return indicates an annual net income of $91,252. That amount divided by 12 months indicates a net monthly income of $7,604 for the father.
We find no error in the trial court's refusal to grant credit for other expenses that Benjaminson argued were normal business expenses. Only the investment interest deduction was adequately documented. The remainder of Benjaminson's so-called accounting lacks documentation. As we have noted above, the court did not err in determining that it lacked credibility.
The trial court's worksheets show a net monthly income of $7,506 for the father. Thus, the court's failure to deduct Benjaminson's investment interest was entirely offset (and then some) by the error in failing to include his capital gain as part of gross his gross income and by the application of the standard deduction amount instead of the actual itemized deductions. It now becomes clear that if the trial court had applied both RCW 26.19.071(3)(m) and the salient ruling in the Mull case, and if it had deducted actual income taxes paid instead of a higher hypothetical figure based on the standard deduction, it would have reached nearly the same net monthly income shown on the father's side of the ledger in the worksheets adopted by the court on September 19, 2003.
Neither the State nor the mother has assigned error to the trial court's failure to include capital gains as income — an error the State invited, in any event. But we cannot properly review Benjaminson's claim of error regarding investment interest paid without also considering the fact that any such error was entirely offset by the erroneous omission of the capital gains as part of gross income. Because that is so, the error in computing the father's net monthly income is, in effect, rendered harmless.
Nothing in the child support schedule act requires absolute precision in calculating parental income and deductions. Where the court averages income over a period of years as it chose to do here, the figures plugged into the worksheet are estimates. The same is true when a court imputes income to a parent; and when it utilizes the standard deduction instead of the taxpayer's actual itemized deductions and actual taxes paid. We are reluctant to remand for recalculation in the interests of more precise numbers, in a case where the difference in outcome would not justify the time and legal expense that would be incurred. Thus, unless some other error requires remand, it would be a waste of scarce resources to remand for recalculation in this case.
Mother's Income
Benjaminson also contends that the court understated the mother's income and overstated the health insurance premiums that she pays for the child's coverage. The mother's gross wages were based on the report of her employer to the Employment Security Department. Her net income was determined based on applying the standard deduction, the same as for the father. The trial court did not err in relying on these figures in determining the mother's net income. Thus we reject the father's contention that the court understated the mother's income.
We think that the court did err in calculating the health care premiums that the mother pays by way of a payroll deduction from her wages, however. In its brief for this appeal, the State contends that the figure shown on the worksheet is proper because the mother is paid 26 times per year rather than 24. But her payroll stub seems to indicate that she is paid only 24 times a year, and the worksheet numbers for her side of the worksheet ledger seem to be based on 24 paychecks a year rather than 26. Thus, the amount that the mother pays for health insurance for the child probably is $146 per month rather than $158 — a difference of $12. To correct that error would reduce the father's proportionate share of any extraordinary health care expenses that the child might incur by a few dollars, but it would not change the amount of the monthly transfer payment. Thus, any error is so minuscule as to be rendered harmless in a case where both parents' incomes and tax liabilities were estimates based on averaged figures, and application of the standard deduction, in any event. Accordingly, we decline to remand for recalculation of the health insurance premium.
Attorney Fees
The trial court did not award attorney fees, and no appeal has been taken regarding that matter. The father requests attorney fees on appeal on the basis of RCW 26.09.140 — need and ability to pay. But he has filed no financial affidavit as required by RAP 18.1(c). And although his appeal is not entirely frivolous, he has gained no affirmative relief because the errors were harmless.
The State requests attorney fees on appeal on the basis of intransigence by the father in bringing this appeal. Certainly, legal fees were increased below by the father's grossly late financial disclosures, but the trial court did not enter a finding of intransigence. We are reluctant to award fees on appeal on the basis of a continuation of intransigence begun at the trial court level when the trial court has made no such finding. And although the trial court's only errors are harmless, we cannot say that the appeal is frivolous.
Finally, the State suggests that the mother is entitled to fees on appeal under RCW 26.09.140; but she has not complied with RAP 18.1(c).
In conclusion, because the errors in this case were de minimus and/or harmless, we decline to remand for recalculation of the transfer payment. The parties' requests for fees on appeal are denied.
Affirmed.
ELLINGTON, BECKER and BAKER, JJ., Concur.