Opinion
No. C3-01-539
Filed December 4, 2001.
Appeal from the District Court, Hennepin County, File No. DC-24-0340.
Jeanette M. Tuzinski (for respondent)
Michael Ormond (for appellant)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
This case involves the issue of modification of child support when the parents have joint physical custody. Appellant-father alleges the district court (a) failed to make adequate findings under Minn. Stat. § 518.551, subd. 5(c); (b) failed to account for the parties' stipulation allowing de novo review of father's support obligation due to his job loss; and (c) improperly used child support to equalize the income of the parties. Respondent-mother requests attorney fees. We reverse and remand.
FACTS
The marriage of appellant Ricky G. Gass and respondent Cheryl L. Gass was dissolved by judgment on December 14, 1999. The parties stipulated during the proceedings to joint legal custody, a child support obligation of $1,780 by appellant, a spousal maintenance buy-out, a property division, and a provision whereby respondent agreed to assume the regular expenses of the children. The stipulations were read into the record. Because of appellant's then extremely high income, the child support agreement did not apply the Hortis/Valento formula. The district court approved the parties' agreement, ordered joint physical custody, and entered judgment.
Respondent was a stay-at-home mother during a significant portion of the parties' 18-year marriage. Before the dissolution, appellant was employed by AGFA as the head of regional sales and had earned annual commission income of roughly $245,000 in 1999. His earnings over the previous five years before 1999 showed a graph line of substantially increasing income. Appellant earned $110,153 in 1994, $111,454 in 1995, $113,567 in 1996, $132,864 in 1997, and $163,016 in 1998. However, his position with AGFA was terminated without any advance warning on November 9, 1999, one day after the parties' marital termination agreement was read into the district court record, but before the drafting of the findings of fact and conclusions of law. AGFA did give appellant a severance package effective until June 15, 2000. After the unexpected termination, the parties and their attorneys met with the district court in chambers to discuss the situation. The court decided to honor the stipulation and the amounts agreed to before appellant knew he was being terminated, but to compensate for this new (and substantial) fact, the court included in the judgment that "[b]ecause of [appellant's] current employment status, [appellant] may request a de novo review of the level of child support" no less than "six months after entry" of the judgment. Both parties understood this.
On July 12, 2000, appellant sought to modify his child support obligation because his new job paid an annual salary of $75,000 with no commissions. His new employer also paid for his car lease and cell phone, but appellant now has the expense of $350 per month for medical insurance, which was previously paid by AGFA. Also, following the dissolution, respondent received a $200,000 inheritance from her grandmother, a sum larger than had been anticipated by the parties during the dissolution. Respondent now currently works part time for wages, grossing approximately $200 per week.
The district court modified appellant's child support obligation downward to $1,400 a month, leaving the rest of the original dissolution agreement basically intact. This appeal follows.
DECISION I. Modification of Child Support
Appellant contends that the district court substantially deviated from the child support guidelines without considering the criteria in Minn. Stat. § 518.551, subd. 5(c) (2000), and stating how the deviation serves the children's best interests. He argues that the substantial deviation from the guidelines was caused by the court's decision now not to apply the Hortis/Valento formula. Appellant also contends that because the district court included in its findings of fact that child support could be reviewed de novo after six months from the entry of the judgment, the district court should not have considered the stipulation binding in determining future modification. He claims that because of the de novo review, the court must apply Hortis/Valento. Appellant claims that a strict application of Hortis/Valento would reduce appellant's child support obligation to approximately $500 to $600 per month. We disagree with appellant that a strict application of Hortis/Valento is now mandated. See Schlicting v. Paulus, 632 N.W.2d 790, 792-93 (Minn.App. 2001) (stating Hortis/Valento is presumptively applicable in joint physical custody cases). However, based on the substantial downward change in appellant's income, and respondent's new financial resources, we conclude the district court erred in only giving appellant, on these facts, a $380 per month decrease in his child support obligation.
The district court has discretion in determining whether to modify child support and its decision will not be reversed absent an abuse of that discretion where its conclusion is against logic and the facts on record. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). The district court's discretion, however, is limited by the governing statute. Moylan v. Moylan, 384 N.W.2d 859, 864 (Minn. 1986). Minn. Stat. § 518.64, subd. 2 (2000), requires the court to determine whether, among other factors, a substantial change in a party's earnings or a substantial change in the children's needs exists, rendering the current support order unreasonable and unfair. In addition to the child support guidelines, the court should consider, among other factors,
(1) all earnings, income, and resources of the parents, including real and personal property * * * ;
(2) the financial needs and resources, physical and emotional condition, and educational needs of the * * * children to be supported;
(3) the standards of living the [children] would have enjoyed had the marriage not been dissolved, but recognizing that the parents now have separate households[.]
Minn. Stat. § 518.551, subd. 5(c) (2000). The court is not required to make specific findings relating to each factor but rather the findings as a whole must show that it considered the relevant factors. Rosenfeld v. Rosenfeld, 311 Minn. 76, 83, 249 N.W.2d 168, 171-72 (1976).
Here, the district court found appellant's net monthly income was $4,900. This factored in appellant's car allowance and cell-phone payment by his employer, health-care premiums, and taxes. The court found appellant's reasonable monthly expenses were $4,000. Review of the record supports these findings.
With regard to respondent, the court found her monthly income was $1,800, which consisted of her maintenance payment, based on the buy-out of $1,000 per month, and her employment income of $13.51 per hour at 15 hours a week. The court found respondent's reasonable monthly expenses were $5,000. The court did state that respondent would continue to be responsible for paying the children's ordinary expenses as contemplated in the original judgment.
The district court did not include respondent's monthly receipt of interest from her inheritance in determining her income. The district court should have considered all of respondent's resources in determining child support, including her inheritance and its investment return that she uses for monthly expenses. See Minn. Stat. § 518.551, subd. 5(c), (stating court shall consider in modifying child support all earnings, income, and resources of parents).
Originally, the parties agreed that appellant would pay $1,780 for monthly child support. The parties agreed not to strictly apply the Hortis/Valento formula, and the district court acquiesced by incorporating the parties' stipulation into the final dissolution judgment. We reject appellant's claim that a strict application of Hortis/Valento is now mandated. The record indicates an acceptable and rational basis for the initial stipulation and judgment and all the dollar figures therein. Now that appellant's income has been reduced drastically, and some modification is called for, the equitable theory behind Hortis/Valento is simply one of several factors that the district court can look at when recalculating fair and reasonable child support based on appellant's drastic decrease in income.
The de novo language is clear, and it is abundantly clear why that language is there. Appellant losing his extremely high-paying position came to the attention of the parties right in the middle of the initial dissolution proceedings, and both parties and the district court made the reasonable decision that "things have changed." Thus, the court, in effect, stated that not only is a modification motion possible in the near future, but also that modification can come right after six months and that, in addition, appellant can request that his level of child support obligation be viewed "as if from scratch," meaning de novo review.
The district court provided the scope of review on the issue of future modification of the judgment. De novo review of this original order means the district court is not bound by its previous determination of child support. The district court can certainly consider the prior agreement in arriving at something equitable. See Schlicting, 632 N.W.2d at 792-93 (allowing deviations from Hortis/Valento formula if district court makes statutorily required findings). The current financial resources of both parties are in play, exactly as the district court anticipated when it ordered a de novo review if appellant moved for modification.
First, we conclude the district court erred when it stated in the modification findings that de novo review of the child support issue "does not require that [respondent] give up the benefit of her bargain." Because appellant no longer has the $245,000 per year income he had when the "bargain" was established, the court cannot continue to provide respondent with the benefit of a "defunct bargain."
Further, the district court was incorrect when it stated in its modification order that [e]ven if [respondent] doubles her employment income, there is a significant shortfall between her income and the monthly expenses necessary to maintain the lifestyle the children enjoy while in [appellant's] custody.
(Emphasis added.) This court has stated that child support should not be used as a means of equalizing income between parents who share the obligations of physical custody. Disparity in income must be related to the needs of the children. Absent a showing that the children's needs require a higher level of support from the parent with the higher income, we believe the guidelines should be straightforwardly applied.
Hortis v. Hortis, 367 N.W.2d 633, 635-36 (Minn.App. 1985). The judiciary does not use child support to "equalize" the parties' incomes. It is not uncommon that following a dissolution, one spouse or the other, because of later acquired assets or resources including, without limitation good jobs, good investments, inheritance, etc., has more disposable income than the other. Statistically speaking, it would be "bizarre" if, for the rest of the natural lives of two divorced adults, their respective assets and financial resources continued on identical paths. The fact that an obligor or obligee may have more discretionary income than the other for extras, movies, plays, trips, vacations, clothes, etc., is neither an equitable nor a legal reason to arbitrarily change a support obligation so the other parent can treat the children to just as many "extras." What the courts try to do is to maintain a balanced level of child support using the two established criteria, the child's reasonable needs and the resources available to the obligor. Minor children are ill served and are given an artificial view of the world if courts try to make sure that both "mommy" and "daddy" have the same amount of income for discretionary spending on children that to one party would be deemed a luxury.
We reverse and remand for the district court to look again for a reasonable and fair child support obligation. The district court should reconsider the factual findings required under Minn. Stat. § 518.551, subd. 5(c), and determine respondent's income based on respondent's income from all appropriate sources. Doing so will allow the district court to determine a fair and equitable support obligation that takes into account the substantial changes in the parties' circumstances and the children's best interests. When an obligor's income drops from $245,000 annually the year before (average yearly income of $126,211 for the previous five years) to $75,000 annually, a modest decrease of $380 per month is not reasonable. On the other hand, appellant's argument that child support should now be $500 to $600 per month does not appear to be reasonable. On remand, the district court in its discretion can request updated evidence of the earnings and expenses of the parties.
II. Attorney Fees
Respondent claims it is appropriate for this court to award her $2,450 under Minn. Stat. § 518.14, subd. 1 (2000), based on her motion for attorney fees and costs associated with this appeal. She asserts that appellant increased the costs of the proceedings by "not being completely candid about the parties' original stipulations in the dissolution proceeding" and that he is fully aware of what the parties bargained for during their negotiations for the stipulation. Respondent claims she should be awarded the amount because the district court found she has a gross monthly income of $1,800 compared to appellant's gross monthly income of $6,250. She claims that she would otherwise have to further deplete her investment/retirement assets.
Minn. Stat. § 518.14, subd. 1, states: the court shall award attorney fees, costs, and disbursements in an amount necessary to enable a party to carry on or contest the proceeding, provided it finds:
(1) that the fees are necessary for the good-faith assertion of the party's rights in the proceeding and will not contribute unnecessarily to the length and expense of the proceeding; that the party from whom fees, costs, and disbursements are sought has the means to pay them; and
(2) that the party to whom fees, costs, and disbursements are awarded does not have the means to pay them.
The court may award fees, costs, and disbursements at any stage of the proceedings. Id. If a party unreasonably contributes to the length or expense of the proceedings, the court has the discretion to award additional fees, costs, and disbursements against that party. Id.
Here, appellant had the absolute right to petition for modification six months after the judgment was entered. He had a substantial change in circumstances, which respondent fully understood, his severance package had expired, and his new job paid about one-third of his previous employment annually. The district court and the parties knew that appellant's severance package would last only until mid-June 2000 and knew the probability of a motion for a downward modification at that time. There is no evidence that appellant unnecessarily contributed to the length and expense of the proceeding before the district court or here on appeal. Further, both parties have substantial assets in real and personal property totaling between $700,000 and $900,000 individually. We conclude that neither party is entitled to attorney fees for this appeal.