Edwards v. Edwards, 960349

Citation563 N.W.2d 394
Decision Date13 May 1997
Docket NumberNo. 960349,960349
PartiesDennis W. EDWARDS, Plaintiff and Appellee, v. Christie EDWARDS, Defendant and Appellant. Civil
CourtUnited States State Supreme Court of North Dakota

Shane Goettle (argued) and Brian W. Hankla (on briefs), of McGee, Hankla, Backes & Wheeler, Ltd., Minot, for plaintiff and appellee.

Steven James Simonson (argued), Special Assistant State's Attorney, Minot, for defendant and appellant.

MARING, Justice.

¶1 Christie Edwards Blore appealed from an amended judgment ordering Dennis W. Edwards to pay child support of $244 per month for Edwards' and Blore's minor child, Ciara Edwards. We hold the trial court's determination of child support under the child support guidelines is clearly erroneous. We reverse and remand with instructions the court enter an order requiring Edwards to pay $733 per month child support for Ciara commencing February 1996.

¶2 Edwards and Blore were married in September 1988. Their only child of this marriage is Ciara, born on August 10, 1991. Edwards and Blore were divorced in July 1993. Under the original divorce decree Edwards and Blore were awarded joint legal and physical custody of Ciara. Neither parent was ordered to pay child support to the other for Ciara's care.

¶3 In September 1995, Ciara started school and then began living with Blore for most of the time. Blore sought assistance from the Minot Regional Child Support Enforcement Unit to obtain child support from Edwards. An attorney for the Child Support Enforcement Unit filed a motion on February 5, 1996, requesting the district court to amend the original divorce judgment to require Edwards to pay child support for Ciara. After a hearing, the district court entered an amended judgment, dated October 7, 1996, requiring Edwards to pay child support of $244 per month.

¶4 On appeal Blore asserts the trial court committed several errors in establishing the amount of child support. The trial court's determination on child support is a finding of fact and will be affirmed unless it is clearly erroneous. Peterson v. Peterson, 555 N.W.2d 359, 363 (N.D.1996). The trial court's findings on a motion to modify child support will not be rejected on appeal unless they are clearly erroneous. Shaver v. Kopp, 545 N.W.2d 170, 174 (N.D.1996). A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if no evidence exists to support it, or if, on the entire record, we are left with a definite and firm conviction that a mistake has been made. Surerus v. Matuska, 548 N.W.2d 384, 387 (N.D.1996). Conclusions of law are fully reviewable. Id.

¶5 Section 14-09-09.7(3), N.D.C.C., creates a rebuttable presumption that the amount of child support resulting from application of the child support guidelines established by the Department of Human Services is the correct amount of child support. See, e.g., Smith v. Smith, 538 N.W.2d 222, 225 (N.D.1995). Under the guidelines, a court must first calculate an obligor's gross income, defined as "income from any source, in any form, but does not mean benefits received from means tested public assistance programs...." N.D.A.C. § 75-02-04.1-01(5). Once the court determines gross income, certain items including tax obligations adjusted as required by the guidelines, health insurance premiums affording coverage for the child, and FICA and Medicare obligations, are subtracted to determine the obligor's net income. N.D.A.C. § 75-02-04.1-01(7). The obligor's net income is then used to set the support amount. N.D.A.C. § 75-02-04.1-10.

Ballisti-Cast Income

¶6 When the motion to establish support was filed in February 1996, Edwards' primary income, according to his own testimony, was his salary as a machinist with Ballisti-Cast, a business manufacturing and selling bullet casting machines. As a machinist with this company Edwards earned a gross salary in 1995 of $18,000. However, on March 1, 1996, Edwards purchased the business for $42,500. He testified he had no earnings or profit from the business in 1996 and was uncertain when the business would generate a profit for him. The trial court did not attribute any income to Edwards from the Ballisti-Cast business in establishing Edwards' child support obligation. In its findings, the trial court stated:

In attempting to establish a current child support payment, it is neither fair, equitable, or reasonable to take into consideration the monthly income of $1,500 per month that [Edwards] used to make as an employee of Ballisti-Cast, since he no longer receives such a monthly pay check. Since there is no experience of income for this Court to review at the present time, there is no current basis for the Court to make a finding as to what [Edwards'] income may be from this business in order to establish current child support payments.

Blore asserts this finding is clearly erroneous and constitutes a misapplication of the child support guidelines. We agree.

¶7 An obligor's ability to pay child support is not solely determinable from actual income, and income compatible with an obligor's prior earning history may be imputed in calculating the child support obligation. Nelson v. Nelson, 547 N.W.2d 741, 744 (N.D.1996). N.D.A.C. § 75-02-04.1-02(8), provides in part:

Calculations made under this chapter are ordinarily based upon recent past circumstances because past circumstances are typically a reliable indicator of future circumstances, particularly circumstances concerning income.

On this issue Edwards testified:

Q What capacity were you employed or did you work for Ballisti-Cast in 1995?

A Machinist.

Q How much did you make in 1995 to the best of your knowledge?

A $18,000.00.

* * * * * *

Q Has this business been a profit making venture for the owner?

A I don't know.

* * * * * *

Q You purchased this business to make a profit though, didn't you?

A I hope so.

* * * * * *

Q Is there anyway possible that you can lose money on Ballisti-Cast?

A No unless I over borrow myself.

* * * * * *

Q But you are--there's no certainty in how much you're going to make next year.

A No.

Q There's no certainty in how much you're going to make this year.

A No.

Q Other than the money that you've gotten paid while you were an employee.

A Correct.

Edwards was uncertain what profit Ballisti-Cast would generate for him as its owner. However, he remained the sole machinist operator of the business which could continue to generate the $18,000 annual income paid to Edwards as its only machinist employee. That past machinist income is, under these circumstances, the best current predictor of Edwards' expected income from the business. Under the guidelines it is therefore both appropriate and necessary to impute that income to Edwards in determining his ability to pay child support now. We conclude the trial court's failure to impute Edwards' past earning capacity as a machinist was clearly erroneous. We, therefore, impute an annual income of $18,000 to Edwards for the Ballisti-Cast business.

Farm Income

¶8 Edwards also has a farm operation. The trial court determined Edwards' 1995 farm income was the best indicator of Edwards' future farm income for purposes of determining his child support obligation. Blore asserts the trial court misapplied the child support guidelines in computing Edwards' allowable deduction for payments on loans used to purchase depreciable farm machinery.

¶9 The applicable guideline is found under N.D.A.C. § 75-02-04.1-05(2):

75-02-04.1-05. Determination of net income from self-employment.

* * * * * *

2. After adjusted gross income from self-employment is determined, all business expenses allowed for taxation purposes, but which do not require actual expenditures, such as depreciation, must be added to determine net income from self-employment. Business costs actually incurred and paid, but not expensed for internal revenue service purposes, such as principal payments on business loans (to the extent there is a net reduction in total principal obligations incurred in purchasing depreciable assets), may be deducted to determine net income from self-employment.

Under this guideline, payments made on business loans for purchasing depreciable assets are deductible from adjusted gross income, but only to the extent "there is a net reduction in total principal obligations" for those purchases.

¶10 To compute this deduction for determining Edwards' 1995 farm income, the trial court found that prior to 1995 Edwards had an existing machinery loan principal balance of $33,234.09 and he incurred additional loans for machinery of $49,700 during 1995, resulting in a total loan balance for machinery purchases of $82,934.09. The court also found that during 1995 Edwards made total payments of $56,234.09 toward principal obligations of loans for depreciable assets. The record evidence of the loan amounts and when they were incurred is sparse and confusing. Having reviewed this evidence, however, we are not persuaded the trial court's findings about the loan amounts or payments are clearly erroneous.

¶11 Using these loan balance and payment amounts, the trial court applied the deduction under the guideline in the following manner:

By subtracting [Edwards'] loan payments of $56,234.09 in 1995, from the total of machinery loans in 1995 of $82,934.09, there leaves a balance of $26,700.00 which represents the net reduction of machinery loans (most of which is a reduction of principal).

We conclude the trial court misapplied the guideline. The court deducted from Edwards' farm income the outstanding balance of machinery loans remaining after subtracting Edwards' 1995 loan payments. Clearly, the guideline does not allow a deduction of the outstanding loan balance. Rather, the guideline provides for a deduction of the "principal payments" on loans incurred to purchase depreciable assets to the extent those payments result in a net reduction of outstanding principal. Under the trial court's application...

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