Albrecht v. Albrecht

Decision Date10 October 2002
Docket NumberNo. 01-715.,01-715.
Citation311 Mont. 412,56 P.3d 339,2002 MT 227
CourtMontana Supreme Court
PartiesPatricia Marie ALBRECHT, Petitioner and Appellee, v. Keith Vincent ALBRECHT, Respondent and Appellant.

Gregory O. Morgan, Gregory O. Morgan, P.C., Bozeman, MT, for Appellant.

Kirsten Mull Core, Kirsten Mull Core, P.C., Bozeman, MT, for Respondent.

Justice TERRY N. TRIEWEILER delivered the Opinion of the Court.

¶ 1 The Petitioner, Patricia Marie Albrecht, filed a petition for dissolution of her marriage to Respondent, Keith Vincent Albrecht, in the District Court for the Eighteenth Judicial District in Gallatin County. Following trial the District Court found the marriage to be irretrievably broken, awarded custody of the parties' three minor children to Patricia and ordered that Keith pay child support in the total amount of $2,412.00 per month. Keith appeals the District Court's child support award. We affirm in part, reverse in part and remand to the District Court for further proceedings consistent with this Opinion.

¶ 2 The issue presented on appeal is whether the District Court erroneously calculated Keith's child support obligation?

FACTUAL BACKGROUND

¶ 3 Keith and Patricia Albrecht were married on February 26, 1983. They had three children during their marriage. Patricia filed a petition for dissolution of their marriage on December 22, 1999. The District Court issued its Findings of Fact, Conclusions of Law, and Decree of Dissolution of Marriage on August 29, 2001. In the Decree the court ordered that Keith pay child support in the amount of $2,412.00 per month for the three children. The District Court relied upon the testimony of Patricia's expert, Mr. Nicholas Bourdeau, and adopted his final child support calculation.

¶ 4 Mr. Bourdeau arrived at Keith's child support obligation by first determining that Keith's income for 1999 was $93,987.00 from full-time self-employment as a roofing contractor and excavator and from house construction done in his spare time. Keith, however, reported an income of $37,747.00 from these sources in his 1999 Amended U.S. Individual Income Tax Return. Mr. Jan Staker, Keith's CPA, testified that Keith's average income from 1995-1999 was $26,613.00. Mr. Staker's knowledge of Keith's income and expenses was based on the information given to him by Keith, and was not based on an actual review of Keith's business records. The parties stipulated that Keith's gross receipts for 1999 were approximately $217,244.00.

¶ 5 The District Court ignored Keith's income tax returns as evidence of income based on Mr. Bourdeau's testimony that he believed the returns were unreliable for child support purposes. It was Mr. Bourdeau's impression that Keith's tax returns were "aggressive" and potentially "overreaching." Consequently, Mr. Bourdeau did his own income and business expense analysis by reconstructing Keith's business records. The difficulty and expense of auditing the business records led the District Court to the conclusion that averaging income for a period of three preceding years to determine income was not necessary.

¶ 6 Therefore, the District Court input $93,987.00 for self-employment income on Line 1 of the Child Support Worksheet A (Worksheet A). However, for the purpose of calculating federal income tax, state income tax and social security payments for allowable deductions on Line 2 of Worksheet A, the District Court averaged the actual taxes and Social Security payments made from the four preceding years. The average of those deductions was $1,649.00. This resulted in $92,338.00 of income on Line 3 of Worksheet A. The question on appeal is whether a child support obligation based on income calculated in this manner is correct.

STANDARD OF REVIEW

¶ 7 The standard of review of a district court's award of child support is whether the court abused its discretion. In re Marriage of Craib (1994), 266 Mont. 483, 490, 880 P.2d 1379, 1384. In deciding whether a district court abused its discretion, we determine whether "the trial court acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in substantial injustice." In re Marriage of Kovarik, 1998 MT 33, ¶ 21, 287 Mont. 350, ¶ 21, 954 P.2d 1147, ¶ 21 (citing In re Marriage of Wessel (1986), 220 Mont. 326, 333, 715 P.2d 45, 50). This court has stated that "a district court must apply its discretion in a realistic manner, taking into account the actual situation of the parties." In re Marriage of Noel (1994), 265 Mont. 249, 252, 875 P.2d 358, 359.

¶ 8 A district court's findings of fact are reviewed to determine whether they are clearly erroneous. In re Marriage of Stufft (1997), 286 Mont. 239, 250-51, 950 P.2d 1373, 1379 (citing Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 322, 820 P.2d 1285, 1286). To determine whether they are clearly erroneous, we consider: 1) whether the findings are supported by substantial evidence; 2) if the findings are supported by substantial evidence, whether the district court misapprehended the effect of the evidence; and 3) where the district court's findings are supported by substantial evidence, and the evidence has not been misapprehended, whether "review of the record leaves the court with the definite and firm conviction that a mistake has been committed." Interstate Production Credit, 250 Mont. at 323, 820 P.2d at 1287 (citing United States v. United States Gypsum Co. (1948), 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746). The standard of review of a district court's conclusions of law is whether the district court's conclusions are correct. In re Marriage of Brown (1994), 263 Mont. 184, 187, 867 P.2d 381, 382 (citing Burris v. Burris (1993), 258 Mont. 265, 269, 852 P.2d 616, 619).

DISCUSSION

¶ 9 Keith assigns error to several of the District Court's findings and in turn to the methodology employed by Mr Bourdeau. We have classified his criticisms as follows.

A. Failure to consider income from years other than 1999.

¶ 10 Keith contends that the District Court erred by calculating his actual income for child support purposes based on his income for 1999 alone, rather than taking a three-year average as required by law. He alleges this error resulted in a skewed and inaccurate portrayal of his income.

¶ 11 In determining child support obligations, a district court must follow the Child Support Guidelines (Guidelines) unless clear and convincing evidence is produced demonstrating that the application of the standards and guidelines is unjust to the child or to any of the parties, or is inappropriate in that particular case. Section 40-4-204(3)(a), MCA; See In re Marriage of Albinger, 2002 MT 104, ¶ 12, 47 P.3d 820,

¶ 12, 309 Mont. 437, ¶ 12. The Instructions for Completing Child Support Worksheets provide that determination of the income for a self-employed parent usually requires an average of at least three years of the net income from Schedule C of that parent's income tax returns.

¶ 12 This Court has recommended consideration of at least two years of income taxes when a district court is determining gross income. In re Marriage of Jacobson (1992), 251 Mont. 394, 399, 825 P.2d 561, 565. Furthermore, Rule 37.62.108(3)(a), ARM, provides that income should be annualized to avoid the possibility of skewed application of the Guidelines based on temporary or seasonal conditions. The period over which income is averaged should be sufficient to accurately reflect the parent's earning ability. Rule 37.62.108(3)(a), ARM. While Worksheet A does not mandate calculating income using a three-year average, the Guidelines and our cases create a strong preference for averaging income. Finally, a district court must be realistic and take the actual situation of the parties into account when calculating child support obligations. In re Marriage of Noel, 265 Mont. at 252, 875 P.2d at 359. The end sought is equity and accuracy in determining income of the party charged with child support obligations, while serving the best interests of the child. It would serve no one's best interests to attribute unrealistic income to a parent. If we expect a parent to meet both his needs and the needs of the children, child support calculations must be realistic.

¶ 13 Patricia cites two cases in which this Court affirmed a district court's award of child support based upon one year's income. In re Marriage of Jacobson, 251 Mont. at 399, 825 P.2d at 565; In re Marriage of Nash (1992), 254 Mont. 231, 235-36, 836 P.2d 598, 600-01. While we did not require evidence of income from more than one year in either case, the cited cases are inapplicable due to the factual differences from this case. In both Jacobson and Nash, the obligated parties were employees receiving wages rather than self-employed individuals. In re Marriage of Nash, 254 Mont. at 233, 836 P.2d at 600; In re Marriage of Jacobson, 251 Mont. at 399, 825 P.2d at 565. The preference for a three-year average on net income expressed in Worksheet A applies to self-employed individuals who do not receive income in the form of wages or a salary. A salaried employee or wage earner's income can be more easily ascertained by reviewing one year of income because, absent a foreseeable promotion, salary or wages can be presumed to remain consistent or predictable over a period of time. However, self-employment is not as predictable. Self-employed business owners experience fluctuations in profits from year to year. Therefore, it is necessary to consider the business history to fairly and accurately determine income.

¶ 14 We conclude that the District Court abused its discretion when it based determination of Keith's income on only what he earned in 1999. Income for a self-employed parent should be calculated based on a three-year average of that parent's net earnings. A district court is not permitted to deviate from the Guidelines absent clear and...

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