Halberg v. Halberg

• Decision Date: 26 January 2010
• Docket Number: No. 20090168.,20090168.
• Citation: 2010 ND 20,777 N.W.2d 872
• Parties: Brandi C. HALBERG, Plaintiff and Appellant v. Daniel J. HALBERG, Defendant and Appellee.
• Court: North Dakota Supreme Court

777 N.W.2d 872

2010 ND 20

Brandi C. HALBERG, Plaintiff and Appellant v. Daniel J. HALBERG, Defendant and Appellee.

No. 20090168.

Supreme Court of North Dakota.

January 26, 2010.

Jacey Layne Johnston (argued) and Dewayne A. Johnston (appeared), Grand Forks, N.D., for plaintiff and appellant.

Leslie Johnson Aldrich, Fargo, N.D., for defendant and appellee.

CROTHERS, Justice.

[¶ 1] Brandi Halberg appeals from an amended judgment ordering Daniel Halberg to pay $792 per month in child support. We reverse and remand for recalculation of Daniel Halberg's child support obligation, concluding the district court misapplied the child support guidelines.

I

[¶ 2] Brandi and Daniel Halberg were married in 1993, divorced in August 2006, and have three minor children together. She was awarded custody of the children. The parties stipulated to Daniel Halberg's child support obligation, and the court ordered Daniel Halberg pay $600 per month in child support and one hundred percent of the unreimbursed medical expenses.

[¶ 3] Daniel Halberg operates a trucking company, hauling oil in western North Dakota out of Tioga. He incorporated his trucking business in September 2008, under the name Halberg Trucking, Inc. Daniel Halberg and his father each own fifty percent of the company's stock. Daniel Halberg is a paid employee of the corporation and is the only truck driver the company employs. He is also involved in running the corporation, and he testified he acts as its CEO. Before the business was incorporated, he was a self-employed truck driver and ran his trucking business as a sole proprietorship. When he incorporated the business, he transferred all the trucking assets to the corporation. He did not begin hauling oil until the business was incorporated.

[¶ 4] Daniel Halberg rents a mobile home with another person in Tioga to live in when he is working. He owns a second mobile home in Lakota that he considers his primary residence, although he testified he stays in Tioga approximately twenty days a month.

[¶ 5] In September 2008, the Regional Child Support Enforcement Unit moved to amend the judgment to include statutory language about medical insurance. Daniel Halberg responded to the motion and moved to amend the judgment, requesting the court order that the parties split any unreimbursed medical expenses. Brandi Halberg responded to his motion and moved to modify Daniel Halberg's child support obligation.

[¶ 6] After an evidentiary hearing, the district court found Daniel Halberg is underemployed, imputed his income and calculated his child support obligation based on the imputed income. The court ordered Daniel Halberg pay $792 per month in child support and all unreimbursed medical expenses.

II

[¶ 7] Brandi Halberg argues the district court misapplied the law by imputing Daniel Halberg's income to determine his support obligation instead of calculating his actual income. She claims his tax return is unreliable and does not accurately reflect his actual income because he received benefits from the corporation that he did not include in his income. She contends the court should use the "real numbers" to determine his income based on his personal bank statements and on the business's general ledger showing what expenses the business paid and how much money was deposited in his personal checking account.

[¶ 8] "`Child support determinations involve questions of law which are subject to the de novo standard of review, findings of fact which are subject to the clearly erroneous standard of review, and may, in some limited areas, be matters of discretion subject to the abuse of discretion standard of review.'" Verhey v. McKenzie, 2009 ND 35, ¶ 5, 763 N.W.2d 113 (quoting Buchholz v. Buchholz, 1999 ND 36, ¶ 11, 590 N.W.2d 215). The district court errs as a matter of law if it fails to comply with the child support guidelines in determining an obligor's child support obligation. Verhey, at ¶ 5.

[¶ 9] The district court found Daniel Halberg is self-employed and the self-employment provisions of the child support guidelines apply, but the court also found he is underemployed and imputed his income:

"Brandi contends that Daniel is not reporting all of his income and that many items which he paid from his business checking account are actually personal expenses, which should not be deducted from his income for child support purposes. Daniel concedes that he pays from his business account some personal expenses and vice versa from his personal checking account.

....

"Brandi's attorney seems to argue, without citing, that the terms of N.D. Admin. Code 75-02-04.1-05, `Determination of Net Income from Self-Employment' should govern. Brandi argues that the income of Daniel for child support purposes for 2008 should be $70,927.24. The Court can not agree with this amount. This section of the North Dakota Administrative Code should govern, however the income calculation must use `total income, for internal revenue service purposes' (Emphasis added). Many of the items which Brandi includes as personal income could well be legitimate business expenses for internal revenue purposes. For example internet service and hardware bills are added back in as personal expenses when they appear to be business expenses. Clearly, many of the items listed in Plaintiff's brief as personal income are not personal income under IRS rules but are legitimate business deductions. Other items paid out of his business account are clearly not legitimate business expenses but should be considered personal expenses, such as a haircut. The burden is on the movant seeking to increase the child support to show that the amount being paid is not in conformance with the child support guidelines and what the correct amount should be. Outlining a list of bills paid to various entities without showing that they are not business expenses under IRS rules is not sufficient. The records do not indicate that the Defendant is accumulating a large amount of cash reserves or buying an expensive vehicle for his personal use. The pickup he drives is high mileage; he lives in a trailer house in Lakota purchased for $13,000. He shares a trailer at Tioga.

....

"The five-year average is not acceptable as it does not truly reflect what the Defendant's income is likely to be.

"The Court finds that Daniel is underemployed. See N.D. Admn. Code § 75-02-04.1-07(2). He lists his Adjusted Gross Income for 2008 at $13,351. This is less than .6 of the prevailing wage of a person with a similar work history and occupational qualifications. Daniel is an experienced truck driver working in the Tioga area. An experienced truck driver should make $46,461 based on the ND Job Service Report. The income to be imputed is .6 of this or $27,876. See N.D. Admn. Code § 75-02-04.1-07(3). He has other VA Disability payments of $1,404 per year.

"This equates to a child support obligation of $792 per month."

[¶ 10] "`[A] proper finding of net income is essential to determine the correct amount of child support under the child support guidelines....'" Gunia v. Gunia, 2009 ND 32, ¶ 13, 763 N.W.2d 455 (quoting Berge v. Berge, 2006 ND 46, ¶ 8, 710 N.W.2d 417). To determine an obligor's net income the court must first determine the obligor's gross income and then subtract the items listed in N.D. Admin. Code § 75-02-04.1-01(7). Steffes v. Steffes, 1997 ND 49, ¶ 31, 560 N.W.2d 888; see also Hieb v. Hieb, 1997 ND 171, ¶ 8, 568 N.W.2d 598. Gross income is income from any source, in any form, including:

"salaries, wages, overtime wages, commissions, bonuses, employee benefits, currently deferred income, dividends, severance pay, pensions, interest, trust income, annuities income, gains, social security benefits, workers' compensation benefits, unemployment insurance benefits, distributions of retirement benefits, ... veterans' benefits (including gratuitous benefits), gifts and prizes to the extent they annually exceed one thousand dollars in value, spousal support payments received, refundable tax credits, value of in-kind income received on a regular basis, children's benefits, income imputed based upon earning capacity, military subsistence payments, and net income from self-employment."

N.D. Admin. Code § 75-02-04.1-01(5).

[¶ 11] The child support guidelines include specific provisions addressing how the court should determine an obligor's income from self-employment. Under the child support guidelines, self-employment is:

"employment that results in an obligor earning income from any business organization or entity which the obligor is, to a significant extent, able to directly or indirectly control.... [I]t also includes any activity that generates income from ... corporations ... regardless of form and regardless of whether such activity would be considered self-employment activity under the Internal Revenue Code."

N.D. Admin. Code § 75-02-04.1-01(10). When an obligor is self-employed, the guidelines generally require the court to average an obligor's self-employment income from the most recent five years of self-employment, if the self-employment activity was undertaken on a substantially similar scale, to determine the obligor's self-employment income. N.D. Admin. Code § 75-02-04.1-05(4). When an obligor exercises direct or indirect control to a significant extent over a corporation that pays its own taxes, a portion of the corporation's taxable income must also be added to the obligor's individual income to determine the obligor's net income from self-employment. N.D. Admin. Code. § 75-02-04.1-05(1)(b).

[¶ 12] The evidence supports the district court's finding that Daniel Halberg is self-employed and that the self-employment provisions of the child support guidelines apply. The court did not use a five-year average to determine his income from self-employment because the court found the five-year average would not accurately reflect what his income is likely to be. The guidelines provide a...