Lemus v. Martinez

• Decision Date: 17 May 2019
• Docket Number: S-18-0223
• Parties: Arsenio LEMUS, Appellant (Petitioner), v. Merissa MARTINEZ, Appellee (Respondent).
• Court: Wyoming Supreme Court

441 P.3d 831

Arsenio LEMUS, Appellant (Petitioner),

v.Merissa MARTINEZ, Appellee (Respondent).

S-18-0223

Supreme Court of Wyoming.

May 17, 2019

Representing Appellant: Tyler J. Garrett of Hathaway & Kunz LLP, Cheyenne, Wyoming.

Representing Appellee: Sarah J. Manwarren of Jacobs-Polidora, LLC, Laramie, Wyoming.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

KAUTZ, Justice.

[¶1] Appellant Arsenio Lemus (Father) appeals from the district court’s order awarding primary custody of the parties’ two children and child support to Appellee Merissa Martinez (Mother). Father claims the district court abused its discretion in determining child support, specifically challenging its calculation of his income. He also asserts the district court violated his right to due process by limiting his direct testimony and his cross-examination of Mother’s witnesses.

[¶2] We reverse the district court’s child support order and remand for further proceedings.

ISSUES

[¶3] Father presents two issues on appeal:

1. Did the district court abuse its discretion when it calculated the amount for child support based on a misunderstanding of the evidence establishing Father’s income?

2. Were Father’s constitutional due process rights violated when the district court precluded him from fully testifying and cross-examining witnesses because of time limits?

Mother includes an additional issue:

3. Is [Mother] entitled to attorney fees and costs against [Father] pursuant to W.R.A.P. 10.05 ?

FACTS

[¶4] Mother and Father were not married, but they had two children together–JAL (born in 2006) and AKL (born in 2011). The family lived together for several years, and Father’s older children occasionally lived with them. Eventually, the parties’ relationship soured, and on November 7, 2016, Father filed a petition in the district court to establish child custody, visitation and child support. He sought sole custody of the children, subject to Mother’s visitation. Father also requested that the court order Mother to pay child support. Mother responded to Father’s petition and counterclaimed for sole custody of the children and for an order awarding her child support.

[¶5] The case was set for a one-day bench trial on September 5, 2017, with the time evenly divided between the parties, "minus breaks" and "any time attributable to [the guardian ad litem (GAL) ]." The court cautioned both parties that time was limited and they needed to be "aware of the implications of running out of time." The district judge periodically informed the parties of the amounts of time they had used.

[¶6] A few days before trial, Father filed a confidential financial affidavit on the form mandated by Wyo. Stat. Ann. § 20-2-308 (LexisNexis 2017). He indicated he was both employed and self-employed. Father stated he was employed by Laramie Valley Contracting & Roofing Services, Inc., and earned a monthly salary of $ 12,525. Later in the form, he declared his gross income from his employment was $ 9,491. After deducting monthly taxes of $ 2,086 and the monthly premium for the children’s health insurance, he arrived at a monthly net income of $ 7,030. Father did not provide any documentation verifying his employment income, such as pay stubs or W-2 forms.¹ He also did not provide information about his self-employment income, as directed in the confidential affidavit form.

[¶7] Father attached the first two pages of his tax returns for 2014 and 2015 and part of an amended 2014 return to his confidential financial affidavit. He indicated he had requested an extension to file his 2016 tax return and it was due on October 15, 2017. Father did not supplement his confidential financial affidavit with the 2016 return after trial. The tax returns he provided did not show any wages, salaries or tips. The only income reported on the tax returns was on line 17 for "[r]ental real estate, royalties, partnerships, S corporations, trusts, etc." The tax returns directed that Schedule E forms be attached, but they were not included in Father’s court filings. According to the IRS website, Schedule E is used to report income or loss from the entities identified in line 17. https://www.irs.gov/forms-pubs/about-schedule-e-form-1040.

[¶8] Father reported his total income on his 2014 tax returns as $ 106,874² and on his 2015 tax return as $ 150,307. Father’s 2015 income of $ 150,307, divided by twelve months, results in a monthly income of $ 12,525.58, which is consistent with one of the amounts reported in his confidential financial affidavit as being income from his employment with Laramie Valley Contracting. Father did not provide tax returns, Schedule K-1s,³ or income and expense reports for his business entities.

[¶9] During opening statement, the GAL drew the district court’s attention to the insufficiency of Father’s confidential financial affidavit and the lack of supporting documentation. She stated:

I would like to bring one more matter before the Court that I would ask the Court take into consideration, which is a confidential financial affidavit by [Father] was filed very, very late in this case, and so really not allowing for the time to really deeply analyze or investigate, but I would like the Court to take judicial notice that he did not provide a 2016 tax -- his taxes, nor did he provide a[n] ... independent statement. And from his own admissions, I believe that [Father] will testify that he is also the owner of the Arsenio Lemus Holdings, LLC, and there has been no reporting with regard to the income that he receives from that.

Also, [Father] had indicated to me that he also is part owner in an establishment, a bar here in town, and I’ve gotten -- no disclosures have been made, and I believe I would like to ask the Court to consider whether or not we need to delay a decision with regard to child support until a proper confidential financial affidavit may be brought before the Court.

The district court stated it would "certainly return to that question before taking the matter under advisement." In the end, though, the district court determined child support without requiring more information about Father’s finances.

[¶10] Father did not testify about his financial status during his direct examination. On cross-examination, Father testified he had interests in several companies, including Laramie Valley Contracting, Arsenio Lemus Holdings, and Opportunity Knocks. He did not explain the business structure of any of these companies, although a handwritten note which appears to have been added to the confidential financial affidavit identifies Laramie Valley Contracting as a corporation. He testified his companies were "pass through" entities for income tax purposes.⁴ Father said that, given the pass-through nature of his businesses, all of his income was reported on his personal tax returns.

[¶11] As part of his business dealings, Father owns approximately 50 rental units. The GAL questioned Father about income from the rentals:

Q. ... [W]hat is the rent range for each one of those units?

A. It can vary anywhere from the cheapest one I own is probably, maybe in the range of [$]395, all utilities included, all the way up to a [$]1,050, [$]1,300 if you have a residential home.

The record contains no documentation showing Father’s gross income from Laramie Valley Contracting, the rentals, or any other business interests. There is also no information about the business deductions he took to arrive at the income figures shown on his 2014 and 2015 tax returns.

[¶12] Mother testified that she had worked for Father and believed his rental income was around $ 45,000 per month and his income from Laramie Valley Contracting "depends on the month, between -- it could be [$]10,000 or [$]80,000 for that month." She believed he earned "[$]450,000 plus" per year, depending upon the year. She also disputed Father’s confidential financial affidavit showing that he earned $ 7,030 in net employment income from Laramie Valley Contracting. She said he did not get a paycheck because he was self-employed.

[¶13] The district court directed the parties to file written closing arguments and/or proposed findings of fact and conclusions of law. In her closing argument, the GAL stated:

Prior to determining child support, [Father] should be ordered to turn over complete tax returns, W-2s, and/or verified income and expense statements for all three of his business[es] that, among other things, must disclose exactly how much depreciation [Father] is claiming on his federal taxes. Such ordered disclosures should include income information for the tax year of 2016 for which [Father] has provided no documentation.

[¶14] Mother’s closing argument also emphasized the insufficiency of Father’s financial disclosures. However, rather than asking the district court to delay a child support ruling and order Father to provide correct documentation, Mother asked the court to impute a net monthly income of $ 25,000 to Father, resulting in a presumptive monthly child support obligation of $ 3,520. Father filed proposed findings of fact, conclusions of law and judgment, requesting the district court to award him primary custody of the parties’ children and order Mother to pay him "child support in the minimum amount of $ 50.00 per month."

[¶15] Five months after the trial, the district court held a hearing to orally deliver its decision. The district court awarded Mother primary custody of the children, subject to Father’s visitation. With regard to child support, the district court stated Father’s financial affidavit was "totally incomplete and unsatisfactory." The district court then said, "the only rational way to conform [Father’s] testimony to the financial affidavit[ ] and the tax returns is to find that he has two forms of income." The court determined his monthly wages, presumably from Laramie Valley Contracting, after taxes were $ 7,030. It ruled that the income shown on his tax returns was "only rental income." The court concluded that, for...