Longtine v. Yeado, 970022

Decision Date11 August 1997
Docket NumberNo. 970022,970022
Citation567 N.W.2d 819,1997 ND 166
PartiesLarry R. LONGTINE, Plaintiff and Appellant, v. Diana YEADO, f/k/a Diana Longtine, Defendant and Appellee. Civil
CourtNorth Dakota Supreme Court

R. Scott Stewart (argued), Langdon, for plaintiff and appellant.

Lawrence D. DuBois (argued), Cavalier, for defendant and appellee.

MARING, Justice.

¶1 Larry Longtine appealed from an amended judgment modifying his child support obligation to Diana Yeado. We hold the child support guidelines authorize a trial court to consider one-time occurrences in the form of an obligor's capital gains from the involuntary conversion of a home and profits from an auction sale in setting child support. We affirm.

¶2 Longtine and Yeado were divorced in January 1992. Under a settlement agreement, the divorce decree awarded Longtine the parties' real estate and farm machinery. 1 The decree also awarded Yeado custody of the parties' four minor children and required Longtine to pay child support of $125 per month per child until each child reached the age of 18. The oldest child turned 18 in June 1995, and effective July 1, 1995, the court modified Longtine's child support obligation to $622 per month.

¶3 In May 1996, Yeado moved to modify Longtine's child support obligation, contending that in 1995 he had received more than $60,000 from an auction sale of farm machinery and $70,000 in insurance proceeds from a fire that destroyed the parties' former homestead.

¶4 A referee recommended finding Longtine had received a capital gain of $25,000 from the involuntary conversion of the house and a profit of $24,920 from the auction sale. The referee included those proceeds in Longtine's gross income. After subtracting $8,339 as debt repayment on a depreciable asset from the auction proceeds, the referee analyzed the effect of the proceeds from those one-time events on Longtine's child support obligation:

24. The next step is to determine how these one-time income items affect plaintiff's child support obligation. The guidelines do not specifically set out any procedure for considering income known to be [a] one-time event. Although the Supreme Court has found that the inclusion of such income is mandated by the guidelines, no procedure is set out. Rather it has been held that the Court "should exercise its discretion and consider awarding the children some portion of these excess ... payments while also ordering a future reduction in support when the effect of the windfall ceases" (Helbling v. Helbling, [541 N.W.2d 443 (N.D.1995) ] ).

25. To include all the income in a single year will result in the greatest increase in child support. This will have the greatest benefit to the children, but also will have the harshest impact upon plaintiff. Despite this, to do so appears to have the most logical result, since all of the income was "earned" in a single year. To make any attempts to spread the income out over two or more years would be arbitrary and will have the result of lessening the harsh impact upon plaintiff at the expense of the children. The only reason to do so would [be] to make payment easier for plaintiff. There has been no showing that there would be any benefit to the children. Plaintiff's child support has been found to be $571.00 per month based upon his regular income as reported in his latest tax return. This figure would be effective as of July 1, 1996. An attempt will then be made to determine an additional amount for a period of 12 months by applying the excess or onetime income to the guidelines in combination with his regular 1995 income. After a period of 12 months, plaintiff's child support would automatically be reduced to the $571.00 or any other modified child support amount.

* * * * * *

30. Plaintiff's guideline child support obligation, including the one-time income items, is $1,622.00 per month. (See "Attachment D")

31. Plaintiff's obligation to pay additional support on the one-time income items is $1,622.00--$571.00 = $1,051.00 per month for a period of 12 months for a total of $12,612.00.

The district court affirmed the referee's findings and recommendation. Longtine appealed.

¶5 District court review of a referee's findings of fact is under the clearly erroneous standard. Steffes v. Steffes, 1997 ND 49, p 8, 560 N.W.2d 888. A referee's conclusions of law, however, are fully reviewable. Id. A decision establishing a child support obligation is a finding of fact which will not be set aside on appeal unless clearly erroneous. Helbling v. Helbling, 541 N.W.2d 443, 445 (N.D.1995). 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 review of the entire evidence, the reviewing court is left with a definite and firm conviction a mistake has been made. Id. A change or modification of child support based upon an erroneous application of the guidelines or statutes is clearly erroneous. Mahoney v. Mahoney, 538 N.W.2d 189, 192 (N.D.1995).

¶6 Here, the dispositive issue involves the effect of the insurance and auction proceeds on Longtine's child support obligation. Longtine contends the proceeds he received from the one-time occurrences should not be counted as income for setting his child support obligation. He asserts the capital gain from the house is not income for purposes of his child support obligation because the gain was deferred under federal tax laws when he purchased another home within two years.

¶7 Section 14-09-09.7(3), N.D.C.C., creates a rebuttable presumption 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. E.g. Edwards v. Edwards, 1997 ND 94, p 5, 563 N.W.2d 394. Under N.D.A.C. § 75-02-04.1-10, the presumptive amount of child support is a scheduled amount, which is based upon the "obligor's monthly net income and the number of children for whom support is being sought." See, e.g., Smith v. Smith, 538 N.W.2d 222, 227 (N.D.1995). The obligor's "net income" is computed by first determining "gross income," which is broadly defined to mean "income from any source, in any form ... [including] capital gains," N.D.A.C. § 75-02-04.1-01(5), and then subtracting the items listed in N.D.A.C. § 75-02-04.1-01(7). 2

¶8 In Helbling, 541 N.W.2d at 447-48, we decided the child support ramifications of an obligor's receipt of moving expenses from his employer in a case where the obligor offered no proof of his actual moving expenses. We considered whether the excess payments should be included in the obligor's income even though the receipt of those payments was a one-time occurrence. We explained the child support guidelines broadly define income to include not only wages and salaries, but nonrecurrent payments such as bonuses, severance pay, and capital gains, and the guidelines do not authorize a deduction from gross income simply because the payments are nonrecurrent. We said our law and public policy inherent in the guidelines dictate that children should share in the obligor's receipt of those nonrecurrent payments. We concluded the trial court properly included the reimbursement payments in the obligor's gross income, but, in calculating his net income, erred in subtracting the excess payments from his gross income:

On remand, if the district court determines that the past payments are unlikely to recur, it should exercise its discretion and consider awarding the children some portion of those excess relocation payments while also ordering a future reduction in support when the effect of the windfall ceases. The district court, ordinarily, should allow [the obligor's] children to capture some portion of any extra income [the obligor] received.

Helbling, 541 N.W.2d at 447.

¶9 Helbling was decided under the 1991 version of the child support guidelines. Effective January 1, 1995, the guidelines were amended. As relevant to this issue, however, the definitions of gross income and net income have not changed since the guidelines were adopted in 1991. The guidelines broadly define gross income as income from any source, including capital gains, and allow deductions from gross income only for specific items. Capital gains from the house and the profits from the auction sale constitute "income from any source, in any form, ... [including] capital gains" under the broad definition of gross income. See Shaver v. Kopp, 545 N.W.2d 170, 175 (N.D.1996) (employer's contribution to tax-deferred savings plan constitutes gross income). The definition of net income does not authorize a specific deduction from gross income for deferred capital gains or the auction proceeds. See fn. 2.

¶10 Moreover, when the guidelines were initially adopted in 1991, several individuals suggested using net income under the federal tax laws to calculate child support:

Seven commentors expressed a view that the Internal Revenue Service net income should be used to establish child support net income. No change based upon these comments is recommended. The IRS net income reflects policies which have been determined appropriate for taxing purposes. In some cases, usually where the income will be deferred and reported in a later fiscal period, the Internal Revenue Service policies call for waiting for the eventual report of that income. Children cannot wait for support, and obligors should not be allowed the option of deferring income until the child reaches adulthood and no support obligation remains.

December 14, 1990 Summary of Comments Received in Regard to Proposed New NDAC Ch. 75-02-04.1, Child Support Guidelines, p. 4. See Shaver, 545 N.W.2d at 175. The guideline drafters specifically declined to define net income by reference to federal tax policies for deferred income, see Wilhelm v. Wilhelm, 543 N.W.2d 488, 490 (N.D.1996) (federal tax status is not conclusive for child support purposes), and we decline...

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