McGinley-Ellis v. Ellis

• Decision Date: 16 August 1994
• Docket Number: GINLEY-ELLIS,No. 49S02-9408-CV-783,49S02-9408-CV-783
• Citation: 638 N.E.2d 1249
• Parties: Anne Marie McAppellant (Petitioner Below), v. Charles R. ELLIS, Appellee (Respondent Below).
• Court: Indiana Supreme Court

Page 1249

638 N.E.2d 1249

Anne Marie McGINLEY-ELLIS Appellant (Petitioner Below), v. Charles R. ELLIS, Appellee (Respondent Below).

No. 49S02-9408-CV-783.

Supreme Court of Indiana.

Aug. 16, 1994.

Nancy L. Cross, Miroff, Cross, Ruppert & Klineman, Indianapolis, for appellant.

Bruce M. Pennamped, Lowe Gray Steele & Hoffman, Indianapolis, for appellee.

SHEPARD, Chief Justice.

The Court of Appeals purported to evaluate the trial court's fidelity to the Indiana Child Support Guidelines under the abuse of discretion standard. It thus contravened the rule announced in Paternity of Humphrey (1991), Ind., 583 N.E.2d 133, which requires appellate review under the clearly erroneous standard.

I. Facts and Procedural History

Anne and Charles Ellis were married on July 26, 1985, and thereafter two children were born to the couple. Anne filed a petition for dissolution in November 1990, and the court entered a final decree on December 4, 1992. Pursuant to a motion by both parties under Trial Rule 52(A), the court entered findings of fact and conclusions of law.

Many of the issues raised before the trial court centered on Charles' relationship to and interest in his family's business, the Paint and Auto Supply Corporation (PASCO). PASCO was established by Charles' father and a partner in 1959; it sells automotive paint and painting supplies. At the time the parties married, Charles owned twenty- two shares of PASCO stock. Subsequent gifts by Charles parents increased his holdings to 162 shares. On the date the petition for dissolution was filed, this represented a 65.6% ownership interest in PASCO. His father and a non-family member employee held the remaining 34.4% interest. In conjunction with his growing ownership interest, Charles assumed primary responsibility for the operations of the corporation in 1983 and he now serves as its president.

In setting child support, the trial court specially found that Charles is "employed as President of the Paint and Auto Supply Corp. ... of which corporation he is the majority stockholder," and that he "controls what his salary and total compensation will be." Finding of Fact 12. The court also found that Charles' present income consists of his salary from PASCO ($814 per week) plus "in kind" compensation, valued at $93.00 per week, derived from his use of a PASCO truck. This analysis translates into an annual income of $47,169 per year. Income in the amount of $230.77 per week was imputed to Anne, who had worked outside the home before the marriage but not since the birth of the Ellis' first child. Plugging these gross incomes into the guidelines, the trial court determined Charles' support obligation to be $200 per week. It also ordered Anne to execute IRS Form 8332 in order to waive dependency tax exemptions in favor of Charles "for all future years."

On review, the Court of Appeals expressed concern over the trial court's failure to include as income to Charles certain payments made by PASCO which reduced the business debt of a partnership in which Charles held a 50 percent interest. It also questioned whether interest free loans taken by Charles from PASCO ought not have been considered in calculating his support obligation. In light of these concerns, it reversed, holding that "the methodology employed by the trial court in calculating Charles income fails to comport with the methodology prescribed by Child Supp.G. 3.A.2 ... and constitutes an abuse of discretion." In re Marriage of Ellis, 622 N.E.2d 213, 220 (Ind.App.1993). While we agree that the trial court failed to employ the methodology prescribed by the Indiana Child Support Guidelines, we observe that the Court of Appeals used the wrong standard of review in arriving at its conclusion.

II. Discussion

Shortly after the Child Support Guidelines became effective, this Court in Humphrey, 583 N.E.2d 133, considered the appropriate standard of appellate review of support orders. Earlier, in Marriage of Davidson (1989), Ind.App., 540 N.E.2d 641, it had been held that where a trial court is required to work from a presumptive result, there the "50-50" division of marital property, and to justify any deviations, it should be affirmed unless the court on appeal is persuaded that its determination is clearly erroneous. Id. at 645. Given the similarity of this approach to the child support framework, we chose to supplant the abuse of discretion standard which had traditionally governed trial court determinations of support obligations and use the clearly erroneous test instead. Humphrey, 583 N.E.2d at 134.

In this case, it may be that the Court of Appeals believed the abuse of discretion standard to be of continuing viability given that the calculations at issue were made under Guideline 3(A)(2), which presents certain "unique problems." Ind. Child Support Guideline 3, Commentary. That Guideline, inter alia, directs courts to "carefully review" the income and expenses of the self employed and to exclude expenses "determined ... to be inappropriate." While we agree that Guideline 3(A)(2) calls upon trial courts to exercise their sound judgment, as for example in determining whether an expense is "ordinary and necessary," see Merrill v. Merrill (1992), Ind.App., 587 N.E.2d 188, this does not necessitate departure from the clearly erroneous standard of review. As to this point, we reiterate our observation in Carr v. Carr (1992), Ind., 600 N.E.2d 943: "Although trial courts must have 'discretion to tailor a child support award to the circumstances,' " this discretion must be exercised within the methodological framework established by the guidelines.

Typical formulations of the clearly erroneous test declare that a child support order will be affirmed unless it is clearly against the logic and effect of the facts and circumstances that were before the trial court. Carr, 600 N.E.2d at 945. Here, application of this standard is further controlled by the fact that the support ordered...