Nass v. Seaton

• Decision Date: 20 October 1995
• Docket Number: No. S-5827,S-5827
• Citation: 904 P.2d 412
• Parties: Frederick Lawrence NASS, Appellant, v. Sharon Michele SEATON, Appellee.
• Court: Alaska Supreme Court

Page 412

904 P.2d 412

Frederick Lawrence NASS, Appellant, v. Sharon Michele SEATON, Appellee.

No. S-5827.

Supreme Court of Alaska.

Oct. 20, 1995.

Charles A. Winegarden, Kodiak, for Appellant.

Alan L. Schmitt, Jamain, Ebell, Bolger & Gentry, Kodiak, for Appellee.

Before MOORE, C.J., and RABINOWITZ, MATTHEWS, COMPTON and EASTAUGH, JJ.

OPINION

RABINOWITZ, Justice.

I. INTRODUCTION

Fred Nass appeals from the superior court's modification of his monthly child support obligation. This appeal raises the issues of whether gifts received by Fred should be considered income for purposes of calculating child support; whether accounts receivable from Fred's business were properly considered income; whether Fred should be allowed to straightline depreciate that portion of his home used for business; whether Fred was voluntarily underemployed and capable of earning $45,000 per year; whether Fred was properly allocated 100% of the children's visitation transportation expenses; and whether Sharon Seaton was entitled to attorney's fees and costs.

II. FACTS AND PROCEEDINGS

Fred and Sharon were married in Kodiak on May 23, 1976. There were two minor children born of the marriage: Kimberly Michele, born September 20, 1979, and Robert Henry, born October 18, 1981. The parties were granted a divorce on May 25, 1988. In conjunction with the divorce, Fred and Sharon entered into a "Separation, Child Custody and Property Settlement Agreement" (agreement) in which the parties agreed to share legal custody of their two minor children. Fred and Sharon agreed that Sharon would have primary physical custody of the children and that Fred would have liberal visitation rights. The agreement was incorporated into the superior court's decree of divorce. Additionally, the superior court determined that Fred should pay monthly child support in the amount of $675 per child, or $1,350 per month.

In May 1989, the superior court modified the decree based upon the parties' stipulation that Fred's monthly child support obligation should be reduced to $335 per child, and that "[t]he parties agree that they will seek no accounting for prior child support or prior spousal support through May 31, 1989...." In May 1992, Sharon filed a motion to modify child support requesting that the superior court order Fred to pay child support every month, even for those months in which he exercises visitation, and additionally that Fred's monthly child support obligation be increased. Sharon's motion was based on two grounds: (1) the amendments to Alaska Civil Rule 90.3 which went into effect on January 15, 1990 (Supreme Court Order No. 1088), and (2) Fred's receipt of $20,000 in gifts in 1991 and 1992 from Walter and Alice Nass, his parents. Fred opposed the motion, arguing that Sharon had no competent evidence that the gifts were made; however, Fred did not explicitly deny that he had received the gifts. Fred further contended that a gift is not income for purposes of determining his child support obligations under Civil Rule 90.3. ¹ Fred in turn moved to retroactively decrease his child support obligation to the date Sharon filed her modification motion, or alternatively, to modify child support under Civil Rule 90.3 "based upon his present income."

Following a hearing, the superior court entered a modification of its previous support order. The new decree required Fred to pay a total of $1,012.50 in monthly child support for the parties' two children, with a fifty percent reduction in this level of support to take place when Fred has physical custody of the children. ²

Fred now brings this appeal. ³

III. APPLICABLE STANDARDS OF REVIEW

A court's modification of a child support award "will not be overturned absent a finding of a clear abuse of discretion." Eagley v. Eagley, 849 P.2d 777, 778 & n. 1 (Alaska 1993). We will disturb an award only if our review of the entire record leaves us with a "definite and firm conviction that a mistake has been made." Id. at 778 n. 1 (quoting Richmond v. Richmond, 779 P.2d 1211, 1216 (Alaska 1989)).

It is firmly established that, pursuant to Alaska Civil Rule 52(a), "[f]indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." See Horton v. Hansen, 722 P.2d 211, 215 n. 7 (Alaska 1986).

As to whether gifts should be treated as income for purposes of calculating child support, and whether straightline depreciation of real estate should be permitted in this case, we apply a de novo standard of review and adopt the "rule of law that is most persuasive in light of precedent, reason, and policy." Matter of K.L.J., 813 P.2d 276, 278 n. 1 (Alaska 1991).

IV. DISCUSSION

A. Whether the Superior Court Erred in Considering the Gifts Fred Received from his Parents as Income in Determining his Child Support Obligations

Where one parent is awarded sole or primary physical custody, Civil Rule 90.3(a) provides in part that child support awards are based upon the noncustodial parent's adjusted annual income. "Adjusted annual income" is in turn defined as "the parent's total income from all sources" minus various deductions not at issue here. Alaska R.Civ.P. 90.3(a)(1). Comment III(A) to Civil Rule 90.3, which relates to the subject of defining income, states:

Means based sources of income such as Aid to Families with Dependent Children (AFDC), Food Stamps and Supplemental Security Income (SSI) should not be considered as income. The principal amount of one-time gifts and inheritance should not be considered as income, but interest from the principal amount may be considered as income and the principal amount should be considered as to whether unusual circumstances exist as provided by 90.3(c).

(Emphasis added.) ⁴

In regard to whether the $20,000 gifts should be included in Fred's adjusted gross income under Civil Rule 90.3, the superior court entered the following relevant findings of fact:

The undisputed evidence is that [Fred] received gifts of $20,000 in each of the following years: 1990, 1991, 1992. And I find that he is due and more than likely will receive an additional $20,000 for 1993. Whether or not he receives it in 1993 is irrelevant. The undisputed testimony is that both [Fred] and his sister have received and are to receive a total of $80,000 each as part of an estate planning plan of his father. His sister has received all $80,000. The father's testimony during a deposition conducted by the parties is that he intends to pay [Fred] all $80,000 and he stopped solely because of this support dispute in this case. Accordingly, the $20,000 payment in 1992 and what he is to receive for 1993 is included in his income for calculating child support.

(Emphasis added.)

In its formal findings of fact the superior court states:

Based upon defendant's reported income, his potential income, the gifts from his father of $20,000.00 per year, and the value of his extraordinarily low business and living expenses, the court finds that defendant's adjusted gross income for child support purposes is $45,000.00 per year. This applies to 1992 and to 1993.

Fred relies on a number of decisions from other jurisdictions which refuse to consider gifts to the obligor as income for purposes of calculating child support. These authorities emphasize the fact that the donors have no legal obligation to continue giving the gifts. See In re Marriage of Harmon, 210 Ill.App.3d 92, 154 Ill.Dec. 727, 729-30, 568 N.E.2d 948, 950-51 (1991); True v. True, 615 A.2d 252, 252-53 (Me.1992); Ikard v. Ikard, 819 S.W.2d 644, 648-49 (Tex.App.1991) (holding that gifts are not to be considered a resource to the recipient unless the donor has a legal obligation to give them); Ebbert v. Ebbert, 744 P.2d 1019, 1023 (Utah App.1987). ⁵

On the other hand, this court has previously held that gifts to a noncustodial parent from his mother must be considered in determining the level of the noncustodial parent's child support obligation. Pattee v. Pattee, 744 P.2d 658, 662 (Alaska 1987). In Pattee, the noncustodial parent's primary source of income was a $1,000 monthly allowance he received from his mother. Id. at 662. ⁶

Review of authorities addressing the question of whether gifts to the obligor parent should be considered income for purposes of determining the level of the obligor's support obligation leads us to the determination that the principal amount of gifts and inheritances should not be considered as income for purposes of Rule 90.3. We are persuaded that any other approach blurs the easily administered and well-established historical distinction between gifts and earned income. In short, we conclude that the authorities which refuse to recognize the inclusion of gifts in determining the level of the obligor's adjusted gross income for purposes of calculating a child support obligation represent the correct rule of law. ⁷ We therefore hold that it was error for the superior court to include any gifts from Fred's parents in calculating his child support obligation under Civil Rule 90.3. ⁸

B. Whether the Superior Court Erred in Finding that Fred's Machine Business Accounts Receivable were Income

In its formal findings of fact the superior court stated:

Defendant has a number of accounts receivable. Given that his business practice is careful, and that he normally does not carry bad debt, the court finds that by and large these accounts are collectible and are the equivalent of a savings account.

Our review of the record supports these findings. ⁹ We cannot say that the superior court's finding that these accounts receivable were collectible is clearly erroneous. ¹⁰

C. Whether the Superior Court Erred in Disallowing Straightline Deductions for Real Estate Depreciation of Machine Business Premises

Fred challenges the superior court's determination that real estate used in conjunction with Fred's machinery business could not be depreciated...