Quamme v. Bellino, 950154

CourtUnited States State Supreme Court of North Dakota
Citation540 N.W.2d 142
Docket NumberNo. 950154,950154
PartiesBrian J. QUAMME, Plaintiff and Appellee, v. Joann L. BELLINO, f/k/a Joann L. Quamme, Defendant and Appellant. Civ.
Decision Date30 November 1995

Wayne T. Anderson, Fargo, for plaintiff and appellee.

Mark A. Meyer of Meyer Law Firm, Wahpeton, for defendant and appellant.

SANDSTROM, Justice.

Joann Bellino appeals the modified judgment adjudicating reserved issues in her divorce from Brian Quamme. We affirm in part, reverse in part, and remand, holding the adjusted income of Quamme's corporation, and not the salary paid to Quamme, should be used to calculate his child support obligation.

I

Joann Bellino (Bellino) and Brian Quamme (Quamme) were married on August 28, 1976. In September 1978, the parties moved to Wahpeton and opened their own dental office. Quamme was the dentist, and Bellino worked as the bookkeeper and dental assistant. In September 1982, the parties' first son, Adam, was born. Bellino quit working at the dental office to become a full-time parent, but she continued doing the bookkeeping for the dental practice at home. A second child, Breanna, was born in September 1984. Bellino remained at home to care for the children until the divorce.

The parties separated on September 25, 1990. At that time, the parties owned two houses in the Wahpeton area. Bellino lived in one house, and Quamme lived in the other.

The divorce was tried August 29, 1991. The court awarded the parties joint legal custody of the two children. Bellino was awarded sole physical custody during the school year. Quamme was awarded sole physical custody during the summer. The court ordered Quamme to assume the mortgage payments for both houses. Recognizing the significant expenses incurred by Quamme in maintaining both houses, the court temporarily awarded Bellino $1,200 per month child support, an amount less than the presumptively correct amount under the guidelines. Bellino was also to receive the rental payments from the larger house. Once the larger house was sold, the court intended to make a more permanent order concerning child support. Intending to revisit the issue of spousal support following the sale of the larger house, the court provided temporary spousal support to Bellino by requiring Quamme to pay for her medical insurance and "uncovered" optometric, dental, and other medical expenses. The court also ordered Quamme to pay Bellino's attorney's fees at the rate of $100 per month. The court added, "This payment is a temporary payment order and is subject to readjustment upon sale of the [larger] house."

Quamme moved to amend the judgment on November 15, 1991. Both parties claimed the other had wrongfully acquired property belonging to the other under the divorce decree. The court ordered Quamme to pay Bellino $1,000 in attorney's fees, in part for Quamme's self-help acquisition of certain property.

Bellino unsuccessfully moved the district court to amend its original judgment on July 16, 1993. Bellino again moved the court to amend the judgment in October, 1994. Specifically, she contended the judgment's provisions regarding spousal support, child support, and attorney's fees needed to be amended. In the memorandum opinion authorizing amendment of judgment, the court noted several factors contributed to the necessity for amendment. First, Quamme was able to reduce his net income through incorporation, paying himself $46,000, instead of being taxed as a sole proprietor on $71,000. The court also noted Quamme gained additional write-offs through incorporation, "including paying salary to his new wife which would result in income to the family but not necessarily be chargeable to him for child support purposes." Second, Quamme purchased the larger house from Bellino and sold the smaller house, reducing his payment obligations. The substantial mortgage payments from two houses had made it impossible, the court said, to award the child support suggested by the guidelines in the initial divorce decree as there just "wasn't enough money to go around." And third, Bellino has lost the rental value of the larger house, since Quamme purchased it.

In its memorandum opinion, the district court stated, "The Court very clearly indicated, and as counsel also recognized, the sale of one of these houses was an absolute necessity in order to properly calculate meaningful child support and spousal support. That is the reason the Court reserved those issues in its initial opinion." Overall, the court found Bellino had lost approximately $500 per month in income, while Quamme had reduced his obligations by about $1,000 per month.

The district court increased monthly child support from $1,200 to $1,372. Bellino was awarded $500 per month in spousal support for four years, and Quamme was released from the obligation to pay her medical insurance and expenses. Finally, the court awarded Bellino additional attorney's fees of $1,500 for the cost of bringing this motion.

Bellino appeals the court's judgment, claiming the spousal support, child support, and attorney's fees awards are all clearly erroneous.

The district court had jurisdiction under N.D.C.C. Sec. 27-05-06. The appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. Art. VI, Sec. 6 and N.D.C.C. Sec. 28-27-01.

II

Bellino claims the court's child support award in the district court judgment is clearly erroneous because it was not calculated using appropriate figures concerning Quamme's income, especially considering the recent incorporation of the dental business.

A

The district court specifically reserved the issue of child support for later decree. See Hallock v. Mickels, 507 N.W.2d 541, 544 (N.D.1993). In addition, the original child support award was entered more than one year before the filing of this motion. See N.D.C.C. Sec. 14-09-08.4(3). On appeal, neither party contends the district court inappropriately revisited this issue.

B

The district court increased Quamme's child support obligations to $1,372 per month. Bellino argues the district court incorrectly calculated Quamme's income for child support purposes. A district court's findings on a motion to modify child support are subject to review under N.D.R.Civ.P. 52(a), and will not be disturbed on appeal unless they are clearly erroneous. Mahoney v. Mahoney, 516 N.W.2d 656, 661 (N.D.App.1994) (citing Hallock v. Mickels, 507 N.W.2d 541, 544 (N.D.1993)). "A finding of fact is clearly erroneous if, although there is some evidence to support it, a reviewing court, on the entire record, is left with a definite and firm conviction that a mistake has been made, or if it was induced by an erroneous view of the law." Mahoney.

In determining Quamme's income for child support purposes, the court considered the average monthly income of $5,241 per month for the three years preceding incorporation, and the average net income of $4,224 per month for the two years following incorporation. The court found the average net monthly income over the entire period to be approximately $4,800.

The district court specifically found Quamme had been able to reduce his net monthly income through incorporation. Yet, there is no indication the district court calculated Quamme's income after incorporation based on the business' actual gross income, rather than the salary Quamme chose to pay himself. When the obligor is self-employed, the district court should "coherently assemble facts and figures from the evidence to determine [the obligor's] net income." Mahoney v. Mahoney, 538 N.W.2d 189, 194 (N.D.1995).

C

In determining income for child support purposes, the district court must consider the entire revenue of the business in self-employment situations. N.D.Admin.Code Sec. 75-02-04.1-05(2) states, "After adjusted gross income from self-employment is determined, all business expenses which may be allowed for taxation purposes, but which do not require actual expenditures, such as depreciation and net operating losses, must be added to determine net income from self-employment." "Net income from self-employment" is "gross income of any organization or entity which employs the obligor, but which the obligor is to a significant extent able to control, less actual expenditures attributable to the cost of producing income to that organization or entity." N.D.Admin.Code Sec. 75-02-04.1-01(8). In instances of self-employment, the administrative code requires consideration of the gross income of the business, rather than what an individual chooses his personal "income" to be.

When an obligor is the sole stockholder of several corporations and determines her own salary, "this is an appropriate case for 'piercing the corporate veil' and considering the income of those corporations in determining [the obligor's] earning capacity." Com. ex rel. Maier v. Maier, 274 Pa.Super. 580, 418 A.2d 558, 561 (1980). "The net income of [an obligor] as shown on income tax returns is not to be accepted in a support case as the infallible test of [the obligor's] earning capacity. Particularly is this true where the [obligor] is in business for himself and is allowed substantial business 'expenses,' items of depreciation and sundry other deductions ..." Commonwealth v. Miller, 202 Pa.Super. 573, 198 A.2d 373 (1964). In determining the obligor's earning capacity, the court should consider "his salary from his wholly owned corporation, the corporation's earnings, life insurance paid by the corporation, and perquisites provided by the corporation ..." Com. ex rel. Maier v. Maier, 274 Pa.Super. 580, 418 A.2d 558, 560 (1980) (citing Commonwealth v. Gutzeit, 200 Pa.Super. 401, 189 A.2d 324, 327 (1963)).

Encompassing the business' entire revenues in a child support obligation calculation for an obligor who significantly controls the business entity from which he derives income is necessary under the child support guidelines. The district court's failure to do so is clear error....

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