In re the Marriage of: Tammy J. Hollenhorst, petitioner, Respondent, vs. Daniel J. Hollenhorst, Appellant.
Annotate this CaseThis opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480 A. 08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
A04-1712
In re the Marriage of:
Tammy J. Hollenhorst, petitioner,
Respondent,
vs.
Daniel J. Hollenhorst,
Appellant.
Filed April 26, 2005
Affirmed
Halbrooks, Judge
Stearns County District Court
File No. F8-99-3505
Russell R. Cherne, Pennington & Lies, P.A., 1111 First Street North, P.O. Box 1756, St. Cloud, MN 56302 (for respondent)
Susan M. Dege, Rajkowski Hansmeier Ltd., 11 7th Avenue North, P.O. Box 1433, St. Cloud, MN 56302 (for appellant)
Considered and decided by Hudson, Presiding Judge, Schumacher, Judge, and Halbrooks, Judge.
U N P U B L I S H E D O P I N I O NHALBROOKS, Judge
Appellant challenges the modification of his child-support obligation, arguing that the district court (1) abused its discretion by ruling that appellant had not shown good cause for a hearing on review of the child-support magistrate's ruling, (2) erred by ruling that appellant's loan proceeds were income for support purposes, and (3) overstated his income by failing to properly apply the statutory deductions. Because the district court did not abuse its discretion by denying appellant's request for a hearing or by calculating appellant's income for child-support purposes, we affirm.
FACTSAppellant Daniel Hollenhorst and respondent Tammy Hollenhorst (n/k/a Tammy Brooks) were married in 1980 and have three children. Appellant and respondent divorced in 2001. They were granted joint physical and legal custody of the children and appellant was ordered to pay respondent child support in the amount of $750 per month.[1]
In October 2003, appellant filed a motion to modify child support, requesting a reduction in his monthly payment, based on the emancipation of the couple's oldest child. Respondent filed a countermotion to increase the amount of appellant's child-support payments, alleging an increase in his income, and subpoenaed appellant's personal and business financial records.
Appellant is the sole shareholder of Pool Products, Inc., a subchapter S corporation. Appellant is also the owner of Screen Pro. Although the record is ambiguous, appellant testified that "Screen Pro is part of Pool Products." He further testified that Screen Pro did not create separate financial documents or submit separate tax returns; rather, its financial information was included in Pool Products' tax return. Appellant explained, "[A]ll the inventory for Screen Pro is owned by Pool Products. Pool Products puts their tax return in. Screen Pro is just a name of the company that builds the screen enclosures, but is part of Pool Products. It's in the Pool Products tax return."
In addition to Pool Products, appellant owns several rental properties. In 2002 and 2003, appellant executed mortgages on these properties, as well as on his homestead, borrowing against the equity therein.
On December 18, 2003, a hearing was held before a child-support magistrate (CSM). Although respondent had subpoenaed numerous personal and business financial records from appellant, appellant had not produced many of these records by the time of the hearing.[2] Moreover, some of the records that were provided were incomplete or otherwise problematic. For example, appellant submitted unsigned tax returns and a computer printout of his company's check register rather than the requested handwritten "unredacted general ledger detail." The CSM noted that appellant had not fully complied with the subpoena and ordered him to do so, holding the record open until January 5, 2004, and allowing the attorneys two additional weeks to submit arguments.
On March 30, 2004, the CSM issued findings of fact, conclusions of law, and an order. The CSM found appellant's income to be "difficult, at best, to ascertain" and further found:
10. [Appellant] was not forthright in complying with the [d]iscovery [r]equests. In fact, not all information requested was actually submitted. [Appellant] did readily submit information regarding any decrease in income from his business, but was reluctant to reveal any income made from the rental or sale of real estate.
11. The [c]ourt specifically requested [appellant] to provide the [c]ourt, and opposing counsel, with a copy of the financial statements submitted in order to obtain the loan(s) [taken against his real estate holdings]. [Appellant] provided all sorts of copies of loan documents, deeds, credit card bills, and other bills, but the [c]ourt is unable to locate the financial statement(s) requested.
Because of the difficulty in determining appellant's income from the documents submitted, the CSM considered appellant's lifestyle, expenses, and bank deposits. Included were deposits resulting from "refinancing real estate, rental income, and the gain on sale of real estate." The CSM subsequently found appellant's monthly income to be at least $5,400 per month based on his monthly expenses and ordered him to pay respondent $1,620 per month in child support, to be reduced to $1,350 per month upon the emancipation of the parties' second child.[3]
Appellant then moved for review of the CSM's order and submitted a transcript of the hearing to the district court. Appellant also requested a new hearing or the opportunity to submit additional evidence.
The district court filed an order on July 15, 2004, denying appellant's request for a new hearing, noting that such a hearing was unnecessary because the district court "ha[d] adequate evidence to review and determine income for child support purposes." After reviewing the evidence, the district court concluded that although appellant had sufficient income and resources to meet monthly expenses of $5,400, $1,270 of that amount was attributable to an increase in personal debt and thus not applicable to computation of his income for child-support purposes. Consequently, the district court found that appellant's monthly income for the purposes of calculating child support was $4,130 and ordered him to make monthly child-support payments of $1,239 for two children and $1,033 per month following the emancipation of the parties' second child on June 1, 2004.[4] This appeal follows.
D E C I S I O NDistrict courts have broad discretion in deciding whether or not to modify awards of child support. Quaid v. Quaid, 403 N.W.2d 904, 906 (Minn. App. 1987), review denied (Minn. June 30, 1987). "The district court reviews the CSM's decision de novo." Davis v. Davis, 631 N.W.2d 822, 825 (Minn. App. 2001). A district court's decision confirming a CSM's order is reviewed under an abuse-of-discretion standard. Id. at 826. "An abuse of discretion exists only if the appellate court finds a clearly erroneous conclusion that is against logic and the facts on record." Quaid, 403 N.W.2d at 906 (quotation omitted). Because a transcript of the hearing before the CSM was submitted to the district court for review, we properly consider it here. See Davis, 631 N.W.2d at 826 (noting that failure to submit a transcript to the district court for review precludes consideration of the transcript on appeal). A district court's determination of an obligor's income for child-support purposes is a finding of fact that will not be set aside if it has a reasonable basis in fact and is not clearly erroneous. State ex rel. Rimolde v. Tinker, 601 N.W.2d 468, 470 (Minn. App. 1999).
I. New Hearing
Appellant initially argues that the district court erred in denying his request for a new hearing to respond to documents and expert testimony submitted by respondent at the close of evidence. Appellant contends that this unfairly denied him the opportunity to rebut the documents or opinions. But the CSM found that "[appellant] was not forthright in complying with [respondent's] [d]iscovery [r]equests. In fact, not all information requested was actually submitted." Moreover, of the information appellant did submit, much was not given to respondent until the date of the modification hearing or later. Because of this, the CSM held the record open for submission of additional records and to allow the parties to submit arguments. Any prejudice appellant suffered was of his own making, due to his failure to comply with the discovery requests.
"The court need not hold an evidentiary hearing on a motion for modification of . . . support." Minn. Stat. § 518.64, subd. 2(f) (2004). Furthermore, the child-support procedural rules state that "[a] child support magistrate or district court judge may order a hearing upon motion of a party or on the court's own initiative. A party's motion shall be granted only upon a showing of good cause." Minn. R. Gen. Pract. 377.09, subd. 5. The district court found that it had "adequate evidence to review and determine income for child support purposes; an additional hearing [was] unneeded." Appellant has not shown that the district court abused its discretion by denying his motion for a new hearing.
II. Determination of Income
Appellant contends that the district court erred by determining that the proceeds from mortgages taken by appellant against the equity in his rental properties is income for the purposes of child support. He cites Stangel v. Stangel, 366 N.W.2d 747, 749 (Minn. App. 1985), for the proposition that such proceeds are loans and thus do not constitute income for calculating child support. In Stangel, the appellant borrowed money from friends and relatives to pay a substantial portion of his living expenses. Id. at 748. Appellant correctly notes that this court held that such loans are not properly considered income for purposes of applying the child-support guidelines because such loans "were not periodic, were not payments,' and were not the type of income which could or should provide a dependable source of child support." Id. at 749.
But we clarified this position in Kuronen v. Kuronen, 499 N.W.2d 51 (Minn. App. 1993), review denied (Minn. June 22, 1993). "[W]hether or not the assets are periodic payments is inconsequential since, by statute, the court is required to take into account personal property as well as income in determining an appropriate modification." Id. at 53 (citing Minn. Stat. § 518.551, subd. 5(b)(1) (1992)). Thus, in Kuronen, we held that the district court abused its discretion by failing to include the receipt of nonperiodic assets in the child-support calculation. Id.
Here, appellant took mortgages against the equity in his rental properties. The district court noted that "when equity is removed from a business capital asset, and where the debt becomes a business expense, the equity removal is analogous to a partial sale of the asset." The district court also observed that the loans on the rental property provided both a "present influx of cash" and allowed for "planned reductions to future rental income."[5] Thus, the district court concluded that "a mortgage taken against rental property may be properly included in a present computation of assets and income available for child support," because "the amounts made in repayment will later reduce rental income, and thus would be reflected in any future modification of child support."[6]
When modifying a child-support payment, the district court must consider "all earnings, income, and resources of the parents, including real and personal property." Minn. Stat. § 518.551, subd. 5(c)(1) (2004). "[A]n obligor's capital assets are not the paramount consideration in determining a child support obligation, but are instead considered within the confines of established principles governing all support decisions." Quaid, 403 N.W.2d at 907. Accordingly, we noted in Quaid that although assets may be properly considered, it is inappropriate to require an obligor to liquidate his assets where there has not been a finding that he is not earning income to the extent of his abilities. Id. But when an obligor voluntarily chooses to liquidate his assets, a different situation exists. See Sieber v. Sieber, 258 N.W.2d 754, 757 n.2 (Minn. 1977) (concluding that when an obligor "voluntarily liquidates . . . a capital asset, and thereby diminishes his future earning capacity, . . . it would be unjust to hold that he is automatically relieved of future alimony payments, even if it ultimately becomes necessary to pay the [obligee] a portion of the proceeds from the sale").
Appellant voluntarily diminished the future earning capacity of his rental properties by taking mortgages against the equity in them. Accordingly, the district court did not abuse its discretion by including the proceeds from those mortgages when calculating his income for the purpose of child support.
Appellant also contends that the district court erred in calculating his income by failing to deduct the cost of his personal and dependent health-care coverage. To determine net income for child-support purposes, the court is to deduct the cost of both "Dependent Health Insurance Coverage" and "Individual or Group Health/ Hospitalization Coverage." Minn. Stat. § 518.551, subd. 5(b)(vi)-(vii) (2004).
As a base for its calculation of appellant's monthly income, the district court used the CSM's estimate of $5,400. The CSM noted that appellant's monthly expenses included $960 for medical insurance$640 of which was for dependent health-care coverage. An examination of the CSM's order demonstrates that this $640 was deducted prior to arriving at the $5,400 estimate.[7] Thus, the cost of dependent health insurance is not included in the district court's baseline calculation.
Financial records submitted to the CSM indicate that appellant's medical insurance was paid by Pool Products. Because Pool Products is an S corporation and appellant is a shareholder in that corporation, these health-insurance premiums are appropriately deducted by the corporation and their value is included in appellant's taxable income. See IRS Publication No. 15-B, Employer's Tax Guide to Fringe Benefits (rev. Jan. 2005). Consequently, the district court did not err in failing to deduct this amount when computing appellant's income for child-support purposes.
At oral argument, appellant asserted that the district court also failed to properly deduct appellant's tax payments when calculating his income. There is no evidence in the record that this issue was presented to the district court. Accordingly, the issue is deemed waived, and we will not consider it here. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (noting that an appellate court will not consider matters that were not argued and considered in the district court).
Affirmed.
[1] This amount was increased, based on a cost-of-living adjustment, to $785 per month beginning in May 2003. See Minn. Stat. § 518.641, subd. 1 (2004) (requiring biennial cost-of-living adjustment).
[2] Appellant's bank statements for 2003 were provided at the hearing, requiring respondent's expert to make his initial examination of those statements during the hearing.
[3] The court found that the couple's first child had been emancipated and thus no child support was to be paid for her.
[4] The district court's order modified only the computation of appellant's income and resultant child-support obligation. The rest of the CSM's order remained in force.
[5] The district court distinguished the equity removed from appellant's rental properties from that removed by refinancing his homestead. It noted that the mortgage payments on appellant's homestead could not be used to reduce his income for calculations of child support, thus it would be "unfair to count the present [homestead] mortgage debt as available income."
[6] Appellant argues that there is no evidence that he "will be able to maintain any level of income from the rental properties for the purposes of ongoing child support." But as the district court notes, such future reduction in income may be addressed via a future modification of child support.
[7] The CSM found monthly expenses, including medical insurance, of $6,036.24. Subtracting $640 leaves a balance of $5,396.24.
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