Carol A. Bettin, petitioner, Respondent, vs. Kenneth J. Bettin, Appellant.

Carol A. Bettin, petitioner, Respondent, vs. Kenneth J. Bettin, Appellant. A05-265, Court of Appeals Unpublished, December 27, 2005.

This opinion will be unpublished and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

A05-265

 

 

Carol A. Bettin, petitioner,

Respondent,

 

vs.

 

Kenneth J. Bettin,

Appellant.

 

 

Filed December 27, 2005

Affirmed

Huspeni, Judge*

 

Stearns County District Court

File No. F5-95-3257

 

 

Ann L. Carrott, Derek Trosvig, Swenson Lervick Syverson Anderson Trosvig Jacobson, P.A., 710 Broadway, P.O. Box 787, Alexandria, MN  56308 (for respondent)

 

Kevin L. Holden, Holden Law Offices, 816 West St. Germain, Suite 102, P.O. Box 1823, St. Cloud, MN  56302 (for appellant)

 

            Considered and decided by Peterson, Presiding Judge; Dietzen, Judge; and Huspeni, Judge.

U N P U B L I S H E D   O P I N I O N

HUSPENI, Judge

            In challenging the district court's denial of a motion to reduce spousal maintenance and its grant of respondent's contempt motion, appellant argues that (a) the district court erroneously imputed income because the record does not show that appellant reduced his income in bad faith and the court misunderstood certain income-related evidence and overemphasized appellant's allegedly affluent lifestyle; (b) the contempt ruling is defective because the finding that appellant had the ability to pay the maintenance obligation is clearly erroneous; and (c) the district court failed to make findings to support its need-based attorney fees award to respondent.  Because we see no error in any of the determinations made by the district court, we affirm.

FACTS

            When the marriage of appellant Kenneth Bettin and respondent Carol Bettin was dissolved in 1997, the issue of spousal maintenance was reserved.  At a 1999 hearing on maintenance, appellant presented evidence of his financial status, including self-generated profit and loss reports and partial income tax returns.  The district court questioned the credibility of these documents, finding them "understated and inconsistent," and in August 1999 ordered monthly maintenance of $1,700 effective April 1 of that year.[1] In arriving at that amount, the court stated that, in view of appellant's claim that his current spouse provided for his lifestyle, "there should be less demand on [appellant's] earnings, and more disposable income available to [appellant] to enable him to meet [respondent's] needs for maintenance."  The court also based the maintenance obligation, in part, on the award to appellant of Lindsay Ecowater Systems (LES), a business that rents and services water softeners that was founded and managed by appellant.  No appeal was taken from the orders establishing the spousal maintenance award. 

            Meanwhile, in February 1998, appellant had transferred all assets and business of LES to his two sons, but reserved the company's existing units and accounts receivable for himself.  Under the transfer agreement, appellant continued to receive revenue from existing customers.  The agreement also specified that appellant's sons were obligated to service the existing units, and if any of the units lapsed, to replace such lapsed units with units of equal or greater value.  The revenue received from the replacement customers continued to be the property of appellant. 

            After the transfer of LES's assets, appellant filed suit against his sons for damages for breach of contract or rescission of the contract, alleging that beginning in about February 2002, the sons failed to comply with the terms of their agreement regarding LES.  Appellant claims to have received "zero income" under the LES asset sale agreement since July 1, 2002.  Because of his claimed lack of income, appellant obtained a position as a real estate appraiser and agent.  He alleges that he has incurred a substantial decrease in income from the income he earned as the owner of LES. 

            Beginning in July 2002, appellant failed to make spousal maintenance payments; in May 2003, he moved for modification of his spousal maintenance obligation.  In support of the motion, appellant presented profit and loss figures, tax returns, and various documents indicating that his income had substantially decreased.  In response, respondent moved the court to hold appellant in contempt for failure to pay maintenance.  By order in November 2003, the district court found appellant in contempt for failure to pay maintenance for the months of April and May 2003, and set purge conditions; all other issues were reserved for an evidentiary hearing. 

            After an evidentiary hearing, the district court determined in a March 2004 order that the documents submitted by appellant in support of his motion to modify maintenance were not credible and were understated and inconsistent and that appellant's motion was a bad-faith attempt at modification through the manipulation of figures.  The court imputed income to appellant in the amount that had been determined in the previous maintenance order.  The court also issued another contempt order for willfully failing to pay maintenance from June 2003 to March 2004 that set purge conditions and awarded attorney fees to respondent.

            In May 2004, appellant moved the district court to vacate the contempt order; he also moved for a new trial and amended findings, and requested that the court take judicial notice of appellant's pending lawsuit against his two sons.  A Mahady[2]hearing was conducted, after which the court granted appellant's motion to take judicial notice of his lawsuit against his sons,[3] but refused to vacate the contempt order and denied motions for a new trial and amended findings.  The court also awarded attorney fees in favor of respondent.  This appeal followed.

D E C I S I O N

            Appellant challenges all of the issues determined by the district court.  We address each challenge in turn.

I.          Modification of Spousal Maintenance

When reviewing a district court's decision on a motion for modification of spousal maintenance, this court may only reverse if the district court "abused its wide discretion."  Hecker v. Hecker, 543 N.W.2d 678, 680 (Minn. App. 1996) (quotation omitted), aff'd, 568 N.W.2d 705 (Minn. 1997).  A district court abuses its discretion when it resolves the matter in a manner "that is against logic and the facts on record."  Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). 

In Minnesota, modification of spousal maintenance may be granted to a moving party if that party shows a substantial change in circumstances rendering the existing award unreasonable and unfair based on one of several factors.  Minn. Stat. § 518.64, subd. 2 (2004).  A district court should exercise its discretion to modify "with great caution and only upon clear proof of facts showing that the circumstances of the parties are markedly different from those in which they were when the decree was rendered."  Rubenstein v. Rubenstein, 295 Minn. 29, 32, 202 N.W.2d 662, 664 (1972).

            Here, appellant alleges that a substantial decrease in his income has caused the maintenance award to become unreasonable and unfair.  See Minn. Stat. § 518.64, subd. 2(a)(1).  He argues that the decision of the district court to deny modification was an abuse of discretion and supports that argument by reference to his self-generated financial reports, his sons' failure to comply with the terms of their agreement, and his limited income as a real estate agent and appraiser as evidence of such a decline. 

            While we recognize that appellant did provide documents that purported to show that his income had decreased, the district court found those documents lacking in credibility.  See Varner v. Varner, 400 N.W.2d 117, 121 (Minn. App. 1987) (stating "[t]he finder of fact is not required to accept even uncontradicted testimony if the surrounding facts and circumstances afford reasonable grounds for doubting its credibility").  The burden of demonstrating the decline is on appellant, and appellant failed to convince the district court that he had provided convincing, good-faith evidence of the decline.  See Abuzzahab v. Abuzzahab, 359 N.W.2d 329, 332 (Minn. App. 1984) (holding no change in circumstances when facts did not support respondent's position that his income had decreased).  And appellate courts defer to district court credibility determinations.  Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988). 

The district court found appellant's evidence duplicitous because his self-generated reports of income and expenses were devoid of any supporting documentation, and the numbers themselves contained conflicting and questionable records of these purported amounts.  For example, the court noted that appellant's

[r]ental income is listed as $35,186.90 and also as $56,403.  Sales are listed as $21,216.07 and also as none or no sales.  Net income is listed as $15,389.28 and also as $20,398.00.  Legal fees, real estate taxes, vehicle expenses and lease payments are shown as business expenses, but also [as] personal expenses.

 

As a result of appellant's bad-faith attempt at demonstrating the decline, the district court imputed income in the amount previously determined in the original maintenance order.  See Carrick v. Carrick, 560 N.W.2d 407, 410 (Minn. App. 1997) (holding that imputation of income for maintenance purposes requires bad-faith underemployment).

            Appellant attempts to refute the district court's findings by offering a clarification of these figures in his appellate brief.  But the fact that appellant found it necessary to explain the reports submitted to the district court lends credence to the district court's finding of inconsistent and unclear evidence.  The district court was acting within its broad discretion in discounting the credibility of the documentation provided by appellant. 

            We are not insensitive to the plea of appellant that as a self-employed individual he would never be able to satisfy his burden due to the inherent difficulty of producing self-generated reports that will be considered by a court to be credible.  As the district court noted, however, appellant could have presented specific documentation, such as billings and income receipts from his real estate sales and commissions from water softener rentals, that would have provided the underlying documentation necessary to bolster the credibility of his reports. 

            Moreover, the district court found that appellant's lifestyle, which included a newly remodeled home, a 2002 SUV, multiple boats, and golf club stock, was also incompatible with the figures urged by appellant.  The district court made very specific findings, and the denial of the motion to modify maintenance was primarily based on the court's findings that appellant's evidence was not credible.  As already noted, credibility determinations are peculiarly within the discretion of the district court.  Sefkow, 427 N.W.2d at 210.

            We conclude that the district court properly held that appellant failed to show that he had incurred a substantial decrease in income making the present spousal maintenance award unreasonable and unfair. 

II.        Civil Contempt  

            In reviewing a finding of civil contempt, this court may reverse or modify the contempt order only if there was an abuse of discretion by the district court.  Kielly v. Kielly, 674 N.W.2d 770, 780 (Minn. App. 2004); Nelson v. Nelson, 408 N.W.2d 618, 621 (Minn. App. 1987).  Various statutory provisions allow for the enforcement of court-ordered spousal maintenance payments through contempt orders.  See, e.g., Minn. Stat. §§ 518.24, .64, subd. 1 (2004).  The proceedings are meant "to induce future performance of a valid court order, not to punish for past failure to perform."  Mahady, 448 N.W.2d at 890.  

In order to find a party in contempt, a court must, among other considerations, (1) find that the obligor has the financial capacity to disburse the obligations as they become due; (2) set purge conditions and determine whether the obligor has the ability to meet the conditions; and (3) establish that the contempt order is reasonably likely to produce compliance.  Hopp v. Hopp, 279 Minn. 170, 174-75, 156 N.W.2d 212, 216-217 (1968).  The issuance of a spousal maintenance order creates a presumption that the obligor has the ability to pay the amount, thereby placing the burden of proving inability to meet the obligations and purge conditions on the obligor.  Minn. Stat. § 518.24; Mahady, 448 N.W.2d at 890-91.  

            Appellant disputes the district court's contempt order by claiming that he did not have the ability to make payments or to meet the purge conditions.  First, he asserts that his financial situation does not allow him to make the requisite payments.  In arguing that the district court clearly erred in determining the ability to make payments, appellant again relies on the very tax returns and profit/loss calculations that the district court found lacking in credibility.   

With reference to the tax returns, this court has noted that taxable income does not always accurately reflect net income available for living expenses.  Otte v. Otte, 368 N.W.2d 293, 297 (Minn. App. 1985).  Here, in addition to finding appellant's tax returns and profit/loss figures to be inconsistent and unsupported by documentation, the district court also noted the existence of $20,000 in accounts receivable for appellant's business, some of which appellant had made no effort to collect, his decision not to liquidate any of his luxury possessions, and his significant charitable donations and other discretionary transactions during the period of noncompliance.  Additionally, the district court observed that appellant and his current wife

commingle their personal income and debts in their S Corporation. . . . This S corporation contains many personal as well as business expenses for [appellant's] businesses and [his wife's] hair salon business.  [Appellant and his wife] each own 50% of their S Corporation.  Determination of net income for a self-employed individual like [appellant] is complex because business deductions are taken.

 

The district court's findings, which are given broad deference, demonstrate that a decision to hold appellant in contempt of court for failure to pay spousal maintenance was proper.

            Next, appellant claims that he does not have the financial wherewithal to satisfy the contempt purge conditions, which required that he pay respondent $21,710.45 by March 1, 2005, or spend 72 hours in jail.[4]  Appellant again offers his self-generated profit/loss forms and tax returns as evidence of his inability to purge, and purports to have no income or liquid assets to meet the purge conditions.  But as this court has noted several times, these documents were found to be inconsistent and not credible.  Also, there is "no statutory requirement that the court determine how an obligor access the money necessary to meet the purge conditions, only that it determine the obligor is able to meet them."  Crockarell v. Crockarell, 631 N.W.2d 829, 837 (Minn. App. 2001), review denied (Minn. Oct. 16, 2001).  

Accordingly, because appellant failed to offer credible evidence of his inability to purge the contempt conditions, this argument fails for the same reason as his claim of inability to pay maintenance.

III.       Attorney Fees  

            Appellant challenges the award of attorney fees in connection with his failure to purge the contempt conditions.  In Minnesota, the district court has broad discretion in determining whether to award such fees, and its ruling will not be reversed absent a clear abuse of that discretion.  Nelson, 408 N.W.2d at 621.

            Appellant contends that the court failed to make findings that (1) the fees are necessary for the good-faith assertion of the party's rights in the proceedings and will not contribute unnecessarily to the length and expense of the proceeding; (2) the party from whom fees, costs, and disbursements are sought has the means to pay them; and (3) the party to whom the amounts are awarded does not have the means to pay them.  But appellant's assertion is premised on an analysis of Minn. Stat. § 518.14, subd. 1 (2004).  The district court here awarded fees under Minn. Stat. § 588.11 (2004).  Section 588.11 allows for the award of the costs and expenses of a party injured by another party's contempt, including "a reasonable attorney's fee incurred in the prosecution of such contempt."  Because the district court's contempt order is supported by the record, we conclude that the award of attorney fees was not an abuse of discretion.   

            Affirmed.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1] Maintenance was retroactively reduced to $1,500 per month by order of November 1999.

[2] See Mahady v. Mahady, 448 N.W.2d 888, 891 (Minn. App. 1989) (providing for two-stage civil contempt proceeding, with second hearing on issues of performance or excusable non-performance of purging conditions).

[3]  At oral argument respondent's attorney made brief reference to the result reached in this lawsuit, and to the rationale expressed by the district court there.  On rebuttal, appellant's attorney asked that we strike all reference to this information.  We have not considered the comments made by respondent's attorney in our deliberations, but note only that it was upon appellant's request that judicial notice of this lawsuit was taken.

[4] Generally, a contempt order identifying conditions that, if satisfied, allow a contemnor to avoid a contempt sentence is an order for civil contempt; criminal contempt traditionally involves a fixed sentence without a purge condition.  Mower County Human Servs. v. Swancutt, 551 N.W.2d 219, 222 (Minn. 1996).  Neither party raises an argument that the contempt found in this case was other than civil.