In re Horace D. Allen, petitioner, Appellant, vs. Nikki D. Thompson, f/k/a Nikki D. Allen, Respondent.

In re Horace D. Allen, petitioner, Appellant, vs. Nikki D. Thompson, f/k/a Nikki D. Allen, Respondent. A04-2225, Court of Appeals Unpublished, August 30, 2005.

This opinion will be unpublished and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

A04-2225

 

In re Horace D. Allen, petitioner,
Appellant,
 
vs.
 
Nikki D. Thompson,
f/k/a Nikki D. Allen,
Respondent.

 

Filed August 30, 2005

Reversed and remanded; motion denied

Minge, Judge

 

Scott County District Court

File No. F-02-22460

 

 

Lateesa T. Ward, Ward & Ward, L.L.C., Carriage House, 2520 Park Avenue South, Minneapolis, MN 55404 (for appellant)

 

Judith L. Oakes, J. Oakes & Associates, Hamline Place, 2589C Hamline Avenue North, Roseville, MN 55113 (for respondent)

 

            Considered and decided by Minge, Presiding Judge; Willis, Judge; and Stoneburner, Judge.

U N P U B L I S H E D  O P I N I O N

MINGE, Judge

            Appellant challenges the district court's denial of his motion to modify the child support provided for in the dissolution judgment and the district court's award of attorney fees against him.  The modification appellant sought would eliminate an agreed on increase in support.  Because the district court abused its discretion in denying appellant's motion, we reverse and remand. 

FACTS

 

On November 21, 2003, the marriage of appellant Horace Allen and respondent Nikki Thompson was dissolved by a judgment based on terms agreed to by the parties.  They agreed that appellant's income at the time of the judgment was $65,000.  Based on this agreement, the judgment contained the following finding:

Petitioner is employed as Chief Operating Officer with TSG Server and Storage.  The support ordered herein is based upon respondent's gross income of $65,000 and net income of approximately $4,000 per month.  Petitioner is completing his MBA Degree at the Kellogg School of Management, Northwestern University, Chicago, Illinois.  It is anticipated that petitioner will complete this degree in May 2004 and, as a result, his income should increase upon completion of his MBA degree.  Given this, the parties hereby stipulate that petitioner's child support obligation will automatically increase effective July 1, 2004 unless petitioner demonstrates that his income has not increased significantly, despite his best efforts to seek appropriate employment. 

 

The corresponding conclusion of law ordered that appellant

shall pay to respondent . . . $1,000 per month as and for child support.  Unless petitioner demonstrates that his income has not significantly increased, petitioner shall pay to respondent the sum of $1,688 per month as and for child support commencing July 1, 2004. 

 

In addition, appellant was required to reimburse respondent for 40% of child care expenses and, unless he demonstrated that his income had not significantly increased, 46% of child care expenses after July 1, 2004.

            Appellant filed a motion in June 2004, to amend the judgment and to reduce child support so that it would remain at the $1,000/40% of child care level.  In support of this motion, appellant filed an affidavit from his treating physician stating that appellant had bilateral lesions of the true vocal folds and that the recommended treatment was to reduce talking and loudness levels to 75% of his original level, reduce employment to one day per week or take six months' leave of absence, and undergo speech therapy.  Appellant also filed an affidavit explaining that he was diagnosed with his condition in February 2004, and that the restriction on speaking had limited his ability to obtain new employment.  He further stated that he had worked with his business partners to perform business tasks that did not require speaking and to handle most of his communications by e-mail.  Appellant attached a copy of a paycheck for the period from May 16 through May 31, 2004, showing gross earnings of $2,708.33 and total gross earnings of $27,083.30 year to date. 

            In July 2004, respondent moved to deny appellant's motion, or in the alternative, to impute income of $200,000 to appellant, and to order appellant to pay reasonable attorney fees to respondent.  Respondent attached an affidavit that states that she never believed that appellant's income was $65,000, that she does not believe it is currently $65,000, that appellant's 2003 W-2 form shows his wages in 2003 were $77,977, and that appellant had not provided a copy of his 2003 income tax return.  Among the documents submitted with her affidavit were a copy of appellant's joint 2001 tax return, the first page of appellant's 2002 tax return, and copies of appellant's 2002 and 2003 W-2 forms.  In addition to wages, a distribution appears on appellant's tax returns under the category "[r]ental real estate, royalties, partnerships, S corporations, trusts, etc." of $80,003 in 2001 and $25,728 in 2002. 

            A hearing was held on the matter in July 2004, before a child support magistrate (CSM).  At the hearing, appellant argued that he could not look for work because he was forced to whisper.  Appellant explained that his 2003 W-2 showed income of $77,977 instead of approximately $65,000 because he had received a year-end 401(k) contribution of $12,000.  The CSM asked if appellant's 2003 tax return was in the record and asked about a Subchapter S distribution.  Appellant replied that his 2003 tax return was not in the record, that his Subchapter S distributions were not a dependable source of income and that respondent had not requested a copy of his 2003 income tax return.   

            The CSM found that appellant had proved he had bilateral lesions of the true vocal folds and that his treatment required him to limit his speech.  The CSM also found that appellant had not proved that his income had not increased significantly or proved what his income was at the time of the hearing because the only evidence of appellant's current income was the one paycheck that he submitted.  The CSM stated that this did not satisfy the requirements of Minn. Stat. § 518.551, subd. 5b(a) (2004), to submit proper documentation of income.  The CSM found that appellant's failure to disclose his 2003 tax returns unreasonably contributed to the expense of the proceeding.  The CSM denied appellant's motion to modify child support and granted respondent's motion for attorney fees in the amount of $950.  Judgment was entered on the CSM's order.

            Appellant moved that the CSM review her order, reduce his child support, and eliminate the requirement that he pay attorney fees.  Appellant also sought to admit 50 documents, including his 2003 tax return, which he claimed showed that he was not hiding anything and that his 2003 W-2 included his entire income.  The CSM denied the motion for review and the admission of the documents.  This appeal followed.

D E C I S I O N

 

I.

 

            The first issue is whether the CSM abused her discretion by ruling that appellant had not demonstrated that his income had not increased significantly and refusing to amend the November 2003 judgment.  The discrete issue before the CSM was whether appellant's 2004 income had increased as expected from the agreed on level of $65,000 in 2003. 

A district court has broad discretion when considering the modification of child support, and a reviewing court will only find an abuse of that discretion when a district court resolves the matter in a manner that is against logic and the facts in the record.  Moylan v. Moylan, 384 N.W.2d 859, 864 (Minn. 1986).  The decision of a CSM is reviewed under the same standard.  Ludwigson v. Ludwigson, 642 N.W.2d 441, 445-46 (Minn. App. 2002).   

            The November 2003 dissolution judgment was based on the parties' agreement that appellant's child support obligation of $1,000 per month would automatically increase to $1,688 per month unless appellant could demonstrate that his income of $65,000 had not substantially increased.  When the parties have stipulated to their respective rights and obligations, the original judgment is important because it "represents the parties' voluntary acquiescence in an equitable settlement."  Claybaugh v. Claybaugh, 312 N.W.2d 447, 449 (Minn. 1981).  Although Claybaugh concerned spousal maintenance, id. at 448-49, a child support settlement approved by the district court is also important.

            Minn. Stat. § 518.551, subd. 5b(a) (2004), states that the "parties shall timely serve and file documentation of earnings and income."  Documentation includes pay stubs, recent federal tax returns, and all other documents verifying income over an extended period.  Id.  What is adequate documentation is a factual determination in each case.  If an obligor fails to produce a reliable statement of income, relief should be denied.  See Taflin v. Taflin, 366 N.W.2d 315, 319 (Minn. App. 1985) (holding that when obligor failed to produce tax returns as directed by the district court and the obligor's affidavit did not substantiate his inability to maintain support payments, the district court correctly found documentation of income was inadequate and denied relief). 

            Under the 2003 judgment, appellant had the burden of demonstrating that his income had not substantially increased.  To meet this burden, appellant presented a pay stub that showed year-to-date earnings consistent with annual earnings of $65,000.    Respondent presented copies of appellant's 2001 and 2002 tax returns, which showed distributions of $80,003 in 2001 and $25,728 in 2002.  In addition, appellant's W-2 showed that he had 2003 income of $77,977, which included a $12,000 401(k) contribution that occurred after the judgment was entered.  Based on this information, the CSM stated that in the past a significant portion of appellant's annual income came from distributions he received as a one-third owner of TSG, the business where he was employed.  In order to assess the likelihood of appellant receiving similar income in 2004, the CSM felt that it was necessary to see a copy of appellant's 2003 tax return and an explanation of the distributions to determine whether or not appellant's income was substantially greater than $65,000 per year. 

The November 2003 dissolution judgment provides that, as a result of appellant's anticipated graduation from an MBA program in May 2004, his income was expected to increase.  It is undisputed that appellant still holds the same position that he held when the 2003 judgment was entered.  The only evidence on the record relevant to appellant's income in 2004 is the pay stub submitted by appellant.  The pay stub is the employer's statement of income and its accuracy is not at issue.  It shows both that appellant's bimonthly gross income was $2,708 and that his bimonthly gross earnings and his year-to-date earnings are consistent with an annual gross income of $65,000.  This pay stub evidence indicates that appellant's wages have not increased from the time of the 2003 judgment.  

The CSM expected appellant to produce his 2003 tax returns.  But it never directed appellant to furnish the 2003 tax return and respondent never requested it.  In any event, his 2003 income was stipulated; it was not at issue.  The important figure was appellant's income in May 2004.  Although his 2001 and 2002 tax returns, which had been available prior to the stipulation, showed additional investment income, the parties in November 2003 stipulated to $65,000 of income as wages and set child support accordingly.  They disregarded the other distributions.  This established a baseline for income that the parties and the district court used to determine child support in the dissolution proceeding.  Appellant only had an obligation to establish the level of his 2004 earned income compared to the established $65,000 figure.  The 2003 tax return would not show 2004 income.  Appellant's pay stub showed that as of May 2004, his earned income had not increased; it was still at the 2003 level.  If, as respondent contends, appellant had other types of income in May 2004, she should have requested or presented evidence of this income.  Based on the record before her, the CSM abused her discretion by denying appellant the relief requested.

Because we conclude that appellant provided credible evidence that his income had not increased significantly, we do not rule on whether the CSM abused her discretion by failing to reopen the record to allow appellant to provide additional evidence that his income had not increased or whether the CSM erroneously imputed income to appellant.

The November 2003 judgment also provides that the parties stipulated that child support would increase unless appellant demonstrated that his income had not increased significantly, "despite [appellant's] best efforts to seek appropriate employment."  (Emphasis added.)  Although appellant presented evidence that the lesions on his vocal chords kept him from seeking other employment, the CSM made no finding or conclusion whether appellant made his best efforts to seek appropriate employment.  Therefore, the CSM should consider this issue on remand.

II.

The other issue is whether the CSM properly awarded respondent attorney fees and whether respondent is entitled to attorney fees for the appeal.  "The allowance of attorney fees rests almost entirely in the discretion of the trial court."  Solon v. Solon, 255 N.W.2d 395, 397 (Minn. 1977).  In marriage dissolution cases, a district court can award attorney fees against "a party who unreasonably contributes to the length or expense of the proceeding."  Minn. Stat. § 518.14, subd. 1 (2004).  Pursuant to motion, this court has the discretion to award fees under Minn. Stat. § 518.14, subd. 1 on appeal as well.  LaChapelle v. Mitten, 607 N.W.2d 151, 167 (Minn. App. 2000), review denied (Minn. May 16, 2000).  This court has found that where a party reasonably pursues a legal claim, attorney fees based on alleged unreasonable conduct cannot be awarded.  See Mize v. Kendall, 621 N.W.2d 804, 806-809 (Minn. App. 2001), review denied (Minn. Mar. 27, 2001) (finding that prevailing party is not entitled to attorney fees because it was not unreasonable to pursue certain custody claims). 

The CSM in this case found that appellant unreasonably contributed to the expense of the hearing by not submitting his 2003 tax return.  Because we find that appellant was not required to take the initiative to produce his 2003 tax return to establish his 2004 income and because appellant did not violate any demand or directive to produce any financial information, the CSM abused her discretion by awarding attorney fees and we reverse that award.  For this same reason we deny respondent's motion for attorney fees on appeal. 

            Reversed and remanded; motion denied.