This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat.§ 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
In Re the Marriage of:
Phillip P. Hansen, petitioner,
Gayle L. Hansen,
Filed January 14, 1997
Affirmed in part and
reversed and remanded in part.
Winona County District Court
File No. F9941082
Phillip P. Hansen, P.O. Box 1221, Winona MN 55987 (Pro Se
Lawrence Downing, 330 Norwest Center, Rochester, MN 55902 (for Appellant)
Considered and decided by Crippen, Presiding Judge, Toussaint, Chief Judge,
and Willis, Judge.
U N P U B L I S H E D O P I N I O N
Appellant Gayle Hansen, having been awarded child support and spousal
maintenance, contends that the awards were insufficient because the trial court
erred in calculating both spouses' incomes. Appellant contends that a
significant part of respondent Phillip Hansen's income will be found in the
expenditures by his law firm. We reverse and remand for findings on this
The parties were divorced after nineteen years of marriage. Primary
physical custody of their 16-year-old daughter was placed with her father,
respondent. Primary physical custody of their 14-year-old son was placed with
his mother. Appellant was awarded monthly child support of $620 premised on a
finding that respondent had a net monthly income of $3,047.
The trial court awarded permanent spousal maintenance in the gross monthly sum
of $870. According to the trial court findings, this award was premised on the
conclusion that the award would produce for appellant a monthly income of
$1,878 ($571 monthly wages, $620 monthly child support, and $687 monthly
maintenance (net after taxes)). The trial court acknowledged that $1,878 would
be less than appellant's reasonable and necessary expenses of $2,036. The
court found that respondent had personal monthly expenses of $2,033 and that he
would have $1,870 income remaining after payment of child support and
maintenance ($3,047 total less $620 child support and $557 net maintenance cost
after an adjustment for tax savings).
The court made an approximately equal division of $148,348 in marital
property, most of the estate being in the form of an expected realization of
equity in the amount of $100,000 from the sale of the couple's home. The trial
court awarded appellant $3,000 in attorney fees, which was much less than the
total fees and costs she estimated that she had incurred.
We will affirm the trial court's findings of fact unless they are
clearly erroneous. Minn. R. Civ. P. 52.01.
Appellant contends that respondent's monthly income was considerably
more than $3,047 and that the trial court primarily erred because it refused to
attribute income to respondent for items that respondent declared as law
practice expenses, although they were incurred for respondent's personal
benefit. Using the testimony of an expert witness, appellant contended that
the law office expenses benefiting respondent personally totaled as much as
$47,369 per year (calculated for 1992) for the years from 1991 to 1994. In an
exhibit the witness itemized personal expenditures characterized as business
expenses totaling $34,984.10 for 1993. These expenses were for vacations,
transportation (including a television and VCR for the law office van), and
other recreational items. The trial court disregarded appellant's claim
regarding respondent's personal income, finding: (a) that the expert's
testimony was "unreliable" as demonstrated by an example of a malpractice
insurance premium that appellant's expert erroneously identified as
respondent's personal income; (b) that certain items appellant characterized as
personal, including key-person life insurance premiums, had some business and
some family value; (c) that any increase in income attributable to law practice
expenditures would likely be expended as well by respondent personally, with
the effect that respondent's expenses or taxes would increase and reduce in
like amount his ability to contribute more support or maintenance; (d) that
overlooking respondent's undeclared noncash payments was less detrimental
because appellant had also failed to declare as personal income her auto
expenses paid by her business; and (e) that two expenses, a country club
membership and boat maintenance, would soon be discontinued.
The trial court's findings are inadequate to permit a competent review on the
issue of respondent's personal/business income because: (a) although the court
found the expert testimony "unreliable," it reported only two examples and
leaves unexplained substantial amounts of expenses incurred on an annual basis;
(b) the court failed to determine what portion of key-person insurance premium
costs should be attributed as a family benefit; (c) the court's observation
about the couple's personal expenses (1) has no bearing on child support, which
is calculated by examining income alone without considering personal expenses
and (2) assumes, evidently in error, that all of the expenses are reasonable
and necessary; (d) the court's determination about the couple's undeclared
incomes off-setting each other ignores the fact that appellant's expenses are
much smaller than respondent's; and (e) while there is evidence that some
expenses will no longer be incurred, this takes nothing away from the veracity
of the calculation of respondent's past income and suggests that in the future
direct distribution of income to respondent will be greater than in the past.
We conclude that the issue of business income is an issue of substantial
importance in the case and that child support and spousal maintenance cannot be
determined without a more specific examination of the subject by the trial
court, with attention given to each of the business expenses said to be
personal and with an informed conclusion as to the total expenses that must be
characterized as personal income.
Appellant claims that the trial court wrongfully imputed earnings to
her. But the court estimated the earnings she could expect, which does not
constitute the imputation of income. We conclude that the court's finding were
Appellant asserts that the trial court erred by determining
respondent's income through an averaging of his income experienced over the
previous seven, instead of four years. The court's use of the evidence to
determine that a seven-year measure was most accurate was well within the trial
court's discretion in weighing evidence.
Appellant contends that because respondent unilaterally incurred two
substantial encumbrances on his law practice after the couple initiated divorce
proceedings, the court erred by reducing the computed value of his law practice
to reflect this increased debt. Respondent took out a $40,000 loan and had
increased accounts payable in the amount of $13,707.25. Minn. Stat. § 518.58,
subd. 1a (1996) states that the burden of proof lies with the party who alleges
that the other party encumbered marital assets to demonstrate that the
encumbrance was not incurred "in the usual course of business." The trial
court was within its discretion to determine that the two debts were operating
expenses and were incurred in the normal course of business.
Appellant additionally alleges that the two debts should not be considered in
the valuation because they were incurred after the valuation date. But our
statutes provide that the court may adjust the valuation of an asset to do
equity where a substantial change in value of the asset between the date of
valuation and the final distribution has occurred. Minn. Stat. § 518.58,
subd.1 (1996). Thus, the trial court did not abuse its discretion by including
the law office debts incurred after the initial valuation.
Appellant alleges that the trial court abused its discretion by
deciding that she should pay the $1,179 due monthly for payment of the
mortgage, estate taxes, and property insurance for the marital home where she
continues to reside. The court properly took into account the needs and
resources of both parties in determining equity in the child support and
maintenance awards. We conclude that the court did not abuse its discretion by
determining that appellant should pay these expenses.
Appellant alleges that the trial court abused its discretion by
adopting respondent's proposed order in its entirety. Appellant's premise is
erroneous partly because the trial court did not adopt respondent's proposed
findings verbatim. The court's departures from respondent's proposed findings
of fact and conclusion of law demonstrate that the court independently
evaluated the evidence. See Bliss v. Bliss, 493 N.W.2d 583, 590 (Minn.
App. 1992) (holding that trial court's verbatim adoption of a party's proposed
findings and conclusions of law not reversible per se if the court
independently has evaluated the party's testimony and evidence), review
denied (Minn. Feb. 12, 1993). Further, this court will defer to the
discretion exercised by the trial court in making findings "unless
consideration of the evidence and inferences permissible therefrom requires
reasonable minds to adopt a contrary conclusion." Talmage v. Medtronic,
Inc., 315 N.W.2d 433, 436 (Minn. 1982). To the extent that the trial
court's adoption of substantial portions of respondent's proposed findings
resulted in the court making findings that were substantiated by the record
evidence, the trial court did not abuse its discretion.
Appellant asserts that the trial court should have awarded her $5,000
in attorney and expert fees. The trial court based its denial of appellant's
request for fees on its determination that neither party had greater financial
resources than the other. Because the trial court did not make sufficient
findings regarding respondent's in-kind income, this court does not have
sufficient information to decide whether the trial court's calculation of
resources constituted abuse. Consequently, we conclude that the trial court
must review the issue of attorney fees upon remand of the case.
Appellant requests that this court award her attorney fees for her
legal expenses on appeal. Because of the pre-award disparities in the income
of the parties and the merits of the case on appeal, this court awards $1,000
fees and costs to appellant.
Affirmed in part and reversed and remanded in part.
[ ]1The award of $620 in child
support will increase to $761.67 when the parties' daughter turns 18 years old
and support is no longer payable for her.