This opinion will be unpublished and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

C8-96-729

In Re the Marriage of:

Phillip P. Hansen, petitioner,

Respondent,

vs.

Gayle L. Hansen,

Appellant.

Filed January 14, 1997

Affirmed in part and

reversed and remanded in part.

Crippen, Judge

Winona County District Court

File No. F9941082

Phillip P. Hansen, P.O. Box 1221, Winona MN 55987 (Pro Se Respondent)

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

Crippen, Judge

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 issue.

FACTS

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.[1]

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.

DECISION

We will affirm the trial court's findings of fact unless they are clearly erroneous. Minn. R. Civ. P. 52.01.

1.

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.

2.

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 not erroneous.

3.

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.

4.

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.

5.

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.

6.

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.

7.

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.

8.

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.