STATE OF MINNESOTA
IN COURT OF APPEALS
Wilkin County District Court
File No. FX96163
Michael J. McCartney, Law Centre Building, 110 North Sixth Street, Breckenridge, MN 56520 (for respondent)
Considered and decided by Amundson, Presiding Judge, Anderson, Judge, and Foley, Judge.[*]
Appellant Robert Miksche (father) challenges the trial court's denial of his petition for modification of spousal maintenance and child support, claiming a substantial change in circumstance. Respondent JoAnn Miksche (mother) challenges the trial court's denial of her motion for attorney fees. We affirm in part, reverse in part, and remand.
In awarding support, the trial court made very detailed findings regarding father's income. The court essentially found that father grossed $18,000 a year in salary from his own corporation and $54,000 in rental income, for a combined gross income of $72,000. His net income after taxes was $46,920. The court also found that father claims a depreciation expense of $18,360 on his rental income schedule. The court concluded that the claim was not true depreciation, making the amount claimed cash available to father. Thus, the court added it back to father's net income, bringing the total to $65,280, or $5,440 a month.
The court calculated mother's reasonable expenses to determine an amount for spousal support and found that she had reasonable expenses of $3,600 per month, but only made $700 per month. The court determined that mother's income plus child support still left her with a reasonable need of $1,300 per month and awarded her maintenance in that amount.
Father made a motion to modify child support and spousal maintenance on July 14, 1998. He claimed in his affidavit that his rental income had decreased in the last year to $42,000, a $12,000 decline. He also alleged in his affidavit that mother's income had increased and her living expenses had decreased. He further alleged that, when calculating his net income, the court should not have added the depreciation he deducted from his rental income. The district court found there was no substantial change in circumstances to justify modifying either child support or spousal maintenance. Mother moved for need-based attorney fees in response to the motion. The trial court denied the request, finding father's motion was neither frivolous nor in bad faith.
Modification of support requires a finding both that a substantial change in circumstances has occurred and that the change makes the existing award unreasonable and unfair. Marx v. Marx, 409 N.W.2d 526, 527 (Minn. App. 1987). Modification of child support is addressed in Minn. Stat. § 518.64, subd. 2 (1998). This statute contains a presumption that, if application of the child support guidelines under Minn. Stat. § 518.551 (1998) to the parties' current circumstances results in a support award that is at least 20% and at least $50 per month higher or lower than the current support order, the current order is presumed to be unreasonable and unfair. Minn. Stat. § 518.64, subd. 2; Bock v. Bock, 506 N.W.2d 321, 323 (Minn. App. 1993).
Father challenges the court's findings regarding changed circumstances, claiming the court erred because it did not apply the calculation in Minn. Stat. § 518.551 to his current income to find if there has been a 20% and $50 per month difference from the original support order. Father cites Bock, 506 N.W.2d at 323, to support his position. The trial court stated:
Furthermore, the Petitioner failed to provide 1998 income information or a 1997 corporate tax return to aid the Court in determining whether the Petitioner's income has truly decreased.
The court further quoted case law holding "this court will not speculate, and the appellant cannot complain where inadequate documentation leads at least in part to the trial court's refusal to modify a decree." (quoting Tuthill v. Tuthill, 399 N.W.2d 230, 232 (Minn. App. 1987) (citing Taflin v. Taflin, 366 N.W.2d 315, 319 (Minn. App. 1985). After examining the record, however, we conclude that the trial court did have the information available to determine father's personal income. Indeed, the district court order specifically refers to the corporate tax return.
Bock generally requires the court to address the statutory presumption. 506 N.W.2d at 323. Though the district court failed to do that, it did state in its memorandum of law that, even if father's income had actually been reduced by the $12,000 he claimed he lost, it would still not be enough to justify a reduction in maintenance or child support. Subtracting $12,000 from the $65,280 the court originally found as father's annual income leaves $53,280, or a monthly total of $4,440. Thirty percent of $4,440 is $1,332, which is $300 less, but only about 18.5% less than the original support order. Although father claims otherwise in his brief, the reduction in his income does not rise to the level of statutory presumption of unfairness. See Minn. Stat. § 518.64, subd. 2 (difference must be at least $50 and 20% less or more than original order).
In light of this calculation, we might be inclined to hold that the district court's failure to assess father's income and apply the statute was harmless error. This court, however, does not know what the district court would have done with the evidence, had he addressed it. The fact that father does not meet the statutory presumption is not necessarily fatal to his claim. The presumption is rebuttable and the court still has discretion to find a substantial change despite the statute. In addition, though the court found the needs of the children have not changed, neither party argued the best interests of the children, which is the paramount consideration of this court.
We remand to the district court for the purpose of reopening the record to determine father's current income, determine whether the statutory presumption is applicable, and address the best interests of the children. The court may then re-determine whether there has been a substantial change in circumstances for support purposes.
2. Father claims the trial court erred when calculating his net income for the purposes of determining his child support obligation and in determining whether to modify child support because the court failed to consider the depreciation expense claimed on his rental income. Instead, the court added the depreciation claimed to father's net income. This court will affirm a determination of net income for the purpose of calculating child support if it has a reasonable basis in fact. Justis v. Justis, 384 N.W.2d 885, 890 (Minn. App. 1986), review denied (Minn. May 29, 1986).
Minnesota guidelines allow "ordinary and necessary" expenses in the context of determining income from self-employment. Minn. Stat. § 518.551, subd. 5b(f) (1998). Minnesota courts have held that a trial court must consider legitimate business expenses in determining an obligor's net income. County of Nicollet v. Haakenson, 497 N.W.2d 611, 615 (Minn. App. 1993). Whether to credit business expenses or deductions, however, lies within the district court's discretion. Keil v. Keil, 390 N.W.2d 36, 39 (Minn. App. 1986).
In this case, the district court did consider the depreciation issue. He found father's argument unconvincing and that, although father argued the depreciation was real and cited examples of replacing equipment, these costs were too minor to change the court's earlier ruling. The district court remained unconvinced that the bulk of the claimed depreciation was real. The district court's findings have a reasonable basis in fact and are not an abuse of discretion.
Father also claims that, if the depreciation is going to be added back, the court should only add back the $10,355 he claimed the past year, as opposed to the $18,360 claimed for depreciation the year before. The court refused, however, finding that father's personal taxes only claim $10,355 but the corporation's claimed depreciation expense increased $10,000 without evidence of new corporate purchases. The trial court's findings have a reasonable basis in fact and are not an abuse of the court's discretion. Keil, 390 N.W.2d at 39.
3. Father challenges the trial court's denial of his motion for modification of spousal maintenance. "The standard of review on appeal from a trial court's determination of a maintenance award is whether the trial court abused the wide discretion accorded to it." Erlandson v. Erlandson, 318 N.W.2d 36, 38 (Minn. 1982). The trial court's conclusion must be clearly erroneous and against logic and the facts on record in order for this court to find an abuse of discretion. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). "Findings of fact concerning spousal maintenance must be upheld unless they are clearly erroneous." Gessner v. Gessner, 487 N.W.2d 921, 923 (Minn. App. 1992).
Father argues that this court must remand on the issue of spousal maintenance because the trial court did not issue sufficient findings of fact upon which to conduct appellate review. Father cites, in support of his proposition, Stich v. Stich, 435 N.W.2d 52, 53 (1989), which requires specific findings on all statutory factors in an award of permanent spousal maintenance.
The standard for modification is that a maintenance award may be modified only upon clear proof of facts showing significant change in circumstances. Wiese v. Wiese, 295 N.W.2d 371, 372 (Minn. 1980). Generally, however, the court is required to address the statutory factors. Tuthill, 399, N.W.2d at 232. The Minnesota statute addressing a modification of maintenance provides that the court "shall" apply the eight factors found in Minn. Stat. § 518.552. Minn. Stat. § 518.64, subd. 2(c) (1998). The district court made some findings, but did not specifically address each statutory factor.
The court did, however, find no substantial change in circumstances. The district court, in a modification proceeding, is not required to make findings on the statutory factors after finding no substantial change in circumstances. Tuthill 399 N.W.2d at 232. In addition, if the findings indicate that relevant statutory factors have been considered, remand is not appropriate. Id. Under these circumstances, the trial court did not abuse its discretion in refusing to modify spousal maintenance.
4. Mother claims the trial court erred in its denial of attorney fees because she requested need-based fees and the trial court refused to award fees under a conduct-based fees standard. Generally, an award for attorney fees based on Minn. Stat. § 518.14 will not be upset absent an abuse of discretion. Katz v. Katz, 408 N.W.2d 835, 840 (Minn. 1987). The court must, however, make specific findings of the factors on which an award of attorney's fees was made or denied. Richards v. Richards, 472 N.W.2d 162, 166 (Minn. App. 1991).
Using an incorrect standard of proof amounts to fundamental error. Kornberg v. Kornberg, 542 N.W.2d 379, 387 n. 3 (Minn. 1996). The error is only reversible, however, if it affects the substantial rights of the parties. Minn. R. Civ. P. 61. This court has reviewed the record and found that father's income has declined, though there is a dispute about how much, and respondent is making more money than she previously did. Under these circumstances, mother was not entitled to attorney fees and therefore the error is harmless.
Affirmed in part, reversed in part, and remanded.
[*] Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.