This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. 480A.08, subd. 3 (1994).





In Re the Marriage of: Lisa McMahon Bailey,

f/k/a Lisa R. McMahon, petitioner,



Bruce B. Phillips,


Dakota County District Court

File No. F3-89-12499

Filed June 4,1996

Affirmed in part, reversed and remanded in part

Toussaint, Chief Judge

Thomas P. Lowe, Lofstrom & Lowe, P.A., 4635 Nichols Road, Suite 206, Eagan, MN 55122 (for respondent)

Christopher D. Johnson, Sieloff and Associates, P.A., Suite 938 Minnesota Building, 46 East Fourth Street, St. Paul, MN 55101 (for appellant)

Considered and decided by Randall, Presiding Judge, Toussaint, Chief Judge, and Mulally, Judge.*


TOUSSAINT, Chief Judge

Bruce B. Phillips appeals and alleges that the district court erred in: (1) imputing rental income in setting his child support obligation; (2) denying, as an expense, costs incurred by Phillips in renting his house; and (3) awarding respondent Lisa McMahon Bailey attorney fees. We affirm the district court's denial of the inclusion of costs incurred to rent Phillips' home and the award of attorney fees. We reverse and remand the determination of Phillips' income for child support purposes.


The district court has broad discretion to provide for support of the parties' children. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). This court will reverse the district court's child support determination only when it is found to be clearly erroneous and against logic and facts on the record. Watson v. Watson, 379 N.W.2d 588, 590 (Minn. App. 1985). On the other hand, questions of law are reviewed de novo and the reviewing court need not defer to the district court's decision. Sherburne County Social Servs. v. Riedle, 481 N.W.2d 111, 112 (Minn. App. 1992).


Phillips argues that the district court erred by imputing rental income of $750 in determining his child support obligation. In setting or modifying child support, the district court shall take into consideration "all earnings, income, and resources of the parents, including real and personal property * * * ." Minn. Stat. 518.551, subd. 5(c)(1) (supp. 1995). However, whether a source of funding is income for purposes of determining child support is a question of law. Sherburne County Social Servs., 481 N.W.2d at 112. In reviewing questions of law, this court need not defer to the district court's decision because questions of law are reviewed de novo. Id.

Minn. Stat. 518.54, subd. 6 (1994) defines income as "any form of periodic payment to an individual * * *." Current net income must be determined for the purposes of child support. Thomas vs. Thomas, 407 N.W.2d 124, 127 (Minn. App. 1987). The record reveals that in 1994, Phillips had two tenants in his home from whom he received a total of $750 monthly rental income. However, as of the day of the hearing, the record reveals that Phillips had only one tenant who paid $350 a month.

Whereas, the $350 rent payment qualifies as income, the record reveals no basis for imputing the additional $400. It is not current income for child support purposes.

This case does not fall within the line of cases in which earning capacity, instead of actual earning, is used to determine child support obligation. See, e.g., Beede v. Law, 400 N.W.2d 831, 835 (Minn. App. 1987) (holding that earning capacity is not the appropriate measure of income in modification proceeding unless it is impracticable to determine obligor's present income or obligor's actual income is unjustifiably self-limited). See Schneider v. Schneider, 473 N.W.2d 329, 332 (Minn. App. 1991) (Obligor with no income may not be ordered to pay child support absent a finding of bad faith).

It is possible to determine Phillips' income from actual earnings. There was no evidence in the record that Phillips unjustifiably limited the amount he could collect as rent from tenants. Therefore, imputed rental income should not have been included in Phillips' income in calculating child support payments.


Phillips argues that the district court improperly failed to consider expenses he incurred in renting his home. He contends that he is entitled to a deduction for expenses related to the production of the rental income.

Net income excludes taxes, social security and other payroll deductions. There is no express provision for expenses incurred in generating income. Minn. Stat. 518.551 subd. 5 (1995 Supplement). Martin v. Martin, 364 N.W.2d 475, 478 (Minn. App. 1985). In Martin, however, this court recognized that under certain circumstances, a district court may consider the expenses an obligor incurs in generating income. Id. To reach the net income figure on which child support is based, the court allowed a business deduction for food and lodging to a self-employed person. Id.

Phillips is responsible for maintaining his homestead. Such an expense is not incurred "solely for the production of his income." Bartl v. Bartl, 497 N.W.2d 295, 300 (Minn. App. 1993). There was no evidence in the record that Phillips incurred expenses solely for generating the rental income. This court will not set aside a district court's finding unless clearly erroneous. Minn. R. Civ. P. 52.01. The district court acted within its discretion in refusing to include any expenses Phillips' incurred in renting out his home.


Phillips argues that because of his inability to pay, the award of attorney fees to McMahon-Bailey should be reversed. Further, Phillips argues that the district court did not make a specific finding about Phillips' ability to pay that award.

The district court may award attorneys fees if it finds that the: (1) fee is necessary for the good faith assertion of the party's right; (2) party from whom fees, costs and disbursements are sought has the means to pay them; and (3) party to whom fees are awarded does not have the means to pay them. Minn. Stat. 518.14, subd. 1 (1994). Also, the court in its discretion may award attorney fees against a party who unreasonably contributes to the length or expense of the proceeding. Id.

An award of attorney fees under Minn. Stat. 518.14 "rests almost entirely within the discretion of the district court and will not be disturbed absent a clear abuse of discretion." Jensen v. Jensen, 409 N.W.2d 60, 63 (Minn. App. 1987) (citation omitted). The award of attorney fees in that case was pursuant to Minn. Stat. 518.14. Here, although there was no specific finding by the district court of Phillips' ability to pay in the order, the district court did make the required finding during a prior hearing. In the April 25, 1995 order, the district court found that Phillips exhibited bad faith in failing to abide by the district court's order of July 29, 1994. The district court stated: "based upon the bad faith exhibited by [Phillips] in his failure to abide by this court's order of July 29, 1994, it is appropriate that [McMahon] be awarded attorneys' fees in the amount of $500."

Furthermore, at the hearing of August 17, 1995, the district court specifically noted that it would review all issues de novo, except the issue of attorney fees. Thus, the order for attorney fees remained intact. The district court did not abuse its discretion by failing to reiterate the prior findings of fact on attorney fees.

We reverse and remand the district court's determination of imputed rental income and remand for a recalculation of Phillips' arrearage and future child support based on his current income. We affirm on all other issues.

Affirmed in part, reversed and remanded in part.


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