This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C5-01-140

 

In re:

 

Linda G. Longrie, petitioner,
Appellant,

Itasca County Health and Human Services,

Intervenor,

vs.

Richy J. Luthen,
Respondent.

 

 

Filed October 23, 2001

Affirmed in part, reversed in part, and remanded

Peterson, Judge

 

 

Itasca County District Court

File No. FX9850295

 

Ellen E. Tholen, 525 East Itasca Street, Grand Rapids, MN  55744 (for appellant)

 

 

James Perunovich, 402 East Howard Street, Suite 7, Hibbing, MN  55746 (for respondent)

 

 

            Considered and decided by Peterson, Presiding Judge, Amundson, Judge, and Anderson, Judge.

U N P U B L I S H E D   O P I N I O N

 

PETERSON, Judge

In this appeal from a child support magistrate’s order and supplemental order, appellant-mother Linda G. Longrie argues that the magistrate should not have collaterally estopped her from introducing evidence that respondent-father Ricky J. Luthen fraudulently transferred assets during his marital dissolution proceeding and acted in bad faith to avoid establishing a child support obligation consistent with his earning ability and past income.  We affirm in part, reverse in part, and remand.

FACTS

            Appellant and respondent had an extramarital relationship that resulted in the birth of a child, T.L., on September 10, 1997.  In March 1998, appellant initiated a paternity action against respondent, and in July 1998, respondent’s exwife, Peggy Luthen, filed a marital dissolution action in Itasca County.  In August 1998, respondent was adjudicated the father of T.L., and child support was reserved.  Appellant and Itasca County Health and Human Services then moved to intervene in the Itasca County dissolution action, and the district court granted the motions.  Peggy Luthen appealed the order permitting intervention, and in Luthen v. Luthen, 596 N.W.2d 278 (Minn. App. 1999), this court reversed, holding that appellant and the county could not intervene.

            Peggy Luthen dismissed her marital dissolution action in Itasca County and began a new dissolution action in St. Louis County.  In that action, the Luthens stipulated to a division of assets that was approved by the district court in an October 5, 1999, judgment.  Pursuant to the judgment, Peggy Luthen received three parcels of real estate, a business called Performance Sports Center, L.L.C., respondent’s nonmarital L&M Supply Company stock, and a vehicle.  Respondent received a business called Lone Pine Enterprises, L.L.C., several vehicles, and a boat.

            A hearing to set child support in the paternity action was scheduled for October 1999, but due to discovery problems, the hearing was continued to February 2000.  At the February hearing, respondent moved to have the matter heard by a child support magistrate, and the motion was granted.  Following a hearing, a child support magistrate issued an order on May 15, 2000.  Appellant moved for review of the magistrate’s order by the district court and following review, the district court remanded the matter to the child support magistrate.  The magistrate reviewed the record and issued a supplemental order on November 16, 2000.

            This appeal is taken from the magistrate’s original order and the supplemental order.

D E C I S I O N

            Appellant argues that the magistrate erroneously applied the doctrine of collateral estoppel to her claims of a fraudulent transfer and her allegations that respondent operated in bad faith to avoid a child support obligation consistent with his earning ability and his past income.  The magistrate did not apply the doctrine of collateral estoppel to any of appellant’s claims.  Rather, the magistrate refused to allow a collateral attack on the Luthens’ dissolution judgment.  After explaining that he understood that an Itasca County judge had found that respondent’s past income is relevant to these proceedings, the magistrate stated:

[B]ut I’m not going to allow a collateral attack on the dissolution decree.  I think this case and—so counsel know how I’m viewing it—i[s] really a question of what Mr. Luthen’s actual income is and of course, whether income could be imputed to him based on his earning history.

 

            The magistrate later explained:

So, I’ve just been cautioning counsel at this point that I don’t want a lot of evidence on the collateral attack on the dissolution decree.

 

            The magistrate’s statements indicate that the magistrate correctly understood that this child support proceeding could not be used to alter the dissolution judgment.

An action with an independent purpose and contemplative of another form of relief that depends on the overruling of a prior judgment is a collateral attack.  It is well-settled in Minnesota that a facially valid judgment is not subject to collateral attack.

 

Popp Telcom v. Am. Sharecom, Inc., 210 F.3d 928, 941 (8th Cir. 2000) (citations omitted).

            But appellant argues that her effort to admit evidence about the dissolution judgment was not a collateral attack on the judgment because she was not trying to have the dissolution judgment overruled.  Instead, she contends, she was attempting to show that respondent used his divorce settlement to transfer all of his income-producing property to Peggy Luthen in order to avoid having the income generated by the property considered when his support obligation for T.L. was set.  Appellant claims that respondent’s conduct was a bad-faith attempt to self-limit his income for purposes of setting his child support obligation and that the magistrate erred by not admitting evidence about the circumstances of respondent’s marital dissolution, which appellant contends would prove her claim.

Absent an erroneous interpretation of the law, whether to admit or exclude evidence is within the district court’s discretion.  Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn. 1997); see Brazinsky v. Brazinsky, 610 N.W.2d 707, 710 (Minn. App. 2000) (this court applies the same standard of review to an order issued by a child support magistrate as it would to a child support order issued by a district court).  The evidence excluded during the hearing before the magistrate generally fell into two categories: (1) evidence about the Luthen dissolution settlement, and (2) evidence about respondent’s intent when he agreed to award most of the marital assets to Peggy Luthen and to become an employee earning ten dollars per hour working for a company that was awarded to Peggy Luthen.

            The magistrate did not admit evidence in the first category because it was repetitious.  Because the Luthens’ settlement agreement was set forth in detail in the dissolution judgment, there was no need for additional evidence about the property transfers required by the judgment.  The dissolution judgment satisfactorily proved which assets respondent agreed to transfer to Peggy Luthen.  The magistrate did not abuse his discretion when he declined to admit additional evidence about the dissolution settlement.

            The magistrate did not admit evidence in the second category because he concluded that the evidence was irrelevant.  The excluded evidence was testimony about the reasons for the dissolution, the reasons why respondent agreed to a property settlement that gave Peggy Luthen most of the income-producing assets, and the reasons why the dissolution proceeding began shortly after appellant initiated the child support proceeding. 

The magistrate did not explain why he concluded that the evidence was not relevant, but it appears that this conclusion was based at least in part upon the magistrate’s understanding that the dissolution property settlement was final and could not be altered in the child support proceeding.  When appellant’s counsel asked about respondent’s intent with respect to the dissolution settlement, respondent’s counsel stated a relevancy objection and argued that counsel was collaterally attacking the dissolution judgment.  The magistrate sustained the objection.

            In a child support proceeding, earning capacity is an appropriate measure of income if an obligor’s actual income is unjustifiably self-limited.  County of Morrison ex rel. Gutzman v. Watland, 448 N.W.2d 71, 74 (Minn. App. 1989).  Appellant argues that by entering into the dissolution settlement agreement, respondent unjustifiably limited his income in two ways.  First, respondent limited his earned income when he transferred Performance Sports Center to Peggy Luthen and became an employee of the business that he had owned and operated during the marriage.  Second, respondent limited his unearned income when he transferred his L&M Supply Company stock to Peggy Luthen and as a result, no longer received income from the stock.

            Although the child support magistrate correctly recognized that the Luthens’ dissolution judgment could not be collaterally attacked in this child support proceeding, the magistrate applied the prohibition against a collateral attack too broadly.[1]  Appellant’s theory before the magistrate was that respondent used his divorce settlement to transfer all of his income-producing property to Peggy Luthen in order to avoid having the income generated by the property considered when his support obligation for T.L. was set.  Appellant’s effort to present evidence about the circumstances of the dissolution settlement was not an attempt to alter the dissolution judgment; it was an attempt to show that respondent unjustifiably used the settlement to reduce his current income, and therefore, that respondent’s actual income should not be used to determine his child support obligation.

            We see no basis for concluding that because respondent’s dissolution settlement agreement has been incorporated into a judgment, respondent’s intent when entering the agreement is not relevant to determining whether respondent has unjustifiably self-limited his income.  Even if respondent is bound by the judgment, his situation is not different from any other child support obligor who has quit a job or taken some other irreversible step that reduced the obligor’s income.  If such steps are taken to limit the obligor’s child support obligation, the obligor’s child support may be based on earning capacity rather than actual income. 

            Because the child support magistrate did not admit evidence that is relevant to a determination whether respondent unjustifiably self-limited his income, we reverse and remand to permit appellant to present evidence and to permit the magistrate to make a factual determination whether respondent unjustifiably self-limited his income.  This opinion should not be interpreted as an indication of how this factual issue should be resolved.

Appellant argues that the magistrate abused his discretion when he found that Peggy Luthen owed $500,000 in past taxes.  The standard of review for this finding of fact, however, is whether it is clearly erroneous; it is not whether the magistrate abused his discretion.  See Minn. R. Civ. P.  52.01 (findings of fact not set aside unless clearly erroneous).  The magistrate found:

1.At Finding of Fact No. 10, the Magistrate found that [respondent] and his ex-wife, Peggy Luthen, owed tax liabilities in excess of $500,000.00.  A review of the record shows liabilities of $150,998.00 for the 1996 tax reporting period, $70,793.12 for the 1997 tax period, these two liabilities being owed to the Internal Revenue Service.  In addition, Peggy Luthen paid $65,958.08 to the Internal Revenue Service for the 1995 tax period, for a total of $287,749.20.

 

2.[Respondent] and Peggy Luthen owe additional tax liabilities to the Minnesota Department of Revenue in the amount of $37,334.12 for tax year 1995, $35,193.20 for tax year 1996, and $61,871.85 for the tax year 1997, for a total of $134,399.17.

 

3. Both the Federal and State outstanding tax liabilities in the amount of $422,148.37 continue to accrue penalties and interest at the statutory rate.  The above-referenced Federal assessments were as of July and August 1999, and the State assessments were as of July 1999.  Almost one year had passed since the last evidence of these assessments and under statutory penalty and interest provisions, Peggy Luthen would owe approximately $500,000.00 in tax liabilities to the Federal and State taxing authorities.

 

The record contains copies of notices from the Internal Revenue Service and the Minnesota Department of Revenue that support these findings of fact.  The findings are not clearly erroneous.

Affirmed in part, reversed in part, and remanded.