Mathis v. Mathis

SABERS, Justice

(dissenting).

[¶ 17.] The trial court erred in determining child support by including in Allan’s income not only the gain from a sale of stock but also the principal or cost basis.

[¶ 18.] This appeal is limited in scope to the interpretation of SDCL 25-7-6.3(5).4 Statutory interpretation is a question of law, which is reviewed de novo. In re Estate of Klauzer, 2000 SD 7, ¶ 22, 604 N.W.2d 474, 479 (citations omitted).

The purpose of statutory construction is to discover the true intention of the law which is to be ascertained primarily from the language expressed in the statute. The intent of a statute is determined from what the legislature said, rather than what the courts think it should have said, and the court must confine itself to the language used. Words and phrases in a statute must be given their plain meaning and effect. When the language in a statute is clear, certain and unambiguous, there is no reason for construction, and the Court’s only function is to declare the meaning of the statute as clearly expressed.

Beck v. Lapsley, 1999 SD 49, ¶ 3, 593 N.W.2d 410, 412 (citations omitted).

[¶ 19.] Generally, all income available to both parties should be considered as income when calculating income for child support purposes. Peterson v. Peterson, 2000 SD 58, ¶26, 610 N.W.2d 69. However, SDCL 25-7-6.3 specifically controls this issue:

The monthly net income of each parent shall be determined by his gross income less allowable deductions, as set forth herein. The monthly gross income of each parent includes amounts received from the following sources:
*778(5) Gain or loss from the sale, trade or conversion of capital assets....

[¶ 20.] The language of this statute is “clear, certain and unambiguous.” The term “gain” is commonly defined as “[a]p-preciation in value or worth of securities or property.” Black’s Law Dictionary 678 (6 th ed.1990). More specifically, a “gain derived from capital” is defined as “a gain, profit or something of exchangeable value proceeding from the property, severed from the capital however invested.... ” Id. (emphasis added). Clearly, the legislature intended to exclude the cost basis, the amount paid for the stock, from income because only the gain or loss is designated as income. We assume statutes mean what they say and that the legislators have said what they meant.

[¶ 21.] In her appellate brief, Beth cites to numerous cases to support her argument that all monies received from the sale of stock are included as income, regardless of the cost. Her cases include receipt of monies from: (1) the sale of farm machinery, (2) insurance proceeds, (3) an inheritance, (4) a trust fund, and (5) a worker’s compensation award. Even if we were to agree with the inclusion of these receipts of monies as income for child support purposes, it is immaterial here. The South Dakota Legislature specifically and unequivocally provided that only the “gain ... from the sale, trade or conversion of capital assets” is considered as income.5

[¶ 22.] Here, the referee calculated Allan’s monthly gross income by using his 1998 income tax return, which reflected a monthly income of $1,953.67 after disallowance of depreciation. The referee included as income Allan’s sale of stock, which Allan previously received as part of the property division in the divorce, amounting to $50,-756 and averaging $4,229.67 per month. The referee combined $1,953.67 and $4,229.67 to conclude that Allan’s monthly income was $6,183.33. Based upon this figure, the referee increased Allan’s monthly child support obligation from $1,226 for four children to $1,247 per month for three children. This was error.

[¶ 23.] Obviously, the referee and the trial court failed to deduct the cost basis of Allan’s stock per SDCL 25-7-6.3(5). Schedule D of Allan’s 1998 income tax return reflects that Allan sold stock for $50,756 with a cost basis of $43,422 resulting in a long-term capital gain of $7,334. The return also reflects that Allan had a short-term loss of $1,492 when he sold his Intel stock. Thus, the total capital gain realized by Allan in 1998 was $5,842. This amount, $5,842, not $50,756, should be included in Allan’s income for child support purposes pursuant to the “clear, certain and unambiguous” language of SDCL 25-7 — 6.3(5). Therefore, the referee and the trial court erred as a matter of law in determining that the entire $50,756 was included as income.

[¶ 24.] Implicitly conceding error, Beth argues alternatively that the $50,756 is included as income to Allan under SDCL 25-7-6.5:

If a child’s needs are not being met through the income of the parents, assets shall be considered. If the parents have savings, life insurance or other assets in amounts unrelated to income, these holdings shall be considered. The parents’ ability to borrow may be used to determine financial ability.

The referee noted that “[t]his is also a case where the assets of the Petitioner Father should be considered if any claims of inadequate cash flow are considered.” However, reliance on this statute is premature and wrong. First, there has been no determination that the needs of the child *779“are not being met through the income of the parents.” Second, SDCL 25-7-6.3(5) excludes the cost basis of stock as income. While other assets may be considered under SDCL 25-7-6.5, those amounts specifically excluded as income may not be included.

[¶ 25.] While I dislike the manner in which Allan presented his financial situation to the referee, that conduct does not justify an affirmance of an error of law. I vote to reverse the trial court’s erroneous inclusion of the cost basis of the stock as part of Allan’s income and remand for a correct determination of his income and child support obligation.

. Allan did not appeal the determination that his 1998 tax return reflected his current income. Therefore, the conference opinion's discussion of his playing "fast and loose” is of little relevance. The referee found that a substantial change of circumstances existed effective June 1, 1999, the date the oldest child graduated from high school. Thus, Allan’s child support obligation was modifiable and the conference opinion's discussion regarding his "failure to meet this stringent burden” is also unnecessary.

Some of the confusion surrounding Allan’s financial status is attributable to the fact that he solely owns a restaurant in Sundance, Wyoming and is paid $1,000 per month, which amount is deducted from corporate income as an expense. Likewise, Beth Mathis solely owns a restaurant in Spearfish, South Dakota and claims she is paid $500 per month.
Beth argues that any reduction in Allan’s income is due to his own voluntary act. In justifying the change in the operation of his restaurant, Allan testified that he has experienced management and personnel problems; for example, he fired his restaurant manager, who is now employed by Beth. In considering deviations from the guidelines, the referee found "[t]here is no recommendation for any deviation at this time.”

. In fact, Beth cites to a Tennessee case that supports this conclusion. In Smith v. Smith, 1999 WL 548568, the Tennessee Court of Appeals noted that it previously remanded the case and had instructed the trial court to "consider [obligor's] 1995 capital gains as well as his commissions, bonuses and salary.” After the capital gains were considered, the child support obligor appealed, but the Smith court affirmed.