No. 8 7 - 1 5 1
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
IN RE THE MARRIAGE OF
CAROL MITCHELL,
Petitioner and Respondent,
and
FRANCIS 0 . MITCHELL,
Respondent and ~ppellant.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Michael Keedy, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Ellingson & Moe; Jon E. Ellingson, Missoula, Montana
For Respondent:
Paulette C. Ferquson, Missoula, Montana
Submitted on Briefs: Oct. 16, 1 9 8 7
Decided: November 24, 1987
Filed: Nnv 2419$E
Clerk
Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.
Francis 0 Mitchell appeals the findings of fact,
.
conclusions of law and judgment of the District Court, Fourth
Judicial District, Missoula County, Montana determining child
support and attorney fees. We reverse and remand for more
accurate determination of the parties' income available for
child support.
Francis and Carol Mitchell were married on July 19,
1969. The couple had two children, Timothy, born September
9, 1971, and Kathryn, born October 17, 1972. Francis is
employed by the University of Alaska cooperative extension
services in McGrath, Alaska. He holds a Masters degree in
human behavior. Carol is an attorney in Missoula, Montana.
She received a Juris Doctrate degree from the University of
Montana in 1977 and has practiced law since that time.
In May 1977, Francis moved to Alaska and lived there
through 1980. He was employed by the Iditarod Area School
District and initially made $30,000 per year which increased
to $36,000 by 1979. Except for a six-month period of time in
1977-1978, the children lived with Carol in Missoula. In
1980, Francis moved from Alaska to Moiese, Montana, where he
was employed by the Confederated Salish and Kootenai Tribe at
an annual salary of $20,000. Francis continued to travel
back and forth between Alaska and Montana to complete
contract work which provided some extra income, but
maintained his domicile in Alaska.
Carol filed an action for dissolution in September of
1981, and a decree of dissolution was entered on October 8,
1981. The court, in its decree, reserved the division of
property, child custody and support. Francis remained
employed from October 1, 1982 to April 1983, as an alcohol
counselor at the Salish Kootenai College but became
unemployed when the program was eliminated.
On June 10, 1983, the parties entered into a "Marital
and Property Settlement Agreement and Release of Claims."
After executing the agreement, Francis travelled back to
Alaska for interviews with the University of Alaska and was
hired on a three-quarter time hasis at an annual salary of
$42,881.
Following a hearing on October 2 6 , 1984, the court
ordered the adoption of the property settlement agreement
except for the issue of child support. A hearing on child
support was held December 20, 1984 in which the parties'
income was thoroughly yet confusingly scrutinized. There was
testimony given and evidence presented which showed amounts
both parties paid for support of their children.
Evidence was presented which showed Francis was
employed at an annual salary of $42,881 but it was unclear as
to what salary Carol claimed. In response to answers to
interrogatories, Carol stated her income for 1984 through
October was $23,450. At the hearing, she testified that it
was $21,850 plus $3,500 which she received from the
partnership in November and December. For the years 1981,
'82 and '83, she stated her income varied between
$2,000-$4,000 from these figures. On July 11, 1985, after
the case had been taken under advisement but no order had
been issued, Carol filed an affidavit of her accountant which
stated Carol's 1984 income as $11,749. Francis objected to
this entry and the court ordered the taking of the
accountant's deposition on January 16, 1986 at Francis'
expense.
The trial judge rendered his ruling on February 27,
1987, twenty-six months after the hearing. The District
Court concluded that no cost of living adjustment should be
made on Francis' Alaskan salary before comparing it to
Carol's under Montana's Guidelines for Determining Child
Support. Francis was ordered to pay $926.27 per month in
child support, maintain a medical insurance policy for the
children and have both children named as beneficiaries on a
life insurance policy, pay the costs of private school.
tuition, and pay transportation costs for visitation.
Francis was also ordered to pay Carol's attorney fees.
Francis appeals the District Court's findings of fact,
conclusions of law and judgment on the following issues:
(1) Did the District Court abuse its discretion in
making the child support award by miscalculating Carol's
income and failing to properly apply the new Guidelines for
Determining Child Support so that substantial injustice
occurred?
(2) Did the District Court err in grantinq attorney
fees?
(3) Was there improper admission of pre-divorce
support history?
This Court recently adopted the Uniform District Court
Rule On Child Support Guidelines (Mont. 1987), 44 St.Rep. 828
(Guidelines). The Guidelines are a suggested procedure for
the determination of child support. Although the Guidelines
are not expressly binding, when used by the District Court,
all findings are reviewable. Absent a clear showing of abuse
of discretion, the District Court will be upheld. Marriage of
Ensign (Mont. 1987), 739 P.2d 479, 482, 44 St.Rep. 1146,
1149; In Re Marriage of Ryan (Mont. 1986), 720 P.2d 691, 693,
43 St.Rep. 1163, 1165. We find that the District Court
abused its discretion in this case.
As to issue number one, Francis alleges error committed
on the part of the trial court in calculating Carol's income.
Francis argues that the court improperly permitted income
deductions for support determination solely because they are
allowed tax deductions by the Internal Revenue Service.
The Guidelines contain a suggested work sheet that the
District Court followed:
1. Gross Income Petitioner Respondent
(Carol) (Francis)
a) earnings. 1983 $32,857.00
1984 15,848.00 $43,174.00
$48,705.00
2-year average: $24,352.50
b) imputed income.
wood gathering/hunting
rental in Missoula
c) asset value $8,325.60
d) business loss 1983 $8,400.00
1984
2-year average:
TOTAL $18,103.00 $59,299.60
2. Deductions
a) taxes
self-employment 1983 $4,964.00
1984 1,660.00
$6,624.00
2-year average: 3,312.00
state & federal income taxes
1983 223.00
1984 1,723.00 $8,793.41
1,946.00
2-year average: 973.00
b) mandatory retirement $6,045.06
C) medical insurance paid on behalf of
children. (Respondent's Exihibt 6) $1,874.00
$4,285.00 $16,712.47
3. Net Available Resources
The gross income figure adopted by the court for Carol
was for two years. The court found Carol made $32,857 in
1983, and $15,848 in 1984. The trial court added the '83 and
'84 income figures for a total of $48,705 and then divided by
two for a two-year average income of $24,352.50. The
District Court stated in paragraph seven of its findings of
fact that Carol was confused as to her income and that the
affidavit and deposition testimony of her accountant was
"[tlhe more credible and reliable evidence ... " of Carol's
income.
The accountant, Tracy Blakeslee, submitted an affidavit
and copies of Carol's tax return for 1984. The return showed
net income of $15,848. Blakeslee then subtracted $2,939 for
depreciation on P & C Rentals, $1,002 for partnership
business expenses paid previously, and $158 for depreciation
on a desk. This left Carol with an income of $11,749 for
1984. For 1983, there was a $5,276 depreciation loss claimed
on P & C Rentals and a loss claim of $1,110 for exotic cats.
The court found that there was an average business loss
of $6,249.50 ($8,400 for 1983 and $4,099 for 1984). Francis
argues, and we agree, that these losses (with the exception
of the $1,002 claimed for business expenses) although
allowable for income tax deduction purposes, should not be
used. to calculate child support. Depreciation is a form of
accounting which does not directly correlate to the amount of
cash on hand of an individual. When analyzing income under
the Guidelines, it is the disposable income of the parent,
and not their income tax returns alone, which need be
considered by the court.
The Colorado Legislature adopted similar Guidelines
effective November 1, 1986. The former chairman of the
Colorado Bar Association Family Law Section, Stephen J .
Harhai, wrote an article focused on possible problems with
those Guidelines. He states:
For the non-wage earner, the Guidelines
use a standard accounting definition of
income: gross receipts less ordinary and
necessary business expenses. Excluded
from expenses -are accelerated
depreciation, the (now repealed)
investment tax credit and any other
expense the court deems inappropriate.
(Emphasis added.)
Harhai, Key Issues in the Colorado Child Support Guidelines,
16 Colo. Lawyer, 51-52 (Jan., 1987).
Under the Colorado statute, " ' ordinary and necessary
expenses' does not include amounts allowable by the internal
revenue service for the accelerated component of depreciation
expenses .
. " . See, Col.Rev.Stat. 5 14-10-1 15 (7)
(a) (11) ( B ) .
This Court deems that the claimed "legitimate business
expenses" of depreciation, on the rental units for 1983 and
1984 and on the desk, plus the expense claimed for exotic
cats both fall within excluded expenses in determination of
child support.
The District Court should also reconsider the claimed
$1,002 previous business expenses claimed by Carol on her
1984 returns to ensure that these are properly deductible.
We do not hold that income tax returns are not a valuable
tool in the determination of child support as suggested in
Part 1 of the Guidelines, but the District Court has always
been vested with discretion under the broad standards of
5 40-4-204, MCA, which we feel requires scrutiny of all.
deductions and exemptions claimed by either parent.
We note also that in the District Court's determination
as to imputed income and assets that further inquiry should
occur upon remand. For Francis' gross income, the trial
court imputes $4,800 for Francis' wood gathering and hunting
and values his assets at $8,325.60. The assets include a
$900 interest in a riverboat and motor, $900 in a
snowmachine, $250 in a 3-wheeler, $800 in a stock trailer and
$250 in a sled and trailer. This $3,100 should possibly be
removed in the calculation of the assets value total because
they are used in generating the imputed income from wood
gathering, hunting and fishing.
Part 4, Assets as income, of the Guidelines states:
[Tlhe assessment of assets should exclude
from consideration such non-income and
non-depreciable producing assets of
"reasonable" value such as a permanent
home, farm land, furnishings, and one
automobile. Also excluded should be
income producing assets such as real
roperty in - - - o f 7 f a r m y
the form
gusiness, v~hicles,tools, - instrumen=
or
u -
- es d produce a primary source - of
income. (Emphasis added. )
..
a
Francis' imputed income also includes $3,000 in rental
income. We believe, as Carol argued, that this rental unit
was Francis' cabin in Alaska, not Missoula as the order
states. If this is the case, the minor error should be
corrected.
Carol claims that if the District Court would have used
the formula that this Court approved of in In Re the Marriage
of Carlson (Mont. 1984), 693 P.2d 496, 41 St.Rep. 2419, that
Francis would have received less than he did under the
Guidelines. The Carlson formula, as we have previous1.y
stated, is only a suggested guideline and therefore is not
binding in this case. Marriage of Ensign, supra, 739 P.2d at
482, 44 St.Rep. at 1149; In Re Marriage of DiPasquale (Mont.
We do, however, find Carlson helpful for two reasons.
First, Carlson states the policy that the comparative earning
figures of the parents "[mlust realistically reflect what the
parents are capable of earning using their actual earnings as
a guideline." Carlson, supra, 693 P.2d at 500, 41 St.Rep. at
2423. Here, we do not believe that the figures presented and
used by the District Court accurately reflect actual
earnings.
Secondly, Carlson facilitates a determination of
whether the court erred in granting attorney fees,
appellant's second issue. The District Court found in its
conclusions of law that Francis "[m]ust pay [Carol's]
attorney fees in this action to modify the settlement
agreement." Under paragraph XI1 of the agreement entered
into by Carol and Francis on June 10, 1983, the parties
agreed that in any action to "[e]nforce, modify or interpret
this agreement, the court ... shall award a reasonable
attorney fee to the successful party."
It is clear that the parties contracted as to the child
support of the Mitchell children in paragraph X of the
agreement. Pursuant to S 40-4-201(2), MCA, this does not
bind the parties.
Carlson states the rule applicable to this situation:
In all divorce matters relating to
children, the best interest of the
children control. While terms of a
contract mav be introduced as evidence in
some instarkes, - custody and support
the
of children are never - -to contract
- left
between the parties. (Emphasis added.)
Carlson, supra, 693 P.2d at 500, 43 St.Rep. at 2424; see also
In re the Marriage of Neiss (Mont. 1987), P.2d I
, 44 St.Rep. 1695, 1697.
Additionally, on April 18, 1984, Carol moved for entry
of a decree adopting the settlement agreement, but requested
the court reserve the issue of child support for a later
time. After a hearing on October 26, 1986, the District
Court granted Carol's request and ordered the adoption of the
agreement in all respects except for child support.
A review of the record shows the majority of subsequent
litigation centered around determination of the parties'
assets, liabilities and income for child support reasons.
Even though Francis failed to promptly comply with discovery,
the assessment of attorney fees was never directed to this
noncompliance. The District Court stated Francis was forced
to pay because the court had to "modify" the settlement
agreement. Since most of the following litigation concerned
the issue of child support, we find that the District Court
abused its discretion in assessing attorney fees under the
facts of this case.
The final issue raised is whether the court erred in
permitting testimony of pre-divorce history. Francis claims
that the testimony was irrelevant to the factors listed in
S 40-4-204, MCA. That testimony dealt with where the
children lived, housing costs, and a lack of a regular
payment by Francis during the time he was in Alaska
(specifically 1977).
It is true that the District Court is to consider all
relevant factors without regard to marital misconduct in
determining child support. Section 40-4-204 (I), MCA. Carol
points out though, that these factors may be considered if it
aids i.n determination of "current child support issues." The
relevancy and possible prejudice of such testimony may be
determined upon rehearing.
Francis additionally argued that the court erred in
failing to adjust his income according to cost of living
expenses in Alaska as compared to Montana. We neither bless
this argument nor condemn it. The Guidelines do not
specifically address whether cost of living in an area is a
legitimate consideration. In appropriate cases, where there
is evidence presented that shows there is substantial
disparity between the value of the dollar in different
locales, the court may in equity need to make appropriate
adjustments.
We remand this case to the District Court for a proper
determination of the parties' income and assets and for more
accurate and equitable application of the Child Support
Guidelines.
Mr. Justice John Conway Harrison, specially concurring.
I concur. As noted in majority the opinion, I wish to
focus attention to the fact that this matter commenced some
seven years ago, September of 1981, with the filing of the
action for dissolution. Even after numerous hearings, no
opinion was rendered by the trial judge for some twenty-six
months after the hearings. In this state, litigants are
entitled to have litigation handled in a more expeditious
manner--this case does not evidence that fact. It is my firm
hope that by calling attention to this factor, the judiciary
of this state will check their calendars and resolve cases
faster, this case is not a good example of handling cases
in a timely fashion.
Under the circumstances of this case, we have a litigant
in the state of Alaska where the cost of living is far above
that in Montana. The trial judge must adjust the income of
the parties according to a cost of living, in this case the