Opinion
No. C2-99-420.
Filed October 19, 1999.
Appeal from the District Court, Houston County, File No. F3-97-356.
Timothy A. Murphy, Rippe, Hammell Murphy, (for respondent)
Gregory B. Schultz, (for appellant).
Considered and decided by Lansing, Presiding Judge, Peterson, Judge, and Amundson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Husband challenges (1) the upward deviation from statutory guidelines child support; (2) inclusion of retroactive pay in calculating his support obligation; (3) calculation of wife's monthly income; (4) the valuation of wife's stock and 401(k) plans; (5) the division of marital property; (6) the treatment of withdrawals from a joint savings account; (7) inclusion of his Tier I retirement benefits in the property division; and (8) the establishment of a present value for his Tier II retirement benefits.
FACTS
Joyce and Loran Johnson were married in 1982 and divorced in 1998. They have two children, now fourteen years old and eight years old. The older child has muscular dystrophy, underwent surgery in 1997, and is now confined to a wheelchair. He receives special services, including in-home care and therapy and an aide at school. The district court found that wife's expenses related to the child's special needs are currently $150 per month. Citing the child's special needs, the district court deviated upward from the statutory child support guidelines.
At the time of trial in May 1998, wife was 42 years old and had worked for the same employer for 18 years. The district court based its findings on wife's income on her 1997 W-2 form, but it mistakenly used the figure for taxable income, reflecting a deduction for pre-tax retirement contributions, rather than gross income. In addition, the court subtracted a pension contribution of $175.13 per month and found wife's monthly net income was $1,411.84. The court found that wife's living expenses are $3,293.63, including $175 for transportation, $212.50 for child care (12-month average), and $150 for expenses relating to the older child's special needs.
Wife participated in her employer's stock bonus, PAYSOP, and ESOP plans. The stock has undergone several splits, the last of which occurred after the prehearing conference in February 1998. The district court valued the stock as of the date of the prehearing conference. Husband argues that the stock should be valued as of the last day of trial in May 1998, at which time the value had increased.
Wife also holds a 401(k) account containing stock. The district court assigned a valuation date for that account of December 31, 1996, the most recent date for which figures on husband's retirement plan were also available. Husband urged that wife's plan be valued as of the last day of trial.
At the time of trial, husband was 40 years of age and had worked for the railroad for 21 years. In calculating husband's income, the district court used his 1997 W-2 and included a lump sum retroactive payment expected in July 1998, after trial. At trial, there was some confusion about husband's reporting of 1997 business expenses. In its amended findings, the district court used figures from husband's 1996 federal tax return to establish business expenses, reimbursement, and out-of-pocket expenses. The district court found that husband's monthly net income was $1,465.94. Based on that figure, the court found that guidelines support would be $439.78 monthly. The district court deviated from the guidelines and imposed a total monthly obligation of $839.78, citing husband's lower monthly expenses and the special needs of the parties' child.
The district court originally assigned to husband the equity in his Tier I retirement account. In its amended findings, the district court ruled that Tier I benefits are not subject to division, but it assigned a present value for the combined Tier I and Tier II accounts. Although there was no evidence presented at trial on husband's anticipated retirement, the present-value determination assumed a retirement age of 60.
In its amended findings, the district court allocated to wife one half of funds withdrawn by wife from a joint savings account. Wife testified that she deposited $500 from every paycheck into the account; there was conflicting testimony as to whether husband contributed to the account. Wife testified to withdrawals from the account to purchase a tractor, to make payments on the parties' house and farm, and for insurance.
Due to wife's future needs and the impact of the needs of the parties' older child on wife's future opportunities, the court concluded that it was appropriate to allocate more of the marital assets to wife than to husband.
DECISION
I. Child Support
The trial court has broad discretion to provide for the support of the parties' children. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).
a. Upward Deviation of $400 in Husband's Monthly Child Support Obligation
Husband argues that the district court's upward deviation from the guidelines was an abuse of discretion. We agree.
The amount of child support payments is governed by Minn. Stat. § 518.551, subd. 5 (1998), which states that unless the parties stipulate to an amount, the court shall order support "in accordance with the guidelines" and statutory factors.
If the court deviates from the guidelines, the court shall make written findings giving the amount of support calculated under the guidelines, the reasons for the deviation, and shall specifically address the criteria in paragraph (c) and how the deviation serves the best interest of the child.
Id., subd. 5(i) (emphasis added).
The district court made findings on income and the special needs of the parties' child. Husband argues that the court's finding that wife had additional monthly expenses of $150 due to the older child's muscular dystrophy is not supported. But the court made specific findings on the needs of the child for clothing, health care supplies, attendant care, an accessible vehicle, and other expenses. The court did not make findings on (a) the financial benefit to wife of receiving the income tax dependency exemption or (b) husband's ability to pay the child support ordered. Husband contends that with monthly income of $1,465.94, paying child support of $839.78 leaves him with only $626.16, far short of his monthly expenses of $1,046.98.
When a district court deviates upward from the guidelines based on costs associated with a child's special needs, yet fails to make sufficient findings and to address the criteria in Minn. Stat. § 518.551, subd. 5(c), a remand is appropriate. Kahn v. Tronnier, 547 N.W.2d 425, 429 (Minn.App. 1996), review denied (Minn. July 10, 1996). We conclude that the district court erred by failing to specifically address and make findings on all of the statutory factors, particularly the resources of the parents. In addition, the record is silent on the method used by the district court to allocate work-related child care expenses. See Minn. Stat. § 518.551, subd. 5(b) (1998) (allocation of costs in proportion to income). We remand for specific findings and for recalculation of husband's child support obligation.
b. Inclusion of Retroactive Pay in Calculating Husband's Monthly Child Support Obligation
Husband argues that the district court should not have included a retroactive wage payment scheduled for July 1, 1998, in calculating his monthly support obligation, but should have awarded a guidelines percentage of the net payment to wife. We agree.
While Minn. Stat. § 518.551 (1998) does not specifically address the issue of retroactive pay, this court has found that annual bonus payments may fall within the statute. Desrosier v. Desrosier, 551 N.W.2d 507, 509 (Minn.App. 1996). "Although not guaranteed and uncertain as to amount," bonuses that were a dependable form of periodic payment and were expected to continue should be considered in calculating an obligor's income. Id.; see also Novak v. Novak, 406 N.W.2d 64, 68 (Minn.App. 1987) (affirming a child support award requiring the non-custodial parent to pay as additional support 35 percent of bonuses if and when received), review denied (Minn. July 22, 1987).
A lump-sum payment that is not "a dependable form of periodic payment * * * expected to continue" may not constitute "income" for purposes of child support. Desrosier, 551 N.W.2d at 509. However, husband agreed that his final lump-sum payment could be considered and does not object to having a guidelines percentage of the net payment awarded to wife.
Awarding a percentage of the final payment to wife does not mean, however, that husband should be forced to move for reduction of his support obligation now that the payments have ceased. Because the evidence established that these payments would terminate after July 1998, the district court erred by including this amount in husband's future income. We remand for the district court to calculate the percentage of the payment to be paid to wife and to delete this payment from the calculation of husband's prospective support obligation. Our ruling on this issue does not preclude consideration of whether any future payments should be included in the recipient's income when establishing future support obligations.
c. Calculation of Wife's Monthly Income
Husband argues that the trial court erred in calculating wife's monthly income by using wife's 1997 W-2, rather than the hourly wage that she was earning at the time of trial. He also contends that the district court erred in allowing wife a double deduction for her 401(k) contributions. Wife contends that by allowing two pension deductions of $175, the district court sought to equalize the parties' contributions; husband's monthly pension deduction is $383. If the changes urged by husband were made, wife's monthly income would increase by more than $200, which could reduce the amount to be paid by husband towards the child's special needs.
The use of 1997 W-2 income for both parties is appropriate. But there is no explanation in the record for the double deduction and it appears this was a clerical error. We reverse in part and remand for recalculation of husband's support obligation after consideration of wife's actual monthly income, without the double deduction for retirement contributions.
II. Valuation of Wife's Stock and 401(k) Plan
An appellate court will not reverse a trial court's valuation of an asset unless it is "clearly erroneous on the record as a whole." Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d 42, 44 (1975). An appellate court does not require the trial court to be exact in its valuation of assets; "it is only necessary that the value arrived at lies within a reasonable range of figures." Johnson v. Johnson, 277 N.W.2d 208, 211 (Minn. 1979). While district courts have broad discretion in the valuation and distribution of assets, exercise of that discretion is not unlimited and decisions on the division of assets must "be supported by either comprehensive findings or clear documentary or testimonial evidence." Ronnkvist v. Ronnkvist, 331 N.W.2d 764, 766 (Minn. 1983).
Husband argues that the district court erred in choosing the date of the prehearing conference as the valuation date for wife's stock and he argues that the stock should be valued as of the final day of trial.
Minn. Stat. § 518.58, subd. 1 (1998) requires the court to value marital assets "as of the day of the initially scheduled prehearing settlement conference," unless (a) otherwise agreed by the parties or (b) "the court makes specific findings that another date of valuation is fair and equitable."
If there is a substantial change in value of an asset between the date of valuation and the final distribution, the court may adjust the valuation of that asset as necessary to effect an equitable distribution.
Id. The court is not required to value marital assets as of the trial date-indeed the statutory presumption is for valuation as of the date of the prehearing conference.
Property acquired during the marriage "but prior to the date of valuation" as prescribed by the quoted statute is presumed to be marital property. Minn. Stat. § 518.54, subd. 5 (1998). The wife's stock was properly valued as of the date of the prehearing conference; subsequent increases in value do not constitute marital property.
The cases cited by husband for the proposition that property acquired after commencement of dissolution proceedings and before the final decree is marital property subject to division are all based on a previous version of Minn. Stat. § 518.54, subd. 5. See, e.g., Ronnkvist, 331 N.W.2d 764; Johnson v. Johnson, 277 N.W.2d 208 (Minn. 1979); Gummow v. Gummow, 375 N.W.2d 30, 35 (Minn.App. 1985) ( Gummow II). Since 1988, the statutory definition has been limited to property (and increases in value) prior to the date of valuation- -which is now presumed to be the date of the prehearing conference. The district court did not abuse its discretion in choosing the date of the prehearing conference as the valuation date for wife's stock.
Husband also asserts that the district court erred in valuing wife's 401(k) plan as of December 31, 1996. Due to stock splits, that account increased in value between the valuation date and the final day of trial. But because recent figures were unavailable for valuation of husband's pension, we conclude that the district court did not abuse its discretion in choosing the valuation date.
The cases cited by husband were decided under the former statute, which provided that property acquired prior to the final decree was marital property to be divided by the court. See, eg., Minn. Stat. § 518.58 (1976) (subjecting all property acquired during coverture to distribution by the court), Johnson, 277 N.W.2d at 211 (coverture encompassed period from beginning of marriage to termination by decree). However, even under that version of the statute, a trial court could decline to divide an increase in the value of a pension up to the date of dissolution if the parties were not living together and one party was unlikely to have contributed to the increase in value. Gummow II, 375 N.W.2d at 36. Similarly, in this case the parties were not living together for a considerable time before trial and there is no evidence that husband contributed to the increase in value to the time of trial.
The district court found that December 31, 1996 was the most equitable date for valuation of the 401(k) plan because husband failed to present more recent records for his pension. The court chose the only date on which a meaningful comparison of value was possible. See Tuthill v. Tuthill, 399 N.W.2d 230, 232 (Minn.App. 1987) (appellant may not now complain that the district court denied her motion when she failed to provide adequate documentation to support the relief requested). We conclude that the district court did not abuse its discretion in choosing valuation dates.
III. Division of Marital Property
A trial court has broad discretion in dividing property. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). Absent an abuse of discretion, the trial court's decision must stand. See id . at 51. "There must be a clearly erroneous conclusion that is against logic and the facts on record before this court will find that the trial court abused its discretion." Id . at 50. Of course, the trial court's discretion "is not unlimited" and any decision "should be supported by either clear documentary or testimonial evidence or by comprehensive findings issued by the court." Id . While there is no requirement that the division of property be mathematically equal, it must be equitable. Stassen v. Stassen, 351 N.W.2d 20, 23 (Minn.App. 1984).
The parties' total marital assets, as determined by the district court, were $346,461. Of this amount, the court allocated $253,967 to wife and $92,494 to husband. Husband asserts that the district court's allocation of assets was grossly disproportionate. He contends that the district court's conclusion that wife's future needs and limited opportunities due to the special needs of the parties' child justify a disparity in the property division lacks support in the record. We disagree.
The district court determined that wife will require the assets in her stock and pension plans to meet her future needs and the older child's, especially after both parties retire. After careful review of the entire record, we conclude that the district court did not abuse its discretion. The division of marital property is not mathematically equal, but it is equitable. See Stassen, 351 N.W.2d at 23.
IV. Other Issues
Husband argues that the district court failed to make him whole with regard to funds withdrawn by wife from a joint savings account. We disagree.
Minn. Stat. § 518.58, subd. 1a (1998) provides that if the court finds that one party has disposed of marital assets "except in the usual course of business or for the necessities of life," the court shall compensate the other party. The burden of proof is on the party seeking compensation. Id. Wife testified that she made regular deposits to the savings account and that funds withdrawn were spent primarily on joint expenses, including a tractor and blade awarded to husband. Husband has not met his burden of establishing that these withdrawals were not "in the usual course of business or for the necessities of life." We conclude that the district court did not err.
Husband also argues that the district court erred in including his Tier I retirement benefits in the property division. We agree. A district court may not distribute Tier I benefits, award other marital property as an offset, or otherwise consider the employee's Tier I benefits in dividing marital property. Larkin v. Larkin, 415 N.W.2d 924, 925-26 (Minn.App. 1987).
We also agree with husband that the district court erred by establishing a present value on husband's Tier II benefits. The district court's determination of a retirement date for purposes of calculating the present value of benefits must be supported by record evidence or specific findings. Fastner v. Fastner, 427 N.W.2d 691, 697 (Minn.App. 1988). In the absence of an explanation for establishing a specific retirement date, this court will reverse and remand a valuation of benefits. Id. at 698.
We conclude that the district court erred by (a) including husband's Tier I retirement benefits in valuing and dividing the marital property and (b) establishing a present value on husband's Tier II benefits. However, after thorough review of the record, we conclude that these errors do not require reconsideration of the property division. Even with these errors, we conclude that the property distribution is equitable and the district court did not abuse its discretion. We do, however, remand for the district court to correct the record on its treatment of husband's retirement benefits.
Affirmed in part, reversed in part, and remanded.
I concur in Section I (child support) insofar as it remands for specific findings. In the memorandum accompanying the dissolution judgment, the district court stated that the Johnsons' son, Matthew, who has muscular dystrophy, requires 24-hour supervision by an adult. The $150 expenses currently allocated to address Matthew's special needs are for health care supplies, special clothing, vehicle maintenance, insurance, and transportation expenses for a handicapped-accessible vehicle. The expense for supervisory assistance for Matthew has not been projected or calculated, but presumably accounts for a substantial part of the remaining $250 of the upward deviation.
In arriving at the upward deviation, the district court explained that it had allowed Loran Johnson business-expense deductions for vehicle maintenance, food, and lodging that effectively reduced or eliminated many of his monthly living expenses. See Minn. Stat. § 518.551, subd. 5(c) (identifying factors including parental income, earnings, and resources to be considered in allowing deviation). If the business-expense deductions were added back in, the guidelines child support would exceed the upward deviation. I agree that case law may require specific findings on projected or historic amounts, but the genesis for the district court's more specific findings exists in the current record. Until the district court is allowed to provide the more specific findings, we cannot determine whether the amount of the deviation is an abuse of discretion.