Source: http://mn.gov/law-library-stat/archive/ctapun/0607/opa051725-0718.htm
Timestamp: 2017-10-18 13:12:42
Document Index: 429433723

Matched Legal Cases: ['§ 518', '§ 518', '§ 518', '§ 518', '§ 518', '§ 518']

In re the Marriage of: Patrick John Nickleson, petitioner, Appellant, vs. Kelly Jane Nickleson, Respondent. A05-1725, Court of Appeals Unpublished, July 18, 2006.
A05-1725
Patrick John Nickleson, petitioner,
Kelly Jane Nickleson,
File No. F2-00-5166
Patrice M. Rico, Rico Law Office, P.A., 905 Jefferson Avenue, Suite 201, St. Paul, MN 55102(for respondent)
On appeal from an order modifying his child-support obligation, Patrick Nickleson argues that the district court erred by using a cash-flow method to calculate his income rather than the statutory method detailed in Minn. Stat. § 518.551, subd. 5b(f) (2004), and further erred by overstating his income and failing to include allowable deductions when calculating his net income. Because the district court properly used a cash-flow method to determine Nickleson’s income and did not err in calculating his income, we affirm.
Patrick Nickleson appeals from an order modifying his child-support obligation. He and Kelly Nickleson dissolved their marriage in 2001 and agreed that Kelly Nickleson would have sole physical custody of their two sons and that Patrick Nickleson would pay $860 a month for child support. In 2005, the parties agreed to modify the custody arrangement after one son moved in with Patrick Nickleson, and Patrick Nickleson moved to modify his child-support obligation. The district court used a cash-flow method to determine his income and calculated his child-support obligation to be $1,523 a month and Kelly Nickleson’s obligation to be $670 a month, resulting in a net child-support payment of $853 a month by Patrick Nickleson. Patrick Nickleson appeals the determination of his income.
A determination of child support is based upon an obligor’s income and the number of children being supported. Minn. Stat. § 518.551, subd. 5(b) (2004). When an obligor is self-employed, income is generally defined as gross receipts less ordinary and necessary expenses. Id., subd. 5b(f) (2004). Although Minn. Stat. § 518.551, subd. 5b(f), provides a method for calculating an obligor’s net income, this statutory method does not represent the sole method for calculating income. When a court determines that the obligor’s reported income is not a true representation of income, courts may use a cash-flow method to calculate income. Coady v. Jurek, 366 N.W.2d 715, 718 (Minn. App. 1985), review denied (Minn. June 27, 1985); see also Johnson v. Fritz, 406 N.W.2d 614, 615-16 (Minn. App. 1987) (holding that court can consider obligor’s lifestyle if evidence suggests it does not correspond with claimed income); Schelmeske v. Veit, 390 N.W.2d 309, 311 (Minn. App. 1986) (stating that court may use cash-flow method to calculate income when determining income of self-employed obligor is difficult). This method looks at deposits to an obligor’s personal accounts and considers income that may not otherwise be reflected on paper. Courts have particularly noted the ability of self-employed obligors to understate their actual income. See Ferguson v. Ferguson, 357 N.W.2d 104, 108 (Minn. App. 1984) (“[T]he opportunity for a self-employed person to support himself yet report a negligible net income is too well known to require exposition.”).
In a support-modification proceeding, the moving party has the burden of proof. Bormann v. Bormann, 644 N.W.2d 478, 481 (Minn. App. 2002) (holding that moving party must provide financial information to district court to enable it to make an accurate determination of income); Spooner v. Spooner, 410 N.W.2d 412, 413 (Minn. App. 1987) (stating that failure to supply financial information justifies adverse inferences). A district court has broad discretion in determining whether to modify a child-support order. Gully v. Gully, 599 N.W.2d 814, 820 (Minn. 1999). We will reverse the district court only if the court abused discretion by making a clearly erroneous decision that is against logic and the facts on record. Id.
The district court’s determination that Patrick Nickleson did not provide sufficient information to establish that his claimed income was accurate and credible is not clearly erroneous. Patrick Nickleson provided several estimates of his income. At the time of the dissolution in 2001, he was self-employed and owned one restaurant franchise. His gross monthly income was $4,000 and his net income was $2,835 a month. When he filed his motion in January 2005, he owned two restaurant franchises and estimated his gross monthly income for 2004 to be $3,038 and his net monthly income to be $2,231. In support of his calculations, he offered only a spreadsheet in which he attributed $3,308 a month to “self-employment income.” To calculate his net income, he then deducted $807 for federal and state taxes, social security taxes, and medical-insurance premiums.
In a responsive affidavit, Kelly Nickleson stated that she conducted discovery because she believed that Patrick Nickleson’s lifestyle, including his stated monthly expenses, exceeded his claimed income. She also stated that he pays many of his personal expenses, such as his current child-support payments and life-insurance premiums, from his business account. A review of his bank records revealed that, in 2004, he deposited approximately $70,648 into his personal checking account. Kelly Nickleson noted that Patrick Nickleson told her his business was cash-based and resulted in a lot of unreported cash. She produced a copy of a receipt showing he had paid $850 in cash for a water softener. She further provided a copy of a 2003 mortgage application on which Patrick Nickleson stated that his gross monthly income was $9,500.
In June 2005, two days before the hearing, Patrick Nickleson filed an affidavit by his accountant. This affidavit stated that, of the deposits in 2004, $9,945 represented advances from a line of credit and were therefore loans that could not be considered income available for child support. His accountant further stated that Patrick Nickleson’s gross monthly income was approximately $4,926. Because the affidavit was filed late, the district court gave Kelly Nickleson an opportunity to respond. Although Patrick Nickleson now asserts that this was an error, he did not object in the district court. See Thiele v. Stitch, 425 N.W.2d 580, 582-83 (Minn. 1988) (stating appellate court may not consider matters not produced and received in district court). In her supplemental affidavit, Kelly Nickleson reasserted her belief that Patrick Nickleson had understated his income. Patrick Nickleson did not provide any documentation of his claimed income to the district court, and the multiple estimates he provided cast doubt on his credibility. See Minn. R. Civ. P. 52.01 (stating that appellate court defers to district court’s opportunity to assess credibility). The district court’s determination that the cash-flow method better captured Patrick Nickleson’s income therefore is not clearly erroneous. See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating that appellate courts defer to district court credibility determinations).
Using the cash-flow method, the court calculated Patrick Nickleson’s gross income by adding the deposits he made into his personal checking account and personal expenses that he paid with business funds. These amounts totaled approximately $6,808 a month. The court did not reduce the deposits by the amount Patrick Nickleson claimed represented credit card advances because he did not provide documentation. See Spooner, 410 N.W.2d at 413 (stating that moving party has burden of providing court with documentation to establish income); see also Minn. Stat. § 518.551, subd. 5b(a) (2004) (stating that documentation of self-employment income includes statements of receipts and expenses); cf. Varner v. Varner, 400 N.W.2d 117, 121 (Minn. App. 1987) (stating that district court is “not required to accept even uncontradicted testimony if surrounding facts and circumstances afford reasonable grounds for doubting its credibility”).
The district court determined that Patrick Nickleson’s net monthly income was approximately $6,092. The court arrived at this figure by looking to Nickleson’s 2004 tax return and subtracting from his gross net monthly income the state and federal tax deductions that he had actually paid.
Patrick Nickleson argues that the district court overstated his income because it counted amounts he received as loans and amounts he used for child support as income and the court only deducted taxes he actually paid and did not deduct a reasonable amount for his pension plan. The record supports the district court’s findings. The court rejected Nickleson’s assertion that some of the deposits made to his bank account were attributable to credit card advances because he provided no documentation for that claim. See Minn. R. Civ. P. 52.01 (stating appellate court defers to district court’s determination of credibility); cf. Varner, 400 N.W.2d at 121. Further, his business paid his current child-support obligation, which resulted in monthly income available to him. Cf. Minn. Stat. § 518.54, subd. 6 (2004) (defining income as any form of periodic payment); Minn. Stat. § 518.551, subd. 5(b)(1) (2004) (including “in-kind” payments received by obligor in obligor’s net income for support purposes).
The court also did not err in the deductions it made to calculate Patrick Nickleson’s net income. Nickleson made no suggestion that he owed more taxes than the court deducted. Further, he presented no evidence that suggests he has a pension account. In estimates of his net income that he provided in his January 2005 affidavit, he listed “0” as the amount deductible for his pension. At the June 2005 hearing, his attorney also stated that he was not entitled to a pension deduction. The record therefore supports the district court’s calculation of Patrick Nickleson’s income.