Opinion ID: 886701
Heading Depth: 1
Heading Rank: 6

Heading: Whether the District Court erred in determining Steve's sustainable income for purposes of calculating child support.

Text: ¶ 18 Steve argues the District Court's finding he had sustainable income of $46,000 was unsupported by substantial credible evidence. Steve contends the District Court misconstrued his expert witness's testimony regarding his annual average income. He also asserts the District Court incorrectly relied on Sherri's expert, Nick Bourdeau (Bourdeau), who arbitrarily arrived at a determination Steve earned $52,028 in wages plus an additional $35,161 from scrap metal sales and adjustments for business expenses and deductions. Included in Bourdeau's estimate is $15,000 in income which Steve contends not only is unsupported by evidence in the record but is, in fact, a product of alchemy. Further, Steve maintains the District Court, in using Bourdeau's testimony, incorrectly considered the three year period immediately preceding the dissolution which failed to reflect the inherent unpredictability of Steve's business and client base. ¶ 19 Sherri also contends the District Court erred in determining Steve's income. However, Sherri counters the District Court's findings fail to reflect Bourdeau's full estimates regarding Steve's earnings. Specifically, Sherri maintains the District Court should have used the average of Steve's income from the prior three years of $52,028 plus an additional $35,161 from unreported scrap income as well as business expenses, depreciations and deductions to estimate Steve's estate share. Sherri argues Bourdeau is a noted expert in the field of marital asset distribution who correctly followed standard calculations in arriving at his conclusions. ¶ 20 We review a district court's award of child support to determine whether the district court abused its discretion. In re Marriage of Bee, 2002 MT 49, ¶ 19, 309 Mont. 34, ¶ 19, 43 P.3d 903, ¶ 19. To conclude a district court abused its discretion in child support calculations, we must determine whether the district court acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in substantial injustice. In re Marriage of Kovarik, 1998 MT 33, ¶ 21, 287 Mont. 350, ¶ 21, 954 P.2d 1147, ¶ 21. ¶ 21 The criteria for determination of income under the child support guidelines is defined in § 37.62.106, ARM, which provides: (1) Income for child support includes actual income, imputed income, or any combination thereof which fairly reflects a parent's resources available for child support. (2) Actual income includes: (a) economic benefit from whatever source derived.... .... (6) `Imputed income' means income not actually earned by a parent, but which will be attributed to the parent based on: (a) the parent's earning potential if employed full-time; .... (7) Income should be imputed whenever a parent: (a) is unemployed; (b) is underemployed.... ¶ 22 We conclude the District Court abused its discretion in determining Steve's sustainable income. In its order, the District Court allocated income of $46,000 to Steve for child support calculations based upon the following: stipulated annual income of $37,000; his average wage of $50,000 for the years 1999 through 2001; Steve's expert's opinion he should earn $46,000 annually; and unreported scrap income of $5,000. However, the District Court failed to properly support its findings as to Steve's average annual income as well as his scrap income. ¶ 23 In arriving at its findings concerning Steve's average annual income, the District Court apparently relied on Steve's expert's opinion about the business' ability to pay Steve a $46,000 salary. Steve's expert stated the following: [W]hen you're looking at business valuations you have to look at what will this business sustain? He should be able to pay himself a $46,000 salary every year. He hasn't been able to do that. There was only three years in the history of the company when he was over $23,000. So to pick one year out of the middle of all of this other business history is  is not a fair way to look at this because it didn't do it the three years after, and this year it's not gonna  right now, as of May, it doesn't look like it's gonna do it. It's down $7,000 from last year. Steve's expert further testified in only three of the last ten years were Steve's wages at the $40,000 level, and in one of those years the corporation sustained losses. It is apparent the District Court misconstrued the testimony of Steve's expert. Although the company was able to pay Steve a salary of $40,000 or more occasionally, the business could not sustain Steve's annual salary at $40,000. Further, the three years used to estimate his average income were not representative because the business continued to sustain loses. Therefore, we conclude the District Court failed to support its findings concerning Steve's average annual income. ¶ 24 The District Court also failed to properly support its findings as to Steve's imputed income. The District Court heard testimony at trial from Sherri's expert, Bourdeau, that Steve averaged $5,000 a year in unreported income as a result of scrap metal sales. However, as part of his calculations as to Steve's unreported income, including the scrap metal, Bourdeau admitted his computations were based on uninformed estimates: Q: Okay. Now, let's take the scrap thing first. First  well, no, before we take the scrap thing at all, how did you get to the figure $15,000? A: It's an estimate. .... Q: An estimate based on what? A: Based upon the kind of expenses that Sherri Helzer said were going through there and Steve Helzer said were going through there and based upon scrap income. Q: So is it your testimony that they told you that $15,000 a year in personal expenditures were going through there? A: That was the problem. Nobody would tell me anything. Q: Okay. And the truth is that you made that estimate kind of out of thin air because nobody did tell you anything, you didn't have any idea, did you? A: No. What I did was I went through the expenses that Sherri Helzer thought were going through there and I said, Okay, I'll confirm these. I was never able to confirm them. Later in Bourdeau's cross-examination, the following testimony was adduced: Q: Okay ... [y]ou never did anything where you mathematically determined that $15,000, did you? A: I couldn't Q: Okay. So that figure is kind of out of thin air or, as the Supreme Court might say, a product of alchemy; correct? A: Alchemy. The above quote refers to our Opinion in In re Marriage of Banka, 2003 MT 84, 315 Mont. 97, 67 P.3d 885. In that case, we stated Bourdeau had incorrectly imputed income to the husband based on assets used to produce income as well as a fictitious assumption the husband was under-employed. There, as here, we believe Bourdeau's reasoning is alchemy at its best. Banka, ¶ 41. Indeed, the District Court's order gives no indication as to how Bourdeau arrived at the figure of $15,000 of which the court used $5,000 as coming from scrap income. In fact, the District Court also heard testimony from Steve's expert the income from scrap metal was $4,847 in 2001, $376 in 1999 and $1,548 in 1998. Furthermore, Sherri issued subpoenas to every scrap dealer in the Northwest who in turn reported Steve never produced $5,000 in scrap metal for one year. Finally, evidence at trial did not suggest Steve was under-employed. ¶ 25 Thus, the District Court's finding Steve averaged $5,000 in scrap sales  let alone $15,000 in unreported income  was arbitrary and unsupported by the evidence. Therefore, we reverse the District Court regarding Steve's sustainable income and remand for further findings consistent with this decision. Upon remand the District Court shall determine a correct child support award based on its amended findings regarding Steve's sustainable income.