Court Opinion

ID: 9719928
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:09:22.603822+00
Date Added: 2024-06-11T18:24:11.267161
License: Public Domain

KLAPHAKE, Judge
(dissenting)
I respectfully dissent. In my view, the trial court’s decision ignores the realities of appellant’s financial condition and fails to properly consider whether he has the ability to pay the amount of maintenance ordered. See Erlandson v. Erlandson, 318 N.W.2d 36, 39-40 (Minn.1982) (basic issue when determining amount of maintenance is recipient’s need balanced against obligor’s financial condition).' These deficiencies render the court’s decision “against logic and the facts on record.” Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn.1984) (definition of abuse of discretion standard). Thus, for the following reasons, I would reverse and remand to the trial court to redetermine appellant’s income, resources, and ability to pay.
While imputation of income may be appropriate, the method used to compute the imputed income was improper. Minn.Stat. § 518.551, subd. 5b(d) (1998) defines imputed income for child support purposes as “the estimated earning ability * * based on the parent’s prior earnings history * * Neither case law nor logic compels some other definition for maintenance. Yet, the tidal court based its imputation of income for the calendar year 1997 by applying a ratio of 1994 gross receipts to gross profits. Only that single year ratio was used, and no similar ratios were determined for years before or after 1994. In addition, 1994 was a pre-dissolution year when both spouses worked as key people in the business. Nothing in the record supports the proposition that 1994 was a typical year or in some way represented earnings history. Thus, based on the record, imputation of income for 1997 derived solely on a 1994 ratio constitutes an abuse of discretion.
The amount of maintenance awarded is also improper because the trial court refused to give any consideration to appellant’s debt. Appellant assumed the parties’ debt of $210,000 and to obtain full ownership of the dog grooming business previously owned by appellant and respondent, paid respondent $306,000 by increasing his debt to $480,000. The trial court simply ignored the debt by categorizing it as a personal and non-income producing debt. In my view, that categorization was erroneous.
First, it defies logic to say that none of appellant’s debt was incurred to produce income. It is not enough to say, as does the majority, that this debt may have an indirect effect on producing income. In fact, appellant owned one-half of the business and was entitled to one-half of its income before he incurred the increased debt. He now owns all of the business and has access to all of the income by reason of the additional debt. It is the total income derived from this business that respondent wishes to be considered in determining appellant’s ability to contribute to her support. Without question, a portion of appellant’s business income is directly related to the debt he incurred to purchase the second half of the business.
Second, it also defies logic to conclude that none of the debt, not even the interest, affects appellant’s ability to pay maintenance. If appellant is to service this debt, his available income to pay maintenance is diminished. A $480,000 debt incurred to buy a portion of a business that produces income can hardly be dismissed as something that does not affect appellant’s financial condition and thus his available resources for maintenance. See Erlandson, 318 N.W.2d at 39-40; cf. Bartl v. Bartl, 497 N.W.2d 295, 300 (Minn.App.*2161993) (in calculating income for purposes of child support, district court abused its discretion in failing to credit a party’s legitimate business expenses incurred in the production of income).
Finally, I reject, as against logic and sound policy, the argument that any recognition of appellant’s debt as reducing his ability to pay maintenance causes respondent to partially finance her property award. Whatever validity such an argument has as to property settlements generally, it has none here. Generally, a debt incurred for a property settlement recognizes that the person incurring the debt received a disproportionately greater property award. The debt represents assets that, at the debtor’s option, can be liquidated, thereby extinguishing the debt. Upon such a sale, the income of the maintenance obligor would be unaffected. Here, however, if the asset represented by the debt is liquidated, to wit: the business, the source of income of the maintenance obligor, will be lost or substantially diminished. So long as respondent wants the entire business income to be considered the source of her maintenance award, the trial court must also consider the debt. The trial court’s failure to do so is an abuse of discretion.
I would reverse and remand to (1) recompute imputed income based on a full earnings history, (2) equitably consider the impact of appellant’s debt on his ability to pay maintenance, and (3) redetermine the amount of the maintenance award.