Armknecht v. Armknecht , 300 Neb. 870 ( 2018 )


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    ARMKNECHT v. ARMKNECHT
    Cite as 
    300 Neb. 870
    Jason L. A rmknecht, appellant, v.
    A lita M. A rmknecht, now known
    as A lita M. R eynolds, appellee.
    ___ N.W.2d ___
    Filed August 24, 2018.   No. S-17-377.
    1.	 Modification of Decree: Child Support: Appeal and Error.
    Modification of a dissolution decree is a matter entrusted to the discre-
    tion of the trial court, whose order is reviewed de novo on the record,
    and which will be affirmed absent an abuse of discretion by the trial
    court. The same standard applies to the modification of child support.
    2.	 Evidence: Appeal and Error. In a review de novo on the record, an
    appellate court is required to make independent factual determinations
    based upon the record, and the court reaches its own independent con-
    clusions with respect to the matters at issue.
    3.	 ____: ____. When evidence is in conflict, the appellate court considers
    and may give weight to the fact that the trial court heard and observed
    the witnesses and accepted one version of the facts rather than another.
    4.	 Judges: Words and Phrases. A judicial abuse of discretion exists if the
    reasons or rulings of a trial judge are clearly untenable, unfairly depriv-
    ing a litigant of a substantial right and denying just results in matters
    submitted for disposition.
    5.	 Child Support. As a general matter, the parties’ current earnings are to
    be used in calculating child support.
    6.	 Rules of the Supreme Court: Child Support. In general, child sup-
    port payments should be set according to the Nebraska Child Support
    Guidelines.
    7.	 Child Support. Use of earning capacity to calculate child support is
    useful when it appears that the parent is capable of earning more income
    than is presently being earned.
    8.	 ____. The court may add “in-kind” benefits derived from an employer
    or other third party to a party’s income for purposes of calculating
    child support.
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    9.	 ____. In determining child support, a court’s findings regarding an indi-
    vidual’s level of income should not be based on the inclusion of income
    that is entirely speculative in nature.
    10.	 Courts: Child Support. The trial court has discretion to choose whether
    and how to calculate a deduction for subsequent children.
    11.	 Child Support. No precise mathematical formula exists for calculating
    child support when subsequent children are involved, but the court must
    perform the calculation in a manner that does not benefit one family at
    the expense of the other.
    12.	 Modification of Decree: Child Support: Proof. The party requesting a
    deduction for his or her obligation to support subsequent children bears
    the burden of providing evidence of the obligation, including the income
    of the other parent of the child.
    Appeal from the District Court for Gage County: Daniel E.
    Bryan, Jr., Judge, Retired. Affirmed.
    Louie M. Ligouri, of Ligouri Law Office, for appellant.
    Mark J. Krieger and Terri M. Weeks, of Bowman & Krieger,
    for appellee.
    Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke,
    JJ., and Derr and Urbom, District Judges.
    Urbom, District Judge.
    INTRODUCTION
    Jason L. Armknecht appeals the modification order entered
    by the district court for Gage County, which modified his child
    support obligation to his former wife, Alita M. Armknecht,
    now known as Alita M. Reynolds. Jason argues the district
    court erred in the calculation of child support. For the reasons
    set forth below, we affirm the order of the district court.
    BACKGROUND
    Jason and Alita married in September 1997 and divorced in
    November 2007. They have three children: Logan Armknecht,
    born in 1998; Rees Armknecht, born in 1999; and Alexia
    Armknecht, born in 2004. In the decree, Alita was granted
    physical custody of all three children, subject to Jason’s
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    parenting time, and Jason was ordered to pay child support in
    the amount of $950 per month. The decree ordered that such
    child support would be reduced to $700 for two children and
    $475 for one child.
    In April 2016, Jason filed a complaint for modification of
    the decree on the basis that the parties’ middle child, Rees, had
    “expressed a strong and consistent desire” to live with Jason
    and had been staying with him since January 1, 2016. Jason
    sought modification of custody with respect to Rees and a
    reduction in his child support obligation due to such change in
    custody. Alita counterclaimed for modification of child support,
    alleging there had been a material change in circumstances that
    would result in an increase in Jason’s support obligation of
    more than 10 percent.
    At the time of trial, Logan had reached the age of majority,
    Rees was living with Jason, and Alexia remained living with
    Alita. The parties stipulated that the split custody computa-
    tion for child support would be retroactive to May 1, 2016,
    which was the first month following the filing of the complaint
    for modification. The evidence also showed that Jason had
    two subsequent children at the time of trial: a child born in
    February 2015, and a child born in October 2016.
    Evidence of Income
    The incomes of Jason and Alita were highly disputed at trial.
    Both parties remarried, and both were currently employed by
    their respective spouses. The evidence showed that in 2015,
    Jason began working as a full-time sales associate for an
    insurance agency owned by his wife, Tasa Paul (Tasa). At the
    time of trial in February 2017, Jason’s two most recent pay
    stubs showed that he was earning $1,650 per month, although
    he earned significantly more the previous year. Jason’s 2016
    pay stubs showed that he earned $3,750 per month from
    January through May and $2,100 per month from June through
    December. Tasa testified that his salary was reduced in June
    2016 because she eliminated the marketing and overhead
    allowances that he had been given for the first part of that
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    year. She explained that the agency had qualified for extra
    marketing dollars from the company at the end of 2015, so she
    decided to give Jason some extra marketing money to see if he
    could bring in more business. Starting in June, she went back
    to her previous practice of covering overhead expenses through
    the agency rather than having Jason pay for those expenses
    from his salary, and decided to eliminate some of the market-
    ing expenses altogether because she decided the practice was
    not feasible.
    Tasa testified that the reduction in Jason’s salary from
    $3,750 to $2,100 in June 2016 was unrelated to the filing
    of his complaint to modify child support in late April 2016.
    She further testified that Jason first met with his attorney in
    December 2015, after which his income actually increased in
    January 2016 before it was reduced in June. However, there
    was no testimony to explain why Jason’s salary was again
    reduced to $1,650 in January 2017. When asked about Jason’s
    earning capacity, Tasa testified that she did not believe it was
    greater than $24,000 annually at that time and explained that
    his salary was very typical for his level of experience in the
    industry. She testified that she expected Jason’s income to
    continue at an amount close to $2,100 per month through the
    calendar year.
    Prior to working for Tasa, Jason was a self-employed con-
    struction worker. His tax returns for the 5 preceding years
    reflect that his income averaged $11,127 per year, or approxi-
    mately $927 per month. However, his taxable income was
    greatly reduced due to deductions of business expenses in
    those years.
    Alita testified that she works as an administrative assistant
    for BeachLifestyle Enterprises, LLC, which is a company
    owned by her husband, Gary J. Reynolds (GJ). Her income,
    as shown on her W-2 wage and tax statements, was $32,000
    in 2013; $11,769 in 2014; and $25,000 in 2015. There was no
    explanation provided for the fluctuation in her income from
    year to year, and she did not produce any evidence of her
    income for 2016 or the first part of 2017.
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    Another contested issue at trial was whether Alita was earn-
    ing any additional income through “ViSalus,” a company for
    which both she and GJ are promoters. Jason submitted sev-
    eral photographs into evidence showing GJ and Alita holding
    placard-sized checks from ViSalus, payable to “GJ & Alita
    Reynolds” in various amounts. The first photograph was taken
    in 2012 and shows them holding one check for $100,000 and
    another for $250,000. When asked if the exhibit accurately
    depicted what was shown in the photograph, Alita indicated
    that both of their names were included on the checks for
    “recognition purposes only.” She further stated that “we only
    were able to receive that money if we continued at a cer-
    tain level, and we did not.” The next photograph was taken
    in 2014 and shows another check made out to “GJ & Alita
    Reynolds” in the amount of $2 million. Another exhibit con-
    tains a promotional photograph of GJ and Alita, and states:
    “WE CONGRATULATE GJ & ALITA REYNOLDS FOR
    REACHING $2,000,000 IN ViSALUS EARNINGS.” The final
    photograph was taken in 2016 and shows GJ and Alita holding
    a large placard containing both of their names, stating: “OVER
    $4,000,000 ViSalus Lifetime Earnings Award.” At the bottom
    of the placard in smaller lettering, it further states: “NOT AN
    ACTUAL CHECK. REFLECTS TOTAL EARNINGS OVER
    TIME.” Alita testified that some of the sums shown on these
    checks were earned by GJ prior to their marriage.
    Given this evidence of income through ViSalus, Jason
    argued that a portion of the income shown on GJ and Alita’s
    joint tax returns was attributable to her. Their joint tax returns
    showed a total income for each year as follows: $187,506 in
    2012; $387,483 in 2013; $33,548 in 2014; and $50,677 in
    2015. However, Alita testified that her personal income was
    limited to the wages shown on her W-2 wage and tax state-
    ments and that the remaining income shown on the joint tax
    returns was attributed to GJ’s wages and corporate income
    from his company.
    In addition to the ViSalus evidence, Jason also presented evi-
    dence of nonwage benefits Alita received from her employer.
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    In November 2014, BeachLifestyle Enterprises deeded a piece
    of real estate to GJ and Alita as joint tenants. They received the
    property free and clear and then sold it approximately 2 years
    later for $315,000. Alita also drives a BMW sedan, which she
    testified was given to her by her employer.
    District Court Findings
    After the close of the evidence, the district court stated its
    findings as follows: “[T]he calculation of income that I’ve seen
    basically in the original decree really hasn’t changed dramati-
    cally here. And so I’m going to find that his is — I’m going to
    leave his at 3100 and hers at 3,333 a month.” It then instructed
    Alita’s counsel to prepare new child support calculations using
    those incomes, with credit for Jason’s two subsequent children,
    and submit an order to the court within 10 days.
    The district court subsequently entered a written order
    awarding physical custody of Rees to Jason and finding that
    a material change in circumstances had occurred due to that
    change in custody. It found that the income of the parties at
    the time the decree was entered in 2007 was an appropriate
    estimation of their actual earning capacity. Given the varying
    number of children and subsequent children being supported at
    various times, the district court’s order split the child support
    computation into four different time periods, as shown in the
    chart below.
    Split	 Subsequent	Final
    Date	                     Custody	 Child Credit	 Support
    May 1 to October	         $288 (F)	          $66
    31, 2016	               (3 children)	     (1 child)	    $222 (F)
    November 1, 2016,	        $288 (F)	         $113
    to January 31, 2017	 (3 children)	 (2 children)	 $175 (F)
    February 1, 2016,	         $3 (F)	          $113
    to March 31, 2018	      (2 children)	 (2 children)	 $110 (M)
    April 1, 2018,	           $612 (F)	         $113
    and thereafter	           (1 child)	    (2 children)	 $499 (F)
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    ASSIGNMENTS OF ERROR
    Although Jason assigns seven errors on appeal, his assign-
    ments of error, as argued, can be consolidated into three. He
    argues the district court erred in (1) basing the child support
    order on the former income of the parties from 2007, rather
    than using their current incomes; (2) failing to make findings
    on contested matters at trial and instead adopting the child
    support calculations and order prepared by Alita’s attorney;
    and (3) improperly calculating the deduction for Jason’s sub-
    sequent children.
    STANDARD OF REVIEW
    [1] Modification of a dissolution decree is a matter entrusted
    to the discretion of the trial court, whose order is reviewed de
    novo on the record, and which will be affirmed absent an abuse
    of discretion by the trial court.1 The same standard applies to
    the modification of child support.2
    [2,3] In a review de novo on the record, an appellate court
    is required to make independent factual determinations based
    upon the record, and the court reaches its own independent
    conclusions with respect to the matters at issue.3 However,
    when evidence is in conflict, the appellate court considers
    and may give weight to the fact that the trial court heard and
    observed the witnesses and accepted one version of the facts
    rather than another.4
    [4] A judicial abuse of discretion exists if the reasons or
    rulings of a trial judge are clearly untenable, unfairly depriv-
    ing a litigant of a substantial right and denying just results in
    matters submitted for disposition.5
    1
    Johnson v. Johnson, 
    290 Neb. 838
    , 
    862 N.W.2d 740
    (2015).
    2
    Id.
    3
    Becher v. Becher, 
    299 Neb. 206
    , 
    908 N.W.2d 12
    (2018).
    4
    Id.
    5
    Connolly v. Connolly, 
    299 Neb. 103
    , 
    907 N.W.2d 693
    (2018).
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    ANALYSIS
    Determination of Income
    Jason asserts that the district court erred in basing the child
    support order on the former income of the parties from 2007,
    rather than using their current incomes. In doing so, the court
    set Jason’s income at $3,100 per month, but he argues his cur-
    rent income at the time of trial was no more than $2,100 per
    month. Regarding Alita’s income, Jason argues the district
    court failed to consider evidence of her substantial earnings
    from ViSalus and significant nonwage benefits provided by
    her employer.
    Alita argues that the evidence clearly showed that Jason
    was earning $3,750 per month before he filed the complaint
    for modification. She argues that the reduction of his salary to
    $2,100 per month in June 2016 by Tasa was directly related to
    the filing of his complaint to modify in late April 2016. Alita
    argues that her income is limited to her earnings of $25,000
    per year as an administrative assistant for BeachLifestyles
    Enterprises, as shown on her W-2 wage and tax statements.
    She asserts that the ViSalus income is generated by GJ’s com-
    pany, which he owned prior to their marriage and in which she
    has no ownership interest.
    [5] As a general matter, the parties’ current earnings are
    to be used in calculating child support.6 However, it appears
    here, based on the statements made by the district court on the
    record, that it did not find either party’s evidence of current
    income to be credible. The court stated:
    I know that, based on these circumstances, there’s no
    question you, from a judge’s standpoint, you’re looking
    at what we consider a little bit of a shell game here for
    — probably for both sides, based on the situations that
    they’re in.
    6
    Peter v. Peter, 
    262 Neb. 1017
    , 
    637 N.W.2d 865
    (2002).
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    I mean, he’s just not working for a third party. He’s
    working for his wife.
    She’s not just working for a third party. She’s working
    for her husband.
    [6,7] Given the wide discrepancy of evidence of the parties’
    current incomes and the fact that both parties’ incomes are con-
    trolled by their respective spouses, we cannot say that the dis-
    trict court erred in setting the parties’ incomes based on their
    earning capacities. In general, child support payments should
    be set according to the Nebraska Child Support Guidelines.7
    However, the guidelines provide that if applicable, earning
    capacity may be considered in lieu of a parent’s actual, present
    income and may include factors such as work history, educa-
    tion, occupational skills, and job opportunities.8 Use of earning
    capacity to calculate child support is useful when it appears
    that the parent is capable of earning more income than is pres-
    ently being earned.9
    Here, the evidence showed that Jason was earning $3,750
    per month at the time he filed the complaint for modification.
    Although there was testimony from Tasa that some of that
    income was to be used for marketing and overhead expenses,
    there was no evidence that any such expenses were ever
    incurred or paid by Jason. We find no abuse of discretion in the
    district court’s setting his income at $3,100 per month based on
    his earning capacity at the time the original decree was entered
    and based on the evidence of what he was earning at the time
    he filed the complaint for modification.
    The district court set Alita’s earning capacity at $3,333 per
    month, even though her income had apparently decreased to
    only $2,000 per month as an administrative assistant for GJ’s
    company. Regarding her earning capacity, the court noted:
    7
    Freeman v. Groskopf, 
    286 Neb. 713
    , 
    838 N.W.2d 300
    (2013).
    8
    Id.
    9
    
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    Now, no one explained to me why she went from $3,[3]33
    down to what her husband’s willing to pay her, only about
    24. I think she — I’m sure she’s worth more than $24,000
    a year, and at least what she was claiming at $3,333,
    before — at the time she was divorced.
    [8,9] Jason argues that Alita’s income should have been
    higher, because the court failed to consider her earnings from
    ViSalus and significant nonwage benefits she received from
    her employer. Although the ViSalus exhibits submitted by
    Jason appear to attribute substantial income to GJ and Alita,
    we agree with Alita that those photographs are not evidence of
    actual income. Regarding the nonwage benefits, there was no
    evidence that such benefits were a regular source of income
    for Alita. While a court is allowed to add “in-kind” benefits
    derived from an employer or other third party to a party’s
    income,10 a “‘court’s findings regarding [an individual’s] level
    of income should not be based on the inclusion of income
    that is entirely speculative in nature.’”11 Given the speculative
    nature of the ViSalus income and nonwage benefits, we cannot
    say that the district court erred in excluding those items from
    Alita’s income, and in setting her earning capacity at $3,333
    per month.
    Failure to M ake
    Independent Calculations
    Jason argues that the district court erred in failing to make
    independent findings on contested matters and adopting the
    child support calculations prepared by Alita’s attorney, rather
    than making its own calculations based on its own findings.
    Neb. Ct. R. § 6-1504(F) provides as follows:
    A worksheet showing calculations under the Nebraska
    Child Support Guidelines shall be attached to every child
    support application, order, or decree and shall be prepared
    10
    Gangwish v. Gangwish, 
    267 Neb. 901
    , 
    678 N.W.2d 503
    (2004).
    11
    Gress v. Gress, 
    274 Neb. 686
    , 698, 
    743 N.W.2d 67
    , 78 (2007).
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    by the party requesting child support, except that in a con-
    tested matter the worksheet shall be prepared by the court
    and attached to the order or decree.
    He also points to our decision in Brunges v. Brunges,12 in
    which the trial court generally found in favor of one party
    and directed counsel for that party to prepare a decree, but
    did not make any specific findings or orders regarding the
    contested issues. We expressed our disapproval of such prac-
    tice and stated, “[i]n an action for dissolution of marriage,
    specific findings of fact must be made as to various contested
    issues, and it is a trial court’s duty to make those findings
    independently.”13
    Unlike Brunges, here, the district court, on the record, made
    findings establishing the monthly income for each party and
    then instructed Alita’s counsel to prepare new child support
    calculations using those incomes, with credit for Jason’s two
    subsequent children. The district court adopted the findings
    contained in the proposed order and the calculations contained
    in the worksheet prepared by Alita’s counsel. At that point,
    those proposed findings and calculations became the findings
    of the district court.
    Credit for Jason’s
    Subsequent Children
    Finally, Jason argues the district court erred in calculating
    the deduction for his subsequent children, as it resulted in an
    increase in Jason’s child support obligation for Alexia, even
    though the district court found no change in the parties respec-
    tive incomes. He argues that the worksheets adopted by the
    district court erroneously attributed too much monthly income
    to Jason’s current wife, Tasa, when calculating what Jason’s
    support obligation would be for his two subsequent children.
    This had the effect of lowering his support obligation to his
    12
    Brunges v. Brunges, 
    260 Neb. 660
    , 
    619 N.W.2d 456
    (2000).
    13
    
    Id. at 669,
    619 N.W.2d at 463.
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    two subsequent children, which in turn raised his support obli-
    gation for Alexia.
    [10-12] The trial court has discretion to choose whether
    and how to calculate a deduction for subsequent children.14
    When the court decides to allow a deduction, the calculation
    is left to its discretion so long as it considers the obligations
    to both families and the income of the subsequent child’s other
    parent.15 No precise mathematical formula exists for calculat-
    ing child support when subsequent children are involved, but
    the court must perform the calculation in a manner that does
    not benefit one family at the expense of the other.16 The party
    requesting a deduction for his or her obligation to support
    subsequent children bears the burden of providing evidence
    of the obligation, including the income of the other parent of
    the child.17
    Here, the district court included worksheets demonstrating
    that it calculated Jason’s subsequent child credit by deter-
    mining how much child support he would owe to each fam-
    ily under the guidelines, after deducting the support obliga-
    tion to the other family from his income. It then computed
    the difference between the amount of support Jason would
    owe without any subsequent children and the amount he
    would owe with each subsequent child. That amount was then
    deducted from his monthly support obligation as a credit for
    his subsequent children. We believe this method of calculat-
    ing the subsequent child credit considers the obligations to
    both families and does not benefit one family at the expense
    of the other.
    Although Jason argues that the worksheets attributed too
    much monthly income to Tasa when calculating what his
    14
    Schwarz v. Schwarz, 
    289 Neb. 960
    , 
    857 N.W.2d 802
    (2015).
    15
    
    Id. 16 Id.
    17
    
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    support obligation would be for his two subsequent children,
    we note that Jason did not submit any proposed calculations
    regarding his support obligations for his subsequent children.
    We find no abuse of discretion in the calculations used to
    determine Jason’s subsequent child credit.
    CONCLUSION
    For the reasons set forth above, we affirm the judgment of
    the district court.
    A ffirmed.