Quamme v. Quamme , 2021 ND 208 ( 2021 )

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
DECEMBER 1, 2021
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
STATE OF NORTH DAKOTA
2021 ND 208Ashley Marie Askew Quamme, Plaintiff and Appellee
v.
Chad Q. Quamme, Defendant and Appellant
No. 20210093
Appeal from the District Court of Cass County, East Central Judicial District,
the Honorable Steven L. Marquart, Judge.
REVERSED AND REMANDED.
Opinion of the Court by McEvers, Justice, Chief Justice Jensen, Justices
VandeWalle, Crothers, Tufte, and Jensen joined. Chief Justice Jensen filed an
opinion concurring.
Jeffrey Sprout, Fargo, ND, for plaintiff and appellee.
Robert J. Schultz, Fargo, ND, for defendant and appellant.
Quamme v. Quamme
No. 20210093
McEvers, Justice.
[¶1] Chad Quamme appeals from a divorce judgment. He argues the district
court erred when it calculated child support and when it awarded Ashley
Quamme spousal support. We reverse the district court’s child support
determination concluding the court’s finding that Chad Quamme is self-
employed is not supported by the evidence. We also reverse the court’s award
of spousal support because we are unable to determine the court’s rationale for
deciding Chad Quamme has the ability to pay. We remand for the district
court to recalculate child support and to reassess whether an award of spousal
support is warranted.
I
[¶2] The parties were married in 2008. Chad Quamme is 41 years old. He
works as a financial advisor at Wells Fargo. He previously worked as a
financial advisor for Dougherty & Company. Ashley Quamme is 34 years old.
She works as a preschool teacher and a fitness instructor. They share three
minor children. Ashley Quamme sued Chad Quamme for divorce in 2019. The
parties entered into a partial stipulation agreement. They agreed to equally
share residential responsibility of their minor children, and they stipulated to
a division of marital assets and debt. They reserved the issues of child support
and spousal support for trial.
[¶3] The district court held a trial and heard testimony from both parties.
After the trial, the court found Chad Quamme was self-employed and ordered
him to pay $2,120 a month in child support based on a five-year average of his
income. The court also found Ashley Quamme was in need of spousal support,
Chad Quamme had the ability to pay, and it awarded Ashley Quamme $2,000
a month in spousal support for a period of five years. The court entered
judgment which provided for child support and spousal support as well as
adopting the parties’ stipulation. Chad Quamme moved for a new trial, and
the court denied his motion.
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II
[¶4] Chad Quamme argues the district court erred when it calculated child
support. He claims he is not self-employed and the court improperly included
certain amounts as income in its calculation.
[¶5] Child support determinations involve questions of law that are reviewed
de novo, findings of fact that are reviewed under the clearly erroneous
standard, and in some instances matters of discretion reviewed for an abuse of
discretion. Shae v. Shae, 2014 ND 149, ¶ 6, 849 N.W.2d 173.
“A court errs as a matter of law if it does not comply with the
requirements of the child support guidelines.” Wolt v. Wolt, 2019
ND 155, ¶ 5, 930 N.W.2d 589. As a matter of law, the court must
clearly set forth how it arrived at the amount of income and level
of support. Minar v. Minar, 2001 ND 74, ¶ 10, 625 N.W.2d 518. “A
finding of fact is clearly erroneous if it is induced by an erroneous
view of the law, if no evidence exists to support it, or if, on the
entire record, we are left with a definite and firm conviction that a
mistake has been made.” Id.Bickel v. Bickel, 2020 ND 212, ¶ 6, 949 N.W.2d 832.
[¶6] To determine the amount of child support required by the guidelines, a
proper finding of net income is “essential.” Halberg v. Halberg, 2010 ND 20, ¶
10, 777 N.W.2d 872; see also N.D. Admin. Code § 75-02-04.1-02(3). An obligor’s
net income is calculated by determining his or her gross income and
subtracting the items listed in the guideline definition of “net income.”
Halberg, at ¶ 10; see also N.D. Admin. Code § 75-02-04.1-01(6) (defining net
income). “[T]he guideline definition of ‘gross income’ is ‘very broad and is
intended to include any form of payment to an obligor, regardless of source,
which is not specifically excluded under the guidelines.’” Wilson v. Wilson,
2014 ND 199, ¶ 24, 855 N.W.2d 105 (quoting Berg v. Berg, 2006 ND 46, ¶12,
710 N.W. 417); see also N.D. Admin. Code § 75-02-04.1-01(4)(b) (providing
examples of gross income). Specific exceptions are set out at N.D. Admin. Code
§ 75-02-04.1-01(4)(a).
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A
[¶7] Chad Quamme argues the district court erred when it determined he was
self-employed. He asserts he is not self-employed because his wages are
reported on IRS W-2 forms, he does not take a self-employment deduction, and
he has no control over Wells Fargo. He argues that because he is not self-
employed, the district court erred when it based its child support calculation
on a five-year average. Ashley Quamme argues Chad Quamme’s compensation
is primarily commission based and performance based, and he has a significant
amount of control over the income he receives which makes him self-employed
for child support purposes.
[¶8] The definition of gross income is very broad and the child support
guidelines give examples of “gross income” including:
salaries, wages, overtime wages, commissions, bonuses, employee
benefits, currently deferred income, dividends, severance pay,
pensions, interest, trust income, annuities income, gains, social
security benefits, workers’ compensation benefits, unemployment
insurance benefits, distributions of retirement benefits, receipt of
previously deferred income to the extent not previously considered
in determining a child support obligation for the child whose
support is under consideration, veterans’ benefits (including
gratuitous benefits), gifts and prizes to the extent they annually
exceed one thousand dollars in value, spousal support payments
received, refundable tax credits, value of in-kind income received
on a regular basis, children’s benefits, income imputed based upon
earning capacity, military subsistence payments, and net income
from self-employment.
N.D. Admin. Code § 75-02-04.1-01(4)(b) (emphasis added). The definition of
self-employment includes income earned:
from any business organization or entity which the obligor is, to a
significant extent, able to directly or indirectly control. For
purposes of this chapter, it also includes any activity that
generates income from rental property, royalties, business gains,
partnerships, trusts, corporations, and any other organization or
entity regardless of form and regardless of whether such activity
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would be considered self-employment activity under the Internal
Revenue Code.
N.D. Admin. Code § 75-02-04.1-01(10) (emphasis added). When self-
employment activities are “undertaken on a substantially similar scale” from
year to year, the district court must generally average the most recent five
years of self-employment activity to determine self-employment income. N.D.
Admin. Code § 75-02-04.1-05(4). If not, “a shorter period may be used.” Id.
Whether an obligor is self-employed is a question of fact. Halberg, 2010 ND
20, ¶ 12.
[¶9] Chad Quamme testified as to the nature of his work as a financial
advisor. He stated his work with his previous employer, Dougherty &
Company, was entirely commissioned based. He testified his current work
with Wells Fargo includes a base salary and commission. At trial, he was
asked whether he had control over his compensation:
Q. [W]ould you say—I’m guessing you have a little control over
your compensation depending on how well you perform?
A. To some extent. A lot of that is based off of the number of
clients that you serve and that you have and how many assets you
have under management.
Q. And who’s responsible for bringing in new clients and
managing those assets?
A. I am.
The district court found, without explanation, “Chad is self-employed for child
support purposes,” and the court averaged his income for the previous five
years.
[¶10] The evidence does not support the district court’s finding. Commissions
are generally included in gross wages from employment, but the earning of
commissions does not necessarily indicate whether the income is from
employment or self-employment. Rather, the determination of self-
employment in this context is whether the obligor directly or indirectly controls
the organization providing him employment. See Wolt v. Wolt, 2019 ND 155,
¶ 6, 930 N.W.2d 589 (discussing obligor’s self-employment income from
4
employment in a Subchapter S corporation). While the evidence may support
a conclusion that Chad Quamme has some control over the amount of his
commissions, there is no evidence to support a finding that he has, “to a
significant extent,” an ability to “directly or indirectly” control Wells Fargo,
which is the “business organization or entity” from which he earns his income.
N.D. Admin. Code § 75-02-04.1-01(10). We conclude the district court erred
when it found Chad Quamme is self-employed, and we reverse its decision.
B
[¶11] Chad Quamme also argues the district court erred when it included two
sources of income in its child support calculation. One source concerns wages
allocated by Dougherty & Company to offset a debt Chad Quamme owed the
company. The other source concerns amounts forgiven from loans Wells Fargo
provided when he began employment there. All of the loans were from 2017 or
earlier. Chad Quamme argues neither constitutes income under the
guidelines.
[¶12] Because we have reversed the district court’s holding that Chad
Quamme is self-employed, the court will again have to determine which funds
should be considered in its calculation. See N.D. Admin. Code § 75-02-04.1-
02(7) (when income fluctuates, the court may consider information from “a
period of time sufficient to reveal the likely extent of fluctuations”); see also
N.D. Admin. Code § 75-02-04.1-02(8) (calculations are “ordinarily based upon
recent past circumstances”). Wells Fargo has forgiven portions of Chad
Quamme’s debt each year since 2018. Thus, whether the district court
determines his net income under N.D. Admin. Code § 75-02-04.1-02(7) or (8),
the issue of whether the amounts forgiven by Wells Fargo constitute gross
income will arise again on remand. We may address issues likely to arise again
on remand. See Berge v. Berge, 2006 ND 46, ¶ 10, 710 N.W.2d 417. Under
N.D. Admin. Code § 75-02-04.1-01(4)(b), gross income includes the “value of in-
kind income received on a regular basis.” “‘In-kind income’ means the receipt
from employment or income-producing activity of any valuable right . . .
including forgiveness of debt . . . .” N.D. Admin. Code § 75-02-04.1-01(5). The
undisputed evidence in this case establishes the Wells Fargo loans were given
5
to Chad Quamme based on his employment there, and Wells Fargo has
forgiven various amounts each year since 2018. The undisputed evidence also
establishes that if Chad Quamme terminates his employment with Wells
Fargo or is fired, the loans will be due immediately. We hold any amounts
regularly forgiven from the Wells Fargo employment loans constitute gross
income under N.D. Admin Code § 75-02-04.1-01(4)(b) and (5).
III
[¶13] Chad Quamme asserts the district court erred when it awarded Ashley
Quamme spousal support. He argues the court’s findings are inadequate
because they do not consider his living expenses. He claims his monthly debts
and expenses exceed his income, and therefore he does not have the ability to
pay the amount ordered.
[¶14] The district court may award spousal support under N.D.C.C. § 14-05-
24.1. When determining whether to award spousal support, “the court must
consider the Ruff-Fischer guidelines, the needs of the spouse seeking support,
and the ability of the other spouse to pay.” Willprecht v. Willprecht, 2020 ND
77, ¶ 40, 941 N.W.2d 556. The Ruff-Fischer factors include:
The respective ages of the parties, their earning ability, the
duration of the marriage and conduct of the parties during the
marriage, their station in life, the circumstances and necessities of
each, their health and physical condition, their financial
circumstances as shown by the property owned at the time, its
value at the time, its income-producing capacity, if any, whether
accumulated before or after the marriage, and such other matters
as may be material.
Orwig v. Orwig, 2021 ND 33, ¶ 35, 955 N.W.2d 34 (quoting Tarver v. Tarver,
2019 ND 189, ¶ 15, 931 N.W.2d 187). “The court is not required to make
specific findings on each Ruff-Fischer factor, but we must be able to determine
the reasons for the court’s decision.” Knudson v. Knudson, 2018 ND 199, ¶ 11,
916 N.W.2d 793. Likewise, the district court is not required to provide a
complete calculation of each parties’ assets, debts, and expenses, but “a clear
description of the financial situation of each party is helpful for this Court in
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understanding the court’s rationale in awarding spousal support.” Willprecht
v. Willprecht, 2021 ND 17, ¶ 11, 954 N.W.2d 707. A decision on spousal support
is a finding of fact reviewed under the clearly erroneous standard of review.
Knudson, 2018 ND 199, ¶ 10.
[¶15] The district court ordered Chad Quamme to pay Ashley Quamme $2,000
a month in spousal support for five years. The court found Ashley Quamme
was in need of spousal support because her expenses exceeded her income by
roughly $2,000. The court also found Chad Quamme had the ability to pay.
However, the court did not analyze Chad Quamme’s ability to pay or address
the sizeable amount of debt he assumed under the parties’ stipulation. In its
post-trial order denying relief, the court stated there was sufficient evidence
submitted at trial to support its finding that the spousal support payment did
not impair Chad Quamme’s ability to pay his debts based on his net income of
$8,526 and his monthly child support obligation, but the court did not identify
the evidence or analyze the issue further.
[¶16] Without any analysis, and given the large amount of debt he assumed
relative to his yet to be determined income, we are unable to decipher the
court’s rationale for determining Chad Quamme has an ability to pay. When
we cannot discern the court’s rationale, reversal of its decision and remand of
the case is appropriate. See Meyer v. Meyer, 2004 ND 89, ¶ 9, 679 N.W.2d 273(reversing district court’s spousal support decision when we were unable to
discern its rationale and remanding for reconsideration). On remand, after
reconsidering Chad Quamme’s child support obligation, the district court must
examine Chad Quamme’s income, expenses, and debt obligations to determine
whether he has the ability to pay spousal support, and if so, the appropriate
amount to order.
IV
[¶17] The judgment is reversed and the case is remanded.
Jon J. Jensen, C.J.
Gerald W. VandeWalle
Daniel J. Crothers
7
Lisa Fair McEvers
Jerod E. Tufte
[¶18] Jensen, Chief Justice, concurring.
[¶19] I have signed the majority opinion and write separately to point out the
limits of the majority’s opinion. Specifically, in ¶¶ 7-10 the majority opinion
concludes the district court’s finding that Chad Quamme is self-employed was
clearly erroneous. The majority opinion does not conclude the court was
prohibited from considering and averaging Chad Quamme’s income over a
period of several years in determining his gross annual income.
[¶20] As acknowledged in ¶ 12 of the majority opinion, the Child Support
Guidelines expressly allow the district court to consider fluctuations in income
in determining an obligor’s gross income. N.D. Admin. Code § 75-02-04.1-02(7).
Subsection (7) of N.D. Admin. Code § 75-02-04.1-02 reads as follows:
7. Income must be sufficiently documented through the use of tax
returns, current wage statements, and other information to fully
apprise the court of all gross income. Where gross income is subject
to fluctuation, regardless of whether the obligor is employed or
self-employed, information reflecting and covering a period of time
sufficient to reveal the likely extent of fluctuations must be
provided.
[¶21] Citing to N.D. Admin. Code § 75-02-04.1-02(7), this Court has expressly
recognized “[a]veraging fluctuating income is also appropriate under the child
support guidelines.” Schiff v. Schiff, 2000 ND 113, ¶ 38, 611 N.W.2d 191(reversing a child support determination that failed to include within gross
income an employee’s longevity bonuses received every third year). Averaging
fluctuations in income may be appropriate “regardless of whether the obligor
is employed or self-employed . . . .” N.D. Admin. Code § 75-02-04.1-02(7).
[¶22] Here, the district court determined Chad Quamme was self-employed
and thereafter determined Chad Quamme’s net income from self-employment
8
under N.D. Admin. Code § 75-02-04.1-05. While this Court has reversed the
court’s finding that Chad Quamme was self-employed and the calculation of
his child support obligation under N.D. Admin. Code § 75-02-04.1-05, the
opinion does not preclude, or require, the averaging of Chad Quamme’s prior
income in the determination of his gross income. On remand, the district court
is free to explain why income averaging of multiple tax years is appropriate in
this case.
[¶23] Jon J. Jensen, C.J.
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