Marriage of Stout

No. 95-407
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
IN RE THE MARRIAGE OF
TANYA TRUAK STOUT,
Petitioner and Respondent,
and
DAVID MARK STOUT,
Respondent and Appellant.
APPEAL FROM: District Court of the Fourth Judicial District,
1n and for the County of Missoula,
The Honorable John Larson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Judith A. Loring, Stevensville, Montana
For Respondent:
John H. Gilliam, Skjelset Law Offices, Missoula,
Montana
Submitted on Briefs: February 22, 1996
Decided: June 18, 1996
Filed:
Justice William E. Hunt, Sr. delivered the Opinion of the Court.
Pursuant to Section I, Paragraph 3 (c), Montana Supreme Court
1995 Internal Operating Rules, the following decision shall not be
cited as precedent and shall be published by its filing as a public
document with the Clerk of this Court and by a report of its result
to State Reporter Publishing Company and West Publishing Company.
Appellant David Mark Stout (Mark) appeals the decision of the
Fourth Judicial District Court, Missoula County, which granted an
increase in child support to Respondent Tanya Stout (Tanya).
Affirmed in part and reversed in part.
ISSUES
The following restated issues are raised on appeal:
1. Did the evidence presented demonstrate changed
circumstances so substantial and continuing in nature as to make
the original child support terms unconscionable?
2. Did the District Court abuse its discretion in its
application of the Child Support Guidelines?
3. Did the District Court abuse its discretion by refusing to
admit one of Mark's proposed exhibits?
4. Did the District Court abuse its discretion by limiting
the time allowed to the parties for presentation of evidence?
FACTS
Mark and Tanya divorced in 1984. They have two children, a
sixteen-year-old boy and a thirteen-year-old girl, who reside
primarily with their mother and enjoy liberal visitation with their
father. Pursuant to the parties' divorce decree, Mark paid $150
2
per child per month in child support. After the divorce, Mark
remarried. His wife, Roxanne, owns and operates an advertising
agency which employs Mark. Through her business, Roxanne pays for
the children's health insurance, for which Mark is responsible
under the divorce decree.
In 1994, Tanya was diagnosed with kidney disease. Her doctor
discovered that one of her kidneys was entirely non-functioning and
placed her on medication to maintain the function of the other.
Since then, Tanya has incurred medical bills of over $2000 each
year.
Also in 1994, Tanya moved the District Court for an increase
in child support. Mark did not file a brief opposing the motion
and, pursuant to Uniform District Court Rule No. 2, the District
Court deemed the motion well-taken. It therefore ordered the
parties to submit child support worksheets in order to facilitate
the determination of an appropriate increase in child support.
Both parties submitted worksheets and the District Court referred
the matter to a Special Master. The Special Master returned her
proposed findings, conclusions, and recommended increase in child
support, which the District Court substantively adopted in its
order. Mark appeals.
STANDARD OF REVIEW
We review a district court's findings of fact regarding child
support modification to determine whether they are clearly
erroneous. In re Marriage of Kovash (1995), 270 Mont. 517, 521,
893 P.2d 860. 862-63. We review a district court's conclusions of
3
law regarding child support modification to determine whether the
court's interpretation of the law was correct. Kovash, 893 P.2d at
863 (citing In re Marriage of Barnard (1994), 264 Mont. 103, 870
P.2d 91). In addition, we review a district court's overall
decision on child support modification to determine whether the
district court abused its discretion. Kovash, 893 P.Zd at 863
(citing In re Marriage of Hill (1994), 265 Mont. 52, 874 P.2d 705).
DISCUSSION
1. Did the evidence presented demonstrate changed
circumstances so substantial and continuing in nature as to make
the original child support terms unconscionable?
When Tanya moved the District Court for an increase in child
support, Mark did not file a brief in response to her motion.
Uniform District Court Rule No. 2 states that "failure to file an
answer brief by the adverse party within ten days shall be deemed
an admission that the motion is well-taken." Rule 2(b), Mont.
Uniform Dist. Ct. Rules. On this basis, the District Court deemed
Tanya's motion well-taken
However, § 40-4-208, MCA, provides in part:
(2) (b) Whenever the decree proposed for
modification contains provisions relating to maintenance
or support, modification under subsection (1) may only be
made:
(i) upon a showinq of changed circumstances so
substantial and continuinq as to make the terms
unconscionable;
(ii) upon written consent of the parties; LOTI
(iii) upon application by the department of public
health and human services . .
Section 40-4-208(2)(b), MCA (emphasis added). Here, the parties
did not agree to modification, nor has the department of health and
4
human services been involved. Therefore, only 5 40-4-208(2) (b) (i),
MCA, applies.
Mark argues that his failure to respond to Tanya's motion does
not relieve her of the duty of showing changed circumstances such
as the statute requires. He contends that this statutory mandate
must be given precedence over the applicable district court rule.
Mark further contends that, by ruling that the motion was well-
taken, the District Court erroneously relieved Tanya of the duty of
showing substantial and continuing changed circumstances sufficient
to make the terms of the existing decree unconscionable.
We have held that compliance with 5 40-4-208, MCA, is a
mandated prerequisite for modification of child support. In re
Marriage of Conkey (1995), 270 Mont. ZOO, 203, 890 P.2d 1291, 1293.
See also, In re Marriage of Clyatt (1994), 267 Mont. 119, 882 P.2d
503; In re Marriage of Craib (19941, 266 Mont. 483, 880 P.2d 1379;
In r-e Marriage of Kukes (1993), 258 Mont. 324, 852 P.2d 655.
Therefore, a district court is powerless to modify a child support
obligation unless it does so in compliance with the statute.
The statute does not render the relevant district court rule
wholly inapplicable, however. Nor does it mean that the court,
faced with an unopposed motion, must hold an evidentiary hearing in
order to prove that which is not disputed. A party may comply with
the statute through a motion by showing therein with reasonable
specificity the changed circumstances which serve to make a decree
unconscionable. If such a reasonably specific motion is not
opposed, the district court may then deem it well-taken pursuant to
5
the district court rule, because the motion on its face will comply
with § 40-4-208(2) (b) (i), MCA.
In this case, however, Tanya's motion stated only that "upon
[her] information and belief" circumstances had changed to such an
extent that the existing support order was unconscionable. The
motion did not state which circumstances had changed, how they had
changed, or to what extent. Such a generic statement does not
comply with § 40-4-208(2) (b) (i), MCA. Therefore, Mark is correct
in asserting that the District Court could not have granted an
increase in child support on the basis of the motion alone.
But the District Court did not deem the motion well-taken,
assign an increase in support, and send the parties home. Instead,
it held a comprehensive evidentiary hearing regarding the proposed
increase, during which both Tanya and Mark were permitted to
present evidence on the issue of whether an increase in child
support was necessary or justified. The proper question,
therefore, is whether the evidence presented at the hearing
supported a finding of changed circumstances substantial and
continual enough to make the existing support decree
unconscionable.
On appeal, Mark alleges that Tanya's motion for an increase in
child support was based on the increase in the cost of living as
well as the increased cost of raising older children. He points
out that Tanya presented no evidence which showed either a general
cost-of-living increase or the specific costs associated with
raising their children. Moreover, he asserts that Tanya's income
6
has increased while his has decreased. Mark therefore alleges that
Tanya failed to show changed circumstances substantial and
continuous enough to render the existing child support arrangements
unconscionable.
It is true that Tanya showed few specific increased expenses
or a general increase in the cost of living. But this Court has
repeatedly recognized that teenage children generate greater
expenditures for the parent than do younger children. In re
Marriage of Barber (19921, 252 Mont. 458, 461-62, 830 P.Zd 97, 99.
See also, In re Marriage of Forsman (1987), 229 Mont. 411, 747 P.2d
861; Johnson v. Johnson (1983), 205 Mont. 259, 667 P.2d 438;
Uniform District Court Rule of Child Support Guidelines (1987), 227
Mont. 1, 9. Furthermore, Mark himself acknowledged at the hearing
that it undoubtedly costs more to raise children today than it
formerly did.
Mark is correct, however, that merely asserting increased
costs, without more, will not be sufficient to show changed
circumstances. In re Marriage of Gingerich (1994), 269 Mont. 161,
164, 887 P.2d 714, 716 (distinguishing Johnson, 667 P.2d at 438).
Such assertions must be supported by evidence of specific cost
increases or a demonstrable impact on the parent's financial
situation. See e.g.,
-I Johnson, 667 P.2d at 438, and Reynolds, 660
P.2d at 90. If Tanya had based her request solely on the increased
cost of raising the children, we would be compelled to reverse the
District Court because the evidence presented on this issue was
sketchy at best.
7
Tanya ( s motion, however, was also based on her Own
deteriorating health. She testified that she must spend at least
$2000 each year on health-related costs. Since she has lost the
function in one kidney, Tanya must take medication to maintain the
function of the other. The District Court did not abuse its
discretion by finding that the evidence of her medical condition,
coupled with the admitted increased cost of raising teenage
children, was sufficient to constitute changed circumstances so
continuing and substantial as to make the existing child support
unconscionable.
Nor does the evidence support Mark's contention that, by so
finding, the District Court ignored Tanya's admitted increase in
wages. When Tanya was divorced, she earned less than $8000 a year.
She currently earns slightly more than $16,000 a year, so her
income has in fact doubled. But such an increase in earnings does
not automatically create a presumption that an increase in child
support is not warranted, especially when, as here, the parent
initially earned very little. The District Court properly
considered Tanya's current income when calculating child support.
Mark also asserts that the District Court erred by determining
his income to be higher than the amount which he claims to
currently earn. He asserts that the District Court improperly
imputed income to him based on its belief that he was purposely
under-employed and that his decrease in wages was "made up" to
avoid an increase in child support. He claims that his salary had
been greatly reduced, and testified that he would only make
8
approximately $10,000 in 1995, the year of the hearing. However,
he also testified that he made $5,700 in one two-week period,
followed by earnings of only $127 in the two weeks which preceded
the hearing.
The District Court's findings and conclusions do not indicate
that it imputed income to Mark based on under-employment. Instead,
Mark's income was determined by looking at his earning capacity as
demonstrated by his salaries for the past four years. It is not
error for the District Court to use the figures actually before it
when determining modification of child support. Platt v. Platt
(1994), 267 Mont. 38, 41, 881 P.Zd 634, 636.
Further, the circumstances of the parties must be determined
at the time of the modification hearing. They may not be based
upon speculative or possible future conditions. In re Marriage of
Conklin (19861, 221 Mont. 30, 32, 716 P.2d 629, 631 (quoting Gall
v. Gall (1980), 187 Mont. 17, 20, 608 P.2d 496, 498). Mask's
earnings before the hearing more than justified a finding that his
income should be at least $20,000. If the District Court found
Mark's sudden and precipitous drop in salary to be suspicious, this
nevertheless was not the basis for determination of his income.
The District Court did not abuse its discretion by determining
Mark's income based on his past proven earning ability and
demonstrated by his salaries for the past four years.
2. Did the District Court abuse its discretion in its
application of the Child Support Guidelines?
Mark asserts that the manner in which the District Court
applied the Child Support Guidelines in this case was erroneous.
9
Specifically, Mark argues that the District court erred by
attributing income to him from his home; by including income Mark
earns from his second job as a musician; and by failing to consider
medical expenses which Mark currently pays on behalf of himself and
the children.
A. Assiqnment of income to Mark from his home.
In computing Mark's income for purposes of determining child
support, the District Court attributed to him the equity income of
his home. To do so, the District Court subtracted a "homestead
exemption" of $40,000 from the total value of the home ($52,000),
leaving Mark with $12,000 in equity in his home. The District
Court then calculated the amount of interest which Mark would earn
if the $12,000 were invested, and attributed this amount to Mark as
income. Mark asserts that the Guidelines do not provide for
attribution of income in this fashion. We agree.
The Child Support Guidelines address the attribution of income
to non-performing assets in Rule 46.30.1514, ARM. That Rule
provides in part:
Income attributed to assets is the amount of interest
income which could be earned if non-performing assets are
liquidated and the proceeds invested. For example, a
parent may possess non-performing assets like a vacation
home, idle land, hobby farm or recreational vehicles. In
such cases, a child is entitled to benefit from this
potential income.
Rule 46.30.1514(l), ARM.
Essentially, by applying the homestead exemption, the District
Court considered $40,000 of the $52,000 value of the home as a
performing asset. It then considered the other $12,000 of the
10
home's value as a non-performing asset to which income may be
attributed. This treatment was erroneous for three reasons.
First, the homestead statutes, found at 5 70-32-101, MCA, et
seq. I provide that a homestead, valued up to $40,000, generally
will be exempt from execution or forced sale. Section 70-32-201,
MCA. However, in order to claim the exemption, the owner must file
a declaration and acknowledgement of homestead in the same way that
a grant of real property must be acknowledged and filed. Section
70-32-105, MCA. In this case, there is no indication that Mark has
filed a homestead declaration as is required by statute, or that
his home is in danger of being subject to execution or forced sale.
Therefore, there is no legal basis for appl,ying the homestead
exemption statutes to this child support modification case.
Second, the applicable rule allows for the attribution of
income which a parent might earn if "non-performing assets are
liquidated and the proceeds invested." Rule 46.30.1514, ARM. By
attributing income to part of Mark's house, the District Court
seemed to presume that some part of the home could be liquidated
and the proceeds invested, while leaving the rest of the home
intact. We fail to see how this can be done. Mark's house is
valued at $52,000. He cannot simply remove the $12,000 which the
District Court has deemed to be non-performing in order to invest
it, as if some part of the house's value is severable from the
rest. The house, in its entirety, is a performing asset; it is
where he and his wife live and where the children live when they
are with him. There is no basis for finding that the majority of
11
the home is a performing asset but that some small part of it is
non-performing.
Third, Mark testified that he is not the sole owner of the
house in question. Apparently, his wife and his brother also have
some interest in the property. This testimony was uncontroverted.
Therefore, the District Court erred in attributing income from the
entire value of the house without acknowledging that Mark does not
in fact own the house in its entirety.
In short, the District Court erred by using the homestead
statutes to conclude that any part of Mark's home was a non-
performing asset.
B. Inclusion of income earned by a second iob.
Mark next argues that the District Court misapplied the
guidelines by including income which he earns through his second
job as a free-lance musician. He points out that the applicable
administrative rule provides that:
[i]f a person with a subsequent family has income from
overtime or a second job, that income is presumed to be
for the use of the subsequent family, and is not included
in gross income for the purposes of determining support
for a prior family. The presumption may be rebutted upon
a showing that the additional income is discretionary.
Rule 46.30.1508(2), ARM. On the basis of this rule, Mark argues
that the income from his second job should be presumed to be for
the benefit of his second family. Therefore, he argues, the
District Court erred in including the income from his second job
when calculating his child support obligation. The cited
administrative rule, however, creates only a presumption which may
12
be overcome by evidence that "the additional income is
discretionary." Rule 46.30.1508(2), ARM.
Mark's wife Roxanne is the owner and operator of her own
business. She is also Mark's employer and pays his salary. At the
hearing, Roxanne testified that her business is very much a going
concern; she has moved the business into new offices and hired
additional staff to handle its substantial growth. The testimony
of both Mark and Roxanne indicated that Roxanne is more than able
to provide for her own needs. This evidence rebuts the presumption
that the income from Mark's second job is necessary for the support
of a second family.
Moreover, Mark admitted that he worked a second job as a
musician during the time he was married to Tanya. When he met
Roxanne, he also was working as a musician. The fact that an
individual's second job pre-dates the second marriage may rebut the
presumption that the second job serves to provide for a second
family. _, Craib,
See 880 P.2d at 1385.
Mark argues that Tanya had the burden of proving that the
income from his second job was discretionary. He argues that the
presumption is not adequately rebutted because Tanya herself
presented no evidence tending to rebut it. However, more than
sufficient evidence was presented to indicate that the second job
is not necessary for the support of Mark and Roxanne. The fact
that this evidence came from them, instead of Tanya, does not
diminish its probative value.
13
However, Mark also testified that 50 to 70% of the gross
income from his second job as a musician goes to cover expenses
related to the pursuit of that job. This testimony was
uncontroverted. Therefore, the District Court erred in attributing
all of Mark's gross earnings to him as income without taking his
expenses into consideration.
Because the presumption regarding income from a second job was
adequately rebutted by the evidence presented, the District Court
did not err in considering the income Mark receives from his second
job when calculating his child support obligation. The District
Court erred, however, by not de'ducting Mark's expenses before
attributing to him the income from this second job.
C. Consideration of medical expenses.
Mark complains that the District Court "failed to draw any
conclusions" from the fact that Mark is responsible for the
children's medical expenses. He argues that the District Court
erred because it "did not give [him] credit for payment of those
costs in its calculations."
In general, a deduction is allowable for that portion of a
parent's insurance costs which benefits the children. Chiovaro v.
Tilton-Chiovaro (1991), 247 Mont. 185, 191, 805 P.2d 575, 578.
However, only the parent's net cost for the children's insurance
may be deducted, Chiovaro, 805 P.2d at 578. If the children's
insurance does not cost the parent,anything, then he or she is not
entitled to a deduction.
14
Mark assigns error to the District Court's failure to allow
him a deduction in consideration of "his" payment for health
insurance. In fact, however, he doesn't pay for the children's
health insurance; Roxanne does, through the policy she maintains
for her business. Mark explains that this arrangement is
economically advantageous because it would be very difficult for
him to obtain insurance for the children independently. We have no
quarrel with the arrangements made. Mark is free to fulfill his
responsibilities in any way he chooses, so long as he does in fact
fulfill them. It is indisputable, however, that Mark incurs no
out-of-pocket expense to obtain the children's insurance.
Accordingly, the District Court did not err in refusing to grant
him a deduction for such expenses.
Mark argues that the District Court erred in its treatment of
the parties' medical expenses as well. At the hearing, Tanya
testified that her worsening health results in between $2000 and
$2500 in medical expenses each year. Mark attempted to introduce
an exhibit showing that he expends approximately $900 each year for
his own medical expenses, but the District Court refused the
exhibit. On appeal, Mark asserts that the District Court erred in
considering Tanya's medical needs while refusing to consider his.
This argument is without merit. While the District Court
refused Mark's proposed exhibit, it nevertheless allowed a $900
deduction for his medical expenses. This deduction appears in the
Child Support Guidelines worksheet prepared and released by the
District Court and accompanying its order.
15
3. Did the District Court abuse its discretion by refusing to
admit one of Mark's proposed exhibits?
Mark asserts that the District Court erred in not allowing his
exhibit regarding his medical expenses. Regardless of whether or
not the exhibit was properly refused, the refusal did not prejudice
Mark. Apparently, the District Court considered the substance of
the exhibit despite having refused it at trial. The proposed
exhibit lists various checks written to cover medical expenses and
totalling $921. As noted above, the District Court gave Mark a
$900 deduction for his medical expenses.
Since Mark received the benefit of the District Court's
consideration of the information contained in the exhibit, its
formal refusal at the hearing did not substantially affect his
rights. Had the exhibit been allowed, it would not have changed
the financial allocation of support. Therefore, even if the
District Court erred in refusing the exhibit, the error was
harmless.
4. Did the District Court abuse its discretion by limiting
the time allowed to the parties for the presentation of evidence?
At the beginning of the hearing, the District Court informed
the parties that each would be given 45 minutes to present
evidence. Mark now asserts that the time limit prejudiced his
ability to present all the evidence he desired.
It is well-settled that this Court will not consider an issue
raised for the first time on appeal. Erler v. Erler (1993), 261
Mont. 65, 73, 862 P.Zd 12, 18 (citing In re Marriage of Starks
(1993), 259 Mont. 138, 855 P.2d 527). Moreover, a party who fails
16
to object to an alleged error during a trial or hearing is
precluded from raising the issue on appeal. Hando v. PPG
Industries, Inc. (1995), 272 Mont. 146, 150, 900 P.2d 281, 284.
At the hearing, the District Court clearly notified the
parties that each would have 45 minutes in which to present
evidence and testimony. Mark's counsel indicated that "probably
that [was] fair." At the end of the hearing, the District Court
expressly asked Mark's attorney, "Do you desire to submit anything
further?" She replied, "I don't. I think I've submitted
everything." Mark's attorney did not object to the time limit
imposed at the hearing; on the contrary, she indicated such a limit
was fine. Because no objection was made, and because this issue
was raised for the first time on appeal, we will not consider it.
Finally, Tanya asks this Court to impose costs and sanctions
against Mark for bringing a frivolous appeal. We do not agree the
appeal was frivolous and decline to impose costs or sanctions.
Affirmed in part and reversed in p,art.
We Concur:
17
Justices
18
Justice W. William Leaphart; dissenting.
I dissent from the Court's holding in issue one that the
District Court correctly held a comprehensive evidentiary hearing
despite the inadequacy of Tanya's initial motion to modify child
support. As the Court points out, compliance with § 40-4-208, MCA,
is a mandated prerequisite for modification of child support. In
re Marriage of Conkey (1995), 270 Mont. 200, 203, 890 P.2d 1291,
1293; In re Marriage of Craib (1994), 266 Mont. 483, 491, 880 P.2d
1379, 1384. Despite this mandatory threshold, the Court relieves
Tanya of the requirements of § 40-4-208, MCA, by approving of the
District Court's sidestep around the deficiencies of Tanya's
initial pleadings.
Rule 8(a), M.R.Civ.P., states that a pleading which sets forth
a claim for relief shall contain a short and plain statement of the
claim showing that the pleader is entitled to relief. To modify a
child support obligation, § 40-4-208(2)(b) (i), MCA, requires that
the moving party establish changed circumstances so substantial and
continuing as to make the terms of the existing child support
agreement unconscionable. Marriaqe of Conkev, 890 P.2d at 1293;
Marriase of Craib, 880 P.2d at 1384.
Tanya's motion to modify child support, pursuant to 5 40-4-
208, MCA, did not establish changed circumstances and did not show
that she was entitled to relief. The motion's entire statement in
support of changed circumstances consisted of the following
remarks:
[Upon the undersigned's information and belief,
circumstances have changed in a substantial and
continuing manner, such that the terms of the original
Decree are now unconscionable. . . Petitioner
respectfully requests the Court entertain her Motion and
19
allow the parties to commence discovery on the issues of
unconscionablity [sic] and the prior and current
financial status of the parties.
The motion is signed by Tanya's attorney. Not only is the motion
based entirely on the attorney's, rather than Tanya's, information
and belief, it is nothing more than a conclusory statement devoid
of any factual allegations. The accompanying child support
determination worksheet itemizes Tanya and Mark's incomes, assets,
and expenses for 1994. The worksheet does not include any
information concerning incomes, assets, and expenses from previous
years, thus, it does not show any changed circumstances. The
motion was inadequate to initiate the proceedings that followed
irrespective of the fact that Mark did not respond to the motion.
Instead of proceeding with an evidentiary hearing, the court should
have summarily denied the motion without prejudice to amend or
refile in accordance with § 40-4-208, MCA. I agree with Mark that
his failure to respond to Tanya's motion did not relieve her of the
initial duty to file pleadings showing changed circumstances as the
statute requires. Since I believe that this matter should have
been terminated based upon the pleadings, I would not reach issues
two through five which arose as a result of the evidentiary
hearing. However, if I were to reach those issues, I would concur
with the Court's analysis.
Justice James C. Nelson and Justice Karla M. Gray join in the
dissent of Justice Leaphart. I
Istide
!i I