Billy G. Ray v. Connie A. Ray ( 2012 )


Menu:
  • Pursuant to Ind.Appellate Rule 65(D),
    this Memorandum Decision shall not be
    regarded as precedent or cited before
    any court except for the purpose of
    FILED
    Oct 03 2012, 8:50 am
    establishing the defense of res judicata,
    collateral estoppel, or the law of the case.                       CLERK
    of the supreme court,
    court of appeals and
    tax court
    ATTORNEY FOR APPELLANT:                           ATTORNEY FOR APPELLEE:
    JOHN B. NORRIS                                    ROBERT J. PALMER
    Hass Vandivier & Norris                           May Oberfell Lorber
    Franklin, Indiana                                 Mishawaka, Indiana
    IN THE
    COURT OF APPEALS OF INDIANA
    BILLY G. RAY,                                     )
    )
    Appellant-Respondent,                      )
    )
    vs.                                )       No. 41A05-1203-DR-130
    )
    CONNIE A. RAY,                                    )
    )
    Appellee-Petitioner.                       )
    APPEAL FROM THE JOHNSON SUPERIOR COURT
    The Honorable Cynthia S. Emkes, Judge
    Cause No. 41D02-0902-DR-50
    October 3, 2012
    MEMORANDUM DECISION - NOT FOR PUBLICATION
    NAJAM, Judge
    STATEMENT OF THE CASE
    Billy G. Ray (“Father”) appeals the post-dissolution court’s order granting the
    petition filed by Connie A. Ray (“Mother”) to modify child support, denying Father’s
    petitions to modify custody, and granting Father’s petition to modify parenting time.
    Father presents three issues for review, which we restate as:
    1.     Whether the post-dissolution court erred when it included
    undistributed pass-through income from Father’s interest in a
    subchapter S-corporation when modifying his child support
    obligation.
    2.     Whether the post-dissolution court abused its discretion when it
    found that Father has not shown a substantial change in one or more
    statutory factors necessary for a modification of physical custody of
    the child.
    3.     Whether the court abused its discretion when it only minimally
    modified Father’s parenting time.
    And Mother requests that we remand for the post-dissolution court to consider an award
    of appellate attorney’s fees.
    We affirm in part, reverse in part, and remand with instructions.
    FACTS AND PROCEDURAL HISTORY
    Father and Mother were married on May 27, 2007, and their child, J.R., was born
    in August of that year. Also in 2007, Father and his father, Bill Ray, Sr., opened a
    seasonal business called Ray’s Dixie Choppers, Inc., a subchapter S corporation (“the S-
    corporation”) located in Franklin. Father and his father each own fifty percent of the
    seasonal business, which sells Dixie Chopper mowers and related parts. Although Father
    reported a little more than $16,000 as gross income on his tax return in the first two
    2
    years, his salary and the retained earnings of the business increased significantly in the
    subsequent three years.
    Mother filed for dissolution of marriage on February 6, 2009. On April 15, the
    court granted a decree of dissolution (“the Decree”), which incorporated the parties’
    waiver of final hearing and settlement agreement.       In the Decree, pursuant to the
    settlement agreement, the court awarded the parties joint custody of J.R., with Mother
    having primary physical custody.      The Decree also awarded Father parenting time
    pursuant to the Indiana Parenting Time Guidelines (“Visitation Guidelines”) as well as
    every other Monday evening for three hours, “alternate weekend parenting time, plus
    Sunday overnight parenting time on his alternate weekends, and one night during the
    week on alternate weeks.” Appellant’s App. at 378. Finally, the Decree ordered Father
    to pay $100 per week for child support, but Mother “reserve[d] the right to examine all
    sources of [Father’s] income inclusive of examination of business records at any time the
    support is modified.” Id. at 380.
    On February 18, 2011, Mother filed her petition to modify child support. On
    March 2, Father filed his verified petitions to modify custody and parenting time as well
    as a rule to show cause. On June 18, Father filed an additional rule to show cause. The
    post-dissolution court held a hearing on the petitions on October 18. At the close of the
    hearing, the court took the matter under advisement but ordered child support to be
    increased to $168 weekly effective immediately, pending the court’s final determination
    on Mother’s request to modify support. On February 21, 2012, the court entered its
    Order on Pending Modification and Contempt Matters (“Order”), granting Mother’s
    3
    petition to modify child support and Father’s petition to modify parenting time. The
    court also denied Father’s motions for rule to show cause and found that Father had not
    proved a “substantial change in one or more of the statutory factors relevant to a custody
    determination for the Court to conclude that a change in custody is in the child’s best
    interest[.]” Id. at 10. Father now appeals.
    DISCUSSION AND DECISION
    Standard of Review
    In ruling on the parties’ petitions, the court entered findings of fact and
    conclusions sua sponte. Our standard of review in such cases is well-settled:
    Therefore, we apply a two-tiered standard of review. Vega v. Allen County
    Dep’t of Family & Children (In re J.V.), 
    875 N.E.2d 395
    , 402 (Ind. Ct.
    App. 2007)[, trans. denied]. We may not set aside the findings or judgment
    unless they are clearly erroneous. Ind. Trial R. 52(A); Perrine v. Marion
    County Office of Child Servs., 
    866 N.E.2d 269
    , 273 (Ind. Ct. App. 2007).
    In our review, we first consider whether the evidence supports the factual
    findings. Perrine, 
    866 N.E.2d at 273
    . Second, we consider whether the
    findings support the judgment. 
    Id.
     “Findings are clearly erroneous only
    when the record contains no facts to support them either directly or by
    inference.” Id.; Quillen v. Quillen, 
    671 N.E.2d 98
    , 102 (Ind. 1996). A
    judgment is clearly erroneous if it relies on an incorrect legal standard.
    Perrine, 
    866 N.E.2d at 273
    . We give due regard to the trial court’s ability
    to assess the credibility of witnesses. T.R. 52(A). While we defer
    substantially to findings of fact, we do not do so to conclusions of law.
    Perrine, 
    866 N.E.2d at 274
    . We do not reweigh the evidence; rather we
    consider the evidence most favorable to the judgment with all reasonable
    inferences drawn in favor of the judgment. 
    Id.
    Richardson v. Hansrote, 
    883 N.E.2d 1165
    , 1171 (Ind. Ct. App. 2008).
    Issue One: Child Support
    The modification of child support orders is controlled by Indiana Code Section 31-
    16-8-1. That statute provides, in relevant part:
    4
    Provisions of an order with respect to child support . . . may be modified or
    revoked. . . . Modification may be made only:
    (1) upon a showing of changed circumstances so substantial and continuing
    as to make the terms unreasonable; or
    (2) upon a showing that:
    (A) a party has been ordered to pay an amount in child
    support that differs by more than twenty percent (20%) from
    the amount that would be ordered by applying the child
    support guidelines; and
    (B) the order requested to be modified or revoked was issued
    at least twelve (12) months before the petition requesting
    modification was set.
    
    Ind. Code § 31-16-8-1
    .           “We review modifications for abuse of discretion with a
    ‘preference for granting latitude and deference to our trial judges in family law matters.’”
    J.I. v. J.H. (In re K.I.), 
    903 N.E.2d 453
    , 457 (Ind. 2009) (quoting Kirk v. Kirk, 
    770 N.E.2d 304
    , 307 (Ind. 2002)). On appeal, we do not reweigh evidence or judge witness
    credibility. Sexton v. Sexton, 
    970 N.E.2d 707
    , 710 (Ind. Ct. App. 2012). We consider
    only the evidence most favorable to the judgment and the reasonable inferences drawn
    therefrom. 
    Id.
     And we will not set aside a trial court’s decision to modify child support
    unless it is clearly erroneous. 
    Id.
    Here, Father contends that the post-dissolution court abused its discretion when it
    modified his child support obligation. Specifically, he argues that the post-dissolution
    court should not have included undistributed pass-through income1 from Father’s fifty-
    percent interest in the S-corporation as part of Father’s income for purposes of
    1
    Father refers to retained earnings and undistributed pass-through income interchangeably. The
    difference between the two terms is of no moment for our purposes, as both refer to income not actually
    distributed to the S-corporation shareholder. The issue here is merely whether Father’s fifty percent share
    of the net of the company’s “gross receipts minus ordinary and necessary expenses” should be included as
    part of his income in determining his child support obligation. Ind. Child Support Rule 3(A)(2).
    5
    determining his child support obligation. Mother counters that Father included pass-
    through income (or retained earnings) in the child support worksheets he submitted to the
    post-dissolution court and, therefore, Father invited the error, if any, by the post-
    dissolution court. We agree with Mother that Father included some of his pass-through
    income when stating his weekly gross income on his child support worksheets admitted
    into evidence at the hearing.2 Thus, to the extent Father now argues that the post-
    dissolution court should have any included any pass-through income in determining his
    child support obligation, Father has invited that error.3 See Reinhart v. Reinhart, 
    938 N.E.2d 788
    , 791 (Ind. Ct. App. 2010) (“Under the invited error doctrine, a party may not
    take advantage of an error that he commits, invites, or which is the natural conduct of his
    own neglect or misconduct.”).
    And, in any event, the inclusion of undistributed pass-through income is not per se
    error when determining a parent’s gross income available for child support. The Indiana
    Child Support Guideline 3(A)(2) provides, in relevant part:
    Weekly Gross Income from self-employment, operation of a
    business, rent, and royalties is defined as gross receipts minus ordinary and
    necessary expenses. In general, these types of income and expenses from
    self-employment or operation of a business should be carefully reviewed to
    restrict the deductions to reasonable out-of-pocket expenditures necessary
    to produce income. These expenditures may include a reasonable yearly
    deduction for necessary capital expenditures. Weekly gross income from
    2
    Father shows the calculation of his average weekly gross income from 2008 through 2010 on
    Respondent’s Exhibit A. Father did not include pass-through income for 2008 but did include pass-
    through income for 2009 and 2010. We find no explanation of this inconsistency in the record or in
    Father’s appellate brief.
    3
    Despite invited error, Father relies on Tebbe v. Tebbe, 
    815 N.E.2d 180
    , 184 (Ind. Ct. App.
    2004), trans. denied, to support his contention that retained earnings should not have been included in his
    gross income for purposes of determining his child support obligation. But the holding in Tebbe is
    limited to minority shareholders. 
    Id. at 183, 184
    . As such, that case is inapposite.
    6
    self-employment may differ from a determination of business income for
    tax purposes.
    Expense reimbursements or in-kind payments received by a parent in
    the course of employment, self-employment, or operation of a business
    should be counted as income if they are significant and reduce personal
    living expenses. Such payments might include a company car, free housing,
    or reimbursed meals.
    (Emphasis added). The ordinary business income of an S-corporation, which passes
    through to a shareholder’s individual income tax return, may have several components,
    including actual cash distributions, income retained by the corporation and not distributed
    to its shareholders, principal payments on debt, and depreciation. Thus, as quoted above,
    the Child Support Guidelines acknowledge that “Weekly Gross Income from self-
    employment may differ from a determination of business income for tax purposes.” 
    Id.
    And there are many variables that affect the calculation of undistributed pass-through
    income, for example, earnings retained by the corporation as working capital or to
    purchase inventory and equipment. It is incumbent upon the party alleging error to
    demonstrate error with particularity. Nowels v. Nowels, 
    836 N.E.2d 481
    , 489 (Ind. Ct.
    App. 2005) (husband did not offer an alternative calculation specifying the amount of
    pass-through income included, if any). Again, by including retained earnings in his own
    child support worksheet calculations, Father has not shown error by the post-dissolution
    court in doing the same.
    But that does not end our inquiry. Father also contends that the post-dissolution
    court “double-counted retained earnings when determining [Father’s] weekly income,
    which likely distorted upward” the court’s final assessment of his weekly gross income
    figure. Appellant’s Brief at 22. In reviewing the record, we find merit to Father’s
    7
    argument that there are irregularities in how the court modified Father’s child support
    obligation.
    With regard to child support, the post-dissolution court found in relevant part:
    8. Based on the following facts, and the Indiana Child Support Obligation
    Worksheet (ICSOW) and Parenting Time Credit Worksheet (PTCW)
    attached hereto, the Court finds as follows and orders support increased to
    the sum of Three Hundred Dollars ($300.00) as of today’s date:
    a.     Father’s income for the years 2009, 2010, and 2011
    averaged Three Thousand Four Hundred Forty-Two Dollars
    ($3,442.00) with retained earnings. Father’s income is
    heavily contingent on several factors including, but not
    limited to, customer demand, the weather, and the number of
    large tractors ordered and sold in any given time period.
    Based on some unusual factors regarding customers,
    equipment demand, and inventory it is difficult to anticipate if
    Father’s past earnings are consistent with future earnings.
    Factoring out (to some extent) some of the extreme variables
    that effect [sic] Father’s income, it is reasonable to conclude
    Father’s income for the purpose of calculating child support is
    in the sum of Two Thousand Eight Hundred Dollars
    ($2,800.00) weekly with a reasonable sum of retained
    earnings considered in said sum.
    Appellant’s App. at 10-11 (emphases added).
    By our calculations, in order to determine that Father’s average weekly gross
    income for 2009 through 2011, including retained earnings, was $3442, Father would
    have had to earn more than $354,000 in 2011. We achieved that result by averaging
    Father’s income from 2009, 2010, and 2011. Father’s 2009 weekly gross income was
    calculated at $1065 based on an annual income of $55,377, and his 2010 weekly gross
    income was calculated at $2442 based on an annual income of $126,991. Thus, in order
    to achieve a three-year average weekly gross income of $3442, Father’s 2011 weekly
    8
    income would have had to be $6819, which would require projected annual gross income
    of $354,584 for 2011.
    But at the hearing on October 18, 2011, Father testified that, as of September 1,
    2011, the company’s “gross receipts” were $1,091,439 and its                          “expenses” were
    $906,342. Id. at 199. The net of these figures is $185,097,4 of which half, or $92,548,
    could be attributable to Father as pass-through income. But that represents income only
    through September 1, 2011. Adding that sum to the highest annual salary Father had
    taken, which was $40,000, Father’s 2011 total income through September 1, 2011, was
    $132,548. Even without considering that the final three-month period of each year had
    consistently experienced slow business for Father’s S-corporation, that sum does not
    come close to the total 2011 income estimated by the court and which would be
    necessary for the three-year average weekly gross income to be $3442.
    The post-dissolution court relied on the weekly gross income figure of $3442, but
    the court correctly recognized and took into account that “Father’s income is heavily
    contingent on several factors” and that “extreme variables” affect Father’s income when
    it discounted his weekly gross income for purposes of computing his child support
    obligation to $2800.5 But, as shown above, the record does not support the calculation
    4
    In what must be a computational error, Father incorrectly computed the “net” of those figures to
    be $137,558.50. Appellant’s App. at 199. We find no acknowledgement of or explanation for this error
    in the record, the transcript, or the appellate briefs.
    5
    The post-dissolution court recognized that “Father’s income is heavily contingent on several
    factors” including “some unusual factors regarding customers, equipment demand, and inventory,” and
    the court discounted the retained earnings when calculating Father’s average weekly gross income for
    child support. Appellant’s App. at 11. The net effect is that the court did not include all of Father’s
    undistributed S-corporation income in its child support calculation. In light of our conclusion that the
    trial court based its calculation on an erroneous weekly gross income figure for 2011, whether the post-
    9
    that Father’s average weekly gross income from 2009 through 2011 was $3442.
    Therefore, the income figure the court computed based on that $3442 is clearly
    erroneous. As such, we conclude that the post-dissolution court erred when it modified
    Father’s child support obligation, and we must remand for the court to recalculate
    Father’s child support obligation.
    Issue Two: Physical Custody
    Father next contends that the post-dissolution court abused its discretion when it
    denied his request to modify physical custody. Modification of custody is governed by
    statute:
    (a) The court may not modify a child custody order unless:
    (1) the modification is in the best interests of the child; and
    (2) there is a substantial change in one (1) or more of the
    factors that the court may consider under section 8 [IC 31-17-
    2-8] and, if applicable, section 8.5 [IC 31-17-2-8.5] of this
    chapter.
    (b) In making its determination, the court shall consider the factors listed
    under section 8 of this chapter.
    (c) The court shall not hear evidence on a matter occurring before the last
    custody proceeding between the parties unless the matter relates to a change
    in the factors relating to the best interests of the child as described by
    section 8 and, if applicable, section 8.5 of this chapter.
    
    Ind. Code § 31-17-2-21
     (alterations in original).                 Indiana Code Section 31-17-2-8,
    governing initial custody determinations, provides:
    The court shall determine custody and enter a custody order in accordance
    with the best interests of the child. In determining the best interests of the
    child, there is no presumption favoring either parent. The court shall
    consider all relevant factors, including the following:
    (1) The age and sex of the child.
    (2) The wishes of the child’s parent or parents.
    dissolution court abused its discretion in determining the extent of that discount is not before us, but the
    court did not err in giving such a discount.
    10
    (3) The wishes of the child, with more consideration given to the child’s
    wishes if the child is at least fourteen (14) years of age.
    (4) The interaction and interrelationship of the child with:
    (A) the child’s parent or parents;
    (B) the child’s sibling; and
    (C) any other person who may significantly affect the child’s
    best interests.
    (5) The child’s adjustment to the child’s:
    (A) home;
    (B) school; and
    (C) community.
    (6) The mental and physical health of all individuals involved.
    (7) Evidence of a pattern of domestic or family violence by either parent.
    (8) Evidence that the child has been cared for by a de facto custodian, and
    if the evidence is sufficient, the court shall consider the factors described in
    section 8.5(b) [IC 31-17-2-8.5(b)] of this chapter.
    (Alteration in original). “We review custody modifications for abuse of discretion with a
    preference for granting latitude and deference to our trial judges in family law matters.”
    Werner v. Werner, 
    946 N.E.2d 1233
    , 1244 (Ind. Ct. App. 2011) (quoting In re K.I., 903
    N.E.2d at 457), trans. denied.
    Here, Father contends that the post-dissolution court abused its discretion when it
    found that he had not proved a substantial change in one or more of the factors the court
    may consider in custody determinations pursuant to Section 31-17-2-21(a). But Father
    does not point to which of the factors in Section 31-17-2-8 he has shown to have
    substantially changed. Instead, Father merely recites the visitation schedule currently in
    place, which is slightly in excess of the applicable parenting time schedule in the
    Visitation Guidelines, and asks for physical custody to be shared under a weekly schedule
    that, on average, allows each parent fifty percent of the time with the child. To the extent
    the circumstances and wishes Father describes in his brief pertain to any one of the
    factors in Section 31-17-2-8, Father may have shown a change in one of those factors,
    11
    namely his wishes.     But we cannot say that the post-dissolution court abused its
    discretion when it determined that Father had not shown a substantial change warranting
    a change of physical custody.
    Issue Three: Visitation
    Finally, Father contends that the post-dissolution court abused its discretion when
    it modified the parenting time schedule in this case. Indiana Code Section 31-17-4-2
    governs the modification of parenting time orders and provides, in relevant part: “The
    court may modify an order granting or denying parenting time rights whenever
    modification would serve the best interests of the child. . . .” “We reverse a parenting
    time determination only when the trial court manifestly abuses its discretion.” Saalfrank
    v. Saalfrank, 
    899 N.E.2d 671
    , 681 (Ind. Ct. App. 2008). “No abuse of discretion occurs
    if there is a rational basis in the record supporting the trial court’s determination.” 
    Id.
    (internal quotation marks and citation omitted).
    Here, Father petitioned the court for more parenting time with J.R. The post-
    dissolution court granted that petition, increasing Father’s parenting time slightly at the
    time of the order and upon the child reaching certain milestones. Father contends that the
    post-dissolution court abused its discretion by making “only token changes to the existing
    parenting time order.” We cannot agree.
    The post-dissolution court found that “Father has demonstrated that the child
    would benefit from more parenting time with him if guaranteed by the Court Order to be
    predictable and consistent.” Appellant’s App. at 10. As a result, the court made the
    following modifications to the parenting time schedule:
    12
    The Court now modifies the Decree herein and orders holiday, special day,
    extended Christmas, and spring recess per the [Visitation Guidelines], and
    further orders alternating weekend parenting time commencing at 6:00 p.m.
    on Friday through Tuesday morning when the child starts school. Further,
    both parties are granted fourteen (14) days of interrupted summer parenting
    time with the minor child . . . .”
    
    Id.
     In essence, the court increased Father’s parenting time by extending the alternating
    weekend parenting time to Tuesday morning, adding a weeknight overnight visitation
    once the child starts school, and adding fourteen days of extended visitation in the
    summer.
    Although the post-dissolution court granted Father’s request for additional
    parenting time, Father contends that the court abused its discretion by only minimally
    increasing his parenting time, delaying the start for some of that increase, and ordering
    parenting time that Father would have received under the Visitation Guidelines anyway at
    the child’s subsequent birthday.     But, again, we will not reverse a parenting time
    determination unless the post-dissolution court manifestly abuses its discretion.
    Saalfrank, 899 N.E.2d at 681. The post-dissolution court did not explain the reason
    behind the minimal increase in parenting time, but Mother testified that she believed the
    best interest of the child, given her young age, would be served by consistency and
    stability, including sleeping in her own bed. Considering the child’s age, the fact that the
    court increased Father’s parenting time from what had been ordered in the Decree, and
    Mother’s testimony that the child needs stability and consistency, we cannot say that the
    post-dissolution court abused its discretion by refusing to increase Father’s parenting
    time further.
    13
    Conclusion
    We conclude that the post-dissolution court erred when it modified Father’s
    weekly child support to $300. Although the evidence supports a modification of the
    support order, the court’s determination of Father’s income is clearly erroneous. The
    previous hearing was held after the third quarter of 2011 and, therefore, required the court
    to extrapolate Father’s 2011 total income. We reverse the Order with respect to the
    amount of Father’s child support obligation and remand for the court to hold a new
    hearing to determine his child support obligation. And on remand the post-dissolution
    court shall also determine whether Mother is entitled to attorney’s fees for this appeal.
    We further conclude that the post-dissolution court did not abuse its discretion
    when it denied Father’s petition to modify physical custody. Nor has Father shown that
    the court abused its discretion when it modified his parenting time.
    Affirmed in part, reversed in part, and remanded with instructions.
    KIRSCH, J., and MAY, J., concur.
    14