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

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www.nebraska.gov/apps-courts-epub/
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Nebraska Supreme Court A dvance Sheets
300 Nebraska R eports
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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ARMKNECHT v. ARMKNECHT
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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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ARMKNECHT v. ARMKNECHT
Cite as 300 Neb. 870
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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Cite as 300 Neb. 870
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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ARMKNECHT v. ARMKNECHT
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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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ARMKNECHT v. ARMKNECHT
Cite as 300 Neb. 870
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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ARMKNECHT v. ARMKNECHT
Cite as 300 Neb. 870
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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300 Nebraska R eports
ARMKNECHT v. ARMKNECHT
Cite as 300 Neb. 870
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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ARMKNECHT v. ARMKNECHT
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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
Id.
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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
Id.
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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.