Mathis v. Mathis

Citations: 2000 SD 59; 609 N.W.2d 773; 2000 S.D. LEXIS 58Docket: None

Court: South Dakota Supreme Court; May 3, 2000; South Dakota; State Supreme Court

Original Court Document: View Document

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Allan D. Mathis appealed a decision from the South Dakota Circuit Court regarding his child support obligations to his ex-spouse, Beth C. Mathis. Following their divorce on March 23, 1998, Allan was ordered to pay $1,226 monthly for the support of their four minor children. Allan later petitioned for a modification, citing a reduction in income and the graduation of one child to adulthood. Beth opposed the modification, contending that no substantial change in Allan's financial circumstances had occurred and that any income reduction was voluntary.

The Child Support Referee, John Feehan, reviewed the case on March 24, 1999, and determined that Allan failed to provide sufficient evidence for a change in his income. The referee noted that Allan had sold stock for $50,756, which was annualized to a monthly income of $4,229.67, bringing Allan's total monthly income to $6,183.33. Consequently, the referee increased Allan's monthly child support obligation to $1,247.

Allan appealed this decision to the Circuit Court, which upheld the referee's findings and calculations. The central legal question on appeal was whether the trial court erred in adopting the referee's child support order. The South Dakota Supreme Court ultimately affirmed the Circuit Court's decision.

Child support referee findings of fact are reviewed under the clearly erroneous standard, while legal questions are fully reviewable. Mixed questions of law and fact are treated as legal questions, reviewed de novo. When a circuit court adopts a referee's findings, the clearly erroneous standard applies to findings of fact, with no deference given to conclusions of law. A reviewing court will not overturn findings unless there is a definite conviction that a mistake was made, recognizing that the referee, as the fact finder, assessed witness credibility directly. Conclusions of law by the referee can be overturned if found incorrect.

The trial court's legal error regarding the adoption of the referee's child support order is assessed. The determination of each parent's monthly net income is governed by SDCL 25-7-6.3, which outlines that net income is gross income minus allowable deductions, including various income sources such as wages, self-employment income, pension payments, investment income, and unemployment benefits. For non-regular income, a monthly average is calculated.

In Allan's case, the referee faced challenges in determining his income due to inconsistent figures provided by him. Key findings include: Allan did not complete a financial statement estimating his present income; claimed $1,000 monthly wages; reported $4,975 monthly income on a financial statement for a lender; and his 1998 tax return showed total income of $19,978, or $1,953.67 per month after adjustments.

Allan was found to be inconsistent in his reporting of net income, often adjusting figures to his advantage for loan applications or child support modifications. The referees and trial court determined that Allan failed to demonstrate a "substantial change of circumstances" necessary for modifying child support, as required by SDCL 25-7A-22. Their conclusion was based on Allan’s fluctuating income reports, which did not provide adequate justification for a change in child support obligations. The court noted that even if the referee made an error, the conclusion was still supported by the record. Beth’s request for $1,329.98 in attorney fees was granted due to the affirmation of the referee's findings. The decision was upheld by the majority, with a dissent from Justice Sabers regarding the trial court's inclusion of stock sale gains as part of Allan's income.

The appeal focuses on the interpretation of SDCL 25-7-6.3(5), which dictates that child support calculations must consider the net income of each parent by deducting allowable expenses from gross income. The statute specifically includes "gain or loss from the sale, trade or conversion of capital assets" as part of gross income. The term "gain" is defined as the appreciation in value of assets, indicating that only the profit from asset sales, not the total proceeds, should be counted as income for support purposes.

Beth's arguments in her appellate brief reference various cases to support her position that all proceeds from asset sales should be included as income. However, these arguments are rendered irrelevant by the explicit language of the statute, which limits the definition of income to the gain alone.

In this case, the referee incorrectly calculated Allan's monthly gross income by including the entire sale amount of stock ($50,756) instead of just the capital gain, which was determined to be $5,842 after accounting for the stock's cost basis. This erroneous inclusion led to an incorrect increase in Allan's child support obligation. Ultimately, the court concluded that the referee and trial court erred in their legal interpretation by not adhering to the statute's clear mandate regarding income calculation for child support.

Beth argues that the $50,756 should be considered income for Allan under SDCL 25-7-6.5, which allows for the consideration of parental assets if a child's needs are unmet by parental income. However, it is premature to apply this statute, as there has been no finding that the child's needs are not being met. Furthermore, SDCL 25-7-6.3(5) explicitly states that the cost basis of stock cannot be counted as income. Although Allan's financial presentation to the referee was criticized, it does not justify a legal error. The trial court's inclusion of the stock's cost basis as Allan’s income is deemed erroneous, warranting a remand for a proper assessment of his income and child support obligations.

Allan had previously stipulated to a monthly income of $6,667 at his divorce proceedings. Despite claiming a significantly lower income of $1,000 per month during a March 1999 hearing, a Uniform Residential Loan Application submitted by Allan indicated an income of $4,975 per month, raising questions about his income declarations. Allan's petition for modification of child support cited a substantial income drop since the divorce, but the referee found sufficient grounds for a modification based on a significant change in circumstances, effective June 1, 1999, coinciding with the oldest child's high school graduation.

Confusion regarding Allan's financial status arises from his sole ownership of a restaurant, where he reports a salary of $1,000 per month, which is classified as an expense. Beth contends that any decrease in Allan's income is voluntary and linked to management issues he has faced. The referee concluded there was no recommendation for deviation from the child support guidelines at that time. Beth referenced a Tennessee case, Smith v. Smith, to support her position regarding the need to consider all relevant financial factors in determining child support obligations.