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Jury v. Jury

Court of Appeals of New Mexico

February 2, 2017

COLETTE C. JURY, Petitioner-Appellant,
v.
VICTOR R. JURY, Respondent-Appellee.

         APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY Deborah Davis Walker, District Judge

          Caren I. Friedman Santa Fe, NM Bishop Law P.C. Julie Bishop Albuquerque, NM for Appellant.

          Kerry Kiernan, P.C. Kerry Kiernan Albuquerque, NM for Appellee.

          OPINION

          JAMES J. WECHSLER, JUDGE

         {1} This case arises from the district court's denial of Petitioner Colette C. Jury's motion to modify the child support decree (the 2010 decree) that resulted from the dissolution of the marriage between Petitioner and Respondent Victor R. Jury. After considering evidence of the parties' updated financial information, the district court ruled that the 2010 decree was not subject to modification because neither party demonstrated material and substantial changes in circumstances affecting the welfare of the children.[1]

         {2} Petitioner claims that the district court's ruling resulted from its erroneous determination of the parties' gross monthly incomes and, by extension, child support obligations. Respondent argues that, even if the district court miscalculated the parties' gross monthly incomes, its determination that no material and substantial changes in circumstances affecting the welfare of the children occurred is dispositive.

         {3} District courts have discretion to deviate from the child support guidelines, NMSA 1978, § 40-4-11.1 (2008), as provided in NMSA 1978, Section 40-4-11.2 (1989). However, such discretion does not extend to the process of calculating the parties' gross monthly incomes. Calculation of the parties' gross monthly incomes must conform to the child support guidelines or precedential appellate court interpretation of the child support guidelines. Therefore, to the extent that the district court improperly deviated from the child support guidelines in calculating the parties' gross monthly incomes, we reverse and remand for recalculation.

         {4} We recognize, however, that recalculation alone does not resolve the central issue raised on appeal. Petitioner asks this Court to conclude that changes in income indicated by the parties' updated financial information entitled her to a modification of the 2010 decree as a matter of law. Because the testimony and evidence offered at trial does not support a modification at common law, we are unable to so conclude. However, if recalculation of the parties' gross monthly incomes results in a deviation upward of more than twenty percent of the existing child support obligation, Petitioner is entitled to "a presumption of material and substantial changes in circumstances" as provided by NMSA 1978, Section 40-4-11.4(A) (1991).

         {5} The district court's deviation from the child support guidelines in calculating the parties' gross monthly incomes potentially deprived Petitioner of a presumption of material and substantial changes in circumstances to which she was entitled as a matter of law. If, on remand, the district court's recalculation of the parties' gross monthly incomes results in a presumption of material and substantial changes in circumstances under Section 40-4-11.4, the district court shall reconsider whether Petitioner is entitled to a modification of the 2010 decree in light of this opinion.

         {6} Petitioner additionally argues that the district court lacked evidence to support its prospective reduction of the amount of child support awarded in the 2010 decree. Respondent argues that the reduction was appropriate but agrees that the district court's failure to articulate how it determined the recalculated amount requires remand. Because Respondent agrees that error occurred, we decline to provide additional legal analysis. On remand, the district court shall determine whether, and to what extent, the 2010 decree was subject to modification given the changes in circumstances occurring on or around June 1, 2015.

         {7} Because our reversal and remand undermines the district court's rationale for awarding certain attorney fees, such awards to Respondent in the amounts of $15, 000 and $750 are reversed. However, we affirm the district court's award of attorney fees arising from post-judgment proceedings in the amount of $1, 500 to Respondent.

         BACKGROUND

         A. The 2010 Decree

         {8} On September 11, 2006, Petitioner filed a petition to dissolve her marriage to Respondent. The district court's February 22, 2010 judgment and order finalized numerous matters between the parties, including the child support obligation. At the time of the 2010 decree, the parties had two minor children of the marriage, ages thirteen (Son) and nine (Daughter). Respondent derived the majority of his income from his employment at, and shareholder interest in, Summit Electric Co., Inc. (Summit Electric) and his shareholder interest in Jury & Associates, LLC (Jury & Associates). Petitioner did not work outside the home.

         {9} Substantial testimony and evidence related to the parties' income and financial resources was offered at trial. Exhibits 16 and 16A, which were filed as supplemental exhibits to the appellate record on July 14, 2016, appear to have featured prominently in the district court's 2010 determination. Exhibits 16 and 16A contained statements of Respondent's gross income, cash received, income taxes paid, and net income for the years 2001 through 2009. Applying the financial information in these exhibits, the district court concluded that Respondent had an "earning capacity" of $750, 000 per year. In its ruling from the bench, the district court explained that $750, 000 was not Respondent's actual gross annual income, but instead represented a conscious deviation downward. While discussing specific evidence of Respondent's then-current year earnings, the district court stated "I think, if anything, the $750[, 000] is low."

         {10} After arriving at an annual income of $750, 000, the district court subtracted $120, 000 paid by Respondent to Petitioner in spousal support. It then divided the total amount by twelve, resulting in a gross monthly income for Respondent of $52, 500.

         {11} The district court calculated Petitioner's income by combining her spousal support award and $4, 000 per month of imputed earning capacity. It then divided the total amount by twelve, resulting in a gross monthly income for Petitioner of $14, 000.

         {12} Having calculated the parties' combined gross monthly income to be $66, 500, the district court calculated the percentage of combined gross monthly income. It credited Respondent with seventy-nine percent of the parties' combined gross monthly income and Petitioner with twenty-one percent of the parties' combined gross monthly income.

         (13} The district court then determined the basic child support obligation to be $10, 707. Although the child support guidelines in effect in February 2010 did not allow for basic calculation of a combined gross monthly income of $66, 500, the district court elected to apply the historical formula to determine the basic child support amount.[2]

         {14} The district court also calculated the total child support obligation, the retained portion based upon custody, and the parties' individual child support obligations. The custodial calculation was based upon the children residing with Petitioner fifty-five percent of each month and residing with Respondent forty-five percent of each month. The district court calculated Petitioner's monthly obligation to be $1, 518 and Respondent's monthly obligation to be $6, 978. It reconciled these obligations to result in $5, 460 owed by Respondent to Petitioner each month. It reduced this amount by twenty-one percent of additional expenses, including the cost of the children's health care insurance and private school tuition. After these reductions, Respondent's total monthly child support obligation was $4, 872. In accordance with Section 40-4-11.4(B), the district court ordered that the parties exchange updated financial information each year. The merits of the 2010 decree are not on appeal or subject to reconsideration by this Court.

         B. The 2014 Denial of the Parties' Motions to Modify the 2010 Decree

         {15} Respondent provided updated financial information to Petitioner on November 14, 2011. On December 6, 2011, Petitioner filed a motion to modify the 2010 decree based upon a "deviation upward of greater than twenty percent of the existing child support obligation[.]" Respondent filed a motion in opposition on April 16, 2013, as well as his own motion to modify the 2010 decree on January 7, 2014. He based his motion to modify the 2010 decree upon allegations of substantial changes in circumstances to the custodial time sharing and changes in the parties' incomes.

         {16} On January 30, 2012, the district court appointed James W. Francis, CPA, as a Rule 11-706 NMRA expert in the case. He prepared a report that (1) analyzed the parties' 2011 gross incomes and (2) updated Exhibit 16A from the November 2009 trial with Respondent's financial information from 2009 through 2011.

         {17} The trial was conducted between April 30, 2014 and May 2, 2014. Francis testified as to his conclusions about the district court's previous determination of Respondent's gross income, stating,

[In 2009] the judge . . . took an average of the prior eight or nine years [of] after-tax cash income, averaged those out, and it came up to about $750, 000. . . . The court then . . . subtracted from that $750, 000, $120, 000, which was the spousal support that [Respondent] was paying, $10, 000 a month. That left a balance of $630, 000, which the court divided by twelve, and said that [Respondent's] monthly income for child support purposes was $52, 500. So, if the court were to follow the exact same model . . . [Respondent's] income for 2011, using the deviations that I described, would be $2, 785, 363. But that's just for 2011.

         {18} Francis additionally testified that Respondent's 2011 gross income was comprised of salary from Summit Electric and pass-through earnings proportionate to his ownership shares in Summit Electric and Jury & Associates. On direct examination, counsel for Petitioner implied that the 2010 decree resulted from an improper application of the child support guidelines because the district court deducted income taxes paid from Respondent's gross income. Francis replied that pass-through income from certain corporate entities is, sometimes, subtracted from gross income by courts as cash not received by the party. On cross-examination, Francis agreed with counsel for Respondent that S-corporations frequently pass through profits to shareholders for the purpose of paying income taxes.

         {19} The parties testified as to the welfare of their children, essentially agreeing that the children lack for nothing and are well provided for by both parents. The parties also agreed that Son, of his own volition, currently resided with Respondent full-time, but disputed the date on which this transition occurred. Based upon motions filed during 2012, the district court ruled that Son ceased residing with Petitioner in late 2011.

         {20} The district court denied both parties' motions to modify the 2010 decree. As rationale for its denial, the district court offered the following statements:

I did the best job I could [in 2009]. And I think it's very interesting to note that, according to the report that you both stipulated into evidence and you both essentially agreed with, number-wise, that [Respondent's] income after deduction for the tax payment was $711, 562 [in 2009], and I put his income at $750, 000. I think, all things considered, that was pretty close. I estimated that [Petitioner's] earning capacity, in addition to her spousal support, was about $4, 000, based on the testimony that I heard and I think it's still at that point.
. . . .
And I said at the time, I don't want to see you back in a year, or two years. I knew that [Respondent] . . . by all accounts, he's a very capable businessman. He runs a very successful company. The income fluctuates up and down, through the last eleven years. There is a huge variation from year to year. So I was well aware at the time that I could pick a number and then the next year the numbers would be twice that much.
Now, under the statute, and there was a quote from Spingola [v. Spingola, 1978-NMSC-045, 91 N.M. 737, 580 P.2d 958');">580 P.2d 958, ] the court can only modify child support if there is a material and substantial change in circumstances which would, since the last order was entered, which would warrant the modification of the child support.
. . . .
I picked what I thought was a reasonable number [in 2009]. If [Petitioner] didn't like that number, she should have appealed at the time. I can't ...

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