In re the Marriage of: Laurel A. Ferris, petitioner, Respondent (A12-2154), Appellant (A13-0558),
Edward H. Szachowicz, Appellant (A12-2154), Respondent (A13-0588)
Hennepin County District Court File No. 27FA000275703.
Kathleen M. Newman, Kathleen M. Newman Associates, P.A., Minneapolis, Minnesota (for respondent/cross-appellant)
Diane B. Bratvold, Daniel J. Supalla, Briggs and Morgan, P.A., Minneapolis, Minnesota; and Debra E. Yerigan, Messerli & Kramer, P.A., Minneapolis, Minnesota (for appellant/cross-respondent)
Considered and decided by Hudson, Presiding Judge; Peterson, Judge; and Stoneburner, Judge.
In these consolidated appeals of separate rulings on two post-judgment motions in this marital-dissolution action, wife argues that the district court erred by (1) using a four-year average to calculate husband's income; (2) failing to make findings to support denial of need-based attorney fees; (3) denying conduct-based attorney fees; and (4) permitting husband to relitigate, in a new motion brought while husband's motion to amend the denial of his first motion was pending, the same issues that were fully litigated and decided in proceedings on the first motion. Husband argues that the district court abused its discretion by failing to grant modification of his maintenance obligation from the date of his first motion through the date of his second motion. Because all of the challenged decisions fall within the broad discretion of the district court, which ultimately reached a correct decision, we affirm.
The marriage of Laurel A. Ferris (wife) and Edward H. Szachowicz (husband) was dissolved by decree in July 2004. At that time, husband's annual income from his solely owned plastic-surgery business was determined to be $313, 000, based on a three-year average of fluctuating income. Husband's monthly budget was determined to be $8, 659. Wife was found to have annual income of $42, 000 and a monthly budget of $12, 596 for herself and the parties' only child. Husband was ordered to pay $1, 744 per month in child support and $10, 000 per month in permanent spousal maintenance. On appeal, this court affirmed the amount and duration of maintenance. Ferris v. Szachowicz, No. A05-553, 2006 WL 9576, *6-7 (Minn.App. Jan. 3, 2006).
In June 2006, to resolve cross-motions concerning support, the parties agreed to modify husband's maintenance and support obligations. The agreement, which was read into the record, involved, in relevant part, husband's employment of a financial consultant chosen by wife to equally divide between the parties the profits from husband's business. In March 2010, on wife's motion, the district court terminated the agreement and reinstated the maintenance and support obligations contained in the decree as modified by cost-of-living adjustments. Husband subsequently employed the financial consultant as his business manager to assist in financial decision-making for the business.
In a motion filed with the court in June 2011 and amended in November 2011 (first motion), husband sought modification of his maintenance and child-support obligations. Husband claimed a reduction in income stemming from a 75% loss of business referrals, increased rent and expenses, business-related loan debt, tax arrearages, and the economic recession. Husband supported his motion with his own affidavit explaining the changes he had been required to make to the business and stating that he could only meet his support obligations by not paying taxes. Husband also provided tax and budget records and documents; an affidavit from a certified public accountant opining that husband's monthly pre-tax cash flow was $13, 984 and describing the growing tax debt; an affidavit from the financial consultant/business manager, detailing the dire financial circumstances of the business, the decrease in husband's income, and the austerity measures undertaken to keep the business running; and an affidavit from a specialist in practice management and marketing in the field of plastic surgery, explaining the effect of the recession on plastic surgeons. Wife opposed the motion and moved for need-based and conduct-based attorney fees. Wife supported her opposition to the motion with the affidavit of a certified public account who, by including repayment of loans from husband's retirement account to the business and excluding husband's payment of a claimed business loan, opined that husband's income had actually increased since the decree.
By order dated April 11, 2012, the district court denied husband's motion, concluding that he had failed to establish a substantial change in circumstances that warranted modification of his support obligations. To reach this conclusion, the district court credited wife's expert's inclusion of loan repayments as income, used a three-year income average rather than the five-year average urged by husband, and did not deduct a monthly payment for the claimed business loan, stating that evidence about the loan was "sparse" and noting that husband "did not provide one piece of documentary evidence that delineates the details of the loan . . . ." The court implicitly denied wife's motion for need-based attorney fees and explicitly denied her motion for conduct-based attorney fees, finding that husband did not "unnecessarily contribute to the length and expense of the proceeding."
In May 2012, husband moved for amended findings, and wife opposed the motion. In June 2012, before the motion for amended findings was heard, husband filed another motion for modification of his support obligations (second motion). As in his first motion, husband cited loss of business, the recession, mounting tax arrearages, and business-loan debt as the basis for his claim of changed circumstances resulting in decreased income and inability to meet his tax and support obligations. Husband stated in his affidavit that he was "completely unaware" that payment of $3, 660 per month on a business debt "would receive so much scrutiny, " and reiterated information from the affidavit filed with his first motion about the origin of the debt and the tax savings that resulted from listing both himself and the business as borrowers. He also attached loan documents, the absence of which the district court had commented on in the April 2012 order. Husband testified that since the April 2012 order (1) he had consulted with a bankruptcy attorney who opined that restructuring the business debt through bankruptcy would not provide the necessary cash flow to meet his support obligations and (2) Hennepin County had begun taking steps to suspend his driver's license, without which he could not maintain his practice. Additionally, husband provided an affidavit from the certified public accountant for husband and the business, refuting some of wife's expert's assumptions about husband's business and income and stating that as of June 21, 2012, tax authorities "have filed a tax lien, levied or proposed to levy wages, and have seized/levied one of [husband's] bank account[s], " and opining that without some relief from the district court, husband would have to shut down his business.
Wife opposed husband's second motion, arguing that husband was attempting to relitigate the same issues fully litigated in his first motion. The motion to amend and husband's second motion were heard together in July 2012.
On October 1, 2012, the district court issued three separate orders. The first two orders denied in part and granted in part husband's motion to amend the April 11, 2012 order and set out the amendments to that order, continuing to deny modification of maintenance but granting modification of child support (together, amended April 2012 order). The third order granted husband's second motion to modify maintenance retroactive to the date of the second motion (October 2012 order).
In the amended April 2012 order, the district court used a four-year average to calculate husband's income, but reiterated that there was insufficient evidence to deduct the loan repayment from his income calculation. The four-year income average supported modification of child support but not modification of maintenance. The parties' child has since become emancipated, and the only issue in this appeal relating to child support is the use of a four-year average to calculate husband's income for ...