Farr v. Little

         Appeal from the Superior Court of the State of Alaska, Third Judicial District, Superior Court No. 3AN-16-05573 CI Anchorage, Patrick J. McKay, Judge.

          John C. Pharr, Law Offices of John C. Pharr, Anchorage, for Appellant.

          Notice of nonparticipation filed by Cameron K. Compton, Law Offices of Cameron K. Compton, Anchorage, for Appellee.

          Before: Stowers, Chief Justice, Winfree, Maassen, and Carney, Justices.

          [Bolger, Justice, not participating.]

          OPINION

          MAASSEN, Justice.

         I. INTRODUCTION

         Unmarried parents separated and asked the superior court for a custody and child support order. The father was receiving military disability payments but was otherwise unemployed. In calculating his child support liability, the superior court imputed income to him of $40, 000 in addition to his military disability payments. The court also apparently rejected the father's request to deduct business losses, including depreciation, incurred by his rental properties. The father appeals.

         We conclude that several aspects of the superior court's findings of fact are not sufficiently explained for purposes of our review: (1) the basis of the imputed income figure; (2) the effect of employment on the father's disability payments; and (3) whether the father is entitled to deduct claimed business losses from his income. We therefore vacate the child support order and remand for the superior court's further consideration of these issues.

         II. FACTS AND PROCEEDINGS

         A. Custody

         Justin Farr and Brandi Little, the parents of two children, separated in November 2015 following an alleged incident of domestic violence. In March 2016 Little moved for custody of both children, and there was another alleged incident of domestic violence a few weeks later. In November 2016 the custody case went to trial; the court ultimately concluded that the domestic violence presumption applied against Farr, and it therefore awarded physical and legal custody to Little.^[1]

         B. Child Support

         In July 2016 Little filed a motion for child support. The parties disputed several distinct issues related to Farr's income that are relevant to this appeal: his earning capacity, his claimed loss of income from rental properties, and other deductions from his income.

         The parties first disputed whether Farr could work at all. He had served in the Air Force for 16 years in a variety of capacities, including Special Operations and Pararescue. He was medically separated from the Air Force in 2012 after injuring his back in an explosion near his convoy. The military considered him 80% disabled, and medical separation resulted in disability payments of $21, 185.76 per year. According to the superior court's later findings, Farr "[did] not appear to have held a full-time job since his separation" from the Air Force.

         Little disputed the extent of Farr's disability. In her motion for child support she asked the court to impute income to him because he was "working as a HVAC mechanic for free" and there was "no reason that he should be unemployed." Pointing to an average salary for an HVAC mechanic of $61, 712, Little asserted that Farr's adjusted annual income including his military disability should be $70, 134.88. Farr's opposition stressed that he was 80% disabled, making any unemployment involuntary. Apparently in response to Little's claim that he was working as an HVAC mechanic, Farr submitted an affidavit from the owner of a carpet-cleaning business attesting that he "[was] not an employee" and was not being paid for the work he was doing to help her keep the business afloat after her former husband "became unable to operate the business."

         Based on the motion and opposition, the superior court issued an interim child support order requiring Farr to pay $466.70 total per month for the two children, including a health insurance adjustment. The court did not impute income to Farr, but it noted that its final support calculation could be "higher because of imputation or withheld income sources."

         Little's trial brief did not reiterate the claim that Farr could be making money as an HVAC mechanic, but focused instead on his alleged "opportunity to make $225, 000 a year" as a defense contractor and his "many job offers"; on the basis of these allegations, Little asked the court to impute income at the $120, 000 maximum for child support purposes. Farr's trial brief addressed child support only cursorily, saying that the issue had already been briefed and that he would "present testimony from his parents about his payment of child support to his parents" for a child of his from an earlier relationship.

         At the trial, Little did not introduce any evidence that Farr had previously worked or could work as an HVAC mechanic or provide the estimated salary information. Instead, Little focused her cross-examination of Farr on custody issues, Farr's six-figure job offers, his rental income, and whether he paid child support to his parents for their care of Farr's older child.^[2]

         Farr testified that after his injury he had received offers to work for Boeing for $ 150, 000, $225, 000, and $255, 000 per year. He also testified that he would try to get a job but that he did not know whether he could actually get one given his back injury and history of concussions. The court later summarized Farr's testimony as admitting that "he was employable and capable of earning a six figure income." But the court saw "a bit of a catch 22": while it "believe[d] that Mr. Farr is capable of making money above his current disability pay, " it was "less certain" that Farr could transfer his military skills to high-paying civilian employment. The court nevertheless found that "Farr has the ability to have an after-tax income for child support purposes of $40, 000 annually plus his military disability."

         Farr also raised the issue of losses he claimed to have incurred on two rental properties he owned in Wasilla. He had not included these on the DR-305 affidavit submitted for child support purposes. But he had claimed significant deductions for the properties on his tax returns from 2013 to 2015, including depreciation and other expenses, ultimately amounting to a loss of approximately $40, 000 each year. The superior court appeared skeptical of these losses at trial: "Is he really losing money on his apartments or is he losing money because of depreciation and things of that nature?" Ultimately the court made no findings about the Wasilla properties and did not separately itemize any business losses in its calculation of income. Its final child support order found Farr's total adjusted annual income to be $62, 207.76, which required Farr to pay $1, 646.37 per month, including a health insurance adjustment.

         On appeal, Farr challenges the court's imputation of income, blaming Little for the lack of evidentiary support for the $40, 000 figure; he claims that Little "did not address child support other than to state that Mr. Farr was not paying any and that she was not the source of his financial strain." He asserts that her failure to present evidence precluded the court from imputing income to him. He also challenges the court's failure to incorporate into its income calculation his claimed self-employment losses from the rental properties.

         Little did not participate in this appeal.

         III. STANDARD OF REVIEW

         "We review an award of child support for abuse of discretion."^[3] But "[w]e review the superior court's factual findings regarding a party's income for purposes of calculating child support for clear error."^[4] "The trial court's determination of an obligor's imputed income is a factual finding that we review for clear error."^[5] "Whether the superior court applied the correct legal standard to its child support determination is a question of law that we review de novo."^[6]

         IV. DISCUSSION

         A. The Imputation Of $40, 000 In Income To Farr Requires Reconsideration On Remand.

         We have explained that under Alaska Civil Rule 90.3(a)(4), "[i]t is appropriate to impute income to an obligor if a parent's current situation and earnings reflect a (1) voluntary and (2) unreasonable decision to earn less than the parent is capable of earning."^[7] "The court must consider the 'totality of the circumstances' in deciding whether an obligor is unreasonably underemployed, "^[8] including "such factors as whether the obligor's reduced income is temporary, whether the change is 'the result of economic factors or of purely personal choices, ' the children's needs, and the parents' needs and financial abilities."^[9] The parent with primary physical custody has the burden to make a prima facie case that the obligor parent is voluntarily and unreasonably under- or unemployed; after that initial burden is met, "the burden of persuasion shifts to the obligor to rebut that claim."^[10]

         1. Little made a prima facie case that Farr was voluntarily and unreasonably unemployed.

         Farr argues that it was inappropriate to impute income to him based on voluntary and unreasonable unemployment. But the superior court's implied conclusion - that Little made a prima facie case that Farr failed to rebut^[11] - is consistent with our precedent.^[12]

         In Sawicki v. Haxby, we affirmed a superior court's determination that a father carried his preliminary burden to make a prima facie case when the mother "concede[d] that she voluntarily left her job" and the father showed she did so "to take a job paying approximately half what she earned before."^[13] The prima facie case was "bolstered by evidence that [the mother's] reduced income may be temporary, that her work history and qualifications indicate she could be making substantially more money, and that she had significant liquid assets at her disposal from which to satisfy her child support obligation."^[14]

         In another case, Beaudoin v. Beaudoin, we remanded for an evidentiary hearing after concluding that the father made a prima facie case by "offer[ing] evidence indicating that [the mother] had previously held a job, that she was capable of obtaining gainful employment, and that she was actually working without pay."^[15] The mother gave up employment to be a "full-time mom" but remained unemployed after her custody changed from full-time custody of three children to half-time custody of two.^[16]

         In Little's motion for child support she asserted that Farr was "working for free based on his own admission, " apparently referring to his explanation at the trial setting conference, the day before, that he was "donat[ing] [his] time" to his neighbor's carpet-cleaning business to help her avoid losing it.^[17] This was evidence that he was capable of working, at least part time, but was not doing so. And the superior court found after trial that Farr had testified "he was employable and capable of earning a six figure income." Although the court had doubts about this testimony, it was sufficient to satisfy Little's burden of making a prima facie case that Farr was voluntarily and unreasonably unemployed, shifting the burden of persuasion to him.

         2. The superior court's findings are insufficient to support its decision to ...