Jury v. Jury, 34,257

Background

Marriage dissolved by 2010 decree: two minor children; Respondent (Victor) earned mainly from Summit Electric and Jury & Associates; Petitioner (Colette) was not employed outside the home. Child support was set in 2010 at $4,872/month from Respondent after calculations that imputed incomes and applied a historical formula.
The 2010 order required annual exchange of financial information. Petitioner moved to modify in 2011 alleging an upward deviation >20%; Respondent filed a competing motion in 2014.
A Rule 11-706 CPA (Francis) prepared an income analysis for 2011; trial occurred in April–May 2014. The district court denied both modification motions in June 2014, explained its use of a multi‑year averaging method and post‑tax figures for Respondent, and reduced Respondent’s support prospectively in light of the older child reaching majority.
Petitioner appealed, arguing the district court miscalculated gross monthly incomes (tax deductions, ten‑year averaging, and continued imputation for Petitioner) and thus improperly denied modification and awarded attorney fees to Respondent.
The Court of Appeals found the district court abused discretion by deviating from the child support guidelines in calculating gross income (tax subtraction, ten‑year averaging, and not using Petitioner’s 2011 actual income) and reversed and remanded for recalculation; it affirmed a $1,500 post‑judgment fees award but reversed the $15,000 and $750 awards tied to the merits.

Issues

Issue	Plaintiff's Argument (Jury)	Defendant's Argument (Jury)	Held
Proper method to calculate gross income for child support	District court miscalculated gross income (deducted taxes; used ten‑year average for Respondent; continued imputing Petitioner’s income rather than using 2011 AGI)	Even if calculation errors occurred, no material & substantial change occurred to warrant modification	Court: Calculation of gross income must follow §40‑4‑11.1 and case law; district court erred by deviating (tax subtraction, excessive multi‑year averaging, failure to use Petitioner’s 2011 income). Reverse & remand for recalculation
Tax treatment of pass‑through and W‑2 income	Taxes should not be broadly subtracted from gross income; cash distributions used to pay K‑1 taxes may be gross income per Clark	District court relied on after‑tax “cash received” figures in 2010 and continued similar approach	Court: Pre‑tax income is the baseline; Clark allows attributing S‑corp distributions to gross income except where distribution was used for bona fide business purposes or solely to pay K‑1 tax liabilities — but the district court improperly blended tax payments across income types
Use of multi‑year averaging to smooth fluctuating business income	Ten‑year averaging distorted current earning capacity; plaintiff entitled to recalculation using appropriate period	District court defended its ten‑year average as reasonable given fluctuations and lack of some year data	Court: No authority supports a ten‑year average; multi‑year averaging may be used in some fluctuating‑income contexts but ten years is generally unreliable — remand to recalculate using appropriate method and explain calculations
Effect of recalculation on modification threshold and attorney fees	Recalculation could produce >20% deviation entitling Petitioner to statutory presumption of material & substantial change under §40‑4‑11.4(A); fee awards premised on district court prevailing should be revisited	Respondent: Even if miscalculation, district court found no material change on the merits; post‑judgment enforcement fees are separate	Court: If recalculation yields >20% upward deviation, petitioner gets a presumption; court must then consider whether presumption was rebutted under Spingola factors. Because remand undermines the merits outcome that supported two attorney‑fee awards, those fees are reversed; $1,500 post‑judgment enforcement fees affirmed

Key Cases Cited

Spingola v. Spingola, 91 N.M. 737, 580 P.2d 958 (N.M. 1978) (traditional substantial‑change welfare test and Spingola factors for discretionary modification)
Boutz v. Donaldson, 128 N.M. 232, 991 P.2d 517 (Ct. App. 1999) (district court may not rely on stale or inconsistent income periods and may not deduct hypothetical tax consequences when computing gross income)
Clark v. Clark, 320 P.3d 991 (N.M. Ct. App. 2014) (S‑corporation distributions actually distributed to shareholders are attributable to gross income unless used for business purposes or solely to pay K‑1 tax allocations)
Klinksiek v. Klinksiek, 136 N.M. 693, 104 P.3d 559 (Ct. App. 2005) (Section 40‑4‑11.1 requires inclusion of income from any source; court may not exclude rental income from gross income)
Tedford v. Gregory, 125 N.M. 206, 959 P.2d 540 (Ct. App. 1998) (trial court must calculate parents’ incomes for applicable periods and state reasons for any deviation from guidelines)