967 N.W.2d 452
N.D.2021Background
- Parties married in 2008 with three minor children; Ashley (preschool teacher/fitness instructor) sued Chad (financial advisor) for divorce in 2019.
- Parties entered a partial stipulation: equal residential responsibility and division of assets/debts; child support and spousal support reserved for trial.
- At trial the district court found Chad was self-employed, averaged his income over five years, and ordered $2,120/month child support.
- The court also found Ashley needed spousal support and that Chad had the ability to pay, awarding $2,000/month for five years.
- Chad appealed, arguing he is not self-employed (W-2 wages, no control over Wells Fargo), certain amounts were improperly treated as income (debt-offset wages and forgiven Wells Fargo loans), and the court failed to analyze his ability to pay spousal support given assumed debts.
- The Supreme Court reversed the self-employment finding, held amounts regularly forgiven by Wells Fargo are in-kind gross income, reversed the spousal-support award for lack of rationale, and remanded for recalculation and reconsideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Chad "self-employed" for child-support purposes? | Chad’s compensation is commission/performance based and he controls client acquisition, so self-employment classification appropriate. | Chad receives W-2 wages, takes no self-employment deductions, and lacks significant control over Wells Fargo, so he is not self-employed. | Reversed: no evidence he "to a significant extent" directly or indirectly controls Wells Fargo; finding of self-employment was clearly erroneous. |
| Should Wells Fargo loan forgiveness and Dougherty wage allocations be included in gross income? | Forgiven loan amounts and allocated wages are compensation or in-kind income tied to employment and should be included. | Such items are not recurring cash wages and should not be included as gross income. | Partially held: amounts regularly forgiven by Wells Fargo are in-kind gross income; district court must reevaluate inclusion of other items on remand. |
| Is averaging multiple years of income appropriate for support calculation? | Averaging is appropriate to capture income fluctuations (commissions/bonuses). | If not self-employed, five-year averaging under self-employment rules is improper. | Majority reversed self-employment but did not bar income averaging; concurrence emphasized guidelines allow averaging fluctuating income regardless of employment status — remand permits district court to explain any averaging used. |
| Did the district court adequately assess Chad’s ability to pay spousal support? | Ashley needs support; Chad has ability to pay. | Chad’s monthly debts/expenses may exceed income; court failed to analyze ability to pay given assumed debts. | Reversed and remanded: court’s findings lack analysis of Chad’s income, expenses, and large assumed debts, so rationale for ability to pay is unclear. |
Key Cases Cited
- Wolt v. Wolt, 930 N.W.2d 589 (N.D. 2019) (discussing self-employment income from employment entities and control analysis)
- Halberg v. Halberg, 777 N.W.2d 872 (N.D. 2010) (net income is essential to guideline child support calculation)
- Minar v. Minar, 625 N.W.2d 518 (N.D. 2001) (court must clearly set forth how it arrived at income/support amounts)
- Wilson v. Wilson, 855 N.W.2d 105 (N.D. 2014) (definition of gross income under guidelines is very broad)
- Schiff v. Schiff, 611 N.W.2d 191 (N.D. 2000) (averaging fluctuating income under guidelines may be appropriate)
- Knudson v. Knudson, 916 N.W.2d 793 (N.D. 2018) (Ruff–Fischer factors require enough explanation to determine the court’s reasons for spousal-support awards)
- Meyer v. Meyer, 679 N.W.2d 273 (N.D. 2004) (remand appropriate when the court’s rationale for spousal support cannot be discerned)