Raap v. Lenton, 2016 ND 195

Background

Tina Raap and Lance Lenton divorced in 2011; they have one minor child and Raap has primary residential responsibility.
Lenton is a self-employed farmer; the 2011 district court calculated child support using a Farm Credit Service statement and grain value rather than five years of tax returns and set support at $1,458/month.
In 2015 Lenton sought a review; the child support agency averaged his 2012–2014 tax returns and calculated a presumptive support of $637/month; the parties did not stipulate to that amount.
The district court held an evidentiary hearing, rejected the tax returns as not reasonably reflecting Lenton’s income, relied on a "Ratios & Indicators" (R & I) document (and some tax data) to set support at $2,400/month.
Lenton appealed, arguing the court improperly ignored or misapplied the child support guidelines for self-employment income and improperly used the R & I document and other income items.
The Supreme Court reversed and remanded, holding the district court erred as a matter of law by failing to calculate self-employment income under the guidelines (notably the five-year averaging rule) and by not explaining use of tax data it had found unreliable.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court erred by not relying on Lenton's tax returns to determine self-employment income	Raap (plaintiff) supported using alternative evidence because tax returns did not reflect Lenton's true income	Lenton (defendant) argued tax returns should be used (or properly averaged) under guidelines	Court: District court permissibly found the returns unreliable, but must follow guideline procedures when doing so
Whether the court properly used the R & I document (profit/loss-type data) to compute net self-employment income	Raap argued R & I and other statements justified using non-tax financials	Lenton argued R & I was improper or inaccurate and could double-count income	Court: R & I is an acceptable form of financial data, but the court must apply five-year averaging or explain why a shorter period is used
Whether the court complied with the guidelines' five-year averaging for self-employment income	Raap relied on shorter-period R & I averaging to justify higher support	Lenton argued the guidelines require averaging over five years unless activity not on similar scale	Court: Error — court failed to average over the most recent five years or to make findings justifying a shorter period
Whether the district court could use tax-return information it found unreliable to augment R & I-based income	Raap relied on combining sources to reach higher income figure	Lenton contended the court could not rely on returns it deemed "wholly inaccurate"	Court: Error — if the court uses both sources it must explain rationale for using tax information it found unreliable

Key Cases Cited

Halberg v. Halberg, 777 N.W.2d 872 (N.D. 2010) (standards of review and requirement to follow child support guidelines)
Verhey v. McKenzie, 763 N.W.2d 113 (N.D. 2009) (importance of accurately determining obligor net income under guidelines)
Pember v. Shapiro, 794 N.W.2d 435 (N.D. 2011) (administrative child support rules have force of law; interpret them using statutory construction)
Kobs v. Jacobson, 707 N.W.2d 803 (N.D. 2005) (trial court cannot arbitrarily ignore guidelines or tax returns without specific findings)
Knoll v. Kuleck, 688 N.W.2d 370 (N.D. 2004) (same principle regarding reliance on guidelines)
Torgerson v. Torgerson, 669 N.W.2d 98 (N.D. 2003) (courts should not accept inaccurate tax returns for self-employed obligors without scrutiny)
Doepke v. Doepke, 760 N.W.2d 131 (N.D. 2009) (farming income should generally be averaged over five years)
Entzie v. Entzie, 789 N.W.2d 550 (N.D. 2010) (net income from self-employment is IRS total income and must be averaged over five years if on similar scale)
Jelsing v. Peterson, 729 N.W.2d 157 (N.D. 2007) (appellate court will not reweigh evidence)