Christina C. Carolan v. David A. Bell

[1] Christina C. Carolan appeals from a judgment entered in District Court
(Lewiston, LaVerdiere, J.), determining child support obligations between her and
David A. Bell. She asserts that the court erred by imputing to her, for purposes of
calculating annual gross income: (1) the difference between the rent her parents
charge her and the rent they charged the previous tenant; (2) an amount equal to
her employer's cost of health insurance; and (3) income for eight hours of pay
Carolan could be earning if she had a forty-hour work week.1 Because the court
erred in imputing, as income, its estimate of the additional economic value of
Carolan's rent and the wages she might earn if she worked additional hours, not
available at her regular job, we vacate and remand.

I. CASE HISTORY

[2] Carolan and Bell are the parents of a son, now seven years old.
Carolan has no other children. Bell has a thirteen-year-old daughter from a
previous relationship. In 2004, Carolan filed a parental rights action seeking child
support for their son. After issuing a preliminary child support order, the court
bifurcated the parental rights issue and the support issue for separate consideration.

[3] The court (Cote, J.) entered its order on the nonfinancial parental rights
issues on December 23, 2005. The court ordered shared parental rights and
responsibilities. In essence, the order gave custody of the child to Bell from
6:00 P.M. on Sunday until the end of school on Thursday. Carolan would pick up
the child at school on Thursday and keep him until Sunday at 6:00 P.M. The parties
do not dispute this shared parental rights arrangement.2

[4] In April 2006, the court (LaVerdiere, J.) held a hearing on the child
support issue. The testimony revealed the following facts relevant to this appeal.
Carolan has a high school diploma and a technical school degree for work in a dental laboratory. In the past she has worked for various dental laboratories and
has worked in the service industry. At the time of hearing, Carolan was working as
a dental assistant and earning $13.50 per hour.3 Carolan's employer's office is
closed on Fridays; therefore she works approximately thirty-three to thirty-five
hours per week, Monday through Thursday. She then takes her son to school on
Friday, a twenty-eight-mile trip, and typically volunteers at the school that day. [5] Carolan testified that her employer covers her health insurance costs,
but because the health insurance premiums have risen, she has not received a pay
raise in two years. She was unaware of how much her employer actually pays to
maintain her health insurance.

[6] Carolan rents a small single-family home that is owned by her parents.
She pays $1000 per month in rent and pays for all of the utilities. Her oil bill for
the 2005-2006 season was over $1000. Carolan hopes to eventually purchase this
home from her parents. Her parents previously rented the home for $1300 per
month.

[7] Testimony indicated that Bell lives rent-free in a home owned by his
employer, Bell Farms, which is his family's corporation. A real estate broker
testified that the fair rental value of the property was $900 to $1000 per month, although Bell claimed that it is much less. The corporation owns several vehicles
that Bell uses for personal purposes. The corporation also pays most of his
expenses, including his utility bills and insurance. Bell's employer also pays for
his children's health insurance. Bell presented exhibits indicating that Bell's
employer would pay $214.85 per month for a single person insurance plan and
$386.73 per month for a parent and child(ren)'s plan.

[8] In lieu of closing arguments, the court instructed counsel to submit
memoranda and proposed worksheets in support of their positions. Carolan argued
that her gross income should be her income that is reported on her W-2 and that the
court should not impute any additional income to her. Bell argued that the court
should impute additional income to Carolan for: (1) the difference between her rent
and the rent charged the prior tenant; (2) the value of the health insurance that
Carolan's employer pays for her;4 and (3) voluntary underemployment. The court
adopted Bell's suggestions for imputing income in its findings and order
addressing child support.

[9] The court calculated Carolan's gross income based on the following:

Employment 32 x $13.50 x 52 = $22,464.00
Imputed wages to full-time 8 x $10.00 x 52 = $4,160.00
Value of paid health insurance $2,578.00
Value of rent reduction $300.00 x 12 = $3,600.00
TOTAL $32,802.00

The court calculated Bell's gross income based on the following:

W-2 income (including health insurance) $29,542.00
In-kind income provided by employer
House rental $900.00 x 12 = $10,800.00
Electricity $75.00 x 12 = $900.00
Cell phone $60.00 x 12 = $720.00
Home phone $35.00 x 12 = $420.00
Heating oil 550 gallons @
$2.25/gallon =
$1,238.00
Vehicle use/maintenance/
registration and fuel
10,000 miles @
$ .445/mile =
$4,450.00
Insurance on home contents and
vehicle
$446.00
TOTAL $48,516.00

[10] Using the calculations on the child support worksheet, the court
ordered that Bell pay Carolan $28.46 per week for child support. The court also
ordered Bell to maintain health insurance for their son. This appeal followed. Bell
did not file a cross-appeal.

II. LEGAL ANALYSIS

[11] This case requires us to consider the limits of a court's discretion to
impute income to establish annual gross income for child support calculation
purposes pursuant to 19-A M.R.S. § 2001(5) (2006). When calculating gross
income for child support purposes, the court may consider income from any
"ongoing source." 19-A M.R.S. § 2001(5)(A). The law authorizes the court to
impute additional income in certain circumstances, such as when a parent is
voluntarily unemployed or underemployed, 19-A M.R.S. § 2001(5)(D), or when
the parent, as an employee, receives in-kind payments or services, in lieu of wages,
in the course of his or her employment, 19-A M.R.S. § 2001(5)(B).

[12] We review child support orders for abuse of discretion. Sylvester v.
Vitagliano, 2002 ME 141, 10, 804 A.2d 391, 394. However, we review the
District Court's factual findings to determine whether they are clearly erroneous.
Williams v. St. Pierre, 2006 ME 10, 8, 889 A.2d 1011, 1013. Findings are
clearly erroneous if "there is no competent evidence in the record to support
[them]." Payne v. Payne, 2006 ME 73, 7, 899 A.2d 793, 795 (quotation marks
omitted).

A. Income Imputed for Value of Rent Reduction

[13] We have held that income from an "ongoing source" includes money
received from educational grants for living expenses, see Rich v. Narofsky, 624
A.2d 937, 939 (Me. 1993); lump sum severance pay, Walker v. Walker, 2005 ME
21, 15, 868 A.2d 887, 890; and per diem stipends, Macomber v. Macomber, 2003
ME 1, 7, 814 A.2d 456, 457-58.5 However, gross income does not include
money received as a gift, where the donor has no legal obligation to continue
"ongoing" payment. See True v. True, 615 A.2d 252, 253 (Me. 1992) (rejecting
the argument that the court should have included the value of monthly checks sent
by the party's grandmother in the gross income calculation).

[14] Here, the difference between the rent Carolan paid and the rent paid
by the previous tenant cannot be considered income from an ongoing source
pursuant to 19-A M.R.S. § 2001(5)(A). Although her monthly rent may be $300
less than the previous tenant's, the $1000 rent is hardly an insubstantial sum.
There is no evidence in the record that Carolan's rent payments are significantly
less than prevailing rental rates for similar properties in the area. Even if the
record included evidence of a significant variance between actual rent paid and
prevailing rates in the area, the court would be engaging in considerable
speculation if it were to impute income, or loss of income, based on a finding that a
particular rent payment was significantly more, or less, than the prevailing, or
"economic," rental rate that should be assessed for a particular unit. Further, there
is no evidence in the record that Carolan's parents have a legal obligation to
continue the $1000 per month rental rate.6 The court erred by imputing the value
of the difference between Carolan's rent and the rent of the previous tenant in
Carolan's gross income calculation.

B. Income Imputed for Value of Health Insurance

[15] Gross income includes "income from an ongoing source, including,
but not limited to . . . expense reimbursements or in-kind payments received by a
party in the course of employment or self-employment or operation of a business if
the expense reimbursements or in-kind payments reduce personal living expenses."
19-A M.R.S. § 2001(5)(A)-(B); see also Knowles v. Knowles, 588 A.2d 315, 318
(Me. 1991). In the present case, subsection (5)(B) provided the authority for the
court to include the value of Bell's rent-free housing, use of vehicles, and other
payments for his living expenses in calculating his gross income, because the value
of these items was received by Bell in lieu of wages in the course of his
employment and reduced his personal living expenses. Here, we need not address, as a general matter, whether a court may include the amount an employer
contributes to an employee's health insurance plan when calculating gross income.

[16] Carolan's testimony that she receives employer-paid health insurance
in lieu of a wage increase supports the court's conclusion that the health insurance
payments are "in-kind benefits" subject to imputation to gross income pursuant to
section 2001(5)(B). This result provides similar treatment for Carolan's and Bell's
employer-paid health benefits. Thus, the court did not err in its treatment of
employer-paid health benefits to impute income to each party pursuant to
subsection (5)(B).

[17] While there was no evidence of the actual amount of Carolan's
employer's health insurance payments, the court did not err in finding that the
value of Carolan's health insurance benefits was $2578. The court arrived at this
amount by multiplying Bell's employer's monthly rate for single employees,
$214.85, by twelve. Using this amount to infer the value of Carolan's employer's
payments was reasonable and not an abuse of discretion.

C. Income Imputed for Eight Additional Hours of Work

[18] Pursuant to the Child Support Guidelines, income may be imputed
when a person is found to be underemployed, subject to conditions specified in
section 2001(5)(D). Paragraph D states in pertinent part: "Gross income may
include the difference between the amount a party is earning and that party's earning capacity when the party voluntarily becomes or remains unemployed or
underemployed, if sufficient evidence is introduced concerning a party's current
earning capacity."

[19] The determination of whether a party is voluntarily underemployed is
a question of fact that we review for clear error. Cf. Wrenn v. Lewis, 2003 ME 29,
17, 818 A.2d 1005, 1010. If a parent is voluntarily underemployed, the court's
decision to impute income or apply the parent's earning capacity, rather than his or
her current income, is discretionary. See Koszegi v. Erickson, 2004 ME 113, 14,
855 A.2d 1168, 1171; Dep't of Human Servs. v. Frye, 2000 ME 128, 11, 754
A.2d 1000, 1002-03.

[20] In this record, there is no dispute that Carolan's job is what would be
considered full-time employment with benefits. Her employment as a dental
assistant properly utilizes her education and experience. She works thirty-three to
thirty-five hours per week, and works virtually all of the hours that are available
from her employer. Her employer's office is closed on Fridays. Like many other
employees in today's economy, she does not work a full forty-hour week.
However, a person who works such a schedule is not thereby "underemployed" as
a matter of fact or law for purposes of section 2001(5)(D). A parent who has a
full-time job consistent with the parent's education and experience, but who works
less than a forty-hour week, is not, thereby subject to having his or her income recalculated to a forty-hour per week equivalent for child support calculation
purposes.

[21] Carolan's employment, although a few hours less than a forty-hour
week, is consistent with her training and experience, and utilizes all available hours
provided by her employer. The finding of voluntary underemployment was a clear
error. Therefore, the court abused its discretion by imputing an additional eight
hours of income to Carolan when calculating her gross income.

Judgment vacated. Remanded for recalculation of
child support consistent with this opinion.