COURT OF APPEALS DECISION DATED AND RELEASED February 27, 1996 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-1953-FT
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
IN RE THE MARRIAGE OF:
MARK A. DURKEE,
Petitioner-Appellant,
v.
NANCY L. DURKEE,
Respondent-Respondent.
APPEAL from an order of
the circuit court for Oneida County:
JAMES P. JANSEN, Judge. Affirmed
in part; reversed in part and cause remanded with directions.
MYSE, J. Mark A. Durkee appeals
an order that requires him to pay child support in the amount of 25% of his total
monthly entitlements including his military allowances.[1] The order further provides that Mark pay
Nancy L. Durkee $200 for a rifle that Nancy was to receive as part of
their divorce judgment or replace the rifle with a similar model. Mark contends that the trial court
erred: (1) when it increased his child support obligation without him
receiving sufficient notice of a request for child support modification; (2) by
including his military allowances in gross income for the purpose of
calculating child support prior to the law's amendment, effective March 1,
1995; and (3) when it ordered him to pay for the rifle although the debt had
been discharged in bankruptcy. This
court concludes that: (1) Mark received sufficient notice; (2) the trial
court erred when it included Mark's military allowances in his gross income for
child support purposes prior to March 1, 1995; and (3) the trial court did not
err when it ordered him to pay for the rifle.
Therefore, this court affirms in part, reverses in part and remands to
the trial court to modify the order to include Mark's military allowances in
his gross income only as of March 1, 1995.
Mark and Nancy were
divorced on April 22, 1988. The divorce
judgment required Mark to "pay twenty-five percent (25%) of his gross
income ($453.00) per month" for child support. Both parties waived maintenance, and the property division was
made in consideration of the agreement and waivers made regarding
maintenance. As part of the property
division, Mark was required to turn over a certain rifle or its cash equivalent
and pay $200 toward Nancy's attorney fees.
Mark subsequently filed bankruptcy and was discharged of his debts.
Nancy later sought to
hold Mark in contempt for failing to pay more than $453 per month in child
support after increases in his pay, failing to turn over the rifle or its cash
equivalent, and failing to pay the $200 for attorney fees.
After a hearing, the
trial court ordered that the child support be recalculated retroactive to
September 1993, that Mark's military allowances be included in his gross income
for child support purposes, and that Mark pay 25% of his total monthly entitlements
as child support. The court also
ordered Mark to pay Nancy a sum equivalent to the cash value of the rifle or to
replace the rifle with a similar model, but determined that the attorney fees
were discharged in bankruptcy. Mark
appeals.
First, Mark contends
that the trial court erred when it retroactively increased his child support
obligation without him receiving sufficient notice of a request for
modification of child support. Mark
argues that he was denied due process because of the alleged insufficient
notice. Because this issue requires
application of constitutional principles, this court is presented with a
question of law that is reviewed without deference to the trial court. See State v. Woods, 117
Wis.2d 701, 710, 345 N.W.2d 457, 462 (1984).
Due process requires
that the notice reasonably convey information about the hearing so the
respondent can prepare a defense and make objections. Schramek v. Bohren, 145 Wis.2d 695, 704, 429 N.W.2d
501, 504 (Ct. App. 1988). Nancy filed
an order to show cause and a motion to hold Mark in contempt for failure to
continue to pay 25% of his gross income as his income increased. Nancy contended that the divorce judgment
which required Mark to "pay twenty-five percent (25%) of his gross income
($453.00) per month" for child support required Mark to pay 25% of his
gross income, not just $453. Mark was
given notice of the motion and order to show cause and of the date set for the
hearing. The motion conveyed sufficient
information for Mark to prepare his defense to having his child support
increased above $453 and setting it at 25% of his total income. Because the motion was sufficient to advise
him of the nature of the issues to be heard, this court concludes that the
notice was sufficient. See id.
Next, Mark contends that
the trial court erred when it included his military allowances in his gross
income for the purpose of calculating child support payments prior to the
change in the law effective March 1, 1995.[2] Because this issue requires interpretation
of Wis. Admin. Code § HSS
80.02(12) (August 1987), this court is presented with a question of law that is
reviewed without deference to the trial court. See Gohde v. Gohde,
181 Wis.2d 770, 774, 512 N.W.2d 199, 201 (Ct. App. 1993).
The Department of Health
and Social Services is required to adopt and publish standards for courts to
use in determining child support obligations.
Section 46.25(9)(a), Stats. The department defined gross income for the
purpose of calculating child support in Wis.
Admin. Code § HSS 80.02(12) (August 1987), which provides:
"Gross
income" means all income as defined under 26 C.F.R. 1.61-1 that is derived
from any source and realized in any form, whether money, property or services,
and whether reported as total income on the payer's federal tax return or
exempt from being taxed under federal law.
This
court concludes that § 80.02(12) is unambiguous in defining "gross
income" for child support purposes, and thus this court need only trace
the language of the relevant statutes and regulations. Under the definition established by § HSS
80.02(12), this court must examine the definition of gross income contained in
26 C.F.R. § 1.61-1 (1995). That
regulation defines gross income as: "all income from whatever source
derived unless excluded by law."
26 C.F.R. § 1.61-1 is the definition of the Department of Treasury,
which defines gross income for internal revenue purposes. This court therefore looks at the Internal
Revenue Code to determine whether Mark's military allowances are "gross
income." If there is no exclusion
from gross income in the Internal Revenue Code, the military allowances fit the
definition of gross income established by § HSS 80.02(12). However, if the military allowances are
excluded from gross income by the Internal Revenue Code, they do not fit the
definition of gross income established by § HSS 80.02(12).
Internal Revenue Code §
134(a), (West Supp. 1995), states: "Gross income shall not include any
qualified military benefit."
Qualified military benefit is defined in I.R.C. § 134(b) as:
(1) ... any allowance or in-kind benefit
... which—
(A) is received by any member or former
member of the uniformed services of the United States ... and
(B)
was excludable from gross income on September 9, 1986, under any provision of
law, regulation, or administrative practice which was in effect on such date
(other than a provision of this title).
This
court examines 26 C.F.R. 1.61-2(b) (1986) to determine whether Mark's military
allowances were excluded from gross income under the regulations as of
September 9, 1986. That regulation
provides: "[s]ubsistence and uniform allowances granted commissioned
officers, chief warrant officers, warrant officers, and enlisted personnel of
the Armed Forces ... and amounts received by them as commutation of quarters,
are to be excluded from gross income."
Mark's military
allowances are basic allowance for quarters (BAQ), basic allowance for subsistence
(BAS), and variable housing allowance (VHA).
Because these allowances are for subsistence or quarters, they fall
under the regulation and are excluded from gross income under I.R.C. § 134. Accordingly, these allowances are excluded
under the definition of gross income in C.F.R. 1.61-1. This court therefore concludes that Mark's
military allowances are not included as gross income for the purpose of
calculating child support under § HSS 80.02(12). See Grohmann v. Grohmann, 189 Wis.2d 532,
538, 525 N.W.2d 261, 263 (1995) ("it would be illogical to conclude that
the department intended gross income to have different meanings under HSS
80.02(12) and sec. 1.61-1.").
The definition of gross
income for child support purposes was modified on March 1, 1995. The new definition of gross income is
contained in Wis. Admin. Code §
80.02(13) (June 1995) which provides in relevant part:
"Gross income" means:
(a) All income considered
federal gross income under 26 CFR 1.61-1;
....
(f) Military allowances
and veterans benefits;
... and
(i) All other income, whether taxable or not, except that gross income
does not include public assistance or child support received from previous
marriages or from paternity adjudications.
(Emphasis added.)
Because
military allowances are now specifically included in the definition of gross
income, the trial court could properly include these benefits in Mark's gross
income beginning March 1, 1995.
Therefore, this court directs that the order be modified to include the
military allowances in Mark's gross income for child support purposes only as
of March 1, 1995.
Mark next contends that
the trial court erred when it ordered him to pay for the rifle although the
debt had been discharged in bankruptcy.
Nancy argues that the rifle was nondischargeable in bankruptcy because
it was awarded to her in lieu of maintenance.
The bankruptcy court
order provides in relevant part:
1.
The debtor is released from all personal liability for debts existing on
the date of commencement of this case, or deemed to have existed on such date
pursuant to Section 348(d) of the Bankruptcy Code (Title 11, United States
Code)[.]
2.
Any existing judgment or any judgment which may be obtained in any court
with respect to debts described in paragraph 1 is null and void as a
determination of personal liability of the debtor, except:
....
(b) Debts which are nondischargeable
pursuant to Section 523[(a)](1), (3), (5), (7), (8), and (9) of the Bankruptcy
Code.
Under
11 U.S.C. § 523(a)(5), the bankruptcy court is without authority to discharge a
party's maintenance obligation.
Further, "[e]ven if the agreement which was incorporated into the
divorce decree is characterized as a division of marital property, '[p]roperty
division may be nondischargeable when it is a substitute for
alimony.'" In re White,
26 B.R. 572, 575 (Bankr. D.R.I. 1983) (quoting In re Singer, 18
B.R. 782, 787 (Bankr. S.D.Ohio 1982)).
In ordering Mark to pay for the gun or replace it, the trial court made
an implicit finding that the gun was a substitute for maintenance and that the
bankruptcy court could not discharge the debt.
There is sufficient evidence to support this finding. At the time of the divorce judgment, Nancy
waived maintenance despite the fact that the parties had a long-term marriage
and Nancy earned substantially less income than Mark. Further, the marital agreement, which was incorporated into the
divorce judgment, provided that the property division was made in consideration
of the agreement and waivers made regarding maintenance. Therefore, this court concludes that the
trial court's finding that the awarding of the gun was in lieu of maintenance
is fully supported by the record.
However, Mark argues
that the time to challenge the dischargeability of the debt as being in lieu of
maintenance was in the bankruptcy court and that the circuit court has neither
jurisdiction nor power to determine the dischargeability of debts in
bankruptcy. This court disagrees. The circuit court and the bankruptcy court
have concurrent jurisdiction to decide whether a debt is nondischargeable under
11 U.S.C. § 523(a)(5). See Lyman
v. Lyman, 184 Wis.2d 124, 128 n.3, 516 N.W.2d 767, 769 n.3 (Ct. App.
1994); In re Reak, 92 B.R. 804, 807 (Bankr. E.D.Wis. 1988). Thus, the circuit court had jurisdiction to
decide whether the debt was dischargeable.
In sum, this court
concludes that Mark received sufficient notice, that the trial court erred when
it included Mark's military allowances in his gross income for determining his
child support obligation prior to March 1, 1995, and that the trial court did
not err when it ordered Mark to pay for the rifle. Therefore, this court affirms in part, reverses in part and
remands to the trial court to modify the order to include Mark's military
allowances in his gross income for child support purposes only as of March 1,
1995.
By the Court.—Order
affirmed in part; reversed in part and cause remanded with directions. No costs to either party.
This opinion will not be
published. Rule 809.23(1)(b)4, Stats.
[2] The new definition of
gross income, effective March 1, 1995, is contained in Wis. Admin. Code § HSS 80.02(13) (June 1995) and provides in
relevant part:
"Gross income" means:
(a) All income
considered federal gross income under 26 CFR 1.61-1;
....
(f) Military
allowances and veterans benefits;
(h) ... and
(i) All other income, whether taxable or not, except that gross income does not include public assistance or child support received from previous marriages or from paternity adjudications. (Emphasis added.)