Olson v. Montoya

IN THE COURT OF APPEALS OF THE STATE OF IDAHO

Docket No. 34915

SUSAN CAROL OLSON, fka SUSAN )
CAROL MONTOYA, ) 2009 Opinion No. 58
)
Plaintiff-Respondent-Cross- ) Filed: August 14, 2009
Appellant, )
) Stephen W. Kenyon, Clerk
v. )
)
MARVIN RAYNELL MONTOYA, )
)
Defendant-Appellant-Cross- )
Respondent. )
)

Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada
County. Hon. D. Duff McKee, District Judge; Hon. Russell A. Comstock,
Magistrate.

Appellate decision of the district court, vacating magistrate‟s child support award
and remanding to the magistrate for further findings, reversed.

Strother Law Office, Boise, for appellant. Jeffrey A. Strother argued.

Bevis, Thiry & Schindele, P.A., Boise, for respondent. James A. Bevis argued.
______________________________________________

LANSING, Chief Judge
In this divorce case, Marvin Raynell Montoya appeals from the district court‟s
intermediate appellate decision vacating the magistrate‟s child support award on the ground that
the magistrate failed to consider all relevant factors in computing Montoya‟s income from three
companies that he owns. Respondent Susan Carol Olson seeks this Court‟s review of the
magistrate‟s subsequent denial of her motion for attorney fees.
I.
FACTS AND PROCEDURE
Montoya and Olson were married in 2001, and two children were born of the marriage.
The couple separated in December 2005, and Olson filed a complaint for divorce in February
2006. The parties were able to resolve all issues concerning custody and property division,

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leaving only two issues for resolution by the magistrate: (1) the amount of Montoya‟s income
for purposes of an award of child support to Olson, and; (2) Olson‟s request for attorney fees
pursuant to Idaho Code § 32-704.
The following evidence was presented at the trial on child support. Montoya is the sole
owner of three business entities, all of which are and have always been his separate property.
Two are corporations that have been in existence for a number of years: MST Insurance
Agency, Inc. (“MST”), which sells insurance products, and MS Administrative Services, Inc.
(“MS”), which earns income by administering health plans for MST and other entities. Before
the marriage broke down, Montoya and Olson planned that Olson would leave her employment
at a law firm and begin working for MS and MST, with the expectation that those two companies
would expand and grow. This plan called for construction of a new building to provide the
larger space that would be needed for the expansion of MS and MST. Toward that end, Montoya
formed a third company, Montoya Enterprises, LLC (“ME”), to construct and own the building.
ME borrowed over $2 million and built a commercial building, completing construction in
August 2005. At that time, MS and MST, which previously rented space from a third party,
moved into ME‟s new building and paid rent at a significantly higher rate than previously paid to
the third party.1 Montoya is the personal guarantor of the debts of all three of his companies.
Montoya testified that approximately six months after the move to the new building, he was
“blindsided” when Olson asked for a divorce.
For purposes of calculating Montoya‟s child support obligation, the parties agreed that
his then current salary from MS was $109,080. Olson contended, however, that Montoya had
additional income from MST in the amount of $165,296. She arrived at this figure by using the
couple‟s 2005 personal income tax return, in which business income, after expenses, was
reported to be this amount. Montoya, on the other hand, presented evidence that MST‟s 2005
income did not reflect its income stream at the time of the September 2006 trial because MST
had recently lost three large clients, including the firm that was Olson‟s employer, resulting in
lost revenue of approximately $128,000. Olson presented no evidence refuting this testimony.
Montoya‟s evidence also indicated that MST‟s profits were further reduced from the 2005 level

1
Other entities also rented space in ME‟s building, but as of the time of trial, some of the
space remained vacant.
2
because MST and MS now paid rent of $20,000 per month to ME for the new offices as
compared to $6,500 per month that had been paid to their previous landlord. Montoya and MS‟s
comptroller testified that the $20,000 monthly rent paid to ME was necessary to enable ME to
service its debt on the building and avoid bankrupting ME. Montoya testified that the additional
rent expense further reduced his personal income. Olson contended, generally, that this
increased rent payment was a sham designed to avoid the imputation of income to Montoya for
child support purposes.
The magistrate accepted Montoya‟s testimony that, because of business circumstances of
the three companies, he would only be able to take $22,599 in compensation from MST during
2006. Using this amount together with Montoya‟s salary of $109,080 from MS and other
income not in dispute here, the magistrate determined Montoya‟s income for child support
purposes to be $140,339. Pertinent to this determination, the magistrate stated in his findings:
During the parties‟ marriage, they discussed Susan having a significant
role in the operation of the insurance businesses. The real property on which ME
later constructed the office building was purchased several years prior to the
initiation of this divorce action. Construction of the office building was
completed in the late summer or early fall of 2005, approximately six months
prior to this divorce action being filed. The court is persuaded that monies
generated by MST and MS, from which commissions were previously paid to
Marvin, are required to be paid to ME as rent which, in turn, service the mortgage
and maintenance costs of operating an office building that did not exist in prior
years. Thus, the court does not find merit in the argument that Marvin,
individually or through his entities, has deliberately invested in assets and formed
entities to conceal income.
Susan attempted to impeach the evidence and testimony offered by Marvin
and his two accountants but did not offer independent evidence. The best
evidence in the record regarding the fairness of Marvin‟s salary, the income
generated by his closely held entities and the reasonableness of the ordinary and
necessary expenses of the entities was offered by Marvin and [his companies‟
financial professionals].
The magistrate also denied Olson‟s motion for attorney fees under I.C. § 32-704, concluding that
she had sufficient income and financial resources to pay for her own attorney fees incurred
throughout the proceedings.
Olson appealed to the district court, which vacated the magistrate‟s decision concerning
Montoya‟s income. Although the district court acknowledged that “[t]here is no issue here of
anyone hiding or disguising any element of income or expense,” it also held that the magistrate
erred, stating:

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It appears that [MS and MST] in prior years paid significantly less per
month in occupancy expenses--rent and maintenance to a third party for the
needed office space--whereas in the new building, which the husband will own,
the businesses were paying occupancy expenses in the amount of $20,000 per
month--largely to service the large mortgage.
....
. . . What is missing from the trial court‟s analysis below is an evaluation
of whether the new level of occupancy expense -- $20,000 per month instead of
the much lower figure -- was a “necessary and reasonable” business expense to
impose on the business. To the extent that the amount was not reasonable and
necessary to the generation of income from the business entities, then the excess
amount was money that was going to enhance the husband‟s separate property
interests. In connection with child support calculations, this excess would appear
to equate to “rent” from separate property interests, and should be included in the
calculation of the husband‟s resources for child support purposes -- even though it
might appear that the money was being applied to the mortgage debt.
. . . The only issue here is whether, after consolidating all of the business
operations and eliminating the intercompany accounts, the moneys applied to the
separate debt of the husband -- the $2.2 million mortgage debt on the office
building -- should come before or after consideration of the husband‟s child
support obligation.
The money that is equivalent to the reasonable business occupancy
expense of the businesses being operated by the husband out of the space, and
which is being paid over to a third party in the form of interest on the mortgage, is
an adjustment to the husband‟s income level before consideration of child
support. However, money being paid in excess of that reasonable to the business,
or which reduces the debt and enhances the husband‟s separate property interest,
should be attributable to the husband‟s separate property interest in the realty and
should not be applied to reduce his income for purposes of child support
determination. In this case, there is not an analysis or finding on how much of the
money attributable to the occupancy expense of the new building was within the
definition of reasonable and ordinary business expense of the business operations,
and how much was attributable to enhancement of the husband‟s separate
property interests. The amounts may be significant, and require a reversal to
reconsider the issue.
Montoya timely appealed from the district court‟s decision.
While Montoya‟s appeal was pending, Olson filed another motion in the magistrate court
for an award of attorney fees pursuant to I.C. § 32-704. This time she requested attorney fees
incurred at trial, on appeal to the district court and on the further appeal to this Court. The
magistrate again denied the motion, concluding that Olson had sufficient income and resources
to pay for her own attorney fees and that the disparity in income between the parties was not so
great as to dictate a different conclusion. Thereafter, Olson filed a notice of cross-appeal,

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seeking to appeal from the magistrate‟s order directly to the Idaho Supreme Court under Idaho
Appellate Rule 12.1.
II.
ANALYSIS
A. Montoya’s Appeal from the District Court’s Intermediate Appellate Decision
Montoya challenges the district court‟s holding that the magistrate did not adequately
consider relevant factors in calculating Montoya‟s income for child support purposes. A district
court sitting as an appellate court is required to review a magistrate‟s award of child support
under an abuse of discretion standard, Browning v. Browning, 136 Idaho 691, 39 P.3d 631
(2001); Aguiar v. Aguiar, 142 Idaho 331, 127 P.3d 234 (Ct. App. 2005), and the party
challenging that award bears the burden of establishing an abuse of discretion. Henderson v.
Smith, 128 Idaho 444, 915 P.2d 6 (1996). Such an abuse will be found if the magistrate failed to
consider relevant evidence, Rohr v. Rohr, 128 Idaho 137, 141, 911 P.2d 133, 137 (1996);
Margairaz v. Siegel, 137 Idaho 556, 558, 50 P.3d 1051, 1053 (Ct. App. 2002), but only if that
evidence exists in the record. Stewart v. Stewart, 143 Idaho 673, 677, 152 P.3d 544, 548 (2007).
The district court here concluded that the magistrate had failed to properly consider
whether the $20,000 monthly rent paid by MS and MST to ME was a reasonable and necessary
expense of the lessee companies and whether ME‟s mortgage payments resulted in enhancement
of ME‟s equity in the building and, thus, an increase in Montoya‟s personal net worth which
should be counted as income to him. Montoya contends that the district court‟s analysis is
flawed and that, even if it were correct, because Olson failed to present any trial evidence on
these matters the magistrate could not have erred by failing to carefully review them. We agree
that the district court erred.
First, there is insufficient evidence in the record from which the magistrate could have
complied with the district court‟s directive to determine how much of the rental paid for offices
in ME‟s new building was “necessary and reasonable” if by that term the district court means the
fair rental value of the occupied space. The record contains evidence of what MS and MST
historically paid to a third party for rent, $6,500, and what they were paying ME, $20,000, and
evidence that the latter amount was necessary to allow ME to service its mortgage debt. There is
no evidence, however, of the number of square feet, the amenities, the market rate for the space
or any other details of the space rented previously or in the new ME-owned building. A mere

5
comparison of the prior and current rental would not have allowed the magistrate to determine
the fair market value of the space MS and MST occupied in the ME building. Therefore, the
magistrate could not have abused its discretion in failing to make findings on that point.
Likewise, although the trial testimony indicates the amount of the mortgage loan and the
monthly payments, we find no evidence about how the monthly payments were distributed
between interest and principal. Therefore, the magistrate could not have determined the growth
of ME‟s equity in the structure.
From the evidence that did exist, the magistrate found that “the best evidence in the
record regarding the fairness of Montoya‟s salary, the income generated by his closely held
entities and the reasonableness of the ordinary and necessary expenses of the entities was offered
by Montoya [and his companies‟ financial professionals]” and that “the court is persuaded that
monies generated by MST and MS, from which commissions were previously paid to Montoya,
are required to be paid to ME as rent which, in turn, service the mortgage and maintenance costs
of operating an office building that did not exist in prior years.” The magistrate also specifically
said that “the court does not find merit in the argument that Montoya, individually or through his
entities, has deliberately invested in assets and formed entities to conceal income.” Thus, the
magistrate did consider, on the evidence available, the validity of rental and mortgage payments
and found them to be reasonable and necessary business expenses.
Moreover, even if there were sufficient evidence in the record by which the magistrate
could have employed the necessary and reasonable rental expense methodology suggested by the
district court, determination of the reasonable rental value of the space occupied by MS and MST
would not be necessary. As the district court observed, Montoya‟s income from his three
business entities could be calculated by “consolidating all of the business operations and
eliminating intercompany accounts,” i.e., by consolidating the collective receipts of the
companies and deducting their collective expenses to compute their consolidated net income.
This is the approach prescribed by Idaho Child Support Guideline (I.C.S.G.) § 6(a)(2), for
computing income derived from a trade or business.2 Ordinarily, under this guideline, the

2
Idaho Child Support Guideline Section 6(a)(2), found at Idaho Rule of Civil Procedure
6(c)(6), states in relevant part:
For rents, royalties, or income derived from a trade or business (whether
carried on as a sole proprietorship, partnership, or closely held corporation), gross
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profits3 for each of Montoya‟s closely held corporations would be calculated by determining the
gross receipts of each company and deducting its ordinary and necessary expenses. Montoya‟s
income from the operation of his businesses for child support purposes would therefore be the
total of the three companies‟ profits and losses. When calculating Montoya‟s income from all
three companies on this unified basis, there is no need to consider payments between the
companies because a payment constituting a deductible business expense of the payor company
also constitutes an includable receipt to the payee company. The expense for one is offset by
income to the other. Here, the $20,000 monthly rent paid by MS and MST is an expense
deductible from the gross receipts of those companies, but also constitutes a receipt in the same
amount for ME. Perhaps intercompany transactions could be a method to conceal income. Here,
however, the evidence in the record demonstrates that ME was experiencing a shortfall or loss.
MS and MST made up the deficit through their rental payments to ME. The income potential to
Montoya was only the net of the combined profits and losses of the three companies. Neither the
magistrate nor the district court found any evidence of an attempt to conceal income in these
intercompany transactions.
In any event, Olson did not seek at trial to calculate Montoya‟s income by using the
combined profits of all three of his companies. Instead, she contended that Montoya‟s income in
addition to his MS salary should be $165,296, the profit of only MST for the prior tax year.

income is defined as gross receipts minus ordinary and necessary expenses
required to carry on the trade or business or to earn rents and royalties. Excluded
from ordinary and necessary expenses under these Guidelines are expenses
determined by the court to be inappropriate for determining gross income for
purposes of calculating child support. In general, income and expenses from self-
employment or operation of a business should be carefully reviewed to determine
the level of gross income of the parent to satisfy a child support obligation.
3
The Child Support Guidelines refer to a parent‟s total income on which child support
obligations are to be calculated as “gross income.” I.C.S.G. § 6(a)(1). This same term, “gross
income,” is used in I.C.S.G. § 6(a)(2) when addressing income from a trade or business. It states
that “gross income is defined as gross receipts minus ordinary and necessary expenses required
to carry on the trade or business . . . .” Thus, business profit that in general parlance would be
referred to as “net income” is referred to in the Guidelines as “gross income.” To avoid possible
confusion from this terminology, in this opinion we will refer to the gross receipts of Montoya‟s
companies, minus their ordinary and necessary expenses, as “profits.”
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Olson‟s theory of Montoya‟s income calculation did not follow the methodology prescribed in
I.C.S.G. 6(a)(2) and literally ignored the receipts and expenses of both MS and ME. 4 The
magistrate decided the issue on the evidence presented, using Montoya‟s salary from MS and
finding Montoya‟s testimony concerning MST‟s current income and expenses to be credible.
For these reasons, the magistrate court did not abuse its discretion. The district court‟s
appellate opinion is reversed and the magistrate‟s judgment reinstated.
B. Olson’s Attempted “Cross-appeal”
The district court‟s appellate decision was issued on December 6, 2007, but a remittitur to
the magistrate division was not issued because on January 7, 2008, Montoya filed a notice of
appeal from the district court‟s appellate decision. Olson did not file a cross-appeal from that
decision. Instead, on January 29, 2008, she filed a second motion in the magistrate court for
attorney fees under I.C. § 32-704, this time seeking fees incurred in the trial, on appeal to the
district court, and on the pending appeal from the district court‟s decision. The magistrate
denied Olson‟s motion in its entirety, concluding for the second time that she had sufficient
income and resources to pay for her own attorney fees and that the disparity in income between
the parties was not so great as to dictate a different conclusion. Thereafter, Olson attempted to
perfect a permissive “cross-appeal” from the magistrate‟s order directly to the Idaho Supreme
Court pursuant to Idaho Appellate Rule 12.1. Her claim of error was briefed by the parties as an
ordinary cross-appeal. The case was ultimately assigned to this Court under I.A.R. 108.
We conclude that we do not possess jurisdiction to hear Olson‟s attempted appeal
because bypassing the district court in this manner is not permitted by governing rules.5 Appeals
from decisions of a magistrate must ordinarily be taken first to the district court. I.R.C.P. 83(a).
Olson sought to bypass the district court in this case by invoking I.A.R. 12.1. That rule

4
Olson may have taken this approach because Montoya predicted that MS would lose
money during the year of the trial and because ME‟s profit in 2005 was $975.
5
Although neither party raised this jurisdictional issue, a question of subject matter
jurisdiction may be raised sua sponte by this Court at any time. Dep’t of Health & Welfare v.
Doe I, 147 Idaho 314, 315, 208 P.3d 296, 297 (2009); Erickson v. Idaho Bd. of Registration of
Professional Engineers and Professional Land Surveyors, 146 Idaho 852, 854, 203 P.3d 1251,
1253 (2009). The parties were notified of the perceived jurisdictional defect and allowed to
address it at oral argument.

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authorizes appeals directly from a magistrate‟s decision to the Supreme Court, by permission of
the Supreme Court, in certain limited circumstances and only from orders “involving the custody
of a minor, a Child Protective Act proceeding, the termination of parental rights, or an
adoption . . . .” I.A.R. 12.1(a).6 Because the magistrate‟s order denying Olson‟s request for

6
At relevant times Idaho Appellate Rule 12.1 stated in its entirety:
Rule 12.1. Permissive appeal in custody cases.
(a) Whenever the best interest of a child would be served by an immediate
appeal, any party or the magistrate hearing a case may petition the Supreme Court
to accept a direct permissive appeal of a judgment or order involving the custody
of a minor, a Child Protective Act proceeding, the termination of parental rights,
or an adoption, without first appealing to the district court.
(b) Motion to magistrate court. In any case in which it is a party seeking
the permissive appeal, a motion for permission to appeal must first be filed with
the magistrate court within fourteen days from the date of entry of the order or
decree. The motion shall be filed, served, noticed for hearing and processed in
the same manner as any other motion, and hearing of the motion shall be
expedited. The magistrate court shall, within fourteen (14) days after the hearing,
enter an order approving or disapproving the motion.
(c) Motion to Supreme Court for permission to appeal.
(1) Motion of a party. Within fourteen (14) days from entry by the
magistrate court of an order approving or disapproving a motion for permission to
appeal under this rule, any party may file a motion with the Supreme Court
requesting acceptance of the appeal by permission. A copy of the order of the
magistrate court approving or disapproving the permission to appeal shall be
attached to the motion. If the magistrate court fails to rule upon a motion for
permission to appeal within twenty-one (21) days from the date of the filing of the
motion, any party may file a motion with the Supreme Court for permission to
appeal without any order of the magistrate court.
(2) Motion by order of court. A magistrate court may enter, on its own
initiative, an order recommending permission to appeal directly to the Supreme
Court. The magistrate court shall file a certified copy of its order with the
Supreme Court and serve copies on all parties. The order recommending
permission to appeal shall constitute and be treated as a motion for permission to
appeal under this rule.
(3) Procedure. A motion to the Supreme Court for permission to appeal
under this rule shall be filed, served, and processed in the same manner as any
other motion under Rule 32 of these rules.
(d) Acceptance by Supreme Court. Any appeal by permission of a
judgment or order of a magistrate under this rule shall not be valid and effective
unless and until the Supreme Court shall enter an order accepting such judgment
or order of a magistrate, as appealable and granting leave to a party to file a notice
of appeal within a time certain. Such appeal shall thereafter proceed in an
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attorney fees does not fall within the scope of Rule 12.1, her only appellate recourse was an
appeal to the district court pursuant to I.R.C.P. 83. Therefore, this Court possesses no
jurisdiction to hear her attempted appeal and it must be dismissed.7 See Dep’t of Health &
Welfare v. Doe III, 147 Idaho 357, 358-59, 209 P.3d 654, 655-56 (2009); Dep’t of Health &
Welfare v. Doe I, 147 Idaho 314, 316, 208 P.3d 296, 298 (2009).
C. Attorney Fees on Appeal
Olson requests attorney fees on appeal under I.C. § 12-121, which authorizes an award of
attorney fees to the prevailing party if the appeal was brought, pursued or defended frivolously,
unreasonably and without foundation. Stewart, 143 Idaho at 681, 152 P.3d at 552; Balderson v.
Balderson, 127 Idaho 48, 54, 896 P.2d 956, 962 (1995). Because Olson is not the prevailing
party, her request is denied.
Olson also requests attorney fees on appeal under I.C. § 32-704(3). That statute provides
that in a divorce proceeding the court may from time to time, after considering the financial
resources of both parties and other factors enumerated in I.C. § 32-705, order one party to pay a
reasonable amount for the other party‟s attorney fees. Olson asserts that the disparity between
her income and Montoya‟s income, and her lack of other sufficient financial assets, compels an
award in her favor.
In addressing a similar request for an award of attorney fees incurred on appeal under the
authority of I.C. § 32-704, our Supreme Court has stated: “It is the policy of this court . . . to
leave the award of attorney fees [under I.C. § 32-704] to the trial court, „and to exercise its
original jurisdiction only upon a showing that such action is necessary to the exercise of its

expedited manner. The clerk of the Supreme Court shall file with the magistrate
court a copy of the order of the Supreme Court granting or denying acceptance,
and shall mail copies to all parties to the action or proceeding.
7
Even if the magistrate‟s order on attorney fees were subject to I.A.R. 12.1, Olson did not
perfect an appeal in compliance with its provisions. Her motion to the magistrate for permission
to appeal directly to the Supreme Court was not filed within fourteen days from entry of the
magistrate‟s order as required by I.A.R. 12.1(c)(1), and she did not follow that with any motion
to the Supreme Court. Rule 12.1(d) specifies that any permissive appeal brought under the rule
will be valid only if the Supreme Court issues an order granting leave for the party to file a
notice of appeal.
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appellate jurisdiction.‟” Stewart, 143 Idaho at 681, 152 P.3d at 552 (quoting Wilson v. Wilson,
131 Idaho 533, 537, 960 P.2d 1262, 1266 (1998)). Thus, Idaho appellate courts will not
ordinarily order attorney fees under section 32-704 unless an award is essential to enable the
exercise of appellate jurisdiction.
Here, the magistrate held that Olson was not entitled to attorney fees under the statute to
pursue or defend an appeal either to the district court or to this Court, and Olson did not properly
perfect an appeal from that decision. Without any award of attorney fees for appellate
proceedings, Olson has been able to respond to Montoya‟s appeal to this Court, pursue a second
motion for attorney fees before the magistrate, and, albeit improperly, present argument on
appeal challenging the magistrate‟s denial of that second motion. She has not demonstrated that
an attorney fee order from this Court is necessary for the exercise of our appellate jurisdiction.
Her request for attorney fees on appeal is therefore denied. See Wilson, 131 Idaho at 537, 960
P.2d at 1266; Brashear v. Brashear, 71 Idaho 158, 165, 228 P.2d 243, 247 (1951).
Montoya also requests attorney fees on appeal under I.C. § 12-121, asserting that Olson‟s
position in the appellate proceedings is frivolous in that she has only invited the appellate court
to second guess the trial court‟s factual findings. Although Montoya has prevailed on all issues
in these appeals, we cannot say that Olson‟s defense to Montoya‟s appeal was frivolous.
Therefore, his request is denied.
III.
CONCLUSION
The district court‟s appellate decision vacating the magistrate‟s determination of child
support is reversed, and Olson‟s cross-appeal is dismissed. Costs on appeal are awarded to
Montoya.
Judge GUTIERREZ and Judge GRATTON CONCUR.

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