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                 THE SUPREME COURT OF NEW HAMPSHIRE

                           ___________________________


5th Circuit Court – Claremont Family Division
No. 2012-696


    IN THE MATTER OF MARCUS J. HAMPERS AND KRISTIN C. HAMPERS

                          Argued: November 14, 2013
                         Opinion Issued: June 24, 2014

      Orr & Reno, P.A., of Concord (Jeremy D. Eggleton and Judith A.
Fairclough on the brief, and Mr. Eggleton orally), for the husband.


      Primmer, Piper, Eggleston & Cramer, P.C., of Manchester (Doreen F.
Connor on the brief and orally), for the wife.

       CONBOY, J. In these cross-appeals, Marcus J. Hampers (husband) and
Kristin C. Hampers (wife) challenge a post-divorce decision of the 5th Circuit
Court – Claremont Family Division (Yazinski, J.) on the husband’s motion to
modify his child support and alimony obligations and on the wife’s petition for
contempt. The husband asserts that the trial court erred by: (1) applying a
standing order requiring him to pay the reasonable attorney’s fees incurred by
the wife for any proceeding or matter related to the divorce decree and
subsequent amendments; and (2) failing to calculate “gross income” for child
support purposes under RSA chapter 458-C by using “net” figures for
investment income to account for losses and expenses as well as gains. The
wife asserts that the trial court erred by: (1) calculating child support based
upon the husband’s 2009 income and tax return when his 2010 income
information and tax return were available; and (2) ordering her to repay sums
that she had received in excess child support. We affirm in part, reverse in
part, vacate in part, and remand.

I.    Attorney’s Fees Order

       The husband contends that the standing attorney’s fees order should be
vacated because, among other things, it violates his rights to equal protection
and due process under the State and Federal Constitutions. See U.S. CONST.
amends. V, XIV; N.H. CONST. pt. I, art. 14. The wife responds that the
husband has challenged the same attorney’s fees order on two prior occasions
before this court, and, therefore, this challenge is barred by res judicata or
collateral estoppel. The husband counters that these preclusive doctrines are
inapplicable because the court has never issued a final decision on the merits
as to the constitutionality of the attorney’s fees award, because the same cause
of action is not at issue in this case, and because the trial court maintains
jurisdiction to review ongoing child support, custody, and alimony issues. We
agree with the wife that res judicata bars this claim.

       Evaluation of the parties’ procedural arguments requires an analysis of
our previous rulings on the attorney’s fees award. In the parties’ 2004 divorce
decree, the trial court ordered the husband to pay all of the wife’s attorney’s
fees incurred in the case and in any appeal from its ruling. In the Matter of
Hampers & Hampers, 154 N.H. 275, 289 (2006) (Hampers I). The court further
ordered the husband to pay all of the wife’s “reasonable attorney’s fees for any
proceeding or any other matter relating to any term of this decree and any
amendment thereto or to the child in this matter in the future” within thirty
days of the husband’s receipt of the wife’s attorney’s fee statement. Id.
(brackets and ellipsis omitted). The court found that it would not be equitable
for the wife to pay fees and costs, id., and that it was necessary to require the
husband to pay the wife’s future attorney’s fees to “prevent abuse of this justice
system.” Id. at 289-90.

      We affirmed the order requiring the husband to pay the wife’s reasonable
attorney’s fees incurred in connection with the case. Id. at 290. However, we
remanded for the trial court to determine the reasonableness of the
outstanding attorney’s fees claimed by the wife pursuant to the procedure we
set out in Gosselin v. Gosselin, 136 N.H. 350, 353-54 (1992). Hampers I, 154
N.H. at 29. We further held that the Gosselin procedure would apply to any
attorney’s fees the wife incurred in the future. Id. We declined to address the
husband’s constitutional arguments because he did not demonstrate that he
had preserved them for our review. Id.

      In 2007, the husband again challenged the attorney’s fees award. In an
unpublished order, we vacated the trial court’s attorney’s fees award “[t]o the
extent that the trial court awarded fees to the [wife], which were incurred



                                        2
between December 2004 and September 2006, without first subjecting these
fees to a Gosselin review.” In the Matter of Hampers and Hampers, No.
2007-519 (N.H. Jan. 24, 2008). We explained that “fees incurred after the date
of the final divorce decree could not have been part of the property settlement,”
and, therefore, were required to be reviewed under Gosselin — including those
incurred in connection with the defense of the original case and appeal. Id.
However, we rejected the husband’s argument that the trial court erred by, in
effect, awarding the wife appellate attorney’s fees. Id. We explained, first, that
such an award is permissible, see Salito v. Salito, 107 N.H. 77, 78 (1966), and,
second, that “we [had] already impliedly upheld the trial court’s inherent
authority to award such fees in the instant case.” Hampers, No. 2007-519
(N.H. Jan. 24, 2008).

       The applicability of res judicata presents a question of law that we review
de novo. Sleeper v. Hoban Family P’ship, 157 N.H. 530, 533 (2008). “The
doctrine of res judicata prevents parties from relitigating matters actually
litigated and matters that could have been litigated in the first action.” Gray v.
Kelly, 161 N.H. 160, 164 (2010) (quotation omitted). The doctrine “applies if
three elements are met: (1) the parties are the same or in privity with one
another; (2) the same cause of action was before the court in both instances;
and (3) the first action ended with a final judgment on the merits.” Id.

       The husband contests both the second and third elements, arguing as to
the latter that our decision based upon his failure to preserve constitutional
arguments for vacating the attorney’s fees award does not constitute a decision
on the merits. We are not persuaded, since even a default judgment can
“constitute res judicata with respect to a subsequent litigation involving the
same cause of action.” McNair v. McNair, 151 N.H. 343, 353 (2004) (quotation
omitted). “The essence of the doctrine of res judicata is that a final judgment
by a court of competent jurisdiction is conclusive upon the parties in a
subsequent litigation involving the same cause of action,” Brzica v. Trustees of
Dartmouth College, 147 N.H. 443, 454 (2002) (quotation omitted), “even though
the plaintiff is prepared in the second action to present evidence or grounds or
theories of the case not presented in the first action.” Id. at 455-56. Because
we consider our decision in Hampers I to constitute a final decision on the
merits for the purposes of res judicata analysis, we must determine only
whether the petition to modify at issue here involves the same cause of action.

       “The term ‘cause of action’ means the right to recover and refers to all
theories on which relief could be claimed arising out of the same factual
transaction in question.” Radkay v. Confalone, 133 N.H. 294, 297 (1990).
“Generally, once a party has exercised the right to recover based upon a
particular factual transaction, that party is barred from seeking further
recovery, even though the type of remedy or theory of relief may be different.”
Id. at 298; see also Shepherd v. Town of Westmoreland, 130 N.H. 542, 544



                                        3
(1988) (finding barred plaintiff’s constitutional and inverse condemnation
claims that arose out of the same factual transaction as did her previous claim
for a variance).

      The husband argues that the divorce proceeding and the present petition
to modify are not the same “cause of action” because “a cause of action is the
underlying right that is preserved by bringing a suit or action” (quotation
omitted), and the underlying right at issue in the divorce proceeding was the
bundle of issues connected with the dissolution of a marriage requiring
equitable review. The underlying right now at issue, he contends, is his
statutory ability to modify his child support payments under RSA 458-C:7
(Supp. 2013). He maintains that the attorney’s fees award was ancillary to
each of these rights, and, therefore, his claim is not barred. We are not
persuaded.

      In our 2006 opinion on the divorce proceeding, we upheld the
enforceability of the standing attorney’s fees order, including the portion of the
order awarding the wife her reasonable attorney’s fees for “any proceeding or
any other matter relating to any term of this decree and any amendment
thereto or to [the child] in this matter in the future.” See Hampers I, 154 N.H.
at 289-91. The husband’s current arguments that the standing attorney’s fees
order is unconstitutional and contrary to law are therefore barred by that
determination. See Brzica, 147 N.H. at 455 (“‘Cause of action’ has a broad
transaction definition in the res judicata context, including the right to recover
regardless of the theory of recovery.”).

       Although attorney’s fees may be an ancillary issue, see, e.g., Vinson v.
Ass’n of Apartment Owners, 312 P.3d 1247, 1253 (Haw. Ct. App. 2013), in
Hampers I, it was one of the bases upon which the husband challenged the
trial court’s order. Hampers I, 154 N.H. at 289-91. Because “[t]he essence of
the doctrine of res judicata is that a final judgment by a court of competent
jurisdiction is conclusive upon the parties in a subsequent litigation involving
the same cause of action,” Brzica, 147 N.H. at 454 (quotation omitted), and
because we reached a final judgment specifically addressing the propriety of
the same attorney’s fees order at issue here, the husband has not
demonstrated that his petition to modify constitutes a different “cause of
action” such that our earlier judgment on the standing attorney’s fees order
lacks preclusive effect.

      The husband next argues that res judicata does not apply to attorney’s
fees awards when the trial court maintains jurisdiction to review ongoing child
support, custody, and alimony issues. He distinguishes “ordinary” divorce-
related attorney’s fees awards, which address the attorney’s fees incurred
during the initial divorce action, from the award here, which provides that the
husband will continue to pay the wife’s attorney’s fees “for any proceeding or



                                        4
any other matter relating to any term of this decree and any amendment
thereto or to [the child] in this matter in the future.” See Hampers I, 154 N.H.
at 289. He cites Appeal of Carnahan, a workers’ compensation case, for the
proposition that when a body exercises continuing jurisdiction over a matter,
res judicata will not apply to prevent that body from exercising its statutory
power to correct a mistake of law. Appeal of Carnahan, 160 N.H. 73, 77-78
(2010). That proposition does not apply here.

      Although the modifiability of an order may affect the applicability of res
judicata, see Restatement (Second) of Judgments § 13 comment c at 133-34,
§ 73, at 197-200 (1982), here, unlike in Appeal of Carnahan, 160 N.H. at 77,
the standing order on attorney’s fees was not part of the judgment subject to
modification pursuant to statute. The statutory provisions the husband cites,
RSA 458-C:2 (2004), :7, refer to the court’s authority to modify child support
orders, not orders on attorney’s fees included in a divorce decree.

       We recognize that the Restatement (Second) of Judgments provides that
“[j]udgments that govern continuing or recurring courses of conduct may be
subject to modification even though the power of doing so is not expressly
provided.” Restatement (Second) of Judgments, supra § 73 comment b at 198.
However, “the principal factor in whether a judgment is subject to modification
is whether it contemplates an interaction between the activity of the judgment
obligor and some other conditions over which the judgment does not exercise
control.” Id. at 199. Thus, when an “unforeseen or uncontrollable interaction
occurs between the judgment obligor and the surrounding circumstances, the
balance between burden and benefit can be disturbed,” and if such
disturbance “assumes substantial proportion, redress by modification may be
appropriate.” Id.

      The husband, however, does not argue that changed circumstances
warrant modifying the standing attorney’s fees order. Rather, he contends that
the standing attorney’s fees order is based upon an error of law. Thus, the
husband alleges no reason why the “balance between burden and benefit”
should be disturbed, and has failed to demonstrate that “redress by
modification” is warranted. Id.

II.   Investment Income

      On the issue of child support, the parties’ 2004 divorce decree, which
deviated from the child support guidelines, explained:

      For purposes of calculating child support under the guidelines,
      [the husband’s] income shall consist of his employment income
      plus one-half of all interest, taxable or tax-exempt, dividends,
      capital gains, or other income to which he is legally entitled



                                        5
      whether he chooses to actually receive it annually as reported on
      this tax return. The court makes this deviation from the
      requirements of RSA 458-C:2, IV.

On appeal from the divorce decree, the husband did not challenge this
definition of income for child support purposes, but rather the trial court’s
alleged failure to apply it properly. See Hampers I, 154 N.H. at 283. Because
we agreed that the record did not support the figure the trial court had used for
his monthly gross income, we vacated the order and remanded. Id. at 277,
283. The subsequent procedural challenges to that recalculation are not before
us in this appeal.

       This appeal challenges the trial court’s ruling on the husband’s March 5,
2010 motion to modify the child support order. See RSA 458-C:7, I(a)
(permitting either party to move for “modification of such order 3 years after
the entry of the last order for support, without the need to show a substantial
change of circumstances”). The parties agreed to the amount of the husband’s
earned income for child support purposes, but disagreed as to how to calculate
his “substantial unearned income from investments in partnerships and capital
gains.” Each party presented an expert witness to testify as to calculation of
the husband’s “present income.” The husband’s expert, Richard J. Maloney,
CPA, testified that capital losses of more than $3,000 in excess of capital gains
should be carried forward to offset capital gains in subsequent years, in order
to fully recognize the “economic reality” of the capital loss. He also testified
that only the net income from the husband’s investments in partnerships
should be attributable to present income for the purposes of child support.

      The wife’s expert, Dennis R. Stone, CPA, testified that a capital loss in
excess of a capital gain should not affect gross income for child support
purposes because it represents a loss of principal, not a reduction of income
available for child support purposes. He contended that the practice of
carrying forward capital losses to offset unrelated capital gains was tantamount
to averaging income over time. As for partnership investment expenses, Stone
explained that they are reported on the partner’s personal tax return as
itemized deductions, “[n]ot as a reduction of the [partnership] income.”

       The trial court agreed with the wife’s expert. It noted that federal tax law
is inapplicable to calculations of child support under New Hampshire law, and
that RSA 458-C:2 “includes a definition of gross income and contains the word
net only in reference to rental income,” indicating the legislature’s familiarity
with the terms “gross” and “net” and suggesting its intent to limit “net” to
rental income. Recognizing that its ruling would result in a large child support
figure under the guidelines, the trial court explained that “the legislature
provided an avenue to address the [husband’s] concern by providing the Court
with discretion to lower any child support award it deems confiscatory.”



                                         6
       On appeal, the husband argues that the trial court erred by refusing to
allow him to carry over capital losses in excess of capital gains to offset future
years’ capital gains, and by declining to deduct the partnerships’ expenses from
the revenues of the partnership investments.

       Trial courts have broad discretion in reviewing and modifying child
support orders. In the Matter of Jerome & Jerome, 150 N.H. 626, 628 (2004).
However, whether capital losses may be carried over to offset future years’
capital gains in calculating “investment income,” and whether the trial court
should have included the husband’s partnership expenses as part of his gross
income as defined under RSA 458-C:2, IV, are questions of statutory
interpretation, and, thus, are questions of law, which we review de novo. See
In the Matter of Albert & McRae, 155 N.H. 259, 262 (2007). We are the final
arbiter of the legislature’s intent as expressed in the words of the statute
considered as a whole. In the Matter of Plaisted & Plaisted, 149 N.H. 522, 523
(2003). We interpret legislative intent from the statute as written, and we will
not consider what the legislature might have said or add words that the
legislature did not include. Id. at 524. We interpret statutes in the context of
the overall statutory scheme and not in isolation. Id.

      For purposes of calculating a parent’s child support obligation, RSA 458-
C:2, IV defines gross income as:

      all income from any source, whether earned or unearned,
      including, but not limited to, wages, salary, commissions, tips,
      annuities, social security benefits, trust income, lottery or
      gambling winnings, interest, dividends, investment income, net
      rental income, self-employment income, alimony, business profits,
      pensions, bonuses, and payments from other government
      programs . . . including, but not limited to, workers’ compensation,
      veterans’ benefits, unemployment benefits, and disability benefits.

(Emphases added.). Although trial courts have discretion to adjust a child
support award based upon special circumstances, see RSA 458-C:4, II (2004),
the legislative scheme requires that all items includable as “gross income” be
considered to determine the parties’ support obligation. In the Matter of State
& Taylor, 153 N.H. 700, 703 (2006); see also In the Matter of Feddersen &
Cannon, 149 N.H. 194, 197 (2003). The parties characterize both questions
before us as relating to the definition of “investment income.” Contrary to the
wife’s assertion that we implicitly answered these questions in Albert, 155 N.H.
at 263, the meaning of “investment income” for child support purposes under
RSA 458-C:2 is an issue of first impression for this court. We note at the
outset that “income tax returns are an unreliable guide to the income available
for child support purposes,” Albert, 155 N.H. at 264, and we have interpreted




                                        7
the statute so that the concept of gross income encompasses the money
available to the obligor parent for paying child support. Id.

      A. Capital Losses in Excess of Capital Gains

       The husband argues that the trial court erred by allowing capital losses
to offset gains only to the extent of the capital gains for any given year. He
contends that this ruling: (1) is internally inconsistent because it recognizes
losses only up to the point of the gain, but no further; (2) conflicts with
persuasive authority recognizing the effect of capital losses; and (3) is against
sound public policy.

        None of the husband’s arguments is persuasive as to the issue at hand:
i.e., the treatment, for child support purposes, of capital losses that exceed
capital gains within a given year. Maloney testified to three potential ways to
address capital losses in excess of capital gains: (1) to follow the method
consistent with federal tax law, pursuant to which a portion of the excess loss
($3,000) is deducted from other income, and the remainder of the loss is
carried over to offset capital gains (and up to $3,000 of other income) in future
years; (2) to deduct the entire capital loss from gross income in the year in
which the loss was incurred; or (3) to “ignore the economic reality of the loss”
by deducting capital losses only up to the point of capital gains. Another
option, which neither party addresses, is to treat capital gains as income and
not to account for capital losses when calculating gross income. The husband
argues in favor of option (1), and claims that option (3), which he characterizes
as the approach that Stone supported and the trial court ordered, is not
“rational” because it does not accurately reflect the income available for child
support purposes. We disagree and discuss each option in turn.

       We first conclude that “investment income” for child support purposes
should not be defined as consistent with the federal taxation approach of
carrying over to future years capital losses which exceed capital gains. See 26
U.S.C. § 1212(b) (2012). “[H]ow federal income taxation statutes define
‘income’ is of little relevance to our interpretation of gross income under the
child support guidelines.” Taylor, 153 N.H. at 704; see Albert, 155 N.H. at 263.
“This is so because the objectives of the child support guidelines differ from the
objectives of the federal income taxation statutes.” Albert, 155 N.H. at 263
(quotation, brackets, and ellipsis omitted). “The objectives of the child support
guidelines are to reduce the economic consequences of divorce on children and
ensure that children enjoy a standard of living equal to that of the noncustodial
parent’s subsequent family.” Taylor, 153 N.H. at 703; see RSA 458-C:1, II
(2004); see also In the Matter of Dolan and Dolan, 147 N.H. 218, 221-22
(2001). Allowing losses to carry over would violate the purposes of the child
support guidelines because it would artificially decrease income in the years




                                        8
subsequent to the capital sale, even though the income available for child
support in those subsequent years would not have decreased.

        “The child support guidelines set forth in RSA chapter 458-C mandate
that an obligor’s entire income be considered.” Jerome, 150 N.H. at 633
(quotation omitted). Moreover, “[o]ur case law is clear that trial courts should
not employ income-averaging over a number of years to determine child
support obligations.” Rattee v. Rattee, 146 N.H. 44, 46 (2001). Instead, “child
support should be determined on the basis of present income.” Id. As Stone
testified, allowing a carry-over of capital losses is a form of income averaging
because it nets “losses from prior periods that have nothing to do with the
gains that were realized in the current period” against one another.
Accordingly, we conclude that the trial court correctly rejected the loss carry-
over option to calculate investment income.

      We likewise conclude that “investment income” for child support
purposes should not be defined to permit deducting an excess capital loss from
other categories of gross income in the year it is incurred. Under that option,
capital losses could exceed income generated from other sources, leaving a
parent with “negative” income, regardless of whether the parent has actual
income available for child support. As the parties agree, that approach would
be against the best interest of the child.

       Because neither party argues in favor of the fourth option, we need not
decide whether to adopt the construction under which capital gains constitute
income without regard to capital losses. See L. Morgan, Child Support
Guidelines: Interpretation and Application § 4.07[H] at 4-47 to 4-48 (2d ed.
2013) (analyzing different courts’ approaches to capital gains as income for
child support purposes); cf. Abercrombie v. Abercrombie, No. E2003-01226-
COA-R3-CV, 2004 WL 626713, at *8 (Tenn. Ct. App. Mar. 29, 2004) (declining
to offset capital gain with capital losses).

       Thus, we uphold the trial court’s decision to give effect to capital losses
only up to the amount of capital gains realized during the same year. First, we
note that neither party argues that capital losses should not offset capital gains
in the year that both are incurred. Thus, we need not decide here whether that
treatment is permitted under our statutory scheme. Second, we agree that the
definition of “investment income” limits the deduction of capital losses, at most,
to the extent of any capital gains within the same year. The child support
guidelines turn on the obligor parent’s income available for support, and not on
the parent’s net worth. See, e.g., RSA 458-C:3 (Supp. 2013) (establishing
formula for calculation of child support based upon parents’ incomes); In the
Matter of Woolsey & Woolsey, 164 N.H. 301, 306 (2012) (“calculating a parent’s
ability to pay child support necessitates determining an actual ability to pay”).
Given the guidelines’ focus upon the obligor’s actual ability to pay and the



                                        9
amount available for child support purposes, it is reasonable to limit a
deduction of capital losses to the extent of any capital gains in one year.

       Accordingly, as between the two approaches advanced by the parties,
because the purposes of RSA chapter 458-C are better served by limiting the
offset for capital losses to the extent of capital gains in the same year, as the
trial court did, we affirm that ruling. If the legislature wishes to clarify the
treatment of capital losses, it is of course free to amend the statute as it sees
fit. See Evans v. J Four Realty, 164 N.H. 570, 576 (2013).

      B. Income From Investments in Partnerships

      The husband next argues that in determining his gross income, the trial
court erroneously declined to deduct reasonable and necessary investment
expenses from the revenues of his partnership investments. There is no
dispute that his 2009 income included income from investments in eight
partnerships. Maloney explained in his report:

      [The husband] is a limited partner in eight limited partnerships.
      These partnerships generate a variety of types of income as well as
      expenses. Because these investments are partnerships, the
      specific category of income and expense is reported in different
      sections of the tax return rather than combined to determine the
      actual net income from a particular partnership. Solely because of
      the requirements of the Internal Revenue Code, the expenses
      related to the investment activity in the partnership are not netted
      against the income for reporting purposes. Rather, the items of
      income are reported in determining gross income but the expenses
      are reported as itemized deductions.

      The partnerships must file an information return (Form 1065). On
      Schedule K-1 of that return, the partnership separately identifies
      many items of income, deduction, capital gain, capital loss, credits,
      etc., with the remaining activity being summarized as ‘ordinary
      business income (loss)’. Each partner reports these various items
      on his individual tax return. These items will be reported on
      separate schedules (Schedule A for expenses, Schedule B for
      Interest and Dividends, Schedule D for capital gains, Schedule E
      for ordinary business income or loss, etc.). In order to calculate
      the correct total income from a partnership, all these items must
      be considered.

Stone disagreed that “investment and portfolio expenses should be deducted”
from income, reasoning “that such amounts are correctly categorized as
expenses and as such should not be accounted for as a reduction of total



                                        10
income for child support purposes.” Noting that the statutory definition of
gross income includes the word “net” only as applied to rental income, the trial
court accepted Stone’s opinion “as the appropriate standard to apply.”

       The husband argues that the business expenses of the partnerships were
the natural, necessary, and ordinary cost of investing in such partnerships,
and maintains that these expenses must be deducted annually from the gains
realized from the partnerships to determine the correct amount of “investment
income.” He explains that, like the Limited Liability Company (LLC) at issue in
Albert or an S-corporation, the partnerships are “pass through” entities,
requiring each investor to report the partnership’s gains, losses, and expenses
on his or her tax return. See Albert, 155 N.H. at 263-64. Citing Woolsey, 164
N.H. at 307, he argues that an obligor’s support obligation should be measured
by taking into account all of his income and deducting therefrom the losses
incurred and expenses actually paid that were directly related to the
production of that income. He asserts, however, that “it would be irrational
and untenable to determine precisely how every partnership expense related to
the income produced by the partnership.” He further notes his lack of
decision-making authority over the partnerships, highlighting his inability to
shield income, manipulate the amount of money he received in order to reduce
his child support obligation, or use the business to defray his personal
expenses.

      The wife counters that each source of income enumerated in RSA 458-
C:2, IV, other than “net rental income,” is intended to refer to that source in
gross, citing Albert, 155 N.H. at 263. She also argues that including all of the
husband’s “investment income” in his gross income is more consistent with the
goal of the child support guidelines to ensure that their son will enjoy a
standard of living commensurate with that of the husband. Finally, she argues
that the partnerships’ expenses are the result of a “discretionary decision to
employ a third party that charges management fees,” and constitute “a
personal expense incurred for management of an investment asset,” rather
than a business expense directly related to the production of income. We
disagree with the wife’s arguments on this point.

       We first note that the statute’s failure to refer to “net” investment income
is not dispositive. We rejected a similar argument in Woolsey, 164 N.H. at 304-
06. There, we considered the meaning of “self-employment income,” which the
legislature also did not qualify by the term “net,” and found “implicit in RSA
458-C:2, IV that the term ‘self-employment income’ means self-employment
income net of legitimate business expenses incurred for the purpose of earning
that income.” Woolsey, 164 N.H. at 306. We reasoned that it was “improbable
that the legislature intended the term ‘self-employment income’ in RSA 458-
C:2, IV to mean the gross receipts of a sole proprietorship when a portion of




                                        11
that money is payable to others as legitimate business expenses, and is
therefore unavailable for the payment of child support.” Id. at 305.

       We turn now to how an obligor parent’s income from partnerships should
be calculated. A partnership is subject to “pass through” taxation, similar to
an S-corporation or an LLC. See, e.g., Thill v. Thill, 26 S.W.3d 199, 202 n.1
(Mo. Ct. App. 2000); 26 U.S.C. §§ 701-709 (2013). The partnership itself does
not pay tax, but its members are taxed on their distributive shares of the
partnership’s income, gain, loss, deduction, or credit. See 26 U.S.C. § 702.
The parties agree that the husband’s income from the partnerships should be
considered “investment income”; however, other states generally treat
partnership income as in the nature of self-employment income. See, e.g.,
Morgan, supra § 4.08, at 4-89 (“Income from self-employment, including rent,
royalties, income from proprietorship of a business, and income from joint
ownership of a partnership or closely held corporation is calculated by taking
gross receipts minus ordinary and necessary expenses required to produce
such income.”); Rein v. Rein, No. FA 064021530S, 2012 WL 898774, at *2-3
(Conn. Super. Ct. Feb. 27, 2012) (analogizing family partnership to self-
employment for purposes of calculating parent’s income, and concluding the
parent’s partnership earnings were “includable in gross income for child
support purposes, but only after deduction of all reasonable and necessary
business expenses” (quotation omitted)); Roubanes v. Roubanes, No. 13AP-369,
2013 WL 6858958, at *2-3 (Ohio Ct. App. Dec. 30, 2013) (interpreting statute
defining “self-generated income” for child support purposes by focusing on
amount of money actually available for child support purposes).

       We agree with the logic analogizing self-employment, proprietorship of a
business, and joint ownership of a partnership. Cf. Opinion of the Justices,
123 N.H. 296, 308 (1983) (understanding legislative concern to be that
proposed tax on business income “might have the practical effect of being a tax
on the income of sole proprietors or partners, since the personal income of
such individuals is essentially the net profit derived from their businesses’
income”). As noted above, we have already determined that “self-employment
income” in RSA 458-C:2, IV “means self-employment income net of legitimate
business expenses incurred for the purpose of earning that income.” Woolsey,
164 N.H. at 306. We reached this conclusion because “calculating a parent’s
ability to pay child support necessitates determining an actual ability to pay,
and, therefore, . . . presupposes the deduction of legitimate business
expenses.” Id.

      The determination of a parent’s partnership income “net of legitimate
business expenses incurred for the purpose of earning that income,” however,
involves more than simply applying the figures reported on income tax returns.
See Woolsey, 164 N.H. at 306; see also Albert, 155 N.H. at 264. “[T]o be
deductible for purposes of determining ‘self-employment income’ under RSA



                                      12
458-C:2, IV, business expenses must be actually incurred and paid, and
reasonable and necessary for producing income.” Woolsey, 164 N.H. at 307
(quotations and citations omitted). “It is for the trial judge to determine
whether claimed expenses meet those criteria.” Id. Although a tax return may
yield valuable data for a trial court’s use in setting child support, see
Abercrombie, 2004 WL 626713, at *7, “income tax returns are an unreliable
guide to the income available for child support purposes.” Woolsey, 164 N.H.
at 305 (quotation omitted).

      The statute does not suggest that an obligor parent’s status as a limited
partner should result in the blanket deductibility of his share of the
partnership’s tax-reported expenses, without regard to whether those expenses
are reasonable and necessary for the production of income. See RSA 458-C:2,
IV. The husband argues that the “relevant calculus is whether the partnership
expense is merely a mask for the personal expense of the obligor,” asserting
that the “stereotypical case” would be one in which an obligor who owns an
interest in a closely held corporation makes minimal distributions to himself,
while characterizing his personal living expenses as business expenses in order
to avoid child support obligations. He contends that because he lacked
decision-making authority over the partnerships, and therefore could not
shield income or manipulate the amount of money he received in order to
reduce his child support obligation or use the business to defray his personal
expenses, the rationale for limiting deductions to only those that are
reasonable and necessary for the production of income does not apply.

       Our reasoning in Woolsey does not support the husband’s position. See
Woolsey, 164 N.H. at 304-07. The justification for considering a parent’s gross
income to be less than the gross receipts of his business is that certain
expenses must be paid from the business’s receipts in order for the business to
continue to function. Id. at 306 (“To embrace a rule that a child support
obligation takes precedence over the self-employed obligor’s business expenses
could create the untenable situation that the expenses associated with the
production of income be held in abeyance until the child support is paid.”
(quotation, ellipses, and brackets omitted)). It is only the reasonable and
necessary business expenses, however, that may reduce a parent’s gross
income from self-employment. Thus, the parent who seeks to reduce his gross
income must demonstrate why gross receipts from self-employment do not
legitimately reflect income available for child support.

       In so interpreting our statute, we admittedly place a risk on a parent who
is a limited partner with no control over the partnership’s expenses: The
partnership may incur expenses that are not reasonable and necessary for the
production of income, and thus not deductible from the parent’s income for
child support purposes, yet the parent may not receive any benefit from these
expenses. However, this is a justifiable risk. As between a parent who chooses



                                       13
to participate in (or invest in) a partnership that might incur unnecessary
expenses, and that parent’s children, it is the parent who should bear the risk.
Other investment vehicles that are not in the nature of self-employment will
not carry the same risk; however, with respect to income from a partnership,
only those expenses that are reasonable and necessary for the production of
income are deductible therefrom for the purposes of calculating child support.
See id. at 306-07.

       Whether to deduct reasonable and necessary expenses from the
business’s income distributions when calculating a parent’s income for child
support purposes is a highly fact-specific determination. See In re Marriage of
Brand, 44 P.3d 321, 330 (Kan. 2002) (discussing treatment of income from an
S-corporation). To the extent that the husband suggests that the burden is on
the wife to establish that the charged expenses were not “actually incurred and
paid, and reasonable and necessary for producing income,” Woolsey, 164 N.H.
at 307 (quotations and citation omitted), we hold that the burden of
demonstrating the deductibility of such expenses is on him. See, e.g., Reichert
v. Hornbeck, 63 A.3d 76, 103 n.11 (Md. Ct. Spec. App. 2013). The burden is
properly on the partner because he or she has the ability to obtain information
to establish the propriety of the partnership’s actions. Cf. Zold v. Zold, 911 So.
2d 1222, 1233 (Fla. 2005) (placing burden on S-corporation shareholder
spouse to prove “that the undistributed ‘pass-through’ income was properly
retained for corporate purposes rather than impermissibly retained to avoid
alimony, child support, or attorney’s fees obligations by reducing the
shareholder-spouse’s amount of available income”).

       Here, the wife characterizes the contested partnership expenses as
nondeductible personal expenses; the husband, based upon Maloney’s
testimony, disagrees. The trial court did not determine whether the expenses
were reasonable and necessary for the production of the partnerships’ income,
however, and the record does not allow such a conclusion as a matter of law.
Maloney explained that he had generated the schedules for his report by taking
the figures as reported by the partnerships to the husband — that is, as they
appeared in the tax returns. Stone likewise expressly disclaimed any
knowledge as to whether the expenses were “actually incurred and paid, and
reasonable and necessary for producing income.” Because “[i]t is for the trial
judge to determine whether claimed expenses meet [our established] criteria,”
Woolsey, 164 N.H. at 307, and the trial court did not address the claimed
expenses in this case, remand is necessary for the trial court to make that
determination. Id.

       Accordingly, we reverse the trial court’s ruling on this issue and remand
for further proceedings consistent with this opinion.




                                       14
III.   Use of 2009 Income Figures

       The wife asserts that the trial court erred when it calculated child
support based upon the husband’s 2009 income and tax return, despite the
fact that his 2010 income figures and tax return were available and neither
party questioned the reliability of the more current earnings data. She
contends that, unless the most recent figures are misleading, as they were in
Feddersen, 149 N.H. 194 (2003), and In the Matter of Crowe & Crowe, 148 N.H.
218 (2002), the most current figures available should provide the basis for the
court’s determination of “present income.” Here, she argues, the husband’s
2009 income was abnormally low, compared to the years before and after, and
therefore the trial court unsustainably exercised its discretion when it based
the husband’s child support obligations on his 2009 income.

       The husband responds that the trial court’s decision to use his 2009
income figures was within its discretion, after hearing substantial testimony
from both experts concerning the husband’s income for both 2009 and 2010.
He supports this argument with two policy considerations: first, that to require
the court to consider only the most current information available would result
in a cycle of discovery, expert preparation, and potentially strategic trial delay,
leaving the figures (and thus the payment obligation) to depend upon the
vicissitudes of court scheduling; and second, that the decision to use financial
information from the date of filing is critical to preserving a moving party’s right
to modification, since a change in income before the petition is heard would
obviate that party’s right to an order setting child support at the amount
commensurate with the party’s need or ability to pay. He also contends that
New Hampshire’s child support statutory scheme and case law, providing for
modification retroactive to the time of filing, reflects an intent to accurately
reflect the obligor’s ability to pay as that ability changes over time.

      In its October 2011 order, the trial court stated: “[T]his case began in
2009 and the Court will utilize [the husband’s] 2009 income for purposes of
setting a child support payment.” On reconsideration, the court further
explained: “The Court utilized the income of 2009 because it found that the
expert[s’] analysis, exhibits, and testimony were more beneficial to the Court’s
analysis of [the husband’s] current income than the testimony relating to other
years. Further, [the husband] filed for modification in 2010 based upon his
2009 income.” However, in its analysis of the capital gains issue, the trial
court acknowledged that New Hampshire cases, including Rattee, 146 N.H. at
46, and Feddersen, 149 N.H. at 196, “indicate that present income is the actual
income that a party has available to it to utilize for itself or to benefit that party
and to pay child support,” and “ruled that the Court is required to determine
present income utilizing RSA 458-C:2 to determine an appropriate child
support payment.” Thus, the issue is whether the court properly applied this
precedent to calculate child support under the guidelines.



                                         15
      “Trial courts have broad discretion in reviewing and modifying child
support orders.” Taylor, 153 N.H. at 702. “Accordingly, we will set aside a
modification order only if it clearly appears on the evidence that the court’s
exercise of discretion was unsustainable.” Feddersen, 149 N.H. at 196
(quotation omitted).

       It is undisputed that “child support should be determined on the basis of
present income.” Rattee, 146 N.H. at 46. “When calculating a parent’s child
support obligation, the court must first determine the parent’s ‘present
income.’” In the Matter of Gray & Gray, 160 N.H. 62, 67 (2010). “It is up to the
trial court to decide what income figures should be used based upon the facts
presented at the hearing and the credibility and forthrightness of the
noncustodial parent in disclosing income.” Id. (quotations omitted). “This
includes the use of past tax returns when the obligor provides ‘misleading’
information on the financial affidavit.” Id. (quotation omitted). For example, in
Gray, in which the only evidence of the obligor father’s current income was an
affidavit he submitted, “the family division observed that the father’s ‘reported
income and expenses as well as his attitude and demeanor’ raised doubts
about ‘his credibility and forthrightness,’” and therefore “properly ordered the
father to submit the past tax returns to aid in establishing his present income.”
Id.; see Feddersen, 149 N.H. at 197; Crowe, 148 N.H. at 223. Here, however,
the parties do not dispute the veracity of the information the husband provided
in his 2009 and 2010 tax returns, but disagree only as to the application of
that information. The trial court made no finding that the husband’s 2010
information was misleading. Thus, this exception to the general rule that
current information is the best representation of “present income” is not
implicated here.

       The trial court’s decision was based upon review of two full sets of
financial data relating to the husband’s 2009 income and 2010 income, with
analysis by experts for both sides. The court explained that it “utilized the
income of 2009 because it found that the expert[s’] analysis, exhibits and
testimony were more beneficial to the Court’s analysis of [the husband’s]
current income than the testimony relating to other years. Further, [the
husband] filed for modification in 2010 based upon his 2009 income.” The
trial court did not explain what characteristics of the 2009 evidence, as
compared to the 2010 evidence, made the older information “more beneficial” to
an analysis of present income. Nor does the record support that conclusion.
Furthermore, nothing indicates that the court’s decision to use the 2009
figures was grounded in any concern raised in the husband’s modification
petition: He did not move to modify on the ground of a substantial change in
circumstances, see In the Matter of Duquette & Duquette, 159 N.H. 81, 86
(2009); rather, he sought modification of the child support order without the
need to show a substantial change of circumstances pursuant to RSA 458-C:7,
I(a).



                                        16
      The husband argues that “[t]he decision to use financial information
from the date of filing is . . . critical to preserving a moving party’s rights to
modification.” He asserts that if the obligor’s financial circumstances warrant
a modification when he moves for it, but change before the case is heard, then
the obligor’s right to modify his child support obligation to that commensurate
with his ability to pay during the year in which he moved for hearing will be
lost. He also points out that a court’s order granting modification of a child
support award is frequently retroactive to the date of the motion, indicating
that the figures at the time of filing are intended to govern the modification.
We agree that fairness concerns may be implicated when a parent’s income
fluctuates between the time of a request for modification and the time that the
case is actually heard, resulting in either overpayment or underpayment for the
period while the case is pending. However, the remedy for a parent who has
made payments under an outdated support order cannot be a new support
order based upon financial figures that are not current; such a resolution
would be inconsistent with the child support guidelines.

      “New Hampshire’s child support guidelines shall be applied in all child
support cases, including any order modifying a support order.” Duquette, 159
N.H. at 86 (quotation and ellipsis omitted). “There is a rebuttable presumption
that a child support award calculated under the guidelines is the correct
amount of child support.” Id. (quotation omitted). “The presumption may be
overcome and the trial court may deviate from the guidelines when it is shown
by a preponderance of the evidence that the application of the guidelines would
be unjust or inappropriate . . . because of special circumstances.” In the
Matter of Forcier & Mueller, 152 N.H. 463, 465 (2005) (quotations and citations
omitted). “Pursuant to the legislative scheme, all items includable as ‘gross
income’ must be used to determine the parties’ total support obligation.”
Feddersen, 149 N.H. at 197. However, an item not includable as “gross
income” may nonetheless be relevant to the computation of a child support
award, by contributing to special circumstances that would make deviation
appropriate. See In the Matter of Fulton & Fulton, 154 N.H. 264, 268 (2006)
(holding that gifts are not included in definition of gross income, but that trial
courts may consider impact of gifts on financial condition of the parties and
that RSA 458-C:5’s special circumstances standard is sufficiently flexible to
address issue).

       In the case of a parent’s fluctuating income, the correct course of action
is to calculate the parties’ child support obligation under the guidelines, and
then to explain what, if any, circumstances warrant deviation from that
amount. See Feddersen, 149 N.H. at 198 (“The statutory scheme provides
courts with the means to address income fluctuations. For instance, trial
courts may adjust an award when applying the uniform child support
guidelines would result in a ‘confiscatory support order.’” (citation omitted)).
Indeed, here, as the trial court noted in another context, “the legislature



                                        17
provided an avenue to address the [husband’s] concern by providing the Court
with discretion to lower any child support award it deems confiscatory.” See
RSA 458-C:4, II (2004); RSA 458-C:5 (Supp. 2013). Although the trial court
may order modification effective as of the filing date of the petition to modify,
see RSA 458-C:7; Maciejczyk v. Maciejczyk, 134 N.H. 343, 345 (1991), “[w]e
would strain the bounds of logic . . . to hold that the court’s authority to order
a reduction mandated such a reduction, or limited the court’s discretion to
deny the reduction if the circumstances warranted denial.” Giles v. Giles, 136
N.H. 540, 546 (1992). The statutory scheme is sufficiently flexible to allow trial
courts to fashion a just modification and repayment order, as necessary, in
cases in which the application of the guidelines — to either future payments or
payments between the date of filing and the court’s final order — would be
“unjust or inappropriate.” RSA 458-C:4, II; see RSA 458-C:7; RSA 458-C:5, I
(“special circumstances” allowing adjustments in application of support
guidelines are not limited to the special circumstances enumerated in the
provision).

       Nor are we persuaded by the husband’s argument that our holding will
require endless delays in order to obtain the latest financial data and allow
experts time to analyze that data. We do not hold that hearings must be
delayed to allow the calculation and review of ever-newer financial data. Our
holding today merely reaffirms our longstanding rule that child support awards
are to be based upon the obligor’s “present income.” See Hillebrand v.
Hillebrand, 130 N.H. 520, 526 (1988); see also, e.g., Feddersen, 149 N.H. at
196.

      We conclude that, on the record before us, the trial court erred by using
the husband’s 2009 income for purposes of calculating his “present income.”
Accordingly, we vacate the calculation of child support and remand for further
proceedings consistent with this opinion.

IV.   Reimbursement of Overpaid Child Support

       The wife argues that the trial court lacked subject matter jurisdiction to
order her to reimburse the husband for overpayment of support resulting from
the modification of the support order. She maintains that the 2007
amendment to RSA 458-C:7, III, affects substantive rights because it provides
that “the court shall order, absent a showing of undue hardship, the obligee to
directly reimburse the obligor” (emphasis added) for any overpayment of
support resulting from a modification of a support order. Therefore, she
argues, because her divorce was finalized in 2006, application of the 2007
amendment to her is unlawful. See In the Matter of Donovan & Donovan, 152
N.H. 55, 62-63 (2005).




                                       18
     Because we are remanding for redetermination of the child support
amount, and the wife’s argument regarding the trial court’s authority to award
reimbursement of any overage may again arise, we address the issue.

       The wife’s reliance upon Donovan, 152 N.H. 55, Walker v. Walker, 116
N.H. 717 (1976), and Henry v. Henry, 129 N.H. 159 (1987), for the proposition
that a statutory change that affects substantive rights may be applied only
prospectively is misplaced. To be sure, “[w]e have held previously that
statutory changes affecting parties’ rights to post-divorce financial support
would not be applied retroactively to pre-existing divorce decrees.” Donovan,
152 N.H. at 63. However, the amendment to RSA 458-C:7, III addresses the
procedure for an obligor spouse to recover overpayments in the wake of a
successful motion to modify his or her child support obligation. It does not
retroactively change child support orders made under divorce decrees. Cf.
Donovan, 152 N.H. at 63 (contrasting prior statutory changes with substantive
effect against procedural change from earlier amendment to RSA 458-C:7,
which did not “mandate a change in child support but simply open[ed] up a
new channel of inquiry into whether a modification is appropriate” (quotation
omitted)). As noted above, the purpose of modification procedures is to ensure
that the parties’ obligations are commensurate with their respective needs and
their respective abilities to meet them as of the time of the motion to modify
and going forward. See, e.g., Taylor, 153 N.H. at 702; see also Feddersen, 149
N.H. at 195-96 (including in calculation of “gross income” significant increases
between 1998, when motion to modify was filed, and 2002, when hearing was
held).

        Because the statutory amendment affects only modification procedures,
it is the date of the motion to modify, rather than the date of divorce, that
controls our retroactivity analysis. The husband’s motion to modify was filed
in 2010, after the effective date of the 2007 amendment to the modification
procedures; the application of that amendment to the modification proceedings,
therefore, cannot constitute a retrospective law. Laws 2007, 274:1 (effective
January 1, 2008).

      Because we are vacating the court’s child support award and remanding,
we do not address her argument that the trial court erred by failing to address
whether the award would cause her “undue hardship.”

                                                 Affirmed in part; reversed in
                                                 part; vacated in part; and
                                                 remanded.

      DALIANIS, C.J., concurred; LYNN, J., concurred specially.




                                       19
       LYNN, J., concurring specially. I write separately to make explicit what I
take to be implicit in section II(B) of Justice Conboy’s opinion. I agree that, in
the case of a pass-through entity like a limited partnership, it makes sense to
impose upon the limited partner, here the husband, the burden of
demonstrating that expenses claimed by the partnership are reasonable and
necessary for the production of income. To the extent that the limited partner
is unable to sustain this burden, reported expenses may not be used to offset
the limited partner’s reported gross income from the partnership. However,
consistent with the core principle that the basis for determining an obligor’s
child support obligation must be the income available to pay child support, in
the case of a limited partner who establishes that he or she does not have
control over the management of the partnership, I do not understand the court
to suggest that the income attributed to the limited partner can exceed the
total of the amount actually distributed to the limited partner or used for his or
her personal benefit during the period in question. Based on this
understanding, I concur in the court’s decision.




                                       20
