Adolph v. Adolph, 2012 ABQB 63

Court of Queen ’ s Bench of Alberta Citation: Adolph v. Adolph, 2012 ABQB 63 Date: 20120124 Docket: 4803 154662 Registry: Edmonton Between: Leanne Rae Adolph Plaintiff - and - Darrel Jack Adolph Defendant _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] Ms. Adolph asks for interim child and spousal support commencing November 1, 2011. She contends that Mr. Adolph’s employment income should not be reduced for support calculation by farming losses and that her income as a teacher’s aide should constitute her baseline income despite her university degree and post-degree diploma. She also states that her need for spousal support is at least partly grounded in Mr. Adolph’s failure to abide by a post-nuptial agreement giving her an entitlement to half the value of the farm operation after 20 years of marriage. [ 2 ] Mr.

Adolph responds that, because the majority of the farm losses he has claimed in his tax returns are in fact hard cash losses which exceed the approximately $15,000.00 of losses claimed yearly, his income for support purposes should be his line 150 income. Moreover, he contends that his income for support purposes should be the average of his last 3 years’ income from his employment as an electrician. He objects to paying spousal support on the grounds that Ms. Adolph is voluntarily underemployed and has made imprudent investment decisions.

[ 3 ] With only minor adjustments relating to personal benefits, Mr. Adolph’s income for support purposes is his income as an electrician less his claimed farming losses; the farming operation is a real business for which the tax deductions claimed are not only allowable, but also reasonable: Gibb . Moreover, since Ms. Adolph has a 50% claim to the farming operation, she will get an eventual benefit from any consequential benefit to the overall value of the farming operation. [ 4 ] Because of the differences in the sworn evidence of the parties about whether Ms.

Adolph suffered economic disadvantage or hardship arising from the marriage or its breakdown, the disagreement between them on Ms. Adolph’s entitlement to spousal support cannot be resolved in this interlocutory application. Nevertheless, it is clear on this application that Ms. Adolph is entitled to one half of the value of the parties’ farming operation and that she has not received any portion of that entitlement despite the fact that the parties have been separated for nearly two years. On that basis alone, Ms.

Adolph is entitled, on an interlocutory basis, to a spousal support award; given the length of the marriage, the clear responsibility of Ms. Adolph for the day-to-day care of the children of the marriage especially before they reached school age at the high end of the range, and the income disparity between the parties, the award is at the high end of the range set in the spousal support advisory guidelines, or approximately $1,400.00 per month. Cases and authority cited [ 5 ] By Ms. Adolph: Gibb v Gibb 2005 CarswellBC 2996 . [ 6 ] By Mr. Adolph: Swaren v Swaren 2007 ABQB 193 ; Kirk v Kirk 2006 ABQB 782 . 1.

Background [ 7 ] The parties married in October, 1988 and separated in March, 2010. They are the parents of two children who are now 17 and 16 years old and who live with their mother. [ 8 ] When she married, Ms. Adolph was 26 years old; she had a Bachelor of Science degree from the University of Alberta and a NAIT diploma in Biological Sciences Technology, and was working full time at the University of Alberta in the Department of Zoology as a lab technician, with gross annual earnings of approximately $35,000.00. [ 9 ] When the older of the two children was born, Ms. Adolph took maternity leave.

When she returned to work, she was pregnant with the parties’ second child and, having complications with that pregnancy, went on full medical leave from her employment. After the second child was born, Ms. Adolph did not return to the work force until the second child was 10 years old; at that time, she took up a part-time position as an educational assistant at the school her children were attending; that employment became full time employment 4 years ago. She is paid by the hour and is not paid during the summer months. It may be material to Ms.

Adolph’s employment picture that the farm is located approximately 9 miles south of Spruce Grove, Alberta, or approximately 25 minutes driving distance from the western outskirts of Edmonton. In 2010, Ms. Adolph’s line 150 income was approximately $27,500.00, which included approximately $1,900.00 of employment insurance benefits received during the summer months. [ 10 ] Mr. Adolph is employed as a journeyman electrician. He has farming income from a mixed farm; however, his tax returns for the last 3 years show net farming losses. The farm operation is not a hobby. After taking farm losses into account, Mr.

Adolph’s line 150 income has averaged nearly $90,000.00 for 2007, 2008 and 2009. [ 11 ] In order to give a somewhat more detailed picture of Mr. Adolph’s taxable income, the tax information he has provided for the year 2010 can be used as representative. In that year, he earned approximately $100,000.00 from employment as an electrician. He earned gross farm income of approximately $61,000.00 from the slaughter of cattle, the production of barley and from a surface lease.

The total farm expenses for that year were $112,575 and consisted of such matters as seed, twine, fertilizer, pesticides, crop and machinery insurance, veterinary fees, property taxes, legal and accounting fees, small tools, motor vehicle expenses, and mandatory and optional inventory adjustments. In past years, farm sales have fluctuated, from approximately $90,000.00 to $52,000.00, when the parties lost their canola crop.

[ 12 ] In early 1989, that is some months after they were married, the parties executed a formal contract dealing with the ownership of the farm. Ms. Adolph asserts that the agreement was entered into at her insistence. Paragraph 5 of the agreement stated that, after twenty years of marriage, Ms. Adolph would acquire an equal interest in the farming operation, i.e. would have joint ownership of the operation, and would be equally responsible along with Mr. Adolph for any debts of the farming operation. Paragraph 7 of the agreement dealt with the way in which Ms. Adolph was to be paid out for her interest: 7.

In the event that Leanne becomes entitled to a share of the farming operation, other than an entitlement under clause 6 herein as a result of the death of Darrel, in that event: (

a) her share net of encumbrances shall be valued as at that date and she shall only be entitled to receive her share in cash and not otherwise, so that the integrity of the farming operation is maintained as a family farm. (

b) Leanne agrees not to seek any share of the farming operation in specie and the provisions of the Law of Property Act,

part 3 shall not apply to the farming operation. (

c) Leanne agrees to be compensated for her share in cash by payments made over time, the terms of which payment as to amounts and time of payments shall be as mutally agreed by the parties, or, failing agreement, as determined by a body of three individuals, one of whom shall be selected by Darrel, one by Leanne and the third by mutual agreement of the two nominees of the parties. The decision of the body shall be final and binding on the parties.

The compensation with regard to S.E. 1/4 21-51-27-W4 shall be reduced by the value of the land at the time it is acquired by Darrel which value shall remain his. [ 13 ] The post-nuptial agreement does not deal with spousal support. [ 14 ] Although the parties have been separated since March 2010, Ms. Adolph has not yet been paid out her ownership interest in the farm operation.

As I understand the evidence on this application, the farm property is owned free and clear and the farm operation is debt free but for a small line of credit. [ 15 ] In addition to her interest in the farm operation, during the course of the marriage, Ms. Adolph acquired approximately $70,000.00 in RSPs. When she separated from her husband, Ms. Adolph took approximately $39,000.00 from the parties’ joint bank accounts. There is a relatively minor dispute between the parties about how much of those funds were used by Ms.

Adolph to pay farm debts, but it is agreed that approximately $4,400.00 of the money was spent on farm expenses including farm fuel. [ 16 ] At about the time of separation, Ms. Adolph told her husband that she wished to buy a new house; as a result of that information, Mr. Adolph made inquiries from his bank and learned that he qualified for mortgage financing of between $350,000.00 and $400,000.00. However, Mr. Adolph asserts that this potential financing limit would have to be reduced to take into account his payments of child and spousal support. As indicated above, as of the date of the hearing, Ms.

Adolph had not been paid out her ownership interest in the farm operation. Although she had not actually received a pay-out from her husband, Ms. Adolph continued with her plans to have a new residence built for herself. She paid $1,000.00 as an initial deposit and a further $10,000.00 to secure the building of a residence. However, when Ms. Adolph did not obtain additional funds from Mr. Adolph, her parents acquired the property Ms. Adolph had agreed to purchase and Ms. Adolph and the children live there. 2. Mr. Adolph’s income for support purposes [ 17 ] Mr.

Adolph’s income for support purposes is the average of his line 150 income for the years 2008, 2009 and 2010, to which will be added for each of those years the amount which has been claimed by Mr. Adolph as vehicle expense. For example, for the year 2010, Mr. Adolph’s income for support purposes is $88,240.02 which is composed of his line 150 income of $87,299.94 plus his motor vehicle (business) claim of $940.08. [ 18 ] Ms. Adolph argues that her husband’s income for support purposes should not be reduced by farm losses.

She does not claim that the farm operation is in any way a sham or a mere hobby; rather, she states that some of the expenses claimed as farm expenses are in fact personal expenses. In support of this claim, Ms. Adolph who asserts that she kept the books for the farm operation until 2006,

specifically identifies the motor vehicle (business) claim made by Mr. Adolph - which in 2010 amounted to $940.08 - and the claim which he has made for a telephone; she claims that “ the motor vehicle, telephone, and waste disposal expenses are for my car, my phone and the house”. [ 19 ] In Gibb , the court distinguished hobby farms and farms which produced little or no income relative to the spouse’s employment from losses associated with real farming operations and concluded that, on the facts of that case, the farming losses could properly be deducted from the income from employment: see para. 42.

This case is like Gibb . Indeed, in this case, we have more information than was available to the court in Gibb , including information about the income from the farming operation which, in the year 2010 was $60,789.00; while not as much as Mr. Adolph’s income from employment, the gross farm income was several orders of magnitude greater than the paltry $4,899.13 noted in the Needham decision referred to in Gibb . [ 20 ] Since even the decision cited by Ms. Adolph supports Mr.

Adolph’s position, it will not be surprising to note that the Swaren decision also allows a deduction for farm losses, although, interestingly, that decision only allowed 50 percent of the net farming losses each year as an appropriate deduction from employment income. However, that decision is a trial decision in which the trial judge heard evidence from experts about the handling of farm losses.

At this stage of the proceedings, a special chambers application, there is no such evidence before me; specifically, there is no evidence about the application of depreciation in the tax system versus the appreciation of buildings in the market place of the type which informs Germain J.’s decision in Swaren .

Therefore, there is no basis for me to reduce the claim for farm losses by 50 percent. [ 21 ] In the Kirk decision, it was admitted by the farm operator that there was virtually no income from the farming operation; that decision is, therefore more analogous on its facts to the Needham decision mentioned in Gibb rather than to the facts which are available on this application.. [ 22 ] Based on the evidence before me, I allow the claimed deductions for farming losses except the claim for motor vehicles (business). In relation to the latter item, relying on Ms. Adolph’s evidence on the point, I will require Mr.

Adolph to add the claim for a motor vehicle (business) to his line 150 income. I will not, however, require him to add back the amounts claimed for a telephone and for waste disposal: Ms. Adolph herself claims in her affidavits that she did a good deal of work to support the farming operation. Some of that work undoubtedly required her to drive - to pick up feed, to pay bills, etc. Therefore, she is wrong when she states that the whole of the claim for motor vehicle (business) is unrelated to the farming operation. A similar analysis would apply to Ms.

Adolph’s own telephone and to the waste disposal claim: each is likely to have some business component in addition to its personal component. However, because we are at an interlocutory stage of proceedings when all evidence has not yet been produced, in order to make calculations as easy and cheap as possible, I have concluded that using only the claim for a motor vehicle (business) item would adequately reflect the personal benefits that Mr. Adolph enjoys from the business expenditures. [ 23 ] Finally, in this context, I observe that Ms. Adolph has a clear claim to a half interest in the farming operation.

Therefore, any benefit to the valuation of the farm which is obtained through legitimate tax adjustments will benefit her in the long run. 3. Child support [ 24 ] There is no issue in relation to the principle of child support; starting on November 1, 2011 until further order of the court Mr. Adolph will pay monthly child support based on his average adjusted line 150 income as discussed above. 4. Spousal support [ 25 ] Ms.

Adolph is entitled to interlocutory monthly spousal support of approximately $1,458.00, which monthly award will be reviewed upon the settlement between the parties of their matrimonial property dispute. [ 26 ] The first stage of analysis of a spousal support claim is, of course, an assessment of entitlement. At this stage of the proceedings, there is a dispute between the parties concerning any economic disadvantage suffered by Ms. Adolph arising from the marriage or its breakdown. Obviously, the reason why Ms. Adolph is earning less now that prior to her marriage will have to be explored.

Also, there is a dispute between the parties about any hardship suffered by Ms. Adolph resulting from the breakdown of the

marriage - whether she had to buy new furniture, etc. However, those disputes cannot be settled on this interlocutory application. [ 27 ] What is clear on this application is that Ms. Adolph is entitled to one half of the farming operation and she has not yet received that asset, despite the nearly two year separation of the parties. On that basis alone, Ms. Adolph is entitled to spousal support. Mr. Adolph argues that, if awarded at all, spousal support should be set at the low end of the range with a view to giving Ms. Adolph an incentive to settle the matrimonial property claim.

With respect, I conclude that making an award on that basis would be as unprincipled as making an award on the basis that a higher than deserved award against a spouse would equally give that spouse an incentive to settle. Here, the court must make the best assessment it can on the basis of the evidence provided; given the length of the marriage, the fact that Ms.

Adolph obviously had the responsibility of the day to day care of the children of the marriage, especially prior to the children’s school age whether or not that care was her choice or the choice of both parties, and the disparity in the parties’ incomes, the spousal support order will, on an interlocutory basis, be at the high end of the range indicated in the spousal support advisory guidelines. Roughly speaking, that award is for monthly spousal support of approximately $1,458.00 as claimed in Ms.

Adolph’s confirming letter; however, that amount will have to be re-calculated based on the determinations made earlier concerning Mr. Adolph’s income for support purposes. The interlocutory award, as re-calculated, will be reviewed once the parties have settled their matrimonial property dispute. 5. Retroactive support [ 28 ] Mr. Adolph is on notice that nothing in this decision affects Ms. Adolph’s right to claim for retroactive child and spousal support from the date of separation until November 1, 2011. 6.

Costs [ 29 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 14 th day of December, 2011. Dated at the City of Edmonton, Alberta this 24 th day of January, 2012. J.B. Veit J.C.Q.B.A. Appearances: Debbie A. Yungwirth, Q.C., Yungwirth Tumbach for Ms. Adolph Nadia D. Koziak, Koziak Law for Mr. Adolph