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Johnson v. Young

Court of Appeals of Arkansas, Division I

March 8, 2017



          Brett D. Watson, Attorney at Law, PLLC, by: Brett D. Watson and Benson Law Firm, P.A., by: King Benson, for appellant.

          No response.

          RAYMOND R. ABRAMSON, Judge

         This appeal arises from the Phillips County Circuit Court's denial of appellant Marti Johnson's request to increase her ex-husband appellee William Young's child-support payments. Johnson argues that the circuit court erred in not increasing Young's child-support payments by not using the correct method to calculate Young's income and in not finding a material change of circumstances. We agree and reverse and remand for further proceedings.

         The parties divorced in December 2005; under the terms of their settlement agreement, Johnson was given primary custody of their two minor children, Young was ordered to pay child support of $800 per month, and Johnson and Young were ordered to equally divide the children's tuition and daycare expenses. On June 16, 2014, Johnson filed a petition to change venue, and for contempt and modification of the previous order against Young. Johnson contended that the children resided with her in Paragould and the circuit court of Greene County was the most convenient forum; that she had repeatedly been required to bring Young to court because of child-support issues and that he should be found in contempt and punished accordingly; and that there had been a material change warranting an increase in child support. Young responded with a motion to dismiss.

         The circuit court denied a change of venue in an order entered on February 11, 2015. An order entered on October 28, 2015, required Young to pay $399 to bring his obligations for medical bills current, and to reimburse Johnson $117 for one of their daughter's braces. It also found Young in contempt for failure to pay financial obligations of his children. The court allowed Johnson to claim both children for tax purposes beginning with the 2015 tax year and also ordered Young to pay Johnson $4, 500 for attorney's fees and costs. The court denied Johnson's request for an increase in child support without comment or explanation.

         Johnson filed her notice of appeal on November 9, 2015. Young filed a notice of cross-appeal as to the $4, 500 attorney's fees on November 10, 2015, but has not filed a brief in this appeal. Young's cross-appeal is therefore rendered moot. On appeal, Johnson contends that (1) the court did not use the correct method to calculate Young's income and (2) the court clearly erred in not modifying Young's child-support obligation as there was a material change in circumstances.

         We review child-support cases de novo on the record, but we will not reverse the trial court's findings of fact unless they are clearly erroneous. Bass v. Bass, 2011 Ark.App. 753, 387 S.W.3d 218. We have further stated that a circuit court's finding is clearly erroneous when, despite supporting evidence in the record, the appellate court viewing all of the evidence is left with a definite and firm conviction that a mistake has been committed. Bethany v. Jones, 2011 Ark. 67, 378 S.W.3d 731.

         The child-support scheme in Arkansas is governed by Arkansas Supreme Court Administrative Order Number 10 ("Administrative Order No. 10"), which includes a family support chart that indicates the amount of support due, depending upon the payor's income. Id. A trial court's order awarding child support must recite the amount of support required by the chart and recite whether the court deviated from that amount. Id. It is a rebuttable presumption that the amount of child support calculated pursuant to the chart is the appropriate amount. Id. If the court deviates from the chart amount, it must include specific written findings stating why, after consideration of all relevant factors including the best interest of the child, the amount is unjust or inappropriate. Id.

         Young testified at the hearing that he made $6, 000 per month. His affidavit of financial means reflects that number, but he includes a $1, 225 rent deduction and an $800 deduction for child support for his and Johnson's minor children; neither of these deductions is proper under Administrative Order Number 10. See Ark. Sup. Ct. Admin. Order No. 10 (II).[1] There was some discrepancy in testimony as to whether Young was self-employed. It was undisputed that Young is a partner in two partnerships and that he pays self-employment taxes based on his income from the partnerships, in which he owns a 20 percent interest. Young contends that he is unaware of what his tax records reflect but that he "just signs them." Moreover, Young testified that $20, 000 was deposited in his account to pay for taxes.

         Young's father, Ned Young, testified that his son is paid $72, 000 pretax which is $6, 000 a month, and that his "guaranteed payment is $6, 000." Ned Young also testified that the company pays his son's child support out of his check. In matters of child support, the definition of income is intentionally broad and designed to encompass the widest range of potential income sources for the support of minor children. Montgomery v. Bolton, 349 Ark. 460, 79 S.W.3d 354 (2002); Stuart v. Stuart, 99 Ark.App. 358, 260 S.W.3d 740 (2007).

         The circuit court did not use the correct method to calculate Young's income. In determining an appropriate amount of child support, it is undisputed that courts are to refer to the family support chart contained in Administrative Order No. 10, which provides a means of calculating child support based on the payor's net income. Cowell v. Long, 2013 Ark.App. 311. Young provided no W-2s; he has a partnership interest in the family businesses, pays self-employment taxes, and receives additional income of $20, 000 to pay those taxes; therefore, his income for child support should have been determined based on the last two years' federal and state income tax returns. Pursuant to Administrative Order No. 10(III)(c), for self-employed payors, the circuit court should first consider the payor's tax returns. See Tucker v. Office of Child Support Enf't, 368 Ark. 481, 247 S.W.3d 485 (2007).

         At the hearing, Young's tax returns for 2012, 2013, and 2014 were introduced into evidence. The tax returns show that Young is a 20 percent partner in two family-owned businesses, Young and Company, and Young's Custom Services, LLC. Both companies are agriculture-related enterprises involving farming and irrigation-well drilling. In Arkansas, a partner may be treated as a self-employed payor for purposes of Administrative Order No. 10. See Brown v. Brown, 373 Ark. 333, 338-39, 284 S.W.3d 17, 21-22 (2008) (treating a partner as a self-employed payor under Administrative Order No. 10).[2] Young's 2012 tax returns showed that his adjusted gross income was $177, 613, his self-employment tax was $13, 806, and his federal taxes totaled $42, 665. His 2013 tax returns showed that his adjusted gross income was $228, 643, his self-employment tax was $19, 010, and his total federal tax liability was $62, 176. His 2014 tax returns reflected that his adjusted gross income was $188, 166, ...

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