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Newton v. Newton

Court of Appeals of Arkansas, Division III

October 31, 2018

BRIAN NEWTON APPELLANT
v.
REBECCA NEWTON APPELLEE

          APPEAL FROM THE SALINE COUNTY CIRCUIT COURT [NO. 63CR-13-981] HONORABLE DAVID GOODSON, JUDGE

          Brett D. Watson, Attorney at Law, PLLC, by: Brett D. Watson, for appellant.

          Jensen, Young & Houston, PLLC, by: Terence C. Jensen, for appellee.

          LARRYD. VAUGHT, JUDGE

         Appellant Brian Newton appeals the September 21, 2017 order entered by the Saline County Circuit Court denying his motion to modify child support. On appeal, Brian first argues that the circuit court abused its discretion in excluding evidence of his 2015 income that he alleged was used by the circuit court in 2016 to calculate his base child-support obligation and that he claims is required to prove a change in circumstances to support his motion to modify child support. Brian also argues that the circuit court clearly erred in denying his motion to modify child support by ordering him to pay appellee Rebecca Newton additional child support in the amount of 21 percent of retained earnings that he claims were included in his 2015 income and had already been accounted for in his base child-support obligation awarded by the circuit court in 2016. We reverse and remand.

         There were two hearings in this case relevant to this appeal. The first hearing was Brian and Rebecca's divorce hearing, which took place in February 2016. At this hearing, Gary Cox, a certified public accountant, testified that he had been preparing tax returns for Brian, Rebecca, and their companies for the past nine or ten years. Cox stated that one of Brian and Rebecca's companies was Newton Medical, Inc. (Newton Medical), an S corporation. According to Cox, Newton Medical's 2015 tax returns reflected retained earnings of $66, 465 and that Brian and Rebecca throughout the course of the year had received distributions from those earnings to pay their household and personal living expenses.

         At the conclusion of the divorce hearing, the circuit court orally granted the divorce, and Brian was ordered to purchase Rebecca's interest in Newton Medical. With respect to child support, the court stated that "[f]uture child support will be paid monthly and will continue to be based upon the amount, as has been done in the past, that as an average over 12 months of what has been taken out for personal use." Brian's counsel then reported to the circuit court that Brian had been paying monthly child support of $2, 012.67. The court responded:

I will add in - - because Mr. Newton has so much control over his income - -and I don't really expect anything underhanded, but I have to be careful. If there is a ten percent change in that from year to year, there should necessarily, in order for a modification of support, be some type of justification for that to be able to be provided. And to put that in a little bit more common English, if Mr. Newton were to reduce his take-home pay by more than ten percent, which would kick in the child support modification provision of the law, and yet his overall business income either went up or did not change by a very, very similar amount, the Court would probably not even come close to considering lowering child support.
Further, at the preparation of taxes each year, Mr. Newton will provide Ms. Newton with a copy of his full tax return. Both state and federal. During the time that both children are of minority age from this point on - - obviously not dealing with the money that's being divided equally - - but from this point on, he will pay child support in the amount of 21 percent after taxes of any retained earnings.

         Thereafter, on April 6, 2016, the circuit court entered a divorce decree. Paragraph nine of the decree provides:

9. [Brian] shall pay [Rebecca] child support in the amount of $2, 021.67 per month. In addition to the above amount, [Brian] shall pay twenty-one percent (21%) of any excess retained earnings, distributions, bonuses or other earnings not otherwise taken as salary. . . . In setting support, the Court has considered the income of [Brian's] business as well as [Brian's] earning potential. The Court considers this amount fair and equitable under the circumstances present although it may represent a deviation from the Arkansas Supreme Court Child Support Guidelines. A reduction will only be considered if [Brian's] income and retained earnings or other resources that may be considered as income decrease by more than ten percent (10%) and is otherwise justifiable under the circumstances. When considering an increase in support [Brian's] net income and retained earnings shall be considered.

         Thereafter, Brian paid Rebecca monthly child support of $2, 012.67. In mid-2017, Brian provided his 2016 tax returns to Rebecca. The returns reflected that Brian had a salary of $88, 500 and retained earnings of $101, 833. When Rebecca requested that Brian pay her 21 percent of the retained earnings as per paragraph nine of the decree, Brian filed a motion to modify child support. He alleged that his current child-support obligation of $2, 021.67 should be increased to $2, 312.77 because his 2016 net income (salary plus retained earnings) had increased. In response, Rebecca moved for contempt, arguing that the circuit court in the decree ordered Brian to pay additional child support of 21 percent of retained earnings not otherwise taken as salary, which totaled $21, 384.93.

         A hearing was held on Brian's motion in August 2017.[1] Brian sought to introduce the testimony of his accountant and two documents[2] to attempt to establish his income basis for the $2, 012.67 child-support award set forth in the decree. When Brian moved to introduce this evidence, counsel for Rebecca objected. Her counsel argued that the decree had been entered in April 2016 and that any question as to the income basis for the child-support calculation in the decree should have been raised and resolved before the circuit court at that time or on appeal, but it ...


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