Michael Bruce Johnston v. Leslie McNeer Johnston
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ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION
WENDELL L. GRIFFEN, JUDGE
DIVISION III
CA07-930
May 7, 2008
MICHAEL BRUCE JOHNSTON
APPELLANT
v.
LESLIE McNEER JOHNSTON
APPELLEE
AN APPEAL FROM POPE
COUNTY CIRCUIT COURT
[No. E 2001-501]
HONORABLE GORDON W. McCAIN, JR.
JUDGE
AFFIRMED ON DIRECT APPEAL;
AFFIRMED ON CROSS-APPEAL
Both parties have appealed in this case involving a post-decree modification increasing
Michael Johnston’s (appellant) child-support obligation. Appellant raises five points on appeal,
contending that the circuit court erred (1) in not making additional findings of fact and
conclusions of law; (2) in increasing his child-support obligation retroactively to a time before
Leslie Johnston (appellee) filed her petition seeking modification; (3) in refusing to refund
appellant’s overpayment; (4) in refusing to consider appellant’s additional expenditures for the
children that were part of the parties’ settlement agreement; and (5) in not deviating from the
child-support chart. Appellee cross-appeals, asserting that the circuit court erred in not
considering appellant’s capital gains for child-support purposes. We affirm on appeal and
cross-appeal, holding (1) that the circuit court did not abuse its discretion when it denied
appellant’s request for specific findings regarding the actual needs of the children for child
support, and (2) that the circuit court also did not err when it denied appellee’s contention
that appellant’s capital gains should be included in calculating the child support owed.
Background
The parties were divorced by a decree entered on September 12, 2001. The decree
approved and incorporated the parties’ property-settlement agreement (PSA or agreement).
In the PSA, appellee was awarded custody of the parties’ two children and appellant agreed
to pay $3,500 per month in child support. This sum was recognized to be in excess of the
amount called for by application of the child-support guidelines. The agreement also provided
that appellant, a dentist, would annually report his income to appellee and, if his income
increased by 10%, appellee could seek a modification of his child-support obligation based on
the applicable percentage (21%) in accordance with the child-support guidelines.
Appellant stopped paying the additional support in January 2005. On September 16,
2005, appellant filed a motion alleging that he had received increased income for the years
2002, 2003, and 2004 and paid 21% of his gross income as additional child support. He
averred that the increased income was based, in part, on money he had received in error from
his dental practice and had to repay. The motion alleged that, as a result, he had overpaid his
child-support obligation by $71,900 and sought repayment. Appellant later amended the
motion to allege that one of the children had reached majority and sought a reduction in his
child-support obligation on that basis.1 Other than the allegations concerning the provision
calling for appellant to pay 21% of his increased income as support and that one child had
attained majority, appellee denied the material allegations of appellant’s petition.
On September 22, 2006, appellee filed a petition alleging that appellant had ceased
paying the 21% on the increase in his income in January 2005 and that she had justifiably
relied on the parties’ PSA that appellant would pay 21% of his increased income as child
support. Appellee sought an increase in support from January 2005 forward. Appellant denied
the material allegations of the petition and affirmatively alleged that any sum in excess of
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He also sought enforcement of provisions of the PSA relating to expenses for the
children’s vehicles. There is no issue in this appeal concerning these provisions.
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$1,000 per month was not reasonably necessary for the support of the parties’ one remaining
minor child.
Evidence at Trial
The parties’ accountants collaborated to prepare exhibits concerning appellant’s
income for the years 2002 through trial in October 2006. Based on the joint exhibits,
appellant’s income increased from $151,000 at the time of the divorce to approximately
$400,000 in 2005.
According to the testimony of Butch Rose, appellant’s accountant, appellant was
overpaid a total of $200,000 in the years 2002, 2003, and 2004. Rose testified that if
appellant’s income for the years 2003 through 2004 was adjusted to deduct the amount he
was overpaid, appellant had overpaid his child support by $64,992.16. His calculations as to
appellant’s income for those same years, without adjustment except for the amount he actually
repaid beginning in July 2005, showed that appellant had overpaid his support obligation by
$82,278.10.
Appellant’s support obligation for the year 2006 was calculated based on 2005 data. It
also reflected that one of the children reached majority in May 2006. Those calculations
showed that if appellant’s income was not adjusted for the overpayment, he underpaid his
child support by $42,521.99. If the calculation reflected that appellant made the repayments,
he underpaid his support obligation by $37,301.68. Rose explained that, based on the
exhibits, appellee was seeking $102,000 in additional support if appellant’s income did not
include the amount he was overpaid and $125,000 if the amount appellant was overpaid was
included. Rose also testified that appellant sold an interest in his dental practice for a gross
sum of $225,000 and a profit of $184,000. He said that this capital gain was not reflected in
appellant’s tax return because he had capital losses in prior years that offset the gain.
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Appellee testified that she had both a bachelor’s and master’s degrees in nursing but
had not worked as a nurse since 1991. She testified that she was employed as a fund-raiser
with the American Cancer Society, earning an annual salary of $34,000. She also testified
extensively about her affidavit of financial means showing the monthly expenses for her and
the two children, even though the oldest child had turned eighteen and was in college.
According to her testimony and affidavit, appellee’s average monthly expenses are $9,417.04,
which includes the mortgage payment of $1,554.23 made by appellant. Appellee also testified
that the payments for her children’s vehicles are included in her expenses even though the
payments are made from the Johnston Family Limited Partnership and she does not have any
out-of-pocket expense. Appellee and appellant equally divide the payments out of the
partnership. She also testified that she needs an additional $14,612 per year ($1,218 per
month) to make ends meet. She also said that she received appellant’s income tax information
and consulted with her accountant and that they determined that the amount paid by
appellant was very close to the actual amount he should have paid so that appellee did not file
a petition to modify.
Appellant testified that he spends approximately $2,800 per month on the children,
which includes the mortgage payment of $1,554.23. He said that he purchases food for the
younger child when the child is with him and provides health insurance and prescription
medications, half of the car payments for both children, and an allowance for oil and gasoline
for the younger child’s vehicle. After an objection as to relevance, appellant proffered that he
spends approximately $1,300 per month for the younger son. Of that sum, approximately
$600 is vehicle-related; $100 is for health insurance; and the rest is spent for food, clothing,
and various fees for the child’s activities. On cross-examination, appellant said that he made
payments on additional income he received without realizing that he was paying 21% of his
gross income instead of his net income. He also said that he never compensated appellee for
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additional income he received in his Russellville office. He also acknowledged that he was
seeking a reduction in support even though his income had increased from $151,000 per year
at the time of the divorce to over $400,000 per year.
The Circuit Court’s Decision
The circuit court announced its decision in a letter opinion dated April 27, 2007. In
that opinion, the court found that the PSA was clear and unambiguous as to appellant’s childsupport obligation. The court found that appellant’s action in voluntarily paying 21% of his
increased income as child support was relied upon by appellee in that she did not pursue a
modification through the court. The court denied appellant’s request for repayment or credit
for sums over $3,500 per month, as well as appellee’s request that the increase be made
retroactive to the date of the divorce decree. The court found that the motion filed by
appellant in September 2005 was a “proper motion” for retroactive modification of support.
The court denied appellant’s request for a deviation from the child-support chart, as well as
appellee’s request that appellant’s income be increased as a result of a capital gain from the sale
of his interest in the dental practice.
Appellant filed a motion for findings of fact relative to the actual reasonable needs of
the children as of the date appellant filed his initial petition and the date the older child
reached majority. Appellee objected, stating that such a finding is not required by the childsupport guidelines. The circuit court denied the motion, stating that the court began its
analysis with the chart and found nothing that gave it pause in applying the chart amount.
On June 21, 2007, the court entered its order. For the period of September 16, 2005,
until May 31, 2006, appellant’s child-support obligation was increased to $8,371.42 per
month. Beginning June 1, 2006, appellant’s support obligation was set at $5,979.58 per month
as a result of one child reaching majority. Appellee was awarded a judgment for child-support
arrearage in the sum of $71,162.07. The court denied appellant’s motion for additional
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findings. Appellant filed a timely notice of appeal on June 28, 2007. Appellee’s notice of
cross-appeal followed on July 5, 2007.
Standard of Review
Child-support cases are reviewed de novo on the record. Cole v. Cole, 89 Ark. App.
134, 201 S.W.3d 21 (2005). As a rule, when the amount of child support is at issue, the
appellate court will not reverse the circuit court absent an abuse of discretion. Id. It is the
ultimate task of the circuit court to determine the expendable income of a child-support
payor. Id. This income may differ from income for tax purposes. Id.
Direct Appeal
Appellant first argues that the circuit court erred in failing to make findings of fact as
to the reasonable needs of the children. The circuit court did not err.
Arkansas Code Annotated section 9-12-312(a)(2) (Repl. 2008) mandates the use of the
child-support guidelines in determining the amount of child support. The guidelines, issued
as Supreme Court Administrative Order No. 10, set forth relevant factors to be considered
in setting support, as well as other factors to be considered in deciding whether to deviate
from the amount determined by applying the chart. These factors include, among others,
food; shelter and utilities; clothing; medical and dental expenses; educational expenses;
transportation expenses; and the accustomed standard of living. Administrative Order No. 10,
section V.
Section 9-12-312 and Administrative Order No. 10 create a rebuttable presumption
that the amount of child support calculated pursuant to the guidelines is the amount to be
awarded. Thus, the statute and guidelines demonstrate that the reasonable needs of the
children are met when the court awards the amount of support called for by application of
the guidelines. Here, after reviewing “a large amount of testimony, notes, and evidence,” the
circuit court awarded the amount of support called for by application of the guidelines and
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found no basis for a deviation. This adequately explained the basis for the denial of appellant’s
request for findings. A party is not entitled to a direct answer on every specific requested
finding if the circuit court’s findings adequately address the issues. See Lawson v. Sipple, 319
Ark. 543, 893 S.W.2d 757 (1995).
Appellant’s second point is that the circuit court erred in retroactively modifying his
child-support obligation prior to the date appellee filed her petition seeking the modification.
Under Ark. Code Ann. §§ 9-12-314(c) and 9-14-234(c) (Repl. 2008) the circuit court cannot
modify an order for support prior to the filing of a petition for modification. However, the
statutes do not specify which party must file such a petition. Here, a petition was filed, by
appellant, on September 16, 2005. That petition did not request an express modification of
appellant’s child support obligation, only that he be credited with the amount that he
overpaid his child support obligation. In Shipp v. Shipp, 94 Ark. App. 351, 230 S.W.3d 305
(2006), we held that a “proper motion” under sections 9-12-314(c) and 9-14-234(c) is one
that necessarily involves a determination of the amount of child support. Appellant’s petition
necessarily involved a child support determination because one cannot calculate the amount
of an overpayment without first determining the amount of child support owed. Therefore,
the circuit court did not err in making the modification retroactive to September 16, 2005,
the date of appellant’s petition.
In appellant’s related third point, he contends that he was entitled to a refund of the
overpayment. He argues that, as a matter of law, the circuit court was without authority to
modify his support obligation prior to the time appellee filed her petition and, therefore, he
is entitled to a refund of the amount he overpaid. Appellant is incorrect in his argument
because it is well settled that a circuit court is not required to give credit for voluntary
expenditures by a parent that are above the child-support amount. Brown v. Brown, 76 Ark.
App. 494, 68 S.W.3d 316 (2002). This rule has been stated in terms such that, as a matter of
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law, appellant is not entitled to credit against child-support arrearages for voluntary
expenditures. Glover v. Glover, 268 Ark. 506, 598 S.W.2d 736 (1980); Stuart v. Stuart, 46 Ark.
App. 259, 878 S.W.2d 785 (1994). This is so because the custodial parent relies on proper
compliance with the decree in making arrangements for the child’s care. Glover, supra.
Here, the circuit court made a finding that subsequent to the execution of the PSA,
the parties agreed that appellant would voluntarily increase the amount of his child-support
payments and appellee relied upon their agreement. Appellant did not challenge these findings
in his argument until his reply brief, after appellee had raised the issue of equitable estoppel
in her brief. This case shows the wisdom of such a rule, because to allow for refunds or credit
for voluntary overpayments would amount to condonation of the unilateral modification of
court orders and interference with the custodial parent’s right to decide how support money
should be spent.
Finally, appellant argues that the circuit court erred in not deviating from the amount
of support called for by application of the child-support chart after considering his other
expenses that benefit the children. The amount of child support lies within the discretion of
the circuit court, and the court’s findings will not be disturbed on appeal, absent a showing
of an abuse of discretion. Smith v. Smith, 341 Ark. 590, 19 S.W.3d 590 (2000). The courts
begin with a presumption that the chart amount is reasonable. Id. A circuit court may deviate
from the chart amount if it exceeds or fails to meet the needs of the children. Williams v.
Williams, 82 Ark. App. 294, 108 S.W.3d 629 (2003).
Appellant is seeking a downward deviation from the amount called for by the childsupport chart because, according to appellant, that amount exceeds the needs for the one
minor child and because he spends additional sums, some mandated by the parties’ settlement
agreement, for the benefit of the children. This court has previously rejected the argument
that a noncustodial parent is entitled to a downward deviation from the amount provided by
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the child-support chart on the ground that the amount exceeds a child’s actual needs. Lee v.
Lee, 95 Ark. App. 69, 233 S.W.3d 698 (2006); Ceola v. Burnham, 84 Ark. App. 269, 139
S.W.3d 150 (2003). We see no reason to deviate from that position now.
One of the factors that appellant wanted the circuit court to consider was that he was
paying for health insurance for both children. However, that expense is addressed by the
child-support guidelines, which directs that payments made for medical insurance be
deducted from the obligor’s income prior to the calculation of the child-support obligation.
To deduct the amount paid for medical insurance from appellant’s income prior to the
calculation of his support obligation and then to consider that same expense in determining
whether to deviate from the amount of support called for by application of the child-support
chart would allow appellant to benefit twice from the same expense. Therefore, the circuit
court did not err in not considering the amount of the medical insurance for the one minor
child.
Another factor to be considered when deviating from the child support called for by
the chart is the maintenance of life insurance for the children’s benefit. Here, appellant
testified that he maintained two policies totaling $1.5 million. Such a factor is discretionary
with the circuit court. See Johnson v. Cotton-Johnson, 88 Ark. App. 67, 194 S.W.3d 806 (2004).
Further, the parties’ agreement allowed appellant to cancel any or all of the life insurance
policies anytime after October 2007.
It is also discretionary for the court to consider the provision of vehicles for the two
children and the fact that they are being paid for by appellant’s dental practice or family
partnership. The fact that appellant agreed in the PSA to share in the expense of providing
his children with vehicles does not automatically entitle him to a deviation in the amount of
his child-support obligation merely because he can agree to pay more child support than
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called for by application of the guidelines. See Riegler v. Riegler, 243 Ark. 113, 419 S.W.2d
311 (1967) (holding based on law prior to enactment of guidelines).
Appellant also cites as a factor to be considered the fact that he has made the children
the beneficiaries of his estate. However, the children would be the beneficiaries of his estate
under the laws of intestate succession. It makes no sense to treat appellant’s conduct consistent
with the law of intestate succession as a basis for reducing the amount of child support payable
to his minor child.
Appellant cites to Smith, supra, and several cases from other states for the proposition
that the purpose of child support is not for the custodial parent or the child to accumulate
capital. However, there is nothing to indicate that appellee is using the child support to
accumulate capital for herself or the minor child. Further, unlike in some other states,
Arkansas’s child-support guidelines and chart do not include a cap on the amount of child
support to be paid.
Cross-appeal
In her sole point on cross-appeal, appellee argues that the circuit court erred in not
considering appellant’s capital gain from the sale of an interest in his dental practice as income
for child-support purposes. There was testimony that appellant sold a one-third interest in his
practice for a gross sum of $225,000, resulting in a profit of $184,000. This sum was not
reflected on appellant’s tax return because he had capital loss carry-overs from prior years to
offset the gain.
The child-support guidelines are broad enough to include capital gain as “income” for
purposes of determining appellant’s income in order to set his child-support obligation. White
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v. White, 95 Ark. App. 274, 236 S.W.3d 540 (2006). The “income” used to set child support
may be different from the “income” for income tax purposes. Id.
The circuit court found that the request to include the capital gain in appellant’s
income was “unsupported by the evidence.” We agree. All that we know is that appellant
sold a one-third interest in his dental practice for a profit of $184,000. We do not know the
amount of his capital loss carryover or what the value of that same one-third interest was at
the time of the parties’ divorce. Without this information, we cannot determine the amount
of the gain or how much of the gain resulted after the divorce. It was appellee’s burden to
provide this information if she wanted the circuit court to consider the gain as income for
purposes of appellant’s support obligation.
Affirmed on appeal and on cross-appeal.
GLADWIN and BAKER, JJ., agree.
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