Opinion
NO. 2011-CA-001591-MR
03-01-2013
RODNEY SCOTT BARNETT APPELLANT v. AMANDA BARNETT APPELLEE
BRIEFS FOR APPELLANT: William E. Wehrman, Jr. Covington, Kentucky BRIEF FOR APPELLEES: Edward G. Drennen Florence, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM KENTON CIRCUIT COURT
HONORABLE CHRISTOPHER J. MEHLING, JUDGE
ACTION NO. 01-CI-00198
OPINION
AFFIRMING IN PART, REVERSING IN PART,
AND REMANDING
BEFORE: KELLER, TAYLOR, AND THOMPSON, JUDGES. KELLER, JUDGE: Rodney Scott Barnett (Scott) appeals from an August 19, 2011, order of the Kenton Circuit Court, Family Court Division, imputing income to him for the purpose of calculating child support and ordering Scott to pay 70 percent of the cost of the children's extracurricular activities for two years prior to the order, as well as a portion of Amanda Barnett's (Amanda) attorney's fees related thereto. We affirm in part, reverse in part, and remand.
FACTS
Scott and Amanda were married in 1993; two children were born of the marriage. On January 26, 2001, Scott filed a petition for dissolution of marriage in the Kenton Circuit Court. Thereafter, the parties entered into a written separation agreement. The agreement provided their children were to spend equal time with each parent and that neither would pay child support. The parties were divorced by decree of dissolution of marriage entered April 11, 2001. The decree incorporated the parties' separation agreement.
The Family Court Division of the Kenton Circuit Court did not become effective until January 2007.
On April 11, 2003, Amanda filed a motion to modify visitation and for child support. The parties reached a settlement, and an agreed order was entered on June 30, 2003. Pursuant to the agreed order, Scott's child support obligation was set at $603.11 per month. The child support worksheet attached to the order listed Scott's gross income as $3,667 a month or $44,000 a year. Additionally, per the parties' agreement, Scott was to pay 70 percent of all future medical expenses of the children, which included dental, prescription, and ophthalmology expenses. Amanda was responsible for payment of the remaining 30 percent. The order did not reference payment of extracurricular activity expenses.
In 2005, Scott remarried. Scott's new wife and her father own a restaurant business known as T & T Enterprises (T & T). T & T owns five fast food franchises in Cincinnati and Columbus, Ohio. Shortly after the marriage, Scott went to work for T & T as a manager of three restaurants in Columbus.
Relevant to this appeal, on April 26, 2011, Amanda filed a motion to modify child support and to compel Scott to pay past-due medical bills and to further pay his share of the children's extracurricular activity expenses. By order entered August 19, 2011, the family court granted Amanda's motion. As to the modification of child support, the family court found Scott to be voluntarily underemployed and imputed a gross monthly income of $5,833 to Scott. Based upon this income, the family court ordered Scott to pay $1,043 a month in child support. Scott was also ordered to pay his share of past-due medical expenses in the amount of $296.80 to Amanda. The family court also concluded that extracurricular activity expenses of the children were included under the 70/30 sharing provision in the 2003 order, and thus ordered Scott to pay 70 percent of extracurricular activity expenses for the two previous years in the amount of $597.80. Scott was further ordered to pay $500 toward Amanda's attorney's fees for his failure to pay his share of the extracurricular activity expenses.
Finally, the family court ordered Scott to pay 73 percent of the children's future medical, dental, optical, and extracurricular activity expenses and directed Amanda to maintain health insurance for the children through her employment. This appeal followed.
Additional facts are set forth below.
STANDARD OF REVIEW
The proper standard of review in a child support case was articulated by this Court in Downing v. Downing, 45 S.W.3d 449 (Ky. App. 2001):
Kentucky trial courts have been given broad discretion in considering a parent's assets and setting correspondingly appropriate child support. A reviewing court should defer to the lower court's discretion in child support matters whenever possible. As long as the trial court's discretion comports with the guidelines, or any deviation is adequately justified in writing, this Court will not disturb the trial court's ruling in this regard. However, a trial court's discretion is not unlimited. The test for abuse of discretion is whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles.Id. at 454 (citations omitted). Absent an abuse of discretion, this Court will not reverse the family court's determination regarding the amount of a child support obligation. Id.
ANALYSIS
1. Imputation of Income
On appeal, Scott first contends that the family court erred by imputing income of $5,833 per month to him. We agree.
In establishing or modifying child support, the family court "may impute income to a party it finds to be voluntarily unemployed or underemployed." McKinney v. McKinney, 257 S.W.3d 130, 134 (Ky. App. 2008). Kentucky Revised Statute (KRS) 403.212(2)(d) provides that:
If a parent is voluntarily unemployed or underemployed, child support shall be calculated based on a determination of potential income, . . . Potential income shall be determined based upon employment potential and probable earnings level based on the obligor's or obligee's recent work history, occupational qualifications, and prevailing job opportunities and earnings levels in the community.
"[I]f the court finds that earnings are reduced as a matter of choice and not for reasonable cause, the court may attribute income to a parent up to his or her earning capacity[.]" Snow v. Snow, 24 S.W.3d 668, 673 (Ky. App. 2000) (internal quotations and citation omitted). But, in doing so, "the court must consider the totality of the circumstances [to decide] whether to impute income to a parent." Polley v. Allen, 132 S.W.3d 223, 227 (Ky. App. 2004).
In the Findings of Fact, Conclusions of Law, and Decree of Dissolution entered on April 11, 2001, the trial court determined that Scott's earning capacity at the time was $47,000 per year. At the July 26, 2011, hearing, Scott testified that he is employed by T & T, which is owned by his current wife and father-in-law, and that he makes approximately $40,000 per year. Scott also testified that he has never earned more than $50,000 per year in his lifetime.
Scott testified that he oversees the daily operations of three of T & T's restaurants located in Columbus, Ohio. According to Scott, the stores he oversees are low-volume and low-profit stores. Because the three stores are located in Columbus, Scott has use of a company car and apartment and is reimbursed for his travel expenses.
Scott explained that the general managers of T & T manage only one store and are paid $32,000 a year plus bonuses based on the profits of the store they manage. According to Scott, one general manager earned approximately $35,000, but another general manager in a Cincinnati store earned $70,000. Scott testified that the general manager who makes $70,000 per year manages a store that averages $80,000 per month in business.
Additionally, Scott testified that, prior to their marriage, his current wife owned the $300,000 house they reside in, and the house is titled solely in her name. Furthermore, Scott stated that he did not have a checking account and his checks are deposited into his wife's checking account. All of the aforementioned evidence is unrefuted in the record.
At the conclusion of the hearing, the family court judge concluded that, because Scott works for his wife, his salary is "manipulated." Moreover, because a person at a lower management level than Scott made $70,000, the family court imputed income of $70,000 per year to Scott.
Having carefully reviewed the record, we conclude that the family court abused its discretion when it imputed $70,000 annual income to Scott. We agree with Scott that the family court did not adequately take into account his "recent work history" or "occupational qualifications." KRS 403.212(2)(d). Instead, the family court based its decision on Scott's limited testimony regarding the annual income of a general manager of a high-profit store located in a different region than the stores Scott manages. Because there was limited evidence regarding the business structure and internal operations of T & T, the family court abused its discretion in reaching its conclusion. Accordingly, we reverse the portion of the order imputing income to Scott and remand for the family court to re-determine the parties' actual income and to recalculate the child support amount.
2. Extracurricular Activities
Next, Scott argues that the family court erred by requiring him to pay 70 percent of the costs associated with the children's extracurricular activities for the two-year period prior to entry of the order in the amount of $597.80. We agree.
The child support guidelines do not specifically provide for payment of expenses for extracurricular activities, and the parties did not provide for such payment in the 2003 agreed order. In Smith v. Smith, 845 S.W.2d 25 (Ky. App. 1992), this Court held that it was improper for a circuit court to include payment for a child's music lessons in a child support order. Closely examining the place of extracurricular activities within the child support statutes, the Smith court held:
We cannot agree with the legal conclusion that the statute encompasses private music lessons in its definition of 'extraordinary educational needs.' As used in the statute, we believe 'extraordinary educational needs' refers to those things not ordinarily necessary to the acquisition ofId. at 26.
a common school education but which become necessary because of the special needs of a particular student. While we may be of the opinion that a parent ought to seek to maximize a child's talents, we do not think the statute was intended to change the common law of this jurisdiction which requires a parent to provide only primary and secondary education.
Based on Smith, it is clear that, as a general rule, a parent is not responsible for payment of expenses associated with his child's extracurricular activities. While a parent is responsible for payment of "extraordinary educational needs" under KRS 403.211, the expenses at issue herein - costs of graduation, senior prom, and senior pictures - do not fall within that category. While many would view these expenses as a parent's legitimate responsibility, the General Assembly has not included them as part of a parent's legal responsibility to support his child. Therefore, the family court erred when it ordered Scott to pay for the extracurricular activities incurred during the two-year period prior to August 2011. Additionally, because Scott was under no duty to pay these expenses, the assessment of a $500 attorney's fee sanction against Scott was erroneous as a matter of law and is thus set aside.
3. Medical Expenses
Scott also argues that the family court erred by ordering him to pay $296.80 or 70 percent of back medical expenses. Scott asserts that these expenses were incurred by "mistake" and he should not be financially responsible for the children's duplicative dental procedures or for the additional costs of the children's visits to out-of-network providers/doctors. As previously noted, the family court is vested with broad discretion in the establishment, enforcement, and modification of child support. Included as part of a parent's support of a minor child is the allocation of extraordinary medical expenses or uninsured medical expenses incurred for the child. KRS 403.211(9).
Pursuant to the agreed order entered in 2003, Scott was required to pay 70 percent of all uninsured medical expenses of the children. Based upon the evidence submitted by Amanda, the family court found that Amanda incurred medical expenses on behalf of the children totaling $424, and Scott refused to reimburse Amanda for his 70 percent share. The parties do not dispute the terms of the agreement or that the medical services were provided; therefore, we cannot say the family court abused its discretion by requiring Scott to reimburse Amanda for 70 percent of these expenses.
4. Health Insurance
Finally, Scott argues the family court erred by mandating that Amanda provide health insurance for the children through her employer. Scott argues that the best interests of the children would be served if he carried the children's health insurance rather than Amanda.
At the time of the hearing, the children were covered by Scott's health insurance, a health savings plan. That plan required each insured to incur $3,000 in out-of-pocket expenses before any medical costs would be covered by the plan. For example, under Scott's health insurance, Amanda was required to pay the full cost of an office visit at the time of the visit. As a result, when one of the children went to the doctor for an appointment, Amanda would pay the entire cost up front and then would have to wait for Scott to reimburse her for his share.
The family court concluded that requiring Amanda to pay the full amount of the medical treatment up front and then wait for Scott to reimburse her was a burden as Amanda's monthly gross income was only $2,123. Furthermore, we note that once Scott's family incurred a combined out-of-pocket expense of $6,000, all medical expenses thereafter are covered at 100 percent. Therefore, Scott, his second wife, and their children would benefit at Amanda's expense under Scott's insurance.
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Amanda testified that she could purchase coverage for the children for a monthly premium of $68. Under that plan, Amanda would be required to pay a $20 co-pay per office visit with the insurer paying any other charges.
The family court considered the costs and care to be provided for the children under both parents' health insurance plans, and concluded that Amanda's plan provided better coverage. Considering the evidence as a whole, we do not believe the family court abused its discretion by allowing Amanda to maintain the children's health insurance through her employer.
CONCLUSION
In summation, we affirm those portions of the family court's August 19, 2011, order: (1) that require Scott to reimburse Amanda for $296.80 in medical expenses; and (2) that require Amanda to maintain health insurance for the children. We reverse those portions of the family court's order: (1) that impute income of $70,000 to Scott; (2) that calculate Scott's child support obligation based on that imputed income; (3) that require Scott to pay for the children's past and/or future extracurricular activities; and (4) that require Scott to pay $500 of Amanda's attorney's fees. Finally, we remand this matter to the family court so that it can re-calculate Scott's income and set his child support obligation.
THOMPSON, JUDGE, CONCURS.
TAYLOR, JUDGE, CONCURS IN PART, DISSENTS IN PART, AND FILES SEPARATE OPINION.
TAYLOR, JUDGE, CONCURRING IN PART AND DISSENTING IN PART: I concur with the majority opinion in all respects except as concerns reversal of the family court's imputation of income to Scott for child support purposes, to which I must respectfully dissent. In child support proceedings, the family court may find that a parent is voluntarily underemployed and impute "potential income" per KRS 403.212(2)(d). Howard v. Howard, 336 S.W.3d 433 (Ky. 2011). A finding of voluntary underemployment should not be disturbed on appeal if supported by substantial evidence of a probative value. CR 52.01; Duff v. Duff, 295 S.W.2d 795 (Ky. 1956).
In this case, the family court concluded that Scott was voluntarily underemployed and imputed gross income of $5,833 per month or $70,000 per year to him. The evidence presented to the family court established that during the parties' marriage, Scott's income peaked at $46,641 in the year 2000. At that time, Scott was employed as a parts department manager for a car dealership. The evidence further revealed that Scott is presently employed by his current wife's company, T & T, as a manager over three restaurants in Columbus, Ohio, although Scott's exact title or position cannot be determined from the record given his family relationship with the owners. Since 2006, shortly after Scott remarried and began working for T & T, his W-2's revealed annual earnings of $39,999.84. This amount remained unchanged for 2006, 2007, 2008, 2009, and 2010. The evidence also revealed that Scott had virtually no assets in his name. The $300,000 house that Scott and his current wife reside in is titled in his wife's name only. Scott's car was also owned by his wife's company, T & T. Scott's paycheck from T & T was deposited into a checking account that was in his wife's name only. The evidence further established that Scott receives the equivalent of approximately $1,530 per month for expenses he incurs while traveling to work in Columbus, Ohio. Evidence was also introduced that established another employee at T & T, who only managed one restaurant, earned approximately $70,000 per year in a position similar to Scott's. Given the totality of this evidence, the family court concluded that Scott was voluntarily underemployed.
In consideration of the evidence presented to the family court as fact-finder, I must agree that said evidence was substantially sufficient to support the family court's conclusion that Scott was voluntarily underemployed. Given the extent of evidence considered, I believe the majority has effectively substituted its judgment for that of the family court on this issue, which is improper, in my opinion.
Thus, I believe the circuit court did not abuse its discretion by imputing income of approximately $70,000 per year to Scott per KRS 403.212(2)(d) for purposes of computing child support in this case. BRIEFS FOR APPELLANT: William E. Wehrman, Jr.
Covington, Kentucky
BRIEF FOR APPELLEES: Edward G. Drennen
Florence, Kentucky