Hinshaw v. Kuntz ( 2014 )

NO. COA13-1184
NORTH CAROLINA COURT OF APPEALS
Filed: 1 July 2014
ELIZABETH HINSHAW,
Plaintiff/Mother,
v. Mecklenburg County
No. 09 CVD 3118
JOHN KUNTZ,
Defendant/Father.
Appeal by plaintiff from judgment entered 8 May 2013 by
Judge Paige B. McThenia in Mecklenburg County District Court.
Heard in the Court of Appeals 9 April 2014.
HORACK TALLEY PHARR & LOWNDES, P.A., by Christopher T. Hood
and Elizabeth J. James, for plaintiff.
Krusch & Sellers, P.A., by Rebecca K. Watts, for defendant.
ELMORE, Judge.
Elizabeth Hinshaw (plaintiff) appeals the trial court’s 8
May 2013 child support award on the basis that the trial court
erred in (1) failing to include bonus income in calculating the
parties’ base income, (2) denying her claim for retroactive
child support, and (3) denying her motion for reasonable
attorney’s fees. After careful review, we find no error in the
latter two issues, but hold that the trial court erred in the
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first. Accordingly, we affirm, in part, and reverse and remand,
in part, for further action consistent with this opinion.
I. Background
Plaintiff and John Kuntz (defendant) were married in
September 2001, separated in December 2006, and divorced in July
2010. The parties are the parents of three minor children,
namely, A. Kuntz, born 15 September 2002; S. Kuntz, born 6
February 2004; and E. Hinshaw, born 27 January 2007 (the minor
children). Plaintiff was awarded primary physical custody of
the minor children pursuant to a Consent Order for Child Custody
entered 16 April 2009. On 12 February 2009, the parties entered
into a Settlement Agreement/Separation Agreement (the Agreement)
whereby defendant agreed to pay plaintiff child support in the
amount of $1,750.00 per month and alimony in the amount of
$5,000.00 per month until 31 August 2010, the date on which his
alimony obligation was to terminate. The Agreement further
provided that, after alimony ended, the parties were to
renegotiate the amount of child support defendant would pay
plaintiff pursuant to the North Carolina Child Support
Guidelines (the Guidelines). At the time the parties negotiated
the Agreement, their combined adjusted gross income was less
than $25,000.00 per month.
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When alimony ended, defendant voluntarily increased his
child support payment from $1,750.00 per month to $2,750.00 per
month. Plaintiff did not find this new sum to be an adequate
support payment. The parties were subsequently unable to agree
on an appropriate child support award; therefore, plaintiff
filed a Motion in the Cause for Child Support on 29 March 2011.
In her motion, plaintiff alleged that the amount of child
support currently paid by defendant was not adequate to meet the
needs of the minor children.
In its 8 May 2013 Child Support Order, the trial court made
the following findings of fact: After spending a number of
years as a stay-at-home parent, plaintiff was hired by Wells
Fargo in April 2010. Plaintiff’s gross base income from Wells
Fargo totaled $121,000.00 per year; she also earned
approximately $94.00 per month on a crossword puzzle business
and $48.00 in interest and dividend income. Therefore,
plaintiff’s gross yearly income totaled $122,904.00. Plaintiff
has received and can continue to expect an annual bonus from her
employer. Defendant is employed by Bank of America earning an
annual salary of $211,000.00. Defendant has received and can
continue to expect an annual bonus from his employer.
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Based on these figures, the trial court found that the
supporting parent’s basic child support obligation could not be
determined by using the child support schedule outlined in the
Guidelines because the parents’ combined adjusted gross income
exceeded $25,000.00 per month. Accordingly, the trial court
determined that the minor children’s reasonable needs and
expenses totaled $6,630.89 per month, with $5,768.70
attributable to plaintiff’s household and $862.19 attributable
to defendant’s household. Based solely on the parties’ monthly
gross incomes—without accounting for bonus income—the trial
court ordered defendant to pay sixty percent (60%) of the minor
children’s reasonable needs and expenses, which totaled
$3,978.53 per month. After crediting defendant $862.19, the
trial court set defendant’s child support obligation at
$3,116.34 per month. Further, the trial court ordered defendant
to pay $8,425.82 in arrears (prospective child support). Both
parties’ motions for attorney’s fees were denied in the 8 May
2013 order. Plaintiff now appeals.
II. Analysis
A. Bonus Income
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Plaintiff first argues that the trial court erred in
excluding the parties’ bonus income when calculating the parties
actual income and the overall child support award. We agree.
“In reviewing child support orders, our review is limited
to a determination whether the trial court abused its
discretion. Under this standard of review, the trial court’s
ruling will be overturned only upon a showing that it was so
arbitrary that it could not have been the result of a reasoned
decision.” Spicer v. Spicer, 168 N.C. App. 283, 287, 607 S.E.2d
678, 682 (2005) (citations omitted). “Child support
calculations under the guidelines are based on the parents’
current [or actual] incomes at the time the order is entered.”
Caskey v. Caskey, 206 N.C. App. 710, 713, 698 S.E.2d 712, 714
(2010) (citations omitted). Under the Guidelines, “income” is
defined as:
[A] parent’s actual gross income from any
source, including but not limited to income
from employment or self-employment
(salaries, wages, commissions, bonuses,
dividends, severance pay, etc.) . . . . When
income is received on an irregular, non-
recurring, or one-time basis, the court may
average or pro-rate the income over a
specified period of time or require an
obligor to pay as child support a percentage
of his or her non-recurring income that is
equivalent to the percentage of his or her
recurring income paid for child support.
When income is received on an irregular,
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non-recurring, or one-time basis, the court
may average or pro-rate the income over a
specified period of time or require an
obligor to pay as child support a percentage
of his or her non-recurring income that is
equivalent to the percentage of his or her
recurring income paid for child support.
N.C. Child Support Guidelines, 2012 Ann. R. N.C. 51. “Gross
annual income in its plain, ordinary and popular sense means
total income without deductions.” Saunders v. Saunders, 52 N.C.
App. 623, 624, 279 S.E.2d 90, 91 (1981) (internal quotations
omitted). This definition “include[s] longevity pay [and]
bonuses.” Id.In the case sub judice, the trial court found that both
parties had received and remained eligible for an annual bonus.
Specifically, the trial court found that defendant’s 2011 bonus
totaled $114,002.20 ($28,500.00 of cash and $85,502.20 of
restricted stock); his 2010 bonus totaled $114,000.00; and his
2009 bonus totaled $37,500.00. Plaintiff’s 2011 bonus totaled
$30,800.00, and her 2010 bonus totaled $17,931.00, representing
nine months of employment. However, in Finding #118 the trial
court declined to incorporate the parties’ bonus income in its
calculation of the parties’ base income for the following
reason:
Given that the reasonable needs and expenses
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of the children are covered by the parties
each month prior to the addition of bonus
income deferred compensation, tuition
reimbursement or other increases to base
income, and given that both parties are
eligible for a bonus each year, the Court
declines to calculate bonus income, deferred
compensation, tuition reimbursement or other
increases to base income as part of child
support.
On appeal, plaintiff contends that the trial court was
required to include bonus income in calculating the parties’
gross base income. Alternatively, defendant argues that because
his bonus income is irregular or non-recurring, “the trial court
is to address that income separately from the parties’ gross
monthly income when determining child support.” Defendant
avers: “The approach of separating out irregular or non-
recurring income from regular, ongoing income . . . makes sense”
given that there is no “guarantee” of receiving a bonus. We
disagree with defendant and point out that he cites no authority
to support his position.
First, we note that the plain language of the Guidelines
clearly includes bonus income in the definition of “income.”
Should certain bonus or other income be deemed irregular or non-
recurring, the Guidelines further instruct the trial court to
average or pro-rate the income or order the obligor to pay a
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percentage of his or her non-recurring income equivalent to the
percentage of his or her recurring income for child support.
There is no provision in the Guidelines that instructs the trial
court to completely separate irregular or non-recurring bonus
income from its calculations. Second, we can infer that the
trial court found that the bonus income was not irregular or
non-recurring given that the order specifically stated each
party had received and could expect an annual bonus. After
reviewing the record, we agree that the bonus income did not
constitute irregular or non-recurring income as contemplated by
the Guidelines. Finally, there is no provision in the
Guidelines which instructs the trial court that it may elect to
opt out of including bonus income in its calculations based
solely on the premise that the reasonable needs and expenses of
the children are otherwise satisfied without its inclusion.
Because the Guidelines include bonus income in the definition of
income, and because the bonus income was not irregular or non-
recurring, the trial court was required to include the bonus
income in calculating the parties’ base income and the overall
child support award. Its failure to do so constituted an abuse
of discretion. See e.g., Waller v. Waller, 20 N.C. App. 710,
713, 202 S.E.2d 791, 793 (1974) (holding that before ruling on a
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motion to modify child support, the trial court must give
consideration to the fact that part of the defendant’s income
was a bonus which fluctuated from year to year).
B. Retroactive Child Support
Plaintiff next argues that the trial court erred in
failing to award retroactive child support from 1 September 2010
through the time she filed her complaint in district court. We
disagree.
“Child support awarded prior to the time a party files a
complaint is properly classified as retroactive child support.”
Carson v. Carson, 199 N.C. App. 101, 105, 680 S.E.2d 885, 888
(2009) (quotation and internal citations omitted).
“[R]etroactive child support payments are only recoverable for
amounts actually expended on the child’s behalf during the
relevant period. Therefore, a party seeking retroactive child
support must present sufficient evidence of past expenditures
made on behalf of the child, and evidence that such expenditures
were reasonably necessary.” Robinson v. Robinson, 210 N.C. App.
319, 333, 707 S.E.2d 785, 795 (2011) (quotations and citations
omitted). “[W]here the parties have complied with the payment
obligations specified in a valid, unincorporated separation
agreement,” the trial court is prohibited from awarding
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retroactive child support, absent an emergency situation.
Carson at 106-107, 680 S.E.2d at 889.
On appeal, plaintiff’s argument is premised on the notion
that the child support provision in the Agreement expired when
defendant’s obligation to pay alimony likewise expired. As
such, plaintiff contends that the parties were not subject to a
valid, unincorporated separation agreement as of 1 September
2010. Plaintiff avers, “the parties were, for purposes of child
support, in a position procedurally analogous to that where
parties separate without executing a separation agreement
providing for child support.” Plaintiff’s argument is similar
to the argument advanced by the plaintiff-mother in Carson. In
Carson, the parties entered into an unincorporated separation
agreement in March 2008, which provided that the defendant-
father would pay a child support obligation of $500.00 per month
until the parties were able to negotiate the terms of a consent
order for child support. Id. at 103, 680 S.E.2d at 887. In the
event the parties were unable to negotiate a consent order
within one year, the separation agreement stated that either
party could file a complaint in district court. Id. The
parties never negotiated the terms of a consent order; the
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defendant-father continued to pay $500.00 per month in child
support. Id.Eight years passed before the plaintiff-mother filed a
complaint in district court seeking retroactive child support,
claiming that she was “entitled to reimbursement from defendant
for a portion of the actual expenses incurred for the benefit of
the minor child from August 2003 through the present.” Id. at
104, 680 S.E.2d at 887 (internal quotation omitted). The trial
court ordered the defendant-father to pay $31,036.85 in
retroactive and prospective child support from September 2003
through January 2008. Id. at 104, 680 S.E.2d at 888. On
appeal, the defendant-father argued that the trial court erred
in awarding the plaintiff-mother retroactive child support
because he had consistently paid $500.00 per month in accord
with the terms of the parties’ separation agreement. Id. at
105, 680 S.E.2d at 888. This Court held that, because the
defendant-father fully complied with the terms of the valid,
unincorporated separation agreement, the trial court was
prohibited from awarding retroactive child support in excess of
the stated terms of the separation agreement. Id. at 108, 680
S.E.2d at 890 (holding “where there is a valid, unincorporated
separation agreement, which dictates the obligations of the
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parent providing support, and the parent complies fully with
this obligation, the trial court is not permitted to award
retroactive child support absent an emergency situation”).
In the instant case, plaintiff’s argument that the child
support provision “expired” is without merit. Here, the parties
were operating under a valid, unincorporated separation
agreement which clearly intended for defendant to continue
making child support payments after the expiration of the
alimony term. It is undisputed that defendant made monthly
payments pursuant to the terms of the Agreement from the time it
became effective until the time plaintiff filed a complaint in
district court. Defendant even voluntarily increased his
support payment from the mandated $1,750.00 per month to
$2,750.00 per month. Should plaintiff have found $2,750.00 to
be an acceptable support payment, the parties could have
operated under the terms of the Agreement indefinitely. On
these facts, the trial court lacked authority to award
retroactive child support because defendant, at all requisite
times, abided by the terms of the valid, unincorporated
separation agreement. Accordingly, the trial court did not err
in denying plaintiff’s claim for retroactive child support.
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Assuming arguendo that the trial court had authority to
award retroactive child support, plaintiff’s argument remains
unconvincing. Again, retroactive child support is based on the
non-custodial parent’s share of the reasonable actual
expenditures made by the custodial parent on behalf of the
child. Robinson, supra. The record discloses that plaintiff
failed to present evidence to the trial court regarding the
specific amounts she actually expended to support the minor
children during the requisite period for which she sought
retroactive child support. As such, plaintiff failed to meet
her burden of proof. The trial court did not err in declining
to award plaintiff retroactive child support on these facts.
Having found that the original terms of the Agreement were not
reasonable to meet the children’s needs, the trial court was
justified in awarding prospective child support in the amount of
$8,425.82.
C. Attorney’s Fees
Lastly, plaintiff argues that the trial court erred in
denying her motion for an award of attorney’s fees. We
disagree.
In a child support action, the trial court has discretion
to award attorney’s fees to “an interested party acting in good
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faith who has insufficient means to defray the expense of the
suit.” N.C. Gen. Stat. § 50-13.6 (2013). Whether a party has
satisfied these requirements is a question of law fully
reviewable on appeal. Barrett v. Barrett, 140 N.C. App. 369,
374, 536 S.E.2d 642, 646 (2000) (citation omitted). Generally,
the dependent spouse has insufficient means to defray the costs
of litigation if he or she is unable “as litigant to meet the
supporting spouse as litigant on substantially even terms.”
Theokas v. Theokas, 97 N.C. App. 626, 630-31, 389 S.E.2d 278,
281 (1990) (citation omitted). In addition, “[b]efore ordering
payment of a fee in a support action, the court must find as a
fact that the party ordered to furnish support has refused to
provide support which is adequate under the circumstances
existing at the time of the institution of the action or
proceeding[.]” N.C. Gen. Stat. § 50-13.6 (emphasis added).
In the instant action, both parties requested an award of
attorney’s fees. Specifically, plaintiff sought to recover “at
least” $25,265.50 in attorney’s fees from defendant. In its
order, the trial court found that neither party was entitled to
recover attorney’s fees because each had sufficient means to
defray the cost of litigation. On appeal, our focus hinges on
whether plaintiff had sufficient funds to defray the costs of
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litigation. “With regard to this determination, a court should
generally focus on the disposable income and estate of just that
spouse, although a comparison of the two spouses’ estates may
sometimes be appropriate.” Barrett at 374, 536 S.E.2d at 646(citation omitted). Having reviewed the trial court’s findings,
we find them to be sufficient to form a basis to deny plaintiff
attorney’s fees. Excluding bonus income, plaintiff’s monthly
gross income is $10,242.00, and her reasonable needs total
$3,183.87. After paying $2,652.35 per month towards the minor
children’s reasonable needs, plaintiff is left with a surplus of
$4,405.78 per month. This alone supports the trial court’s
determination that plaintiff had sufficient means to defray the
cost of litigation.
Further, the trial court did not find as fact that
defendant refused to provide support which was adequate under
the circumstances. See N.C. Gen. Stat. § 50-13.6. The record
indicates that defendant complied with the terms of the
Agreement directing him to make child support payments; in fact,
he voluntarily made support payments in excess of what he was
required to pay. This evidence further supports the trial
court’s decision to deny plaintiff’s motion for attorney’s fees.
See Prescott v. Prescott, 83 N.C. App. 254, 262, 350 S.E.2d 116,
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121 (1986) (holding that the trial court did not abuse its
discretion in denying wife’s motion for reasonable attorney’s
fees in connection with her child support action when the
husband paid adequate child support and voluntarily made
additional support payment which he was not obligated to make
under the parties’ consent order). We hold that the trial
court’s findings of fact are supported by competent evidence and
conclude that it was not an abuse of discretion for the trial
court to deny plaintiff’s motion for an award of attorney’s
fees.
III. Conclusion
The trial court did not err in denying plaintiff’s motions
for retroactive child support and for attorney’s fees. However,
by excluding the parties’ bonus income in its calculation of the
parties’ gross base income, the trial court did err in
calculating its child support award. We reverse the requisite
portions of the trial court’s order and remand so that the trial
court can include the bonus income in its calculations. We
further instruct the trial court to recalculate the supporting
parent’s child support obligation accordingly.
Affirmed, in part; reversed and remanded, in part.
Judges McCULLOUGH and DAVIS concur.