Tim Walton v. Sharon (Walton) Camp ( 2001 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
November 28, 2001 Session
TIM WALTON v. SHARON (WALTON) CAMP
A Direct Appeal from the Circuit Court for Shelby County
No. 128214-6 The Honorable George H. Brown, Jr., Judge
No. W2001-01409-COA-R3-CV - Filed March 19, 2002
This is an appeal of an order modifying child support. Mother filed a petition seeking, inter
alia, an increase in child support based upon income from father’s home appraisal business, which
he receives in addition to his regular salary from his full-time employment. Mother alleged that
father entered into a partnership with his new wife in order to shelter income. The trial court found
that, by the time mother filed her petition for an increase in support, a legitimate partnership existed
between father and his new wife. The court ordered an increase in child support based upon father’s
projected share in the partnership, but taking into consideration the child of father’s new marriage.
Mother has appealed. We affirm in part and reverse in part.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Reversed in Part,
Affirmed in Part And Remanded
W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which ALAN E. HIGHERS,
J. and HOLLY KIRBY LILLARD, J., joined.
Jeffrey Jones, Memphis, For Appellant, Sharon (Walton)Camp
James Stephen King, Memphis, For Appellee, Tim Walton
OPINION
This is an appeal of an order on Appellant’s Petition to Increase Child Support, to Acquire
Life Insurance, and to Modify Medical Insurance Provisions (the “Petition”). Appellant, Sharon
(Walton) Camp (“Ms. Camp”), and Appellee, Tim Walton (“Mr. Walton”), were divorced in 1990.
Ms. Camp has custody of the parties’ two minor children and Mr. Walton has paid Ms. Camp child
support since the divorce. Mr. Walton has since remarried. At the time the trial court heard this
matter, Mr. Walton and his new wife, Susan Walton (“Ms. Walton”), had a one and a half (1 ½)
year-old child of their marriage1.
Mr. Walton is employed full-time as a paramedic with the Shelby County Fire Department.
In 1996, however, Mr. Walton started a sole-proprietorship, Allright Real Estate Services
(“ARES”), which he operated in addition to his full-time employment. ARES provided home
inspection services, and the record indicates that, when Mr. Walton started ARES, he sought to
become a Certified Real Estate Appraiser and offer appraisal services, as well. Mr. Walton received
his certification as a real estate appraiser in 1997.
For the taxable year 1996, Mr. Walton filed a Schedule C, Profit and Loss from Business,
with his federal tax return which showed a net loss of $7,141 for ARES. Similarly, Mr. Walton
filed a return in 1997 which showed a net loss of $7,106 for ARES. In 1998 and 1999, Mr. Walton
showed ARES with a net profit of $26,186 and $37,647, respectively, on Schedule C. On their
2000 Federal Tax Return, however, the Waltons filed a Form 1065, U.S. Return of Partnership
Income. The Form 1065 shows ARES had $70,176 in gross receipts, with deductions, including
salary to Ms. Walton, resulting in a net profit of $26,051.
The Waltons testified that they filed their ARES earnings as a partnership at their
accountant’s suggestion, which the accountant apparently proposed in August of 2000. Mr. Walton,
however, testified that Ms. Walton “had a vested interest in the company from the time she left her
other career,” sometime in 1998. This, Mr. Walton alleges, was the date when the partnership
between husband and wife was actually formed. The first document evidencing the partnership was
the Waltons’ 2000 Federal Income Tax Return, which the couple signed on February 28, 2001.2
The record indicates that, at least up to the date of the hearing in this matter, ARES’
business was transacted out of a checking account entitled, “Tim Walton d/b/a Allright Real Estate
Services.” Mr. Walton indicated that, although Ms. Walton “is not listed as the owner” of the
ARES account, “she has full access to it.” Ms. Walton, among other things, writes the majority of
the checks from the business checking account. Rather than transferring money out of the business
account into the couple’s personal checking account for salaries or draws, Mr. Walton testified that
the couple pay most of their personal expenses from the ARESs checking account.
Ms. Walton testified that she “pretty much run[s] the business,” and that the only thing she
doesn’t do “is actual field work on the appraisals.” She also testified that, until she began running
the business in 1998, ARES was losing money. Along these lines, Richard Douglas, a loan
originator with Carty Mortgage Services, testified that Ms. Walton is his contact at ARES, that she
1
The record does not indicate when Mr. and Ms. Walton were married.
2
In her brief, Ms. Camp notes that this document was signed 30 days after she filed her Petition to Increase
Child Suppo rt.
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delivers the completed appraisals to his office, and that she “is the person that I interface with on
any billing questions.” Mr. Douglas testified that Ms. Walton “basically manages the business.”
The Divorce Referee’s Order filed April 20, 2001 states, in relevant part:
In light of the proof, the cases cited and the Tennessee
Uniform Partnership Act Statutes, it is my opinion that a business
partnership existed between the Respondent, Tim Walton, and his
present Wife, Susan Walton in the operation of the Allright Real
Estate Services from the time the present Mrs. Walton, left her job
with Paul Davis Systems and began her work efforts on behalf of her
Husband’s Real Estate Appraisal business.
The Partnership Code and especially the Bass v. Bass case
makes it clear that no “formal” writing or magic event is needed to
create a partnership, but actions of the parties are the test of said
partnership creation.
However, no cases were cited regarding the proof in this
case, where the parties used total proceeds of Husband’s full time
job and income of the appraisal service, produced by their joint
efforts as “family” income with only an alleged oral agreement
between Husband and Wife as to a 51% 49% split of the profits, and
no such evidence emerged until the partnership tax return prepared
for the year 2000.
The Petition to Modify however was not even filed until
January 29, 2001, by which time the proof has shown that a definite
business partnership agreement was fully effective. Therefore the
issues for the referee to determine are, has there been a substantial
increase in the income of the father that warrants a modification, and
if so, what portion of the income from the Allright Real Estate
Services is to be used to calculate child support?
I believe the law to be, that minor children share in increased
income of the payor and that based on the proof of the father’s
income for the year 2000, projected into 2001 from both the Shelby
County Fire Department and his projected share of the profit from
Allright Real Estate Services. I find that total child support amount
should be based on 41% as there is also a 3rd child of the current
marriage to enter into the guideline requirement, and set a $1,000.00
per month for the two children of the marriage to the Petitioner.
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Said Order to be retroactive to the date of the filing of the Petition
on January 29, 2001.
I also Order the Respondent, Tim Walton, to acquire life
insurance with the two minor children of the first marriage as
irrevocable beneficiaries of $100,000.00 each child, until child
support obligation ends for each one. I also Order that he continue
to provide medical insurance coverage on the two children of the
former marriage and divide equally any uncovered medical expenses
with his former Wife, including reasonable and necessary dental
expenses. Also Order that attorney fee [sic] be paid to Mr. Jeffrey
Jones in the amount of $1,500.00 and is given 90 days to pay said
fee. Otherwise, the parties each will pay their own litigation
expenses heretofore incurred in preparation of this Petition.
The Referee’s Order was affirmed by the trial court order filed May 3, 2000 the trial court
entered an order increasing child support to $1,000.00 per month, retroactive to January 29, 2001,
requiring Mr. Walton to carry life insurance on his life for the benefit of the children of his first
marriage, requiring Mr. Walton to continue to provide medical insurance benefits to the children,
and ordering Mr. Walton to pay Ms. Camp’s attorney fees. Ms. Camp appeals this Order, and
presents the following issues for review, as stated in her brief:
(1) Whether the trial court or Divorce Referee properly determined
the obligor’s income subject to child support; (2) Whether the trial
court or Divorce Referee erred in reducing the obligor’s net self-
employment income subject to child support by allowing deductions
for payments allegedly made to his current wife; (3) Whether the
trial court or Divorce Referee erred in reducing the obligor’s net
self-employment income subject to child support by allowing
unproven business deductions and expenses; (4) Whether the trial
court or Divorce Referee erred in its award of attorney fees and
expenses in favor of the custodian, and whether the Appellant;
should be awarded fees and expenses with this appeal.
Mr. Walton adds the following issue: Whether Appellant failed to properly perfect her appeal of
the Divorce Referee’s ruling.
Since this case was tried by the court sitting without a jury, we review the case de novo
upon the record with a presumption of correctness of the findings of fact by the trial court. Unless
the evidence preponderates against the findings, we must affirm, absent error of law. See Tenn. R.
App. P. 13(d).
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Although we review the factual findings of the trial court under the “presumption of
correctness” standard set out in Tenn. R. App. Rule 13(d), we review the actual modification of
child support for abuse of discretion. In a recent opinion, the Middle Section of this Court
described this heightened standard of review as follows:
Setting child support is a discretionary matter. See State ex rel.
Coleman v. Clay, 805 S.W.2d at 755. Accordingly, we review child
support decisions using the deferential "abuse of discretion" standard
of review. This standard requires us to consider (1) whether the
decision has a sufficient evidentiary foundation, (2) whether the
court correctly identified and properly applied the appropriate legal
principles, and (3) whether the decision is within the range of
acceptable alternatives. See BIF v. Service Constr. Co., No.
87-136-II, 1988 WL 72409, at *2 (Tenn. Ct. App. July 13, 1988)
(No Tenn.R.App.P. 11 application filed). While we will set aside a
discretionary decision if it rests on an inadequate evidentiary
foundation or if it is contrary to the governing law, we will not
substitute our judgment for that of the trial court merely because we
might have chosen another alternative.
State ex rel. Vaughn v. Kaatrude, 21 S.W.3d 244, 248 (Tenn. Ct. App. 2000).
In the case of a modification of an existing support order, the governing law is T.C.A. §
36-5-101(a)(1) (2001), which states, in pertinent part:
In cases involving child support, upon application of either party, the
court shall decree an increase or decrease of such allowance when
there is found to be a significant variance, as defined in the child
support guidelines established by subsection (e), between the
guidelines and the amount of support currently ordered unless the
variance has resulted from a previously court-ordered deviation from
the guidelines and the circumstances which caused the deviation
have not changed.
The Child Support Guidelines (the “Guidelines”) define “significant variance as "at least 15% if the
current support is one hundred dollars ($100.00) or greater per month and at least fifteen dollars
($15.00) if the current support is less than $100.00 per month." Tenn. Comp. R. & Regs.
1240-2-4-.02(3) (1997).
Before we address the substantive issues regarding modification of the parties’ existing child
support order, we must first address the threshold issue Mr. Walton raises regarding Ms. Camp’s
failure to perfect her appeal of the Divorce Referee’s ruling, which was filed outside of the
prescribed period. In support of this position, counsel for Mr. Walton cites the case of Edmundson
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v. Pratt, 945 S.W.2d 754 (Tenn. Ct. App. 1996). Edmundson is not on point, however, because
it deals with an appeal to this Court under the Tennessee Rules of Appellate Procedure rather than
local court rules.
This Court has, however, often said that a trial judge may choose to waive local rules, and
this Court may not reverse such a decision “absent the clearest showing of an abuse of discretion
and that such waiver was the clear cause of a miscarriage of justice.” Killinger v. Perry, 620 S.W.2d
525 (Tenn. Ct. App. 1981). See also Crumbley v. Crumbley, No. M1998-00158-COA-R3-CV,
1999 WL 1015565 (Tenn. Ct. App. 1999). We find no such showing in this case. This issue is,
therefore, without merit.
We next address the issues regarding the propriety of the order modifying Mr. Walton’s
child support obligation in this case. We believe the Ms. Camp’s issues on this subject can be
condensed to the single issue of whether the trial court properly determined Mr. Walton’s income
and correctly applied the Child Support Guidelines in determining Mr. Walton’s support obligation.
Ms. Camp asserts that Mr. Walton did not have a partnership with his present wife and that
his claim of such is a subterfuge to hide his net income. The Referee and trial court found that Mr.
and Ms. Walton had entered into a partnership. We hold that the evidence does not preponderate
against the trial court’s finding that, at least as of the date Ms. Camp filed her Petition in this matter,
a legal, albeit oral, partnership existed between the Waltons.
Under Tennessee law, a partnership is statutorily defined as, “an association of two (2) or
more persons to carry on as co-owners a business for profit.” T.C.A. § 61-1-105(a). See also Bass
v. Bass, 814 S.W.2d 38, 41 (Tenn. 1991). The Tennessee Supreme Court, in Bass, explained that:
no one fact or circumstance may be pointed to as a conclusive test,
but each case must be decided upon consideration of all relevant
facts, actions, and conduct of the parties. Roberts v. Lebanon
Appliance Service Co., 779 S.W.2d 793, 795 (Tenn.1989). If the
parties' business brings them within the scope of a joint business
undertaking for mutual profit--that is to say if they place their
money, assets, labor, or skill in commerce with the understanding
that profits will be shared between them--the result is a partnership
whether or not the parties understood that it would be so. Pritchett
v. Thomas Plater & Co., 144 Tenn. 406, 232 S.W. 961, 969-70
(1921).
814 S.W.2d at 41. The Bass Court went on to note that the determination of whether a partnership
exists “depends upon the intention of the parties,” and that in this regard, courts should ascertain
the parties’ intentions based upon the actions of the parties. See id. Although a partnership contract
is required to establish the existence of a partnership relationship, such a contract need not be in
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writing, and the partners need not even intend to become partners for such a contract to be effective.
See id., Aussenberg v. Kramer, 944 S.W.2d 367, 371 (Tenn. Ct. App. 1996).
In this case, the Referee and trial court found that a partnership existed between the Waltons
primarily on the basis of the testimony of witnesses. When the resolution of the issues in a case
depends upon the truthfulness of witnesses, the trial judge who has the opportunity to observe the
witnesses in their manner and demeanor while testifying is in a far better position than this Court
to decide those issues. See McCaleb v. Saturn Corp., 910 S.W.2d 412, 415 (Tenn. 1995);
Whitaker v. Whitaker, 957 S.W.2d 834, 837 (Tenn. App. 1997). The weight, faith, and credit to
be given to any witness’s testimony lies in the first instance with the trier of fact, and the credibility
accorded will be given great weight by the appellate court. See id.; In re Estate of Walton v.
Young, 950 S.W.2d 956, 959 (Tenn. 1997).
The record indicates that the Walton’s were both active participants in ARES. Mr. Walton
testified that, although he performs the assessments, Ms. Walton attends to the administrative needs
of the business. Ms. Walton’s full-time participation in the business coincides with ARES’ first
turning a profit in 1998. Mr. Walton also testified that, although the partnership was not “in
writing” until the parties’ filed their 2000 Federal Income Tax Return, “[w]e actually agreed that
[Ms. Walton] had vested interest in the company from the time she left her other career.”
Ms. Camp has argued that the Referee and trial court’s reliance upon the Bass case in
determining the existence of a partnership in the case at bar is misplaced. Specifically, Ms. Camp
argues that the “underpinning of the holding in Bass was that the parties had been on ‘equal
footing’ and the success of the business was due in equal part to the efforts of the implied partner.”
Ms. Camp explains, no such “equal footing” could have existed here, because the appraisal business
would cease to exist if it were not for Mr. Walton’s professional appraisal license. We respectfully
disagree.
We are unaware of a requirement under Tennessee law that partners must possess identical
skills in order to enter into a legal partnership. In fact, the Bass Court specifically noted that “the
existence of a partnership may be implied from the circumstances where it appears that the
individuals involved have entered into a business relationship for profit, combining their property,
labor, skill, experience, or money.” 814 S.W.2d at 43 (emphasis added). The Waltons have done
precisely this: combined their skills, labor and experience in order to make ARES a profitable
business.
While we hold that the Referee and trial court correctly found that the Waltons were
engaged in a partnership at the time Ms. Camp filed her petition, for the reasons below, we cannot
say that the determination of child support was proper.
“The two most important variables in the guidelines' formula are the number of children to
be supported and the noncustodial parent's net income.” Kirchner v. Pritchett, No.
01-A-01-9503-JV-00092, 1995 WL 714279 (Tenn. Ct. App. 1995). See also Turner v. Turner, 919
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S.W.2d 340, 344 (Tenn. Ct. App. 1995). There is no dispute that Ms. Camp and Mr. Walton had
two children born of their marriage. However, there is considerable disagreement over Mr.
Walton’s income subject to child support. In reviewing the Orders in this case, as well as the entire
record on appeal, we hold that the Referee and the trial court failed to properly indicate the basis
for the modification of Mr. Walton’s child support obligation. Nothing in the record indicates how
either the Referee or trial court determined the monetary basis for the $1,000.00 in child support.
Without a starting figure, we cannot determine if the trial court properly set the amount of support.
The Referee wrote:
I believe the law to be, that minor children share in increased
income of the payor and that based on the proof of the father’s
income for the year 2000, projected into 2001 from both the Shelby
County Fire Department and his projected share of the profit from
Allright Real Estate Services. I find that total child support
amount should be based on 41% as there is also a 3rd child of the
current marriage to enter into the guideline requirement, and set
a $1,000.00 per month for the two children of the marriage to the
Petitioner. Said Order to be retroactive to the date of the filing of
the Petition on January 29, 2001.
(emphasis added). While we agree that basing the increase in child support upon Mr. Walton’s
income from his Fire Department job and his share of ARES is appropriate under the Guidelines,
neither Order indicates upon what amount of Mr’ Walton’s income the court’s Order is based.
Without such a finding, we cannot determine if the trial court properly calculated the amount of
child support Mr. Walton must pay.
Additionally, the trial court and Referee did not indicate which of ARES’ expenses, if any,
should be deducted from Mr. Walton’s income. The Guidelines provide that:
Gross income shall include all income from any source (before taxes
and other deductions), whether earned or unearned, and includes but
is not limited to, the following: wages, salaries, commissions,
bonuses, overtime payments, dividends, severance pay, pensions,
interest, trust income, annuities, capital gains, benefits received from
the Social Security Administration, i.e., Title II Social Security
benefits, workers compensation benefits whether temporary or
permanent, judgments recovered for personal injuries,
unemployment insurance benefits, gifts, prizes, lottery winnings,
alimony or maintenance, and income from self-employment. Income
from self-employment includes income from business operations
and rental properties, etc., less reasonable expenses necessary to
produce such income. Depreciation, home offices, excessive
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promotional, excessive travel, excessive car expenses or excessive
personal expenses, etc., should not be considered reasonable
expenses. . . .
Tenn. Comp. R. & Regs. 1240-2-4-.03(3)(a) (1997) (emphasis added). Again, without any findings
about which expenses the Referee and trial court considered in determining what portion of Mr.
Walton’s partnership income was subject to child support, we cannot determine if the trial court
correctly determined his child support obligation.
Finally, we believe that the trial court and Referee have impermissibly included Mr.
Walton’s child from his new marriage when arriving at the new child support figure.
Children of the obligor who are not included in a decree of child
support shall not be considered for the purposes of reducing the
obligor’s net income or in calculating the guideline amount. In
addition, these children should not be considered by the court as a
reason for deviation unless they meet the requirements of rule 1240-
2-4-.04(4).
Tenn. Comp. R. & Regs. 1240-2-4-.03(4) (1997) (emphasis added). Rule 1240-2-4-.0-4(4)
provides:
In instances of extreme economic hardship, such as in cases
involving extraordinary medical needs not covered by insurance or
other extraordinary special needs for the child(ren) of the obligor’s
current family, [child(ren) living in the home with the obligor for
whom the obligor is legally responsible] deviation from the
guidelines may be considered in order to achieve equity between the
parties when the court so finds.
In this case, the Referee’s Order indicates that Mr. Walton’s child support obligation was
based upon “41% as there is also a 3rd child of the current marriage to enter into the guideline
requirement.” As we have noted above, the Guidelines forbid the courts from considering children
“not included in a decree of child support” when determining a parent’s financial obligation, except
for exceptional circumstances. Tenn. Comp. R. & Regs. 1240-2-4-.03(4). Since we find nothing
in the record to indicate that Mr. Walton has any other children included in a child support decree
or that any exceptional circumstances as set out in Rule 1240-2-4-.04(4) existed, we hold that the
Referee and trial court should have based Mr. Walton’s child support obligation by determining Mr.
Walton’s net income, and multiplying that figure by 32%, the Guidelines figure for two children.
See Tenn. Comp. R. & Regs. 1240-2-4-.03(5).
For these reasons, we remand this case to the trial court for a proper determination of Mr.
Walton’s income subject to child support. The trial court should deduct “reasonable expenses” of
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the ARES partnership, pursuant to Rule 1240-2-4-.03(3)(a). If any reason for deviation from the
Guidelines exists in this case, the trial court should specify the reasons for such a deviation.
Finally, we hold that the trial court did not abuse its discretion in awarding Ms. Camp
attorney’s fees. We have often held that a trial court is afforded discretion concerning whether to
award attorney’s fees in a divorce case. See Long v. Long, 957 S.W.2d 825, 827 (Tenn. App.
1997). On appeal, an appellate court shall not interfere with the trial court’s decision except upon
a showing of an abuse of that discretion. Id.The order of the trial court setting child support is reversed, and the case is remanded to the
trial court for a determination of the proper amount of child support consistent with this Opinion.
The present child support award shall remain in effect until the trial court makes its determination.
The order of the trial court in all other respects is affirmed. Costs of appeal are assessed to appellee,
Tim Walton. The parties shall each bear their expense for attorney fees on appeal.
__________________________________________
W. FRANK CRAWFORD, PRESIDING JUDGE, W.S
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