Smith v. Smith ( 1999 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
FILED
July 29, 1999
SHARON ANN SMITH, ) Cecil Crowson, Jr.
) Appellate Court Clerk
Plaintiff/Appellee, )
) Appeal No.
) 01-A-01-9809-CH-00515
VS. )
) Williamson Chancery
) No. 22128
ALAN WAYNE SMITH, )
)
Defendant/Appellant. )
APPEALED FROM THE CHANCERY COURT OF WILLIAMSON COUNTY
AT FRANKLIN, TENNESSEE
THE HONORABLE HENRY DENMARK BELL, JUDGE
R. E. Lee Davies
HARTZOG, SILVA & DAVIES
123 Fifth Avenue North
P. O. Box 664
Franklin, Tennessee 37065-0664
Attorney for Plaintiff/Appellee
GREGORY D. SMITH
FARRIS, WARFIELD & KANADAY, PLC
424 Church Street, Suite 1900
Nashville, Tennessee 37219
Attorney for Defendant/Appellant
AFFIRMED AND REMANDED
BEN H. CANTRELL,
PRESIDING JUDGE, M.S.
CONCUR:
KOCH, J.
CAIN, J.
OPINION
When the parties divorced, the trial court calculated the husband’s net
income for child support purposes by averaging his salary over a three year period.
The wife appealed, arguing that the child support guidelines required that a capital
gain of over $200,000 realized by the husband during the same period also be
included in the calculation. We agreed, but suggested the trial court could prorate the
capital gain over the longer time-frame during which the capital gain income was
apparently earned. Upon remand, the trial court took evidence as to the length of that
period, and made a fresh calculation, which the husband objects to in this appeal. We
affirm the trial court.
I. Prior Proceedings
Sharon Smith and Alan Smith divorced in 1994. The trial court divided
the marital property and gave the wife custody of the two children of the marriage. Mr.
Smith was ordered to pay child support and alimony. Two years later, Ms. Smith
petitioned the trial court for an increase in child support, claiming that her former
husband’s net income had greatly increased.
The trial court heard proof that the husband earned an annual salary
that averaged $113,000 as a Vice President of Comdata Corporation during the years
1994-1996. He also earned substantial bonuses and commissions during those
years. In 1995, Mr. Smith exercised stock options he had acquired incident to his
employment, resulting in a capital gain of $221,1801. The court calculated a fixed
amount of monthly child support ($2,086) based upon Mr. Smith’s salary income and
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Mr. Smith calculated the gross amount he realized upon the exer cise of his stock o ptions to
be $217,142. However, for the purposes of this appeal, he has accepted the figure of $221,180, which
was ca lculated by M s. Sm ith and us ed by the trial co urt.
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ordered that he also pay as child support 32% of any future bonuses or commissions
he received. The court did not take the 1995 capital gain into account in any way.
The wife appealed.
Following oral argument, we filed an opinion in this case (Smith v. Smith,
Appeal No. 01-A-01-9705-CH-00216, filed Nashville, October 29, 1997). We found
that the trial court had exceeded its authority in ordering an automatic adjustment in
child support based upon the husband’s future bonuses and commissions, because
the child support guidelines promulgated by the Legislature require the courts to fix
some definite amount for the obligor to pay, based upon his earning capacity. Tenn.
Code Ann. § 36-5-101(a)(2)(A). We also noted that the definition of gross income
found in the Rules and Regulations of the State of Tennessee defined gross income
broadly as “all income from any source” and that it specifically included capital gains.
We accordingly remanded this case to the trial court for a fresh
calculation of net income upon which to base Mr. Smith’s child support obligation, with
the following instructions:
We therefore hold that in calculating a definite monthly
amount of child support, the trial court must consider Mr.
Smith’s 1995 capital gains as well as his commissions,
bonuses and salary. Since Mr. Smith apparently
accumulated his stock options during the entire period of his
employment at Comdata, and not just during the year in
which he exercised them, it might be equitable to average his
capital gains over that entire period, or to prorate them in
some way, rather than just averaging them over the three
year period that was used for calculating his average salary,
commission and bonus. The trial court may take proof on the
process by which the options were acquired, in order to make
this determination.
II. Current Proceedings
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Following the remand, Ms. Smith filed a motion to set child support. The
chancellor conducted a hearing in his chambers on May 19, 1998. No court reporter
was present, so there is no transcript of that hearing. The court heard arguments of
counsel and reviewed unsworn documents presented by the parties.
Ms. Smith presented a letter by Sara Groehler, Stock Option
Administrator at Ceridian Corporation (Ceridian bought Comdata in 1995),
accompanied by an employee stock option summary in the form of a table, which
listed the grant date for Mr. Smith’s stock options as August 3, 1993. Mr. Smith
presented an offer of employment, in the form of a letter to him dated April 17, 1983
from Louis Molettiere, a Senior Vice President of Comdata. The letter outlined the
salary and benefits that were to accompany the offered job, including a grant of
“25,000 shares of the Company’s common stock under the 1987 Non-Statutory Stock
Option Plan.”
Following the hearing, the trial court issued an order pro-rating Mr.
Smith’s stock options from August 1993. The chancellor’s order referenced the
documents described above, but did not state the reasons for apparently preferring
the evidence presented by Ms. Smith over that of Mr. Smith. The recalculation of Mr.
Smith’s annual income from 1994-1996 resulted in a finding that his average gross
annual income was $206,881, or $17,240 a month. Based upon this amount (or more
precisely, based upon the net income derived from this amount), Mr. Smith’s child
support obligation came to $3,860 per month. The arrearage from the date of the
court’s earlier order came to $28,069 after consideration of the amount of child
support actually paid since that time.
Mr. Smith’s attorney subsequently filed a motion under Rule 59, Tenn.
R. Civ. P., to Alter or Amend the Judgment, or for New Trial. Attached as an exhibit
to the motion was a ledger containing a listing of stock options that were granted
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between January 1, 1987 and January 27, 1995. The ledger indicated that Mr. Smith
had been granted options for 25,000 shares of Comdata Corporation on October 1,
1991. At the hearing on the motion, Mr. Smith also produced the sworn affidavit of
Michael W. Sheridan, acting Secretary of Comdata, testifying to the regularity and
correctness of both the above-mentioned ledger, and of another document, the
minutes of a regular meeting of the Board of Directors of Comdata Corporation held
on October 1, 1991, which included a resolution approving the aforementioned grant
to Mr. Smith.
In her response to the Rule 59 motion, Ms. Smith argued that Mr. Smith
was not entitled to have his new evidence considered by the court because he failed
to file an affidavit to meet his burden of proving that the evidence he wished to present
could not have been discovered prior to the original proceeding through the exercise
of due diligence. See Seay v. City of Knoxville, 654 S.W.2d 397, 399 (Tenn. App.
1983).
At the end of the hearing, the chancellor took the matter under
advisement. On August 26, 1998, he filed an order denying the Rule 59 motion. This
appeal followed.
III. A Necessarily Limited Review
We must note at the outset the irregular nature of the hearing of May 19,
1998. A proceeding in chambers may be useful for some limited purposes, but when
the rights of the parties are to be conclusively determined, it is not an adequate
substitute for a hearing in open court, in accordance with the Rules of Civil Procedure
and the Rules of Evidence.
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The absence of a transcript of the evidence is particularly damaging to
an appellant’s prospects, for without such a transcript (or in the alternative, a
statement of the evidence filed in accordance with Rule 24(c), Tenn. R. App. Proc.),
the presumption of correctness that normally accompanies findings of fact by the trial
court becomes conclusive. See Rule 13(d), Tenn. R. App. Proc.; Word v. Word, 937
S.W.2d 931 (Tenn. App. 1996); Sherrod v. Wix, 849 S.W.2d 780, 783 (Tenn. App.
1992).
It appears to us that both parties submitted without objection to the
procedures whose results are now at issue. Neither party alleges that he or she
objected to the admission of documents submitted by the other that could have been
excluded as inadmissible hearsay by a timely objection. If we are mistaken and
objections were indeed taken, the failure of the parties to preserve those objections
by arranging for the presence of a court reporter prevents us from reviewing the
court’s actions in any meaningful way.
Relief is not generally available in the appellate courts to a party who
fails to take whatever action is necessary to prevent or nullify the harmful effect of an
error. See Rule 36(a), Tenn. R. App. P. Thus, we cannot consider the appellant’s
argument that the trial court erred in accepting the unsworn, unexplained letter from
Ms. Groehler and its attachments, and in using those documents to determine the
date of the grant of the stock options in question.
As for the hearing on the Motion to Alter or Amend or for New Trial, we
believe the appellee is correct in stating that when the basis of such a motion is the
existence of newly discovered evidence, the appellant has a duty to furnish the court
with an adequate explanation as to why such evidence could not have been produced
at the trial of the case. The reason is that without such a rule, our courts would have
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a much more difficult time closing the books on many cases, and achieving that
finality of judgment which is one of the primary goals of our judicial system.
Since the appellant did not even attempt to offer such an explanation,
the trial court did not err in refusing to reverse its earlier ruling, despite the appellant’s
contention that he was in possession of evidence that was better than the evidence
he produced at trial.
IV. The Educational Trust Fund
The Tennessee Child Support Guidelines permits the court to order a
non-custodial parent to pay that portion of child support which is based upon net
income in excess of $6,250 per month into an educational trust fund for the benefit
of the children, rather than going directly to the custodial parent. Tenn. Rules & Regs
1240-2-4-.04(3). The appellant argues that the trial court erred in refusing to order the
creation of such a fund. However the creation of an educational trust fund is not
mandatory, but is within the sound discretion of the trial court. Nash v. Mulle, 846
S.W.2d 803, 804 (Tenn. 1993).
Since there is no evidence in the record that the appellant asked the
court to create an educational trust fund, we cannot find that the court abused its
discretion in failing to do so. But because of the modifiable nature of child support
orders, we see nothing to prevent the appellant from moving the court for the creation
of such a fund, if he believes it would be to his advantage, or that of the children.
Ms. Smith has also asked to be awarded her attorney fees on appeal.
We note, as we did in our earlier opinion in this case, supra, that a substantial portion
of the attorney fees she incurred were for the purpose of vindicating her right to
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receive an appropriate amount of support for her children. We therefore direct the
trial court to order the appellant to pay one-half of her attorney fees on this appeal.
V.
The order of the trial court is affirmed. Remand this cause to the
Chancery Court of Williamson County for further proceedings consistent with this
opinion. Tax the costs on appeal to the appellant.
_________________________________
BEN H. CANTRELL,
PRESIDING JUDGE, M.S.
CONCUR:
_____________________________
WILLIAM C. KOCH, JR., JUDGE
_____________________________
WILLIAM B. CAIN, JUDGE
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IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
SHARON ANN SMITH, )
)
Plaintiff/Appellee, ) Appeal No.
) 01-A-01-9809-CH-00515
)
VS. ) Williamson Chancery
) No. 22128
)
ALAN WAYNE SMITH, ) Affirmed and
) Remanded
Defendant/Appellant. )
JUDGMENT
This cause came on to be heard upon the record on appeal from the
Chancery Court of Williamson County, briefs and argument of counsel; upon
consideration whereof, this Court is of the opinion that in the decree of the Chancellor
there is no reversible error.
In accordance with the opinion of the Court filed herein, it is, therefore,
ordered and decreed by this Court that the decree is affirmed. The cause is
remanded to the Chancery Court of Williamson County for the enforcement of the
decree and for the collection of the costs accrued below.
Costs of this appeal are taxed against Alan W. Smith, Principal, and
Gregory D. Smith, Surety, for which execution may issue if necessary.
______________________________________
BEN H. CANTRELL, PRESIDING JUDGE, M.S.
______________________________________
WILLIAM C. KOCH, JR., JUDGE
______________________________________
WILLIAM B. CAIN, JUDGE