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Docket Number

No. M1999-02045-COA-R3-CV.

Attorney(S)

Dana C. McLendon III, Franklin, Tennessee, for the appellant, Paul David Wilson. D. Scott Parsley, Nashville, Tennessee, for the appellee, Kellye Wair Wilson.

Judges

CANTRELL, P.J.

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Smart Summary

Case Summary: Kellye Wair Wilson v. Paul David Wilson

Court of Appeals of Tennessee, Nashville; No. M1999-02045-COA-R3-CV; Opinion by Cantrell, P.J.; July 31, 2000 (May 2000 Session). Appeal reversed and remanded. Permission to appeal to the Tennessee Supreme Court denied March 12, 2001.

Factual and Procedural Background

In 1996 the parties were divorced. The final decree granted primary custody of the parties' one child to Ms. Kellye Wair Wilson and ordered Mr. Paul David Wilson to pay $1,135.00 per month in child support, pay the child's insurance premiums, and pay all uninsured medical and dental expenses. At the time of the divorce decree Mr. Wilson was employed as the business manager of a car dealership and earned $121,562.65 for that year (approximately $10,130.00 per month).

In October 1998 Mr. Wilson's employment was terminated following accusations that he sold extended warranties and failed to remit the proceeds to his employer. Mr. Wilson subsequently filed a petition (filed November 1998, according to the opinion's reference point for modification) requesting termination or reduction of his child support obligation until he obtained new employment.

At a hearing in May 1999 Mr. Wilson was the sole witness. He testified that in January 1999 he accepted a sales and leasing position with another car dealership that provided a $4,000.00 per month salary guarantee (the dealer would loan the difference if commissions did not reach that guarantee). By the time of trial he had borrowed $7,200.00 under that guarantee and earned $9,544.13 in commissions. He testified to financial distress: behind on mortgage payments after taking a second mortgage, having maxed at least one credit card, taking out a $15,000 personal loan, and being unable to afford household expenses.

The trial court found Mr. Wilson owed child support arrearages of $8,220.00, concluded that he was "the maker of his own financial troubles as a result of his dishonest actions at his former place of employment," and denied his request for reduction or termination of support. Mr. Wilson appealed. The Court of Appeals reversed and remanded for further proceedings.

Legal Issues Presented

Whether there exists a "significant variance" between the child support dictated by the Tennessee child support guidelines and the amount currently ordered, such that modification is appropriate under Tenn. Code Ann. § 36-5-101(a).
If a significant variance exists, whether that variance results from the obligor's willful and voluntary unemployment or underemployment (which would justify calculating support based on potential income rather than actual income) under the child support guidelines and Tenn. Comp. R. Regs. 1240-2-4-.03.
Whether the trial court correctly based the child support obligation on Mr. Wilson's potential income rather than his actual income where his employment termination resulted from criminal misconduct.

Arguments of the Parties

Appellant's (Paul David Wilson) Arguments

Requested termination or reduction of child support following involuntary termination of his prior employment and reduced earnings at a new job with a $4,000.00 monthly salary guarantee.
Presented evidence of current actual earnings (salary guarantee and commissions), outstanding loans from the employer under the guarantee, and substantial personal indebtedness and mortgage problems to show inability to pay the previously-ordered support level.

Appellee's (Kellye Wair Wilson) Arguments

Contended that because Mr. Wilson's job loss resulted from his criminal acts (selling warranties and failing to remit proceeds) and he later pled guilty to counts of theft of property, his unemployment/underemployment was willful and voluntary; consequently, a downward modification should not be allowed and support should be calculated on potential income.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Carvell v. Bottoms, 900 S.W.2d 23 (Tenn. 1995)	Establishes that findings of fact by the trial court are presumed correct unless the preponderance of the evidence is otherwise; conclusions of law receive no presumption.	Used to frame the standard of appellate review: the Court of Appeals reviewed the child support order de novo on the record and applied the Carvell standard regarding fact/conclusion presumptions.
Turner v. Turner, 919 S.W.2d 340 (Tenn. Ct. App. 1995)	Identifies the "significant variance test" (adopted by the General Assembly) as the proper standard for modification of child support orders.	Relied upon to state that Tenn. Code Ann. § 36-5-101(a) and the child support guidelines control modification requests and that a significant variance between guideline amount and current order can justify modification.
Ralston v. Ralston, No. 01A01-9804-CV-00222, 1999 WL 562719 (Tenn. Ct. App. Aug. 3, 1999)	Discusses the concept that willful or voluntary unemployment/underemployment requires intent to reduce or terminate income (cited in a footnote in this opinion).	The court cited Ralston to support the proposition that misconduct leading to discharge is not automatically "willful" under the guidelines; willfulness requires an intent to reduce income to avoid obligations.

Court's Reasoning and Analysis

The Court of Appeals proceeded stepwise:

Standard of review: the court reiterated that review of child support orders is de novo on the record and that trial court factual findings are presumed correct unless the preponderance of the evidence indicates otherwise; legal conclusions receive no such presumption (citing Carvell v. Bottoms).
Legal standard for modification: the court applied the "significant variance" test established under Tenn. Code Ann. § 36-5-101(a) (as explained in Turner v. Turner). The opinion quotes the statutory command that a court "shall decree an increase or decrease" when a significant variance between the guidelines and current order is found, subject to an exception where the variance results from a previously court-ordered deviation that has not changed.
Definition and measurement of significant variance: the opinion referenced the Department of Human Services guidelines (Tenn. Comp. R. Regs. 1240-2-4-.03(3)) which define "significant variance" as at least 15% when current support is $100.00 or greater per month. The guidelines also provide that if an obligor is willfully and voluntarily unemployed or underemployed, support should be calculated on potential income (Tenn. Comp. R. Regs. 1240-2-4-.03(d)).
Application to the facts: the court compared incomes and found a clear significant variance: at divorce Mr. Wilson earned approximately $10,130.00 per month; at trial he was earning $4,000.00 per month. Thus the statutory significant variance test was met.
Determination whether the variance resulted from willful or voluntary unemployment/underemployment: the court examined the circumstances of Mr. Wilson's job loss (termination after accusations of selling warranties and not remitting proceeds; appellate record showing he later pled guilty to counts of theft of property). The court rejected a categorical rule that any discharge for misconduct equals willful unemployment under the guidelines. Instead, it adopted the view that "willful or voluntary unemployment or underemployment must result from an intent on the part of the parent to reduce or terminate his or her income." The court found no evidence that Mr. Wilson intended to lose his job or that he took a lower-paying job to escape his child support obligations; rather, the record showed he had little or no choice after the allegations. Accordingly, the court concluded the trial court's finding of willful underemployment was not supported.
Relief ordered: because the record did not support basing child support on potential income, the Court of Appeals reversed the trial court's award based on potential income. The appellate court noted that the trial court did not make a specific factual finding of Mr. Wilson's actual net income at trial, despite Mr. Wilson's testimony that he was earning $4,000.00 per month. The matter was remanded for the trial court to determine Mr. Wilson's actual net income and to set child support accordingly, with any modification relating back to the filing of Mr. Wilson's petition in November 1998.

Holding and Implications

Core Ruling: The judgment of the trial court is REVERSED AND REMANDED.

Direct consequences for the parties:

The trial court's decision to calculate child support based on Mr. Wilson's potential income (instead of his actual income) was reversed because the record did not support a finding that Mr. Wilson was willfully and voluntarily unemployed or underemployed.
The cause is remanded to the Circuit Court for Davidson County for the trial court to determine Mr. Wilson's actual net income and to make an award of child support based on that income. Any modification (if appropriate) is to relate back to the time Mr. Wilson's petition was filed (November 1998).
On appeal the Court of Appeals taxed the costs to the appellee, Kellye Wair Wilson.

Broader implications: The opinion applies existing statutory and regulatory standards (Tenn. Code Ann. § 36-5-101(a) and Tenn. Comp. R. Regs. 1240-2-4-.03) and interprets "willful or voluntary unemployment or underemployment" to require an intent to reduce or terminate income to avoid obligations; it rejects an automatic rule that discharge for misconduct is per se willful underemployment. The opinion does not announce a new statutory rule but clarifies the application of the existing regulatory standard to facts involving misconduct-related termination.

Administrative and Case Details

Trial court: Circuit Court for Davidson County, No. 95D-3581, Judge Muriel Robinson. Counsel on appeal: Dana C. McLendon III for appellant Paul David Wilson; D. Scott Parsley for appellee Kellye Wair Wilson.

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KELLYE WAIR WILSON v. PAUL DAVID WILSON.

CANTRELL, P.J.

OPINION

This is an appeal from the trial court's refusal to modify Mr. Wilson's child support obligation after he was terminated from his place of employment. We reverse the trial court's judgment.

In 1996, Ms. Wilson was granted a divorce from Mr. Wilson on the grounds of inappropriate marital conduct on Mr. Wilson's part. The parties had one child. In the final decree of divorce, Ms. Wilson was granted primary custody of the child and Mr. Wilson was ordered to pay $1,135.00 in child support per month and to pay the child's insurance premiums as well as all uninsured medical and dental expenses. At the time of the divorce decree, Mr. Wilson was employed as the business manager of a car dealership and earned $121,562.65 that year.

In October of 1998, Mr. Wilson's employment was terminated after accusations that he sold extended warranties to customers and failed to tender the proceeds from those warranties to the car dealership. Mr. Wilson subsequently filed a petition requesting a termination or reduction in child support until he is able to obtain new employment.

A hearing was held in May of 1999 on the issue of reduction of child support and any arrearages due and owing to Ms. Wilson. Mr. Wilson, the only witness at the hearing, testified regarding the state of his finances since the termination of his employment in October of 1998. In January of 1999, Mr. Wilson accepted a job with another car dealership in the sales and leasing department. This job had a salary guarantee of only $4,000.00 per month. This salary guarantee effectively meant that if Mr. Wilson did not earn the entire $4,000.00 in commissions, the car dealer would loan Mr. Wilson the difference between the amount actually earned and the $4,000.00 guaranteed salary. At the time of trial, Mr. Wilson had borrowed a total of $7,200.00 from the car dealership based on this salary guarantee and had earned an additional $9,544.13 in commissions. Mr. Wilson testified that he was unable to afford to pay his current household expenses and other bills. In addition, Mr. Wilson had taken out a second mortgage on his home and was behind on the mortgage payments. He also testified that he had charged the maximum allowable amount on at least one of his credit cards and had obtained a personal loan for $15,000.00.

After hearing the proof, the trial court issued an order finding that Mr. Wilson owed child support arrearages in the amount of $8,220.00. The trial court further found that Mr. Wilson was "the maker of his own financial troubles as a result of his dishonest actions at his former place of employment" and denied Mr. Wilson's request for a termination or reduction in child support. Mr. Wilson now appeals.

We first note that our review of a child support order is de novo on the record. The trial court's findings of fact are presumed correct "unless the preponderance of the evidence is otherwise." Tenn. R. App. P. 13(d). No presumption of correctness attaches to the trial court's conclusions of law. Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn. 1995).

In a case involving the modification of a child support order, the proper standard is the "significant variance test" adopted by the General Assembly in 1994. Turner v. Turner, 919 S.W.2d 340, 342-43 (Tenn.Ct.App. 1995). The statute provides that

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 . . . 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.

Tenn. Code Ann. § 36-5-101(a) (Supp. 1999).

The child support guidelines are promulgated by the Department of Human Services and are generally based on a flat percentage of the obligor's net income. A significant variance between the amount set out in the guidelines and the current support obligation is defined as "at least 15% if the current support is one hundred dollars ($100.00) or greater per month" and "[s]uch variance would justify the modification of a child support order unless, in situations where a downward modification is sought, the obligor is willfully and voluntarily unemployed or underemployed." Tenn. Comp. R. Regs. 1240-2-4-.03(3). Where an obligor is willfully and voluntarily unemployed or underemployed, child support is calculated based on a determination of potential income as evidenced by the obligor's educational level and/or previous work experience. Tenn. Comp. R. Regs. 1240-2-4-.03(d).

In the case at bar, the evidence established that at the time of the divorce decree Mr. Wilson was earning approximately $10,130.00 per month. However, at the time of trial, Mr. Wilson was earning only $4,000.00 per month. Clearly there was a significant variance in Mr. Wilson's income.

We must next determine if, in spite of the significant variance in Mr. Wilson's income, such variance is a result of willful and voluntary unemployment or underemployment. The evidence established that Mr. Wilson's employment was terminated after accusations that he sold warranties to customers and failed to render the proceeds of those warranties to his employer. Although Mr. Wilson had not been indicted as of the time of the trial, exhibits to the appellate record establish that he later pled guilty to several counts of theft of property. Ms. Wilson contends that, because Mr. Wilson's criminal actions were willful and voluntary, he is willfully and voluntarily underemployed.

We do not think that any time an obligor parent is fired for misconduct he or she is willfully unemployed under that provision of the child support guidelines. Although there is no requirement that a parent intended to avoid their child support obligations by their actions, we do think that willful or voluntary unemployment or underemployment must result from an intent on the part of the parent to reduce or terminate his or her income. See Ralston v. Ralston, No. 01A01-9804-CV-00222, 1999 WL 562719 at ftn. 1 (Tenn. Ct. App. Aug. 3, 1999). There is nothing in the record to indicate that Mr. Wilson intended to lose his job when he committed these criminal acts, and the record establishes that he had little or no choice in taking a lower paying job after the allegations of theft were made against him. Furthermore, there is no evidence that he took a lower paying job in order to escape his child support obligation. In light of the foregoing, we find that the record does not support a finding that Mr. Wilson was willfully or voluntarily unemployed or underemployed. Consequently, the trial court's award of child support based on Mr. Wilson's potential income rather than his actual income is reversed.

At trial, Mr. Wilson testified that he was earning $4,000.00 per month in income. However, there was no specific finding of fact made by the trial court regarding Mr. Wilson's actual net income. Therefore, we remand this case to the trial court to determine Mr. Wilson's actual net income and make an award of child support based on this income rather than the income he enjoyed at the time of the divorce. The modification, if any, would relate back to the time Mr. Wilson's petition was filed in November of 1998.

The judgment of the trial court is reversed, and the cause remanded to the Circuit Court for Davidson County for any further proceedings necessary. Tax the costs on appeal to the appellee, Kellye Wair Wilson.

WILSON v. WILSON