Phillips v. Hedges, 100,302.

• Decision Date: 01 November 2005
• Docket Number: No. 100,302.,100,302.
• Citation: 2005 OK 77,124 P.3d 227
• Parties: Charles A. PHILLIPS, personal representative of the Estate of Joan F. Phillips, formerly Joan F. Hedges, deceased. Plaintiff/Appellant, v. Edward Lane HEDGES, Defendant/Appellee.
• Court: Oklahoma Supreme Court

124 P.3d 227

2005 OK 77

Charles A. PHILLIPS, personal representative of the Estate of Joan F. Phillips, formerly Joan F. Hedges, deceased. Plaintiff/Appellant, v. Edward Lane HEDGES, Defendant/Appellee.

No. 100,302.

Supreme Court of Oklahoma.

November 1, 2005.

COPYRIGHT MATERIAL OMITTED

On Certiorari to the Court of Civil Appeals Division IV.

¶ 0 Mother filed a motion in the district court to determine the amount of collectable arrearage for unpaid child support. The father stipulated to the amount of unpaid child support he owed but disagreed about the method of determining interest. Mother argued that the interest should have been compounded based on 12 O.S.2001, § 727(C). Father argued that the district court correctly used simple interest to compute the interest owed. The district court set a payment schedule and ordered that the interest not be compounded. In her motion for a new trial, Mother not only complained about the method of computing the interest but also about the payment schedule. The Court of Civil Appeals reversed the district court. This Court previously granted certiorari.

COURT OF CIVIL APPEALS' OPINION VACATED; TRIAL COURT'S ORDER AFFIRMED; MOTION FOR APPEAL-RELATED ATTORNEY FEES DENIED.

Barry K. Roberts, Norman, OK, and James M. Levine, Oklahoma City, OK, for the appellant.

Scott A. Hester and Jon L. Hester, Hester Schem Hester & Batson, Oklahoma City, OK, for the appellee.

TAYLOR, J.

¶ 1 The issues before this Court are: (1) Whether title 12, subsection 727(C),¹ a general statute providing for yearly compound interest on judgments, applies to delinquent child support payments; (2) Whether the trial court erred by failing to calculate the amount of accrued interest owed on delinquent child support payments at the time it entered the order; (3) Whether the district court erred in the schedule it established for paying delinquent child support payments; and (4) Whether the appellant is entitled to appeal-related attorney fees.

¶ 2 The plaintiff, Joan F. Phillips (Mother),² appealed the district court's order setting the schedule for delinquent child support payments and providing the arrearage should draw simple interest rather than compound interest. The Court of Civil Appeals found that the interest on the arrearage should have been compounded and that the district court erred in the payment schedule. The Court of Civil Appeals also found that the trial court's order should have included the amount of interest which had accrued at the time the order was entered. The defendant, Edward Lane Hedges (Father), filed a petition for certiorari, which this Court granted.

I. FACTS

¶ 3 When Mother and Father were divorced in 1988, they had three minor children. The divorce decree provided for Father to pay monthly child support of $648.00. The oldest child reached majority in 1991, the second in 1995, and the third in 1997.

¶ 4 Father did not make the payments as provided in the decree. Mother filed for contempt against Father for his failure to pay child support. The trial court recast the proceeding as one for satisfaction of past-due and unpaid child support obligation and denied Mother relief based on the defenses of laches and waiver. See Hedges v. Hedges, 2002 OK 92, ¶ 3, 66 P.3d 364, 367 (Hedges I). Mother appealed, and this Court retained that appeal for disposition. Id. ¶ 4, 66 P.3d at 367. In Hedges I, this Court found that the trial court erred in allowing the laches defense and remanded the matter to the trial court for further examination of the waiver issue. Id. ¶ 27, 66 P.3d at 374.

¶ 5 On remand, Mother filed a motion to determine the amount of collectable child support arrearage. She attached an exhibit in which she calculated the interest through December 4, 2002 at $26,859.19 and the total amount owed at $84,290.97. Using subtraction, we determine $57,431.78 of the total to be for actual unpaid child support payments. She compounded the interest monthly and added an extra $648.00 of principal when calculating the interest due for the month. Father stipulated he owed $42,257.00 in unpaid child support but objected to the interest being compounded.

¶ 6 After a hearing, the trial court awarded Mother $42,257.00 for unpaid child support, ordered interest to accrue at ten percent per year pursuant to title 43, section 114, and ordered the interest not be compounded. Also the trial court found the parties had stipulated Father could not pay the arrearage within the statutory thirty-six months, see 43 O.S.2001, § 137(C), and ordered Father to pay $400.00 a month for the first twelve months and then to pay $600.00 per month until the amount owed is paid. As the Court of Civil Appeals noted, the order does not include the actual amount of interest accrued at the time it was entered.

¶ 7 Mother filed a motion to modify and for a new trial. She asked that Father be required to obtain a life insurance policy for the amount owed and with her as the beneficiary. Also, she renewed her request for compounding the interest on the child support arrearage. Mother contended the payment schedule results in a sixteen year payoff period and asked for a shorter payment period. She attached a payment schedule which shows a payoff period of over fifteen years. On its face, we find it is inaccurate. For example, she computes the interest on the principal amount of $78,949.05, but it should be computed on $42,257.00. Further, she admits the amounts do not include reductions in balance during the year and accrual of additional interest. The trial court denied Mother's request to modify the payments and to compound the interest. It also declined to require Father to obtain a life insurance policy with her as the beneficiary, providing the Father maintained his employment-related, group insurance policy with a face value of $50,000.00 and with his children as the beneficiary. The record on appeal does not contain any transcripts for our review.

II. STANDARD OF REVIEW

¶ 8 The first issue of whether interest should be compounded and the second issue of whether the order must state the amount of accrued interest are questions of law and are reviewed de novo. Conoco Inc. v. Agrico Chemical Co., 2004 OK 83, ¶ 9, 115 P.3d 829, 833. The third issue of whether the trial court erred in the child support payment schedule is of equitable cognizance. Merritt v. Merritt, 2003 OK 68, ¶ 7, 73 P.3d 878, 881-82. In matters of equitable cognizance, the trial court's decision will not be disturbed unless the trial court's findings were against the weight of the evidence or it otherwise abused its discretion. Id.

III. INTEREST ON CHILD SUPPORT ARREARAGE

¶ 9 Mother argues that title 12, subsection 727(C) of the Oklahoma Statutes, providing for compound interest on certain judgments, applies to delinquent child support payments. She reasons that a delinquent child support payment is transformed into a judgment by operation of law, see 43 O.S.2001, § 137(A), and should draw compound interest pursuant to title 12, subsection 727(C). Father argues title 12, subsection 727(C) conflicts with title 43, section 114 of the 2001 Oklahoma Statutes. He reasons because title 43, section 114 is a specific statute which provides for simple interest on delinquent child support payments, it controls over title 12, section 727(C), a general statute. We agree with Father.

¶ 10 Title 43, section 114 provides: "Court-ordered child support payments and court-ordered payments of suit moneys shall draw interest at the rate of ten percent (10%) per year from the date they become delinquent." (Emphasis added.) We construed similar language in Lee v. Volkswagen of America, Inc., 1987 OK 80, ¶¶ 6-8, 743 P.2d 1067, 1069. The 1971 version of title 12, section 727 provided: "All judgments of courts of record shall bear interest, at the rate of ten percent (10%) per annum, from the date of rendition...." We determined that nothing in this language implied a legislative intent that interest be compounded. Id. ¶ 7, 743 P.2d at 1069. Similarly, we find nothing in title 43, section 114's language which would imply a legislative intent that interest be compounded, rather the intent is for delinquent child support payments to draw simple interest, whether or not memorialized in a court order.

¶ 11 Title 12, subsection 727(A)(1) provides: "Except as otherwise provided by this section, all judgments of courts of record ... shall bear interest at a rate prescribed pursuant to this section." Subsection 727(C) provides for the accrued postjudgment interest, together with the judgment, to draw interest at a variable rate.

¶ 12 A conflict results between title 43, section 114, applying ten percent simple interest specifically to delinquent child support payments and title 12, subsection 727(C), providing for annual compounding of interest at a variable rate. When there is a conflict between two statutes, one specific and one general, the statute enacted for the purpose of dealing with the subject matter controls over the general statute. King v. King, 2005 OK 4, ¶ 22, 107 P.3d 570, 579. Because title 43, section 114 specifically deals with interest on delinquent child support payments, it controls in the present case. The trial court correctly determined interest on the $42,257.00 in unpaid child support should accrue at ten percent per year and should not be compounded.

IV. FAILURE TO CALCULATE PREJUDGMENT INTEREST

¶ 13 The Court of Civil Appeals found error in the trial court's failure to calculate prejudgment interest. Because prejudgment interest is an item of damages and an integral part of the total adjudged liability, the amount of prejudgment interest must be included in a judgment. May-Li Barki, M.D., Inc. v. Liberty Bank & Trust, Co., 1999 OK 87, supp. opinion ¶ 4, 20 P.3d 135, 142-43. Postjudgment interest is "a continuing obligation that runs at the statutory rate from the date of judgment until paid," and, unlike prejudgment interest,...