Sarver v. Dathe

• Decision Date: 30 August 1988
• Docket Number: No. 16059,16059
• Citation: 439 N.W.2d 548
• Parties: Constance Rae SARVER, formerly Constance Rae Dathe, Plaintiff and Appellant, v. Norman Lee DATHE, Defendant and Appellee. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 548

439 N.W.2d 548

Constance Rae SARVER, formerly Constance Rae Dathe Plaintiff and Appellant, v. Norman Lee DATHE, Defendant and Appellee.

No. 16059.

Supreme Court of South Dakota.

Considered on Briefs Aug. 30, 1988.

Decided April 19, 1989.

Linda Lea M. Viken of Finch, Viken, Viken & Pechota, Rapid City, for plaintiff and appellant.

Bryce A. Flint of Jackley & Flint, Sturgis, for defendant and appellee.

HENDERSON, Justice.

ACTION/ISSUES

Plaintiff Constance R. Sarver (Sarver) appeals a decision of the Meade County Circuit Court by which her former husband, Norman L. Dathe (Dathe), was awarded a reduction in child support and a federal income tax exemption for their minor son. Sarver alleges circuit court error in four respects:

(1) The circuit court lacked authority to reduce child support in the circumstances of this case;

(2) The circuit court lacked authority to give Dathe the federal income tax exemption;

(3) Sarver was entitled to an award of child support arrearages; and

(4) The circuit court abused its discretion in not awarding attorney's fees to Sarver.

We reject Sarver's first argument on theoretical grounds, but grant her the remedy she seeks by reversing the trial court on Issues 2, 3, and 4. The first two issues are interrelated if not interlocking.

PROCEDURAL HISTORY

Plaintiff Constance R. Sarver (Sarver) and Defendant Norman Dathe (Dathe) were divorced pursuant to a Judgment and Decree of Divorce, entered by the circuit court for Meade County in February 1979. Under that decree, Dathe was to pay $225 per month in child support for the couple's minor child, Todd. Dathe consistently met his obligations. In July 1986, Sarver filed a Petition for Modification of Child Support with the Department of Social Services (DSS), as provided by SDCL 25-7-7. After an administrative hearing held on July 29, 1986, Dathe's child support payments were increased to $361 per month. Sarver requested rehearing by DSS seeking a further increase on the grounds that DSS had not considered all of Dathe's income. DSS granted this request and scheduled a new hearing for October 29, 1986.

In the meantime, on October 6, 1986, Dathe, who had not participated in the July hearing, because of lack of notice, ¹ filed a motion to show cause in the Meade County Circuit Court seeking, among other things, to set aside the DSS order and have a federal income tax exemption for his son awarded to him. DSS delayed further action, awaiting the outcome of the circuit court's consideration of Dathe's motion. At a hearing on November 3, 1986, the circuit court remanded the matter of child support to DSS, and deferred consideration of other issues until such time as the case came back before it following an administrative hearing.

A second administrative hearing was held on February 2, 1987, after which an order was entered directing Dathe to pay $435.58 per month in child support. The DSS Hearing Examiner based this order on its determination that Dathe's net income was $23,759.05.

Dathe took no action to appeal this order, but filed a Motion for Rehearing with the Meade County Circuit Court on April 22, 1987, asking consideration of, inter alia, the matter of the federal tax exemption. Dathe also alleged that a change in circumstances had arisen since the February 1987 DSS hearing in that Dathe had been advised, by his tax preparer, of a loss incurred on his rental properties (the record indicates that this loss was briefly discussed in the administrative hearing, but Dathe did not have his 1986 tax return completed at that time).

After a June 15, 1987 hearing, the circuit court reduced Dathe's child support to $361 per month, based upon its determination that Dathe's monthly income had been reduced from $1,979, in February 1987, to $1,551, a change in circumstances sufficient to warrant the reduction, according to the circuit court. Dathe was not required to pay any alleged arrearages in child support and was awarded the federal income tax exemption. On November 3, 1987, a hearing was held in the circuit court regarding a motion for rehearing filed by Sarver, which resulted in the order, nunc pro tunc October 21, 1987, rejecting Sarver's claims, from which Sarver now appeals.

DECISION

No change in circumstances

Circuit court had authority to reduce child support but not

under these circumstances

Sarver argues that the circuit court lacked authority to reduce Dathe's child support because (a) Dathe did not appeal the DSS decision, and (b) there was no change of circumstances or conditions after the DSS hearing.

Dathe's position is that the circuit court properly exercised its statutory authority under SDCL 25-4-45, which he urges must be read in conjunction with SDCL 25-7A-11. SDCL 25-4-45 reads:

In an action for divorce the court may, before or after judgment, give such direction for the custody, care, and education of the children of the marriage as may seem necessary or proper, and may at any time vacate or modify the same.

SDCL 25-7A-11 provides:

An administrative decision or order establishing liability and periodic payments for support is superseded by entry of a subsequent circuit court order establishing support to the extent the circuit court order is inconsistent with the administrative decision or order.

The initial child support level of $225 per month was set by the circuit court in its 1979 decree of divorce and an associated "Property Settlement, Support and Custody Agreement" between the parties. It is settled law that SDCL 25-4-45, cited by Dathe, grants the trial court "continuing jurisdiction in a divorce action to modify the judgment concerning the support and maintenance of the children." Hoy v. Hoy, 391 N.W.2d 685, 689 (S.D.1986). See also Blare v. Blare, 302 N.W.2d 787, 791 (S.D.1981); Larsgaard v. Larsgaard, 298 N.W.2d 381, 383 (S.D.1980) (modification of support agreements can be ordered even if the original judgment was based on a stipulation between the parties). ² DSS is an agency within the meaning of the Administrative Procedures Act (SDCL ch. 1-26). See Parsons v. South Dakota Dep't of Social Services, 314 N.W.2d 863, 864 (S.D.1982). SDCL 1-26-30.2 authorizes appeal in the circuit court from a final decision, ruling, or action of an agency by any party in a contested case. SDCL 1-26-30.3 provides: "Notwithstanding any other provision of law, all appeals authorized by Sec. 1-26-30.1 or Sec. 1-26-30.2 shall be taken and conducted pursuant to the provisions of this chapter." Notice of appeal must be served on the adverse party and agency within 30 days, "or if a rehearing is authorized by law and is requested, within 30 days after notice has been served of the decision thereon." SDCL 1-26-31. No notice of appeal was ever filed or served by Dathe. This Court has held, regarding proceedings revoking a driver's license, that failure to follow statutory guidelines regarding petitions or notices of appeal in reference to SDCL 1-26-31 deprives a circuit court and, in turn, the Supreme Court, of jurisdiction. Kulesa v. Department of Public Safety, 278 N.W.2d 637, 638 (S.D.1979). Dathe's motion, however, requested consideration of the child support matter on the basis of a change in circumstances arising after the second DSS hearing in February 1987. This, if true, would bring the matter within the circuit court's jurisdiction under SDCL 25-4-45. See State v. Dryden, 409 N.W.2d 648, 651 (S.D.1987). The circuit court, in its findings of fact, specifically determined that the action before it was not an appeal of an administrative order.

The "material change in circumstances" Dathe referred to was a loss associated with his rental business suffered in 1986, and projected into 1987. The information provided to the circuit court as justification for the change in circumstances was based on data in Dathe's 1986 federal income tax returns, which he did not complete prior to the hearing in February 1987. Documentation was not provided to the hearing examiner, although Dathe was granted extra time to do so. Although Dathe claimed a change in circumstances after the February 1987 hearing, the events upon which the alleged change was based occurred in 1986. Thus, there was no change in circumstances after the DSS hearing to justify the circuit court's taking jurisdiction under SDCL 25-4-45, until one considers the status of the federal income tax exemption which was being claimed by both parties.

Circuit court erred in awarding federal income tax exemption

to appellee

The circuit court was faced with the issue of the federal income tax exemption for the parties' child in October 1986, on Dathe's motion to show cause. The circuit court deferred ruling on the income tax exemptions, but referred the case to DSS for determination of child support. This was error, as allocation of this tax exemption affects the financial situation of the parties and constitutes a factor in considering ability to pay child support. These are absolutely interlocking considerations. See Baird v. Baird, 760 S.W.2d 571, 573 (Mo.App.1988); Lorenz v. Lorenz, 166 Mich.App. 58, 62-64, 419 N.W.2d 770, 772 (1988). The tax exemption question should have been decided at the same time as the child support issue. As DSS is not given statutory authority to allocate federal tax exemptions, the second DSS child support determination was based on a faulty legal premise. In these circumstances, the trial court was inherently mandated to take jurisdiction of this case to decide the tax exemption issue which it had reserved to itself before the second DSS hearing.

Dathe was awarded a federal income tax exemption by the trial court for Todd, the parties' minor son residing with Sarver, although 26 U.S.C. Sec. 152(e) provides that, for tax years beginning after December 31, 1984, the custodial parent is to receive the exemption, subject to three exceptions. Two of the three exceptions require written declarations that the custodial...