Yates v. Yates

• Decision Date: 16 December 2003
• Docket Number: No. 03-19.,03-19.
• Citation: 2003 WY 161,81 P.3d 184
• Parties: James Gerard YATES, Appellant (Defendant), v. Jill Marie YATES, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

81 P.3d 184

2003 WY 161

James Gerard YATES, Appellant (Defendant), v. Jill Marie YATES, Appellee (Plaintiff).

No. 03-19.

Supreme Court of Wyoming.

December 16, 2003.

Representing Appellant: Mitchell E. Osborn, Cheyenne, Wyoming.

Representing Appellee: Nancy D. Freudenthal, of Davis & Cannon, Cheyenne, Wyoming.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

VOIGT, Justice.

[¶ 1] James Gerard Yates (Father) appeals the district court's determination that he owes $105,700.50 in child support arrearages. In 2001, Jill Marie Yates (Mother) filed a Motion for Production of Documents because Father had failed to provide her with financial information. Father responded with a Petition for Modification of Child Support and Determination of Child Support Arrears. As a shareholder in a Subchapter S corporation, Father reported significant amounts of pass-through income on his personal federal income tax return. His primary contention at the modification hearing was that this pass-through S corporation income should not be included as income when calculating his support and arrearages. The district court agreed with Father and calculated his child support without using his S corporation income. On appeal, Father asks for an additional reduction in his obligation. The district court used Father's gross income in calculating his arrearages. Father now contends that the district court should have used his after-tax income. Because Father failed to raise this issue before the district court, we affirm.

ISSUE

[¶ 2] Father raises only one issue on appeal:

Did the trial court abuse its discretion when it failed to consider the state of the law at the time the decree of divorce was entered in defining "gross income" to be income before taxes as it applied to the computation of the child support arrearage owed by defendant.

FACTS

[¶ 3] When the parties were divorced, in August of 1989, the legislature had recently enacted Wyo. Stat. Ann. §§ 20-6-301, et seq. (1989), setting forth the guidelines for calculating child support.¹ In its divorce decree, the district court awarded Mother custody of the parties' two children subject to Father's reasonable visitation rights, and ordered that child support be paid as follows:

Pursuant to the child support guidelines set forth in W.S. § 20-6-301 (1989 Supp.) et seq, HUSBAND be, and he hereby is, obligated to pay WIFE a contribution for the support of CHILDREN in the amount of thirty percent (30%) of his adjusted gross income, but in no event less than Three Hundred Ninety Dollars ($390.00) per month. Adjusted gross income is defined to be all of HUSBAND's gross income from any and all sources, less a living allowance for HUSBAND of Four Hundred Fifty Dollars ($450.00) per month which shall not be subject to a child support obligation[.]

[¶ 4] At the time of the divorce, Father's annual adjusted gross income, as defined by the divorce decree (his gross income minus a $450.00 monthly living allowance), was $14,636.00. For the next five years, Father met, or came close to meeting, his child support obligation. However, in 1995, his income nearly doubled, yet he did not increase his child support payments accordingly. Father was a partner in a relatively successful business venture and his income continued to increase during the next five years. In 2000, Father reported $310,084.00 of income on his personal income tax return. However, this included $167,551.00 of pass-through S corporation income that was not considered income for child support purposes. Therefore, in 2000, Father's adjusted gross income was $136,592.00, yet he paid only $6,000.00 in child support.

[¶ 5] In August of 2001, Mother filed a Motion for Production of Documents, in which she asserted that Father had failed to provide copies of his annual tax return as required by the divorce decree. She requested copies of Father's tax returns from 1989 to 2000, and asked that Father identify each and every business venture in which he had an interest. In response, Father petitioned for modification of child support and determination of arrearages. To his petition, Father attached a record of his child support payments, proffered as evidence that he had satisfied his obligation. However, after the parties exchanged financial affidavits, Father conceded that he was at least $45,000.00 in arrears.

[¶ 6] In June of 2002, the district court heard the case to determine arrearages and address the petition to modify. Father was represented by counsel and Mother appeared pro se. Both Mother and Father testified at the hearing. During Father's testimony, he offered into evidence Exhibit C, a chart outlining his child support obligation and arrearage amount from 1989 to 2002. Father described the chart as an "aid for the Court in determining [his] arrearages." The district court's ultimate determination of Father's arrearages appears to have been based on this chart, as the numbers the district court used are exactly the same as those provided by Father.

[¶ 7] The focal point of the hearing was whether the district court should include the S corporation income as part of Father's gross income when determining arrearages and future child support. The bulk of Father's testimony related to his S corporation income and his role and involvement in the business. Besides Mother and Father, the only other witness called was John Howard, Father's accountant. His testimony also focused on the S corporation issue. Mr. Howard testified generally about the nature of S corporation income and the benefits and risks of that corporate structure. Specifically, he explained that the pass-through income reported on Father's personal tax return was not available to Father, but rather was always put back into the corporation to facilitate growth and pay taxes and other debts. [¶ 8] The question of whether taxes should be included in determining Father's gross income—the issue Father raises in this appeal—did not come up at the hearing until closing arguments. Father's attorney was addressing the arrearage amount when the district court interrupted:

THE COURT: Well, it's been a while since I looked at that from earlier hearings, but isn't it at least contemplated by the prior documents that gross income meant after taxes and after social security deductions?

[FATHER'S ATTORNEY]: Your Honor, we're in a very precarious part and that's normally the approach that I know the Court takes.

THE COURT: No, I'm talking about when the decree was entered.

[FATHER'S ATTORNEY]: What happened with this decree, Your Honor, because it was entered in the time between statutes going from one formula to another is that rather than using the statutory definition of gross income, or using—I guess getting to a net income figure, this decree actually says just deduct $450 a month from your gross. We're not going to worry about what your tax is.

THE COURT: Wait. Doesn't it define or contemplate that the gross means what he gets from his employer? Because he was employed at the time. What he got from his employer, he had deducted out of it withholding and social security. So it wasn't based on the top line. It was based upon what his check showed.

[FATHER'S ATTORNEY]: Well, Your Honor, I would agree that that is a great way and probably the way the Court contemplated that to happen. That isn't the way we've prepared our Exhibit C. And I will tell you that we used the actual gross without those deductions. And if we need to go back and determine what his social security and his presumptive tax would have been during those years, I certainly can do that.

But we took gross income to mean gross income. But I think you're right. I think that at that time, gross income was being defined differently than we define gross income today.

THE COURT: Well, somehow I have the impression that in the file I reviewed some documents that would indicate that they were deducting those taxes. Maybe it was just an exhibit at trial, but I see—

[FATHER'S ATTORNEY]: And, Your Honor, I will tell you I wouldn't have even thought to go to that point to try to figure out where they were coming from. I was going from the literal terms of the decree and the statute that existed in 1989.

THE COURT: See, those documents must have been part of trial exhibits. At least that would be consistent with where I got the idea there was an Exhibit A that showed some deductions and it contemplated a child support estimate of $315. And that would have been the defendant's exhibits. So you may be right. It wasn't necessarily in the mind of the Court. I just remember that when I reviewed the file.

[FATHER'S ATTORNEY]: Well, Your Honor, I certainly, as I said, I could take that Exhibit C and to aid the Court rerun the gross income numbers and present an amended exhibit to [Mother] and to the Court. I have those orders available to me and my office can do that within a couple of hours.

THE COURT: All right. Continue with your argument. I guess it's important for me to know that Exhibit C was based upon gross without taking into consideration any taxes. I didn't realize that when it was presented to be honest with you.

Go ahead.

Father's attorney then finished her closing argument without further mention of the issue.

[¶ 9] In its decision letter and order, the district court modified the child support obligation and addressed Father's arrearages. With respect to the arrearages, the district court accepted Father's argument and did not use the pass-through S corporation income as part of its calculation. Based on the language of the divorce decree, the district court calculated Father's arrearages at thirty percent of his adjusted gross income, and entered a judgment on the arrearage in the amount of $105,700.50.

[¶ 10] Father appeals from that judgment and subsequent order.

STANDARD OF REVIEW

[¶ 11] Father challenges the district court's determination of child support arrearages. We recently stated:...