In the case titled Hill (Bowron) v. Hill, No. M2012-02699-COA-R3-CV Slip Copy, 2013 WL 5604359 (Tenn. Ct. App. Oct. 11, 2013) Knoxville family law attorneys learn how parenting plans containing provisions for children's college expenses are handled in regards to contract law, and when prejudgment interest awards are appropriate when a party has lost the use of funds.
Mother and Father divorced in 2003. In anticipation of their three children attending college, the couple's parenting plan addressed future out-of-pocket college expenses, stating that any college expenses not covered by grants, scholarships, or other funds were to be divided equally among the parties, and that both parents could participate in their children's choice of college. The parenting plan was incorporated into the parties' MDA.
When the youngest daughter chose the University of Alabama, Father claimed that he was not consulted and believed it to be too expensive. Therefore, he chose to pay only $2,500 per semester toward his half of the child's out-of-pocket college expenses. Mother filed a petition to enforce the parenting plan in Chancery Court. The Chancellor found that "the Father should not be relieved of his contractual obligation simply because the obligation proved to be more burdensome than anticipated." Mother was awarded $23,750.60 for Father's unpaid portion of the daughter's college expenses, and she was also awarded attorney fees. Father appealed.
According to Pylant v. Pylant, 174 S.W.3d 143, 151 (Tenn. Ct. App. 2003), an MDA is a contract and is treated as such on appellate review. The interpretation of a contract is a question of law with no presumption of correctness of the trial court's interpretation when on appeal. Id. at 150. However, the trial court's factual findings are reviewed de novo with a presumption of correctness unless the record indicates otherwise. Id. at 151; Tenn. R. App. P. 13(d).
Penland v. Penland, 521 S.W.2d 222,224-25 (Tenn. 1975) set a precedent that a parental agreement providing for a child's college expenses after the age of majority is a valid contractual obligation. According to Pylant, "where the parties have unambiguously set out the terms of their agreement, courts will enforce those terms as written, regardless of any inequity arising from that enforcement."
Although the trial court found the words "jointly participate" in the parenting plan to be ambiguous, the appellate court did not agree, finding that according to Pitt v. Tyree Org., Ltd., 90 S.W.3d 244, 252 (Tenn. Ct. App. 2002), the words in a contract should be read with their natural meaning. The appellate court interpreted the meaning of "jointly participate" to mean that Mother and Father would jointly take part in their children's college choice process. Further, it found that the phrase did not grant veto power to either parent regarding the choice of the children's college.
Father argued that the phrase "jointly participate" gave him and Mother joint decision making in regards to their children's choice of college to find one that was within his or her budget and met the child's college interests. The appellate court found the phrase did not mandate joint decision making. Instead, it simply allowed each parent to be involved in the process of choosing a college if he or she chose to do so. It did not mandate that participation, nor did it grant veto power to either parent.
Father further argued that he was not consulted on his youngest child's choice of the University of Alabama. However, when reviewing the record the appellate court found that Father testified that he and his daughter had discussed the college, and Father never investigated the cost of the school until his daughter had made her decision.
Apparently, when Mother's and Father's first child was deciding on a college, both parents refused to pay for an online class at ITT. Father averred that this denial was evidence of Mother's and Father's intention regarding the "jointly participate" language in their parenting plan. The appellate court did not agree with him. It averred that the denial of payment for ITT course was both parent's decision acting in accord for the child's best interest and not one parent's unilateral decision to not pay their half. Therefore, the appellate court found this argument not to support Father's position. Father also maintained that Mother refused to pay for their oldest child to live near MTSU while taking classes there. The appellate court found that the "jointly participate" language only dealt with the choice of a college, not with mitigating expenses once a college was already chosen.
Tennessee courts have read an implied condition of reasonableness into agreements to pay for children's college. To determine this reasonableness, the courts must determine if the college meets the child's needs, and the parent's ability to pay for same. Father admitted in his brief to the court that he believed the University of Alabama was a good fit for his daughter. Therefore, the court determined that portion of the reasonableness standard was met.
However, Father questioned the reasonableness of the cost of the University of Alabama when compared to his income of $96,000 per year. Father calculated that to pay half of the college expenses would constitute 32% of his take home income. However, per the record, Father testified that he had $150,000 in equity in his home, and he had the ability to borrow money via a second mortgage or student loan to pay the college expenses. The court explained to determine a parent's ability to pay in regards to college expenses the court must look at available assets, income, and expenses. It was found that due to Father's ability to get a loan, he had the ability to pay one-half of the child's college expenses.
Finally, Mother requested the appellate court to reverse the trial court's denial of her request of prejudgment interest. According to Scholz v. S.B. Int'l, Inc., 40 S.W.3d 78, 81 (Tenn. Ct. App. 2000), an award of this type of interest is discretionary. The intent of prejudgment interest is "to fully compensate a plaintiff for the loss of the use of funds to which he or she was legally entitled, not to penalize a defendant for wrongdoing." Myint v. Allstate Ins., 970 S.W.2d 920, 927 (Tenn. 1988).
The trial court based its denial of the prejudgment interest on the fact that the dispute was made on reasonable grounds and such an award would be inequitable. The appellate court reasoned that Mother had to make up Father's portion of the college expenses since he was only paying $2,500 per semester. Because Mother lost the use of her funds and was never compensated for same, the appellate court reversed the trial court's ruling on the matter and remanded it back to the trial court to calculate and award Mother prejudgment interest. Costs of the appeal were taxed to Father.
The appellate court found that Father must incur half of the out-of-pocket expenses for his daughter's college expenses due to the language in the parenting plan. Mother was awarded prejudgment interest for the loss of funds for the portion of expenses she had to pay to make up Father's difference of these expenses. Mother was awarded her attorney's fees for the appeal.