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Parenting Plan Provision Requiring Payment of College Tuition Upheld in Tennessee Appeal

October 21, 2013 by The McKellar Law Firm, PLLC

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.

Facts

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.

Analysis

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.

Conclusion

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.



Marital Dissolution Agreements Change From Contracts to Court Orders Upon Finalization of Divorce in Tennessee

The case of Beck v. Beck, No. W2011-01806-COA-R3-CV, (Tenn. Ct. App. May 11, 2012) outlines for Tennessee family law attorneys exactly why parties must return to court before modifying or even enforcing their divorce decrees and judgments.
The parties had entered into a Marital Dissolution Agreement "MDA" that required them to exchange tax returns each year. If they failed to do so, the MDA provided that the alimony obligation would be suspended until adequate documents were provided. When Wife provided tax returns with redacted info, Husband unilaterally suspended his alimony payments without first returning to court.

Holding: Because the MDA, a contract, was incorporated into the parties' Final Decree (a court order), the Husband did not have the authority to suspend his payments and should have gotten court approval before doing so.

Although Husband filed a Motion to Clarify, and obtained a court order stating that redacted tax returns were not appropriate, no court order was issued allowing suspension of payments. Wife filed a Motion to Set Aside this order under Tennessee Rules of Civil Procedure 60.02 alleging she had not been properly served and did not attend that hearing. The trial court found she had not been properly served and that Husband did not attempt to have a second summons issued nor send a copy via certified mail. He simply sent notice to her last-known address via regular mail, which was not sufficient in this case.

Although MDAs are viewed as contracts when a court must interpret the terms, they lose their contractual nature when incorporated into a court order. The decision as to whether the suspension of payments was appropriate fell to the trial court. Therefore, the Husband was charged with an arrearage of alimony payments throughout this time frame. Even had the trial court found Wife in contempt for not providing the correct documents, that does not allow suspension to follow without court authority.


Wife Allowed to Clarify Final Decree 12 Years After Divorce

Richmond v. Richmond, No E2011-01687-COA-R3-CV (Tenn. Ct. App. May 7, 2012), shows Tennessee Divorce Attorneys that although a Wife waited 12 years after her divorce to clarify her final decree, the elapsed time did not serve as a bar to her claim nor waive her right to her Husband's retirement.

In 1999, Husband and Wife divorced and Wife was awarded 50 percent of Husband's retirement from U.S. AIR Force through the date of divorce. In 2010, Husband retired from military with 28 years of service. In 2011, Wife filed motion to clarify the Final Decree which did not include sufficient language to allow direct payment of Husband's retirement to the Wife. Wife also sought award of any lapsed payments she would be entitled to while not receiving direct pay. In 2011, the trial court entered a Military Retired Pay Division Order ("MRPDO") which awarded Wife 42.5% of Husband disposable military pay. The trial court also determined that Husband owed Wife her share of his Federal military retirement which accrued between August 2010 and June 2011 and ordered Husband to pay $200.00 a month until the total due was paid, an amount of approximately $3,000.00. Husband appealed.

Husband raised two issues on appeal: (1) whether Wife's failure to file the necessary paperwork until 12 years later after the final divorce entitles Husband to the protection of the unclean hands doctrine; and (2) whether Wife waived her right to receive the past payments of her share of Husband's retirement by waiting 12 years to complete the necessary paperwork to secure such payments.

The doctrine of unclean hands, provides the court a reason to refuse to grant relief to parties who have willfully engaged in unconscionable, inequitable, immoral, or illegal acts with regards to the subject matter of their claims under a preponderance of evidence standard. The trial court here found Wife had not acted in such a manner. Wife's failure to complete the paperwork, the essence of Husband's argument, did not meet standard for unclean hands doctrine. The Court of Appeals ruled this issue was without merit.

Husband next argued Wife waived her rights by waiting 12 years to complete the necessary paperwork. A waiver is a voluntary relinquishment of a party of a known right and can be waived expressly or by acts or conduct which shows intent not to claim said advantage. Husband argues Wife knew of right and neglected and failed to act to claim retirement. The Court of Appeals disagreed, stating Wife attempted to claim her portion to payment once Husband retired in 2010 and was unable to do so with Final Order and MDA as written. Wife also attempted to get Husband to sign papers to facilitate her receipt of her portion but Husband refused to sign. Wife then sought an order from the court allowing her to claim her portion of Husband's retirement. Wife's twelve year wait did not constitute a waiver to the claim because Husband had not retired nor was there an express declaration of Wife to waive her right to the payment. Wife was not eligible to receive her portion of Husband's retirement until 2010. Therefore, the judgment of the trial court is affirmed on both issues.


When to Use Civil Versus Criminal Contempt

April 27, 2012 by The McKellar Law Firm, PLLC

In Jarrell v. Jarrell, No. W2011-00578-COA-R3-CV (Tenn. App. Ct., March 28, 2012), the Tennessee Court of Appeals ("CoA") reversed the decision holding the Mother in civil contempt and awarding attorney's fees. Also, the CoA reversed the dismissal of the criminal contempt charge against Mother. This case highlights for Tennessee divorce attorneys how to utilize civil versus criminal contempt.

The parties married in 2003 and had two children. In 2009, Mother filed for divorce and in 2010 a Final Decree, Marital Dissolution Agreement and PPP (Permanent Parenting Plan) were entered. In the PPP, the major decisions concerning religious upbringing were to be made jointly and if a disagreement arose, the parties agreed to have the dispute settled by a mediator. Father and Mother attended a Methodist church and Mother felt the children should be baptized at an early age while Father did not. Following the divorce, Mother began attending a new church which required infant baptism. In 2010, Mother had the children baptized without Father's knowledge or consent. Father filed a Petition for Contempt and the trial court held the Mother in civil contempt but dismissed the criminal contempt charge. The trial court further awarded attorney's fees to Father.

Father argued on appeal that the trial court erred in dismissing the criminal contempt petition against Mother. Mother argued that the trial court erred in finding her in civil contempt and in awarding attorney's fees to Father.
Mother argued the trial court lacked authority to hold her in civil contempt because her actions did not substantially harm the children. The CoA dismissed this argument and stated the trial court was only asked to determine whether Mother's conduct violated the terms of the PPP.

T.C.A. §29-9-102(3) authorizes a court to exercise its contempt powers for willful disobedience of a court order and it may be civil or criminal. Criminal contempt is intended to punish the wrongdoer and the contempt cannot be purged by compliance with the court order. Civil contempt is used when a person fails to comply with a court order and is designed to bring the party into compliance. Mother, on appeal, claims the trial court's finding of civil contempt against her is erroneous because her single act cannot be cured and the PPP did not specifically forbid her action. The CoA disagreed that the PPP was ambiguous charge but found the trial court was attempting to punish her for her actions rather than compel her compliance. Therefore, the CoA found the trial court's civil contempt holding in error and reversed (also reversing the award of attorney's fees).

Regarding the dismissal of the criminal contempt charges, the guidelines for contempt proceedings must comply with Tenn. R. Crim. P. 42(b). A defendant must be given notice that they are charged with criminal contempt, notice of time and place of hearing, notice of essential facts, and allowed a reasonable time to prepare. Father's petition to the Mother and its accompanying fiat meets the criteria laid out Tenn. R. Crim. P. 42(b). The CoA found that the trial court erred and should not have dismissed the criminal contempt petition for lack of notice and remanded the case so the trial court may hear the petition.


Jurisdiction is Lost When Parties Relocate

March 29, 2012 by The McKellar Law Firm, PLLC

The Tennessee Court of Appeals has defined for Tennessee divorce attorneys when a trial court has jurisdiction to modify child support under the Uniform Interstate Family Support Act (UIFSA) when neither the parents nor the children still reside in Tennessee.

In Earls v. Mendoza, No. W2010-01878-COA-R3-CV, the parties filed for divorce in Jackson, TN. They had two children together. During the divorce proceedings, the father accepted a promotion in Buffalo, NY. He, the mother, and the two children all moved there. Once the divorce was finalized in Jackson, the mother accepted a job offer in Denver, CO. The mother subsequently filed a motion with the Jackson trial court to relocate with the children to Denver. She also filed contempt against the father for not paying child support. The trial court granted the mother's motion to relocate with the children to Denver and also found the father to be in contempt. The trial court then modified the father's child support obligation.

The Tennessee Court of Appeals reversed the trial court's decision, finding that the trial court lacked jurisdiction due to none of the parties living in Tennessee at the time the motions were made. While this issue was not raised by either party, Tennessee appellate courts are able to decide jurisdictional issues on their own under Tenn. R. App. P. 13(b).

Regarding whether the court had jurisdiction to modify the father's child support obligation, the court looked to UIFSA (T.C.A. § 36-5-2201 et seq.). This Act governs interstate jurisdiction questions involving child support. Under T.C.A. § 36-5-2101, in order for a Tennessee trial court to have jurisdiction, the parties and the children have to live in Tennessee for at least six consecutive months immediately preceding the time of filing a petition. A trial court can also only have continuing, exclusive jurisdiction under certain situations. According to T.C.A. § 36-5-2205, a Tennessee Court has continuing, exclusive jurisdiction over a child support order: "(1)As long as this state remains the residence of the obligor, the individual obligee, or the child for whose benefit the support order is issued; or (2) Until all of the parties who are individuals have filed written consents with the tribunal of this state for a tribunal of another state to modify the order and assume continuing, exclusive jurisdiction." Looking to courts of other states as well as previous appellate cases in Tennessee, the court noted that "virtually all have concluded that, once the parents and their minor children have left the issuing state, that state no longer has jurisdiction to modify its order."

Even though the mother argued that the parties consented to have the Tennessee trial court hear their case, the Appellate Court disagreed. No indication existed in the record showing that the parties "consent[ed] in a record or open court" to the Tennessee trial court below exercising jurisdiction to modify its order. In essence, silent acquiescence is not enough to show consent.



Parties Agreement on Insurance Coverage Deemed Terminable

October 12, 2011 by The McKellar Law Firm, PLLC

In the case of Davis v. Davis, No. E2010-00958-COA-R3-CV (Tenn. Ct. App. Aug. 30, 2011), the Wife appealed the trial court's classification of Husband's agreement to carry Wife's insurance as alimony in futuro. The original agreement was as follows: Wife was given a paid position on the board of Husband's company, CBM, which allowed her to be on the company's health insurance plan. Wife was then to reimburse CBM for all costs they incurred from her coverage. Husband eventually sold CBM to his son, who continued Wife's position and coverage. Then in 2005, CBM ended its group coverage for all employees and ceased paying Wife as a board member. Wife sued CBM and Husband. The Chancery Court for McMinn County held that the CBM payments were alimony in futuro, deemed Husband liable for CBM's lack of coverage and required him to cover Wife going forward. Husband appealed.

Interestingly, both parties disagreed with the trial court's classification of the insurance provision as alimony. Wife argued the payments could not be modified (and therefore cannot be alimony in futuro, which is modifiable) and did not cease upon death or remarriage. Husband argued that the agreement was a good-faith compromise allowing Wife to obtain insurance in return for her services as a board member.

The Court of Appeals noted that the original agreement stated that neither party would owe the other any spousal support. Also, the trial court, under T.C.A. §36-5-121(k) may require either party to pay health insurance costs for any appropriate length of time. However, this was an agreement of the parties, which the Appeals Court stated was terminable by Wife at any time or by Husband upon the extinguishing of his interest in the company, which he retained the right to do. Accordingly, the Appeals Court agreed with Husband that this was a good faith concession to allow Wife to easily obtain coverage, and therefore is properly classified as property division. Therefore, when Husband sold his interest in CBM, his obligation to carry Wife's insurance ended and Husband should not be held liable for prior unmade payments or future payments related to Wife's health insurance. The Court also ruled that the Wife could not recover payments from CBM either, because this was not an employment contract but an agreement between Husband and Wife. The Court further stated that neither the Husband nor CBM would be tasked with providing coverage for Wife indefinitely. The option for Wife to be covered by insurance in this manner was just that - an option, which the parties' agreement allowed to terminate at any time. Therefore the decision of the trial court was reversed and costs taxed to the Wife.


Recovering Attorney's Fees in Domestic Relations Contempt Actions in Tennessee

August 10, 2011 by The McKellar Law Firm, PLLC

When a couple with children divorce, typically the most important consideration is how to provide for and support their children. The responsibilities of each parent for child support are included in the all Tennessee divorce agreements. This agreement is essentially a contract between the parties that becomes a court order when signed by a judge. Because a divorce agreement becomes a court order, if one of the parents fails to perform all of their obligations for child support, the court may hold that parent in contempt.

Contempt is simply a means for a court to coerce a party to comply with an order by imposing penalties on the non-performing party. The court may impose fines or even imprisonment on the party that willfully fails to comply with the order. The non-performing party can purge himself or herself of the contempt by following the order.

In Brumit v. Brumit, No. E2010-01999-COA-R3-CV, the Tennessee Court of Appeals had to decide which parent should be responsible for the attorney's fees incurred in enforcing a child support order through contempt proceedings. In this case, the Father was ordered to pay Mother $1,500 per month in child support following their divorce. From that amount, Mother was ordered to put $300 in an educational trust account for the benefit of their child. In 2008, Father filed a Motion for Contempt, alleging that he had fulfilled all his obligations to pay child support, but Mother was $6,600 behind in payments into the trust account. Mother brought all the payments up-to-date prior to the hearing on the contempt. The trial court found Mother in contempt for failing to obey the court order, and ordered that Mother pay half of Father's attorney's costs. Father appealed, arguing Mother is obligated to pay all his attorney's fees.
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The Court of Appeals noted that even though Mother fully repaid the amount she owed to the trust account before the contempt citation was entered, Father could still be entitled to additional relief. The appeals court affirmed the trial court's finding of contempt against Mother since Father had to initiate contempt proceedings before she fully paid into the account. Additionally, the appeals court noted the Marital Dissolution Agreement itself stated that if one of the parties had to institute a legal action to force the other party to fully perform, "the party commencing such action shall be entitled not only to performance, but the costs of the proceeding, reasonable interest on all sums recovered, and reasonable attorneys' fees."

The Court of Appeals found that because of this provision, there was no doubt that Father was entitled to an award of attorney's fees. Yet the appeals court also affirmed the trial court's decision to order Mother to pay only half the fees Father incurred because "determining the reasonableness of the amount of an attorney's fee is a discretionary inquiry by the trial court . . . to which appellate courts will defer, absent an abuse of discretion." Therefore, even though the parties agreed that attorney's fees would have to be paid by the party breaching the Marital Dissolution Agreement, the Agreement did not specify what was "reasonable." This case illustrates the importance of being specific when drafting a Marital Dissolution Agreement (or any contract). If the parties intended for attorney's fees to be paid in full by the parent who failed to fulfill his or her obligations under the Agreement, they should have written it exactly that way. As it was, that decision was left to the trial court which may exercise considerable discretion in determining what is "reasonable."


Post-Divorce Interest Can Be Tricky in Tennessee

In a recent Court of Appeals case entitled Moss v. Moss, 2011 WL 1459170
(Tenn.Ct.App., Apr. 15, 2011), post-judgment interest in a Tennessee divorce is explored.

The divorce finalized at end of 2008 and Husband was awarded marital residence and farm worth $580,000 plus equipment worth $200,000. Wife was awarded a chalet in Gatlinburg and a cash award of $250,000 to be paid upon Husband's receipt of his expected inheritance, to be paid within 30 days of the estate closing. If this did not happen within 12 months, Wife was given the option to petition the Court for relief, which she did, asking for immediate payment. The trial court denied her request and denied awarding her interest but ordered Husband to pay $417.00 per month until the estate closed, credited toward the $250,000. Wife appealed.

The Court of Appeals held that by denying the Wife any benefit of the martial estate along with denying post-judgment interest was not fair to the Wife, because of her financial circumstances and the Husband's farm produced income for him. Therefore, the Court remanded the case to the trial court with instructions to lift the stay regarding payment of the $250,000 and allow her to execute upon that judgment. The Court also held that interest should be awarded to the Wife as of December 2009 when she petitioned for relief. The Court reversed the $417.00 payment in light of the fact that the Wife can now execute on the judgment.

The Court noted that cash awarded in divorces are money judgments, meaning that post-judgment interest is allowed to accrue under T.C.A. §47-14-121, a mandatory statute requiring that interest in the amount of 10% per year shall accrue unless specified otherwise by statute or contract. Here, Wife is only entitled to interest beginning after the 12-month stay, because the rule in Tennessee is that interest doesn't accrue until the party is actually entitled to the funds.


Timing of Post-Divorce Relief Filings Key In Tennessee


The recent Tennessee Court of Appeals Case Warren v. Warren, No. M2009-02255-COA-R3-CV (Tenn. Ct. App. Apr. 29, 2011) highlights the importance of quickly filing for relief once a judgment has entered by the court.

Wife filed for divorce in Tennessee in May 2007 alleging irreconcilable differences. In April 2008, Husband filed an Answer but no Counter-Claim. Husband then filed a summons, served on Wife, stating failure to respond would result in a default judgment, even though no counterclaim or other document was filed. Husband then filed a Notice of Hearing for Default Divorce. The trial court entered a Final Decree of Divorce against Wife at the noticed hearing based on inappropriate marital conduct. That day the court also awarded each party the property in their separate possession and entered a parenting plan waiving child support.

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One year later, Wife filed a Petition to Modify Child Custody and Support, Motion to Set Aside Default judgment and Motion to Compel Mediation under T.R.C.P. 60, arguing that the default was void since a counter-claim was never filed. The trial court denied Wife's request for the following reasons: the Notice of Hearing had a certificate of service indicating that Wife was served with a copy of the Notice of Entry of Default and the court took testimony from witnesses at a prior default hearing before granting the judgment.

The Appeals Court noted that "void" under Rule 60 means the court lacked jurisdiction or violated due process, regardless of whether procedural flaws exist. Here, the judgment was found not to be void even though the default failed to comply with the rules of procedure (T.R.C.P. 55), because this was an appeal from a Rule 60 denial and not a direct appeal from the entry of the default (an argument that would have been meritorious if made immediately).
The Wife next argued that the default judgment should have been set aside based upon two additional grounds. The first is based upon mistake, inadvertence, surprise or excusable neglect, determined by looking at all relevant circumstances including prejudice, good or bad faith, impact on proceedings and principles of equity. Here, the Appellate Court determined the default judgment to be equitable and refused to set it aside. Second, Wife argued that default judgment did not comply with the requisite laws and rules. The Appellate Court looked at whether the failure to respond was willful, whether the default had a meritorious defense, and the extent of prejudice caused. Because Wife failed to produce proof at the Rule 60 hearing that she could have established a defense or that the court erred in the Final Decree, and instead only addressed argument to parenting and support provisions, her argument fails. Moreover, Wife waited eleven months to file her Rule 60 Motion.

The Court noted that had Wife filed to have the default set aside immediately, the procedural errors would have resulted in the judgment being set aside, but because of her delay and due to the T.R.C.P. 60 standards, the Final Decree stands.