Newton v. Newton
2018 Ark. App. 525
Ark. Ct. App.2018Background
- Divorce decree (Apr. 2016) ordered Brian to pay $2,021.67/month child support plus 21% of any excess retained earnings/distributions/bonuses not taken as salary; decree did not state the income basis or methodology for the $2,012.67 figure.
- At the 2016 divorce hearing, CPA testimony showed Newton Medical (an S corp) had $66,465 retained earnings in 2015; court orally warned it would consider retained earnings in future support and imposed the 21% additional-payment provision.
- In mid-2017 Brian provided 2016 tax returns showing salary $88,500 and retained earnings $101,833; Rebecca demanded 21% of those retained earnings; Brian moved to modify support claiming his 2016 income increase required raising the base support.
- At the August 2017 hearing Brian sought to introduce his 2015 income evidence (accountant testimony, 2015 income summary and W-2) to show what the court used in 2016 to set the base amount; Rebecca objected and the court excluded that evidence as irrelevant.
- The trial court thereafter denied Brian’s modification motion, found the 2016 retained earnings were “excess retained earnings” subject to 21%, ordered payment of $21,384.93, awarded attorney’s fees, and held Brian in contempt for nonpayment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of 2015 income evidence offered to prove the 2016 base used to calculate child support | Brian: evidence is necessary to show the 2016 baseline income and thus to prove a material change in circumstances for modification | Rebecca: decree was final in 2016; the income basis should have been litigated then and is irrelevant now | Court of Appeals: exclusion was an abuse of discretion; evidence was relevant and should have been admitted |
| Whether Brian established a change in circumstances warranting modification | Brian: 2016 salary + retained earnings increased net income above prior baseline, justifying modification under statute and guidelines | Rebecca: decree already dealt with retained earnings via deviation; additional 21% claim under decree is enforceable | Court of Appeals: remanded for recalculation under Administrative Order No. 10 because trial court erred by excluding baseline evidence; did not decide the merits of the 21% issue |
Key Cases Cited
- Rogers v. Rogers, 90 Ark. App. 321 (discussing law-of-the-case doctrine)
- Cadillac Cowboy, Inc. v. Jackson, 347 Ark. 963 (explaining law-of-the-case and finality)
- Martin v. Scharbor, 95 Ark. App. 52 (party seeking child-support modification must prove a change in circumstances; court must consider income and financial conditions)
- McKinney v. McKinney, 94 Ark. App. 100 (parent’s right to seek modification despite prior decree)