{ "id": 3799724, "name": "Michele Kelly HILL v. James Edward KELLY III", "name_abbreviation": "Hill v. Kelly", "decision_date": "2006-11-30", "docket_number": "06-83", "first_page": "200", "last_page": "218", "citations": [ { "type": "official", "cite": "368 Ark. 200" }, { "type": "parallel", "cite": "243 S.W.3d 886" } ], "court": { "name_abbreviation": "Ark.", "id": 8808, "name": "Arkansas Supreme Court" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "307 Ark. 410", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1902462 ], "weight": 2, "year": 1991, "opinion_index": 0, "case_paths": [ "/ark/307/0410-01" ] }, { "cite": "29 Ark. App. 137", "category": "reporters:state", "reporter": "Ark. App.", "case_ids": [ 6139190 ], "weight": 2, "year": 1989, "pin_cites": [ { "page": "141" }, { "page": "224" } ], "opinion_index": 0, "case_paths": [ "/ark-app/29/0137-01" ] }, { "cite": "616 S.W.2d 529", "category": "reporters:state_regional", "reporter": "S.W.2d", "case_ids": [ 9970830 ], "year": 1981, "pin_cites": [ { "page": "533" } ], "opinion_index": 0, "case_paths": [ "/sw2d/616/0529-01" ] }, { "cite": "49 Ark. App. 106", "category": "reporters:state", "reporter": "Ark. App.", "case_ids": [ 6140035 ], "weight": 3, "year": 1995, "opinion_index": 0, "case_paths": [ "/ark-app/49/0106-01" ] }, { "cite": "Ark. Code Ann. \u00a7 9-12-312", "category": "laws:leg_statute", "reporter": "Ark. Code Ann.", "weight": 2, "pin_cites": [ { "page": "(a)(2)" }, { "page": "(a)" } ], "opinion_index": 0 }, { "cite": "82 Ark. App. 173", "category": "reporters:state", "reporter": "Ark. App.", "case_ids": [ 6139085 ], "weight": 3, "year": 2003, "opinion_index": 0, "case_paths": [ "/ark-app/82/0173-01" ] }, { "cite": "Ark. Code Ann. \u00a7 9-14-234", "category": "laws:leg_statute", "reporter": "Ark. Code Ann.", "weight": 2, "year": 1995, "opinion_index": 0 }, { "cite": "311 Ark. 287", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1896994 ], "weight": 6, "year": 1992, "pin_cites": [ { "page": "301" }, { "page": "842" } ], "opinion_index": 0, "case_paths": [ "/ark/311/0287-01" ] }, { "cite": "863 S.W.2d 291", "category": "reporters:state_regional", "reporter": "S.W.2d", "weight": 2, "year": 1993, "pin_cites": [ { "page": "294", "parenthetical": "per curiam" } ], "opinion_index": 0 }, { "cite": "314 Ark. App'x 644", "category": "reporters:state", "reporter": "Ark. App'x", "year": 1993, "pin_cites": [ { "page": "647", "parenthetical": "per curiam" } ], "opinion_index": 0 }, { "cite": "367 Ark. 210", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 3695731 ], "weight": 2, "year": 2006, "opinion_index": 0, "case_paths": [ "/ark/367/0210-01" ] }, { "cite": "361 Ark. 63", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 5683848 ], "weight": 5, "year": 2005, "opinion_index": 0, "case_paths": [ "/ark/361/0063-01" ] }, { "cite": "355 Ark. 215", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 2650092 ], "weight": 5, "year": 2003, "opinion_index": 0, "case_paths": [ "/ark/355/0215-01" ] }, { "cite": "361 Ark. 153", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 5683094 ], "weight": 2, "year": 2005, "opinion_index": 0, "case_paths": [ "/ark/361/0153-01" ] }, { "cite": "Ark. Code Ann. \u00a7 9-14-107", "category": "laws:leg_statute", "reporter": "Ark. Code Ann.", "weight": 2, "year": 2005, "pin_cites": [ { "page": "(a)(l)" } ], "opinion_index": 0 }, { "cite": "19 S.W.3d 1", "category": "reporters:state_regional", "reporter": "S.W.3d", "case_ids": [ 1257732, 1257788 ], "weight": 3, "year": 2000, "pin_cites": [ { "page": "4" }, { "page": "4" } ], "opinion_index": 0, "case_paths": [ "/ark/341/0596-01", "/ark/341/0525-01" ] }, { "cite": "341 Ark. 596", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1257732 ], "year": 2000, "opinion_index": 0, "case_paths": [ "/ark/341/0596-01" ] } ], "analysis": { "cardinality": 1091, "char_count": 35439, "ocr_confidence": 0.761, "pagerank": { "raw": 2.0763987126270524e-07, "percentile": 0.7584575394163907 }, "sha256": "0c233556e7b061d1c7dc843b6abcdb4d39c073995cfbadba01e202856cc13202", "simhash": "1:c26ddfecaccb6255", "word_count": 5743 }, "last_updated": "2023-07-14T15:59:17.047242+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Imber and Dickey, JJ., dissent.", "Dickey, J., joins this dissent." ], "parties": [ "Michele Kelly HILL v. James Edward KELLY III" ], "opinions": [ { "text": "Jim Gunter, Justice.\nThis appeal arises from an order of the Sebastian County Circuit Court finding a material change in circumstances to justify a modification of child support owed by appellee, James Edward Kelly, III, to appellant, Michele Kelly Hill, for their three children. On appeal, Hill raises three allegations of error, and Kelly brings a cross-appeal. We affirm the circuit court\u2019s order as modified.\nA recitation of the facts are contained in the first appeal, Kelly v. Kelly, 341 Ark. 596, 19 S.W.3d 1 (2000). The Kellys have three children. After the birth of their third child, Hill chose to stay home with their children. In 1998, Hill filed for divorce. Hill and Kelly negotiated and executed a property-settlement agreement resolving all marital-property issues. A hearing was held on August 6, 1999, and at the conclusion of the hearing, the chancellor granted Hill an absolute divorce and set child support in the amount of $6,000 per month consistent with the parties\u2019 property-settlement agreement. The court also awarded additional child support in the amount of 25% of the net of any bonus that Kelly received. The chancellor entered the divorce decree on August 25, 1999.\nIn Kelly, supra, Kelly challenged the trial court\u2019s ability to order payments based upon the bonus, which he considered as indefinite, conditional income that is contingent upon the profitability of the clinic in the future. Id. at 600, 19 S.W.3d at 4. We agreed, interpreting the language of section III(b) of Administrative Order Number 10 and holding\n[t]here is no history of bonus income, and the trial court acknowledged the uncertainty of whether Kelly would even qualify for a bonus in the foreseeable future given the business expense calculation that would be required. We therefore reverse and remand for entry of an order consistent with this opinion.\nId. at 600, 19 S.W.3d at 4.\nOn February 6, 2003, Hill, who had custody of all three children, filed a motion for increase in child support and motion to enforce child custody, support, separation, and property-settlement agreement. In her motion for increase in child support, Hill alleged a material and substantial change in circumstance that would justify a modification of the child-support payment of $6,000. In her motion to enforce child custody, support, separation, and property-settlement agreement, she averred that Kelly refused to divide their retirement accounts in accordance with their agreement and assessed a hypothetical tax and penalty on the division of the accounts.\nOn February 24, 2003, Kelly filed responses to Hill\u2019s motion, affirmatively pleading that Hill was barred, among other defenses, by the doctrine of res judicata, estoppel, and laches. He filed a cross-petition for decrease in child support, requesting the consideration of adjusting child support in the event that he was awarded custody of one or more of the minor children. In that cross-petition, he averred that his income for 2002 decreased and that he was entitled to a reduction in child support under the Family Support Chart. He also filed a cross-petition, alleging that he paid Hill one-half of the accounts per their agreement. On July 11, 2003, the circuit court ordered that, based upon an attorney ad litem\u2019s recommendation and interviews with the two oldest children, the youngest child remain in Hill\u2019s custody, and Kelly was awarded custody of the two oldest children. The circuit court reduced Kelly\u2019s support payment to $3,600 per month for obligations to his youngest child.\nOn August 12, 2003, Hill filed an amended motion for increase in child support and an amended motion to enforce child custody, support, separation, and property-settlement agreement. She also filed a motion for counseling for the three children. In her motion for increased child support, she argued that the entry of the July 11, 2003, order justified a modification in child support. In her motion to enforce child custody, support, separation, and property-settlement agreement, she maintained that Kelly attempted to assess a hypothetical tax and penalty on various accounts and that the accounts had not been equally divided. In her motion for counseling, she requested that Kelly pay for counseling for the three children to assist in the change of their environment. Kelly responded on August 27, 2003.\nHill filed a motion to require Kelly to comply with Act 337 of 2003 on September 26, 2003, requesting the circuit court to order Kelly to provide income information for the previous calendar year, as provided by Act 337. On October 15, 2003, Kelly responded, arguing that Hill breached their confidentiality agreement by disclosing tax returns to third parties and by making remarks that he was guilty of tax fraud in the presence of their children. He requested that the court enter a protective order, impose sanctions against Hill, and order attorneys\u2019 fees to be paid by Hill. In the motion, he cross-petitioned the circuit court to hold Hill in contempt of court for her alleged refusal to comply with visitation orders. On January 20, 2004, the circuit court ordered Hill to produce 2002 tax returns, to refrain from disclosing the contents of those tax returns, and to discontinue discussing their financial affairs in the presence of the children. The circuit court denied Kelly\u2019s petition for contempt of court and set a summer visitation schedule for 2004.\nThe circuit court held a hearing on May 27, 2005. On October 17, 2005, the circuit court entered an order, ruling that the motion for counseling was dismissed, and found that there had been a material change in circumstances that justified a modification in child-support payments required of Kelly in accordance with Ark. Code Ann. \u00a7 9-14-107(a)(l) (Supp. 2005). The circuit court found from Administrative Order Number 10 the applicable rates to be used to calculate child support to be 25% for three children, 21% for two children, and 15% for one child because Kelly\u2019s income exceeded the chart. The court further found the effective date of the motion for changing custody to be the effective date for calculating support. Ultimately, the court allowed Hill 25% of Kelly\u2019s income from the date of the motion until custody was changed with the two older children going to Kelly and the youngest child remaining with Hill. From the date of the change of custody, the court allowed a 21% credit against income to Kelly before calculating the support due to Hill for the youngest child, and then applied 15% to Kelly\u2019s income as reduced by the credit. Finally, the court required Hill to contribute to the support of the two children in Kelly\u2019s custody by calculating the support based upon Hill\u2019s imputed minimum-wage income. The net result included a lump-sum, accrued-support balance of $39,198 due to Hill, as well as the current support amount of $4,653 per month to be used prospectively. The circuit court also found that Kelly was entitled to a credit of $4,540 against a child-support balance of$39,198 for paying orthodontic expenses. Kelly\u2019s claims for contribution to the children\u2019s college fund and for reimbursement of travel expenses were denied. The court also ruled that Kelly would continue to claim the three children as dependants for income-tax purposes. The circuit court further denied Kelly\u2019s cross-petition to receive a refund of a portion of Hill\u2019s alimony. After the circuit court\u2019s order was entered, Hill timely filed her notice of appeal on October 28, 2005. Kelly filed a cross-appeal on November 1, 2005. From the October 17, 2005, order, both parties bring their appeals.\nFor her first point on appeal, Hill argues that the circuit court erred in adjusting Kelly\u2019s income for the financial support of the two oldest children in determining the amount of support owed by Kelly to Hill for the youngest child. Specifically, Hill contends that the circuit court\u2019s reducing Kelly\u2019s net income by 21% was a deviation from the support guidelines set forth in Administrative Order Number 10. She asserts that, in addition to the 21% reduction for his financial support for the two oldest children, Kelly is credited with the amount of Hill\u2019s support for the children in Kelly\u2019s custody. Further, she makes the argument that she did not receive the same credit for the financial support of her youngest child; that there was no evidence presented that would support any need for an adjustment; that the circuit court\u2019s adjustment is based upon \u201cthe erroneous finding that \u2018the father has contributed all of the funds to support the two children in his custody;\u2019 \u201d and that the allocated reduction of 21% of Kelly\u2019s net income has no bearing on what is spent on the two children. In response, Kelly argues that the circuit court\u2019s adjustment of his child-support obligation for their youngest child was not in error. Specifically, he contends that the circuit court\u2019s rulings comply with Administrative Order Number 10.\nOur standard of review for an appeal from a child-support order is de novo on the record, and we will not reverse a finding of fact by the circuit court unless it is clearly erroneous. Ward v. Doss, 361 Ark. 153, 205 S.W.3d 767 (2005). A finding is clearly erroneous when the reviewing court, on the entire evidence, is left with the definite and firm conviction that a mistake has been committed. Akins v. Mofield, 355 Ark. 215, 132 S.W.3d 760 (2003). We give due deference to the trial court\u2019s superior position to determine the credibility of the witnesses and the weight to be given their testimony. Id. In a child-support determination, the amount of child support lies within the sound discretion of the trial court, and the lower court\u2019s findings will not be reversed absent an abuse of discretion. Id. However, a trial court\u2019s conclusions of law are given no deference on appeal. Id.\nIt is axiomatic that a change in circumstances must be shown before a court can modify an order for child support. Evans v. Tillery, 361 Ark. 63, 204 S.W.3d 547 (2005). In addition, the party seeking modification has the burden of showing a change in circumstances. See id. In determining whether there has been a change in circumstances warranting adjustment in support, the court should consider remarriage of the parties, a minor reaching majority, change in the income and financial conditions of the parties, relocation, change in custody, debts of the parties, financial conditions of the parties and families, ability to meet current and future obligations, and the child-support chart. See id. We have made it clear that a finding that a material change in circumstances has occurred is subject to a clearly-erroneous standard of review. See id.\nThe Arkansas General Assembly has provided that the appropriate method for determining the amount of child support to be paid by the noncustodial parent is by reference to a family-support chart. Davis v. Bland, 367 Ark. 210, 238 S.W.3d 924 (2006). Arkansas Code Annotated \u00a7 9-12-312(a)(2) (Repl. 2002) states:\nIn determining a reasonable amount of support, initially or upon review to be paid by the noncustodial parent, the court shall refer to the most recent revision of the family support chart. It shall be a rebuttable presumption for the award of child support that the amount contained in the family support chart is the correct amount of child support to be awarded. Only upon a written finding or specific finding on the record that the application of the support chart would be unjust or inappropriate, as determined under established criteria set forth in the family support chart, shall the presumption be rebutted.\nThe issue involves the circuit court\u2019s calculations in reaching its modification of Kelly\u2019s child-support payments. The authority for the circuit court\u2019s modification of child support is found at Ark. Code Ann. \u00a7 9-14-107, which provides in pertinent part:\n(a)(1) A change in gross income of the payor in an amount equal to or more than twenty percent (20%) or more than one hundred dollars ($100) per month shall constitute a material change of circumstances sufficient to petition the court for modification of child support according to the family support chart after appropriate deductions.\nSection I of Administrative Order No. 10, which addresses the authority and scope of the circuit court, sets forth further guidelines for child-support modification orders. Section I provides in pertinent part:\nAll orders granting or modifying child support (including agreed orders) shall contain the court\u2019s determination of the payor\u2019s income, recite the amount of support required under the guidelines, and recite whether the court deviated from the Family Support Chart. If the order varies from the guidelines, it shall include a justification of why the order varies as may be permitted under Section V hereinafter. It shall be sufficient in a particular case to rebut the presumption that the amount of child support calculated pursuant to the Family Support Chart is correct, if the court enters in the case a specific written finding within the Order that the amount so calculated, after consideration of all relevant factors, including the best interests of the child, is unjust or inappropriate.\nUnder Administrative Order Number 10, \u201cincome\u201d means \u201cany form of payment... less proper deductions for:... (4) [presently paid support for other dependents by court order.\u201d Ark. Sup. Ct. Admin. Order No. 10, \u00a7 11(4).\nSection III of Administrative Order Number 10 allows the circuit court to consider the payor\u2019s income that exceeds the family-support chart. In our per curiam opinion, In re Guidelines for Child Support, 314 Ark. App\u2019x 644, 647, 863 S.W.2d 291, 294 (1993) (per curiam), we stated: \u201cFor self-employed payors, support shall be calculated based on last year\u2019s federal and state income tax returns and the quarterly estimates for the current year. Also the court shall consider the amount the payor is capable of earning or a net worth approach based on property, life-style, etc.\u201d Id. When the payor\u2019s income exceeds the amount stated in the chart, then the following percentages are established: 15% for one dependent; 21% for two dependents; and 25% for three dependents. Ark. Sup. Ct. Admin. Order No. 10, \u00a7 111(b). The chart is structured so that the amount of support per child decreases in proportion to the number of added dependents. Barnes v. Barnes, 311 Ark. 287, 843 S.W.2d 835 (1992).\nFurther, the circuit court has the authority to make any deviations to the chart under the following provision:\nb. Additional Factors. Additional factors may warrant adjustments to the child support obligations and shall include:\n7. The support required and given by a payor for dependent children, even in the absence of a court order ...[.]\nArk. Sup. Ct. Admin. Order No. 10, \u00a7 V.\nBased upon these directives from Administrative Order Number 10, we turn to the circuit court\u2019s order. Under Section I, the court\u2019s order \u201cshall contain [1] the court\u2019s determination of the payor\u2019s income, [2] recite the amount of support required under the guidelines, and [3] recite whether the court deviated from the Family Support Chart.\u201d Ark. Sup. Ct. Admin. Order No. 10, \u00a7 I. First, the circuit court\u2019s order in this case contains substantial calculations of Kelly\u2019s income based upon previous tax returns. We have said that, based upon the child-support guidelines for self-employed payors, the formula for calculating child support is based on the last year\u2019s federal and state income-tax returns and the quarterly estimates for the current year. See In re Guidelines for Child Support, supra. Here, the circuit court, after reviewing the income-tax returns for 2001, 2002, and 2003, determined Kelly\u2019s adjusted gross income; deducted income attributable to his wife through their business, Northwest Arkansas Collection and Billing Services, Inc.; figured the amount of income from the business attributable to Kelly; and determined the monthly averages of child-support payments for 2003 and for 2004 to be $35,605 and $41,384, respectively. Pursuant to Ark. Code Ann. \u00a7 9-14-234 (Supp. 1995), the circuit court properly ruled that these child-support modifications were set on February 6, 2003, the effective date of the filing of the motion to modify. We conclude that, in figuring Kelly\u2019s income, the circuit court\u2019s child-support modifications properly begin on this date.\nSecond, under section I of Administrative Order Number 10, the circuit court\u2019s order \u201crecitefs] the amount of support required under the guidelines.\u201d Because Kelly\u2019s income exceeded the child-support chart levels, the circuit court applied the child-support guidelines\u2019 percentages found in section 111(b). Here, the circuit court properly ruled that, when the income exceeds the chart, the amount of support is 25% for the three children, 21% for two children, and 15% for one child. See Administrative Order No. 10, Section 111(b). Thus, the circuit court properly calculated Kelly\u2019s obligation by calculating 21% of Kelly\u2019s adjusted income, noted above as $35,605 and $41,384, to arrive at a logical support allowance for the two children in his care. Kelly\u2019s income was adjusted as follows:\nPeriod Ave. Mo. Income Rate Mo. Support Adj. Income\n7-11-03 to 1-1-04 $35,605 .21 $7,477 $28,128\n1-1-04 to 10-1-05 $41,384 .21 $8,691 $32,693\nNext, the court applied the rate of 15% to calculate the support owed to Hill for the youngest child. The calculations are as follows:\n7-11-03 to 1-1-04 $28,128 1-1-04 to 10-1-05 $32,693\nSupport for one child x .15 Support for one child x .15\nMonthly support $ 4,219 Monthly support $ 4,904\n5.67 months (7-11-03 to x 5.67 1-1-04) 21 months (1-1-04 to x 21 10-1-05)\nAccrued support $23,921 Accrued support $102,924\nBased upon these calculations, we cannot say that the circuit court was clearly erroneous.\nThird, under section I of Administrative Order Number 10, the circuit court\u2019s order must \u201crecite whether the court deviated from the Family Support Chart.\u201d Here, the crux of Hill\u2019s argument is that these 21% and 15% deductions amounted to deviations from the support guidelines enumerated in Administrative Order Number 10. However, this argument is a mischaracterization of the circuit court\u2019s calculations.\nHere, the circuit court\u2019s order is replete with specific calculations, as well as explanations of those calculations with citations to Administrative Order Number 10, that fully explain how the court reached those figures. The court allowed credit to Kelly for support of the two children in his custody before calculating support for the one child in Hill\u2019s custody. The circuit court made the following ruling:\nTotal support accrued: $172,924 (using the rates set out above)\nSupport actually paid: -127,034\nMother\u2019s support: -6,694 (imputed to Hill for two older children based upon a minimum-wage income)\nBalance owed: $39,198\nAfter figuring these calculations, the circuit court ruled that the \u201cnet amount of child support owed by the father through October 1, 2005 is $39,198.00.\u201d From these calculations, the circuit court set prospective support to continue at the last rate of $4,904, less the amount of $251, which was a minimum-wage imputation attributed to Hill for support of the one child, and ordered Kelly\u2019s monthly child-support obligation to be $4,653. These calculations appear to follow Administrative Order Number 10. Therefore, based upon our well-established standard of review, as well as Administrative Order Number 10, we hold that the circuit court properly modified Kelly\u2019s child-support obligations for the Kelly children. Accordingly, we affirm the circuit court\u2019s rulings on this point.\nFor her second point on appeal, Hill argues that the circuit court erred in awarding Kelly a credit of $4,540, against child-support arrearage owed, for all orthodontic expenses paid by Kelly. Specifically, she contends that the offset should have been half the amount of $4,540, or $2,270, as it was listed in an exhibit presented by Kelly at trial. In response, Kelly concedes this point, noting that all medical, dental, and orthodontic expenses incurred by the Kelly children are to be equally divided between Kelly and Hill. Here, both parties agree that the settlement agreement provided that the \u201cparties shall be equally responsible for any unreimbursed medical, dental, orthodontic, counseling, prescription drug and eyeglass expenses.\u201d Therefore, we hold that the circuit court erred in awarding Kelly the $4,540 credit for orthodontic expenditures. Accordingly, we modify the circuit court\u2019s order to reflect a credit to Hill of $2,270 for those expenses.\nFor her third point on appeal, Hill argues that the circuit court erred in ruling that the three children shall be considered as Kelly\u2019s dependents for income-tax purposes. Specifically, Hill contends that she should have been allowed the tax exemption for the youngest child because he was in her custody. Hill asserts that this ruling deviates from the Arkansas Child Support Guidelines. Kelly responds, arguing that the circuit court was correct in its ruling because Hill has no income and that she \u201creceives no benefit from claiming [her youngest child] as a dependent for income tax purposes.\u201d Kelly further contends that allowing Hill to claim that child as a dependent benefits Hill\u2019s husband, Steve Hill.\nThe circuit court has the authority to allocate dependents for tax purposes under Administrative Order Number 10, which provides in relevant part:\nf. Allocation of Dependents for Tax Purposes. Allocation of dependents for tax purposes belongs to the custodial parent pursuant to the Internal Revenue Code. However, the Court shall have the discretion to grant dependency allocation, or any part of it, to the noncustodial parent if the benefit of the allocation to the noncustodial parent substantially outweighs the benefit to the custodial parent.\nArk. Sup. Ct. Admin. Order No. 10, \u00a7 111(b).\nIn Dumas v. Tucker, 82 Ark. App. 173, 119 S.W.3d 516 (2003), the court of appeals held that an award of a tax exemption to a non-custodial parent results in a deviation from the family-support chart and that the trial court erred in making such an award without providing the findings required by Ark. Code Ann. \u00a7 9-12-312(a)(2). The court of appeals further held that the circuit court made its rulings without weighing the benefits to the parties as required by Administrative Order Number 10, section 111(f). See also Fontenot v. Fontenot, 49 Ark. App. 106, 898 S.W.2d 55 (1995). The court of appeals cited with approval the case of Niederkorn v. Niederkorn, 616 S.W.2d 529, 533 (Mo. Ct. App. 1981), that \u201can award of a tax exemption to one party is nearly identical in nature to an order that the other party pay as child support a sum equal to the value of the exemption.\u201d Freeman v. Freeman, 29 Ark. App. 137, 141, 778 S.W.2d 222, 224 (1989).\nWith this precedent in mind, we turn to the present case. Here, the circuit court made the following ruling regarding the tax-exemption issue:\n24. That the defendant-father shall continue to claim the three children as dependents for income tax purposes. The court finds that the father is responsible for all of the support of the two children in his custody and that the net amount of support of $4,653.00 per month for the child in the mother\u2019s custody is more than 50% of the support required to maintain the child in her lifestyle.\nHere, the circuit court\u2019s ruling allows Kelly to claim the youngest child as a dependent and receive a tax exemption. Under Fontenot, supra, this award to a noncustodial parent constitutes a deviation from the child-support chart. However, under Dumas, supra, the circuit court made findings, required by Ark. Code Ann. \u00a7 9-12-312(a) (2), and, pursuant to Administrative Order Number 10, section 111(f), the court determined whether the benefit of the allocation to the noncustodial parent substantially outweighed the benefit to the custodial parent. The circuit court found that, by agreement of the parties, \u201cthe mother stopped working prior to the birth of the last child and has not been employed since that date.\u201d Further, the circuit court found that the \u201cnet amount of support of $4,653.00 per month for the child in the mother\u2019s custody is more than 50% of the support required to maintain the child in her lifestyle.\u201d Based upon these rulings, the circuit court weighed the benefits to Kelly and Hill, particularly in light of the fact that Kelly had a substantial income and Hill had no current income due to her unemployed status. For these reasons, we cannot say that the circuit court erred on this point.\nFor his first point on cross-appeal, Kelly argues that the circuit court\u2019s decision to retroactively award Hill an increase in child support was clearly against the preponderance of the evidence.\nRetroactive modification of a court-ordered child-support obligation may only be assessed from the time a petition for modification is filed. See Ark. Code Ann. \u00a7 9-14-234 (Supp. 1995); Grable v. Grable, 307 Ark. 410, 821 S.W.2d 16 (1991). Here, the circuit court ruled that Kelly\u2019s initial child-support obligation of $6,000 per month was based upon an annual income of $288,000. However, the circuit court further ruled that Kelly\u2019s adjusted gross income was $753,834, $795,746, and $856,061 for the years 2001, 2002, and 2003, respectively. Thus, the circuit court, in reviewing Kelly\u2019s adjusted gross income for the years 2001 through 2003, in light of the initial finding of $288,000, made the adjustments to reflect the significant increase in Kelly\u2019s income since the initial ruling. Based upon our standard of review, we hold that the circuit court did not err.\nFor his second point on cross-appeal, Kelly argues that the circuit court erred in increasing his income because of income earned by his wife, Pamela Kelly. Specifically, he contends that the circuit court disregarded evidence and erred in taking income from Pamela Kelly and attributing it to him. In response, Hill argues that the circuit court correctly increased Kelly\u2019s income because of income earned by his current wife. Hill asserts that the circuit court\u2019s inclusion of her income of $66,000 was not clearly erroneous.\nIn the present case, the circuit court made the following relevant finding:\n8. The defendant\u2019s wife, Pam Kelly, receives a substantial annual income as 50% owner and manager of a business, Northwest Arkansas Collection and Billing Services, Inc. The defendant is the owner of the other 50% and does not receive an income from the business. The primary client of the business is the defendant\u2019s medical practice, Western Arkansas Plastic and Reconstruction Surgery Center. Dr. Kelly and Pam Kelly file a joint income tax return and all of Pam Kelly\u2019s income from the billing business is reported on the joint return. Randy Philpot, the defendant\u2019s accountant testified that if some of the billing income was deducted from Pam Kelly and attributed to Dr. Kelly there would not be any change in their tax liability. Mr. Philpot conceded that attributing all of the billing income to Pam Kelly would reduce Dr. Kelly\u2019s income for child support purposes. The plaintiffs accountant, Ken Kincade, testified that a reasonable salary for an office manager in Fort Smith would be $47,644.00. Pam Kelly testified that the monthly compensation she receives from the billing company is the sum of $5,500.00 or $66,000.00 annually. The Court finds that the sum of $66,000.00 is a reasonable annual salary for the management of the billing company and that any income from the billing company in excess of $66,000.00 is considered by the court as a distribution of income to the owners based on their ownership percentage of 50% each...[.]\nThe circuit court determined Pam Kelly\u2019s billing income minus a $66,000 salary for a total distribution amount. From that amount, the circuit court determined 50% to represent Kelly\u2019s share. Kelly\u2019s respective 50% shares for 2001, 2002, and 2003 were $66,858, $39,565, and $7,792, respectively.\nWe agree with the circuit court\u2019s ruling on this issue. Here, the circuit court considered an increase in the amount of income from the billing company attributable to Kelly rather than Hill. Contrary to his argument in his cross-appeal, the circuit court considered Pamela Kelly\u2019s salary only in the context of computing Kelly\u2019s amount of income from Northwest Arkansas Collection and Billing Services, Inc., of which he owns one-half. Therefore, this increase constituted a material change in circumstance, and based upon our standard of review, we hold that the circuit court was not clearly erroneous on this point.\nFor his last point on cross-appeal, Kelly argues that the circuit court erred in imputing a minimum-wage salary to Hill. Specifically, Kelly contends that she \u201cenjoys a very comfortable lifestyle and has an education and work history which is not consistent with a minimum wage worker.\u201d In response, Hill asserts that the circuit court properly imputed a minimum-wage income to her, as she is an unemployed payor.\nSection 111(d) of Administrative Order 10 provides:\nImputed income. If a payor is unemployed or working below full earning capacity, the court may consider the reasons therefor. If earnings are reduced as a matter of choice and not for reasonable cause, the court may attribute income to a payor up to his or her earning capacity, including consideration of the payor\u2019s life-style. Income of at least minimum wage shall be attributed to a payor ordered to pay child support.\nIn Barnes v. Barnes, 311 Ark. 287, 843 S.W.2d 835 (1992), we upheld the chancellor\u2019s order directing the appellant to pay the minimum chart amount for retroactive child support where the trial judge recognized that there was no evidence of appellant\u2019s weekly take-home pay for the relevant time period. Finding no error or abuse of discretion, we stated that the \u201c[cjhancellor simply set the support at the minimum level required of an unemployed person.\u201d Barnes, 311 Ark. at 301, 843 S.W.2d at 842.\nHere, citing section III(d), the circuit court found that Hill stopped working after the birth of the youngest child by agreement of the parties. The court further found that, although she had a college degree with a former job in pharmaceutical sales, \u201cthere was no evidence presented as to her present earning capacity.\u201d For those reasons, the circuit court imputed to Hill a minimum-wage income for child support for the two older children in the amount of$6,694.\nWe cannot say that this ruling was in error. It appears that Kelly did not present evidence as to Hill\u2019s lifestyle or earning capacity. Because there was no evidence presented as to Hill\u2019s current earning capacity, we hold that the circuit court properly imputed a minimum-wage income to Hill. Accordingly, we affirm the circuit court\u2019s ruling on this issue.\nAffirmed as modified.\nImber and Dickey, JJ., dissent.", "type": "majority", "author": "Jim Gunter, Justice." }, { "text": "Annabelle Clinton Imber, Justice,\ndissenting. For her first point on appeal, Hill argues that the circuit court erred when it adjusted Kelly\u2019s income for the financial support of their two oldest children in determining the amount of support Kelly owed Hill for the youngest child. She specifically contends that the circuit court\u2019s reduction of Kelly\u2019s net income by 21% was a deviation from the support guidelines set forth in Administrative Order No. 10. I agree.\nUnder the plain language of Administrative Order No. 10, income is defined under Section II:\nIncome means any form of payment, periodic or otherwise, due to an individual, regardless of source, including wages, salaries, commissions, bonuses, workers\u2019 compensation, disability, payments pursuant to a pension or retirement program, and interest less proper deductions for:\n1. Federal and state income tax;\n2. Withholding for Social Security (FICA), Medicare, and railroad retirement;\n3. Medical insurance paid for dependent children; and\n4. Presently paid support for other dependents by court order.\n(Emphasis added.) Thus, in determining income for child-support purposes under section II, only \u201cpresently paid support for other dependents by court order\u201d is properly deductible. Under section 111(b), when the payor\u2019s income exceeds that shown on the family support chart, then certain percentages \u201cof the payor\u2019s monthly income as defined in Section II\u201d should be used to set and establish the amount of child support. The relevant percentages in the instant case are 15% for one dependent; 21% for two dependents, and 25% for three dependents. As Kelly is a self-employed payor, support must be calculated based on \u201cthe last two years\u2019 federal and state income tax returns and quarterly estimates for the current year.\u201d See Ark. Sup. Ct. Admin. Order No. 10, \u00a7 III(c).\nThe circuit court complied with Sections II and III of the administrative order when it determined Kelly\u2019s monthly averages for child-support purposes to be $35,605 for 2003 and $41,384 for 2004. It was at this point, according to the majority, that the court deducted 21% of Kelly\u2019s income from the monthly averages noted above, \u201cto arrive at a logical support allowance for the two children in his care.\u201d The court then applied the rate of 15% to calculate the child support Kelly owed to Hill for the youngest child in her custody. The majority states that such a calculation \u201cappear[s] to follow Administrative Order Number 10.\u201d I disagree.\nThe majority apparently relies upon the following provision set forth in section V:\nV. Deviation Considerations\nb. Additional Factors.\nAdditional factors may warrant adjustments to the child support obligations and shall include:\n7. The support required and given by a payor for dependent children, even in the absence of a court order;\u201d\nThis provision expressly states that all of the factors listed under section V are \u201cDeviation Considerations\u201d; that is, matters to be considered by the court in determining whether a deviation is appropriate. Thus, the circuit court\u2019s adjustment of Kelly\u2019s income for the financial support of the two oldest children in his care was in fact a deviation from the support guidelines under Administrative Order No. 10. As support for the adjustment to Kelly\u2019s monthly average income, the circuit court cited section V(b)(7) of the administrative order, as well as its finding that \u201cthe father has contributed all of the funds to support the two children in his custody.\u201d\nSuch circular reasoning does not, in my view, satisfy the requirement that the court set forth a justification for \u201cwhy the order varies as may be permitted under Section V.\u201d Ark. Sup. Ct. Admin. Order No. 10, \u00a7 I. To merely cite the provision that authorizes a deviation, i.e. section V, does not begin to answer the question \u201cWhy?\u201d Similarly, to say that the father contributes all of the funds to support the children in his custody is inconsistent with the court\u2019s decision to impute a minimum wage income to Hill and then to assess her with child support for those two children.\nFor the above stated reasons, I respectfully dissent.\nDickey, J., joins this dissent.", "type": "dissent", "author": "Annabelle Clinton Imber, Justice," } ], "attorneys": [ "Gean, Gean & Gean, by: Roy Gean, III, for appellant/crossappellee.", "Pryor, Robertson & Barry, PLLC, by: John Beasley and Dusti Miller, for appellee/cross-appellant." ], "corrections": "", "head_matter": "Michele Kelly HILL v. James Edward KELLY III\n06-83\n243 S.W.3d 886\nSupreme Court of Arkansas\nOpinion delivered November 30, 2006\nGean, Gean & Gean, by: Roy Gean, III, for appellant/crossappellee.\nPryor, Robertson & Barry, PLLC, by: John Beasley and Dusti Miller, for appellee/cross-appellant." }, "file_name": "0200-01", "first_page_order": 226, "last_page_order": 244 }