Opinion
No. 2-765 / 01-2060
Filed November 15, 2002
Appeal from the Iowa District Court for Polk County, Eliza Ovrom, Judge.
Michael Chapman appeals and Elizabeth Evans cross-appeals from the district court ruling modifying child support. AFFIRMED AS MODIFIED.
Barry Kaplan of Fairall, Fairall, Kaplan, Hoglan, Condon Frese, Marshalltown, for appellant.
Richard Bartolomei of Bartolomei Lange, P.L.C., Des Moines, for appellee.
Considered by Huitink, P.J., and Zimmer and Miller, JJ.
Michael Chapman appeals and Elizabeth Evans, now known as Elizabeth Brown, cross-appeals from the district court's ruling on Elizabeth's application to modify child support. We affirm as modified.
I. Background Facts and Proceedings.
On December 20, 1996, a paternity decree was entered declaring Michael the father of Emily Lauren Chapman, born July 1995. The court ordered Michael to pay child support in the amount of $335 per month based on a salary of $28,800. In 1998, Michael filed an application to modify the visitation provisions of the decree. Elizabeth counterclaimed seeking to modify the child support provisions. Michael later filed an additional application to modify which he subsequently withdrew.
The parties did not actively pursue their claims and the modification action was not tried until October 2, 2001. At trial, the parties stipulated to a modification of the visitation schedule, which the court approved. Elizabeth argued for an increase in child support due to Michael's increased income, or increased earning capacity, and for additional support as a result of a lump sum settlement Michael received from the railroad in 2001.
In 1998, Michael earned $39,888 with Union Pacific. Between January 1, 1999 and August 31, 1999, he earned $30,999 from Union Pacific. In August 1999, Michael was suspended from Union Pacific for testing positive for drugs. He received approximately $3000 in railroad unemployment benefits for the remainder of the year. Michael contended the drug screen results were erroneous. In 2000, Michael earned $27,526 working four different jobs. After being unemployed for a period of time, Michael accepted a part-time position in May 2001 with the Metropolitan Transit Authority (MTA) earning $10.38 per hour. His earnings from MTA in 2001 were $10,629. He testified that he planned to begin full-time employment with MTA at which time he would earn an annual income of $29,536. Michael received a lump sum settlement from Union Pacific a few months before he began working for MTA. Michael is married and has two children, a stepdaughter and a baby son.
Elizabeth works thirty-two hours per week as a dental assistant. She earns $16.00 per hour, or $26,624 annually. She has two children and at the time of trial, was in the process of obtaining a divorce.
Based on Michael's current level of income, the trial court found that a substantial change of circumstances had not occurred to warrant modification of the prior child support award of $335 per month. However, the court found Michael's net settlement from the railroad in the amount of $40,711 should be included in his income for the year 2001. Based on the settlement, the district court ordered retroactive child support of $7,653.66. The court left the underlying support award from the 1996 decree undisturbed and ordered the retroactive child support award to be paid in monthly installments of $100 until paid in full. Elizabeth filed a motion to enlarge or amend claiming error in the court's order. She also requested attorney's fees. The court preserved the question of attorney's fees and denied Elizabeth's motion on all of the remaining grounds. Elizabeth and Michael appeal from the court's ruling.
II. Scope of Review.
Our review of modification proceedings is de novo. See Iowa R.App.P. 6.4; In re Marriage of Walters, 575 N.W.2d 739, 740 (Iowa 1998). However, the trial court has reasonable discretion in determining whether a modification is warranted and we will not disturb its discretion on appeal unless there is a failure to do equity. State ex rel. Pfister v. Larson, 569 N.W.2d 512, 514 (Iowa Ct.App. 1997).
A court may modify child support provisions when there has been a substantial change in circumstances. Iowa Code § 598.21(8) (2001). As the party seeking to modify the existing child support order, Elizabeth must prove the change in circumstances by a preponderance of the evidence. In re Marriage of Rietz, 585 N.W.2d 226, 229 (Iowa 1998). Not every change in circumstances is sufficient. Pfister, 569 N.W.2d at 514. "[A] substantial change of circumstances exists when the court order for child support varies by ten percent or more from the amount which would be due pursuant to the most current child support guidelines. . . ." Iowa Code § 598.21(9). The change must be permanent or continuous, rather than temporary. Pfister, 569 N.W.2d at 514. Among other factors, the court considers changes in the employment, earning capacity, income or resources of a party in determining a substantial change in circumstances. Iowa Code § 598.21(8)(a).
III. Discussion.
The parties raise several issues on appeal. Michael contends the court should not have treated the settlement award from Union Pacific as income. In the alternative, he claims Elizabeth was not entitled to any portion of the settlement amount because child support had already been deducted from it. In addition, he argues that the payment was a one-time payoff that did not constitute a substantial and material change of circumstances.
Elizabeth argues the court was correct in concluding the lump sum payment from the railroad should be considered as income for purposes of child support. However, she claims the settlement should have been apportioned over the period between Michael's suspension and the date of settlement. She also contends the court erred in calculating the amount of retroactive child support attributable to the lump sum settlement. Elizabeth claims a substantial change of circumstances has occurred warranting an increase in Michael's child support. Finally, she asserts the court should have based child support on Michael's earning capacity because of his voluntary decision not to return to railroad work.
We first address the issues pertaining to Michael's current level of child support. Michael's income has fluctuated since the entry of the original decree in 1996. Michael earned $29,595 in 1996, $35,083 in 1997, $39,888 in 1998, $33,999 in 1999, $27,526 in 2000, and $10,629 in 2001. Upon review of the record, we reject Elizabeth's contention that Michael voluntarily reduced his income recklessly or with improper intent to deprive Emily of child support. See Walters, 575 N.W.2d at 741-42. We agree with the trial court that Michael diligently sought other full-time employment after he lost his job with Union Pacific. Michael offered several legitimate reasons for not seeking employment with a railroad. The trial court concluded Michael was not avoiding employment with a railroad in order to avoid paying child support. The record supports this conclusion.
If Michael is able to work for MTA full-time he will earn approximately $29,500 annually, and will have insurance benefits that cost $200 per month. This is comparable to what he was earning when the decree was entered. We agree with the court that the original $335 monthly support award should not be modified.
We next address the district court's treatment of the Union Pacific settlement. Michael received a gross settlement of $82,000 in April 2001. The district court concluded the settlement was income and should be considered in calculating child support. Michael posits that the settlement proceeds were more akin to a tort award than income. He claims the court incorrectly applied In re Marriage of Swan, 526 N.W.2d 320 (Iowa 1995). In Swan, the court treated a lump sum settlement for a worker's compensation claim as income for purposes of determining child support. Swan, 526 N.W.2d at 325.
Upon review of the record, we agree with the trial court's conclusion that the settlement was income. Union Pacific treated the sum of $82,000 as gross earnings and deducted $22,960 for federal taxes. In fact, Union Pacific's settlement letter states that Michael would be allowed $82,000 "less usual and normal deductions including, but not limited to, Railroad Retirement, income taxes, RUIA, etc." After deductions, Michael's net settlement was $40,711. Part of the deductions included $1133 owed in back child support. Michael offered no evidence to establish that the settlement was not income.
Michael has a pending lawsuit against the laboratory which provided the drug screen results.
In calculating Michael's additional child support obligation as a result of the settlement, the district court added his net settlement from the railroad to his earnings from MTA in 2001. The court did not take deductions for taxes from the net settlement figure because that had already been done. The court calculated Michael's net income for the year 2001 to be $48,445. Based on the child support guidelines, the court then concluded the applicable percentage was 18.8. The product resulted in a $758.97 monthly support obligation. Rather than use this figure to determine Michael's obligation, the court multiplied the net settlement ($40,711) by the percentage under the guidelines (18.8) to arrive at a retroactive child support obligation of $7653.66. The court ordered this additional amount payable in $100 monthly installments.
Elizabeth contends the court should have apportioned the retroactive award as the court did in Swan. In Swan, the employer paid the worker's compensation claimant and child support obligor $60,772.32, which represented 126 weeks of prospective disability benefits. Swan, 526 N.W.2d at 325. Rather than return to work in some capacity, the obligor chose to return to school for vocational training. Id. Coincidentally, the obligor was scheduled to complete school at the end of the 126 weeks of disability benefits. Id. Based on the unique circumstances of the case, the court apportioned the disability settlement over 126 weeks. Id. at 325-26. Rather than espouse one rule for apportioning workers' compensation benefits, the court determined the appropriate treatment should be decided on an ad hoc basis. Id. at 325.
Elizabeth contends the settlement should have been apportioned over the seventeen and one-half months between discharge and settlement to determine the retroactive child support award. We disagree. Under the circumstances of this case, we conclude it was reasonable for the trial court to include the settlement in Michael's income for the year 2001. However, we disagree with the method the court employed in calculating the amount of retroactive child support due from that settlement.
The district court chose to award 18.8% of the net settlement as child support after arriving at that percentage using the total income from 2001. We believe this method of calculation fails to consider that Michael was already obligated to pay $335 per month under the original decree.
Michael earned a net income in 2001 of $49,578.12. This figure includes $41,844 in settlement proceeds and his net earnings from MTA. Based on a net annual income of $49,578.12, Michael's net monthly income is $4,131.51. The product of his net monthly income and the corresponding guideline percentage of 18.8 is $776.72 per month, or $9320.69 annually, for 2001. However, Michael is already paying $335 monthly, or $4020 annually, under his current obligation. We reduce the total support obligation of $9320.69 for the year 2001 by Michael's current annual support obligation of $4020 to arrive at a retroactive support obligation of $5300.69 for the year 2001. We agree with the district court that this additional child support should be paid in $100 monthly installments until satisfied.
We chose to add $1133 to the net settlement figure because $1133 was deducted from the settlement proceeds for back child support. In our calculation, Michael does receive a credit for the child support he is obligated to pay in 2001 under the original decree.
IV. Conclusion.
We affirm the trial court's decision not to modify Michael's current monthly child support obligation of $335. We modify the court's decree by reducing the amount of retroactive child support owed from $7653.66 to $5300.69. In all other respects, the district court's ruling is affirmed. We award no attorney fees at the trial level or on appeal.