IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
March 10, 2014 Session
DONALD LESTER BENEDICT v. GRETCHEN MICHELLE BENEDICT
Appeal from the Chancery Court for Hamilton County
No. 99-0673 W. Frank Brown, III, Chancellor
No. E2013-00978-COA-R3-CV-FILED-MAY 27, 2014
This appeal concerns numerous post-divorce issues. Donald Lester Benedict (“Husband”)
filed a petition to modify his child support obligation against his former wife Gretchen
Michelle Benedict (“Wife”) in the Chancery Court for Hamilton County (“the Trial Court”).1
The parties eventually raised a host of issues about money, which were referred to a Special
Master. Wife objected to certain of the Master’s findings. Ultimately, the Trial Court
sustained certain of Wife’s objections to the Master’s report and denied others. The Trial
Court found, inter alia, that Husband was willfully or voluntarily underemployed. Husband
appeals, and both parties raise several issues. We reverse the Trial Court as to its finding that
Husband is willfully or voluntarily underemployed and those issues related to this finding.
We remand for the Trial Court to make new determinations on these issues in light of our
holdings that Husband was not willfully or voluntarily underemployed, and that Husband’s
income for purposes of child support is $75,000 per year as found by the Master. Otherwise,
we affirm the judgment of the Trial Court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed,
in Part, and, Reversed, in Part; Case Remanded
D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which C HARLES D. S USANO,
J R., C.J., and T HOMAS R. F RIERSON, II, J., joined.
Phillip C. Lawrence, Chattanooga, Tennessee, for the appellant, Donald Lester Benedict.
Grace E. Daniell, Chattanooga, Tennessee, for the appellee, Gretchen Michelle Benedict.
1
The parties have been divorced for quite some time. Nevertheless, we refer to them as Husband and
Wife for convenience.
OPINION
Background
Husband and Wife divorced in September 2000. Two children (“the Children”)
were born from the marriage. The MDA and divorce judgment contained many obligations
for Husband to Wife, among them: 1) child support of $3,200 per month effective June 1,
2000; 2) health and dental insurance for the Children; 3) private education for the Children;
4) funds for the Children to attend college; 5) rehabilitative alimony of $3,400 per month
from August 1, 2000 through August 1, 2005; 6) indemnify Wife on debt to Pioneer Bank;
and, 7) make payments for a 1999 Mercedes-Benz. Wife was awarded the marital residence.
Their divorce notwithstanding, the parties resumed living together in June 2002. Wife and
the Children moved in with Husband at his home. In 2003, Husband, Wife, and the Children
moved into Wife’s home at Shadow Walk Drive in Chattanooga, Tennessee. Also in 2003,
Husband filed for bankruptcy. The parties stopped living together in July 2006.
In January 2007, Husband filed a petition to modify child support. Husband
alleged that his income had decreased substantially and that Wife now was working. Wife
filed an answer and counterclaim alleging that Husband had unclean hands and had failed
to pay child support and alimony as ordered. Wife acknowledged that the parties had
resumed living together for a while and that she was working. In November 2007, the Trial
Court cut Husband’s child support obligation from $3,200 per month to $1,900 per month
pending trial. For his part, Husband denied being behind on child support or alimony. In
May 2008, Wife filed a petition for contempt alleging that Husband failed to pay fees for one
of the Children to attend school. Husband filed a response, alleging a reduction in income
and asking for removal of his responsibility to pay tuition.
In April 2009, the Trial Court entered an order referring numerous issues in the
case to a Master. The Master heard the case on several dates in 2010. We will not recount
herein the whole breadth of testimony in this immensely litigious case, but confine ourselves
to that relevant for review. The Master heard evidence about the parties’ history and
financial circumstances. Husband’s income in 2000 was $350,000 per year. Husband at that
time worked for Adams Lithography. Husband’s work was commission-based. In 2002,
Husband lost his job at Adams when the major client left Adams. Between 2002 and 2009,
Husband worked in a variety of jobs. Husband opened Five-0-5 Marketing, LLC, an
advertising agency, and Fireball Business Services, a printing company. The businesses
ultimately did not thrive. Husband’s income was as follows: 2005–$102,943,
2006–$205,143, 2007–$2,188, 2008–$24,954. By 2009, Husband returned to Adams and
earned $75,000 per year. As of 2009, Wife was earning around $17,000 per year.
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In March 2011, the Master entered his order. Husband’s child support was set
at $1,259 per year based on his salary at Adams of $75,000 per year. The Master ruled that
Husband’s obligation for private school tuition, college tuition, the second mortgage, and
lease payments and residuals on the Mercedes were discharged in bankruptcy.
In January 2013, the Trial Court entered its memorandum opinion and order
resolving Wife’s objections to the Master’s findings. The Trial Court held that the Master
erred in calculating Husband’s income and that Husband was willfully or voluntarily
underemployed. The Trial Court held, inter alia: 1) Husband’s income was his actual
$75,000 salary at Adams plus an imputed $144,362 for a total of $219,362; 2) there was no
substantial and material change in circumstances to modify Husband’s private school tuition
obligation; 3) Husband owed Wife $33,853.98 for tuition; 4) the college tuition obligation
was discharged by Husband’s bankruptcy; 5) the private school tuition obligation was not
discharged in bankruptcy; 6) the debt on the second mortgage to Pioneer Bank was not
discharged in bankruptcy; 7) although Husband’s payment for the Mercedes-Benz was not
discharged in bankruptcy, he satisfied his obligations under the MDA by providing Wife with
a Ford Windstar van; 8) Husband owed child support arrearage of $7,548.92; 9) Husband
owed medical expenses of $7,932.67; and, 10) Husband owed $44,150.64 for the second
mortgage.
Wife filed an application for attorney’s fees in the amount of $71,186.50. In
March 2013, the Trial Court awarded Wife $44,568 in attorney’s fees. Husband appealed
to this Court.
Discussion
Although not stated exactly as such, Husband raises five issues on appeal: 1)
whether the Trial Court erred in finding that Husband was willfully or voluntarily
underemployed so as to impute to him an income to create a child support obligation of
$2,045 per month retroactive to February 2007; 2) whether the Trial Court erred in its
modification of Husband’s child support and award of child support arrearage; 3) whether
the Trial Court erred in finding that Husband was not entitled to a modification of his
obligation to pay for private school tuition and an arrearage for private school tuition; 4)
whether the Trial Court erred in finding that Husband’s obligation for payment of the second
mortgage was not a debt discharged in bankruptcy; and, 5) whether the Trial Court abused
its discretion in awarding Wife $44,568 in attorney’s fees. Wife raises four issues of her
own: 1) whether the Trial Court erred in finding that Wife waived her right to receive
alimony during the period the parties resumed living together and in its calculation of
alimony arrearage; 2) whether the Trial Court erred in finding that Husband was not in
contempt; 3) whether the Trial Court erred in finding that Husband’s obligation for college
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tuition for the Children was not a domestic support obligation under 11 U.S.C. 523 (a)(5);
and, 4) whether the Trial Court erred in finding that Husband was not required to pay any
additional amount for the Mercedes. Wife also argues that the Trial Court erred in the
amount owed to her on the second mortgage debt, an argument we will address when we
address Husband’s issue of the second mortgage.
Our review is de novo upon the record, accompanied by a presumption of
correctness of the findings of fact of the trial court, unless the preponderance of the evidence
is otherwise. Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001).
A trial court's conclusions of law are subject to a de novo review with no presumption of
correctness. S. Constructors, Inc. v. Loudon County Bd. of Educ., 58 S.W.3d 706, 710 (Tenn.
2001). However, as to the concurrent finding of a chancellor and master, our standard of
review is quite narrow as discussed in In re Estate of Ladd:
Where there has been a concurrent finding of the Special Master and
Chancellor, this Court may not disturb the concurrent findings. Tenn. Code
Ann. § 27-1-113. A concurrent finding of a master and chancellor is
conclusive on appeal, except where it is upon an issue not proper to be
referred, where it is based on an error of law or a mixed question of fact and
law, or where it is not supported by any material evidence. Coates v.
Thompson, 713 S.W.2d 83, 84 (Tenn. Ct. App. 1986). This standard of review
is similar to our standard when reviewing a jury verdict; we must affirm if
there is any material evidence to support the trial court's concurrence. See Id.;
Tenn. R. App. P. 13(d).
In re Estate of Ladd, 247 S.W.3d 628, 636-37 (Tenn. Ct. App. 2007).
The Trial Court’s discretion is implicated for some of the issues on appeal. In
Lee Medical, Inc. v. Beecher, 312 S.W.3d 515 (Tenn. 2010), the Supreme Court discussed
the abuse of discretion standard at length, stating:
The abuse of discretion standard of review envisions a less rigorous
review of the lower court’s decision and a decreased likelihood that the
decision will be reversed on appeal. Beard v. Bd. of Prof’l Responsibility, 288
S.W.3d 838, 860 (Tenn. 2009); State ex rel. Jones v. Looper, 86 S.W.3d 189,
193 (Tenn. Ct. App. 2000). It reflects an awareness that the decision being
reviewed involved a choice among several acceptable alternatives. Overstreet
v. Shoney’s, Inc., 4 S.W.3d 694, 708 (Tenn. Ct. App. 1999). Thus, it does not
permit reviewing courts to second-guess the court below, White v. Vanderbilt
Univ., 21 S.W.3d 215, 223 (Tenn. Ct. App. 1999), or to substitute their
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discretion for the lower court’s, Henry v. Goins, 104 S.W.3d 475, 479 (Tenn.
2003); Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998). The
abuse of discretion standard of review does not, however, immunize a lower
court’s decision from any meaningful appellate scrutiny. Boyd v. Comdata
Network, Inc., 88 S.W.3d 203, 211 (Tenn. Ct. App. 2002).
Discretionary decisions must take the applicable law and the relevant
facts into account. Konvalinka v. Chattanooga-Hamilton County Hosp. Auth.,
249 S.W.3d 346, 358 (Tenn. 2008); Ballard v. Herzke, 924 S.W.2d 652, 661
(Tenn. 1996). An abuse of discretion occurs when a court strays beyond the
applicable legal standards or when it fails to properly consider the factors
customarily used to guide the particular discretionary decision. State v. Lewis,
235 S.W.3d 136, 141 (Tenn. 2007). A court abuses its discretion when it
causes an injustice to the party challenging the decision by (1) applying an
incorrect legal standard, (2) reaching an illogical or unreasonable decision, or
(3) basing its decision on a clearly erroneous assessment of the evidence. State
v. Ostein, 293 S.W.3d 519, 526 (Tenn. 2009); Konvalinka v.
Chattanooga-Hamilton County Hosp. Auth., 249 S.W.3d at 358; Doe 1 ex rel.
Doe 1 v. Roman Catholic Diocese of Nashville, 154 S.W.3d at 42.
To avoid result-oriented decisions or seemingly irreconcilable
precedents, reviewing courts should review a lower court’s discretionary
decision to determine (1) whether the factual basis for the decision is properly
supported by evidence in the record, (2) whether the lower court properly
identified and applied the most appropriate legal principles applicable to the
decision, and (3) whether the lower court’s decision was within the range of
acceptable alternative dispositions. Flautt & Mann v. Council of Memphis,
285 S.W.3d 856, 872-73 (Tenn. Ct. App. 2008) (quoting BIF, a Div. of Gen.
Signal Controls, Inc. v. Service Constr. Co., No. 87-136-II, 1988 WL 72409,
at *3 (Tenn. Ct. App. July 13, 1988) (No Tenn. R. App. P. 11 application
filed)). When called upon to review a lower court’s discretionary decision, the
reviewing court should review the underlying factual findings using the
preponderance of the evidence standard contained in Tenn. R. App. P. 13(d)
and should review the lower court’s legal determinations de novo without any
presumption of correctness. Johnson v. Nissan N. Am., Inc., 146 S.W.3d 600,
604 (Tenn. Ct. App. 2004); Boyd v. Comdata Network, Inc., 88 S.W.3d at 212.
Beecher, 312 S.W.3d at 524-25.
We first address whether the Trial Court erred in finding that Husband was
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willfully or voluntarily underemployed so as to impute to him an income to create a child
support obligation of $2,045 per month retroactive to February 2007. As this Court
explained in Richardson v. Spanos:
Prior to the adoption of the Child Support Guidelines, trial courts had
wide discretion in matters relating to child custody and support. Hopkins v.
Hopkins, 152 S.W.3d 447, 452 (Tenn. 2004) (Barker, J., dissenting). Their
discretion was guided only by broad equitable principles and rules which took
into consideration the condition and means of each parent. Brooks v. Brooks,
166 Tenn. 255, 257, 61 S.W.2d 654, 654 (1933). However, the adoption of the
Child Support Guidelines has limited the courts’ discretion substantially, and
decisions regarding child support must be made within the strictures of the
Child Support Guidelines. Berryhill v. Rhodes, 21 S.W.3d 188, 193 (Tenn.
2000); Jones v. Jones, 930 S.W.2d 541, 545 (Tenn. 1996); Smith v. Smith, 165
S.W.3d 279, 282 (Tenn. Ct. App. 2004).
***
Because child support decisions retain an element of discretion, we
review them using the deferential “abuse of discretion” standard. This
standard is a review-constraining standard of review that calls for less intense
appellate review and, therefore, less likelihood that the trial court’s decision
will be reversed. State ex rel Jones v. Looper, 86 S.W.3d 189, 193 (Tenn. Ct.
App. 2000); White v. Vanderbilt Univ., 21 S.W.3d 215, 222-23 (Tenn. Ct. App.
1999). Appellate courts do not have the latitude to substitute their discretion
for that of the trial court. Henry v. Goins, 104 S.W.3d 475, 479 (Tenn. 2003);
State ex rel. Vaughn v. Kaatrude, 21 S.W.3d 244, 248 (Tenn. Ct. App. 2000).
Thus, a trial court’s discretionary decision will be upheld as long as it is not
clearly unreasonable, Bogan v. Bogan, 60 S.W.3d 721, 733 (Tenn. 2001), and
reasonable minds can disagree about its correctness. Eldridge v. Eldridge, 42
S.W.3d 82, 85 (Tenn. 2001); State v. Scott, 33 S.W.3d 746, 752 (Tenn. 2000).
Discretionary decisions must, however, take the applicable law and the
relevant facts into account. Ballard v. Herzke, 924 S.W.2d 652, 661 (Tenn.
1996). Accordingly, a trial court will be found to have “abused its discretion”
when it applies an incorrect legal standard, reaches a decision that is illogical,
bases its decision on a clearly erroneous assessment of the evidence, or
employs reasoning that causes an injustice to the complaining party. Perry v.
Perry, 114 S.W.3d 465, 467 (Tenn. 2003); Clinard v. Blackwood, 46 S.W.3d
177, 182 (Tenn. 2001); Overstreet v. Shoney’s, Inc., 4 S.W.3d 694, 709 (Tenn.
Ct. App. 1999).
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Richardson v. Spanos, 189 S.W.3d 720, 725 (Tenn. Ct. App. 2005). The Richardson Court
observed that the burden is on the custodial parent to prove that the obligor parent is willfully
or voluntarily underemployed. Id. at 727 (citing Demers v. Demers, 149 S.W.3d 61, 69
(Tenn. Ct. App. 2003)). See also Wilson v. Wilson, 43 S.W.3d 495, 497 (Tenn. Ct. App.
2000) (“Although there is no requirement that a parent intended to avoid their child support
obligations by their actions, we do think that willful or voluntary unemployment or
underemployment must result from an intent on the part of the parent to reduce or terminate
his or her income.”).
The Child Support Guidelines provide that imputing income to a parent when
calculating child support is appropriate: “If a parent has been determined by a tribunal to be
willfully and/or voluntarily underemployed or unemployed ….” Tenn. Comp. R. & Regs.
1240-2-4-.04(3)(a)(2)(i)(I). When making a determination of willful or voluntary
unemployment or underemployment, a trial court may consider:
(I) The parent’s past and present employment;
(II) The parent’s education, training, and ability to work;
(III) The State of Tennessee recognizes the role of a stay-at-home parent as an
important and valuable factor in a child’s life. In considering whether there
should be any imputation of income to a stay-at-home parent, the tribunal shall
consider:
I. Whether the parent acted in the role of full-time caretaker
while the parents were living in the same household;
II. The length of time the parent staying at home has remained
out of the workforce for this purpose; and
III. The age of the minor children.
(IV) A parent's extravagant lifestyle, including ownership of valuable assets
and resources (such as an expensive home or automobile), that appears
inappropriate or unreasonable for the income claimed by the parent;
(V) The parent's role as caretaker of a handicapped or seriously ill child of that
parent, or any other handicapped or seriously ill relative for whom that parent
has assumed the role of caretaker which eliminates or substantially reduces the
parent's ability to work outside the home, and the need of that parent to
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continue in that role in the future;
(VI) Whether unemployment or underemployment for the purpose of pursuing
additional training or education is reasonable in light of the parent's obligation
to support his/her children and, to this end, whether the training or education
will ultimately benefit the child in the case immediately under consideration
by increasing the parent's level of support for that child in the future;
(VII) Any additional factors deemed relevant to the particular circumstances
of the case.
Tenn. Comp. R. & Regs. 1240-2-4-.04(3)(a)(2)(iii).
The Trial Court, holding that the Master miscalculated Husband’s potential
income, stated relative to this issue:
[H]ere, the court is not persuaded by Mr. Benedict’s argument as to his
income. The evidence of consistently large annual incomes in prior years due
to his entrepreneurial skill and marketing knowledge convinces the court that
he has the potential to earn equivalent sums now. As in Demers, simply
because his business ventures had one or two bad years after many years of
good years, does not convince the court that Mr. Benedict will be unable to
earn larger amounts in the future. Indeed, the evidence presented to the court
in the form of accounting records for his businesses, and the testimony of
Michelle Camp, CPA convince the court that Mr. Benedict was earning more
money from his companies than his tax records reflect. Primarily, the court
notes that Mr. Benedict’s personal draws from Five-0-5 Marketing in 2008
were $85,468.38, despite listing his income for tax purposes as $24,954 and
a depreciation expense of $69,715 for Fireball. Depreciation is not an
allowable deduction from income in calculating income for child support
purposes. In the Schedule C portion of Mr. Benedict’s 2007 tax return for
Five-0-5 Marketing, LLC, there is no statement of who was paid wages of
$196,305.00. It is difficult to believe that a business that grossed $454,258.00
made only a profit of $78.00. Five-0-5 Marketing, LLC, did much better in
2008. On its gross receipts of $325,866.00, the company made a profit of
$93,590.00. However, most of that profit was erased by the $73,911.00 loss
sustained by Fireball Business Services, LLC. Part of Fireball’s expenses was
$69,715.00 in depreciation. If the depreciation is eliminated, as required by
the child support guidelines, then the loss is only $4,196.00, which reduces the
profit from Five-0-5 to $89,394.00, which would have been Mr. Benedict’s
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income instead of the stated $19,679.00. Further, his draws for 2009 totaled
$29,134.50 despite claiming his income was only $21,833 based on his wages
from Adams Lithographing alone. Accordingly, the court does not find Mr.
Benedict’s own accounting of his income for 2007-2009 credible.
Moreover, the court finds support for its decision to impute income in
Mr. Benedict’s own 2007 loan application. Mr. Benedict’s 2007 tax return
states that he earned a total of $2,188.00 for the year. However, the loan
application for his condo purchase, filled out in 2007 states that his monthly
income was $15,000. Indeed, Mr. Benedict claimed he had a $9,000 monthly
income on his 2008 income and expense statement. However, he explained
this $9,000 “was in fact the draws against the loans to his company from [his
line of credit] that he had to make to cover his living expenses.” Thus,
presumably the stated monthly income of $15,000 on his loan application
referred to the draws against the line of credit as well. However, Mr. Benedict
must have believed he would shortly return earning close to $15,000 per month
in actual income, in light of (a) the length of the loan term for which he was
applying (360 months), and (b) the fact that the interest rate on the money from
the line of credit was 8%, but the interest rate on the loan for which he was
applying was a lesser 5.85%.
Additionally, the court agrees with Ms. Benedict that it is disingenuous
for Mr. Benedict to argue that the loan proceeds and “draws” from his
companies are not “income” for the purpose of calculating child support, but
claim they are “income” for the purposes of obtaining a loan and for paying his
other personal expenses. Thus, the court cannot affirm the Master’s Report,
which sets Mr. Benedict’s salary at $75,000 for the purposes of calculating
child support. Instead, the court finds that Mr. Benedict is willfully
underemployed and imputes income to Mr. Benedict in the amount of
$144,362.00 per year to make his total annual income $219,362.00, or the
average of his total incomes listed on line 22 of his 2006 ($205,143) and 2005
($102,943) tax returns and his income on which child support was originally
based in 2000, $350,000. The court makes its imputation calculation based on
these numbers because these are the only evidence of Mr. Benedict’s pre-2007
annual incomes before the court, and because the court does not find Mr.
Benedict’s testimony or reports of his income for 2007-2009 to be accurate or
credible. (Internal citations omitted).
From our review of the law and facts of this case, several things seem evident.
A finding of underemployment is fact-intensive. Also, the burden is on the support recipient,
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here Wife, to prove underemployment. It is not sufficient to point out that Husband once
earned a great deal more money than he does currently. There must be some evidence in the
record to show that Husband is capable of earning more and is refraining from acquiring this
better-paying work to reduce or terminate his income.
The record reveals that Husband’s earnings took a major hit over the course
of the decade after his divorce. Husband went from earning $350,000 per year to $75,000
per year at Adams. In the interim, his different enterprises eventually floundered. The
evidence in the record on appeal does not support a finding that Husband intentionally
torpedoed his career prospects. Rather, it appears Husband has tried and failed to reestablish
some measure of his previous lifestyle. Husband filed for bankruptcy a few years after the
divorce, as well. In its order, the Trial Court questioned the credibility of Husband’s
accounting of his income for the relevant years. However, the Trial Court did not identify
any discrete facts which would tend to support a finding of underemployment resulting in
Husband’s income being set at anything greater than the $75,000 he earned at Adams. For
example, the Trial Court states that “simply because his business ventures had one or two bad
years after many years of good years, does not convince the court that [Husband] will be
unable to earn larger amounts in the future.” The proof is overwhelming that Husband’s
businesses did not just have one or two bad years, but instead eventually did so poorly that
Husband closed them. The Trial Court also expressed incredulity at Husband’s assertions.
For example, the Trial Court stated that “[i]t is difficult to believe that a business that grossed
$454,258.00 made only a profit of $78.00.” We found nothing in the record to support this
belief of the Trial Court that a business grossing over $450,000 a year must make a profit or
that the more the business grosses, the greater its profit will be. This is an assumption
unsupported by any facts in the record, particularly as applies to Husband’s now failed
businesses. In our view, the record does not suffice to show willful underemployment by
Husband. It should be noted that the Trial Court did not hear Husband testify. The Trial
Court relied on the record of the testimony given before the Master, and we, therefore, are
not required to defer to the Trial Court’s credibility determinations as to Husband.
In calculating Husband’s income, the Trial Court added his salary of $75,000
to an imputed income of $144,362 to reach $219,362. We do not believe this is the correct
way to go about determining Husband’s income. As noted by Husband, he either is earning
a salary of $75,000 or is an entrepreneur capable of earning $144,362, but not both at the
same time. The Master found Husband’s income for purposes of child support to be $75,000
per year. We believe the preponderance of the evidence supports the Master’s finding, and
the Trial Court erred in setting aside that finding by the Master. This of course does not
settle once and for all time the issue of Husband’s income. Husband perhaps will earn more
money in the future. However, under the evidence in the instant appeal, we find that
Husband’s income for child support purposes is $75,000 per year.
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We hold that the Trial Court erred in finding that Husband was willfully or
voluntarily underemployed. Because of the close nexus between this issue and Husband’s
next two issues (whether the Trial Court erred in its modification of Husband’s child support
and award of child support arrearage; and, whether the Trial Court erred in finding that
Husband was not entitled to a modification of his obligation to pay for private school tuition
and an arrearage for private school tuition), those issues are pretermitted as they are to be
considered anew by the Trial Court on remand in proceedings as necessary consistent with
this Opinion.
We next address whether the Trial Court erred in finding that Husband’s
obligation for payment of the second mortgage was not a debt discharged in bankruptcy. The
Trial Court conducted the following thorough analysis relative to this issue:
The Sixth Circuit has held that an ex-husband’s obligation to pay the
second mortgage on the marital home and the car loan for the ex-wife’s vehicle
does not constitute “spousal support” under the factors listed in Fitzgerald,
where the evidence showed they were primarily promises to pay the debts of
the ex-spouse rather than to support. In re Jestice, 168 F. App’x 39, 42-43
(6th Cir. 2006). The court focused its analysis on the fact that these
obligations were not “structured as direct payments to [ex-wife], but rather as
assumption of third-party debts.” Id. at 42. Although there was some evidence
the parties intended the assumption of debt to be in lieu of support, the court
found the countervailing evidence in the divorce decree, expressly stating that
no support obligation was to be awarded, weighed heavily against a finding of
support. Id. However, in Woosley v. Woosley, No. CIV-3:09-0910, 2010 WL
500423 (M.D. Tenn. Feb. 5, 2010), the District Court for the Middle District
of Tennessee held that a debtor’s promise to pay an ex-spouse’s car payment
was non-dischargeable as spousal support because the debt was “certainly
related” to the divorce agreement as it was referenced therein and there was
evidence the ex-spouse took less money in alimony due to her reliance on the
debtor paying her car payment. Thus, it seems the inquiry as to the
dischargeability of such obligations turns on whether the obligation was
intended to be in lieu of a greater spousal support payment.
A. The Second Mortgage Payment
The court holds that Mr. Benedict’s obligation to pay the second
mortgage was in the nature of support under similar analysis as Woosley, and
therefore a domestic support obligation that was not discharged by Mr.
Benedict’s bankruptcy. The Shadow Walk property was to be the home place
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of Ms. Benedict and the two minor children. There were two mortgages on the
home. Mrs. Benedict agreed to pay the first mortgage and Mr. Benedict agreed
to pay the second mortgage. Further, Mr. Benedict agreed to hold Ms.
Benedict harmless and to indemnify her from the claims of the second
mortgagee, then Pioneer Bank.
B. Credit for Second Mortgage Payments.
According to a summary of the amount of the second mortgage to
AmSouth and First Tennessee, Mr. Benedict contends that he spent $24,923.43
on the second mortgage. The court does not know what part was interest and
what part was principal. Ms. Benedict points to the lack of evidence to support
Ms. Benedict’s alleged payments on the second mortgage. Mr. Benedict
claims that he was no longer required to pay this debt after he received his
discharge in bankruptcy. Therefore, he should receive credit for these monies
against the alimony and child support balances that accrued after March 13,
2003. The court doubts he could receive any credit against the child support
obligation under the “necessaries” test.
Ms. Benedict testified that the property was re-financed in 2007 and she
did not withdraw any additional amounts or obtain any additional loans at that
time. She testified that she had to refinance the mortgage because the interest
rate on the Pioneer Bank loan was a variable rate. The current balance owed
is $42,024.44, which includes an additional $10,800 withdrawn by Mr.
Benedict on the loan after the divorce. He should not have made a loan on
realty owned by someone else.
First, if Mr. Benedict’s payment of the second mortgage is in the nature
of alimony or support, then he would not be entitled to any credit against any
other debt. He would have owed that payment as a matter of support. Second,
if the payment is not alimony or support, then the court may not be able [to]
characterize it as a payment entitling Mr. Benedict to credit. Until July of
2006, he was living with Ms. Benedict at her home. If the parties’
cohabitation and agreement prohibits enforcement of the alimony order, then
Mr. Benedict cannot “eat his cake and keep it” also. He was paying part of the
overhead while the parties cohabited. Mr. Benedict also told Ms. Benedict that
he felt he was “100% responsible” for the second mortgage. Trial Exhibit 36
shows that Ms. Benedict paid five payments of $425.24 each after cohabitation
ended. She is due reimbursement for this $21,262.00 plus the current balance
due of $42,024.44 for a total due of $44,150.64. (Some internal citations
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omitted).
The evidence does not preponderate against the Trial Court’s findings and
ultimate holding relative to this issue. Wife made payments when Husband failed to pay the
second mortgage. Wife was at risk of losing her home. The evidence reflects that the second
mortgage obligation was in the nature of support, and thus was not discharged in bankruptcy.
Wife argues on appeal that she should be awarded an additional $14,002.08 as
reimbursement for payments she made on the second mortgage. The evidence does not
preponderate against this figure of $44,150.64 as found by the Trial Court, and, therefore we
do not disturb the Trial Court’s figure. We affirm the Trial Court as to this issue.
Husband’s final issue is whether the Trial Court abused its discretion in
awarding Wife $44,568 in attorney’s fees. Tenn. Code Ann. § 36-5-103(c) provides:
(c) The plaintiff spouse may recover from the defendant spouse, and the
spouse or other person to whom the custody of the child, or children, is
awarded may recover from the other spouse reasonable attorney fees incurred
in enforcing any decree for alimony and/or child support, or in regard to any
suit or action concerning the adjudication of the custody or the change of
custody of any child, or children, of the parties, both upon the original divorce
hearing and at any subsequent hearing, which fees may be fixed and allowed
by the court, before whom such action or proceeding is pending, in the
discretion of such court.
Tenn. Code Ann. § 36-5-103(c) (2010). Pursuant to the statute, we review this issue raised
on appeal for abuse of discretion. Id. Husband, among other things, argues that the Trial
Court erred by awarding Wife attorney’s fees without determining whether the award applied
only to areas where Wife prevailed. Wife incurred considerable expense in this matter, and
was successful, to an extent, in enforcing the decree for alimony and/or child support both
below and on appeal. There is no hint her fees were unreasonable. It was within the
discretion of the Trial Court to award Wife attorney’s fees as it did. We hold that the Trial
Court committed no reversible error in its award of attorney’s fees to Wife.
We next address Wife’s issues. First, we address whether the Trial Court erred
in finding that Wife waived her right to receive alimony during the period the parties
resumed living together and in its calculation of alimony arrearage. On the alimony
arrearage, the Trial Court stated:
The parties began living together in June of 2002 when Ms. Benedict
and the children moved into Mr. Benedict’s home. On page 19, the Master
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stated that the parties reunited in May of 2002. The parties separated again in
July of 2006. The court ruled that Mr. Benedict would not owe Ms. Benedict
any alimony while they were living together. On January 6, 2010, the court
found that Ms. Benedict waived her right to alimony between June 2002 to
July 2005. According to the MDA, the alimony obligation terminated in July
2005 before they separated in July of 2006. (Internal citations omitted).
The issue of alimony in this case is somewhat unusual in that the parties
cohabited shortly after their divorce for several years. During this time of cohabitation, the
alimony provisions of the MDA did not proceed as originally planned. The record reflects
that the parties had an agreement regarding payment of alimony in the context of their
cohabitation. This agreement should be recognized and given effect. Wife wishes to have
received the financial benefits of her and the children having lived with Husband after the
divorce and also receive her awarded alimony as if Husband had not provided financially for
her during their post divorce years together. The evidence does not preponderate against the
findings of the Trial Court and its ultimate holding relative to this issue, and we affirm the
Trial Court.
We next address whether the Trial Court erred in finding that Husband was not
in contempt. The Master and the Trial Court were in agreement on this agreement. The
record reflects that Husband has made efforts to comply with his obligations. Moreover,
there has been considerable dispute as to what his obligations are and whether they should
be altered. Given our limited standard of review as to these concurrent findings of the Trial
Court and the Master, there is no basis in the record to establish that Husband should be held
in contempt, and we decline to hold that the Trial Court erred in failing to hold Husband in
contempt. Wife’s argument on this issue is without merit. We affirm the Trial Court.
We next address whether the Trial Court erred in finding that Husband’s
obligation for college tuition for the Children was not a domestic support obligation under
11 U.S.C. 523 (a)(5). As pointed out by Husband, this Court has stated:
While a parent generally has no legal duty to support a child past the
child's majority, Blackburn v. Blackburn, 526 S.W.2d 463, 465 (Tenn. 1975),
a parent may contractually extend his or her support obligation beyond that
imposed by law. Penland v. Penland, 521 S.W.2d 222, 224 (Tenn. 1975);
Hawkins v. Hawkins, 797 S.W.2d 897, 898 (Tenn. Ct. App. 1990). Payment of
college expenses is an appropriate subject for an agreement between a husband
and wife going through a divorce. Penland, 521 S.W.2d at 224; Hathaway v.
Hathaway, 98 S.W.3d 675, 678 (Tenn. Ct. App. 2002). Such an agreement is
binding on the parties and constitutes “a contractual obligation outside the
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scope of the legal duty of support during minority and retains its contractual
nature . . . .” Penland, at 224; Hathaway, at 678. As with property settlement
agreements generally, one that includes a provision on college expenses is
subject to the same rules of contract interpretation as any other contract.
Hathaway, 98 S.W.3d at 678.
Pylant v. Spivey, 174 S.W.3d 143, 151 (Tenn. Ct. App. 2003).
We are persuaded by Husband’s argument that Tennessee law regards an
obligation of this kind as contractual. Husband’s obligation for college tuition could extend
well into the Children’s adulthood. In theory, the Children could avail themselves of a claim
to Husband to support their college education in middle age or later. The college tuition
obligation was in the nature of a contract rather than support. This obligation does not
appear to be a support obligation as such, and thus is dischargeable. See In re Sholes, No.
92-5610, 1993 WL 15123 (6th Cir. Jan. 25, 1993). We affirm the Trial Court.
The final issue we address is whether the Trial Court erred in finding that
Husband was not required to pay any additional amount for the Mercedes. Husband was to
provide Wife with the Mercedes under the MDA. The Trial Court held, however, that the
obligation was use of the Mercedes. When the Mercedes was repossessed, Husband
nevertheless provided wife with adequate substitute vehicular transportation. This complied
with the substance of Husband’s obligation. We believe the Trial Court ruled correctly when
it declined to require Husband to pay any additional amounts on the Mercedes. The evidence
does not preponderate against the Trial Court’s findings as to this issue. Husband effectively
fulfilled his obligations in this area. We affirm the Trial Court.
In summary, we reverse the Trial Court as to its holding that Husband was
willfully or voluntarily underemployed, and those two subsequent issues related to this
determination. We find that Husband’s income for child support purposes is $75,000 per year
as found by the Master. We remand for the Trial Court to conduct further proceedings as
necessary consistent with this Opinion. We affirm the judgment of the Trial Court on all
other issues.
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Conclusion
The judgment of the Trial Court is affirmed, in part, and, reversed, in part, and
this cause is remanded to the Trial Court for further proceedings as necessary consistent with
this Opinion. The costs on appeal are taxed one-half against the Appellant, Donald Lester
Benedict, and his surety, if any, and one-half against the Appellee, Gretchen Michelle
Benedict.
_________________________________
D. MICHAEL SWINEY, JUDGE
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Donald Lester Benedict v. Gretchen Michelle Benedict
Combined Opinion