Hinshaw v. Kuntz

NO. COA13-1184

NORTH CAROLINA COURT OF APPEALS

Filed: 1 July 2014

ELIZABETH HINSHAW,
Plaintiff/Mother,

v. Mecklenburg County
No. 09 CVD 3118
JOHN KUNTZ,
Defendant/Father.

Appeal by plaintiff from judgment entered 8 May 2013 by

Judge Paige B. McThenia in Mecklenburg County District Court.

Heard in the Court of Appeals 9 April 2014.

HORACK TALLEY PHARR & LOWNDES, P.A., by Christopher T. Hood
and Elizabeth J. James, for plaintiff.

Krusch & Sellers, P.A., by Rebecca K. Watts, for defendant.

ELMORE, Judge.

Elizabeth Hinshaw (plaintiff) appeals the trial court’s 8

May 2013 child support award on the basis that the trial court

erred in (1) failing to include bonus income in calculating the

parties’ base income, (2) denying her claim for retroactive

child support, and (3) denying her motion for reasonable

attorney’s fees. After careful review, we find no error in the

latter two issues, but hold that the trial court erred in the
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first. Accordingly, we affirm, in part, and reverse and remand,

in part, for further action consistent with this opinion.

I. Background

Plaintiff and John Kuntz (defendant) were married in

September 2001, separated in December 2006, and divorced in July

2010. The parties are the parents of three minor children,

namely, A. Kuntz, born 15 September 2002; S. Kuntz, born 6

February 2004; and E. Hinshaw, born 27 January 2007 (the minor

children). Plaintiff was awarded primary physical custody of

the minor children pursuant to a Consent Order for Child Custody

entered 16 April 2009. On 12 February 2009, the parties entered

into a Settlement Agreement/Separation Agreement (the Agreement)

whereby defendant agreed to pay plaintiff child support in the

amount of $1,750.00 per month and alimony in the amount of

$5,000.00 per month until 31 August 2010, the date on which his

alimony obligation was to terminate. The Agreement further

provided that, after alimony ended, the parties were to

renegotiate the amount of child support defendant would pay

plaintiff pursuant to the North Carolina Child Support

Guidelines (the Guidelines). At the time the parties negotiated

the Agreement, their combined adjusted gross income was less

than $25,000.00 per month.
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When alimony ended, defendant voluntarily increased his

child support payment from $1,750.00 per month to $2,750.00 per

month. Plaintiff did not find this new sum to be an adequate

support payment. The parties were subsequently unable to agree

on an appropriate child support award; therefore, plaintiff

filed a Motion in the Cause for Child Support on 29 March 2011.

In her motion, plaintiff alleged that the amount of child

support currently paid by defendant was not adequate to meet the

needs of the minor children.

In its 8 May 2013 Child Support Order, the trial court made

the following findings of fact: After spending a number of

years as a stay-at-home parent, plaintiff was hired by Wells

Fargo in April 2010. Plaintiff’s gross base income from Wells

Fargo totaled $121,000.00 per year; she also earned

approximately $94.00 per month on a crossword puzzle business

and $48.00 in interest and dividend income. Therefore,

plaintiff’s gross yearly income totaled $122,904.00. Plaintiff

has received and can continue to expect an annual bonus from her

employer. Defendant is employed by Bank of America earning an

annual salary of $211,000.00. Defendant has received and can

continue to expect an annual bonus from his employer.
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Based on these figures, the trial court found that the

supporting parent’s basic child support obligation could not be

determined by using the child support schedule outlined in the

Guidelines because the parents’ combined adjusted gross income

exceeded $25,000.00 per month. Accordingly, the trial court

determined that the minor children’s reasonable needs and

expenses totaled $6,630.89 per month, with $5,768.70

attributable to plaintiff’s household and $862.19 attributable

to defendant’s household. Based solely on the parties’ monthly

gross incomes—without accounting for bonus income—the trial

court ordered defendant to pay sixty percent (60%) of the minor

children’s reasonable needs and expenses, which totaled

$3,978.53 per month. After crediting defendant $862.19, the

trial court set defendant’s child support obligation at

$3,116.34 per month. Further, the trial court ordered defendant

to pay $8,425.82 in arrears (prospective child support). Both

parties’ motions for attorney’s fees were denied in the 8 May

2013 order. Plaintiff now appeals.

II. Analysis

A. Bonus Income
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Plaintiff first argues that the trial court erred in

excluding the parties’ bonus income when calculating the parties

actual income and the overall child support award. We agree.

“In reviewing child support orders, our review is limited

to a determination whether the trial court abused its

discretion. Under this standard of review, the trial court’s

ruling will be overturned only upon a showing that it was so

arbitrary that it could not have been the result of a reasoned

decision.” Spicer v. Spicer, 168 N.C. App. 283, 287, 607 S.E.2d

678, 682 (2005) (citations omitted). “Child support

calculations under the guidelines are based on the parents’

current [or actual] incomes at the time the order is entered.”

Caskey v. Caskey, 206 N.C. App. 710, 713, 698 S.E.2d 712, 714

(2010) (citations omitted). Under the Guidelines, “income” is

defined as:

[A] parent’s actual gross income from any
source, including but not limited to income
from employment or self-employment
(salaries, wages, commissions, bonuses,
dividends, severance pay, etc.) . . . . When
income is received on an irregular, non-
recurring, or one-time basis, the court may
average or pro-rate the income over a
specified period of time or require an
obligor to pay as child support a percentage
of his or her non-recurring income that is
equivalent to the percentage of his or her
recurring income paid for child support.
When income is received on an irregular,
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non-recurring, or one-time basis, the court
may average or pro-rate the income over a
specified period of time or require an
obligor to pay as child support a percentage
of his or her non-recurring income that is
equivalent to the percentage of his or her
recurring income paid for child support.

N.C. Child Support Guidelines, 2012 Ann. R. N.C. 51. “Gross

annual income in its plain, ordinary and popular sense means

total income without deductions.” Saunders v. Saunders, 52 N.C.

App. 623, 624, 279 S.E.2d 90, 91 (1981) (internal quotations

omitted). This definition “include[s] longevity pay [and]

bonuses.” Id.

In the case sub judice, the trial court found that both

parties had received and remained eligible for an annual bonus.

Specifically, the trial court found that defendant’s 2011 bonus

totaled $114,002.20 ($28,500.00 of cash and $85,502.20 of

restricted stock); his 2010 bonus totaled $114,000.00; and his

2009 bonus totaled $37,500.00. Plaintiff’s 2011 bonus totaled

$30,800.00, and her 2010 bonus totaled $17,931.00, representing

nine months of employment. However, in Finding #118 the trial

court declined to incorporate the parties’ bonus income in its

calculation of the parties’ base income for the following

reason:

Given that the reasonable needs and expenses
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of the children are covered by the parties
each month prior to the addition of bonus
income deferred compensation, tuition
reimbursement or other increases to base
income, and given that both parties are
eligible for a bonus each year, the Court
declines to calculate bonus income, deferred
compensation, tuition reimbursement or other
increases to base income as part of child
support.

On appeal, plaintiff contends that the trial court was

required to include bonus income in calculating the parties’

gross base income. Alternatively, defendant argues that because

his bonus income is irregular or non-recurring, “the trial court

is to address that income separately from the parties’ gross

monthly income when determining child support.” Defendant

avers: “The approach of separating out irregular or non-

recurring income from regular, ongoing income . . . makes sense”

given that there is no “guarantee” of receiving a bonus. We

disagree with defendant and point out that he cites no authority

to support his position.

First, we note that the plain language of the Guidelines

clearly includes bonus income in the definition of “income.”

Should certain bonus or other income be deemed irregular or non-

recurring, the Guidelines further instruct the trial court to

average or pro-rate the income or order the obligor to pay a
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percentage of his or her non-recurring income equivalent to the

percentage of his or her recurring income for child support.

There is no provision in the Guidelines that instructs the trial

court to completely separate irregular or non-recurring bonus

income from its calculations. Second, we can infer that the

trial court found that the bonus income was not irregular or

non-recurring given that the order specifically stated each

party had received and could expect an annual bonus. After

reviewing the record, we agree that the bonus income did not

constitute irregular or non-recurring income as contemplated by

the Guidelines. Finally, there is no provision in the

Guidelines which instructs the trial court that it may elect to

opt out of including bonus income in its calculations based

solely on the premise that the reasonable needs and expenses of

the children are otherwise satisfied without its inclusion.

Because the Guidelines include bonus income in the definition of

income, and because the bonus income was not irregular or non-

recurring, the trial court was required to include the bonus

income in calculating the parties’ base income and the overall

child support award. Its failure to do so constituted an abuse

of discretion. See e.g., Waller v. Waller, 20 N.C. App. 710,

713, 202 S.E.2d 791, 793 (1974) (holding that before ruling on a
 -9-
motion to modify child support, the trial court must give

consideration to the fact that part of the defendant’s income

was a bonus which fluctuated from year to year).

B. Retroactive Child Support

Plaintiff next argues that the trial court erred in

failing to award retroactive child support from 1 September 2010

through the time she filed her complaint in district court. We

disagree.

“Child support awarded prior to the time a party files a

complaint is properly classified as retroactive child support.”

Carson v. Carson, 199 N.C. App. 101, 105, 680 S.E.2d 885, 888

(2009) (quotation and internal citations omitted).

“[R]etroactive child support payments are only recoverable for

amounts actually expended on the child’s behalf during the

relevant period. Therefore, a party seeking retroactive child

support must present sufficient evidence of past expenditures

made on behalf of the child, and evidence that such expenditures

were reasonably necessary.” Robinson v. Robinson, 210 N.C. App.

319, 333, 707 S.E.2d 785, 795 (2011) (quotations and citations

omitted). “[W]here the parties have complied with the payment

obligations specified in a valid, unincorporated separation

agreement,” the trial court is prohibited from awarding
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retroactive child support, absent an emergency situation.

Carson at 106-107, 680 S.E.2d at 889.

On appeal, plaintiff’s argument is premised on the notion

that the child support provision in the Agreement expired when

defendant’s obligation to pay alimony likewise expired. As

such, plaintiff contends that the parties were not subject to a

valid, unincorporated separation agreement as of 1 September

2010. Plaintiff avers, “the parties were, for purposes of child

support, in a position procedurally analogous to that where

parties separate without executing a separation agreement

providing for child support.” Plaintiff’s argument is similar

to the argument advanced by the plaintiff-mother in Carson. In

Carson, the parties entered into an unincorporated separation

agreement in March 2008, which provided that the defendant-

father would pay a child support obligation of $500.00 per month

until the parties were able to negotiate the terms of a consent

order for child support. Id. at 103, 680 S.E.2d at 887. In the

event the parties were unable to negotiate a consent order

within one year, the separation agreement stated that either

party could file a complaint in district court. Id. The

parties never negotiated the terms of a consent order; the
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defendant-father continued to pay $500.00 per month in child

support. Id.

Eight years passed before the plaintiff-mother filed a

complaint in district court seeking retroactive child support,

claiming that she was “entitled to reimbursement from defendant

for a portion of the actual expenses incurred for the benefit of

the minor child from August 2003 through the present.” Id. at

104, 680 S.E.2d at 887 (internal quotation omitted). The trial

court ordered the defendant-father to pay $31,036.85 in

retroactive and prospective child support from September 2003

through January 2008. Id. at 104, 680 S.E.2d at 888. On

appeal, the defendant-father argued that the trial court erred

in awarding the plaintiff-mother retroactive child support

because he had consistently paid $500.00 per month in accord

with the terms of the parties’ separation agreement. Id. at

105, 680 S.E.2d at 888. This Court held that, because the

defendant-father fully complied with the terms of the valid,

unincorporated separation agreement, the trial court was

prohibited from awarding retroactive child support in excess of

the stated terms of the separation agreement. Id. at 108, 680

S.E.2d at 890 (holding “where there is a valid, unincorporated

separation agreement, which dictates the obligations of the
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parent providing support, and the parent complies fully with

this obligation, the trial court is not permitted to award

retroactive child support absent an emergency situation”).

In the instant case, plaintiff’s argument that the child

support provision “expired” is without merit. Here, the parties

were operating under a valid, unincorporated separation

agreement which clearly intended for defendant to continue

making child support payments after the expiration of the

alimony term. It is undisputed that defendant made monthly

payments pursuant to the terms of the Agreement from the time it

became effective until the time plaintiff filed a complaint in

district court. Defendant even voluntarily increased his

support payment from the mandated $1,750.00 per month to

$2,750.00 per month. Should plaintiff have found $2,750.00 to

be an acceptable support payment, the parties could have

operated under the terms of the Agreement indefinitely. On

these facts, the trial court lacked authority to award

retroactive child support because defendant, at all requisite

times, abided by the terms of the valid, unincorporated

separation agreement. Accordingly, the trial court did not err

in denying plaintiff’s claim for retroactive child support.
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Assuming arguendo that the trial court had authority to

award retroactive child support, plaintiff’s argument remains

unconvincing. Again, retroactive child support is based on the

non-custodial parent’s share of the reasonable actual

expenditures made by the custodial parent on behalf of the

child. Robinson, supra. The record discloses that plaintiff

failed to present evidence to the trial court regarding the

specific amounts she actually expended to support the minor

children during the requisite period for which she sought

retroactive child support. As such, plaintiff failed to meet

her burden of proof. The trial court did not err in declining

to award plaintiff retroactive child support on these facts.

Having found that the original terms of the Agreement were not

reasonable to meet the children’s needs, the trial court was

justified in awarding prospective child support in the amount of

$8,425.82.

C. Attorney’s Fees

Lastly, plaintiff argues that the trial court erred in

denying her motion for an award of attorney’s fees. We

disagree.

In a child support action, the trial court has discretion

to award attorney’s fees to “an interested party acting in good
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faith who has insufficient means to defray the expense of the

suit.” N.C. Gen. Stat. § 50-13.6 (2013). Whether a party has

satisfied these requirements is a question of law fully

reviewable on appeal. Barrett v. Barrett, 140 N.C. App. 369,

374, 536 S.E.2d 642, 646 (2000) (citation omitted). Generally,

the dependent spouse has insufficient means to defray the costs

of litigation if he or she is unable “as litigant to meet the

supporting spouse as litigant on substantially even terms.”

Theokas v. Theokas, 97 N.C. App. 626, 630-31, 389 S.E.2d 278,

281 (1990) (citation omitted). In addition, “[b]efore ordering

payment of a fee in a support action, the court must find as a

fact that the party ordered to furnish support has refused to

provide support which is adequate under the circumstances

existing at the time of the institution of the action or

proceeding[.]” N.C. Gen. Stat. § 50-13.6 (emphasis added).

In the instant action, both parties requested an award of

attorney’s fees. Specifically, plaintiff sought to recover “at

least” $25,265.50 in attorney’s fees from defendant. In its

order, the trial court found that neither party was entitled to

recover attorney’s fees because each had sufficient means to

defray the cost of litigation. On appeal, our focus hinges on

whether plaintiff had sufficient funds to defray the costs of
 -15-
litigation. “With regard to this determination, a court should

generally focus on the disposable income and estate of just that

spouse, although a comparison of the two spouses’ estates may

sometimes be appropriate.” Barrett at 374, 536 S.E.2d at 646

(citation omitted). Having reviewed the trial court’s findings,

we find them to be sufficient to form a basis to deny plaintiff

attorney’s fees. Excluding bonus income, plaintiff’s monthly

gross income is $10,242.00, and her reasonable needs total

$3,183.87. After paying $2,652.35 per month towards the minor

children’s reasonable needs, plaintiff is left with a surplus of

$4,405.78 per month. This alone supports the trial court’s

determination that plaintiff had sufficient means to defray the

cost of litigation.

Further, the trial court did not find as fact that

defendant refused to provide support which was adequate under

the circumstances. See N.C. Gen. Stat. § 50-13.6. The record

indicates that defendant complied with the terms of the

Agreement directing him to make child support payments; in fact,

he voluntarily made support payments in excess of what he was

required to pay. This evidence further supports the trial

court’s decision to deny plaintiff’s motion for attorney’s fees.

See Prescott v. Prescott, 83 N.C. App. 254, 262, 350 S.E.2d 116,
 -16-
121 (1986) (holding that the trial court did not abuse its

discretion in denying wife’s motion for reasonable attorney’s

fees in connection with her child support action when the

husband paid adequate child support and voluntarily made

additional support payment which he was not obligated to make

under the parties’ consent order). We hold that the trial

court’s findings of fact are supported by competent evidence and

conclude that it was not an abuse of discretion for the trial

court to deny plaintiff’s motion for an award of attorney’s

fees.

III. Conclusion

The trial court did not err in denying plaintiff’s motions

for retroactive child support and for attorney’s fees. However,

by excluding the parties’ bonus income in its calculation of the

parties’ gross base income, the trial court did err in

calculating its child support award. We reverse the requisite

portions of the trial court’s order and remand so that the trial

court can include the bonus income in its calculations. We

further instruct the trial court to recalculate the supporting

parent’s child support obligation accordingly.

Affirmed, in part; reversed and remanded, in part.

Judges McCULLOUGH and DAVIS concur.