Trial Court ‘Prematurely’ Ordered Retroactive Modification Of Child Support
The trial court should have completed an evidentiary hearing before ordering a retroactive modification of the plaintiff’s child-support obligation, the Michigan Court of Appeals has ruled.
“It is undisputed that the evidentiary hearing was commenced to determine whether there had been any affirmative acts of misrepresentation by plaintiff that would warrant retroactive modification of his child support obligations,” the Court of Appeals wrote in Kidder v Pobursky-Kidder (Docket Nos. 356297 and 357908). “But plaintiff had not completed his testimony. And plaintiff had not yet been afforded the opportunity to present evidence or witnesses at the hearing.”
Meanwhile, the Court of Appeals also held the trial court properly sanctioned the plaintiff for filing pleadings that were not “well grounded in fact” and “intended to falsely lead the court to believe” that a reduction in child support was necessary.
As a result, the Court of Appeals vacated that portion of the trial court’s order directing the Friend of the Court (FOC) to retroactively calculate the plaintiff’s child-support obligation. The case was remanded for further proceedings.
Judges Elizabeth L. Gleicher, Jane E. Markey and Sima G. Patel were on the panel that issued the unpublished opinion.
Background
The parties were divorced in 2011. The consent judgment of divorce awarded the parties joint legal and physical custody of their three children. The Oakland County Circuit Court ordered the plaintiff to pay monthly child support.
In February 2018, the plaintiff sought to modify the child-support order, alleging a change in circumstances. Among other things, the plaintiff claimed he had a change in income and stated: “The second change of circumstances is that I am out of a job currently. I am working on obtaining a job to support my family. There is no way I can obtain a salary of the one I previously had. So I am requesting my income level to change for the formula to calculate child support.” The plaintiff testified that he had been self-employed at his family’s business, Kidder Associates, of which he was a 49 percent owner. The plaintiff said that his brother, who owned 51 percent of the business, had terminated his employment with a three-month severance package. The plaintiff claimed that his income from Kidder Associates would cease at the end of March 2018 but he was in negotiations for a buyout of his 49 percent interest. The plaintiff further testified that he had two residential homes that he planned to sell for a profit. The FOC referee imputed income to both parties and recommended that neither pay child support.
In June 2019, the defendant filed a motion to modify the plaintiff’s child-support obligation. She asserted that, contrary to his 2018 motion and testimony, the plaintiff received his full salary from Kidder Associates through December 2018. The defendant also claimed the plaintiff had income from real estate sales and rental properties. In response, the plaintiff asserted he was a full-time student working on a master’s degree and “commencing in 2019,” he no longer received an income from Kidder Associates. The FOC referee recommended the defendant be given an opportunity to conduct discovery.
The defendant served several subpoenas to investigate the plaintiff’s finances and, in March 2020, she filed a motion for retroactive modification of child support. The defendant also claimed the plaintiff committed perjury in his 2018 testimony and that, beginning in 2014, the plaintiff received periodic disbursements from Kidder Associates in addition to his regular salary and that none of the disbursements were disclosed by the plaintiff. The defendant requested the opportunity to conduct additional discovery on the issue of retroactive child support, asserting the plaintiff should be sanctioned and ordered to pay her expert witness fees and attorney fees.
The plaintiff, however, denied that he received his regular monthly income in 2019. He claimed the 2019 payments were used to offset the amounts due the plaintiff pursuant to a settlement agreement with Kidder Associates. The plaintiff further alleged the disbursements he periodically received in addition to his regular salary were for his corporate income tax obligations and were not personal income.
The Oakland County trial court referred the matter to the FOC referee for an evidentiary hearing. Due to time constraints, the evidentiary hearing was stopped before the plaintiff’s testimony concluded. But before the evidentiary hearing continued, the defendant filed motions to compel production of the plaintiff’s tax returns and W-2s. The trial court ordered the plaintiff to produce his tax returns for the previous three years and indicated that it would consider requiring the plaintiff to produce additional tax returns with a showing of good cause. The plaintiff complied with the order.
Thereafter, the defendant filed a motion to compel production of the plaintiff’s tax returns dating back to 2011. She asserted the information was relevant to calculating the plaintiff’s retroactive child-support payments. The defendant also renewed her request for expert witness fees and attorney fees.
After a November 2020 hearing on the defendant’s motion to compel, the trial court entered an order that: 1) directed the FOC referee to continue the evidentiary hearing regarding retroactive child support to be paid by the plaintiff for the time period prior to 2019, 2) instructed the FOC referee to calculate the amount of retroactive support from 2019 to the present, 3) awarded the defendant fees for a financial expert, 4) awarded the defendant attorney fees incurred since 2019 and 5) reserved the issue of producing additional tax returns and further retroactivity of child-support modifications upon good cause shown.
The trial court denied the plaintiff’s motion for reconsideration. The plaintiff appealed.
No Support Modification
The plaintiff argued on appeal that, prior to completing the evidentiary hearing, the trial court should not have 1) determined the defendant was entitled to a retroactive modification of child support and 2) ordered the FOC referee to calculate the amount of retroactive support.
“We agree,” the Court of Appeals said.
The Court of Appeals explained that MCL 552.603b requires a party be given “notice and an opportunity for a hearing” before a court can retroactively modify child support on the basis of a knowing and intentional failure to report or refusal to report income, or a knowing misrepresentation of income. Here, although the plaintiff provided “some testimony” about his income and his settlement with Kidder Associates at the August 2020 evidentiary hearing, “the hearing ended before plaintiff finished his testimony and before plaintiff had an opportunity to present any evidence or witnesses,” the appeals court observed.
It was “premature” for the trial court to determine that the defendant was entitled to a retroactive modification of child support from 2019 to the present under MCL 552.603b before the evidentiary hearing was completed, the Court of Appeals said. In particular, the appeals court pointed out the plaintiff had not completed his testimony at the evidentiary hearing and the plaintiff had not yet been allowed to present evidence or witnesses.
Moreover, the issue of whether support should be retroactively modified was not before the trial court at its November 2020 hearing, the Court of Appeals said, noting that MCL 552.603b requires “notice and an opportunity for a hearing” before a court can retroactively modify child support. The plaintiff “did not have notice that retroactive modification would be addressed, let alone decided, at the November 2020 hearing.”
Therefore, “we vacate the portion of the trial court’s … order instructing the referee to calculate retroactive child support from 2019 to the present and remand for this issue to be addressed and decided at the ongoing evidentiary hearing before the referee.”
Sanctions Appropriate
The plaintiff also claimed the trial court wrongly awarded the defendant attorney fees and expert witness fees.
“We disagree,” the Court of Appeals said, pointing out that awards of costs and fees are recoverable only where specifically authorized by statute, court rule or a recognized exception.
According to the Court of Appeals, MCR 1.109(E)(6) grants a court the authority to award sanctions in the form of attorney fees and expenses if a document is signed in violation of the rule. In this case, the trial court determined the plaintiff violated MCR 1.109(E)(5) in his February 2018 motion to modify child support and in his July 2019 response to the defendant’s motion to modify child support. “MCR 1.109(E)(6) states that the trial court ‘shall’ impose sanctions upon finding that a document has been signed in violation of the rule. Therefore, if a violation of MCR 1.109(E)(5) has occurred, the sanctions provided for by MCR 1.109(E)(6) are mandatory. … The plain language of MCR 1.109(E)(6) affords the trial court discretion to fashion ‘an appropriate sanction’ and does not restrict the sanction to costs or expenses incurred.”
The filing of a signed document that is “not well grounded in fact and law subjects the filer to sanctions” and, in this case, the plaintiff signed his February 2018 pro se motion, the Court of Appeals explained. “And the July 2019 motion response was signed by plaintiff’s counsel. An attorney is under an affirmative duty to conduct a reasonable inquiry into both the factual and legal basis of a pleading before it is signed.”
Meanwhile, the defendant incurred attorney fees “[a]s a direct result of plaintiff’s misrepresentations in his February 2018 motion and his July 2019 motion response,” the Court of Appeals said. “And defendant had to retain a financial expert because plaintiff failed to accurately disclose his full income, the payments that he received from Kidder Associates, and the sources of income reported on his tax returns.”
As a result, “[w]e are not left with a definite and firm conviction that the trial court made a mistake in determining that the pleadings were signed in violation of MCR 1.109(E)(5) and, therefore, the imposition of sanctions was required under MCR 1.109(E)(6),” the Court of Appeals held. “We conclude that the trial court did not abuse its discretion in sanctioning plaintiff for this violation by ordering him to pay defendant’s attorney fees incurred since 2019 and defendant’s financial expert’s fees.”
