Child support guidelines

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Issues for discussion 12/5/08
1.Child support; Whether the trial court properly granted the defendant-father's motion to modify his child support obligation; De novo standard of review; Peterson v. Peterson; In re Lobaina Estate;
2.Change of circumstances; Chapdelaine v. Sochocki; MCL 552.605(2) governing determination of child support; Ghidotti v. Barber; Burba v. Burba (After Remand);
3.Michigan Child Support Formula Manual (MCSFM); Oviatt v. Oviatt; Aussie v. Aussie; 4.Contract principles; Rory v. Continental Ins. Co.; Bloomfield Estates Improvement Ass'n, Inc. v. Birmingham; Gramer v. Gramer; Lentz v. Lentz; Krueger v. Krueger; Royal Prop. Group, LLC v. Prime Ins. Syndicate, Inc.
[This opinion has been modified for media presentation consult an attorney before you rely on its content.(...) Indicates content has been removed CAP headlines have been added-Terry Bankert 12-5-08]
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Michigan Court of Appeals (Published), Case Name: Holmes v. Holmes e-Journal Number: 41219, Judge(s): Gleicher, Bandstra, and Beckering
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CONTRACT THEORY AND CHILD SUPPORT
The court held since the child support guidelines set forth a parent's minimum support obligation, a voluntarily assumed obligation to pay an amount in excess of the minimum is not inherently objectionable and a contract enhancing a parent's child support obligation should be enforced, absent a compelling reason to forebear.
THE COUPLE WERE BOTH ATTORNEYS
The parties, both attorneys, have two minor children.
THEY DIVORCED 1996
A consent divorce judgment was entered in July 1996. At the time of the divorce, the plaintiff-mother practiced in a small firm.
MOM NOW RUNS A CONSTRUCTION BUSINESS
She is now the president of a family construction business and no longer practices law.
DAD IS A PARTNER IN A LARGE FIRM
Defendant-father is a partner in a large statewide law firm.
THE DIVORCE JUDGEMENT INCORPORATED A SIDE AGREEMENT OR CONTRACT
DAD GETS 164 OVERNIGHTS A YEAR* DAD PAYS 25% OF HIS BONUS AS CHILD SUPPORT
The consent judgment of divorce incorporated a document the parties called the "contract," which provided, inter alia, for joint legal custody of the children, with plaintiff having physical custody, defendant having overnight custody about 164 days a year, and a paragraph as to the computation of child support including a provision requiring defendant to pay as child support 25 percent of any net bonus each year. The contract also contained a provision addressing future child support modification. Over the years, the computation of the amount of child support defendant was to pay was disputed by the parties.
2006 DAD WANTS TO CHANGE THE CHILD SUPPORT
Just before the 10-year anniversary of the divorce judgment, defendant moved for modification of his child support obligation.
THEY WENT TO MEDIATION
The issue was mediated and the trial court issued an order modifying the support obligation (which resulted in a $45 increase in defendant's payments) and held an evidentiary hearing on the bonus percentage, and changed the bonus to 9.3 percent.
THE TRIAL COURT WOULD NOT ENFORCE THE SIDE AGREEMENT OF CONTRACT
The trial court refused to enforce the bonus agreement the parties entered into voluntarily, despite the absence of any evidence its enforcement would create a hardship for the defendant, or otherwise qualify as unjust or inappropriate.
MOM APPEALED TO THE MICHIGAN COURT OF APPEALS
Plaintiff appealed.
CHANGES OF CIRCUMSTANCES CAN CHANGE CHILD SUPPORT
The court held the trial court did not err in concluding a change of circumstances warranted modification of defendant's support obligation.
THE TRIAL COURT MUST USE THE MICHIGAN CHILD SUPPORT FORMULA MANUEL AND EXPLAIN HOW IT DEVIATES
The Supreme Court requires trial courts use the MCSFM and established a procedure they must follow when deviating from the MCSFM including an explanation of how the order deviates from the formula.
THE BONUS AGREEMENT IS CHILD SUPPORT BUT CAN BE MODIFIED IF CIRCUMSTANCES CHANGE
The court noted the history the parties' child support dispute illustrated enforcing the bonus agreement served the purposes of the statutes governing child support, while preserving the court's ability to modify defendant's obligation if his or the children's financial circumstances changed.
THE BONUS AGREEMENT IS A CONTRCAT AND MUST BE ENFORCED
The bonus provision in the divorce judgment was contractual, freely negotiated, and unambiguous. Thus, it must be enforced as written. Reversed and remanded.
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S T A T E O F M I C H I G A N C O U R T O F A P P E A L S
ELIZABETH S. HOLMES, Plaintiff-Appellant, FOR PUBLICATION
December 4, 2008 9:05 a.m. v No. 276470 Kent Circuit Court
RICHARD E. HOLMES, JR., LC No. 96-003184-DM Defendant-Appellee.
Before: Bandstra, P.J., and Beckering and Gleicher, JJ. GLEICHER, J.
e-Journal Number: 41219
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I. Facts and Proceedings
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PROPERTY SETTLEMENT CONTRACT
The parties’ consent judgment of divorce incorporated a document entitled, "Alimony,
Custody, Child Support, Parenting Time, and Property Settlement Contract" (the contract). The
contract provided for joint legal custody of the children, with plaintiff receiving physical
custody. Defendant’s parenting time consisted of 12 monthly overnight visits, or approximately
164 days a year. Paragraph 7 of the contract, entitled "Child Support," is the disputed portion at
the center of this appeal. It provides,
DAD PAYS CHILD SUPPORT IN THE AMOUNT OF $1,263.00
Husband shall pay child support in the amount of One Thousand, Two
Hundred Sixty-three ($1,263.00) Dollars per month (see attached calculations),
which includes his portion of the payment for the children’s nanny.
DAD IS A BIG DOG AND GETS A BIG BONUS
Further,
Husband shall pay twenty-five percent (25%) of any net bonus he receives in any
given year as additional child support. When the oldest child attains the age of
18 or completes high school, whichever event occurs last, this payment shall be
reduced to fifteen percent (15%) of his net bonus, and shall terminate upon the
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youngest child’s attaining the age of 18 or graduating from high school,
whichever last occurs. [Emphasis supplied].
THEY CONTRACTED TO BE OUT OF COMPLIANCE WITH SERF.MOM SAID YOU CAN HAVE EXTRA PARENTING TIME BUT YOU DO NOT GET A BREAK ON YOUR CHILD SUPPORT
The parties agree that they calculated defendant’s $1263 monthly child support obligation
by adding together the amount that would have been due under the standard child support
guidelines in the Michigan Child Support Formula Manual (MCSFM), assuming sole custody
resided with plaintiff ($1697.81), and the amount calculated under the shared economic
responsibility formula (SERF)1 ($828.25), and then dividing by two.2 At the time they
negotiated the contract, the parties recognized that defendant’s substantial parenting time would
potentially entitle him to application of the SERF. They agreed on the compromise embodied in
the contract to avoid a protracted courtroom battle regarding both parenting time and child
support.
Paragraph 8 of the contract, entitled "Additional Child Support Provision," addressed
future child support modification:
All child support shall be paid through Kent County Friend of the Court
and shall be subject to all Friend of the Court regulations and supervisory fees.
DAD SAID HE PROMISED TO NEVER ASK FOR A CHILD SUPPORT REDUCTION UNDER SERF
Husband waives the right to assert shared economic participation and agrees not
to introduce the shared economic concept into the support calculation for the
minor children for a ten-year period. Wife agrees that as long as Husband
exercises the parenting time specified in this Agreement, the same shall be
effected in the support calculation.
DADS INCOME COULD BE REDUCED BUT HE CANNOT SEEK A REDUCTION UNLESS HE IS UNEMPLOYED-CONTRACT PROVISION
Husband and Wife agree that support shall remain fixed for one year after
the entry of the Judgment of Divorce, before it can be reviewed, and that support
will be reviewed only in the event that either Husband or Wife is receiving greater
compensation than at the time of the entry of the Judgment of Divorce.
In no
event shall child support be reduced, unless Husband is completely unemployed
on a non-voluntary basis, or unless Wife’s earnings increase. [Emphasis
supplied].
MPMS INCOME WENT DOWN AND DAD WANTS SERF ....1997
In 1997, the parties filed competing motions to modify defendant’s monthly child support
payments. Plaintiff sought a significant increase, alleging that her income declined when her law
firm closed it doors and she became self-employed. Defendant advocated for application of the
SERF, averring that because he had 14 parenting time days a month the SERF was more
equitable. Plaintiff countered that in the contract defendant had "agreed not to assert shared
economic responsibility for a period of ten years."
1 This methodology appears in § 3.05 of the 2004 MCSFM.
2 The "attached calculations" referenced in ¶ 7 of the contract were not attached to the divorce
judgment or the copy of the contract filed with the circuit court. The parties clashed regarding
the formula for many years. But their current positions remain consistent with the simple
mathematics described here.
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THE LOWER COURT INCREASED CHILD SUPPORT PAYMENTS AND TALKED ABOUT THE CONTRACT BUT DOES NOT ATTACH IT TO THE ORDER
The circuit court increased defendant’s child support payment to $1391 a month,
observing as follows in its written opinion and order:
The issue is complicated by the fact that the judgment incorporates by
reference a document entitled "alimony, custody, child support, parenting time,
and property settlement contract" entered by and between the parties under date of
March 16, 1996. This rather singular document addresses child support in
paragraphs 7 and 8 on pages 3 and 4. Paragraph 7 establishes child support for
the 2 minor children of the parties at $1263.00 per month, including child care,
which figure is ostensibly based upon "attached calculations." Lamentably
however, no such calculations are in fact attached to the document.
1997 LOWER COURT SAID NO MORE REVIEWS FOR 2 YEARS
The circuit court calculated the $1391 monthly figure through a formula of its own creation,
which was more complex than simply adding the standard guideline and SERF numbers, then
dividing the total by two. The circuit court further ordered that no child support reviews would
occur for 24 months, absent an "extraordinary change in circumstances."
2001 DAD WANTS HIS SUPPORT LOWERED,NEW JUDGE
On September 28, 2001, defendant filed a motion "for child support calculation pursuant
to judgment of divorce." He requested that the newly assigned circuit court judge reconsider the
previous judge’s calculation method, and instead calculate the support obligation by combining
the standard guideline amount with the SERF, and dividing by two. Plaintiff responded that the
previously employed method constituted the law of the case. The parties also argued regarding
whether the calculation would be made using defendant’s "base salary" or his "income." The
circuit court ruled that the parties had intended to use the formula advocated by defendant.
2002 CHILD SUPPORT $1,383 PER MONTH PLUS 25 % OF HIS BONUS
In December 2002, the parties stipulated to a monthly child support payment of $1,383.3 Defendant continued to pay 25% of his net bonus as child support.
FOR 10 YEARS DAD PAID 25% OF HIS BONUS
During the 10-year period described in paragraph 8 of the contract, the parties fought
several contentious custody battles, and filed multiple motions seeking child support
modification.4 Notably, neither party challenged the portion of the 1996 contract addressing
defendant’s bonus percentage. Defendant consistently paid 25 percent of his net bonuses as
child support, which in some years represented substantial, six-figure sums.
DAD NOW WANTS A CHANGE AT 10 YR MARK,
Shortly before the 10-year anniversary of the divorce judgment, defendant moved for
modification of his child support obligation. Defendant contended that he could now introduce
the "shared economic concept" because the 10-year period of forbearance specified in the
contract would soon expire. Defendant invoked the following contract provision: "Husband
waives the right to assert shared economic participation and agrees not to introduce the shared
3 Plaintiff filed a delayed application for leave to appeal these rulings, and on May 8, 2003, this
Court denied the application for lack of merit in the grounds presented. Holmes v Holmes,
unpublished order of the Court of Appeals (Docket No. 246548).
4 A 2003 custody battle also resulted in an appeal to this Court. Holmes v Holmes, unpublished
order of the Court of Appeals, issued April 1, 2003 (Docket No. 247574).
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economic concept into the support calculation for the minor children for a ten-year period."
Defendant averred that he had custody of the children for 172 days a year, and that the court thus
had to apply the SERF.
DAD WANTS TO REDUCE HIS CHILD SUPPORT BY $636
He sought a reduction of his support obligation to $636 a month,
constituting four percent of his average monthly income, and a commensurate reduction in the
amount of the support payment deducted from his net bonus, from 25 percent to 4 percent.
MOM SAYS NO CHANGE IN CIRCUMSTANCES
Plaintiff responded that no basis existed for modifying defendant’s support obligation,
because defendant had failed to show a "change in circumstances." Plaintiff further argued that
the bonus percentage had been established in the contract and could not be modified. Plaintiff
calculated that under the SERF, defendant would pay $1134 a month, and under the straight
guidelines formula he would pay $2076.30 each month.
COURT FINDS CHANGE IN CIRCUMSTANCES FOR BOTH
The circuit court referred the matter to the friend of the court, explaining as follows:
The Court does find that there has been a change in circumstances
presented.
I am satisfied that having the ten years lapse is a basis to re-evaluate
appropriate support for the two children.
I’m also satisfied that it’s been two years since the last review of child
support.
And, I’m further satisfied that based on the allegations set forth within
both briefs, that there’s a change in the income of both parties. And, also that the
overnight stays which have been kept track by both parties in copious and
voluminous notations, deserves review.
On March 31, 2006, plaintiff filed a cross-motion for modification of child support,
alleging a change of circumstances that included defendant’s failure to utilize all of his parenting
time, and an increase in defendant’s income. On April 14, 2006, the circuit court referred the
matter "for review and a recommendation to a mediator selected and agreed upon by the parties."
On October 2, 2006, mediator David C. Sarnacki issued his report and recommendations, which
included the following:
39. In this case, the parties’ original agreement included a regular
monthly support amount and a provision for additional child support in the
amount of 25% of any net bonus. The 1996 support calculations showed that the
regular monthly child support obligation was about 25.4% of Richard’s net
income.
40. Richard and his attorney (who calculated the 1996 obligation)
contend that the 25% figure was deliberately set based on the percentage of
obligation to net income. Elizabeth contends that she was never told this in 1996
and that she did not know how Richard selected the 25%. She merely agreed to
his proposal because she knew there was a potential for large bonus income.
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41. As indicated above, the method for providing additional support in
the form of a percentage of net bonus income is not surprising. In fact, the figure
(25%) bears far too much similarity to the actual ratio (25.4%) to be a
coincidence. If there was something shocking about the percentage or including it
within the child support obligation, Elizabeth’s attorney—an experienced and
respected divorce attorney—would have recognized it and it could have been
dealt with in 1996.
42. Despite Elizabeth’s contention that the bonus percentage was
separate and distinct, it was included in the child support provisions, which are
modifiable by law. That percentage served the parties well for 10 years. Now,
with the entire obligation under review, there is no reason to ignore the new ratio
of obligation to net income. The bonus percentage should reflect the child
support obligation as modified.
43. RECOMMENDATIONS: Based upon all the information
provided to this evaluator, I submit the following recommendations to this Court:
44. The effective date for modification is March 19, 2006.
45. Richard’s income is $177,400.00 ($14,783.33/month).
46. Elizabeth’s income is $80,425.00 ($6,702.08/month).
47. Richard’s number of overnights for purposes of the Formula is
157.
48. The formula to be used is SERF.
49. The net bonus percentage is modified in accordance with the ratio
of obligation to net income.
50. The calculation of child support is as follows:
Effective March 19, 2006, Defendant/Father shall pay
Plaintiff/Mother for support for the two minor children, the sum of $1032.89 per
month ($674.55 per month for one) or until further Order of the Court.
In addition to monthly child support, Defendant/Father shall pay
Plaintiff/Mother 9.30% of any net bonus income for the care of the two minor
children (6.17% of any net bonus income for one minor child).
On October 6, 2006, defendant filed a motion requesting that the circuit court adopt the
mediator’s recommendations. Plaintiff accepted the recommendation regarding monthly child
support and agreed that defendant’s parenting time consisted of 157 overnights a year. However,
plaintiff rejected the mediator’s recommendation regarding the modification of defendant’s
bonus percentage. On October 13, 2006, the circuit court entered an order providing as follows:
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1. Defendant’s motion for modification of child support is hereby
GRANTED in part and, by agreement of the parties, the Court adopts the
recommendations of the mediator as follows:
a. Defendant’s monthly child support obligation shall be modified
effective March 19, 2006;
b. The formula to be utilized in calculating monthly child support is
the Shared Economic Responsibility Formula;
c. The monthly income to be utilized in the shared economic
responsibility formula is $14,783.33 per month for Defendant and $6,702.08 for
Plaintiff.
d. The number of overnights for the Defendant to be utilized in the
shared economic responsibility formula is 157.
e. As of the effective date of modification, Defendant’s monthly child
support obligation is $1,032.89 per month.[5]
2. Plaintiff’s cross-motion for modification of child support is hereby
DENIED.
3. That portion of Defendant’s motion for modification of child
support relating specifically to modification, if any, of a percentage of
Defendant’s net bonus shall be scheduled for an evidentiary hearing before this
Court.
On January 19, 2007, the circuit court conducted the evidentiary hearing regarding
defendant’s bonus percentage. Both parties testified regarding their interpretations of the
contract’s bonus clause. Plaintiff testified that she and defendant agreed that she would receive
25 percent of defendant’s bonus until the older child’s eighteenth birthday. The bonus
percentage "would then drop to 15 percent," and would remain at that level until the younger
child’s eighteenth birthday. Plaintiff conceded that this amount was considered child support
rather than a property settlement, and that child support is modifiable under Michigan law.
Plaintiff nevertheless asserted, "My position is that Rich and I agreed that it would not be
modifiable until [the older child] turned 18, which we can do."
Defendant contended that when they negotiated the bonus provision, he and plaintiff
applied the same percentage (25%) to his bonus as they had to his income, when calculating his
monthly child support payment. He asserted that he agreed to pay more than the SERF required
so that plaintiff would agree to allow him more overnights with his children, declaring, "I paid
extra money to purchase time with my children and to guarantee they could stay in the home."
5 This constituted a $45 increase in defendant’s payments.
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BONUS AGREEMENT COULD CHANGE AFTER 10 YEARS
Defendant testified that he and plaintiff intended the bonus percentage to remain at 25% for 10
years, and that ¶ 8 of the contract "guaranteed" that after 10 years the bonus percentage would
change. He explained, "I also understood at the time that all child support agreements had to
read that they continued until a child was 18 or had graduated from high school. That was
standard language."
Attorney Roger Boer represented plaintiff at the time of the divorce, and drafted the
contract. According to Boer, the parties modeled the bonus percentages on those used by
divorcing Steelcase employees, because Steelcase "had a wonderful bonus plan," and the 25%
formula for two children was "state of the art at the time that most judgments contained that."
Boer asserted that when he drafted the contract, he intended that the bonus percentages "would
run" until the specific events identified in the contract, the children’s eighteenth birthdays. Boer,
too, conceded his awareness that child support is always modifiable under Michigan law.
THE LOWER TRIAL COURT SAID THE SIDE AGREMENT/CONTRACT WAS INCLUDED AS CHILD SUPPORT AND IS MODIFIABLE
The circuit court ruled from the bench as follows:
I am asked by Ms. Holmes to find that this is a contractual negotiated
provision and to not modify its terms.
The Court declines to be persuaded by this argument.
Certainly there are many times when additional support is a negotiated,
contractual, additional enforceable term, such as agreements within judgments
that a parent agrees to pay for college, or in some cases where bonus amounts are
also referred to in the property section and there is specific language that although
child support is reviewable, this specific term is not to be modified and was a part
of the negotiated agreement.
I don’t find that those clarifying terms exist in the parties’ judgment of
divorce. I do not find that this is a negotiated portion of a property settlement.
I do find that the bonus, as with the child support, is modifiable and that
the terms contained in the judgment allow for the Court to review what
modifications are appropriate.
LOWERE COURT TO FOLLOW SERF
In reviewing the extensive income information, the Court concurs with the
agreement of the parties, that the application of the SERF formula is appropriate
in this case.
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As SERF has been applied to the child support component, I also believe
that the SERF application is appropriate to utilize when evaluating the bonus
funds.
I concur with the observations, findings and recommendations of the
skilled mediator, David Sarnacki.
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The Court will utilize the same computations and order that as SERF is
applied to the bonus, that 9.3 percent of Mr. Holmes’ bonus be paid over annually
to Ms. Holmes to assist in supplementing the child support she receives to care for
the children.
MOM APPEALS, A CONTRACT IS A CONTRACT
Plaintiff filed a delayed application for leave to appeal, which this Court granted.
HOW DOES THE COURT OF APPEALS REVIEW THE LOWER COURT.
II. Standard of Review
DE NOVO REVIEW
We review child support orders and the modification of such orders for an abuse of
discretion. Peterson v Peterson, 272 Mich App 511, 515; 727 NW2d 393 (2006). However,
"[w]hether a trial court properly operated within the statutory framework relative to child support
calculations and any deviation from the child support formula are reviewed de novo as questions
of law." Id. at 516. An appellate court also reviews de novo a trial court’s finding "derived from
an erroneous application of law to facts." Beason v Beason, 435 Mich 791, 804-805; 460 NW2d
207 (1990). To the extent that the circuit court’s ruling involves statutory construction, this
Court also applies de novo review. Fisher v Fisher, 276 Mich App 424, 427; 741 NW2d 68
(2007).
EXISTENCE OF A CONTRACT
The existence of a contract involves a question of law that we review de novo. Kloian v
Domino’s Pizza, LLC, 273 Mich App 449, 452; 733 NW2d 766 (2006). Contract interpretation
presents a question of law also subject to de novo review. Reed v Reed, 265 Mich App 131, 141;
693 NW2d 825 (2005).
CONTRACTS AND DIVORCE JUDGEMENT
A judgment of divorce "entered upon the settlement of the parties . . .
represents a contract, which, if unambiguous, is to be interpreted as a question of law." In re
Lobaina Estate, 267 Mich App 415, 417-418; 705 NW2d 34 (2005).
CHANGE IN CIRCUMSTANCES
III. Change of Circumstances
... "A party may not take a position in the trial court and subsequently seek redress in an appellate court that isbased on a position contrary to that taken in the trial court." Czymbor’s Timber, Inc v City ofSaginaw, 269 Mich App 551, 556; 711 NW2d 442 (2006) (internal quotation omitted), aff’d 478 Mich 348; 733 NW2d 1 (2007).
"A party cannot stipulate a matter and then argue on appeal that
the resultant action was error." Chapdelaine v Sochocki, 247 Mich App 167, 177; 635 NW2d
339 (2001).
CHILD SUPPORT
IV. Governing Legal Principles Regarding Child Support
A circuit court’s power to determine an award of child support is governed by MCL
552.605(2), which provides as follows:
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Except as otherwise provided in this section, the court shall order child
support in an amount determined by application of the child support formula
developed by the state friend of the court bureau as required in section 19 of the
friend of the court act, MCL 552.519.
DEVIATION FROM THE FORMULA
The court may enter an order that deviates
from the formula if the court determines from the facts of the case that application
of the child support formula would be unjust or inappropriate and sets forth in
writing or on the record all of the following:
(a) The child support amount determined by application of the child
support formula.
(b) How the child support order deviates from the child support
formula.
(c) The value of property or other support awarded instead of the
payment of child support, if applicable.
(d) The reasons why application of the child support formula would be
unjust or inappropriate in the case.
A COURT MAY DEVIATE FROM THE FORMULA
This statute specifically acknowledges that under certain circumstances, a court may properly
deviate from the guidelines:
A COURT MAY AGREE TO A PARTIES STIPULATION
Subsection (2) does not prohibit the court from entering a child support
order that is agreed to by the parties and that deviates from the child support
formula, if the requirements of subsection (2) are met. [MCL 552.605(3).]
2004 MCSFM -DAD AT 177,000+, MOM 80,000+, AND THE BONUS
The 2004 MCSFM states, "Based on the estimated costs of raising children and factors
like parental income, family size, and ages of children, the formula provides for appropriate
support amounts in orders involving the support of children." 2004 MCSFM § 1.02. The 2004
MCSFM sets forth a lengthy list of potential "Deviation Criteria," including,
(i) One or both parents earn incomes of a magnitude not fully taken
into consideration by the formula.
(j) One or both parents have varying amounts of irregular bonus
income. [Id., § 1.04(D)(5).]
NEEDS OF THE CHJILD PLUS ACTUAL RESOURCES
The child support formula utilized by a circuit court "shall be based upon the needs of the
child and the actual resources of each parent." Ghidotti v Barber, 459 Mich 189, 198; 586
NW2d 883 (1998), quoting MCL 552.519(3)(a)(vi).
THE LOWER COURT MUST USE THE GUIDELINES OR A PROCEDURE FOR DEVIATION
Our Supreme Court has repeatedly
emphasized the obligation of circuit courts to utilize the MCSFM guidelines in fashioning child
support orders. In Burba v Burba (After Remand), 461 Mich 637; 610 NW2d 873 (2000), the
Supreme Court established a procedure that circuit courts must follow when deviating from the
MCSFM.
WHAT IS THE SUPPORT UNDER THE FORMULA
The Supreme Court directed that a deviating court "must first state the level of child
support it would have ordered had it followed the formula (§ 17)." Id. at 645.
EXPLAIN HOW IT DEVIATES
Because courts
"presumptively must follow the formula," they are required "to meticulously set forth" the
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statutory deviation criteria and "provide an explanation of how the order deviate[s] from the
formula." Id. at 645-646.6
THE COURT DISFAVORS SIDE AGREEMENTS
This Court strongly disfavors deviations from the child support formula premised on
private agreements that limit a parent’s obligation to pay child support.
YOPU CANNOT BARGAIN AWAY THE CHILD WELFARE
For example, in Johns v
Johns, 178 Mich App 101, 106; 443 NW2d 446 (1989), this Court observed, "Parents may not
bargain away a child’s welfare and rights, including the right to receive adequate child support
payments.
SIDE AGREEMENTS DO NOT SUSPEND THE AUTHORITY OF THE COURT
An agreement by the parties regarding support will not suspend the authority of the
court to enter a support order." In Ballard v Ballard, 40 Mich App 37, 39-40; 198 NW2d 451
(1972), this Court refused to enforce a provision in a divorce judgment requiring that the
custodial parent never seek modification of a child support order awarding her $2.84 a week for
each child. This Court employed sweeping language in rejecting the parties’ agreement:
"[I]rrepsective of the agreement, the trial judge retained inherent jurisdiction to modify the
judgment as to support payments upon a proper showing at any time." Id. at 40.
BUT THE COURT DOES ENFORCE VOLUNTARY AGREEMENTS
In contrast, this Court has enforced voluntary agreements to pay additional child support
incorporated into a divorce judgment. In Oviatt v Oviatt, 43 Mich App 628, 629; 204 NW2d 753
(1972), this Court considered the power of the circuit court to enforce "provisions in a judgment
of divorce which require the husband to provide support (including college expenses) for his
children after said children reach age 21, where the challenged provision was incorporated
verbatim into the judgment from a written stipulation and property settlement agreement
voluntarily executed by the parties prior to their divorce." This Court held that a circuit court
could validly exercise its discretion to enforce such as provision, explaining,
[W]here the parties entered into an agreement that was incorporated by the
court in its judgment, and the parties concede they knew at the time that the terms
were not subject to performance fully within the minority of the children, it would
be an invitation to chaos to hold that such provision was not enforceable.
WE WANTS CONTRCATS ENFORCED OR THERE WILL BE CHAOS
It would permit parties to divorce actions to play fast and loose with the court and
with the other parties to the action by entering into agreements which they had no
intention of performing. [Id. at 638.]
In Aussie v Aussie, 182 Mich App 454, 460; 452 NW2d 859 (1990), the defendant father
entered into a post-divorce agreement requiring him to pay $6000 a year toward one child’s
college expenses, "in return for which plaintiff waived her right to petition the circuit court ‘for
an increase in child support, above the current level of $75 per child, per week.’" The defendant
breached the agreement, and the plaintiff filed a petition seeking an increase in child support, as
6 The divorce judgment in this case was entered several years before the Supreme Court’s Burba
decision. However, the circuit court and the parties freely deviated from the MCSFM guidelines
throughout the first 10 years after the divorce, and failed to strictly comply with the procedural
rules discussed in Burba. Presumably, because the guideline deviations benefited the children,
the circuit court and the parties never considered that they should explain on the record the
reasons for rejecting the MCSFM formula.
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well as reimbursement of the child’s college expenses. Id. The circuit court entered an order
increasing the defendant’s child support, but refused to enforce the post-divorce college payment
agreement. Id. This Court affirmed the circuit court’s order for increased child support,
observing that a circuit court "has the statutory power to modify orders for child support upon a
showing by the petitioning party of a change in circumstances sufficient to justify a
modification." Id. at 463. But citing Oviatt, this Court reversed the circuit court’s decision not
to enforce the college payment agreement, explaining that the "defendant did agree to pay the
college expenses in consideration of plaintiff’s agreement not to seek additional support at the
time. Plaintiff kept her part of the bargain. As the Oviatt panel concluded, failure to enforce
such contracts would be ‘an invitation to chaos . . . .’" Id. at 464.7
CHILD SUPPORT PRINCIPALS
V. Application of Child Support Principles
WE WILL LET YOU AGREE TO PAY MORE
.... We hold that because the child support guidelines set forth
a parent’s minimum support obligation, a voluntarily assumed obligation to pay an amount in
excess of the minimum is not inherently objectionable.
CONTRCAT INCREASING CHILD SUPPORT SHOULD BE ENFORCED
Therefore, a contract enhancing a
parent’s child support obligation should be enforced, absent a compelling reason to forbear.
Here, the circuit court refused to enforce the bonus agreement that the parties, two attorneys,
entered into voluntarily, despite the absence of any evidence that its enforcement would create a
hardship for defendant, or otherwise qualify as unjust or inappropriate. The history of the
parties’ child support dispute illustrates that enforcement of the bonus agreement served the
purposes of the statutes governing child support, while preserving the court’s ability to modify
defendant’s obligations if his financial circumstances, or that of his children, were to change.
Defendant consistently contended throughout these lengthy proceedings that when he
entered into the contract, the SERF guidelines applied. According to defendant, because he
spent more than the requisite number of overnights with the children, plaintiff was not entitled to
utilize the "straight guidelines" formula. Defendant alleged that the parties’ compromise
regarding application of the SERF led to the development of the contract, specifically that he
gave up on application of the SERF solely to avoid a protracted custody battle that could have
resulted in a reduction of his parenting time and a consequent application of the "straight
guidelines" formula.
That compromise involved payment of a significant, certain, and presumptively
nonmodifiable percentage of his yearly bonus. Defendant agreed to pay a larger percentage of
7 In Aussie, this Court acknowledged that in Smith v Smith, 433 Mich 606; 447 NW2d 715
(1989), the Michigan Supreme Court held that a circuit court lacked jurisdiction to order child
support beyond the age of majority. Aussie distinguished Smith as follows: "[W]e do not read
Smith to preclude plaintiff from enforcing a clear contract of the parties which may be of record
or in the judgment in the case." Aussie, supra at 464. The Michigan Legislature subsequently
enacted MCL 552.16a "in response to" Smith’s conclusion that "Michigan law did not provide
for postmajority support." Rowley v Garvin, 221 Mich App 699, 706; 562 NW2d 262 (1997).
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his bonus than he would have had to pay if the SERF applied.
APPELLATE COURT SAID HE AGREED TO PAY MORE
Thus, the agreement negotiated by
the parties required defendant to pay an amount exceeding the guidelines, which served to
benefit the Holmes children, and caused no demonstrable hardship for defendant during the 10
years that he paid it. Continued enforcement of the 25% bonus provision benefits the Holmes
children without violating the court’s inherent ability to modify the child support award in the
event that circumstances substantially changed, or that the child support amount qualified as
"unjust or inappropriate" under MCL 552.605(2).
THE LOWER COURT SHOULD HAVE ENFORCED THE CONTRACT
Accordingly, we conclude that the circuit
court erred by finding that it lacked the power to enforce the contractual bonus provision.
VI. Governing Contract Principles
CONTRCATS ARE GIVEN PLAIN MEANING,ENFORCE THEM AS WRITTEN
A contract must be interpreted according to its plain and ordinary meaning. St Paul Fire
& Marine Ins Co v Ingall, 228 Mich App 101, 107; 577 NW2d 188 (1998). Our interpretation of
contractual language is further guided by the following precepts:
Under ordinary contract principles, if contractual language is clear,
construction of the contract is a question of law for the court. If the contract is
subject to two reasonable interpretations, factual development is necessary to
determine the intent of the parties and summary disposition is therefore
inappropriate. If the contract, although inartfully worded or clumsily arranged,
fairly admits of but one interpretation, it is not ambiguous. The language of a
contract should be given its ordinary and plain meaning. [Meagher v Wayne State
Univ, 222 Mich App 700, 721-722; 565 NW2d 401 (1997).]
In Rory v Continental Ins Co, 473 Mich 457, 461; 703 NW2d 23 (2005), the Supreme
Court emphasized that courts must construe unambiguous contract provisions as written. "We
reiterate that the judiciary is without authority to modify unambiguous contracts or rebalance the
contractual equities struck by contracting parties because fundamental principles of contract law
preclude such subjective post hoc judicial determinations of ‘reasonableness’ as a basis upon
which courts may refuse to enforce unambiguous contractual provisions." Id. In Bloomfield
Estates Improvement Ass’n, Inc v Birmingham, 479 Mich 206, 213; 737 NW2d 670 (2007), the
Supreme Court again stressed that contracts must be enforced as written: "[W]hen parties have
freely established their mutual rights and obligations through the formation of unambiguous
contracts, the law requires this Court to enforce the terms and conditions contained in such
contracts, if the contract is not ‘contrary to public policy.’" Parties may elect to include a written
modification clause in a contract, but with or without such a clause, "the principle of freedom to
contract does not permit a party unilaterally to alter the original contract." Quality Products &
Concepts Co v Nagel Precision, Inc, 469 Mich 362, 364; 666 NW2d 251 (2003) (emphasis in
original).
STGIPULATED AGREEMENTS IN A JUJDGEMENT ARE LIKE A CONTRACT
"Judgments entered pursuant to the agreement of parties are of the nature of a contract."
Gramer v Gramer, 207 Mich App 123, 125; 523 NW2d 861 (1994).
ENFORCEABLE CONTRACTS ARE CREATED IN DIVORC E
A long line of case law
reflects that divorcing parties may create enforceable contracts. In Gramer, this Court enforced
a property settlement agreement, finding that "there is no claim or any factor such as fraud or
duress," and that its language qualified as "unambiguous and unequivocal." Id. More recently,
in Lentz v Lentz, 271 Mich App 465, 467; 721 NW2d 861 (2006), we enforced the parties’
separation agreement, created in contemplation of their divorce, observing "Generally, contracts
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between consenting adults are enforced according to the terms to which the parties themselves
agreed." Id. at 471.
In In re Lobaina Estate, supra, this Court applied the principles of Gramer and Lentz to a
divorce judgment provision entitled, "SUPPORT OF MINOR CHILDREN—LIFE
INSURANCE." Id. at 417. The provision required both parties to "irrevocably designate the
minor children as beneficiaries of any life insurance policies they may have by virtue of their
employment," until the end of the parties’ support obligations. Id. This Court enforced the
provision, reasoning, "Because the judgment of divorce was entered upon the settlement of the
parties, it represents a contract, which, if unambiguous, is to be interpreted as a question of law."
Id. at 417-418. In Krueger v Krueger, 88 Mich App 722; 278 NW2d 514 (1979), this Court
acknowledged that although the circuit court lacked the power "to compel a party to convey
property or a property interest to a third person, even a child of the parties," it could confirm a
settlement regarding property interests. Id. at 724-725. In Krueger, we explained,
MOM GAVE UP SPOUSAL SUPPORT AND TOOK LESS CHILD SUPPORT THAN THE GUIDELINES IN EXCHANGE FOR THE BONOUS
The wife took no alimony and the child support was in an amount less
than that recommended by the Friend of the Court. She gave up something she
was entitled to in exchange for a benefit to her child. Under these circumstances
many courts have held that the agreement embodied in the judgment will be
enforced even if the court would have had no power to order the same disposition
in a contested case. [Id.]
The Court also enforced a contested insurance agreement not linked to a child support provision,
characterizing it as an "obligation, voluntarily undertaken," and subject to court enforcement. Id.
at 726.
The contractual language here qualifies as clear and unambiguous:
Further, Husband shall pay twenty-five percent (25%) of any net bonus he
receives in any given year as additional child support. When the oldest child
attains the age of 18 or completes high school, whichever event occurs last, this
payment shall be reduced to fifteen percent (15%) of his net bonus, and shall
terminate upon the youngest child’s attaining the age of 18 or graduating from
high school, whichever lasts occurs.
It contains definite terms regarding is duration, and lacks any reference to future adjustments or
modifications. By its terms, the agreement plainly contemplated that the 25 percent bonus
payments would continue until the older child’s eighteenth birthday. We reject defendant’s
argument that the bonus provision was modifiable because paragraph 8 permitted the circuit
court to review "support" after one year. This Court reads contracts as a whole, giving
harmonious effect to each word and phrase. Royal Prop Group, LLC v Prime Ins Syndicate, Inc,
267 Mich App 708, 719; 706 NW2d 426 (2005). Specific contractual provisions normally
override general ones. Id.
We further reject defendant’s argument that the parties intended that the original base
child support percentage (25.4) would also apply to the bonus. The 25.4 base support percentage
applied only during the first year of the agreement. During the next 10 years, defendant’s
income and bonuses fluctuated, as did his support obligation. The parallel bonus ratio did not
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necessarily continue during the time that the parties voluntarily abided by the support provision.
Moreover, regardless of the basis for the initial calculation, the plain language of the agreement
contemplates that the agreed percentages would apply until the children’s eighteenth birthdays.
The circuit court recognized its authority to enforce a parent’s contractual agreement to
pay a child’s college expenses, or a similarly worded bonus provision contained in the property
settlement section of a divorce judgment. The circuit court expressly admitted, "Certainly there
are many times when additional support is a negotiated, contractual, additional enforceable term .
. . ." Nevertheless, the circuit court refused to enforce this "negotiated, contractual, additional …
term" because (1) the contract lacked "specific language that although child support is
reviewable, this specific term is not to be modified," (2) child support is always modifiable, and
(3) "[a]s SERF has been applied to the child support component, I also believe that the SERF
application is appropriate to utilize when evaluating the bonus funds." The circuit court further
referenced Sarnacki’s conclusion regarding the modifiability of the bonus provision:
42. Despite Elizabeth’s contention that the bonus percentage was
separate and distinct, it was included in the child support provisions, which are
modifiable by law. That percentage served the parties well for 10 years. Now,
with the entire obligation under review, there is no reason to ignore the new ratio
of obligation to net income. The bonus percentage should reflect the child
support obligation as modified.
CONTRACTS ARE ENFORCED AS WRITTEN
The absence of specific contractual language prohibiting modification of the bonus
provision does not render the bonus provision unenforceable. Contracts are enforced as written,
and no exception to this basic rule exists for contracts lacking a modification clause.
Furthermore, the parties included a "review" provision in ¶ 8, contemplating that the monthly
child support payments would be "fixed for one year after the entry of the Judgment of Divorce,
before it can be reviewed, and that support will be reviewed only in the event that either Husband
or Wife is receiving greater compensation than at the time of the entry of the Judgment of
Divorce." The absence of a similar provision regarding the bonus percentage supports that the
parties did not intend that percentage to be modifiable. Furthermore, merely because a circuit
court possesses the power to modify a child support award, it may not simply ignore an
unambiguous contractual provision regarding child support.
Finally, the circuit court opined that "additional support" might constitute a "negotiated,
contractual, additional enforceable term" when it is included in the "property section" of a
divorce judgment. Apparently the circuit court would have enforced the bonus provision as
written, if it had been labeled as part of the parties’ property settlement rather than appearing in a
child support paragraph. We conclude that this is a distinction lacking a meaningful difference.
Regardless of the bonus provision’s location in the judgment, the provision is contractual, freely
negotiated, and unambiguous. Therefore, it must be enforced as written.
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Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.
/s/ Elizabeth L. Gleicher
/s/ Richard A. Bandstra
/s/ Jane M. Beckering