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Hanrahan v. Bakker

Supreme Court of Pennsylvania

June 19, 2018

MICHAEL HANRAHAN, Appellant
v.
JEANNE BAKKER, Appellee

          ARGUED: November 28, 2017

          Appeal from the Order of the Superior Court of Pennsylvania dated November 18, 2016 at Nos. 1638 EDA 2015 & 1702 EDA 2015 which Affirmed/Reversed/Remanded the Order of the Court of Common Pleas of Delaware County, Civil Division, dated June 1, 2015, entered June 4, 2015 at No. 2008-16689.

          SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

          OPINION

          BAER, JUSTICE

         In this discretionary appeal, we consider whether the high income child support guidelines found at Pa.R.C.P. 1910.16-3.1 inherently account for the reasonable needs of the children such that any discrete analysis of those needs by a fact-finder is improper.[1] We also examine whether a voluntary contribution to an irrevocable non-grantor trust[2] for the benefit of the children is an appropriate factor for a court to consider for purposes of deviating from the guidelines amount of child support under Pa.R.C.P. 1910.16-5(b).[3] Finally, we evaluate the propriety of an award of attorney's fees to the obligee in this case.

         For the reasons set forth below, we conclude that Rule 1910.16-3.1 does not render independent examination of the reasonable needs of the children by the fact-finder improper in high income cases. We further hold that a voluntary contribution to an irrevocable non-grantor trust for the benefit of the children is an inappropriate factor to consider for deviation purposes under Rule 1910.16-5(b). Finally, we hold that the obligee is not entitled to an award of attorney's fees in this case.

         I. Background

         A. Facts

         Michael Hanrahan (Father) and Jeanne Bakker (Mother), both attorneys, were married on November 14, 1992, and have two children (Children), born in 1998 and 2004. Father and Mother divorced by decree dated July 9, 2009. Prior to their divorce, Father and Mother entered into a property settlement agreement (PSA), which was incorporated into their divorce decree. The PSA provides, in relevant part, as follows:

The parties agree to exchange tax information for each tax year by no later than April 15 of the year following the tax year. Child support and the proportion of Child Expenses shall be recalculated each year as of May 1 based on the parties' respective net incomes and Pennsylvania guidelines, provided, however, either party may apply to the Court to adjust child support and/or their share of Child Expenses for the year based on relevant factors.

         PSA at 13. The PSA further provides that in the event of a breach or wrongdoing by a party he or she "shall bear the burden and obligation of any and all costs and expenses and counsel fees incurred by himself or herself as well as the other party to the extent the other party is successful in enforcing his or her rights under this [PSA]." Id. at 19.

         From May 1, 2010 through April 30, 2011, Father's monthly support payment was set at $15, 878, which was calculated based upon his 2009 income of $4, 010, 938, and Mother's 2009 income of $183, 635. Amended Trial Court Order, 6/4/2015, at 3. From May 1, 2011 through April 30, 2012, Father's support payment was calculated to be $3, 702 a month based upon his 2010 income of $1, 083, 312 and Mother's 2010 income of $138, 988. Id. at 4. From May 1, 2012 through April 30, 2013, Father's support payment was $7, 851 per month, which was calculated using his 2011 income of $2, 303, 031 and Mother's 2011 income of $145, 593. Id. Notably, Mother prepared the support calculations each year apparently based on the first two parts of the calculation outlined in Pa.R.C.P. 1910.16-3.1(a), [4] and though Father disagreed with the methodology Mother used, he paid the amounts due per her calculations. Id. at 3-4, 8; Father's Trial Exhibits 6-10.

         In 2012, Father's income jumped to approximately $15, 500, 000, while Mother's income was approximately $105, 000. Amended Trial Court Order, 6/4/2015, at 4. That same year, Father deposited $2.5 million into an irrevocable non-grantor trust for the benefit of the Children. Id. at 9. Additionally, Father paid an approximate $70, 000 in support year 2013 towards the Children's private school tuition and camps. Id. at 10. In March 2013, Father wrote a letter to Mother stating as follows:

As we discussed, I was fortunate enough to make a substantial amount of money last year. Based on this income, the preliminary calculation that is the first step in the child support determination in high income cases will yield a result that is way beyond any realistic estimate of the reasonable needs of the [C]hildren. In the past, you and your counsel have insisted on using the preliminary calculation[5] as if it were a definitive determination of the amount of child support. Though I considered the amounts excessive, I acquiesced to avoid conflict. However, I simply cannot agree that the reasonable needs of two children could be anywhere close to the preliminary calculation amount this year.

         Letter from Father to Mother, 3/6/2013. While Father disagreed with the child support calculation, which would have averaged to about $60, 000 per month, [6] he agreed to continue to pay the monthly child support amount of $7, 851 that he paid the previous support year. Amended Trial Court Order, 6/4/2015, at 5.

         B. Trial Court Proceedings

         On December 20, 2013, Mother filed a petition for enforcement of the PSA and divorce decree. Following extensive filings and a hearing at which Mother and Father testified, the trial court issued an order including its findings of fact and conclusions of law. Both parties filed motions for reconsideration, which the trial court granted. The trial court issued an amended order concluding that Father owed a monthly total of child support of $52, 289 for the period of May 1, 2013, to August 8, 2013, and $59, 206 for the period of August 9, 2013, to April 30, 2014.[7] Id. at 25-26.

         In calculating the support amount, the trial court rejected Father's claim that the court was required to conduct a discrete analysis of the reasonable needs of the Children in applying the high income guidelines and concluded that any such analysis had been eliminated from the child support guidelines. Id. at 18-19. The court also found that Father was entitled to a downward deviation for support purposes based upon his voluntary $2.5 million trust contribution on behalf of the Children. Id. at 24. Finally, the court found that neither party was entitled to an award of attorney's fees under the PSA, as neither party had been "successful" in the litigation, both had presented partially "flawed" arguments, and Father had continued to pay substantial monthly child support to Mother for the support year at issue. Id. at 25.

         C. Superior Court Decision

         Both Mother and Father appealed to the Superior Court, each raising several issues. As is relevant herein, Father argued that the trial court erred in concluding that analysis of the reasonable needs of the Children had been eliminated from the calculation of a child support obligation under the guidelines. Mother claimed that the trial court erred in concluding that: (1) Father was entitled to a downward deviation for support purposes based on his voluntary trust contribution; and (2) Mother was not entitled to reimbursement of attorney's fees pursuant to the PSA.

         In a published, split decision, a three-judge panel of the Superior Court affirmed in part and reversed in part the trial court's amended order, and remanded the matter to the trial court. Hanrahan v. Bakker, 151 A.3d 195 (Pa. Super. 2016). The Superior Court majority opinion concluded that the trial court did not err in fashioning a child support award without conducting a discrete analysis of the reasonable needs of the Children. The Superior Court explained that, in 2010, this Court added Pa.R.C.P. 1910.16-3.1 to the guidelines to address high income cases. The Superior Court observed that, according to Rule 1910.16-3.1's 2010 Explanatory Comment, the rule was "intended to bring all child support cases under the guidelines and treat similarly situated parties similarly." Hanrahan, 151 A.3d at 206-07 (quoting Pa.R.C.P. 1910.16-3.1 Ex. Cmt. 2010).

         The court further highlighted the comment's statement that "high income child support cases no longer will be decided pursuant to Melzer v. Witsberger, 505 Pa. 462, 480 A.2d 991 (1984)." Hanrahan, 151 A.3d at 207 (quoting Pa.R.C.P. 1910.16-3.1 Ex. Cmt. 2010). Melzer, discussed infra at page 12, provided the formula for calculating child support in high income cases prior to adoption of the 2010 amendments to the guidelines and included an analysis of the children's reasonable needs.

         Accordingly, the Superior Court rejected Father's contentions that the "replacement of the complicated Melzer analysis with the three[-]step process of Rule 1910.16-3.1 did not eliminate the reasonable needs limitation on child support" and that a trial court must consider a child's reasonable needs when determining an appropriate support award pursuant to 23 Pa.C.S. § 4322.[8] Hanrahan, 151 A.3d at 207. The Superior Court explained that, in accord with Section 4322: (1) the guidelines are based in part upon the reasonable needs of the child; (2) in determining reasonable needs, the guidelines "place primary emphasis on the net incomes and earning capacities of the parties, with allowable deviations;" and (3) there is a rebuttable presumption that the award as determined through application of the guidelines is the correct amount to be awarded. Id. (quoting 23 Pa.C.S. § 4322). The Superior Court further noted that, in applying Pa.R.C.P. 1910.16-3.1, the trial court is to consider the factors listed in Pa.R.C.P. 1910.16-5(b) to determine whether deviation is proper, and that "reasonable needs" is not listed as a specific factor for consideration. Hanrahan, 151 A.3d at 207.

         The Superior Court also opined that Pennsylvania courts had already rejected Father's argument. The Superior Court specifically relied upon this Court's decision in Ball v. Minnick, 648 A.2d 1192 (Pa. 1994), a "standard, " non-high income, support case where the Court rejected that a guidelines deviation should be permitted when the basic needs of the children allegedly could be met through a payment of less than the guidelines amount. Hanrahan, 151 A.3d at 207-08 (discussing Ball, 648 A.2d at 1196). The Superior Court further explained that in another standard support case, Arbet v. Arbet, 863 A.2d 34 (Pa. Super. 2004), it had rejected the father's argument that the court should have considered the children's reasonable needs rather than simply applying the guidelines formula. As the Superior Court noted, the Arbet court observed that the father's argument essentially advocated for a Melzer analysis in every case and that "[t]he rules make clear that the amount of support as determined from the support guidelines is presumed to be the appropriate amount of support." Hanrahan, 151 A.3d at 208 (quoting Arbet, 863 A.2d at 42).

         Notwithstanding that Ball and Arbet were standard rather than high income support cases, the Superior Court found that both cases were applicable herein. Id. The Superior Court thus held that the trial court did not err or abuse its discretion in awarding child support in this case based on the guidelines formula without engaging in a separate analysis of the Children's reasonable needs.[9] Id.

         Regarding Mother's issues, the Superior Court first concluded that the trial court abused its discretion by determining that Father's voluntary trust contribution was a "relevant and appropriate" factor entitling Father to a downward deviation under Pa.R.C.P. 1910.16-5(b)(9) (providing that the trier of fact consider "other relevant and appropriate factors, including the best interests of the child or children" in deciding whether to deviate from the guidelines amount of support). In so doing, the Superior Court observed that "a parent's obligation to support minor children is independent of the minor's assets" and that, "to the extent that a parent can 'reasonably' do so, a parent is obligated to provide support for a child regardless of the child's property." Hanrahan, 151 A.3d at 204 (quoting Sutliff v. Sutliff, 528 A.2d 1318 (Pa. 1987) (plurality)). Thus, the Superior Court concluded that the trial court should not have considered the Children's assets (i.e., the $2.5 million in trust funds) when determining Father's child support obligations and deviations.

         The Superior Court also relied upon Portugal v. Portugal, 798 A.2d 246 (Pa. Super. 2002), holding that a father's voluntary contributions to his 401(k) retirement plan constituted income for support purposes. The court at bar analogized Father's voluntary trust contribution to the voluntary 401(k) contributions in Portugal, and concluded that the trial court could not reduce Father's child support obligation because of his voluntary trust contribution. Hanrahan, 151 A.3d at 204. The Superior Court further reasoned that the trial court's primary focus should have been on the Children's immediate needs and that ordering a downward deviation of Father's present child support obligation based upon the trust contribution was in direct opposition to that principle. Id. (citing MacKinley v. Messerschmidt, 814 A.2d 680, 683 (Pa. Super. 2002) (noting "the dominant interest of the children's immediate needs, as well as the recognition that children should not be made to wait for support and parents should not be permitted to defer income to which they are entitled until they choose to avail themselves of it").

         Turning to the issue of attorney's fees, the Superior Court determined that the trial court abused its discretion by denying the reimbursement of fees to Mother. The court explained that the PSA: (1) required Father to pay child support to Mother according to the guidelines; and (2) stated that the "breaching or wrongdoing party … shall bear the burden of counsel fees … to the extent the other party is successful in enforcing his or her rights." Id. at 205 (quoting PSA at 19). The Superior Court concluded that Father was the breaching or wrongdoing party herein for sending the March 2013 letter (supra at pages 3-4), which the Superior Court loosely paraphrased as informing Mother that "he no longer agreed to pay child support according to the [g]uidelines" as required by the PSA. Id. According to the Superior Court, Mother sought enforcement of the PSA, and the trial court awarded Mother support in accordance therewith through use of the guidelines. Thus, Mother was entitled to attorney's fees for successfully enforcing her rights under the PSA. Id. The Superior Court further observed that, based upon the plain language of the PSA, the trial court's denial of attorney's fees on the basis that both parties had "flawed arguments" was improper. Id.

         In a dissenting opinion, Judge Jenkins disagreed with the majority on the issues concerning Father's trust contribution and the award of attorney's fees to Mother. With respect to the trust contribution, Judge Jenkins opined that the majority's reliance upon Portugal was misplaced because the $2.5 million was included in Father's income calculation, he used the money to create an irrevocable trust for the benefit of the Children, and he was not a trustee for or beneficiary of the trust. Id. at 213 (Jenkins, J., dissenting). Judge Jenkins also criticized the Majority's reliance upon Sutliff, explaining that the trial court did not award the downward deviation in light of the Children's assets, but rather because Father chose to give a significant amount of his income to secure their futures, which was clearly in their best interests. Id. As for the award of attorney's fees to Mother, Judge Jenkins agreed with the trial court's reasoning in denying fees and concluded that Father did not breach the PSA for contesting the extreme increase in his child support calculation. Id. at 215.

         II. Issues

         We granted allowance of appeal to decide the following issues, as stated by Father, but modified to eliminate superfluous argument:

a. Whether the Superior Court erred on an issue of first impression and substantial public importance by affirming the trial court's misinterpretation of the Pennsylvania Supreme Court's high income support guideline[s], Pa.R.C.P. 1910[.]16[-]3.1…[.]
b. In holding that the trial court abused its discretion by granting a downward deviation of approximately 4% of the $2.5 million Father placed in an irrevocable non-grantor trust for the [C]hildren, did the Superior Court err by ruling, as a matter of first impression and substantial public importance, that a voluntary contribution to a trust can never be a relevant factor in determining child support?
c. Did the Superior Court depart from accepted judicial practice, thereby justifying the exercise of the Pennsylvania Supreme Court's supervisory authority, when the Superior Court made a premature and incorrect holding that the trial court abused its discretion in denying Mother an award of attorney[']s fees … ?

Hanrahan v. Bakker, 168 A.3d 1291 (Pa. 2017) (per curiam).

         III. Discussion

         A. Standard of Review

         We review child support awards for an abuse of discretion. Maher v. Maher, 835 A.2d 1281, 1283 (Pa. 2003). A court does not commit an abuse of discretion merely by making an error of judgment. Id. Rather, a court abuses its discretion if it exercises judgment that is manifestly unreasonable or the result of partiality, prejudice, bias, or ill-will as shown by the evidence of record. Id. This Court has further observed that we will not disturb a support order unless the trial court failed to consider properly the requirements of the rules governing support actions. Ball, 648 A.2d at 1196. Additionally, as this appeal presents questions of law, we observe that "our standard of review is de novo and our scope of review is plenary" for such questions. A.S. v. I.S., 130 A.3d 763, 768 (Pa. 2015).

         B. Reasonable Needs

         i. History

         To understand the import of the parties' arguments, we first review the history of the adoption of Rule 1910.16-3.1. In 1984, prior to the adoption of the guidelines, this Court identified a need for an orderly method of calculating child support awards and thus took the opportunity to set forth a methodology for the calculation of child support in Melzer v. Witsberger, 480 A.2d 991 (Pa. 1984). The calculus set forth by the Melzer Court included a determination of the reasonable needs of the children involved and the respective abilities of the parents to support the children. Id. at 995-96.

         Shortly thereafter, federal and state legislation was passed requiring the adoption of child support guidelines, which today are reviewed at least every four years and create a rebuttable presumption regarding the amount of child support a parent is obligated to pay. See 42 U.S.C. § 667(a), (b)(2);[10] 23 Pa.C.S. § 4322(a)-(b).[11] As articulated in Section 4322, guidelines amounts are "based upon the reasonable needs of the child … seeking support and the ability of the obligor to provide support, " which are determined by placing "primary emphasis on the net incomes and earning capacities of the parties, with allowable deviations for unusual needs, extraordinary expenses and other factors, such as the parties' assets, as warrant special attention." 23 Pa.C.S. § 4322(a). The Pennsylvania Rules of Civil Procedure 1910.16-1 et seq., which became effective in 1989, represent this Court's manifestation of these principles.

         In 1994, following the guidelines' adoption, this Court addressed the scope of their applicability in Ball, a support case falling within the standard guidelines.[12]Importantly, as Ball observed, the guidelines at the time provided that the Melzer formula still applied to high income cases. See Ball, 648 A.2d at 1195. The trial court in Ball, notwithstanding that it had before it a standard income case subject to the guidelines, had opined that the guidelines were only a starting point and ordered child support in an amount lower than the guidelines suggested. Id. at 1194-95. While the Superior Court reversed and remanded the matter on appeal because the trial court failed to consider certain relevant factors, the Superior Court likewise concluded that the guidelines were not mandatory, but only a starting point, and did not supersede the Melzer analysis. Id. at 1195.

         This Court disagreed, concluding that in a standard support case the Melzer formula should not be employed, even if the finder-of-fact would have determined upon application of the guidelines that deviation is warranted. Id. The Court explained that there is a strong presumption that the amount of support determined in accordance with the guidelines is the appropriate support amount. Id. at 1196. The Court continued that, while a court may deviate from that amount, the court's discretion is not unfettered. Id. Indeed, deviation is permitted "only where special needs and/or circumstances are present such as to render an award in the amount of the guideline[s] figure unjust or inappropriate." Id. The Court further observed that: (1) the deviation factors listed in the guidelines were the only ones a trier of fact may consider in determining whether to deviate; (2) all relevant factors should be considered; and (3) no one factor will necessarily dictate whether deviation is appropriate. Id. The Court also explained that the trier-of-fact must make a reasoned decision as to whether deviation is necessary, and, if so, it must explain the justification for the deviation. Id.

         The Court concluded that the trial court's primary justification for deviating from the guidelines in Ball, which was that the basic needs of the children could be met by a lesser support payment, was an improper consideration for deviation purposes. The Court reasoned that a "support obligation is not limited to the basic necessities of life, " but rather includes "any expenditure that will reasonably further the child's welfare." Id. at 1196-97. The Court continued by explaining that "unless a child enjoys an unusually high standard of living, the amount of the support obligation is based on a parent's ability to pay child support rather than the amount of money required to pay for those essential and nonessential items that would reasonably further the child's welfare." Id. at 1197.

         The Ball Court also observed that the reasonable needs of the child and the reasonable expenses of the obligor were factored into the guidelines such that the guidelines amount of support "is presumed to be (1) a payment which the obligor can reasonably afford and (2) a payment that is reasonably necessary to further the child's welfare." Id. The Court reasoned that the guidelines were clearly intended to eliminate "individual, case-by-case determinations of just what constitutes the reasonable needs and expenses of the particular parties involved" and that, therefore, the trier-of-fact should not "consider in the first instance, the actual expenses of the parties in an effort to establish the reasonable needs of a particular child. Instead, the trier of fact must assume initially that the guideline[s] amount constitutes the amount necessary to meet the reasonable needs of the child." Id.

         Based on the foregoing, the Ball Court concluded that deviation on the ground that an individual judge could conclude that a particular child does not require the guidelines amount of support is improper because that reason is not a listed factor. Id. The Court further found that, while the deviation factor referencing the parties' "standard of living" appeared to support the trial court's reasoning in the case, that factor was not intended to justify a downward deviation absent a showing of special needs and/or circumstances given the premises on which the guidelines are based, which are to ensure children receive an economically sound amount of support that is similar to other families in similar situations. Id. The Court reiterated that "the purpose of the support guidelines is to make available for the children's reasonable needs the full amount of the guideline[s] figure unless unusual obligations of the obligor limit his or her ability to pay the guideline[s] amount." Id. Thus, the Court concluded that the trial court abused its discretion in issuing the child support award.

         Years after Ball was decided, in 2010, this Court adopted the high income child support guidelines found at Rule 1910.16-3.1 to supplant Melzer. As of the time period in question in this appeal, the rule provided, in relevant part, as follows:

(a) Child Support Formula. When the parties' combined monthly net income [(CMNI)] is above $30, 000, the following three-step process shall be applied to calculate the parties' respective child support obligations. The amount of support calculated pursuant to this three-step process shall in no event be less than the amount of support that would have been awarded if the parties' combined net monthly income were $30, 000. That amount shall be a presumptive minimum.
(1) First, the following formula shall be applied as a preliminary analysis in calculating the amount of basic child support to be apportioned between the parties according to their respective incomes:
***
Two children: $3, 777 8.0% of combined net income above $30, 000 per month.[13]
***
(2) And second, the trier of fact shall apply Part II and Part III of the formula at Rule 1910.16-4(a), making any applicable adjustments for substantial or shared custody pursuant to Rule 1910.16-4(c) and allocations of additional expenses pursuant to Rule 1910.16-6;[14]
(3) Then, third, the trier of fact shall consider the factors in Rule 1910.16-5 in making a final child support award and shall make findings of fact on the record or in writing.[15] After considering all of the factors in Rule 1910.16-5, the trier of fact may adjust the amount calculated pursuant to subdivisions (1) and (2) above upward or downward, subject to the presumptive minimum.

Pa.R.C.P. 1910.16-3.1 (2013).

         Based on the foregoing, the three-step high income formula works as follows. First, a court conducts a "preliminary analysis" by calculating the basic child support amount to be apportioned between the parties according to their incomes. Pa.R.C.P. 1910.16-3.1(a)(1). That preliminary analysis requires the court to take the applicable basic support obligation from the support schedule found at Rule 1910.16-3 (based on a combined net income of $30, 000 per month and the number of children involved) and to add to that value a specific percentage of CMNI above $30, 000.[16]Id. Thus, for a high income case involving two children, the rule at the time called for the court to use $3, 777 (or $3, 836 after the 2013 amendment) as the standard support schedule value, which represented how much an intact family having ...


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