M.P.G. v. J.L.G. ( 2020 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
M.P.G. : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
J.L.G. : No. 1364 MDA 2019
Appeal from the Order Entered July 18, 2019,
in the Court of Common Pleas of Bradford County,
Domestic Relations at No(s): 19DR00247.
BEFORE: PANELLA, P.J., KUNSELMAN, J., and FORD ELLIOTT, P.J.E.
MEMORANDUM BY KUNSELMAN, J.: FILED: MAY 18, 2020
In this matter, M.P.G. (Father) appeals the order obligating him to pay
J.L.G. (Mother) for the support of their three children. Specifically, Father
contends that the master and the trial court miscalculated the support
obligation by failing to consider Mother’s structured settlement payments as
income. For the reasons below, we agree and remand for recalculation.
The relevant factual and procedural history may be summarized as
follows. The parties appeared before the child support master on January 21,
2019. There, the master utilized the parties’ W-2 statements to determine
their monthly net incomes: Father’s monthly net income was $2,797.04, and
Mother’s monthly net income was $1,941.75. Critically, the master did not
consider Mother’s additional income, her structured settlement payments.
Mother testified that she receives a settlement payment each month in the
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amount of $1,000. See N.T., 1/21/19, at 6. Mother explained that settlement
compensates her for the loss of her leg when she was a child, and that she
uses some portion of the settlement to pay for medical expenses not covered
by insurance (relating to her prosthetic) as those expenses arise. See id. at
6.
Having excluded the settlement payments, the master applied the
support guideline formula under Pa.R.C.P. 1910.16-4(a)(1)(Part A) and
determined Father’s preliminary obligation to be $1,031.32 per month for the
support of the parties’ three children. However, the master had to adjust this
amount downward to reflect the parties’ equally shared custody arrangement,
which, in turn, necessitated a further adjustment to equalize the parties’
monthly net incomes, pursuant to Pa.R.C.P. 1910.16-4(c)(1)-(2). See
Pa.R.C.P. 1910.16-4 (a)(1)(Part D). Father was ultimately ordered to pay
$427.65 per month.
Father filed exceptions with the trial court claiming the master should
have included Mother’s settlement payments when calculating her income.
The trial court denied Father’s exceptions, reasoning that the master
essentially applied the deviation factors, specifically Pa.R.C.P. 1910.16-
5(b)(5) (“medical expenses not covered by insurance”), to exclude the
settlement payments from Mother’s income. See Trial Court Opinion (T.C.O.),
10/15/19, at 4-5. Father presents this timely appeal. He raises the
settlement issue through two interconnected questions:
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1. Did the trial court err in failing to include the $1,000
structured settlement payment [Mother] receives each
month as income to [Mother], in violation of Pa.R.C.P.
1910.16-2(a)(8)(iii)-(v)?
2. Did the trial court err in failing to include the $1,000
structured settlement payment [Mother] receives each
month as income to [Mother] when [Mother] testified
that she does not currently have a medical expense for
which these funds are currently being used, but rather
only that it is possible that she “may” have such
expenses in the future?
Father’s Brief at 2.
We begin with our standard of review:
We review child support awards for an abuse of discretion.
A court does not commit an abuse of discretion merely by
making an error of judgment. 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. 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.
Hanrahan v. Bakker, 186 A.3d 958, 966 (Pa. 2018) (citations omitted).
Pursuant to state and federal legislation, child support shall be awarded
pursuant to standardized guidelines. See 23 Pa.C.S.A. § 4322(a); 42 U.S.C.
§ 667(a), (b)(2). Those guidelines are based on the reasonable needs of the
child, and they specify how child support shall be calculated. “In determining
the reasonable needs of the child or spouse seeking support and the ability of
the obligor to provide support, the guideline shall place primary emphasis on
the net incomes and earning capacities of the parties, with allowable
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deviations for unusual needs, extraordinary expenses and other factors, such
as the parties' assets, as warrant special attention.” 23 Pa.C.S.A. § 4322(a).
Thus, we turn to the definition of income as set forth in our Domestic
Relations Code:
“Income.” Includes compensation for services, including,
but not limited to, wages, salaries, bonuses, fees,
compensation in kind, commissions and similar items;
income derived from business; gains derived from dealings
in property; interest; rents; royalties; dividends; annuities;
income from life insurance and endowment contracts; all
forms of retirement; pensions; income from discharge of
indebtedness; distributive share of partnership gross
income; income in respect of a decedent; income from an
interest in an estate or trust; military retirement benefits;
railroad employment retirement benefits; social security
benefits; temporary and permanent disability benefits;
workers' compensation; unemployment compensation;
other entitlements to money or lump sum awards,
without regard to source, including lottery winnings;
income tax refunds; insurance compensation or
settlements; awards or verdicts; and any form of payment
due to and collectible by an individual regardless of source.
23 Pa.C.S.A. § 4302 (emphasis added).
Income is broadly defined to reflect the parties’ actual financial
resources. See Mackay v. Mackay, 984 A.2d 529, 537 (Pa. Super.
2009), appeal denied, 995 A.2d 354 (Pa. 2010) (citing Woskob v. Woskob,
843 A.2d 1247, 1251 (Pa. Super. 2004)) (emphasis added). The Pennsylvania
Rules of Civil Procedure 1910.16-1 et seq. represent our Supreme Court’s
manifestation of these principles. Hanrahan, 186 A.3d at 966-967.
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To calculate a party’s income in a support matter, the Rules provide the
following, in relevant part:
Rule 1910.16–2. Support Guidelines. Calculation of
Net Income
Generally, the support amount awarded is based on the
parties' monthly net income.
(a) Monthly Gross Income. Monthly gross income is
ordinarily based on at least a six-month average of a party's
income. The support law, 23 Pa.C.S. § 4302, defines the
term “income” and includes income from any source. The
statute lists many types of income including, but not limited
to:
(1) wages, salaries, bonuses, fees, and commissions;
[…]
(8) other entitlements to money or lump sum awards,
without regard to source, including:
(i) lottery winnings;
(ii) income tax refunds;
(iii) insurance compensation or settlements;
(iv) awards and verdicts; and
(v) payments due to and collectible by an
individual regardless of source.
Pa.R.C.P.1910.16–2(a)(1), (8) (emphasis added).
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The question before us is whether the trial court properly excluded the
settlement payments Mother’s receives each month. Father argues that the
entirety of the monthly sum is includable as income.1, 2
In addition to the plain language in 23 Pa.C.S.A. § 4302 and Pa.R.C.P.
1910.16-2, this Court has long held that settlements, including personal injury
settlements earmarked for other purposes, shall be considered when
calculating income in a child support action. In Butler v. Butler, 488 A.2d
1141 (Pa. Super. 1985), an obligor-father argued that his entire lump sum
tort award should not be considered as income, because at least some portion
of the award was intended to compensate for his pain and suffering (as
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1 Mother did not submit an appellate brief.
2We note further that the trial court suggested that Father waived his entire
challenge for his noncompliance with the Bradford County Local Rules
governing exceptions. According to the court, Father did not abide by Local
Rule 1910.12(e) for failing to identify in his exceptions whether the alleged
error was of fact or law, for failing to identify the specific finding he challenged,
and for not including the amount of support that should have been ordered.
See T.C.O., at 1-2. However, the Pennsylvania Rules of Judicial
Administration dictate:
No case shall be dismissed nor request for relief granted or denied
because of failure to initially comply with a local rule. In any case of
noncompliance with a local rule, the court shall alert the party to the
specific provision at issue and provide a reasonable time for the party
to comply with the local rule.
Pa.R.J.A. No. 103(c)(8).
It is unclear whether the trial court allowed Father the opportunity to comply,
but in either event, the court ultimately addressed the merits of Father’s
exceptions. Thus, the court was not so impeded by Father’s noncompliance
that it could not review the exceptions, and we conclude that Father’s
noncompliance would be an improper basis to find waiver.
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opposed to compensate merely for his lost income). He argued further that
the award was excludable because it resulted from an accident that predated
the birth of the parties’ child. Butler, 488 A.2d at 1143. We disagreed and
held that the entire of the award was includable.
In Darby v. Darby, 686 A.2d 1346, 1349 (Pa. Super. 1996), an obligor-
father attempted to distinguish Butler by arguing that his settlement
payments represented compensation, not only for current pain, suffering and
lost wages, but also for future debts, such as medical expenses. We
reaffirmed Butler, concluding that even those settlements, which are meant
to compensate for future medical expenses, are nevertheless includable:
The award as actually received by appellant is a single fund
which appellant may expend in his discretion. The whole
tort award is subject to all appellant’s debts. It would,
indeed, call into question the sanity of the law if this Court
were to rule that the tort award is available to pay debts to
“the butcher, the baker and the candlestick maker but not
debts to appellant’s child for support.”
Darby, 686 A.2d at 1349 (quoting Butler, 488 A.3d at 1143).
Returning to the instant matter, the trial court reasoned that Mother
utilized her settlement payments to “pay the expenses associated with
[Mother’s] prosthetics (which enable her to work) cannot be discretionarily
paid to the butcher, baker or candlestick maker and thus cannot be relied
upon to support [the parties’] children.” Trial Court Opinion (T.C.O.),
10/15/19, at 4.
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The trial court cited these cases but misconstrued our holdings. The
issue is not whether the income is discretionary. After all, income is rarely
unencumbered from obligation. People spend income on all sorts of goods
and services, some essential (the butcher and the baker) and some non-
essential (candlesticks). They also spend income on necessities to generate
more income, like a car to drive to work. But because “the duty to support
one’s child is absolute,” they must spend income on child support. See, e.g.,
Bulgarelli v. Bulgarelli, 934 A.2d 107, 111 (Pa. Super. 2007). Our law has
captured “settlements,” among a litany of other revenue streams, not because
it can be spent at a party’s discretion, but to reflect the party’s “actual financial
resources.” See 23 Pa.C.S.A. § 4302; see also Pa.R.C.P. 1910.16-2(a); and
see Mackay, 984 A.2d at 537. Thus, there is no question that Mother’s
settlement payments should have been included as income, notwithstanding
that the settlement predated the birth of the parties’ children (like in Butler)
or that some of the payments were used for medical expenses (like in Darby).
Still, the question remains whether the trial court’s decision to exclude
Mother’s settlement payments constituted an abuse of discretion. See Silver
v. Pinksey, 981 A.2d 284, 292 (Pa. Super. 2009) (en banc) (“When
evaluating a support order, this Court may only reverse the trial court’s
determination where the order cannot be sustained on any valid ground.”)
Adopting Mother’s argument on exceptions, the trial court defended the
master’s recommendation in its Rule 1925(a) opinion:
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Although the [master] did not specifically find application of
Pa.R.C.P. [1910.16-5(b)(1), (6) (relating to deviations from
the support guidelines)][3], perhaps he should have. He did
find that the $1,000 per month was used for costs of
prosthetics and medical care of [Mother]. He thus
considered the unusual needs and medical expenses of
[Mother] and excluded such income in calculation of
support.
T.C.O. at 4-5.
Put another way, the court believed the master properly, albeit
informally, applied the Rule 1910.16-5(b) factors to deviate from the guideline
child support amount. But that was not what the master did. It was clear
from the master’s report and recommendation that the master deviated not
from the amount of child support; instead, the master improperly deviated
from the amount of Mother’s net income. See Master’s
Findings/Recommendation at ¶19. The master plainly stated, “[Mother’s]
structured settlement benefit of $1,000 per month…is not being considered
as income to her under Rule 1910.16-2(a)(8) as it covers her costs for
prosthetics and medical care.” Id. (emphasis added). This is a very subtle,
but significant error.
Rule of Procedure 1910.16-5(b) lists those factors the trier-of-fact must
consider if deviating from the guideline child support amount. Among them
are the “unusual needs and unusual fixed obligations” and “medical expenses
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3 In an apparent typo, the trial court cited a nonexistent rule, “Pa.R.C.P.
1910.12-5.” Clearly the court meant to cite the 1910.16-5, which
encompasses those factors the trier-of-fact must consider when deviating
from the guideline support amount.
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not covered by insurance.” See Pa.R.C.P. 1910.16-5(b)(1), (6). At first
blush, it would appear that the master’s considerations were appropriate.
However, the Rule clearly states: “The deviation applies to the amount of the
support obligation and not to the amount of income.” Pa.R.C.P. 1910.16-5(a)
(emphasis added).
The master’s error was significant, because as with any mathematical
formula, following the correct order of operations is essential to reaching the
correct result. The same holds true with the formula for calculating child
support. Fundamentally, “the support guidelines determine the amount of
support that a [] parent should pay based on the parties’ combined monthly
net income, as defined in Pa.R.C.P. 1910.16-2, and the number of persons
being supported.” Pa.R.C.P. 1910.16-1(a)(1).
In this matter, which involved the shared custody of three children with
no obligation to pay spousal support or alimony pendente lite, the master had
to calculate child support according to the following formula:4
First, the master had to determine the parties’ gross incomes. See
Pa.R.C.P. 1910.16-4(a)(1)(Part A)(line 1). As we discussed above, income
includes “other entitlements to money or lump sum awards, without regard to
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4 Rule 1910.16-4 (“Support Guidelines. Calculation of Support Obligation,
Formula”) was amended to reflect the changes to the Internal Revenue Code
made by the federal Tax Cuts and Jobs Act of 2017. Because the instant
support order was entered after January 1, 2019, the formula utilized is Parts
A through E. See Pa.R.C.P. 1910.16-4(a)(1). In this case, the change did not
affect the calculation of child support.
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source, including settlements, awards, or verdicts.” See Pa.R.C.P. 1910.16-
2(a)(8).
Second, the master had to make proper deductions to arrive at the
parties’ net incomes. See Pa.R.C.P. 1910.16-4(a)(1)(Part A)(line 2). The list
of the five allowable deductions is itemized at Rule 1910.16-2(c)(1)(i-v).5
Notably, a party’s “unusual needs” or “medical expenses not covered by
insurance” are not among the proper income deductions under this Rule. (The
master’s error occurred at this step.)
Third, the master had to convert the net incomes into monthly amounts,
and then combined them. That way, the master could consult the schedule
listed in Rule 1910.16-3 and determine the total amount of support the
parties owe. See Pa.R.C.P. 1910.16-4(a)(1)(Part C)(lines 16-20).6
Fourth, the master had to determine what percentage of that total
amount each party’s net income represented. See Pa.R.C.P. 1910.16-
4(a)(1)(Part C)(line 21). Generally speaking, the obligor-parent pays the
obligee-parent his/her respective percentage of the total; this figure is the
monthly basic child support obligation.
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5 The only items the trier-of-fact shall deduct from the gross income to arrive
at the net income are: (i) federal, state, and local income taxes; (ii)
unemployment compensation taxes and Local Services Taxes; (iii) F.I.C.A.
payments and non-voluntary retirement payments; (iv) mandatory union
dues; and (v) alimony paid to the other party. See Pa.R.C.P. 1910.16-
2(c)(1)(i-v). The 2010 Explanatory Comment to this Rule indicates that this
list is exclusive. See id. Explanatory Comment – 2010.
6 Part B is omitted in this instance, because it concerns spousal support and
alimony pendente lite. See Pa.R.C.P. 1910.16-4(a)(Part B.)
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However, when parties have substantial or shared custody, as they did
here, the master necessarily had to apply Part D of the support formula. See
Pa.R.C.P. 1910.16-4(a)(1)(Part D)(line 25a-g).
Under Part D, the master had to adjust the basic support obligation
downward to reflect the parties’ equal custody. See Pa.R.C.P. 1910.16-
4(a)(1)(Part D)(line 25a-e); see also Pa.R.C.P. 1910.16-4(c)(1). If the result
of this downward adjustment caused the obligor (Father) to end up with a
lower monthly net income than the obligee (Mother), then the master had to
make a second Part D adjustment. See Pa.R.C.P. 1910.16-4(a)(1)(Part
D)(line 25f); see also Pa.R.C.P. 1910.16-4(c)(2). The purpose of the second
adjustment is to equalize the parties’ monthly net incomes so the obligor
would no longer be the party with the lower income. See id. Whatever
amount would equalize the monthly net incomes would constitute the obligor’s
adjusted basic child support amount. See Pa.R.C.P. 1910.16-4(a)(1)(Part
D)(line 25g). In this case, as there were no additional expenses to consider
under Part E, Father’s adjusted basic child support amount was the ultimate,
total monthly support obligation. See Pa.R.C.P. 1910.16-4(a)(1)(line 27).
Only at this point, after the ultimate monthly support obligation was
determined, could the master properly consider the deviation factors under
Rule 1910.16-5(b), i.e., Mother’s “unusual needs” or “medical expenses not
covered by insurance.”
The problem is that from the moment of error – the determination
Mother’s net income – the rest of the master’s child support calculations were
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off. Perhaps most importantly, the master might not have reached Part D
(adjustments for shared custody) if Father had the lower income:
Without regard to which parent initiated the support action,
when the children spend equal time with their parents, the
Part [D7] formula cannot be applied unless the obligor is the
parent with the higher income. An order shall not be
entered requiring the parent with the lower income to pay
basic child support to the parent with the higher income.
Pa.R.C.P. 1910.16-4(c)(2) (footnote added).
The question of whether Mother is entitled to receive any child support
– or is obligated to pay child support to Father – once her settlement income
is included, is not before us. Here, it suffices for us to conclude that the court
abused its discretion when it “failed to consider properly the requirements of
the rules governing support actions.” Hanrahan, supra. On remand, the
court shall consider Mother’s settlement payments as income when calculating
child support under the guidelines.
Order vacated. Case remanded. Jurisdiction relinquished.
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7 In an apparent oversight, we note that Pa.R.C.P. 1910.16-4(c)(2) was not
updated to reflect the post-January 1, 2019 formula (Parts A-E) following the
Tax Cuts and Jobs Act of 2017; subsection (c)(2) only cites to “Part II”
(substantial or shared custody adjustments in orders issued prior to January
1, 2019). However, both Part II and Part D concern adjustments for
substantial custody; their language is nearly identical, and the effect is the
same. As Part D still cites subsection (c)(2), we conclude (c)(2) applies to
both Part D and Part II alike.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 05/18/2020
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