in the Interest of J.Z., a Child ( 2018 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-17-00127-CV
___________________________
IN THE INTEREST OF J.Z., A CHILD
On Appeal from the 231st District Court
Tarrant County, Texas
Trial Court No. 231-554628-14
Before Sudderth, C.J.; Walker and Pittman, JJ.
Memorandum Opinion by Justice Pittman
MEMORANDUM OPINION
The trial court denied the petition to modify the parent-child relationship
(Petition to Modify) filed by Appellant J.K.Z. (Father). In two issues, Father argues
that the trial court abused its discretion in denying his Petition to Modify. Because the
trial court had evidence from which it could find that Father’s financial circumstances
had not materially and substantially changed, we affirm.
BACKGROUND
In 2014, Father filed for divorce from Appellee M.Z. (Mother), using pro se
forms. See Family, Divorce & Children, TexasLawHelp, https://texaslawhelp.org/family-
divorce-children (last visited Oct. 22, 2018). They had one child, J.Z. Both Father and
Mother represented themselves in the divorce. On July 9, 2014, the trial court signed
the final decree of divorce, which was based on a mediated settlement agreement.1 In
the decree, the trial court ordered Father to pay Mother $1,500 child support per month,
plus the cost of J.Z.’s medical insurance. Both parents agreed to the terms of the
divorce decree. The divorce decree stated that “[t]he amount of child support is
approximately the amount recommended by the Texas Family Code Child Support
Guidelines.”
Father’s Petition to Modify asserted that the order to be modified was not based
1
on a mediated settlement agreement, but he acknowledged at trial that it was.
2
In June 2016, Father filed his Petition to Modify. Father pled that the
circumstances of the child or a person affected by the order had materially and
substantially changed since the date of the rendition of the divorce decree; that the
support payments previously ordered should be decreased; that the support payments
ordered in the divorce decree were not in substantial compliance with the guidelines in
Chapter 154 of the Texas Family Code; and that the requested decrease would be in
J.Z.’s best interest.
After a hearing, the trial court denied the Petition to Modify. The trial court
issued the following findings of fact and conclusions of law relevant to this appeal:
7. From the evidence presented, [Father] did not meet his burden
of establishing a material and substantial change in circumstances since
the date of the prior order.
8. The evidence presented established that the child support
amount contained in the prior order was in the best interest of the child.
9. As [Father] failed to meet his burden, and as it was not in the
best interest of the child to modify child support, [Father]’s Petition to
Modify Parent-Child Relationship was denied.
Father filed a motion for new trial that was overruled by operation of law. He
now appeals.
DISCUSSION
I. Standard of Review
We review the trial court’s orders regarding child support modification for an
abuse of discretion. In re T.D.C., 91 S.W.3d 865, 872 (Tex. App.—Fort Worth 2002,
3
pet. denied) (op. on reh’g); see In re A.B.H., 266 S.W.3d 596, 601 (Tex. App.—Fort
Worth 2008, no pet.) (op. on reh’g) (applying standard). A trial court abuses its
discretion if it acts arbitrarily or unreasonably or does not analyze or apply the law
properly. Iliff v. Iliff, 339 S.W.3d 74, 78 (Tex. 2011). Whether the evidence supporting
the decision is legally and factually sufficient is relevant in deciding whether the trial
court abused its discretion. T.D.C., 91 S.W.3d at 872.
II. Modifications of Child Support Must Be Supported by Sufficient
Evidence.
Because Father filed the Petition to Modify within three years of the original
support order, the trial court could modify the amount of support only if Father showed
a material and substantial change in circumstances since the signing of the mediated
settlement agreement on which the order was based. Tex. Fam. Code Ann. § 156.401(a)
(West Supp. 2018).2 “A trial court’s determination as to whether there has been a
material and substantial change of circumstances is not guided by rigid rules and is fact
specific.” In re V.L.K., No. 02-10-00315-CV, 2011 WL 3211245, at *3 (Tex. App.—
Fort Worth July 28, 2011, no pet.) (mem. op.). When, as here, a parent moving for
modification asserts a change in financial circumstances, “[t]he record must contain
both historical and current evidence of the relevant person’s financial circumstances.”
2
The legislature slightly amended this section effective September 1, 2018. Act
of May 27, 2015, 84th Leg., R.S., ch. 1150, § 29, 2015 Tex. Sess. Law Serv. 3874, 3874–
75 (West) (amending section 156.401 to include orders for dental support for a child).
The amendment does not affect the parts of the statute relevant to this appeal.
4
In re S.D., No. 02-10-00221-CV, 2011 WL 3847440, at *4 (Tex. App.—Fort Worth Aug.
31, 2011, no pet.) (mem. op.).
In evaluating whether there has been a material or substantial change of
circumstances, the trial court may consider the child support guidelines under Texas
Family Code Chapter 154 (the guidelines). Tex. Fam. Code Ann. § 156.402(a) (West
2014). The fact that a child support order does not conform to the guidelines, as Father
asserts is the case here, does not by itself establish a material or substantial change
warranting modification, and a trial court is not required to modify a support obligation
to conform with the guidelines. Id.; see also In re R.D., No. 02-04-165-CV,
2005 WL 503055, at *2–3 (Tex. App.—Fort Worth Mar. 3, 2005, no pet.) (mem. op.)
(noting that a child support order not in compliance with guidelines does not by itself
establish a material or substantial change in circumstances warranting modification and
rejecting argument that a material and substantial change mandates a modification of
child support payments). If the support previously ordered does not substantially
conform to the guidelines, the trial court may modify the previous order to substantially
conform with the guidelines, but only if doing so is in the best interest of the child.
Tex. Fam. Code Ann. § 156.402(b). “In sum, the trial court retains broad discretion in
making the equitable decision of whether to modify a prior child support order.” R.D.,
2005 WL 503055, at *2; see also In re A.B.K., No. 10-06-00272-CV, 2007 WL 3293724,
at *2 (Tex. App.—Waco Nov. 7, 2007, no pet.) (mem. op.) (noting that “[i]n a suit to
modify a child support order, the court may modify the order to substantially conform
5
with the guidelines but the court may also consider other relevant evidence in addition
to the factors listed in the guidelines,” and “[t]hus, the court’s use of the guidelines for
setting the amount of child support in a modification proceeding is discretionary, not
mandatory” (citation and internal quotation marks omitted)).
As the person seeking a modification, Father had the burden to prove a material
and substantial change in circumstances. S.D., 2011 WL 3847440, at *4. Because Father
based his Petition to Modify on a change in his financial circumstances, he had the
burden to produce both historical and current evidence of his financial circumstances.
Id.
III. The Trial Court’s Denial of the Requested Modification Was Not an
Abuse of Discretion.
In his first issue, Father argues that “[t]he trial court abused its discretion in
finding that [he] ‘did not meet his burden of establishing a material and substantial
change in circumstances since the date of the prior order’ because the finding was
against the legal and factual sufficiency of the evidence.”
A. The Trial Court Had Evidence of Father’s Assets Beyond His
Income.
1. Father Produced Evidence that His Income Has Decreased.
To meet his burden to show a material and substantial change, Father presented
evidence that his income had decreased since April 2014, the approximate time of the
6
mediated settlement agreement. 3 See Reagins v. Walker, 524 S.W.3d 757, 761 (Tex.
App.—Houston [14th Dist.] 2017, no pet.) (noting that a change in the obligor’s income
can constitute a material and substantial change in circumstances).
Father owns fifty-five percent of ID Innovations Incorporated, with the other
forty-five percent owned by one other person. Father described the company’s
business as making “magnetic cards and bar code devices, as well as some other types
of software.” Father testified that in 2015, the major credit card networks began
requiring the use of cards with chips that are incompatible with his company’s
equipment, “and so [the equipment] immediately [became] obsolete.”4 At the time of
trial, his company was developing new products, but he stated that “it’s a very long,
time-consuming process.” In the meantime, the company was reducing costs; he had
frozen employee salaries. His goal was to get new products on the market by the year’s
end. He stated, “we believe that we have enough capability in order to improve . . . our
income status.” Father acknowledged on cross-examination that, at the time he agreed
The statute required Father to show a change in circumstances since the date he
3
and Mother signed the mediated settlement agreement. Tex. Fam. Code Ann.
§ 156.101(a) (West 2014). Father failed to establish the exact date on which the
mediated settlement agreement was signed, but Father testified that the agreement was
“from April of 2014.”
See Danielle Douglas, MasterCard, Visa explain why your credit card isn’t safer, Wash.
4
Post: Wonkblog (Feb. 20, 2014), https://www.washingtonpost.com/news/wonk/wp
/2014/02/20/mastercard-visa-explain-why-your-credit-card-isnt-safer (noting that
three years prior to the article’s date, MasterCard, Visa, and the other credit card
companies “laid down an ultimatum . . . that any actor without chip technology in place
by October 2015 would have to bear the cost of fraud.”) (last visited Oct. 24, 2018).
7
to pay $1,500 a month in support, he was aware that the change from unchipped to
chipped cards was imminent and that he could anticipate fluctuation in his income “in
2015 for sure, because that was the date that [the credit card networks] were going to
roll it out.” 5 Father has a degree in computer science, but he doubted that he could
find another job with a similar income to what he earned in the past, given the type of
code he uses in his work and his age (fifty-four). At the time of the hearing, he had
been paying himself a lower salary, giving him a gross income of about $3,000 a month.
Father testified that he has reduced his salary rather than maintaining it by drawing from
the company’s retained earnings—past earned income saved by the company—because
spending the retained earnings “reduces our ability to run the company. The cash is
what we use to run our company.” He also acknowledged, however, that since the
divorce, rather than spending any of its retained earnings to run the company or
otherwise, the company added about $13,000 to the retained earnings. At the end of
2015, the company had $318,000 in retained earnings. Aside from its retained earnings,
the business also has a money market account that it treats as a savings account. Rather
5
Father argues that there is no evidence that he knew at the time of the divorce
exactly how much his income would fluctuate or by what date the anticipated decrease
would actually occur. That is technically true; Father did not testify to knowing any
specific amounts in projected decreased income or a specific date by which his business
would start losing income. There was, however, evidence that Father knew the change
would happen “in 2015 for sure” and that his business’s equipment could not
accommodate those cards, rendering them functionally obsolete.
8
than decreasing between the divorce and the modification hearing, the amount in that
account had increased from just over $198,000 to just over $237,000.
2. The Evidence Also Showed that Father Has Substantial
Savings and Decreased Expenses.6
Father testified that he has downsized his living expenses since the divorce. He
stated that between 2014 and 2016, his monthly expenses decreased from $8,622 to
$2,749. He sold his home, which had a mortgage payment of $3,935 a month, for
$1.5 million, of which $759,901.75 was equity. One month prior to filing the Petition
to Modify, Father spent some of that money to buy land in Johnson County with his
girlfriend, paying half of the $350,000 purchase price. At the time of trial, Father still
retained the rest of the proceeds from the house sale, was living with his girlfriend, and
did not have a mortgage payment or pay rent. Father agreed that his net worth was
“most likely” over a million dollars. Father testified that although he was current on
his support obligation, he had been paying it out of his savings.
3. The Evidence Did Not Show that J.Z.’s Needs Have
Decreased.
Father focused his arguments at the hearing on his financial circumstances, but
the trial court also had evidence of J.Z.’s circumstances; namely, that there had been no
6
Father focuses quite a bit of his argument on whether the trial court could
consider certain assets in assessing his “net resources” for purposes of determining the
default amount of child support under the guidelines. But, as we have already explained,
the trial court was not restricted to following the guidelines to determine whether to
modify an existing child support obligation.
9
material and substantial change in J.Z.’s circumstances to justify a modification. See
Tex. Fam. Code Ann. § 156.401 (allowing the modification of a support obligation if
the circumstances of the child affected by the order have materially and substantially
changed). Under the possession-and-access order in the divorce decree, J.Z. lives with
Mother except for every other weekend and certain holidays. Father acknowledged that
Mother pays all of the childcare costs for J.Z. and pays for all school supplies, school
fees, and other school costs such as class parties, yearbooks, and field day. Mother also
buys all of J.Z.’s clothes. J.Z.’s after-school care costs about $300 a month during the
school year and about $1,000 a month during the summer. Father does not contribute
to expenses for J.Z. outside of the $1,500 support obligation other than paying for J.Z.’s
participation in a baseball league. There was no testimony or other evidence that either
J.Z.’s needs or the costs of caring for him have decreased.
B. The Trial Court’s Finding of No Material and Substantial Change
Was Not an Abuse of Discretion.
Father cites to two cases in which a court of appeals held that a parent had
established a material and substantial change in circumstances by showing a change in
income. See Trammell v. Trammell, 485 S.W.3d 571, 578 (Tex. App.—Houston [1st Dist.]
2016, no pet.); In re P.C.S., 320 S.W.3d 525, 531 (Tex. App.—Dallas 2010, pet. denied).
But, the trial court was not restricted to considering Father’s income in deciding
whether Father established a material and substantial change in his financial
circumstances warranting modification. See In re G.J.S., 940 S.W.2d 289, 293 (Tex.
10
App.—San Antonio 1997, no writ) (“Financial ability to pay child support does not
depend solely on earnings, but extends to all sources of income.”); In re E.A.E., No. 2-
09-162-CV, 2010 WL 3618707, at *5 (Tex. App.—Fort Worth Sept. 16, 2010, pet.
denied) (mem. op.); see also Plowman v. Ugalde, No. 01-14-00851-CV, 2015 WL 6081666,
at *5 (Tex. App.—Houston [1st Dist.] Oct. 15, 2015, no pet.) (mem. op.) (“[A] trial
court may take into consideration whether a parent has other assets at his disposal with
which to pay child support.”).
Further, Trammell and PCS would not require a different outcome in this case.
In Trammell, there was no evidence that the father seeking modification had assets other
than his income from which to pay child support. 485 S.W.3d at 577. To the contrary,
the father there was insolvent and on the brink of bankruptcy. Id.
P.C.S. is also distinguishable. See V.L.K., 2011 WL 3211245, at *3 (noting that a
trial court’s determination of whether a material and substantial change of
circumstances has occurred is not guided by rigid rules and is fact specific). The father
in that case lost his job after the divorce decree, but after filing for modification, he
inherited $400,000. 320 S.W.3d at 531. After the job loss but before the inheritance,
the father used his retirement funds to pay back loans and cover his living expenses. Id.
After he received his inheritance, he used approximately $60,000 of it to start a business
and, for about a year until the business was profitable enough to pay him a salary, used
the inheritance to pay living expenses, child support, and some debt. Id. Once the
business could pay him a salary, he used $150,000 of his inheritance to buy an annuity
11
retirement investment to replenish the retirement funds he had used and gave his
stepson $1000 of the inheritance for the purchase of a vehicle. Id. at 531–32. That left
approximately $75,000 of the inheritance, which he put in a money market account. Id.
at 532. Here, Father is not jobless, relying solely on his savings to pay his living
expenses. He is not using his savings to start a business to produce income or to keep
his existing business afloat. He is not using the savings to replenish a retirement account
he previously liquidated to pay his living expenses because he was jobless. Indeed,
approximately a month before he filed the Petition to Modify, he used $175,000 of the
over $750,000 from the sale of his house to buy land to possibly build on in the future,7
and he still has the rest.
Even were we bound to follow that court’s holding, the Dallas Court of Appeals
in P.C.S. held that there was some evidence on which the trial court could exercise its
discretion to find a material and substantial change in circumstances, but it did not hold
that a decrease in income always qualifies as a material and substantial change in
financial circumstances.8 The inquiry in a modification proceeding based on changed
7
Father testified that he has “a long-term goal to build something on [the]
property.” He pays $476 a month to store his belongings from the house he sold, and
because he plans one day to build on the land he purchased, he does not “want to get
rid of [his] stuff in [his] storage units.” The amount he pays for storage is approximately
the same amount of child support he wants the trial court to order.
The Dallas court’s language comes close to suggesting that a decrease in income
8
is necessarily a material and substantial change in a person’s financial circumstances,
regardless of the person’s other assets. But, while a material and substantial decrease in
income can certainly be some evidence on which a trial court may exercise its discretion
12
finances is not whether the relevant person’s income has changed, but is whether the
person’s financial circumstances, of which income is a part, have changed materially
and substantially. Tex. Fam. Code Ann. § 156.401. Here, the trial court had evidence
that Father knew at the time of the settlement agreement and divorce decree that his
business’s product would soon be obsolete; that Father pays nearly $500 a month in
storage fees to hold on to belongings from his former house; that Father has chosen to
increase his business’s retained earnings and savings account rather than keep a larger
salary; that Father chose to spend approximately $175,000 to buy land on which he may
one day build something but which now sits empty; and, most importantly, that Father
has substantial savings. None of these circumstances on their own or in a different
context necessarily prevent a finding of a material and substantial change in financial
circumstances. But put together with the other evidence at the hearing, the trial court
had evidence from which it could, in its discretion, determine that Father failed to show
a material and substantial change in circumstances.
Although Father is paying himself a lower salary due to the decrease in his
company’s business, his expenses have also drastically decreased, and he has substantial
savings. Considering all the evidence that the trial court could consider, the trial court’s
conclusion was not an abuse of discretion.
to modify a support obligation, we decline to hold that it necessarily satisfies the
statutory ground for modification regardless of a parent’s other assets so as to remove
a trial court’s discretion to find otherwise.
13
C. Father’s Other Arguments Are Unavailing.
Father asserts that “[t]he court may consider factors like the parent’s ‘ability . . .
to contribute to the support of the child’ and ‘any financial resources available for the
support of the child’ only when the ‘evidence rebuts the presumption that application
of the guidelines is in the best interest of the child and justifies a variance from the
guidelines.’” Father cites Family Code Section 154.123 for that proposition, but he
ignores Section 156.402. Tex. Fam. Code Ann. § 154.123 (West 2014), § 156.402(a)
(“The court may consider the child support guidelines for single and multiple families
under Chapter 154 to determine whether there has been a material or substantial change
of circumstances.” (emphasis added)). As we have stated, a trial court’s consideration
of the guidelines is discretionary in determining whether to modify child support. See
Id. § 156.402; E.A.E., 2010 WL 3618707, at *6 (rejecting an argument in a modification
proceeding that a child support obligation “well beyond” the guidelines is presumptively
not in the child’s best interest and noting that “compliance with the statutory guidelines
is discretionary when a trial court is considering whether to modify an existing child
support order”); A.B.K., 2007 WL 3293724, at *2 (noting that “[i]n a suit to modify a
child support order, the court may modify the order to substantially conform with the
guidelines but the court may also consider other relevant evidence in addition to the
factors listed in the guidelines”; “[t]hus, the court’s use of the guidelines for setting the
amount of child support in a modification proceeding is discretionary, not mandatory”
(citation and internal quotation marks omitted)).
14
Father further argues that the trial court could not disregard the guidelines
without making the findings required by Family Code Section 154.130. As stated, the
trial court did not have to follow the guidelines. And even if the findings in that section
would have been required had the trial court modified the support obligation, they were
not required here because the trial court left the existing support obligation in place.
See Onkst v. Onkst, No. 03-15-00636-CV, 2017 WL 2628245, at *4 (Tex. App.—Austin
June 16, 2017, no pet.) (mem. op.); Hardin v. Hardin, 161 S.W.3d 14, 19 (Tex. App.—
Houston [14th Dist.] 2004), judgm’t vacated op. not withdrawn, No. 14-03-00342-CV,
2005 WL 310076 (Tex. App.—Houston [14th Dist.] Feb. 10, 2005, no pet.) (mem. op.).
Father acknowledges as much in his reply brief.
Finally, Father argues that the trial court found in its judgment that “the child
support previously ordered is within the guidelines of Chapter 154.” In its judgment,
the trial court stated, “After hearing the evidence and the argument of counsel, the
Court finds that the child support previously ordered is within the guidelines of Chapter
154 of the Texas Family Code, and that lowering the child support payments previously
ordered would not be in the best interest of the child.” The finding in the judgment
does not merit reversal. The trial court did not repeat the finding in its separately-filed
findings of fact and conclusions of law, wherein it found that Father did not meet his
burden of establishing a material and substantial change in circumstances and that the
evidence established that the child support amount in the prior order was in J.Z.’s best
interest. As stated, the trial court did not have to follow the support guidelines in
15
determining whether Father had established a material or substantial change in
circumstances. If Father did not establish a material or substantial change in
circumstances, he was not entitled to a modification, regardless of whether the
previously-ordered support still complied with the guidelines at the time of the
modification hearing. See Tex. Fam. Code Ann. § 156.401; G.J.S., 940 S.W.2d at
293 (“We are not bound by what is contained in the findings of fact where a complete
statement of facts reveals otherwise and the conclusion is legally sound.”).
The trial court had some evidence on which to base its finding that Father’s
circumstances had not changed so as to warrant modifying the child support obligation,
and the finding was supported by sufficient evidence. Accordingly, the trial court’s
denial of the modification was not an abuse of discretion.
Because we have upheld the trial court’s finding that Father’s circumstances had
not materially and substantially changed, we do not address his second issue arguing
that he established that a modification was in J.Z.’s best interest. See Tex. Fam. Code
Ann. § 156.101(a); Tex. R. App. P. 47.1.
CONCLUSION
Having overruled Father’s first issue, which is dispositive, we affirm the trial
court’s order denying Father’s Petition to Modify.
16
/s/ Mark T. Pittman
Mark T. Pittman
Justice
Delivered: October 25, 2018
17