Anderson v. Anderson

EYLER, Judge. The issue of first impression presented by this appeal is whether a noncustodial parent is entitled to a credit toward child support in the amount of Social Security benefits received directly by a minor child by virtue of the parent’s work ⁴⁷⁶ history and eventual retirement. We hold that such benefits do not offset the obligor parent’s child support obligation as a matter of law. Instead, a trial court, in exercising the discretion afforded to it by § 12-202(a)(2)(ii) of the Family Law Article, may take such payments into consideration in determining whether to deviate from the guidelines in any particular case.

Alternatively, where a case involves parents with above-guidelines income levels, the trial court may consider such payments when it sets child support in accordance with the discretion afforded to it by § 12-204(d) of the Family Law Article. Facts Appellant, Richard D. Anderson, and appellee, Jean D. Anderson, were divorced by decree dated December 15, 1992. Three children were born during the marriage, the first on April 28, 1981, and twins on June 6, 1983. The parties’ divorce decree, inter alia, directed appellant to pay to appellee $600 per month per child.

The decree incorporated a prior agreement between the parties, and the record does not contain any information with respect to how that figure was computed. With respect to employment history, appellant spent 13 years on active duty with the United States Air Force and subsequently was employed by the National Security Administration until age 55. Thereafter, he worked for Martin Marietta Corporation, Ford Aerospace, and Loral Corporation, Ford Aerospace’s successor and his employer at the time of divorce. On September 30, 1994, apparently at age 63, appellant retired rather than be laid off as the result of downsizing by Loral Corporation.

As of the time of divorce, appellant earned approximately $113,000 per year. In 1993, appellant earned approximately $116,000, and according to appellant’s brief, in 1995, after retirement, he earned $67,269. This total was comprised of pensions from the Department of Defense, the Office of Personnel Management, and Loral Corporation totalling $59,901, plus $7,368 in Social Security benefits. The parties entered into a stipulation at a hearing before a master ⁴⁷⁷ in September, 1995, however, to the effect that appellant’s gross income was then $5,636 per month or $67,632 per year.

With respect to appellee, the record reflects that, as of the time of divorce, she earned approximately $70,000 per year. In 1995, at age 46, she was employed as a human resources manager by Westinghouse Corporation and, according to a stipulation between the parties, earned $6,704 gross income per month or $80,448 per year. Based on appellant’s history of employment, the three minor children of the parties also were eligible to receive and did receive Social Security benefits. The benefits began on November 1, 1994, initially in the amount of $354 per month, later increasing to $507 per month.

The amount of appellant’s Social Security benefits is not reduced or otherwise affected by the fact that the children receive Social Security benefits. On October 24,1994, appellant filed a petition to modify and decrease child support, and beginning in November, 1994, appellant unilaterally began reducing the amount of his child support payments to appellee by an amount equal to the amount of the Social Security benefits received by the children. He first deducted $354 from his monthly payments and then deducted $507 per month when the Social Security payments increased to $507 per month. Consequently, the total received by the children from both appellant and the Social Security Administration continued to be $1,800 per month.

Subsequently, appellee filed a petition to hold appellant in contempt for failure to pay directly the full $1,800 per month support pursuant to the December 15, 1992 decree. The matter was heard by a master in September, 1995, who issued a report and recommendations on September 21,1995. Appellant filed exceptions, which the circuit court heard on September 10, 1996, and decided by memorandum and order on October 30,1996. Appellant, in his petition to modify child support, asserted that there was a change in circumstances based on his decrease in income and appellee’s increase in income.

Appellant ⁴⁷⁸ further asserted that he was entitled to a credit against his child support obligation in the amount of Social Security benefits received directly by the children. Appellee apparently conceded that some reduction in support going forward was indicated, based on appellant’s decrease in income, but challenged the credits for Social Security benefits unilaterally taken by appellant prior to any modification order. Appellee also asserted that appellant had voluntarily impoverished himself and should be charged with potential income. The master recommended monthly support in the amount of $1,412 effective June 1, 1995, plus a payment of $200 per month on arrears totaling $3,683 as of September 11, 1995. 1 The master did not find that appellant had voluntary impoverished himself, and imputed no potential income to appellant.

The transcript of the hearing in circuit court indicates that the master’s notes reflecting her calculations were made a part of the record. As of the time the trial judge issued his memorandum opinion, however, he indicated that no work ⁴⁷⁹ sheet had been provided with the master’s written report and recommendations, and he could not discern how the master had treated the Social Security benefits. The parties have not favored us with a copy of any exhibits in the record extract, and we have not been able to locate in the record the exhibits referred to at the circuit court hearing, including the master’s notes. 2 Consequently, even though the parties did not dispute the numbers involved, and present as the sole issue the treatment of the Social Security benefits received by the children, we are unable to track the numbers, either as argued by the parties, or as recommended by the master. Appellant filed exceptions to the master’s written report, only one of which is currently before us: that the reduction in support failed to allocate the children’s monthly Social Security benefit.

With respect to this exception, the trial court held that the children’s Social Security benefit did not meet the definition of actual income to either parent, as set forth in the Family Law Article, but could be considered an amount in direct reduction of the parties’ combined basic child support obligation. The trial court concluded that, because it could not tell how the master allocated the children’s monthly Social Security benefit, the exception was denied as were all other exceptions, but the case was remanded to the master to compute the bottom line in light of the trial court’s opinion and to submit a new report with a worksheet and the calculation of any new arrearage. Appellant filed a timely appeal raising the trial court’s treatment of the Social Security benefit. Discussion The sole question presented by this appeal is whether the trial court erred in denying appellant credit against his child support obligation in an amount equal to the direct payment by the Social Security Administration for the benefit ⁴⁸⁰ of the children. 3 Appellant argues that he is entitled to a dollar for dollar credit against his child support obligation because the benefits were earned by appellant through his years of service and his payments of Social Security taxes.- In addition, he stressed a number of times below that, during the time he unilaterally reduced his payments, appellee never received an amount less than that provided for in the parties’ separation agreement.

Appellant maintains that the source of the funds should not matter as long as appellee is receiving the total allotment of the child support for which the trial court determines appellant is responsible, and argues that to treat the benefits in any other manner is to provide appellee with a windfall. Preliminarily, we make the following observations regarding the nature of the Social Security benefits. As we noted earlier, the benefits paid to or on behalf of the minor children do not in any way affect appellant’s Social Security benefits. Appellant receives the same amount in Social Security benefits no matter whether the children also receive benefits.

Although it is true that the entitlement to benefits was created by appellant’s years of employment and payment of Social Security taxes, it is an entitlement belonging to the children and not to appellant. Further, although it also is true that, for the time period prior to the modification of child support, the total support provided by appellant, when combined with the benefits, always equalled the $1,800 per month provided by the decree, the decree does not provide for reduction of the child support award by Social Security benefits. Appellant acknowledges that the precise issue before us has not been determined in Maryland, and relies on cases from a number of other jurisdictions in support of his position. As ⁴⁸¹ Maryland possesses a comprehensive statutory scheme governing child support awards, see Family Law Article, §§ 12-201 et seq., 4 we shall begin our analysis by examining that scheme.

Because Maryland’s child support legislation provides an answer to our query, we also shall end our analysis there. 5 The Maryland Child Support Guidelines Statute, Fam. Law §§ 12-201 through 12-204, enacted in February, 1989, is based on the Income Shares Model. Voishan v. Palma, 327 Md. 318, 322 , 609 A.2d 319 (1992) (citing Senate Judicial Proceedings Committee Bill Analysis, Senate Bill 49 (1989)). The premise of this model is that “a child should receive the same proportion of parental income, and thereby enjoy the standard of living, he or she would have experienced had the child’s, parents remained together.” Id. “[TJhe model establishes child support obligations based on estimates of the percentage of income that parents in an intact household typically spend on their children.” Id. at 322-23 , 609 A.2d 319 .

Under this model, each parent contributes to the care of the child on a basis proportionate to his or her share of the total gross income. The statutory scheme requires the trial court to first determine the gross actual income of each parent and then determine the adjusted actual income of each parent. If the parents’ combined adjusted actual income is $10,000 per month or less, the trial court must then determine the basic support obligation by reference to the schedule provided in § 12-204(e). Once the basic child support obligation is determined, additional work-related child care expenses, extraordinary medical expenses, and other additional expenses are ⁴⁸² added to obtain the total support obligation.

The total support obligation is then divided between the parents in proportion to their incomes. In sole physical custody cases such as the one before us, the custodial parent is presumed to spend that parent’s total child support obligation directly on the child, § 13 — 204(k)(2), and the noncustodial parent shall owe his or her total child support obligation to the custodial parent minus any ordered payments included in the calculations that are made directly by the noncustodial parent on behalf of the child. § 12-204(k)(3). The amount of child support dictated by the guidelines schedule is presumed to be correct, although the presumption may be rebutted by evidence that such amount would be “unjust and inappropriate in a particular case.” § 12-202(2)(ii); Voishan, 327 Md. at 323-24 , 609 A.2d 319 . If the combined adjusted actual income of the parents exceeds $10,000 per month, the trial court is directed to use its discretion in setting the amount of child support. § 12-204(d); Voishan, 327 Md. at 324 , 609 A.2d 319 .

As we will explain, this matter must be remanded to the circuit court for a determination of the issues consistent with this opinion. As of almost two years ago, it appears that the combined adjusted actual income of the parties was slightly in excess of the guidelines, but we, of course, do not know the current facts or what they will be on remand. Consequently, we will discuss the issue with regard to cases both within and without the guidelines. A review of the record indicates consideration below of at least four different ways, from a purely mechanical standpoint, of treating the Social Security benefits: (1) treat the benefits as satisfying appellant’s support obligation, although from a different source, by giving appellant a dollar for dollar credit (position urged by appellant); (2) treat the benefits as income to appellee (position presumably taken by master); 6 (3) sub ⁴⁸³ tract the benefits from the basic child support obligation so as to give a credit to both parties (position taken by trial court); or (4) do not factor in the benefits at all in calculating child support (position urged by appellee).

With the possible exception of the fourth approach, none of the approaches is provided for by the support guidelines. The guidelines do not provide for application of Social Security benefits directly against the obligor’s support obligation. Neither do the guidelines provide that Social Security benefits paid on behalf of a minor child shall be included in the income of the custodial parent. Section 12-201(b) defines “income” as “actual income of a parent, if the parent is employed to full capacity; or [ J potential income of a parent, if the parent is voluntarily impoverished.” While “actual income” means income from any source, § 12-201(c)(l), including Social Security benefits, § 12-201(c)(3)(x), it is undisputed that the Social Security benefits in this case are paid on behalf of the children.

Thus, they are income to the children. As such, we agree with the circuit court that they are not properly included in the first instance in the custodial parent’s income for the purpose of determining the basic child support obligation and the parties’ respective proportions of such obligation. See Moore v. Tseronis, 106 Md.App. 275, 284 , 664 A.2d 427 (1995)(noting that potential income of noncustodial parent’s spouse may not properly be imputed to noncustodial parent). Similarly, however, the approach adopted by the trial court is not provided for by the guidelines.

Section 12-204(a)(l) provides that the basic child support obligation shall be determined in accordance with the schedule, and shall be divided by the parents in proportion to their income. The schedule sets an amount based upon the parents’ joint