Hathcock v. Hathcock

Reason: I
attest to the
accuracy and
integrity of this
document
Date: Cite as 2020 Ark. App. 236
2021-06-15 20:
26:50
ARKANSAS COURT OF APPEALS
Foxit DIVISION II
PhantomPDF No. CV-19-446
Version: 9.7.5
Opinion Delivered: April 15, 2020

APPEAL FROM THE PULASKI
STEPHEN ALLEN HATHCOCK COUNTY CIRCUIT COURT,
APPELLANT FIFTEENTH DIVISION
[NO. 60DR-03-2911]
V.

TRACY YOUNG HATHCOCK (NOW HONORABLE RICHARD MOORE,
SMITH) JUDGE
APPELLEE
AFFIRMED IN PART; REVERSED
AND REMANDED IN PART

PHILLIP T. WHITEAKER, Judge

Dr. Stephen Allen Hathcock appeals a Pulaski County Circuit Court order denying

his amended motion to modify child support and challenges the circuit court’s failure to

strike appellee Tracy Young Hathcock’s objections to his discovery requests and to compel

discovery. We affirm the circuit court’s decision on the discovery issue and reverse and

remand on its denial of the amended motion to modify child support.

I. Relevant Facts and Procedural History

Stephen and Tracy were married in October 1994. Not long after Stephen and Tracy

married, Stephen’s grandmother, Mary Louise Hathcock, established the Mary L. Hathcock

Revocable Trust (the Trust) in May of 1996 for the benefit of her two adult sons—Stephen’s
father, Alfred, and his uncle, Charles. She funded the Trust primarily with interests in farm

and timber land.1 The Trust also contained a spendthrift provision which provided:

3.6. Spendthrift Clause. To the extent permitted by law, no beneficiary of
this Trust shall have the power to dispose of or to charge by way of anticipation any
interest given, and all sums payable to any beneficiary shall be free and clear of his or
her debts, contracts, disposition, pledges and anticipations, and shall not be taken or
reached by any legal or equitable process in satisfaction thereof.

Mary died in September 1998. Alfred died approximately two weeks later, and under

the terms of the Trust, was treated as though he had predeceased Mary. Alfred’s share of the

Trust then passed to Stephen and his sister, Lisa.

The Trust was administered primarily for the benefit of Charles. Each year, the third-

party trustee ensured that Charles’s needs were met; the Trust even allowed for the invasion

of principal for Charles’s support and maintenance. To the extent there were any funds

remaining, the trustee could distribute those funds equally between Stephen and Lisa. On

average, Stephen and Lisa each received approximately $10,000 a year in trust income.

In February 2004, Stephen and Tracy divorced. In the decree, they agreed that they

would share joint legal custody of their two minor children, SH and CH, with Tracy

retaining primary physical custody. They further agreed that Stephen would pay directly to

Tracy $1000 a month in child support2 and maintain a medical savings account for the

1
Some of the interests were direct and some were the result of owning minority
interests in limited partnerships or limited liability companies.
2
The amount agreed on by the parties was not based on a precise calculation of
Stephen’s net income pursuant to the child-support chart. The parties agreed that any future
modification would not be barred by either party’s inability to demonstrate a material change
of circumstances. Absent a future modification, Stephen’s child-support obligations would
continue until SH reached age eighteen or graduated from high school, whichever occurred
last. At that point, absent a requested review of the remaining support obligation, support

2
medical and other health-related expenses of the children. We are unclear on the record

before us if any income that Stephen received from the Trust was included in calculating

the award of child support set forth in the divorce decree entered in 2004.

While the issues on appeal pertain to child support and discovery, Stephen’s and

Tracy’s property awards from the divorce decree are relevant to the arguments on appeal.

Each was awarded an interest in certain trusts as separate nonmarital property. Specifically,

Tracy was awarded her interest in the Vivian C. Young Testamentary Trust, and Stephen

was awarded his interest in the Mary L. Hathcock Revocable Trust and the Alfred B.

Hathcock Insurance Trust.

The parties returned to court in the fall of 2009 after Stephen accepted a position at

a hospital and moved to New Hampshire.3 In an August 2010 order, the court modified

child support to $2,0003.60 a month on the basis of Stephen’s change of employment and

improved financial situation. Additionally, the court ordered Stephen to pay Tracy as child

support 21 percent of any net income he received over and above his regular salary and to

provide her with his federal and state income tax returns, including all schedules, within ten

days of the date the returns were mailed to the IRS or the state revenue authority.

Again, we are unclear on the record before us if the trust income received by Stephen

was included in the court’s 2010 order that he pay 21 percent of any net income received

was to be automatically adjusted pursuant to the provision of Arkansas Code Annotated
section 9-14-237 until CH reached age eighteen or graduated high school, whichever
occurred last.
3
The move was strictly for economic reasons.

3
over and above his regular salary.4 Tracy obviously thought that it was included because she

subsequently filed a motion for wage assignment arising from a disagreement as to the

amount and timing of the trust-related child-support payments. In May 2012, Stephen and

Tracy entered an agreed order that specifically addressed the payment of child support on

disbursements Stephen received from the Mary L. Hathcock Revocable Trust. The order

provided in pertinent part:

1. This Court orders the trustee of the Mary Louise Hathcock Revocable
Trust (“Farm Trust”) to send Tracy Young Smith’s account at the Office of Child
Support Enforcement an amount deducted from any disbursement made to Stephen
Allen Hathcock calculated as follows. Subtract 33% of the disbursement amount from
the amount disbursed to Stephen Hathcock (the “net amount”). (This is the
approximate tax liability owed by [Stephen] for that disbursement). Then pay to Tracy
Young Smith’s account at the Office of Child Support Enforcement, 21% of the net
amount.

2. When [Stephen] files his annual income tax return if [Stephen] has overpaid
child support attributable to the Farm Trust disbursement he will notify [Tracy] of
the overpaid amount with accompanying proof of overpayment and [Tracy] will
promptly reimburse [Stephen] for such overpaid amount. If [Stephen] has underpaid
child support attributable to the Farm Trust disbursement, [Stephen] will promptly
pay [Tracy] the amount of underpayment with accompanying proof of
underpayment.

(Emphasis added.) After the entry of the May 2012 order, Stephen paid Tracy child support

on the income he received from the Mary L. Hathcock Revocable Trust.

In 2014, Stephen returned to Arkansas from New Hampshire. In March 2015,

Stephen filed a motion to reduce child support on the basis of the reduction of his salary

commensurate with the relocation back to Arkansas. While that motion was pending before

4
The trust income was not specifically identified in the August 2010 order.

4
the court, Stephen’s uncle, Charles, died.5 His death triggered the termination of the Trust.

The trustee began the process of dissolving the Trust, including adjusting the values of the

trust assets to their date-of-death value. Lisa, Stephen’s sister, continued to get distributions

from the Trust.6 Stephen did not.

On December 2, 2015, Stephen filed an amended motion to reduce child support

requesting the court to declare that funds inherited from the Trust were not “disbursements”

from the Trust and therefore were not subject to the 21 percent child-support provision of

the May 2012 agreed order. In the alternative, Stephen requested that if the funds were

declared disbursements under the May 2012 agreed order, the agreed order be modified so

as to prevent a windfall over and above the reasonable needs of the children.

On December 3, 2015, the circuit court entered an agreed order concerning

Stephen’s March 2015 motion to modify. In accordance with the parties’ agreement, the

court in the agreed order directed Stephen to pay $14,994.96 in arrearages, plus medical

bills and attorneys’ fees, and modified the May 2012 child-support order to $1,891 a month.

The court reserved and did not rule on the issues contained in the December amended

motion.

The parties engaged in lengthy and protracted discovery, including the retention of

expert witnesses by both sides. Stephen objected to Tracy’s responses to his requests for

interrogatories, alleging that her “boilerplate” and “general” objections and her reservation

5
Charles died in June 2015.
6
She received $5,000 on July 24; $3,000 on August 6; $5,000 on September 30;
$2,000 on November 13; and then a larger disbursement of $582,000 on November 19.

5
of rights to each of his discovery requests were improper and prevented him from

ascertaining the true nature of her objections and made it difficult to ascertain whether all

requested information had been properly produced. The circuit court ultimately overruled

Stephen’s objections and denied his motion to compel.

The court conducted a hearing on the motion to amend in April 2018, hearing

testimony and receiving evidence from Stephen, Tracy, Cheryl Shuffield—Stephen’s expert,

and Steve Shroeder—Tracy’s expert. The parties also filed posttrial briefs in which

significant attention was paid to the definition of “disbursement” as contemplated in the

2012 agreed order.

Stephen asserted that the parties intended for the term disbursement to encompass

only distributions of income he received from the Trust, not distributions of corpus. He

pointed to the testimony of his expert that the term “disbursement” has a specific meaning

in accounting parlance, that it designates a “cash payment,” and that a distribution of

property would not constitute a disbursement. Thus, the court should strictly construe the

terms of the 2012 agreed order to exclude disbursements made to him upon the dissolution

of the Trust and from his inheritance from the estate of his uncle Charles Hathcock.

Alternatively, Stephen argued that if the court disagreed, the award should be modified to

prevent a windfall over and above the reasonable needs of the children.

Tracy argued that the 2012 agreed order was an independent contract between her

and Stephen that could not be modified by the court. She disagreed with Stephen and

argued that the 2012 agreed order applied to disbursements of any kind, whether it be

income, corpus, or inheritance, which was contemplated by the parties’ independent

6
contract. She pointed to the testimony of her expert that disbursements included all moneys

transferred out of the Trust to the beneficiaries, whether in cash or in kind. She also argued

that the 2012 order did not state that the disbursements had to be taxable income or cash

disbursements. Concerning the alternative argument, Tracy took the position that the 2012

order did not indicate that it was subject to the reasonable needs of the children. If the court

did consider the reasonable needs of the children, she argued that her testimony regarding

the expenses of the children was enough to avoid any windfall.7

On November 14, 2018, the court issued a letter opinion. We recite the relevant

portions of this letter opinion that pertain to the issues on appeal. 8 The letter opinion

provided:

The first question before the Court is whether [Stephen’s] Amended Motion
to Reduce Child Support was filed in a timely manner to allow modification of the
May 2012 Agreed Order, if so, if the Agreed Order entered into by the parties and
filed with the Court in May of 2012 is modifiable. Pursuant to the testimony
presented to the Court, the trust at issue in this matter was dissolved on or about
November 19, 2015. [Stephen] then filed an Amended Motion to Reduce Child
Support on or about December 2, 2015, requesting that the previously entered
Agreed Order, dated May 30, 2012, be modified and arguing that the dissolution of
the trust should not be considered a disbursement for purposes of the Agreed Order,
or, in the alternative, if the Court does find that there is a disbursement, that the

7
At the time of the hearing, SH was twenty years old and CH was almost eighteen.
8
The court also addressed the distribution of proceeds from the sale of certain
properties (the Main Street properties), and whether they should be considered a trust
disbursement, subject to the “21%” formula, or if the proceeds of said sale should be
considered part of Stephen’s inheritance from his uncle and thus subject to the application
of the support chart. The circuit court found that the proceeds from the sale of the Main
Street Properties constituted an inheritance from his uncle and could be considered as
income for purposes of calculating child support pursuant to the child-support chart.
Stephen does not challenge the circuit court’s ruling in this regard.

7
Order should be modified so that [Tracy] does not receive a windfall that would be
significantly more than the needs of the children.

The court finds that the dissolution of the trust is considered a disbursement
for purposes of the May 2012 agreed order. Further, the Court finds that the
dissolution of the trust occurred on or about November 19, 2015, and Plaintiff’s
Motion regarding modifying the Agreed Order was not filed until December 2,
2015. The law in Arkansas is clear that child support cannot be modified prior to the
date that a Motion is filed with the Court. Rogers v. Rogers, 90 Ark. App. 321
(2005). As a result of the fact that the Amended Motion was filed after the Plaintiff’s
interest in the disbursement attached it is unnecessary for the Court to address the
issue of whether or not the May 2012 Agreed Order is modifiable, or the alternative
“needs of the children” argument.

....

The Court requests that [Tracy’s counsel] prepare an Order expressing and
incorporating the Court’s Letter Opinion and transmit same to [Stephen’s counsel]
for his review.

A formal order was entered on February 7, 2019. Contrary to the court’s express

direction, the formal order did not reference or incorporate the court’s letter opinion; nor

did it express the reasons for the court’s opinion. It simply denied the motion and calculated

the child support due and owing. We, however, can look to the letter opinion to discern

the circuit court’s reasoning when there is a gap in the order. See T & S Mach. Shop, Inc. v.

KD Sales, 2009 Ark. App. 836, at 4–6, 372 S.W.3d 410, 412–14.

Stephen appeals arguing that the circuit court erred (1) in finding his motion

untimely; (2) in failing to consider the reasonable needs of the children in determining an

appropriate award of support; (3) in failing to consider the effect of the spendthrift provision

of the Trust; and (4) in overruling his complaints about discovery.

8
II. Analysis

Our standard of review for an appeal from a child-support order is de novo on the

record, and we will not reverse a finding of fact by the circuit court unless it is clearly

erroneous. Morgan v. Morgan, 2018 Ark. App. 316, at 6, 552 S.W.3d 10, 15 (citing Hall v.

Hall, 2013 Ark. 330, 429 S.W.3d 219). In reviewing a circuit court’s findings, we give due

deference to that court’s superior position to determine the credibility of the witnesses and

the weight to be accorded to their testimony. Id., 552 S.W.3d at 15. As a rule, when the

amount of child support is at issue, we will not reverse the circuit court absent an abuse

of discretion. Id. at 6–7, 552 S.W.3d at 15. However, a circuit court’s conclusion of law is

given no deference on appeal. Id. at 7, 552 S.W.3d at 15.

Stephen first argues that the circuit court erred in concluding that his motion to

modify was untimely. Stephen is correct. The circuit court found that the Trust dissolved

on or about November 19, 2015, and that the Trust dissolution is considered a disbursement

for purposes of the 2012 agreed order. We disagree.

The 2012 agreed order provided that child support was to be deducted from “any

disbursement” made “to” Stephen. The court found the dissolution of the trust to be a

disbursement for purposes of the 2012 agreed order. However, the experts testified that

disbursements are the payments of cash and/or the transfer of property to the beneficiary

from the Trust. Thus, while Stephen’s interest in the corpus of the Trust may have been

triggered by the death of Charles and the termination of the Trust, nothing was actually

transferred to him at that time; accordingly, under the terms of the agreement, there could

be no disbursement for purposes of calculating child support on the date of Charles’s death.

9
Inexplicably, the court found that the Trust dissolved on November 19, 2015—the date

Lisa received a large distribution from the Trust—not the date of Charles’s death.

Additionally, that distribution was a distribution to Lisa, not Stephen, and the 2012 agreed

order speaks in terms of disbursements made to Stephen from the Trust. Thus, the circuit

court’s determination that the Trust dissolved on this date was in error, as was its conclusion

that Stephen received a disbursement on that date. In fact, the record clearly shows that

Stephen did not receive a distribution of any kind from the Trust until after the filing of his

December 2, 2015, amended motion.9 Under the terms of the 2012 agreed order, Stephen’s

obligation to pay support only materialized when a disbursement had been made. To the

extent these distributions are found to be disbursements from the Trust for purposes of

calculating child support under the agreed order, they did not occur until after Stephen’s

amended motion had been filed. Thus, the court’s conclusion that the motion was untimely

was in error.

Because it found the motion to modify was untimely, the circuit court found it

unnecessary to consider Stephen’s “needs of the children” argument 10 or whether the agreed

9
The record reflects that Stephen received a $95,779.99 distribution on December
21, 2015 ($25,779.99 in farm income and $70,000 in proceeds from the sale of real estate).
On that date, the Trust also set aside $81,887 for Stephen’s potential payment of child
support, which equals the child support due based on the distribution amount paid to Lisa
in November 2015 less Stephen’s potential tax liability. He received a beneficiary
distribution of $415,000 on March 9, 2016, and $85,000 on March 31, 2016. Stephen
received additional distributions of $8,636, capital stock and in-kind distributions totaling
approximately $1,319,595, and $63,880 from the sale of the Main Street properties; all of
these additional distributions were received in 2016.
10
We note that child support is not a mechanism to provide for the accumulation of
capital by children but is to provide for their reasonable needs. See Smith v. Smith, 341 Ark.
590, 596, 19 S.W.3d 590, 594–95 (2000). The court has a duty to exercise its discretion in

10
order could be modified by the court. The court further failed to address what effect, if any,

the spendthrift provisions of the Trust had on the Stephen’s agreement to pay child support

on his disbursements from the Trust. The court also failed to address Stephen’s argument

that the term “disbursement” as used in the agreed order was not intended by the parties to

apply in this situation but was instead intended to apply only to “income” Stephen received

from the Trust on an annual basis. As a result, we must remand for the court to consider

these issues.

Finally, Stephen argues that the circuit court erred in allowing Tracy to provide

boilerplate or general objections to his discovery requests. He claims that if these objections

are allowed to stand, he has no way of knowing whether all information that has been

requested has been produced or whether information has been withheld as a result of the

general objections.

Circuit courts have wide discretion in all matters pertaining to discovery, and we will

not reverse their decisions absent an abuse of discretion that is prejudicial to the appellant.

Heinrich v. Harp’s Food Stores, Inc., 52 Ark. App. 165, 915 S.W.2d 734 (1996). Under the

circumstances revealed by the record, we cannot say that the court abused its discretion in

overruling Stephen’s objection to Tracy’s responses to his discovery requests. The circuit

court questioned counsel extensively as to his objection to the responses. The court stated

every case to ensure that the award is necessary to provide for the reasonable needs of the
children. Grimsley v. Drewyor, 2019 Ark. App. 218, 575 S.W.3d 636. However, we express
no opinion as to whether the parties may agree to a greater award or whether any such
agreement was contemplated in this case.

11
that it was its understanding that if a party makes a general discovery objection and then the

opposing party answers, the objecting party waives the objection. The court noted that

although Tracy generally objected to the requests, she then proceeded to give detailed

answers to the questions asked. When asked, Stephen’s counsel could not point to any

particular answer that was deficient. The circuit court considered Stephen’s arguments and

found the discovery responses to be sufficient. That was not an abuse of discretion.

Affirmed in part; reversed and remanded in part.

GRUBER, C.J., agrees.

HARRISON, J., concurs.

BRANDON J. HARRISON, Judge, concurring. I agree that we must reverse the

circuit court’s decision that Stephen’s motion to modify his child-support obligation was

untimely filed. It was timely. Although I join the decision to reverse the appealed order

and remand for further proceedings, I do so for an additional reason. My colleagues state

that the “circuit court found it unnecessary to consider . . . whether the agreed order could

be modified by the court.” I believe the circuit court has already acted on the agreed order.

And to the extent the circuit court determined that the 2012 agreed order alone settled

Stephen’s child-support obligation, it erred.

The challenged order in this case states (in part) that Stephen must pay $144,123.50

to the Office of Child Support Enforcement “[p]er the provisions of the Agreed Order

dated May 30, 2012.” That directive runs afoul of Arkansas’s child-support law in general.

It does so because the amount the court awarded in child support was the precise amount

that Tracy said Stephen had “contracted” to pay in the 2012 agreed order. But the agreed

12
order cannot in and of itself control the outcome of the child-support question this record

presents.

A circuit court is not bound by an agreed order or an independent contract regarding

the amount of child support one must pay. We so recognized as recently as two weeks ago

in Callan v. Callan, 2020 Ark. App. 205, 599 S.W.3d 145. In Callan, this court held that

the circuit court was not bound by the parties’ “earlier contractual agreement” because “the

circuit court always retains jurisdiction over child support as a matter of public policy, no

matter what an independent contract states.” Id. at 6 n.2, 599 S.W.3d at 149 n.2. Nor do

I believe that a circuit court is bound by an agreed order that purports to definitively

determine which sources of money are “income” for child-support-calculation purposes.

Finally, in a similar vein, parties cannot render a circuit court mute regarding whether an

agreed upon amount of support is enough under Arkansas law. As we have recently written:

[P]arties cannot with any security enter into agreements regarding child
support that vary by even a small amount from [Administrative Order No.
10] . . . . Although there are numerous reasons why parties would enter into
such agreements, counsel for such parties should consider setting out in the
support order reasons for the variance that would constitute a ‘rebuttal’ of the
chart and obtaining the approval of the circuit court before entering into such
agreements in the future.

See Higdon v. Roberts, 2020 Ark. App. 59, at 7–8, 595 S.W.3d 19, 24–25 (internal citations

and quotations omitted).

Child support is always modifiable if there is a showing of a change in circumstances.

Roark v. Office of Child Support Enf’t, 101 Ark. App. 382, 278 S.W.3d 114 (2008). When a

circuit court determines whether there has been a material change in circumstances it must

probe whether the alleged change is based on facts that were known (or knowable) to the

13
parties and the court when the initial support order was entered. Troutman v. Troutman,

2017 Ark. 139, 516 S.W.3d 733. The threshold question in this case, which has not yet

been decided, is whether Stephen has shown a material change in circumstances since the

agreed order was entered in 2012. Stephen timely alleged that a material change in

circumstances had occurred between the entry of the 2012 order and his March 2015

motion to reduce child support. The March motion was amended by his December 2

motion; the latter of which asked the court to decide whether Stephen’s inheritance from

Charles was “income” for child-support purposes. Though it is not crystal clear, the court’s

order appears to have accepted Tracy’s argument regarding the legal effect of the agreed

order instead of applying all the usual steps when determining whether a present child-

support obligation should be modified.

* * *

On remand, the circuit court must decide whether a material change in

circumstances has occurred since Stephen’s 2012 support obligation was set. Regardless,

the agreed order cannot legally bind the court when deciding whether Stephen’s inheritance

from his uncle is a source of income for child-support purposes, and if it is, what amount of

the inheritance can be used when calculating Stephen’s support obligation.

Wagoner Law Firm, P.A., by: Jack Wagoner III, Bruce Tennant, and Carmen Mosley-

Sims, for appellant.

LaCerra, Dickson, Hoover & Rogers, PLLC, by; Traci LaCerra, for appellee.

14