# FILED
February 23, 1999 Cecil Crowson, Jr. Appellate Cou rt Clerk IN THE COURT OF A

PPEALS OF TENN ESSEE AT NASHVILLE
JANET LYNN

HOBBS, ) ) Plaintiff/Appellant, ) Bedford Chancery No. 20, 945 ) VS. ) Appeal No . 01A01-9808-CH- 00418 ) GARRY EA

RL HOBBS, ) ) Defendant/Appellee. )
APPEAL FROM

THE CHANCE RY COURT O F BEDFORD COUNTY AT SHELBYVILLE, TENNESSEE THE HONORABLE TYRUS H. COBB, CHANCELLOR

BRENDA S. BRAMLETT Shelbyville, Tennessee Attorney for Appellant

JOSEPH E. FORD McBEE & FORD Winchester, Tennessee Attorney for Appellee

REVERSED AND

REMANDED

ALAN E. HIGHERS, J.

CONCUR: W. FRANK CR

AWFORD, P.J., W.S . DAVID R. FA

RMER, J. Plainti ff Janet Lynn Hobbs (“Wife” or “Appellant”) appeals the judgmentof the trial2

court which re fused to consider the lump sum w orkers’ compensation settl ement of Defendant Garry Earl Hobbs (“Husband” or Appellee”) in the settin g of current and prospect ive child support for the minor child of the parties, and reduced the child suppo rt order from $960.00 per month to $565.00 per month.

I. Factual and Procedur al History

A complaint for divorce w as filed by Wife on November 22, 1996. That same date, Husband, pro se, f iled an An swe r and the Final Decree was entered which incorpor ated
a Marital Dissoluti on Agreement making support p rovisions for the two (2) minor children. 4. That, the parties agree that Husband is currently unemplo yed due to a work-related i njury suffered by him. In this regard, the part ies hav e agreed that husband shall be responsible for the payment of child support in the amount of $400.00 per month until Husband’s worke rs’ compensation action is concluded, or twelve (12) months h as ex pired, whichever

comes fi rst. Howeve r, when Hus band’s wo rk ers’ compen satio n claim shall be concluded, w hether by settlement, judgment or otherwis e, Husband shall pay to Wife a lump sum equal to the difference in the amount of interim child support o f $400.00 per month, and $960.00 per month, which is his ac tual child support oblig ation. In addition, Husband shall resume regularly [sic] monthly payments of chil d support in the abo ve sum af ter concl usion of his wo r kers’ compensation case. Husband shall p ay s aid child support obligation directly

to Wife.
Husband ultimately settled his workers’ compensa tion cla im for a lump sum paymentof $125,000. On October 29, 1997, W ife file d a Petition for Contempt citing an arrearage of $2,400.00 for child support as wel l as other factors. A Show Cause Ord er was entered and the matter was set to be heard on January 30, 1998.

On February9, 1998, Husband petitioned the Court for a reduction of child support

. Husband contended that under the child s upport guidelines, his monthly child suppo rt obligation wo uld be the sum of $565.00 based upon his tota l monthly income from retirement, the Veteran’s Administrati on and th e Social Securi ty Administration. He a verred that there was a significant difference between the amount of child support he was ordered to pay in the final decree of divorce ($960.00 per month) and the amount called for by the3

guidelines

and that he was therefore entitled to have his child support obligation reduced.

A hearing was held in Chancery Court on May 1, 1998 on the Plaintiff’s Petition for Contempt and Verbal Motion to Increas e Child Support. At this ti me, t he Court h eld that Husband’s Petition for Reducti on of Child Support filed in res ponse to Wife’s Petition for Contempt would properly be considered a counter-compl aint.

Wife contended that H usband was liable for the out standing arrearage and the Court should assign a part of the workers’ c ompensation settlement for that purpose but
more importantly, that a portion of the $125,000.00 settlement should be considered in establishing present and future child support . The Court found that the l ump s um settlementcould be used to pay the child su pport arrearage pursuant to Tenn. Code Ann. §50-6-223 and ordered Husband

to pay t o Wife the sum of $11,760.00 for the stipulated arrearage. The Court refused to consider the $125,000.00 settlement as income for the purposes ofchild support. The Court then ordered that Husband’s monthly child support obligation should be reduce d from $960.00 to $565.00. This appeal by Wife followed.
II. Child Support and Workers’ Compensation Settlement

Husband was awarded a lump sum w orkers’ compensation aw ard in the amount of $125,000.00. The trial court refused to cons ider this lum p sum award as income for the purpose of determining Husband’s child support obligation. Husb and also received mont hly incomefrom retirement, Veterans Admini stration and S ocial Security Admini stration totaling $2,199.00 per month. The trial cour t based Husband’s child suppor t obligation on this figure and reduced Husband’ s child support obligation from $960.00 per month to $565.00 per month.

Wife contends that the trial court erred in refusing to consider Hus band’s lump sum workers’ compensation s ettlement as income for the purpose of

setting his child support obligation. The Child Suppor t Guidelines state in perti nent part:1 Tennessee Code Annotated §50-6-223 has been amended effect ive May 19, 1998. While much of

the language i s changed, the amendment does not appear to clari fy the i ssue presented i n this case. 4 Gross income shall include all income

from any source (before taxes and other deductions), wh ether earned or unearned, and includes but is not limited to, the following . . . workers’ compensation benefits whether tempor ary or permanent . . . Tennessee Depart ment of Human Services Child Support GuidelinesChapter 1240-2-4-.03(3). Tennessee Code Annotated §50-6-223 1 deals with the assign ability of compensation claims. §50-6-22 3 Exemption and n onas sign abil ity o f

compensation claims - Exceptio ns to nonas signability - (a) No claim for compensation under this chapter shall be assignable, and all compensation and claims therefor s hall be exempt from claims of creditors. (b) No twithstanding the prov isions of subsection (a) to the contrary, the cou rt may assign up to fifty percent (50%) of such compensation made by period pay ments to fulfill a valid presentand prospective child support o bliga tion; provided, that such assignment is administered in acco rdanc e with §50-2- 105. However, no suc h assignment may be made for arrearage in child su pport. (c) Notwithstand ing the provi sions of

s u bsection (a) to the contrary, the court may assign up to twenty

percent (20%) of a lump sum settlement to s atisfy a judgment for a rrearage in child support.
The trial judge refused to cons ider Hus ba nd’s lump sum workers’ compensation settlementas income

for the purpose of setting chil d support based on Tenn. Code Ann. §50 -6 -223. Subsection (a) states that workers’ compensation is not assignable and is exemptfrom claims of creditors, w hile sections (b) and (

c) spell out

the exceptions to that general principal. The language of section (b) allows a court to assign up to 50% of workers’ compensation benefits made by periodic payments to fulfill a present and prospect ive child support obligati on. Nowhere in the statute doe s it specifically st

ate that
a lump sum settlement can be similar ly assigned. Thus the

trial cour

t found that the

lump sum settlement could not be considered for child sup port purposes. The o bj ects of the Workmens’ Compensation Act prohibiti ng assignment of compensation claims and exempting them from creditors claims, are to insure application of awardsto necessities of injured empl oyees or their dependents and prevent them from becoming public charges. Prime v. Dunaway , 50 S.W .2d 223 (Tenn 1932). Althou gh the statute is worded in terms of periodic workers’ compensation payments, it is illogical t o5

conclude that the legislature i ntended lump sum awards to be ex empt when used for the same purpose.

The provisio n s found in the guidelines and Tenn. Code Ann. §5 0-6-223 were addressed by the Tennessee Supreme Court i n Gonsalvesv. Robert s , 905 S.W.2d 931 (Tenn. 1995). In that case the trial court refused to consider the fath er’s workers’ compensation permanentdisability benefits as income and the wif e appeal ed. Ultim ately, the Supreme Court reversed the lower courts and hel d that w orker s’ compensation permanent disability benefits w ere income for thecalculation of child support obligations. Id . at 932.
Although the Gonsalvescase dealt with periodic workers’ compensation payments rather than a lump

sum settlement, the Supreme Court spoke on the purpose of the child support exceptions to the genera l rule of nonassignability. The C ourt found that the legislature enacted Chapter 224 of the Public Acts of 1991, adding s ubsection (b) and (c) to Tenn. Code Ann. §50-6-223, in rec ognition of the duty to suppor t and the p erva sive tendency in recent times by parents responsible for child s upport to avoid t hat responsi bility.

The I lli nois Appellate court address ed the issue of lump sum worker s’ compensation settlements and concluded that a person’s l ump sum workers compensation settlement
was income for

the purposes of

determining child support. The court reasoned that it would be illogical to treat

the two methods of payment differently

. To reach this unreasonable result, one must c onclude that the legislature intended to require a pare nt who elects to receive a worke rs’ com pensati on awar d in the f

orm of p eriodi c payments to include theaward as income for the purposes of meeting his child support obligations, whil e, at the same time, permitting another parent, merely beca use he elect s a lump sum workers’ compensation award, to escape the dut y of apply ing the award to his chil d support obligations. Sta tu te s are to be construed in such a wa y that the y have a reasonable meaning and are accorded an interpretation that will not lead to absurd consequences. In re Marriage of Dodds , 583 N.E.2d 608 (Ill.App. 1991).6

As stated above, the object of the Tennes see st atute is to insure the workers’ compensation award will be av ailable for use by the inj ured party and his depe ndent s. Subsections( b) an d (c) of the statute excepti ng child support from the g eneral rule of nonassignability

were enacted in recog nition of a p ar ents duty to support his or her children. These goals are the same whether the injured w orker receives peri odic payments or elects to receive a lump sum settlement.

Husband could have taken his settlement in periodic payments. Instead, Husband
e lected to t ransform his right to rec eive periodic payments into a lump sum present day
c ash val ue pursuant to Tenn. Code Ann. §50-9- 229. Husband should not be allow ed to escape the duty of ap plying th is award t o his child

support obl igation me rely beca use of this election. The election to receive a lump sum settlement rather than per iodic payments should not eliminate Husband’s duty to pay child sup port on that amount.
Furthermore, it is the State’s polic y that parents support thei r children. If the parties had not divorced, the chil dren would have shared, at least in part, in Husband’s improved economic status. As recogniz ed in Nash v. Mulle , 846 S.W.2d 803, 80 4-05 (Tenn. 1993),
one purpose of the guidelines is to ensure that whenparents live separately, the economic impact on the children is minimiz ed to the extent that ei ther paren t enjoys a higher standard of living, the childr en share in that higher st andard. Nash furt her held suc h purpose consistent with the l ong established co mmon law rule requir ing a parent to provide support in a manner commensurate with his means and stat ion in life. Klemets rud v. Klemetsrud , No. 02A01-9306-CV-001 50, 19 94 Tenn. App. LEXIS 565, at *4 (Tenn. C t. App. October 12, 1994).

For all the above stated reasons, this Court holds that Husband’s lump sum workers’ compensation settlement is income for the purposes of det erminin g Hu sband’s child support obligation.
III. Calculation of Child Support Obligation2 Tennessee Cod e An nota ted § 50-6 -229 (a) pr ovide s the me thod by whic h periodic payments are

origin ally

commuted to a lump sum award. 7 Having determined that Husband’s lump sum workers’ compensation settlement is incomefor the purposes of determining H usband’s child support obli gation, we feel it helpful to set forth some guidelines by which this sh ould be accom plished. It will be necessary for the trial court to examine thelump sum workers’ compens ation award and det ermine the equivalent periodic payments. The trial court w ill, in essence, have to convert the lu mp sum settlement back into period ic payments, taking i nto account the number of months the award is designed to encompass, and the present value/future v alue of mone y. 2

After determining the correct mon t hly award, the appropriate child support percentage should be ap plied to th is amount. The result will be the obligor’s monthly support obligation. If the obligor has ot her monthly inco me, the child su pport obliga tio n shall be based upon the obligo r’s total monthly inco me.

This process is necessar y to arrive at the correct child supp ort obligation. The trial court shall not merely apply the appropriate child suppor t percentage to the en tire lump
sum. Such a procedure would result in the ov erpayment of child support in situationswhere the obligor’s child support obligation will ter minate in fewer years than the award is designed to com pensate. Ta ke for example an obligor with a twelve ( 12) year old child, who receives a lump sum w orkers compensation awar d designed to compensate him for the next fifteen (15) years. The obligor’s child support obligation will legally terminate in six (6) years when the

child reaches age eighteen (18). If the trial court were to apply the child support percentage to the entire lump sum, the child would be receiving a share of obligor’s incomefor the entire fifteen ( 1 5) year award, rather than the six (6) years to which he is entitled.

This Court is mindful that Husb an d may diminish or deplete the lump sum settlementbefore his c hildren r each the age of majority and before his child support oblig ation is fulfilled. We theref ore note that, after determining the correct monthly child8

support obligation, the trial court may wish to ca lculate the total amount of support du e (based upon the workers’ compens ation award) for the remain der of the children’s minority and award a lump sum to the obligee if the court believes there is a potential for loss of the funds. Naturally, the obligor would remain obli gate d to pay monthly child support in the appropriate percentage based upon his other monthly income.
IV. Modification of Agreement

Wife contends that thetrial court erred in reducing the amount of child support owed byHusband , as it was a p roperty se ttlemen t provi ding fo r the equitable divi sion of Husband’s w

orkers’ co mpensation cl aim.

Generall y, a marital dissolution ag reement between husband andwife dealingwith legal duty ofchild support, or alimony over whi ch the court has continuing statutory power to modify, loses

its contractual nature w hen merged into a decree of divorce. Penland v. Penland , 521 S.W.2d 222 (Tenn. 1975). However, an ag reement on matters outside the scope of the legal duty ofchild support during mi nority, or alimony in futuro over which the court also has continuing statutory power to modify,retains its contractual na tur e and is enforceable in the same manner as other contracts. Blackburn v. Blackburn , 526 S.W.2d 463, 465 (Tenn. 1975).

Wife asserts that the provision for Hu sband to pay the amount of $960.00 per month child support was made in contemplation of the divor ce and with knowledge of a pending workers’ compensation claim. Wife argues that this provis ion was made to equitably divid e that benefit f

o r the use of the two minor chil dren. Wife therefore contends that the contractual agreement is beyond the scope of Husband’s legal duty and is now a binding contract not subject to modifica tion by the trial cour

t.

Th e provisi on at issue, found in paragraph four (4) of the Marital Dis solution Agreement, states that Husband will p ay the amou nt of $400.00 per month until his9

workers’ compensation claim is settled, at w

hich time “H usband shall pay to Wife a lump sum equal to the difference in the amount of interim child support of $400.00 per month, and $960.00 per month, which is actual child support obligation.” Additional ly, the provision states that “Husband shall resume regularly [sic] monthly payments of child support in the above sum after conclusion of his workers compensation c ase. “

Wife seek s to t erm this agreement of the parties as one in which Husband’s workers’ compensation settlement was a greed to be divided. Ho wever, the agre ement contains no such language of property division but rather s peaks in ter ms of payment of child support. Furthermore, this provision which Wife claims to be division of the workers’ compensation claim, is t he only p r ovision dealing w ith child support found in the mar ital dis solution agreement. The provision at issue here clearly deals with the child su ppor t obligation of Husband and is modi fiable by the court.

For the above reasons, this C ourt finds that

the provision at issue is a provision for child support and is modifiabl e by the trial court, consistent with our opi nion above.

V. Conclusion

The judgment of the trial court holding that Husband’s lump sum workers’ compensation award is not income for the purposes of determining Husband’s child support obligation and reducing Husband’s child support ob ligation from $960.00 to $565.00 per month is revers ed and remanded for calculation of Husband’s child support obligation consistent

with this opinion. Costs of this appeal are taxed to Husband, for which executio n may issue if neces sary.

HIGHERS, J.

CONCUR:10

CRAWFORD, P.J., W.S.

FARMER, J.