Opinion ID: 2637586
Heading Depth: 3
Heading Rank: 2

Heading: The Superior Court Erred by Reinstating the Income Cap Despite the Settlement Agreement to the Contrary.

Text: In the settlement agreement reached following the remand of their divorce case after the first appeal, the parties agreed that Sarkesian would make monthly child support payments in excess of what would have been required had Rule 90.3's income cap been imposed. The settlement agreement incorporated by reference the superior court's June 1, 1992 findings of fact and conclusions of law, which explicitly waived the cap because of the lifestyle advantages the children would have enjoyed had the family stayed together. In their settlement agreement, the parties further expressed [their] intent ... to end this litigation, to stop the possibility of further appeals and to prevent the expenditure of additional attorney's fees. Hixson argues that because Sarkesian entered into a settlement of child support, agreeing to an award above that required by Civil Rule 90.3, he has given up his right to seek modification of the child support award. In Flannery v. Flannery , we held that an agreement to waive the income cap for calculation of child support may later be modified due to a material change in circumstances. [13] But the change in circumstances must not be anticipated at the time the agreement is signed, and the drop in income must appear to be permanent, not temporary. [14] Judge Zervos, after finding more than a fifteen percent reduction in Sarkesian's income, applied Rule 90.3's $84,000 income cap as the basis of Sarkesian's child support obligation. Judge Zervos found there to be a material change in circumstances due to the decline in Sarkesian's income. Judge Zervos distinguished the present case from Flannery, where we warned against allowing obligors to use a motion for modification of child support as a back door by which to circumvent an earlier agreement to waive the income cap. [15] First, Judge Zervos concluded that in contrast to Flannery, where waiver of the income cap had been a part of the initial divorce settlement, [16] Sarkesian here acquiesced to the amount of child support only after extensive litigation, after the court had ordered the cap to be waived, and when the only issue remaining was whether the children's needs justified the waiver. Second, Judge Zervos reasoned that the adjustment to Sarkesian's income brought him close to the income cap and that the amount in issue, if the cap is breached, is de minimus. We reject the superior court's first line of reasoning and reiterate our holding in Flannery that modifications of child support cannot be used as a means to circumvent an agreement to waive the income cap. [17] Because they are, in essence, contracts, settlement agreements freely entered into do not lose their binding nature because extraneous circumstances exist at the time. [18] It therefore does not matter that Sarkesian signed the settlement agreement only after extensive litigation. Sarkesian still signed the agreement with full knowledge of its contents. [19] Sarkesian presumably believed that the agreement, including the waiver of the income cap, was in his best interests and that he was being compensated by not having to face further litigation and its inherent risks. Moreover, although the superior court recognized that Sarkesian's adjusted annual income of $85,015.41 is quite close to the income cap of $84,000, this does not justify reduction of child support to an award based on the income cap. Our concern in Flannery was that the 15% rule not be used as a means by which a parent who, because of a settlement agreement, pays child support well above that required by the income cap, could turn around and reduce the child support payments to the amount derived from the income cap even though the parent's ability to pay child support above that required by the income cap remains intact. [20] In other words, in the context of an agreement to waive the income cap and pay child support in excess of Rule 90.3's requirement, the mere fact of a fifteen percent change in income does not necessarily constitute a change of circumstances entitling the obligor to a reduction in support based on the income cap. [21] As we stated in Flannery, [w]e think that in context of an agreement like the Flannerys', the 15% rule can be used to demonstrate materiality, but the comparison cannot be between the amounts Michael agreed to pay and what the rule minimally requires. [22] Because Sarkesian's reduction in income, while exceeding fifteen percent, does not reduce his income to the level of the income cap, applying that cap to Sarkesian is inconsistent with our decision in Flannery. As we suggested in Flannery, where an obligor's income is significantly reduced but still exceeds the cap, multiplying the obligor's uncapped changed income by the pertinent percentage yields the support the parties presumptively would have specified had that been the obligor's income when they entered into their agreement. [23] Thus, the child support award should have been based on Sarkesian's actual reduced income of $85,015.41, not the income cap of $84,000. And although the resulting difference in child support is, according to the superior court, only $22.84 a month, we cannot agree that this amount is de minimus or in itself justifies application of Rule 90.3's income cap. [24]