Alaska Supreme Court Opinions made Available by Touch N' Go Systems and Bright Solutions

Touch N' Go, the DeskTop In-and-Out Board makes your office run smoother. Visit Touch N' Go's Website.
  This site is possible because of the following site sponsors. Please support them with your business.

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State, Dept of Revenue, Child Support Enforcement Div. V. Pealatere (2/11/00) sp-5238

State, Dept of Revenue, Child Support Enforcement Div. V. Pealatere (2/11/00) sp-5238


OF REVENUE, CHILD SUPPORT     )    Supreme Court No. S-7507
                              )    Superior Court No.
               Appellant,     )    3PA-90-926 Civil
     v.                       )
                              )    O P I N I O N
KATHY A. PEALATERE,           )
                              )    [No. 5238 - February 11, 2000]
               Appellee.      )

          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Palmer,
                    Beverly W. Cutler, Judge.

          Appearances: Terisia K. Chleborad, Assistant
Attorney General, Anchorage, and Bruce M. Botelho, Attorney
General, Juneau, for Appellant.  No appearance by Appellee.

          Before:  Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.

          FABE, Justice.

          In this appeal, the Alaska Child Support Enforcement
Division (CSED) challenges the superior court's denial of its
motion for reimbursement of public assistance.  The superior court
found that because a non-custodial parent met her child support
obligation by relinquishing her interest in a portion of the
marital property, she is entitled to an offset against the amount
sought by CSED.  During the pendency of this appeal, we issued an
opinion in State, CSED v. Green, [Fn. 1] holding that CSED
possesses an independent statutory right under AS 25.27.120(a) to
recoup the cost of public assistance payments from an obligor
parent, even when the obligor has prepaid child support pursuant to
an agreement executed at divorce. [Fn. 2]  Because this case meets
an exception that we considered when we announced our rule in
Green, we affirm the superior court's decision to allow the child
support offset.  But we reverse the valuation of the offset because
the lower court did not account for the custodial parent's share of
the marital property.
          Ralph and Kathy Pealatere married in 1969 and divorced on
December 12, 1991.  Their youngest son, Jason, was born on February
10, 1979.  Under their divorce agreement, Ralph received primary
physical custody of Jason, their only minor child at the time of
divorce.  The agreement provided that Kathy 
          shall not be required to pay monthly child
support.  Rather, KATHY has relinquished any and all claims to
RALPH's tools in consideration of this waiver of monthly child
support payments.

          At the hearing on the divorce agreement, Judge Rene J.
Gonzalez made an oral finding that the tools, valued at
approximately $5,000, would offset Kathy's child support obligation
of $50 per month.  In its written findings, the superior court
found that
          [t]he income of [Kathy] would require her to
pay the minimum of $50 per month for child support.  The agreement
of the parties regarding a waiver of that monthly payment
obligation is supported by clear and convincing evidence and is
therefore approved. 

          In January 1994 Jason began receiving monthly grants of
Aid to Families with Dependent Children (AFDC).  Between January
1994 and June 1995, these grants were often as much as $821 per
month.  In 1995 CSED learned that Kathy earned an income in 1994 of
$23,510.30 and filed motions both to increase Kathy's support
obligation to $308 per month and to receive reimbursement of past
and ongoing public assistance. 
          Judge Beverly W. Cutler increased Kathy's child support
to $301.50 per month and ordered her to provide health insurance
for Jason at a cost of $7.50 per month.  The superior court,
however, denied CSED's motion for reimbursement without prejudice,
ruling that Kathy was entitled to a $5,000 offset against her
support obligation of $50 per month because she had relinquished
her interest in Ralph's tools.  The court found that a credit of
$2,750 from that offset remained as of October 1, 1995.  CSED
          On July 30, 1999, this court published an opinion in
State, CSED v. Green. [Fn. 3]  In Green we examined the scope of
CSED's statutory right to public assistance recoupment in light of
an agreement between the parents calling for the non-custodial
parent to pay child support in one up-front lump sum.  Because we
thought our decision in Green might assist in our resolution of the
instant case, we delayed our decision of this case and ordered the
parties to file supplemental briefing.  Only CSED filed a
supplemental brief.
     A.   Standard of Review
           Whether the court-approved agreement to offset marital
property against future child support payments was permissible
under an exception to the rule in Green is a question of law we
review de novo. [Fn. 4]  "Under this standard, it is our duty to
adopt the rule of law that is most persuasive in light of
precedent, reason, and policy."[Fn. 5]  We review modification of
child support orders under an abuse of discretion standard. [Fn. 6] 
 An abuse of discretion occurs when, based on our review of the
whole record, we are left "with a definite and firm conviction that
a mistake has been made."[Fn. 7]  We review the superior court's
findings of fact under the clearly erroneous standard. [Fn. 8] 
     B.   The Superior Court Properly Offset Kathy's Interest in 
          the Marital Property Against Kathy's Child Support 
          CSED first argues that the trial court erred in finding
that Kathy and Ralph agreed that Kathy would relinquish her
interest in Ralph's tools in exchange for an offset against her
child support obligation.  CSED contends that Kathy provided "no
evidence of any such purported agreement between the Pealateres
. . . at the time of the divorce proceedings"and that "[n]o
agreement was ever produced." Despite these assertions, the record
contains an agreement signed by Ralph, Kathy, and their counsel and
filed with the superior court November 8, 1991.  Furthermore, the
superior court's decree specifically noted the existence of an
agreement and incorporated it by reference.  Therefore, CSED's
argument that the superior court erred in finding an agreement
between Ralph and Kathy is without merit. 
          CSED next argues that the agreement between Kathy and
Ralph does not limit its right to reimbursement under AS
25.27.120(a). [Fn. 9]  We addressed the scope of CSED's recoupment
right in Green and held that AS 25.27.120(a) gives CSED an
independent right to recoup the cost of public assistance payments
from an obligor parent. [Fn. 10]  CSED's right persists even when
that parent has prepaid child support pursuant to an agreement
executed at divorce.  But we carefully noted that situations may
exist in which CSED's direct and derivative rights to recoupment of
public assistance payments should yield to equitable
considerations.  We suggested that one such circumstance would be
a child support offset agreement that a court approved as serving
a child's best interests:
          We need not consider whether circumstances
could both defeat CSED's derivative section .345 right and also
make it inequitable for CSED to rely on its independent subsection
.120(a) right.  (Consider, for example, an obligor who makes
payments directly to the obligee with CSED's permission, in
extremis, or under an arrangement adequately protecting the child's
interests.)  There was no judicial determination that Green's
arrangement was in [his daughter's] best interests.[ [Fn. 11]]
We believe that this case presents the exception that we
contemplated when we announced the rule in Green. 
          The trial court decided that the equities in this case
favored a child support offset against Kathy's interest in marital
property.  By permitting Ralph to keep his tools, the court
intended that Ralph maintain his ability to support Jason with the
tools that facilitated his work as a skilled laborer.  The trial
court found that it would not be "fair and equitable"to extract
$50 monthly payments from Kathy's limited income while forcing
Ralph to sell the tools "that he uses in work." In his written
findings, Judge Gonzalez concluded that clear and convincing
evidence supported this offset of child support payments. [Fn. 12] 
If a child support offset preserves the custodial parent's means of
support, the trial court may conclude that the offset is in the
best interests of the child.  Judge Gonzalez did not abuse his
discretion in drawing that conclusion in this case.
          The application of this exception to the rule in Green
comports with the policy behind the rules governing child support
awards.  Rule 90.3(c)(1) permits courts to deviate from the formula
for determining child support.  Permitting this deviation supports
the proposition that certain circumstances justify alternative
methods for calculating a child support award.  Rule 90.3(c)(1)
          The court may vary the child support award as
calculated under the other provisions of this rule for good cause
upon proof by clear and convincing evidence that manifest injustice
would result if the support award were not varied.  The court must
specify in writing the reason for the variation, the amount of
support which would have been required but for the variation, and
the estimated value of any property conveyed instead of support
calculated under the other provisions of this rule.

In this case the court found that the arrangement was in Jason's
best interests and found clear and convincing evidence to support
adoption of the agreement in the final decree.  Thus, applying the
exception to Green in this instance comports with the policies
underlying Alaska's child support award rules. 
     C.   The Superior Court Properly Modified Kathy's Child 
          Support Obligation. 

          We must next consider whether CSED's motion to modify
child support altered the rate at which Kathy's child support
credit would be depleted.  We conclude that modification of the 
child support order, and the resulting increase in the rate of
credit depletion, was appropriate.  Rule 90.3(h)(1) allows a child
support order to be modified upon a "material change in
circumstances." Here Kathy saw a substantial rise in her income.
[Fn. 13] Moreover, Ralph's income dropped such that he began
receiving AFDC payments, and this factor, combined with CSED's
right to reimbursement, could justify modification of the parties'
child support offset agreement. [Fn. 14]
          Moreover, it is immaterial that Kathy and Ralph agreed to
offset all future child support based on their understanding that
Kathy's payments would only be $50 per month.  Our precedent
clearly establishes that agreements between spouses do not prevent
a court from modifying a parent's child support obligation upon the
occurrence of a material change in circumstance. [Fn. 15]  Judge
Cutler's order to modify Kathy's child support to $301.50 per month
was therefore appropriate.
     D.   The Superior Court Erred in Its Assessment of What Kathy
May Owe to CSED.

          Having determined that the superior court appropriately
modified the child support obligation, we must now decide what
Kathy owes to CSED as a reimbursement for Jason's support.  Because
modification of child support is only effective prospectively,
Kathy's obligation to pay $301.50 per month arose when CSED filed
the motion to modify in late September 1995. [Fn. 16]  Kathy owed
Jason a duty of support until he reached the age of majority. 
Accordingly, she owed Jason $301.50 per month in child support from
October 1995 until Jason turned eighteen on February 10, 1997. 
This period spanned sixteen full months.  CSED had a right to
collect child support in the amount of $4,824 less any amount
remaining on her child support offset.
          The trial court did, however, err in its valuation of the
child support offset.  In approving the property settlement, Judge
Gonzalez found the total value of Ralph's tools to be $5,000.  But
Judge Cutler accepted Kathy's argument that her one-half interest
in the tools was valued at $5,000 and concluded that $2,750 in
credit remained.  This ruling contradicted Judge Gonzalez's finding
that the value of the tools totaled $5,000.  Valuing Kathy's one-
half interest at $5,000 also contradicted Kathy's own testimony as
to the tools' value:
          Q:   On the issue of child support, Mr.
Pealatere agreed to waive future child support in exchange for your
waiving any interest you may have had in his marital tools -- the
tools that he has had during the marriage.  Is that correct?

          A:   Yes.

          Q:   And you and he agree that these tools
               have an approximate value of $5,000.  Is
that correct?

          A:   Yes.

Because the tools had a total value of $5,000, Kathy's fifty
percent marital interest was worth only $2,500. [Fn. 17]  In light
of Judge Gonzalez's finding and Kathy's testimony, Judge Cutler
erred in granting Kathy a $5,000 child support offset; instead, the
offset should have been $2,500.
          The trial court deducted $50 per month from Kathy's child
support credit for the time between January 1992 -- the first full
month after the divorce decree -- and October 1995 -- the first
full month after CSED filed the motion to modify child support.  As
the trial court found, that amounted to $2,250 in child support
offsets. [Fn. 18]  The trial court, however, failed to calculate
the amount of back child support from the date of separation. 
Although the parties did agree to waive back child support from the
date of separation, we have held that agreements to waive child
support in contravention of Rule 90.3 are invalid. [Fn. 19] 
Because the date of separation was more then five months before the
divorce decree, the remaining $250 of credit was totally exhausted
by the time CSED filed to modify child support.  Therefore, CSED
had a right to collect child support in the amount of $4,824.
          We AFFIRM the lower court's granting of the child support
credit and the modification of child support, but we REVERSE the 
lower court's valuation of the child support credit.


Footnote 1:

     983 P.2d 1249 (Alaska 1999).

Footnote 2:

     See id. at 1256.

Footnote 3:

     983 P.2d 1249 (Alaska 1999).

Footnote 4:

     See id. at 1252.

Footnote 5:

     Perry v. Newkirk, 871 P.2d 1150, 1151 (Alaska 1994).

Footnote 6:

     See Patch v. Patch, 760 P.2d 526, 529 (Alaska 1988).

Footnote 7:

     Richmond v. Richmond, 779 P.2d 1211, 1216 (Alaska 1989)
(citation omitted).

Footnote 8:

     See Adrian v. Adrian, 838 P.2d 808, 811 (Alaska 1992).

Footnote 9:

     AS 25.27.120(a) provides in relevant part:

               An obligor is liable to the state in the
amount of assistance granted under . . . AS 47.25.310 - 47.25.420
to a child to whom the obligor owes a duty of support except that,
if a support order has been entered, the liability of the obligor
for assistance granted under AS 47.25.310 - 47.25.420 may not
exceed the amount of support provided for in the support order . .
. .

Footnote 10:

     See Green, 983 P.2d at 1253.

Footnote 11:

     Id. at 1254.

Footnote 12:

     Alaska Rule of Civil Procedure 90.3(c)(1) calls for all child
support awards that deviate from the Rule 90.3 formula to be
supported by "clear and convincing evidence."

Footnote 13:

     "A material change of circumstances will be presumed if
support as calculated under this rule is more than 15 percent
greater or less than the outstanding support order." Alaska R.
Civ. P. 90.3(h)(1).    

Footnote 14:

     See, e.g., Arndt v. Arndt, 777 P.2d 668, 669 (Alaska 1989)
(holding that dramatic decrease in father's income and rise in
mother's income justified modifying child support award).

Footnote 15:

     See Flannery v. Flannery, 950 P.2d 126, 129-30 (Alaska 1997).

Footnote 16:

     See Alaska R. Civ. P. 90.3(h)(2).

Footnote 17:

      See Brown v. Brown, 914 P.2d 206, 209 (Alaska 1996) ("A 
50/50 property split is presumptively just[.]").

Footnote 18:

     January 1992 to October 1995 encompasses 45 months.  The
product of 45 months and $50 per month is $2,250.

Footnote 19:

     See Cox v. Cox, 776 P.2d 1045, 1048 (Alaska 1989).