Facts: Parties divorced in 2006 after 24 years of marriage. Husband was ordered to pay child support, including a substantial upward deviation. Husband was also ordered to pay a significant sum of rehabilitative alimony over a protracted period of time. In 2008, Husband filed a petition to modify his child support and alimony obligations, citing decreased income. The parties entered an Agreed Order in 2008 reducing Husband’s monthly child support obligation by reducing the upward deviation by over half. The parties also agreed to reduce Husband’s alimony obligation to a fluctuating formula providing for “a sum equal to one-third of his gross monthly income minus $3,000.” In 2009, Husband filed a new petition seeking further reductions in his child support and alimony obligations. After a hearing, the trial court reduced Husband’s child support and alimony obligations even further. Wife appealed.

On Appeal: The Court of Appeals modified the trial court’s ruling on child support and reversed its ruling on alimony.

Alimony. Wife argued that because the parties’ 2008 Agreed Order addressed the change in circumstances asserted by Husband—his reduced income—the court was required to defer to the terms of the agreement, unless doing so would lead to an unconscionable result. Rehabilitative alimony is subject to modification upon a substantial and material change of circumstances unless “the terms of the parties’ agreement” state otherwise. Tenn. Code Ann. § 36-5-121(a). Moreover, when the parties’ agreement addresses a particular circumstance, that circumstance becomes “foreseeable,” and therefore does not provide a reviewing court an appropriate basis for modifying an alimony award. Because the 2008 Agreed Order was based upon and addressed Husband’s decreased income, the Court concluded it “must defer to its provisions, absent an unconscionable result.”

Because the Court found the 2008 Agreed Order contemplated Husband’s decreasing income and did not lead to an unconscionable result, the trial court’s modification was reversed and the terms of the 2008 Agreed Order were restored as to alimony.

Child Support. The trial court acknowledged that the preferred method for setting a child support obligation based upon a variable income is to average the fluctuating income over an extended period. However, because it found Husband’s income was “steadily declining,” the trial court based Husband’s obligation upon his current income, which it determined by apparently picking a round number close to his average income over the most recent three months. The trial court’s finding was close, but it was not exact. For this, the trial court was reversed.

“If an obligor parent receives variable income, such as commissions, bonuses, or overtime pay, the variable income must be ‘averaged’ and added to the obligor spouse’s fixed salary.” However, because the Child Support Guidelines do not stipulate how such averaging should be made, “it is left to the courts to determine on a case-by-case basis the most appropriate way to average fluctuating income.” Our courts have consistently concluded that fluctuating incomes should, when possible, be averaged over a long-term, rather than a short-term, period. See also Tenn. Comp. R. & Regs. 1240-2-4-.04(3)(b) (“Variable income . . . shall be averaged over a reasonable period of time consistent with the circumstances of the case[.]”).

Because Husband’s income fluctuates from month to month, we find that the trial court’s apparent failure to average his income was error. However, based on the unique circumstances of this case, we find long-term averaging inappropriate. Instead, we find it reasonable to average Husband’s commissions paid [during the most recent three month period].

Upward Deviation of Child Support. Wife argued the trial court lacked authority to eliminate the upward deviation of Husband’s child support obligation absent a specific finding that the circumstances supporting the deviation no longer existed. Wife relied upon the Child Support Guidelines, which provide that “[i]f the circumstances that support the deviation cease to exist, the child support order may be modified to eliminate the deviation irrespective of compliance with the significant variance requirement[.]” However, this section of the Guidelines simply allows a court to modify or eliminate a deviation upon cessation of the deviation-supporting circumstances even if no “significant variance” of 15% between the current and presumptive child support obligations is found.

The Child Support Guidelines also provide as follows:

Upon a demonstration of a significant variance, the tribunal shall increase or decrease the support order as appropriate with these Guidelines unless the significant variance only exists due to a previous decision of the tribunal to deviate from the Guidelines and the circumstances that caused the deviation have not changed. If the circumstances that resulted in the deviation have not changed, but there exist other circumstances, such as an increase or decrease in income, that would lead to a significant variance between the amount of the current, excluding the deviation, and the amount of the proposed order, then the order may be modified.

This provision allows for modification of the child support order, including a deviation, upon the showing of a “significant variance” of 15%, even where the circumstances leading to the deviation have not changed. Because the significant variance was found, the trial court was free to modify or eliminate the upward deviation and it did not err by doing so.

In other words, if you want to have a court reconsider a deviation from the Child Support Guidelines, you have to show either the reasons for the deviation no longer exist or a “significant variance” independent of the deviation.

Grisham v. Grisham (Tennessee Court of Appeals, Western Section, February 22, 2011).

Information provided by K.O. Herston, Tennessee Divorce Lawyer.