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Case Spotlight: Kowalski v. Obst

By Matthew J. Price

When the supreme court issued its decision in In re the Paternity of Tukker M.O., 199 Wis. 2d 186, 544 N.W.2d 417 (1996), WIS. STAT. § 767.51(5) set forth the child support factors to be applied in paternity cases. The specific section at issue in Tukker, § 767.51(5)(e), permitted the trial court to consider "the need and capacity of the child for education, including higher education." By contrast, the general child support (i.e. divorce) factors contained in § 767.25(1m) are devoid of any reference to higher education. Instead, these factors merely permit the trial court to evaluate "the child’s educational needs." § 767.25(1m)(g). Most practitioners theorized that the general child support factors did not include higher education consideration because the authority to award child support in a divorce action, in most cases, ends at the time of graduation from high school, which by operation of law divests the trial court of the authority to order the parties to provide future support, in the form of higher education contributions.

In Tukker, the supreme court held that the trial court had authority under the paternity child support statute to place a portion of the child support payments into a higher education trust. However, the supreme court took no position as to Tukker’s applicability to divorce actions. Nevertheless, in footnote 5 of the Tukker decision, the supreme court recognized the discrepancy between the divorce and paternity statutes’ treatment of the education factor and "direct[ed] the legislature’s attention to this discrepancy." The legislature obliged.

In 1999 WISCONSIN ACT 9, § 767.51(5) was repealed and all references in the paternity statutes to the determination of child support refer back to the general child support statute, § 767.25. In his April 2000 Wisconsin Lawyer article explaining the custody, placement and paternity reform contained in 1999 WISCONSIN ACT 9, Attorney Christopher D. Walther, who was instrumental in advancing these reforms, explained the need for the change:

Several of the child support factors in paternity cases were different from the child support factors in marital cases. In harmonizing marital and paternity law, the inconsistent paternity factors were eliminated. This includes the factor formerly found in section 767.51(5)(e), ‘the need and capacity of the child for ... higher education.’ The elimination of this factor effectively overrules that portion of the 1996 Wisconsin Supreme Court decision, In re the Paternity of Tukker M.O., which permitted the creation of a higher education child support trust in paternity cases.
The court of appeals disagrees.

In a stunning decision issued in mid-September, the court of appeals in Kowalski v. Obst, 2003 WI App 218, ___ Wis. 2d ___, 671 N.W.2d 339 rev. denied, concluded that the repeal of § 767.51(5)(e) did not overrule Tukker and, moreover, that Tukker’s holdings remain applicable:

¶14 We cannot assume, as [Obst] asks us to do, that when the legislature repealed the separate, redundant language in the paternity statute it intended to overrule [Tukker]. First, and most importantly, the rationale underpinning the supreme court’s decision in [Tukker] remains valid despite the statutory changes. In [Tukker], the supreme court posited that because the percentage standards presume a higher standard of living commensurate with the payer’s higher income, the child is entitled to the money over and above his or her needs and that the excess money in the trust can be used for his or her future educational needs. This would be in the child’s best interests and put the child in the same position as if the child was in an intact high-income family; thus, accomplishing the goal of the child support statutes, including WIS. STAT. § 767.25 (2001-02). Second, the language in WIS. STAT. § 727.25(1m)(g) (2001-02) permitting courts to consider a child’s "educational needs" is clearly broad enough to encompass the higher educational needs of the child. To conclude otherwise would be to severely limit the trial court’s discretion, especially in a high income earner situation. Thus, we are convinced that the statutory changes have not altered the import of [Tukker]."

¶15 We also note that case law interpreting WIS. STAT. § 727.25 (2001-02), the statute that now governs child support determinations in the context of paternity actions, suggests that a trust may be established for a minor child’s higher education costs. In Hubert v. Hubert, 159 Wis. 2d 803, 817, 465 N.W.2d 252 (Ct. App. 1990), we held that § 767.25(2) provides the trial court with the necessary authority to establish trusts for the postmajority needs of the children. Section 767.25(2) reads: ‘The court may protect and promote the best interests of the minor children by setting aside a portion of the child support which either party is ordered to pay in a separate fund or trust for the support, education and welfare of such children.’ We concluded that the statute ‘gives the court an attractive means of providing for the future educational needs of children with child support that is paid while the children are under the age of majority.’ Hubert, 159 Wis. 2d at 817. For the foregoing reasons, we hold that the trial court had the authority to establish a trust for Andrew’s higher educational needs with child support paid while he is under the age of majority."

Also, the Kowalski court’s reliance on Hubert, which used § 767.25(2) as an alternative avenue to establish a trust, raises questions. In Hubert, where the payor was a cardiothoracic surgeon earning $1,000,000 per year, the court affirmed the creation of a trust from income earned during the child’s minority. The Hubert court distinguished the facts of the case to those in Resong v. Vier, 157 Wis. 2d 382, 459 N.W.2d 591 (Ct. App. 1990) (court not to impose trust after child support initially established, except in very limited circumstances), as the payee in Hubert requested imposition of the trust and the recipient in Resong did not. It appears from the recitation of facts in the Kowalski decision that the child support motion filed by the payee requested full guidelines support, as opposed to requesting reasonable current support with the balance up to the guidelines to be paid into a trust. For this reason, it appears that the facts in Kowalski bear far greater resemblance to Resong than to Hubert.

The court of appeals also rejected the payor’s position in Kowalski that Tukker (where the father was an NFL player with an expectation of a very short career) is limited to high income cases where the high income payor’s ability to support the child in the future is limited or questionable.

The reach of Kowalski could greatly affect high income payor cases, as there now appears to be little incentive for the payee to agree to downward deviation (i.e. child support cap) from the child support guidelines to an amount which comfortably meets the needs of the child. Instead, Kowalski provides fresh incentive to payees to ask the courts to apply the full guidelines to the entire gross income of the payer, with a portion of the resulting amount to be placed in a higher education account. To that end, it remains to be seen if the application of Kowalski will serve to de facto extend child support until college graduation in high income cases.

Matthew J. Price, senior associate at Loeb & Herman, S.C., Milwaukee, primarily concentrates his practice in the area of trial and appellate family law.

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