Marriage of Riddle discusses calculation of child and spousal support

In re Marriage of Riddle
(2005) CA4 4th DCA Div. 3, Justice Sills
Orange County, Judge Polla

Summary                                                                                                   The calculation of income for determining child and spousal support orders must be based on fair and representative sampling period. "Income," as defined in the Family Code, is not synonymous with cash flow. Income can be imputed only where there is evidence justifying imputation. The fact that Husband earned a certain level of income in the past does not necessarily mean he will earn it in the future.

Facts
Husband was a commissioned financial advisor for a major investment firm. Prior to separation Husband received a $1 million advance as an inducement to come to work for his current firm. Husband received the $1 million before the date of separation and the parties proceeded to spend it. For tax purposes the employment arrangement provided that Husband would be required to "repay" the advance, with interest, on a monthly basis. Simultaneously, Husband would be "foregiven" the loan by the employer in an amount equal to the installments. Wife filed an order to show cause requesting pendente lite child support and spousal support.

Trial Court Ruling
Husband was ordered to pay temporary child support of $3,619 plus 16 percent of any income in excess of $21,950 in a month. In addition, he was ordered to pay spousal support of $4,338 plus 20 percent of any income in excess of $21,950 per month. Those ordered were based on the court’s finding that Husband’s monthly gross income was $21,950. The court determined that amount by considering the draw, commissions and loan foregiveness that Husband earned in January and February 2003, from which the court deducted the amount of the repayment.

Ruling on Appeal

Reversed and remanded.

1. Cash Flow Is Not Necessarily "Income"
The court disagreed with Husband’s expert who opined that Husband’s income was equal to his "cash flow" of only $1,700 per month. The definition of "income" in the Family Code was derived from the Internal Revenue Code definition, which includes forgiveness of debt as a form of income. Kirk allows the court to ignore "phantom income." However, that does no t mean that phantom income as imputed by the tax laws is any less "income" for purposes of Family Code § 4058 (a). There was evidence that contradicted the accountant’s opinion, including Husband’s W-2 form and the employer’s earnings statement.

2. Time Samples Must Be Fair and Representative to Determine Fluctuating Income.
The trial court used an erroneous sample to determine Husband’s income. Husband’s income would have been an average of $7,591 if it had been based on the prior fourteen months. The prior twelve calendar month (2002) average would have been only $6,611. The average for the last twelve months would have been $8,394. Even though Rosen concerned itself with the calculation of income for purposes of determining goodwill in a law practice. It is an abuse of discretion to take so small a sliver of time to figure income that the determination essentially becomes arbitrary. The trial court’s use of only the husband’s last two months of income was arbitrary. The court held that 12 months or "annual" income is a "benchmark" for the calculation of support, which is consistent with income tax laws.

3. There Was No Basis To Impute Income to Husband
It was improper for the trial court to impute income to husband based on historical data. There are none of the elements here that were present in other reported decisions in which imputation of income was upheld. It is illogical to assume that husband would do in the immediate future what he did in his or her best of recent years. It is also contrary to the rule in Rosen samples must be representative.

Cited Authorities
Fam. Code, § § 4058, 4059, 4060 and 4064. In re Marriage of Schulze (1997) 60 Cal.App.4th 519. In re Marriage of Kirk (1990) 217 Cal.App.3d 597, In re Marriage of Loh (2001) 93 Cal.App.4th 325 [presumptive correctness of tax returns]. In re Marriage of Hall (2000) 81 Cal.App.4th 313 [ court must arrive at a stable number]. County of Placer v. Andrade (1997) 55 Cal.App.4th 1393 [purpose of having a stable number is to have a reasonable predictor of what each spouse or parent will earn in the immediate future]. (In re Marriage of Rosen (2002) 105 Cal.App.4th 808 [time period on which income is calculated must be long enough to be representative, as distinct from extraordinary.] In re Marriage of Destein (2001) 91 Cal.App.4th 1385 [imputed income from potential sale of real property]. In re Marriage of Hinman (1997) 55 Cal.App.4th 988 [ income imputed where noncustodial parent capable of employment]. In re Marriage of Padilla (1995) 38 Cal.App.4th 1212 [income imputed where parent voluntarily terminated work]

Comments

[Louis Mendoza]

I recently went to family court in Orange, and I was shocked at the enitre process. My hearing was to set Temporary child custody and support. My wife moved out while I was at work she took the children and only allowed me access when she wanted to. In the formula the judge used the amount of time I was allowed access to the children 35% against my will! My last year's tax returns where I worked an outrages amount of overtime. I'm a police officer and last year I worked extremely hard shifts with sometimes only 2 hours of sleep working a doubdle shift of 20 hours in a day. This was done for the purpose of buying a franchise, of which we had attended meetings. There is currently ver little overtime and budget cuts. It's impossible for me to attain this again. My base salary is $5400 a month after taxes. The judge used this formula to award her $3,400 a month child support and spousal support(married for 13 years and 1 day). I can't pay that with all my bills, mortgage. Would this case decission apple to me "In re Marriage of Riddle". Can I appeal this decission. Our next court date isn't until Sept 06. The good news is I got 50% custody for the summer vacation. What will happen if I only pay her $1,000 a month? Any suggestions

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