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Golithon v. Valdez

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE
Jan 19, 2012
A130725 (Cal. Ct. App. Jan. 19, 2012)

Opinion

A130725

01-19-2012

In re the Marriage of BRECK R. and LISA M. GOLITHON. BRECK R. GOLITHON, Respondent, v. LISA M. VALDEZ, Appellant.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Lake County

Super. Ct. No. FL201171)

Lisa Golithon (now Lisa Valdez) appeals from an order resolving two motions she brought to reduce her child support obligations in connection with the dissolution of her marriage to Breck Golithon. Lisa contends that in calculating her obligation for the support of their minor son, the trial court made findings that understated Breck's self-employment income and the extent of her visitation with their minor son, and overstated her salary as the high-income parent. We disagree, and affirm the trial court's findings and order.

Following the customary practice in marital dissolution cases, we use first names for the sake of clarity, meaning no disrespect to the parties.

I. BACKGROUND

Breck filed a petition for dissolution of his marriage to Lisa in 2004. A status-only dissolution judgment was entered in November 2005, but contentious litigation over property, child custody, and child support issues continued and has resulted in five previous appellate proceedings in this case. The present appeal arises from motions to modify child support filed by Lisa on November 30, 2006 and April 3, 2007. Due to custody issues and other pending motions, an evidentiary hearing on Lisa's modification motions was deferred until February 2010.

Although Breck and Lisa had two minor children when the 2006 modification motion was filed—a son and daughter—their minor daughter turned 18 in December 2006, and child support for her was not disputed when the motions were heard in 2010. The evidentiary hearing focused on issues pertaining to child support from December 1, 2006 to June 2010 for Breck and Lisa's minor son, Brandon. Brandon turned 18 in the fall of 2009, but remained eligible for child support until June 2010, when he completed high school. (See Fam. Code, § 3901, subd. (a).) Breck had sole physical custody of Brandon during the relevant time period, and the custody and visitation order provided Lisa had visitation on alternating weekends and major holidays, and for half of Brandon's summer and winter break periods. Because of the custody arrangement and the fact Lisa earned significantly more income as a nurse than Breck's self-employment income from his landscaping business, she had been ordered to pay $1,198 per month for Brandon's support effective September 1, 2006.

All statutory references are to the Family Code.

Lisa was originally ordered to pay $580 per month in child support to Breck for Brandon on September 25, 2006. Lisa unsuccessfully appealed that order to this court and later moved to set it aside in the trial court. That challenge was not resolved until April 24, 2009, when the court ordered Lisa to pay Breck $1,198 per month for Brandon's support effective September 1, 2006. This was based on a stipulation that Breck's income for January to August 2006 be set at $2,902 per month.

Lisa's modification requests as to Brandon were primarily based on her view Breck had deliberately understated the income from his landscaping business. Breck denied this, but acknowledged his average monthly income was higher during the last four months of 2006 and the first quarter of 2007 than the income he reported in the first eight months of 2006. At the hearing in February 2010, Lisa sought a reduction of child support for the period December 1, 2006 to March 31, 2007 to approximately $820 per month and a further reduction to approximately $575 per month for April 1, 2007 forward. To calculate net disposable income for the two modification requests, the court used the 2006 calendar year (hereafter Period A) to determine Breck's income for the December 1, 2006 to March 31, 2007 modification and the 11-month period from April 30, 2006 to March 31, 2007 (hereafter Period B) to determine gross income for purposes of the April 1, 2007 to 2010 modification motion.

A parent's "net disposable income" is calculated in general by deducting certain mandatory expenses, such as state and federal taxes paid, to arrive at a figure more reflective of the parent's ability to pay child support. (See § 4059.)

In calculating the statutory guideline support figures applicable to each period (see § 4055), the critical facts in dispute were (1) Breck's monthly income in Periods A and B; (2) Lisa's income during the same time periods; and (3) the percentage of time Lisa had primary physical responsibility for Brandon compared to Breck, referred to in the statute as the "H%" factor. (See § 4055, subd. (b).)

During the trial, Breck stipulated to the use of Lisa's figures for the gross business receipts of his landscaping business in Period A and Period B. The only material dispute relative to Breck's self-employment income was over the amount of his allowable business expenses in these periods. The parties presented conflicting accountings of those expenses to the court, as well as live testimony and cross-examination about the accountings and relevant aspects of Breck's landscaping business and record-keeping practices. The trial court ultimately drew from both parties' expense evidence to determine Brett's net self-employment income.

There was also a dispute over Lisa's claim that $300 per month of rental income (one-third of his monthly rental cost) should be imputed to Breck because he and his girlfriend shared a residence with his girlfriend's mother, Dorothy, in 2006 and 2007. The court properly rejected Lisa's claim. Although Breck acknowledged Dorothy shared in the household expenses, there was no evidence she was Breck's subtenant or paid him rent. (See County of Orange v. Smith (2005) 132 Cal.App.4th 1434, 1447-1448.)

For Period A, the court used Brett's proposed figure of $4,823 for the cost of goods sold, but it adjusted that figure downward by $104.37 to reflect plants Brett had gifted to his attorney. The court accepted Brett's accounting of certain business expenses, but it disallowed two categories of operating expenses disputed by Lisa— outside labor services and truck rental fees—that comprised 35 percent of his claimed operating expenses of $ 12,830 for that period. For Period B, the more consequential calculation, the court used Lisa's figure of $4,873 for the cost of goods sold. For business operating expenses in Period B, the court used Brett's figures primarily, but— consistent with Lisa's position— it disallowed 56 percent of Brett's proposed expenses of $26,723 for that period, representing claimed day labor and truck rental costs.

The cost of goods sold is, generally, the cost to acquire goods (in this case, plants) that are re-sold to customers. The net income of a business is arrived at by deducting from total sales revenues the cost of goods sold and all other business operating expenses. (See Black's Law Dict. (8th ed. 1999) at p. 1247, col. 1.)

Lisa's figure for cost of goods sold was $4,412.18.

Lisa's accounting would also have disallowed all vehicle repair or gasoline expenses and all telephone expenses for Periods A and B, and would have allowed less than $10 for office supplies, postage, and printing and copying during those periods. Under Lisa's accounting, Breck's allowable operating expenses were $2,132.91 or 4 percent of his gross receipts for Period A and $2,366.61 or 3.5 percent of his gross receipts in Period B.

To determine Lisa's income in Period A, the court relied on a deposit advice issued by Lisa's employer for the two-week pay period ending December 2, 2006. It multiplied the gross pay amount of $3,356 shown in the deposit advice by 26 and divided the resulting product by 12 to arrive at a monthly income for Lisa in Period A of $7,271. In its statement of decision, the trial court observed the deposit advice was the only evidence of Lisa's income during Period A admitted into evidence at the trial. For Period B, the court used a deposit advice issued to Lisa for the two-week pay period ending March 24, 2007. It performed the same calculation as for the 2006 deposit advice and arrived at a monthly income for Lisa during Period B of $7,197.

The court used 26 percent as the H% factor for both Period A and Period B child support calculations. At trial, the court had proposed using visitation during the one-year period beginning December 1, 2006 as the basis for the H% determination for both modification periods, and neither party objected to this. Lisa proceeded to testify about the actual days of visitation she had with Brandon from December 1, 2006 to December 31, 2007. Based on this testimony, Breck calculated an H% factor of 25.5 percent, and the court rounded this up to 26 percent. This was consistent with Lisa's figures for the actual time Brandon spent with her in the 12-month period beginning December 1, 2006.

At trial, the court and parties engaged in a colloquy about how best to determine the H% factor for a period of time that has already occurred. The court observed that the H% factor is normally calculated prospectively based on projecting past visitation or using the custody and visitation order the parties assume will be followed after a child support modification goes into effect. In this case, because the modification encompassed a period beginning December 1, 2006, that had mostly already occurred, the court proposed and the parties seemingly agreed to base the percentage on a 12-month snapshot of Brandon's actual visitation with Lisa after that date.

Visitation after December 1, 2007 was outside of the period the court proposed to use.

Based on the parental income figures and H% factors the court found, and other facts not in dispute, the DissoMaster calculation showed child support payable by Lisa from December 1, 2006 to March 31, 2007 of $884 per month, and support payable by her from April 1, 2007 forward of $653 per month. This resulted in Lisa having to pay a total of approximately $3,000 more in child support for the period from December 2006 to June 2010 than the amount she had calculated based on her own numbers.

The trial court entered an order incorporating its findings and child support determinations on October 12, 2010, from which Lisa timely appealed.

II. DISCUSSION

Lisa's contends the trial court abused its discretion in the following respects: (1) adopting Breck's assertedly unsupported business expense figures rather than the business records and accounting Lisa put in evidence; (2) calculating Lisa's Period A income using a single deposit advice rather than other documents contained in her moving papers; and (3) using the same time window to calculate the visitation factor for both Period A and Period B given asserted evidence that Breck had hampered her visitation prior to February 2007. A. Standard of Review

Our review of an order of child support "is limited to determining whether the court's factual determinations are supported by substantial evidence and whether the court acted reasonably in exercising its discretion. [Citation.] We do not substitute our judgment for that of the trial court, but confine ourselves to determining whether any judge could have reasonably made the challenged order." (In re Marriage of de Guigne (2002) 97 Cal.App.4th 1353, 1360.) A trial court's exercise of discretion will be upheld "as long as its determination is within the range of the evidence presented." (In re Marriage of Nichols (1994) 27 Cal.App.4th 661, 670 (Nichols).) Conversely, a court abuses its discretion if its findings are wholly unsupported, since a consideration of the evidence "is essential to a proper exercise of judicial discretion." (Johns v. City of Los Angeles (1978) 78 Cal.App.3d 983, 998.) B. Breck's Business Expenses

Lisa presented an accounting of Breck's business expenses she and her husband, Norman Valdez, Jr., had prepared using business records and receipts Breck had turned over to her in December 2007. Valdez explained they had sorted the records and receipts by month and category and then entered the information onto a computer and generated profit and loss and expense reports using the QuickBooks software program. The reports and supporting records were admitted in evidence at trial. Valdez testified he had taken bookkeeping classes in high school and had helped his father with bookkeeping for small businesses his father owned. Lisa testified she had taken many courses on business and accounting, had assisted her mother in her mother's accounting business, and was very familiar with preparing accounting records on the computer because she had used QuickBooks to assist Breck with the bookkeeping for his landscaping business from 1997 to 2003.

Breck freely admitted he had a poor memory and no talent for paperwork. He testified Lisa handled the majority of the paperwork for his business during their marriage. It was evident throughout his testimony he had trouble remembering details, especially of events dating back three or four years. Breck did not have a high school diploma and he admittedly used simple methods to keep track of his jobs, receipts, and expenses. In February 2007, when Lisa was challenging his income and expense reports earlier in this litigation, Breck hired a bookkeeper, Miracle Bookkeeping Service, to go over his receipts and records for 2006 to prepare accounting reports for 2006. He brought all of the records and receipts he could find to the bookkeeper. For months where receipts were missing, Breck and the bookkeeper estimated expenses. He also maintained a calendar on which he recorded receipts and expenses he gave to the bookkeeper at Miracle. Miracle prepared statements showing Breck's annualized business income, cost of goods sold, business expenses, and net profit for calendar year 2006. These statements were filed with the court originally in May 2007 as part of an amended income and expense declaration, which was offered and admitted in evidence at the trial. The May 2007 amended declaration also included a typed listing of monthly receipts and expenses for the first four months of 2007, compiled by Breck and his girlfriend in 2007, using the records and calendar they maintained. Breck testified he believed the May 2007 declaration and its attachments, subject to possible de mimimus errors, fairly and accurately reflected his income and expenses for the 16-month time period it covered.

As noted above, the court relied on an amalgam of Lisa's and Breck's evidence of expenses. It used Breck's cost of goods sold for Period A, with a small adjustment proposed by Lisa. It used Lisa's cost of goods sold for Period B. It used Breck's reported operating expense figures for most items, but it reduced these figures by substantial amounts by disallowing 100 percent of his expense claims for two significant categories—outside labor and truck rental. We cannot say these choices were irrational or wholly unsupported by the record.

Breck testified to the manner in which his accounting was prepared, and testified it fairly and accurately reflected his expenses for the time periods in issue. Unlike Lisa, he used a professional bookkeeping service to compile and analyze his records. Lisa and her husband claimed to have some bookkeeping experience and coursework, but they were not professionals in that field. The court was in the best position to determine the credibility of their testimony and the validity of their financial analysis. In that regard, it was apparent from the trial record and the entire record of this case that Lisa was far from an unbiased witness when it came to Breck. She went out of her way to disparage his honesty and even suggested at one point he had committed perjury in the proceedings. The court had little reason to assume Lisa approached her accounting analysis with the same objectivity an outside bookkeeping professional would have displayed. In contrast, Breck praised Lisa for her attention to detail and paperwork skills, and he and his counsel made numerous factual concessions in order to facilitate faster resolution of their dispute. In its statement of decision, the court observed it had "little faith" in Lisa's methodology and gave "little weight" to it because "[t]his type of a financial analysis is one which needs the services of an independent expert." In context, we construe this to mean the court might have had more faith in the credibility and objectivity of Lisa's accounting if it had been prepared or reviewed by an independent accounting or bookkeeping service rather than leaving it up to Lisa and her husband to decide what business expenses they would or would not recognize.

The court also faulted Lisa's accounting because it was based on incomplete records from the business compiled without completing formal discovery as to Breck's records. This was apparently based on the fact Lisa rejected expenses (such as gasoline costs for Breck's truck, and equipment and insurance costs) in part on the grounds he did not produce certain records she had requested (e.g., mileage logs and the insurance policy), although she had never moved to compel production of such documents or established they did not exist. At the very least, completion of formal discovery might have helped to clarify whether Lisa and Breck had used the same documents to prepare their respective accountings.

Further, as noted above, Lisa's accounting would have attributed an unreasonably small percentage, less than 4 percent of gross receipts, to operating expenses. Among other things, she excluded all of Breck's check-cashing fees even though the evidence established and Lisa did not dispute he did incur such expenses. For other stated reasons, she excluded or minimized several other categories of expenses (e.g., telephone, vehicle fuel, office expenses), and arrived at the unreasonably low figure for operating expenses for all of 2006 of $2,132.91. Lisa ended up reducing Breck's deductible business expenses (operating expense plus cost of goods sold) to approximately 11 or 12 percent of his receipts for Periods A and B. At the same time, Lisa admitted that when she and her mother prepared Breck's 2003 federal tax return for the same business during the marriage, the comparable ratio of business costs incurred to receipts was nearly 50 percent. In contrast, the court's findings for Breck's net income were consistent with a percentage ratio of costs to receipts of roughly 24 percent for both Periods A and B. Although not as draconian as Lisa's accounting, that percentage seems, if anything, to understate Breck's actual cost-to-income ratio by past standards.

Breck had no bank account or driver's license.

Lisa places great reliance on the court's comment in its statement of decision that it was disallowing the amounts Breck claimed for outside services and truck rental due, among other reasons, to Breck's "general lack of credibility regarding business expenses." (Italics added.) Lisa reads too much into the italicized clause. She takes it as an unqualified rejection of all of Breck's evidence of expenses, and questions how the trial court could have rationally chosen to rely on any aspect of Breck's accounting over hers. Viewing the court's comment in context, we do not believe the court was making a statement about the totality of Breck's evidence. Breck freely admitted his lack of personal credibility about the business expenses he incurred in 2006 and 2007. He admitted he was not a meticulous record keeper and did not have a reliable memory of expenses he incurred three and four years prior to the trial. But he also testified that in early 2007, at a time when the information was fresher in his mind than it was at the time of trial in 2010, he had gathered all of the documents that were available and worked with a bookkeeper and his girlfriend to do the best job they could to reconstruct his expenses for the relevant time periods. In our view, the court was simply explaining why it could not accept these reconstructions at face value. It was neither questioning Breck's sincerity in trying to substantiate his true income nor was it suggesting Lisa's accounting was more credible than Breck's. The court found flaws in both and reasonably drew from both in making its findings.

Finally, we reject Lisa's argument that certain Period B costs claimed in Breck's posttrial brief lack evidentiary support. The figures for these items are all based either on Lisa's numbers contained in her trial exhibit A, on costs listed in Breck's trial exhibit No. 6 for 2006 and 2007, or on combining non-overlapping figures drawn from both accountings. The apparent discrepancies to which Lisa points either do not exist upon examination (e.g. equipment rental, office/professional expenses), arise from differences over whether certain costs (e.g., tool purchases) are deductible as current expenses, or involve miniscule arithmetic errors ($8 for dump fees, $17 for check-cashing fees). Overall, we find the court's estimate of Breck's expenses fell well "within the range of the evidence presented." (Nichols, supra, 27 Cal.App.4th at p. 670.) If anything, allocating more than 75 percent of the gross receipts from Breck's business to his net income tilted the scales toward Lisa and helped to give her the lion's share of the modifications she sought. C. Lisa's Income

These items include costs for dump or trash fees, auto gas expenses, insurance premiums, equipment fuel and rental costs, check cashing fees, tool replacement, and office/professional expenses.
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In her posttrial briefing, Lisa proposed the court use as her Period A income the figure of $84,429.92, shown on her 2006 W-2 form as her taxable wage and salary income for that year. She attached a copy of the W-2 to her brief because it had not been offered in evidence at the trial. In his trial brief, Breck pointed out Lisa failed to provide proof of her income for Period A and did not file an income and expense declaration with her November 2006 motion. As noted earlier, the court used an employer deposit advice for the pay period ending December 2, 2006 that Breck had put in evidence, extrapolating Lisa's two-week gross income to a yearly income of $87,256.

We find no abuse of discretion. The court based its determination on the actual evidence introduced at trial. That evidence was highly probative of Lisa's actual income during the period in issue, the 12-month period beginning December 1, 2006. We note there was in fact a minimal difference between the yearly income the court used and the actual income reflected on Lisa's 2006 W-2 form. The W-2 shows Lisa's actual calendar year gross income in 2006 was $87,045.73 (shown in box No. 3 as her Social Security wages), not the $84,429.92 figure she proposed. The difference between the two figures is $2,615.81 in nontaxable income shown in box No. 12a, reflecting Lisa's voluntary contribution to a retirement savings plan. Such voluntary retirement contributions are not deducted from income for child support purposes. (§ 4058, subd. (a)(1); cf. § 4059, subd. (c).) When that is taken into account, the court's income figure is only $210 higher in round figures than the income shown on Lisa's 2006 W-2. Lisa concedes this difference is insignificant. D. The H% Factor

The parties discussed and agreed to using the same 12-month snapshot period to determine the percentage of time Brandon spent with Lisa during both Periods A and B. Lisa testified in detail about the visitation that actually occurred during the agreed period, which came out to a figure of 25.5 percent. The court rounded this up to 26 percent to Lisa's benefit.

Lisa waived her claim that two separate periods should have been used by failing to timely object to the approach the parties and court discussed and ostensibly agreed to during the trial. Although Lisa alleged Breck improperly hindered her visitation before April 1, 2007, the evidence at trial failed to prove that allegation, and there was uncontradicted evidence the missed visits, whoever was responsible for them, were made up at later times within the window.

We find no abuse of discretion with respect to the trial court's adoption of an H% factor of 26 percent.

III. DISPOSITION

The trial court's findings and order of October 12, 2010 are affirmed.

___________________________

Margulies, J.
We concur:

___________________________

Marchiano, P.J.

___________________________

Banke, J.


Summaries of

Golithon v. Valdez

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE
Jan 19, 2012
A130725 (Cal. Ct. App. Jan. 19, 2012)
Case details for

Golithon v. Valdez

Case Details

Full title:In re the Marriage of BRECK R. and LISA M. GOLITHON. BRECK R. GOLITHON…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE

Date published: Jan 19, 2012

Citations

A130725 (Cal. Ct. App. Jan. 19, 2012)