Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County No. D455565, Patricia Garcia, Judge.
NARES, Acting P. J.
Tonya Cohen appeals an order reducing her former husband Glenn Nusbaum's child support obligation to $1,617 per month. Specifically, Tonya challenges the court's finding that income from the sale of Glenn's chiropractic business should not be considered in determining the amount of his child support obligation, asserting (1) the court was barred by the doctrine of res judicata from making this finding based upon a prior stipulation of the parties that money from the sale of his chiropractic business was income for purposes of determining his child support obligation; and (2) the court abused its discretion in excluding that money in determining Glenn's child support obligation. Glenn, in addition to opposing this appeal on the merits, asserts the res judicata issue has been forfeited because Tonya failed to raise it below.
We use first names for clarity and convenience only and intend no disrespect.
We conclude Tonya has not forfeited the right to assert the court's modification of Glenn's child support obligation is barred by the doctrine of res judicata. However, we also conclude (1) res judicata does not apply because there was no final judgment in this matter; and (2) the court did not abuse its discretion by excluding income from the sale of Glenn's old chiropractic practice as he reinvested that money in a new business. Accordingly, we affirm the court's order modifying Glenn's child support obligation.
FACTUAL AND PROCEDURAL BACKGROUND
Glenn and Tonya were married in September 1995 and separated four years later. The couple had one child, Amber. A judgment of dissolution was filed in November 1999, based upon a marital settlement agreement (MSA). The MSA provided that Glenn would pay child support to Tonya in the amount of $650 per month plus 100 percent of her day care expenses. Glenn's chiropractic business was awarded to Glenn.
From 1999 to January 2005, in response to Tonya's motions, Glenn's support obligation increased as his chiropractic practice became more successful.
In January 2006 Glenn filed an order to show cause (January 2006 OSC) to modify child support. Glenn requested the modification because the 2004 Workers' Compensation Reform Act had eliminated two-thirds of his patients. As a result, Glenn entered into a new line of business. He sold the chiropractic practice and bought an Assist2Sell real estate franchise. In the sale of the chiropractic business Glenn received a seven-year promissory note from the buyer with payments of $3,571 a month, and his accounts receivables.
In May 2006, as a result of the January 2006 OSC, the parties stipulated Glenn would pay $2,008 a month for child support (May 2006 stipulation). The May 2006 stipulation was based upon Glenn's then-total monthly income of $27,826. Included in that figure was the monthly income of $3,571 from the sale of Glenn's chiropractic practice. Tonya's income was imputed at $3,300 a month. The May 2006 stipulation did not state that Gleen was precluded from seeking to modify his child support obligation in the future.
In December 2006 Glenn filed another OSC (December 2006 OSC), seeking to further decrease his child support obligation. In support of the December 2006 OSC Glenn stated his income had decreased further because of the recent crash in the real estate market and the "dry up" of the old accounts receivables from his prior chiropractic business. Glenn stated that in an attempt to supplement his income he had opened a new chiropractic practice and forced his new wife, who had been a stay-at-home mom, to return to work in both the real estate company and the new chiropractic practice. Glenn's income and expense declaration showed average monthly income of $3,571, and monthly expenses of $9,215, including $2,800 for rent. In addition, Glenn declared $4,685 a month in accounts receivable from his old chiropractic business, with no monies collected in the last month. He stated he had $442 a month in rental income in 2006. He listed the value of his real property as totaling $1.55 million.
Tonya opposed the December 2006 OSC. She stated she was a stay-at-home mom and that she had two children by her new marriage. She asserted Glenn had not complied with local rules and had not declared his new wife's income from the new chiropractic practice or the real estate business, and had not attached profit and loss statements or tax returns showing his income from his real estate and chiropractic businesses. Tonya relied upon the May 2006 stipulation to estimate Glenn's 2006 income at $27,826 per month. She also alleged that Glenn's real estate had increased in value by over $900,000 in a year. Tonya's income from her new husband was $14,000 a month, and she stated her expenses with her new husband were $13,649 a month.
In response, Glenn stated his wife received no income for the work she performed for his businesses. She performed billing and scheduling in the chiropractic practice and assisted in the real estate business as well. He stated that he did not file his tax returns and profit and loss statements with the December 2006 OSC because they had not been prepared. He stated the returns would be lodged with the court when filed. He acknowledged that the stated value of his real estate investments was a mistake. He had included the full value of the properties when he only owned a smaller percentage.
Glenn also stated that he had run the new real estate franchise in a declining market. The franchise had been profitable in 2006. To augment his income, Glenn had reestablished a new chiropractic practice in December 2006. However, his ability to earn money as a chiropractor had been "greatly diminished."
He requested that the court impute income of at least $40,000 to Tanya as previously determined in 2005. He also noted that Tonya and her new family enjoyed a higher lifestyle than his family that included a larger home, housekeeper, nanny, day care, private horseback riding lessons and membership in an exclusive health club.
As for the old chiropractic business, he stated the total remaining accounts receivables were between $25,000 and $50,000 and would take 12 to 48 months to collect. With regard to his realty, he noted he had used savings to buy raw land. Glenn owned only 12 percent of Edmund Oquendo LLC, the company that purchased the land, and he derived no income from the land. He stated his rental properties needed repairs. Glenn advised the court that that he sold off his chiropractic practice in 2005 and had reestablished a new practice in December 2006. His future income was "lien" income and would occur only when and if cases settled. In this regard he stated:
"Like any business, I have overhead expenditures despite the lack of income. These expenses include renting space, office supplies, medical supplies, and the like. These business expenses are being paid predominantly though [my] past accounts receivable which are deposited into A.D.N. Financial Services. Some expenses for the newly established chiropractic office are also being paid through Assist2Sell, [my] real estate company, as supplies purchased are used for the running of both businesses . . . . [¶] Based on the aforementioned, [I] can not establish a reliable Profit & Loss statement at this time as there is no income to declare and all expenses are being paid through [my] other businesses." (Italics added.)
The purchaser of Glenn's former business, Brandon Goldstein, D.C., confirmed that chiropractor income was down because of the changes in the workers' compensation law and reduction in insurance reimbursement.
B. The Hearings
The December 2006 OSC was heard on March 22 and March 27, 2007. At the first hearing, Glenn stated that he never intended to get back into the chiropractic field but the real estate market was down and he was not showing any "substantial income." He had to start over and "drum up" business from his old sources. However, he faced the same workers' compensation laws that drove him out of the business earlier. He also assisted Dr. Goldstein, his buyer, to make sure he could maintain his payments. Going back into the chiropractic business and contacting his old sources could negatively impact Dr. Goldstein, resulting in him being unable to pay the promissory note. He also stated that his income was dependent on liens being paid.
Glenn received $3,517 a month from the proceeds of the sale of the chiropractic business. A portion was for interest and a portion for capital gain.
Glenn purchased the Assist2Sell franchise in 2005 for $130,000. Glenn had 25 active listings in 2005. At the time of the hearing, he only had three. This was caused by the downturn in the real estate market. Since income was down, he planned to give up his leased office in Rancho Bernardo and run the business out of his house.
Tonya's attorney argued that certain expenses should be added back. He argued the court should impute income from Glenn's investment real estate. Tonya's attorney also argued income should be imputed to Glenn's wife as well.
The court questioned Tonya's attorney on why the monthly income from the sale of the chiropractic business should be included. Counsel for Tonya argued it was "[income from] the sale of a business." The court analogized the sale of the old chiropractic business to the sale of an asset, stating, "It's [akin] to selling a house. . . . [I]t's selling an asset." Counsel for Tonya argued the sale of a business asset was not the same as sale of a house, stating, "[I]t's business income."
The court took the matter under submission to review the evidence and perform calculations, and set a hearing for March 27, 2007 to rule on the matter.
At the second hearing, the court announced its ruling: "Because a new chiropractic business has been started it would be reasonable to expect that the principal generated from the old—the sale of the old practice would be invested in the new practice, so I'm not going to consider that as income. I'm only going to consider the interest portion of $1,145." The court also ruled it would not impute any income to the new chiropractic business as it is "still a start up." It found Glenn's income after expenses from the real estate business was $5,700 a month, and he had $7,674 a month from collection of old chiropractic receivables, $1,766 in rental income, interest of $1,304, and imputed interest of $125.
The court found that the monthly payment from Dr. Goldstein was $3,552 a month, of which $1,145 was interest and $2,407 was principal. The court found Glenn's total income was $17,714 a month, and imputed income to Tonya of $3,333 a month. As a result, the court set child support in the guideline amount of $1,617 a month.
Tonya's timely appeal follows.
DISCUSSION
A. Res Judicata/Collateral Estoppel
Tonya asserts the court erred in failing to include the principal of Glenn's monthly income from the sale of the chiropractic business because in the May 2006 stipulation he agreed he had income in the amount of $3,571 per month from the sale of that business, and therefore the court was barred by the doctrine of res judicata from excluding that item from Glenn's income. Glenn, in addition to arguing the doctrine of re judicata does not apply, argues Tonya has forfeited the right to raise this issue on appeal as she did not raise it before the trial court. We first conclude Tonya did not forfeit the right to raise the res judicata issue on appeal. However, we also conclude the doctrine of collateral estoppel, the issue preclusion form of res judicata, does not apply to this case as there was not a final judgment on the merits as to the issue of Glenn's child support obligation.
1. Forfeiture
"A party forfeits the right to claim error as grounds for reversal on appeal when he or she fails to raise the objection in the trial court." (In re Dakota H. (2005) 132 Cal.App.4th 212, 221-222.) A "reviewing court ordinarily will not consider a challenge to a ruling if an objection could have been but was not made in the trial court." (In re S.B. (2004) 32 Cal.4th 1287, 1293.)
Although commonly referred to as "waiver," this legal doctrine is more appropriately called "forfeiture." (In re S.B., supra, 32 Cal.4th at p. 1293, fn. 2.)
In this case, Tonya did not forfeit the right to assert on appeal the court erred in not determining the doctrine of res judicata barred excluding the monthly payments from the sale of Glenn's old chiropractic business from income for the purposes of determining his child support obligation. Tonya cannot be charged with forfeiting the right to raise this issue as it was the court that sua sponte raised the issue of not considering the income from the sale of the chiropractic business at the hearing on Glenn's December 2006 OSC. Thus, Tonya had no notice that the previous stipulation might become an issue at the December 2006 OSC.
Further, because the res judicata/collateral estoppel issue is a question of law on undisputed facts, Tonya has not forfeited the right to raise the issue on appeal. We may properly consider this issue regardless of whether Tonya raised it before the trial court. (Yeap v. Leake (1997) 60 Cal.App.4th 591, 599, fn. 6.)
2. Analysis
The doctrine of res judicata is composed of two parts: claim preclusion and issue preclusion. Claim preclusion prohibits a party from relitigating a previously adjudicated cause of action. A new lawsuit or motion on the same cause of action is barred. Issue preclusion, also known as collateral estoppel, applies to a subsequent suit or motion between the same parties. Collateral estoppel prevents the parties from relitigating any issue litigated and finally decided in the earlier action or motion. (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341 & fn. 3.)
"According to that aspect of the doctrine of res judicata known as collateral estoppel, a party is collaterally estopped from relitigating an issue necessarily determined in a prior adjudication if (1) the issue decided in the previous litigation is identical with that presented in the action in question; (2) there was a final judgment on the merits in the first action; and (3) the party against whom the plea is asserted was a party or in privity with a party to the prior action." (In re Marriage of Buckley (1982) 133 Cal.App.3d 927, 935, italics added.)
With exceptions not applicable here, child support orders are modifiable "at any time as the court determines to be necessary." (Fam. Code, § 3651, subd. (a).) Thus, the family law court's jurisdiction to issue child support orders in a marital action continues even after the final judgment and independent of any reservation of jurisdiction in the judgment or MSA. For child support purposes, a dissolution remains pending throughout the child's minority as a matter of law. (In re Marriage of Armato (2001) 88 Cal.App.4th 1030, 1040-1042.) Thus, a domestic relations judgment can never be considered a "final" adjudication of the extent of the parents' obligation to support their minor children. (Id. at p. 1042.)
All further statutory references are to the Family Code.
Because there was no final adjudication on the merits as to the amount of child support to be awarded in this case, and the court has continuing jurisdiction to modify the amount until the minor reaches the age of majority, the doctrine of collateral estoppel does not apply.
Moreover, "[c]ollateral estoppel does not apply where there are changed conditions or new facts which did not exist at the time of the prior judgment . . . ." (United States Golf Assn. v. Arroyo Software Corp. (1999) 69 Cal.App.4th 607, 616.) In this case there were changed circumstances and new facts in that Glenn had started a new chiropractic business and invested the principal from the sale of his old chiropractic business to support the new one. The doctrine of collateral estoppel therefore does not apply for this additional reason.
C. Merits
Tonya asserts the court abused its discretion when it excluded the monthly payments from the sale of Glenn's chiropractic business as income for purposes of calculating his child support obligation. We reject this contention.
1. Standard of review
We review child support awards under an abuse of discretion standard. (In re Marriage of Chandler (1997) 60 Cal.App.4th 124, 128.) Under this standard "[w]e cannot substitute our judgment for that of the trial court, but only determine if any judge reasonably could have made such an order. [Citation.] Our review of factual findings is limited to a determination of whether there is any substantial evidence to support the trial court's conclusions." (Ibid.)
2. Analysis
"Subject to certain statutory exceptions, which do not apply here [under section 4058, subdivision (a)], gross income means 'income from whatever source derived . . . .' [Citation.] Although it specifically lists more than a dozen possible income sources, by the statute's express terms, that list is not exhaustive." (In re Marriage of Cheriton (2001) 92 Cal.App.4th 269, 285.) Rather, income for purposes of determining child support has been broadly defined with judicially recognized income sources covering a wide range. (Id. at pp. 285-286.) Section 4058, subdivision (a)(2) provides that one example of gross income is "[i]ncome from the proprietorship of a business, such as gross receipts from the business reduced by expenditures required for the operation of the business." (Italics added.) Thus, the court could have properly exercised its discretion to not consider Glenn's income from the sale of his old chiropractic business to the extent it was used to defray losses and expenses for the start up of his new business.
Case law further supports the court's exercise of discretion in modifying the child support in this matter. In In re Marriage of Pearlstein (2006) 137 Cal.App.4th 1361, the husband sold his interest in a business for which he received cash and stock. The Court of Appeal held the market value of unsold shares of stock received by a parent in connection with the sale of his or her business generally is not income includible in a child support calculation. (Id. at p. 1375.) To the extent the parent has sold the stock and spent the proceeds, the trial court has discretion to treat the realized income as income for child support. (Id. at p. 1376.) Finally, cash received by a parent from the sale of his or her business, like stock received in the sale, is a capital asset because it is the proceeds from liquidation of a capital asset. However, a portion of the cash, unlike the unliquidated stock, represents realized capital gain and is treated differently from unrealized gain: To the extent a support obligor has spent funds derived by liquidating his or her capital (rather than reinvesting), the trial court acts within its discretion in considering those funds to be income for child support purposes. (Ibid.) Of relevance to this case, the Court of Appeal held, "Moreover, to the extent that [husband] sold the shares only for the purpose of reinvesting them in income-producing assets, the resulting gain also was not income, but merely the replacement of one capital investment with another." (Id. at pp. 1375-1376.)
Likewise in this case, the court excluded the principal income from the sale of Glenn's old chiropractic business on the basis that he was investing that money in his new start up chiropractic business. Thus, the court did not abuse its discretion by finding that money should be excluded from his gross income in determining the amount of child support Glenn should pay.
CONCLUSION
The judgment is affirmed. Glenn shall recover his costs on appeal.
WE CONCUR, McDONALD, J.,IRION, J.