Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. SD018483 Joe W. Hilberman, Judge.
Bookman & Kent, Robert K. Kent for Appellant Courtney J. Stewart.
Law Offices of Lynn Soodik, Lynn Soodik and James L. Keane for Appellant James C. Stewart.
ROTHSCHILD, Acting P. J.
Former wife initiated proceedings against her former husband to determine child and spousal support arrearages under the parties’ stipulated judgment of dissolution. In interpreting the support provisions of the stipulated judgment the court resolved certain matters in favor of the former wife and other matters in favor of her former husband. Former wife appeals from the postjudgment order and her former husband also appeals. We affirm in part, reverse in part, and remand with directions.
BACKGROUND
Courtney J. Stewart and James C. Stewart married on March 27, 1993. They have two minor children, a son, James, born on October 27, 1995, and a daughter, Cecelia, born on July 22, 1998. After eight years of marriage, Courtney and James separated on March 5, 2001, and began marital dissolution proceedings immediately thereafter. On January 21, 2003, the family law court entered a stipulated judgment of dissolution resolving all issues.
She is also apparently known as Courtney Jane.
We refer to the parties by their first names to avoid confusion.
On March 24, 2008, Courtney filed an order to show cause (OSC) to establish child and spousal support arrearages under the stipulated judgment. Courtney submitted an income and expense declaration which showed no earnings, a loss in her mortgage, finance and real estate business, net assets of $520,000 and monthly expenses of over $30,000. Courtney’s declaration stated that she held a B.A. and an M.B.A. degree and a real estate license. With her OSC Courtney submitted a report prepared by a certified public accountant setting forth the claimed arrearages.
James filed opposition and included a forensic accountant’s report of his income and the support payments he had made during the relevant period. His income and expense declaration stated that he held Bachelor of Commerce and M.B.A. degrees and was employed by UBS as an investment banker. The two children lived part time with James and his current wife and three-year-old son. James declared a monthly income of over $16,000, monthly expenses of over $60,000 and net assets of over $2 million.
At the court’s request, the parties filed a joint statement of disputed issues in which each presented proposed interpretations of the stipulated judgment’s provisions for child and spousal support. The parties submitted the matter after hearing and argument and on October 31, 2008, the court issued a written order addressing each of the disputed issues. Both Courtney and James appeal.
The parties represent that after the court’s ruling Courtney filed a request to modify child support and that the court has since heard and ruled on the request for modification, the terms of which the parties did not disclose.
DISCUSSION
Standard of Review
“Marital settlement agreements incorporated into a dissolution judgment are construed under the statutory rules governing the interpretations of contracts generally. [Citations.]” (In re Marriage of Iberti (1997) 55 Cal.App.4th 1434, 1439.) “The interpretation of a written instrument, even though it involves what might properly be called questions of fact [citation], is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect. (See Civ. Code, §§ 1635-1661; Code Civ. Proc., §§ 1856-1866.) Extrinsic evidence is ‘admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible’ [citations], and it is the instrument itself that must be given effect. (Civ. Code, §§ 1638, 1639; Code Civ. Proc., § 1856.) It is therefore solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence. Accordingly, ‘An appellate court is not bound by a construction of the contract based solely upon the terms of the written instrument without the aid of evidence [citations], where there is no conflict in the evidence [citations], or a determination has been made upon incompetent evidence [citation].’ [Citations.]” (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.)
Courtney’s Appeal:
Child Support 2
The judgment provided a formula for child support. The first provision (Child Support 1) called for a fixed amount of support plus eight percent of James’ “bonus income” and “EICP” (Equity Incentive Compensation Plan) stock. The second provision (Child Support 2) provided that once spousal support ended on January 1, 2007, and certain other conditions were met, the portion of child support based on James’ “bonus income” and “EICP” stock would increase by seven percent up to $2 million of “bonus income” and “EICP” and by eight percent of any amounts over $2 million. In addition, James was required to pay for the children’s private school expenses if his cash compensation exceeded $400,000 per year.
Courtney and James disagree on the validity and interpretation of Child Support 2. In their joint statement, Courtney contended that the conditions were void and unenforceable and sought a declaration that James was required to pay the increased support without regard to the conditions. Alternately, she asserted that the conditions had been met and therefore she was entitled to the increase. James argued that the conditions were valid but, because not all the conditions had been met, he was not obligated to pay the increase. Alternately, he requested that if the court agreed with Courtney that the conditions were invalid, the court either strike the entire provision for increased child support and retain the basic child support provision (Child Support 1) or strike all the child support provisions and make a new child support order based on the parties’ current finances.
The specific provisions in the 2003 stipulated judgment at issue concerning child support provided as follows:
“SECTION 3: CHILD SUPPORT
“3.1 Child Support Payments.... [¶]
“CHILD SUPPORT 1: Based on his current base salary of One Hundred and Sixty Thousand dollars ($160,000), the amount of child support per month shall be Two Thousand Four Hundred Twenty-Four dollars ($2,424)....
After an arbitration of various matters under the stipulated judgment, base child support was increased to $2,781 per month for 2004 and increased to $2,862 per month for 2005.
“ [James] is ordered to pay to [Courtney], as additional child support, (hereinafter referred to as ‘ADD-ONS’) Eight percent (8%) of [James’] gross bonus income and Eight percent (8%) of the gross amount of the Equity Incentive Compensation Plan (includes units and options and is hereinafter referred to as ‘EICP’) vesting during the term.... EICP becomes the property of [Courtney] upon vesting and shall be paid to her by [James] upon EICP becoming saleable. Bonus income is defined as all income from employment in excess of base salary,... and does not include other investment income of any description. [¶]... [¶]
“Child Support 2: Commencing January 1, 2007, in the event that all of the following conditions are met:
“a. Mother lives within 25 miles of St. Matthew’s school and has at least Fifty Percent (50%) custody of the children;
“b. The children are enrolled in St. Matthew’s Parish School until eighth grade for each, unless the school declines their enrollment or the parties otherwise agree at which point they must be enrolled in a mutually acceptable school;
“c. The children are enrolled in a mutually acceptable high school subsequent to St. Matthew’s.
“[James] shall pay the following as additional child support: [¶] An additional Seven Percent (7%) of the gross amount of the ADD-ONS for a total of Fifteen Percent (15%) of gross bonus income and 15% of gross EICP to a maximum of Fifteen Percent (15%) of Two Million Dollars, plus a total of Eight Percent (8%) of the excess ADD-ONS over Two Million Dollars. [¶]... [¶]
“The parties shall exchange the following information each year when filed: W 2’s, 1099s, Federal and State income tax returns, whether individual, corporate or trust returns including records of trusts where a party is the beneficiary of a trust.... [¶]... [¶]
“3.3 Additions to Child Support.
In addition to the child support set forth above, the following amounts are Ordered to be paid (as provided below) to [Courtney] as part of the regular monthly allotment of child support from [James].
“Education Costs: [James] shall pay the children’s school tuition and all related expenses for St. Matthew’s or any other mutually acceptable school through high school, provided his cash compensation is greater than Four Hundred Thousand Dollars ($400,000) per year. [¶]... [¶]
“3.6 Long Term Investment Accounts for Children.
All EICP awarded to [Courtney] as and for child support shall be deposited by [Courtney], and controlled by [Courtney], into two equal long term investment accounts, one for each of the children, to be turned over to the respective child upon reaching age 25, unless said trust funds are required for the children’s extraordinary circumstances, including college education. Any and all tax liability for the children’s EICP shall be chargeable against the children’s accounts. [¶]... [¶]
“4.6 [Courtney]’s obtaining employment and no imputation of income.
“No income shall be imputed to [Courtney] or attributed to her for purposes of child or spousal support. In the event that [Courtney] has actual earned income (not including alimony) in excess of Two Hundred Thousand Dollars ($200,000) in any given year, [James’] child support obligation shall be reduced by one-half of such excess amount earned.”
Analysis
Relying on our decision in In re Marriage of Armato (2001) 88 Cal.App.4th 1030, the court found that the conditions for Child Support 2 were void as against public policy and declared the entire provision for increased child support unenforceable. Courtney agrees with the trial court that the conditions were void but contends that, instead of simply striking the entire provision, the court should have either excised the offending conditions or excised them as conditions of increased child support and required her to comply with the mandates of the conditions independently of child support. Alternatively, if we do not agree that the conditions can be excised or made independent, she requests that we restore the provision as written. We conclude that the court erred by failing to enforce the Child Support 2 increases as agreed to by the parties in the stipulated judgment.
First, we note that in finding the conditions for Child Support 2 “void and unenforceable” the trial court misread our decision in In re Marriage of Armato, supra, 88 Cal.App.4th 1030. In Armato we held that trial courts were not required to “blindly enforce” any type of child support agreement reached by the parties, noting that agreements “‘“compromising the parents’ statutory child support obligation or purporting to divest the family court of jurisdiction over child support orders are void as against public policy....”’” (Id. at pp. 1045-1046, quoting In re Marriage of Lusby (1998) 64 Cal.App.4th 459, 469.) In making these observations, we did not hold that as a matter of law all agreements imposing conditions for additional child support are necessarily against a child’s best interest and thus void as against public policy, but only those provisions parents agree to without court supervision or approval that compromise, abridge, or restrict a court’s power to act on a child’s behalf in support proceedings. (Id. at p. 1046; see also In re Marriage of Sabine & Toshio M. (2007) 153 Cal.App.4th 1203, 1217-1218 [court was not required to enforce a purported agreement waiving all support arrearages in exchange for a fraction of the sum owed].)
Reading the stipulated judgment as a whole, as we must, (see Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633) it appears James wanted the children to live near him, wanted them to attend St. Matthew’s Parish School, wanted to ensure that the children went to an appropriate high school and, in exchange, James was willing to pay private school expenses (if his cash compensation exceeded $400,000, which it apparently did in all the relevant years), not to impute income to Courtney up to $200,000 per year, and upon termination of spousal support on January 1, 2007, to pay an additional amount in child support (Child Support 2).
Unlike the situation in Armato, here the judgment was the product of the parties’ negotiations which was approved by the family law court. In their negotiations James and Courtney were represented by experienced family law attorneys and, as both parties concede, each provision in the stipulated judgment resulted from extensive negotiations and was the product of a bargained-for exchange. The provisions thus constitute interrelated compromises on the issues, which bargain would be upset by changing any one part of the judgment alone.
Further, the conditions attached to James’ obligation to pay Child Support 2 did not compromise James’ child support obligation. The trial court noted, and Courtney did not claim otherwise, that Child Support 1 exceeded the uniform guideline formula amount. Nor did Courtney present any evidence to show that Child Support 1 was insufficient to meet the children’s current needs.
Unlike the situation in In re Marriage of Sabine & Toshio M., the conditions attached to Child Support 2 did not purport to divest the family law court of jurisdiction over child support. (In re Marriage of Sabine & Toshio M., supra, 153 Cal.App.4th at p. 1208 [parties’ agreement purported to vest exclusive jurisdiction over support matters in the Japanese court].) The agreement itself stated that child support could be modified at any time on a showing of changed circumstances. Paragraph 3.1 of the stipulated judgment specified that “[i]t is understood that the child support specified under this Section 3 is modifiable by a court of competent jurisdiction, if warranted by changed circumstances.”
We therefore conclude that the conditions related to Child Support 2 increases were not void and the court should have enforced the provision for increased child support as provided in the judgment. Indeed, Courtney contends that she has met the conditions for the increase in support. Although in the trial court James argued that all the conditions for increase had not been met because neither of the children yet attended high school, he has not asserted this position on appeal and it is therefore forfeited.
Long-Term Investment Accounts For Child Support
Under the stipulated judgment, Courtney was required to place all EICP stock proceeds awarded as child support into long-term accounts with the funds released to the children on reaching age 25. The stipulated judgment provided an exception for “extraordinary circumstances,” including college expenses. Citing the decision in In re Marriage of Chandler (1997) 60 Cal.App.4th 124, the trial court struck this provision, finding “these accounts would abridge the immediate, ‘support, care, maintenance, and education’ of the children.” James contends the provision for long-term investment accounts was valid. Courtney contends the provision was invalid and correctly stricken by the trial court. We disagree.
James argues that the provision for long-term investment accounts was an additional condition for Child Support 2. The trial court did not decide the issue, and we need not resolve the matter in light of our conclusion that the provisions for Child Support 2 and for the long-term investment accounts are both valid and enforceable.
In In re Marriage of Chandler (1997) 60 Cal.App.4th 124, after a contested hearing, the trial court ordered $7,000 for child support, $4,000 of which the father was ordered to place into a trust as a type of mandated savings account, with the balance distributed to the child on attaining majority. The trial court further ordered that, to the extent possible, payments from the trust be made directly to providers of services pursuant to written agreement of the parties or court order. (Id. at p. 127.) The Chandler court held that the court-imposed trust for base child support was unauthorized and inappropriate because it restricted the custodial parent’s access to funds to meet the child’s current needs. The Chandler court further concluded, that even assuming a trust account for child support payments could ever be appropriate, use of a trust for child support payments “must be limited to cases where there is a strong showing of necessity, buttressed by specific, detailed factual findings compelling the need to limit access to support funds. [Citations.]” (Id. at p. 128.)
The Chandler decision is distinguishable from this case. Here, in contrast to Chandler, the provision requiring that all proceeds from EICP stock received as additional child support be placed into long-term accounts was not imposed unilaterally by court order. Rather the parties agreed to adopt this provision to ensure some portion of additional child support be available for educational needs and extraordinary contingencies. (See, e.g., Fam. Code, § 4062, subd. (b)(1) [court may order as additional child support costs related to the educational or other special needs of the child].)
Further, Courtney produced no evidence to show that base child support plus eight percent of James’ cash bonuses was either below the guideline amount or was otherwise insufficient to meet the children’s current needs. As noted above, James had assumed responsibility under the stipulated judgment for paying expenses which might normally, at least in part, be paid using child support funds, such as the children’s school tuition, school uniforms, textbooks, and fieldtrips.
Because the parties adopted this provision after admittedly extended negotiations, and because there was no showing that this portion of additional child support was necessary to meet the children’s current needs, we conclude that the trial court erred by striking the provision. In future, should circumstances change, the parties may of course seek an order modifying child support pursuant to section 3.1 of the stipulated judgment.
Courtney challenged the trial court’s ruling regarding whether certain EICP stock vested within the period that she was entitled to spousal support. At oral argument, Courtney withdrew this contention, apparently because it was already resolved or would be resolved in a separate proceeding, and we thus do not discuss it.
James’ Appeal:
James contends the court erred in failing to treat the EOP stock he received as compensation from his then employer, UBS, as the equivalent of the EICP stock he received as compensation from Morgan Stanley, the investment banking firm for whom he worked when the stipulated judgment was entered in 2003. He also contends the court erred in failing to treat as exempt investment income amounts he received from a UBS stock rights offering.
EICP vs. EOP
Our independent review of the stipulated judgment shows that it addressed three categories of income James received as compensation from his then employer Morgan Stanley: base salary, discretionary annual cash bonuses, and noncash benefits in the form of Morgan Stanley stock from the company’s Equity Incentive Compensation Plan, or EICP. When Courtney filed her OSC for arrearages James was employed by UBS and received as compensation a base salary, discretionary annual cash bonuses, and periodic noncash grants of UBS stock from the company’s Equity Ownership Plan, or EOP. The trial court found that because the judgment on its face only addressed EICP and did not provide for the distribution of EOP, “EOP cannot be construed to be the same or a substitute for the EICP payments.” Thus, the court concluded that noncash stock benefits received under the EOP had to be categorized as “gross bonus income” under section 3.7 of the judgment which specified that “[b]ase salary or base pay is defined as all income from employment other than bonus income and EICP....”
James contends the trial court erred in concluding that EOP noncash stock benefits were not the equivalent of EICP noncash stock benefits. We agree. Both EICP and EOP were company stock awards. Both EICP and EOP vested and became saleable on schedules set by the respective companies, usually ranging over several years. The shared characteristics of these noncash stock benefits of requiring vesting and lengthy periods before becoming convertible into cash are unique to this category of compensation. In contrast, when bonuses were awarded by either Morgan Stanley or UBS, their value was set on an annual basis, expressed in dollar terms, and paid in cash on a date certain.
Because both EICP and EOP share the same characteristics, they are the functional equivalent of each other, and should have been treated the same under the stipulated judgment. We accordingly conclude that the trial court erred in treating EOP, not as stock, but as a cash bonus instead.
UBS Stock Rights Offering
Section 3.1 of the stipulated judgment provided that “[b]onus income” “is defined as all income from employment in excess of base salary” but “does not include other investment income of any description.” In 2008, James’ “earnings statement” from UBS for the period ending July 31, 2008, showed an entry of approximately $185,000 described as “UBS Rights.” Courtney claimed that this sum was employee compensation, namely “bonus income,” and therefore should have been included in determining child support. James, on the other hand, asserted this sum was “investment income,” exempt from child support. The only evidence to support James’ classification was his own declaration stating that the $185,000 represented a rights offering available to all shareholders. He did not present any evidence from UBS supporting this classification. The trial court rejected his position and substantial evidence, the earnings statement, supports the court’s conclusion.
He asserts that in the event this court concludes the rights offering was employee compensation that we should further conclude that the trial court erred by failing to value the rights offering at its after-tax net value. James presented no argument or analysis to support this contention and we thus need not consider it. (See McComber v. Wells (1999) 72 Cal.App.4th 512, 522-523 [appellate court need not consider contentions unsupported by argument and citation to authority].)
DISPOSITION
The portions of the order striking the conditions and provision for Child Support 2 and striking the provision for long-term investment accounts for children are reversed. The portion of the order finding that EOP was bonus income rather than the equivalent of EICP stock is also reversed. The matter is remanded to the trial court with directions to enter an order that EOP stock is to be treated the same as EICP stock for the purposes of determining support, to determine support arrearages in accordance with this opinion, and make any orders adjusting the parties’ financial obligations as required. The order is otherwise affirmed. The parties are to bear their own costs on appeal.
We concur: CHANEY, J., JOHNSON, J.