Opinion
D078016
09-09-2021
J.C., Appellant, v. A.D., Respondent.
Bickford Blado & Botros and Andrew J. Botros for Appellant. Richard S. Sterger for Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County, No. D503067, Adam Wertheimer, Commissioner.
Bickford Blado & Botros and Andrew J. Botros for Appellant.
Richard S. Sterger for Respondent.
DATO, J.
Custodial parent J.C. (Father) is a certified public accountant in Alabama. After leaving his position with a large national accounting firm to start his own accounting practice, he sought an order modifying the current child support obligation owed to him by A.D. (Mother). The family court denied the request based on the fact that “Father voluntarily divested himself of income from a prior job.” In this appeal, Father argues that the court erred in imputing income to him, as the custodial parent, without sufficient evidence and findings.
As we explain, a parent's voluntary decision to change jobs, resulting in a significant reduction in income, is a factor the family court can consider in setting the appropriate amount of child support because it may reflect a conscious choice by that parent to avoid reasonably utilizing their ability to earn. But that is not always or necessarily true. Particularly in the case of a custodial parent, making choices that have the effect of reducing income may be a reasonable way of balancing economic necessity and parental responsibility.
Here, the court denied Father's April 2019 request to modify child support with nothing but a reference to his “voluntary” reduction in income. Without more, this is an insufficient basis for the court's June 2020 order. Accordingly, we will vacate that order and remand for further proceedings on Father's request.
I. FACTUAL AND PROCEDURAL BACKGROUND
Father and Mother, who never married, have two children together-one born in May 2007, and one born in September 2013. At the time of the June 2020 order denying modification of child support, the children were 13 and 6 years old.
Mother was the children's primary caregiver from their births until March 2015. At that time, the family court awarded Father sole legal and physical custody of the children, with supervised visitation for Mother. A year later, in a March 2016 order, the family court found it was in the children's best interests for Father to retain primary physical custody. It modified legal custody to joint, and granted Father's request to move to Alabama with the children.
The parties tell us nothing about the origin of the underlying lawsuit. The first document in the parties' respective appendices is the family court's March 2016 move-away order. Likewise, neither the parties nor the Department of Child Support Services (the Department) tell us how the Department is involved in the lawsuit. From the record and the docket, however, we know that the Department is a party to the family court proceedings; and the Department filed a letter in this court, advising that it will not file a respondent's brief in the appeal.
In March 2016, at the time of the evidentiary hearing on his request to move with the children, Father had worked at the same company for 10 years. At the hearing Father explained that after the move to Alabama, his business plan was to continue working for his current employer for a few months, then return to construction forensic accounting, a type of work he previously performed. In 2015, Father earned approximately $170,000 as a base salary and $31,000 as a bonus. In November 2016, a little over a half year after the move-away order, the family court heard Mother's request for an order regarding child support. Following an evidentiary hearing, the court ordered that Mother make monthly child support payments to Father in the amount of $600 ($300 per child) based on findings of: a gross monthly income of $8,333 for Father; a gross monthly income of $6,391 for Mother; and a timeshare of 80 percent (Father)-20 percent (Mother).
The parties have not provided us with evidence from the November 2016 hearing. In a May 2019 declaration, Mother testified that, in finding Father's monthly income to be $8,333, in November 2016 the court “ordered imputation of income in the amount of $100,000.00 annually.” At a hearing in 2020, counsel for the Department advised that the court's November 2016 monthly award of $600 was a deviation from the child support guideline figure of $1,040. This is consistent with the DissoMaster printout attached to the minute order from the November 2016 hearing.
In August 2018, the court modified child support, ordering Mother to make monthly payments to Father in the amount of $550 ($352 for the younger child, $198 for the older child, with certain offsets) based on the following findings: a gross monthly income of $17,541 for Father; a gross monthly income of $8,907 for Mother; and a timeshare of 76 percent (Father)-24 percent (Mother). This is the order Father seeks to modify in these proceedings. The parties provide none of the foundational evidence on which the order was based, although they agree that by the time of the order Father was employed by the national accounting firm Price Waterhouse Coopers (PwC). The order itself says nothing about whether the determination of Father's income was based on actual earnings or earning capacity (imputing income to Father).
Father's request for an order modifying the existing child support award (RFO) was filed in April 2019. He sought support for each of the children “based on the child support guideline.” The accompanying income and expense declaration explained the reason for Father's request: “I left my employer and started my CPA practice per commitments made to the court, mom and children to spend more time at home.” He claimed gross self-employment income of $5,000 per month.
In the RFO, Father also requested an order removing certain restrictions on the Department's ability to collect child support arrears of $4,263. There are no issues on appeal regarding arrears or the Department's collection efforts.
Prior to the eventual hearing on the RFO, Father supplemented his request with two additional declarations. In the first declaration, dated May 2019, he asked for guideline support based on: Father's “expected income for April 2019 to April 2020 of $60,000” ($5,000/month); Mother's “updated income of $78,000” ($6,500/month); and a timeshare of 78 percent (Father)-22 percent (Mother). Father stated as follows with regard to his “Change in Income”: “I initiated [a previously disclosed, planned] career change in March of 2019. This change has had a permanent impact on my earnings which are now approximately $30,000 per year, anticipated to grow to $100,000 per year by May 2020.”
Father provided an additional explanation as to the reason for the change in jobs: “[Mother] has repeatedly requested that I stop traveling for work so that I can directly care for the children instead of relying on over-night babysitters. In fact, this was her testimony in a custody hearing in May 2018. In addition to [Mother]'s requests, changing careers to start my own local CPA practice was part of the move away plan approved by the court in 2015 [sic].”
In the second declaration, dated January 2020, Father again requested guideline support, this time based on: Mother's monthly gross income of $7,916; Mother's monthly rental income of $400; Father's “expected” monthly gross income of “around” $8,333; and a timeshare of 78 percent (Father)‒22 percent (Mother). With regard to the calculation of guideline support, Father testified as to why income should be imputed to Mother and why income should not be imputed to him.
Mother opposed Father's request. She acknowledged that in March 2019 Father left his employment with PwC to start his own accounting firm, and that he claimed this resulted in a substantial reduction in his income. But she argued from the outset that his “attempt to reduce his income is inappropriate and requires that he be imputed income at the level he is capable of earning.” Mother maintained that Father's “voluntary decision to leave his stable employment to pursue self-employment at a highly reduced salary” did not present “a substantial change of circumstances” that would warrant a modification of child support. And even if the reduction in Father's income constituted a material change of circumstances that allowed him to request a child support modification, Mother asserted that “any modification based solely on [Father's] voluntary divestiture from his stable employment requires that he be imputed income at his earning capacity.”
At a June 2020 evidentiary hearing, the parties presented conflicting evidence as to some of the issues-e.g., timeshare, Mother's offset for travel expenses, and Father's mortgage interest. Representing himself, Father referred to previously submitted documentary evidence and testified that his current earnings were “running around $5,000 a month.” He then argued why the court should not impute monthly income of $17,000 to him. In response to a question from the court, Father confirmed that he based his decision to leave his salaried job on a business plan that would provide “a six-figure income” by 2020. In response, Mother's counsel reminded the court that Father “voluntarily” reduced his income by leaving lucrative employment and choosing to become self-employed. She contended that Father had not “met his burden to show an involuntary change of circumstance” that would justify modification of the existing order. (Italics added.) In the alternative, Mother asked the court to impute income of $17,541 per month-the same amount used to calculate the existing support order-based on what Father earned at PwC in 2018.
The family court denied Father's request in a two-sentence order. It ruled that “[c]urrent child support orders shall remain in effect” based on the fact that “Father voluntarily divested himself of income from a prior job.” Father timely appealed from the June 2020 order.
Both Father and Mother tell us that appellate jurisdiction is based on Code of Civil Procedure section 904.1, subdivision (a)(2), which provides for an appeal from a postjudgment child support order. Although the record on appeal does not contain a judgment, we do not question our appellate jurisdiction because a prejudgment order denying modification of temporary support is also appealable. (In re Marriage of Stanton (2010) 190 Cal.App.4th 547, 554 (Stanton).)
II. DISCUSSION
On appeal, Father contends the family court erred in denying his request to modify child support based on his change in employment since the August 2018 order. He characterizes the court's decision as imputing to him monthly income of $17,541-his PwC earnings on which the prior order was apparently based-which he insists is unsupportable. Mother disputes Father's characterization. She claims his “voluntary divestiture” of income fails to satisfy his burden of showing changed circumstances, but argues in any event there was no error in denying the modification request.
Because the parties' arguments appear at times to be ships passing in the night, we start by defining what is really at issue in this case. As Mother's counsel clarified at oral argument, she does not dispute the fact that Father changed jobs and is now earning less income. Indeed, a factual finding that Father was earning less at the time of the RFO seems implicit in the court's conclusion that “Father voluntarily divested himself of income from a prior job.” Rather, Mother is making a legal argument that a parent's voluntary decision to change jobs, which results in what might otherwise be a substantial reduction in income, either (1) does not qualify as a material change in circumstances for purposes of modifying support, or (2) justifies imputing income to that parent based on earning ability rather than actual income.
We also deny Mother's request that we take judicial notice of the transcript of a hearing that occurred more than eight months after the June 2020 order, ostensibly for the purpose of “clarif[ying] the basis” for that order. “[N]ormally ‘when reviewing the correctness of a trial court's judgment, an appellate court will consider only matters which were part of the record at the time the judgment [or order] was entered.' ” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.) No exceptional circumstances exist that would justify deviating from that rule in this appeal. One of the passing ships is Mother's motion to dismiss Father's appeal (and related request for judicial notice) in which she argues that Father's opening brief inaccurately characterizes the family court's ruling and therefore does not raise any issue within our appellate jurisdiction. As we have already noted (ante, fn. 5), the order denying Father's modification request is appealable, and his notice of appeal was timely. Mother presents no authority, and we are aware of none, that determines appellate jurisdiction based on how the issues are characterized in an appellant's opening brief. Accordingly, we deny the motion to dismiss.
Moreover, while we do not appear to have a factual dispute between the parties, we do have added factual uncertainty as a result of the state of the record. As previously noted, although our record includes the existing August 2018 support order-with the attendant findings as to income, timeshare, etc.-we do not have the foundational evidence considered by the court, i.e., income and expense declarations, pay stubs, etc. Thus, we do not know for sure whether the prior support order was in any way based on Father's earning capacity instead of his actual earnings.
To the extent Mother tries to argue a “voluntary” change in employment that results in less income can never amount to changed circumstances sufficient to justify a modification of child support, she is incorrect. At various points she relied on two cases to support this argument-In re Marriage of Bodo (2011) 198 Cal.App.4th 373, 393 (Bodo) and this court's earlier decision in In re Marriage of Stephenson (1995) 39 Cal.App.4th 71, 80‒81 (Stephenson). But both cases involve very different factual scenarios and neither stands for the broad legal proposition Mother advances.
In Bodo, a father who ran his own company and effectively set his own salary sought to modify a stipulated child support agreement by claiming a substantial reduction in income. (Bodo, supra, 198 Cal.App.4th at pp. 376‒377.) The case did not involve a change in employment, voluntary or otherwise. The Court of Appeal held that the family court did not abuse its discretion in concluding that there had been no substantial change in the father's income. (Id. at pp. 392‒394.) Here, as we have explained, Mother does not dispute that Father's earnings at PwC were higher than his current self-employment income. Her complaint is that he voluntarily left a higher paying job for one that does not pay as much.
Stephenson, likewise, did not concern a voluntary decision to surrender a more lucrative job in favor of a different position with lesser compensation. Indeed, Stephenson is not even a child support case, but rather involved spousal support. Faced with a declining business environment, the husband's company offered him early retirement and he accepted. The wife claimed the husband's decision “constituted a deliberate attempt to reduce or extinguish his spousal support obligation to her, requiring the trial court to consider his earning capacity in evaluating his request for modification of support.” (Stephenson, supra, 39 Cal.App.4that p. 76.) Contrary to Mother's argument here, this court in Stephenson rejected the wife's contention that the voluntary nature of the husband's decision affected the analysis. While “reasonable earning capacity, ” as distinguished from actual earnings, may be relevant in some circumstances, “it matters not the nature of the cessation of employment or whether it be voluntary or involuntary in character.” (Ibid., italics added.) Our court went on to explain that “a supporting party's retirement or cessation of gainful employment does not automatically compel a finding of a sufficient changed circumstance to warrant a decrease or termination of a support obligation.” (Id. at p. 80, italics added.) In other words, whether a supporting party's earning capacity should be used to supplement actual income earned will depend on all the surrounding circumstances, and requires a case-specific analysis of the sort that is missing from court's order in this matter.
The decision whether to stay in a job or pursue another employment opportunity requires the evaluation and balancing of a complex set of factors, which include (but are not limited to) hours, work environment, responsibilities, stress, coworkers, and future earning potential. Current pay is only one consideration, and may not be the most important. Here, Father maintains that several of these “other” factors made it reasonable for him to conclude that a change in jobs, even with less present income, would be in the best interests of the children.
One reading of the family court's order-perhaps the most natural reading-suggests the court accepted Mother's legal argument that any voluntary reduction in income does not warrant a modification of child support. The only reason given by the court for denying the modification request utilized a term apparently copied from Mother's opposition papers-the “voluntary divestiture” of income. Alternatively, perhaps the court meant only that the particular circumstances of Father's “divestiture” did not justify modification but, if so, it completely failed to identify any such circumstances or explain why the reduction in Father's income does not constitute a material change.
Accordingly, we are compelled to vacate the order and remand with directions to conduct a new hearing. We envision the following issues on remand:
The court should first determine whether the reduction in Father's income occasioned by his decision to become self employed amounts to a substantial change in the circumstances that existed at the time of the August 2018 support order. The record before us suggests it does if Father's actual annual income declined from something more than $200,000 to roughly $60,000. But we cannot foreclose the possibility that our incomplete understanding of those 2018 circumstances might have given us an erroneous impression.
Of course, if the family court concludes that Father did not meet his burden of establishing a material change in circumstances, it should deny the modification request. (Stanton, supra, 190 Cal.App.4th at p. 553.) But even if it finds a material change of circumstance, that is only the first step of the analysis and does not necessarily dictate a modification of the 2018 child support order. If the court agrees there has been a substantial change in Father's circumstances, it should proceed to calculate an appropriate support order based on those new circumstances.
This calculation could include imputation of some amount of income based on Father's earning capacity, or it might not. And imputing income to Father could conceivably result in a support order similar to the June 2020 order. We in no way mean to limit the court's discretion to consider all the relevant factors in deciding whether Father's decision to accept a reduced income was reasonable. If the court concludes that Father's earning capacity-as distinguished from actual earnings-is the appropriate benchmark, it should articulate the necessary statutory finding as to why imputing income to a primary custodial parent is in the best interests of the children. (Fam. Code, § 4058, subd. (b); In re Marriage of Ficke (2013) 217 Cal.App.4th 10, 13.)
III. DISPOSITION
The June 2020 order denying Father's request for an order modifying child support is vacated and the matter is remanded for further proceedings consistent with this opinion. The parties shall bear their respective costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
I CONCUR: AARON, Acting P.J.
I CONCUR IN THE RESULT: IRION, J.