Opinion
G053234
02-14-2018
In re Marriage of SUSAN and DOUGLAS KIM. SUSAN KIM, Appellant, v. DOUGLAS KIM, Respondent.
Tritt & Tritt and James F. Tritt for Appellant. Law offices of Marjorie G. Fuller and Marjorie G. Fuller for Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 07D005879) OPINION Appeal from an order of the Superior Court of Orange County, Ronald P. Kreber, Judge. Reversed and remanded. Tritt & Tritt and James F. Tritt for Appellant. Law offices of Marjorie G. Fuller and Marjorie G. Fuller for Respondent.
The trial court reduced Susan Kim's (Susan) spousal support from $2,447 to $850 per month. In her appeal, Susan asserts the order must be reversed because (1) there was insufficient evidence of a material change of circumstances to justify the modification, and (2) the trial court improperly determined what the marital standard of living (MSOL) was in 2012 when there was a stipulated judgment. Finding these contentions have merit we reverse the order and remand for a new hearing on spousal support and attorney fees.
FACTS
Susan and Douglas Kim (Douglas) were married for a little over 24 years. In August 2010, the parties entered into a settlement agreement regarding their legal separation. They each agreed to waive spousal support and divide the community assets. Douglas made an "equalization payment" of $92,000 to Susan.
The following year, Susan filed a motion to set aside the stipulated judgment due to fraud and misrepresentations. She explained the settlement agreement was based on her understanding Douglas was unemployed and she now had reason to believe this was untrue. She stated the equalization payment was no longer adequate and she never would have agreed to waive spousal support had she known Douglas was employed. Douglas opposed the motion, arguing it was untimely. He noted the equalization payment was made "in lieu of paying spousal support."
After considering argument from both parties, the court granted Susan relief as to spousal support and vacated that portion of the judgment. A few months later, Susan filed an order to show cause (OSC) seeking attorney fees and spousal support. In her supporting declaration, Susan stated that during the marriage they had lived "an upper middle class lifestyle." She explained Douglas was the primary income earner. When he earned his master's degree in accounting, she "sacrificed [her] own career" and worked as a babysitter and housecleaner. When he graduated and secured employment with an accounting firm, the couple were "financially very comfortable." Susan's declaration addressed all the factors listed in Family Code section 4320.
All further statutory references are to the Family Code.
With respect to her marketable skills, Susan stated she currently worked as a junior financial analyst, earning $50,000 per year. She explained her marketability was hampered by her poor English skills and advanced age. She was currently taking English classes to increase her chances of a promotion. Susan believed her earning capacity was impaired by a long period of unemployment. As was common in the Korean culture, she followed Douglas's "directive" to devote her time to taking care of the family during the marriage. The family moved frequently to give Douglas better job opportunities. Susan stated if she had stayed in Korea, and had not moved with Douglas to Texas, she was confident she would have earned a greater income than Douglas.
Susan stated that based on Douglas's job history, she believed he had the earning capacity of $131,000 as a tax director. Before their separation they owned a home worth $300,000 and had retirement funds equaling $200,000. Susan declared she had rented a room for the past ten months to contribute money to her son's school loans. She also used the $92,000 equalization payment to pay down her son's loans.
As for her current assets, she had $54,000 in life insurance and $44,000 in retirement funds. She was 52 years old and Douglas was 51 years old. She added there was a long history of domestic violence. She had stayed in battered women's centers and with friends. Susan concluded, "I truly believe that I deserve to live a similar lifestyle as [Douglas]. The fact that he is able to earn such a high salary is in no small part a result of my hard work, sacrifices in my own career, and my sage advice regarding [his] career path. [¶] I worked at menial jobs while [he] earned his [m]aster's degree. I gave up my own career ambitions at the bequest of [Douglas]." She requested attorney fees and costs based on the disparity of income and the court's finding Douglas committed fraud and perjured himself. Susan's income and expense declaration listed an average monthly income of $4,167 and living expenses totaling $8,052.
Douglas's opposition raised the same argument made in his opposition to vacate the judgment. He added, if the court awarded spousal support that it should be "guideline support." He declared he currently earned $10,833 per month. However, he believed the court should also consider he was unemployed for a long time and had to file for bankruptcy in 2009.
Douglas stated Susan was an accountant. She had a master's degree in business administration and her undergraduate degree was from one of the best universities in Korea. Douglas denied asking Susan to be a homemaker and declared they often needed her to work "in order to make ends meet." His income and expense declaration confirmed he earned $10,833 per month and he had accumulated over $232,000 in assets. He received $2,250 in rental income per month, thus his total monthly income from all sources was $13,083 per month ($156,996 per year).
In May 2012, the parties entered into a stipulation resolving Susan's OSC. The hearing was not reported. Douglas agreed to pay Susan $2,477 per month in spousal support beginning May 1, 2012. They agreed there would be no retroactive support dating back to when she filed the OSC and nothing to account for the two years of no support. Douglas agreed to pay Susan $10,000 for attorney fees. The stipulation included a copy of an "Xspouse" DissoMaster calculation, stating Douglas earned $12,848, Susan earned $4,326, and the guideline support amount should be $2,704.
In July 2013, Douglas filed a request for an order dissolving the marriage. The prior judgment was for legal separation. The judgment of dissolution noted the spousal support stipulation would remain in effect.
Two years later, Douglas filed an OSC seeking modification of spousal support. He explained the prior support order was based on an inappropriate DissoMaster calculation and should have been based on section 4320 factors. He declared that in the five years before the date of separation in 2008, his income "never rose above $39,040." Douglas claimed that after separation he obtained new skills and a higher paying job, thus, the court used an improper higher salary in the DissoMaster calculation. He concluded Susan was benefitting from his "efforts" after the marriage ended. Douglas added he was remarried and the high spousal support award was "putting [his] current marriage into financial difficulty" and he believed Susan now had a higher paying job. His income and expense declaration, filed April 23, 2015, reported he earned $11,801 per month as a tax manager. His personal assets now totaled $598,000.
Susan opposed the OSC, arguing Douglas had not articulated a material change in circumstances justifying modification. She stated her earnings had increased to $6,666 per month but she had set job-related expenses that meant she actually earned $6,238 per month. She had relocated to New Jersey and her monthly expenses totaled $10,708. She noted Douglas's income and assets had increased since 2012. He also received additional income from his new spouse. She calculated he earned $13,103 per month because, in addition to his salary, he received rental income and retirement funds from his company. She calculated his net assets totaled $598,000 and her assets totaled $169,700. She discussed why she believed there was a high standard of living during the marriage. She explained Douglas's tax returns showed five years of low income simply because at that time he was self-employed and many household expenses were included in calculations.
One week before the hearing, Douglas filed points and authorities "on the issue of whether or not a material change of circumstance exists to warrant a review of the current permanent spousal support order." He argued there was a change of circumstances because he had remarried and was supporting a wife and stepson. He added that Susan's income increased by 60 percent, which was also a change of circumstances that would require reevaluation of the support order.
Douglas separately filed a "reply declaration." He stated that during the last five years of the marriage the standard of living "was extremely depressed." His bankruptcy action was discharged the same year the family court entered the legal separation judgment. Douglas said his attorney and Susan's attorney ran the "Xspouse" calculation based on what he was earning at his new job and did not take into account the bankruptcy or his earnings during the last five years of the marriage. He concluded the order was not reflect consideration of any section 4320 factors. His income and expense declaration (dated August 20, 2015) indicated his average monthly income was $11,579 and he had assets worth over $596,000. His expenses were a little over $9,000 per month. Douglas stated his new wife earned approximately $2,000 per month, and his stepson was 17 years old.
The hearing was continued to November 6, 2015. In October 2015, Douglas filed another income and expense declaration, which essentially repeated the same figures stated in the August version, except he increased his monthly expenses to $11,060. In early October 2015, Douglas filed a brief discussing the section 4320 factors. He repeated his complaint that the stipulated judgment was not based on section 4320 factors. He also noted there had been multiple changes of circumstances justifying modification of the support amount. Specifically, Susan's income had increased by 60 percent and he had remarried and was "supporting his wife and stepchildren."
Susan filed a response to Douglas's brief. She maintained Douglas's remarriage was not a reason to lower his spousal support obligation. She noted Douglas's wife was employed and he had no legal obligation to support his stepson. She maintained Douglas had the ability to pay spousal support because he recently purchased a new home in Virginia and was renting his home in California. She filed an income and expense declaration stating her monthly income was $6,666, her assets totaled approximately $28,000, and her expenses exceeded $13,000 per month. She had also paid $26,991 in attorney fees by taking a loan from her life insurance policy.
The hearing was continued again. Before the next hearing date, Susan's counsel filed a declaration regarding Susan's attorney fees and costs. He described the fees and costs incurred in the case and concluded Susan owed a total of $31,645. In December 2015, Susan submitted another income and expense declaration indicating essentially the same information contained in the November declaration.
The court heard the matter on December 18, 2015. After considering argument, exhibits, and testimony from both parties, the court took the matter under submission. It prepared the following written order:
"How does the [c]ourt set the [MSOL] based on [Douglas's] income which was set in 2010 with zero spousal support? Two years later [Douglas] agrees to pay $2,477 spousal support along with $10,000 in attorney[] fees to [Susan's] attorney. This [c]ourt did not make any findings in 2012, as this was an agreement between the parties. The only way to get to this position is that former husband did not report his true income in 2010.
"If the amount of income submitted by [Douglas] was not reported properly in the first agreement of 2010, and the [c]ourt sets the [MSOL] off of these figures submitted by [Douglas], this would cause an error and would not be fair to [Susan]. The [c]ourt calculates[] that when [Douglas] agreed to pay spousal support of $2,477 in 2012, [Douglas] would have had to have an income in excess of $9,500 a month.
"Presently the [c]ourt finds [Douglas's] income not true as he is reporting. The [c]ourt added [Douglas's] monthly income of[] $11,841 in salary, $1,062 in company retirement match, $200 in rental income, and $817 in paid time off to find [Douglas's] true income to be $13,920 per month. The [c]ourt cannot use these numbers [except] in the modification issue.
"The [c]ourt sets the MSOL at $7,000 by adding the incomes of [Susan and Douglas]. The [c]ourt would reduce the spousal support to $850 per month because [Susan's] income has increased by 60 [percent]. Spousal [s]upport of $850 to be paid from the date of [Douglas's] filing for modification [(April 23, 2015)]. . . . [¶] The [c]ourt would not reduce the support to zero as [Douglas] had requested because [Douglas], in his declaration, says that he was paying this inappropriate high support amount and it is putting his current marriage into financial difficulty.
"It would appear that the true income should be adjusted to the 2012 agreement, as the agreement calls for spousal support of $2,477 per month and the [c]ourt would extrapolate these numbers and set the marital standard of living at $7,000 per month.
"[Douglas] complained about this procedure in his moving papers, but it was [Douglas] who entered into this agreement. The [c]ourt was not involved in the agreement. The [c]ourt signed off on the agreement but there was no evidence taken on any issue. At that time, the [c]ourt would not go through the [section] 4320 factors as I was not making any findings on these issues, as this was an agreement between the parties. [¶] The [c]ourt has to use the [section] 4320 factors for this modification, as the [c]ourt must make findings and the [c]ourt has to settle the marital standard of living issue."
Next, the court recited several facts about Douglas including that he was an accountant, "he has a new family to support," and Susan's income had grown 60 percent. It noted Susan requested attorney fees.
In the next section of its written order, the court listed each section 4320 factor and recited the facts existing in 2012 relating to each factor. We need not repeat these facts as they were discussed in detail above with respect to the circumstances existing when the parties executed the stipulation on spousal support. The court inserted into the list the following current information: (1) the current salaries of each spouse and that Susan was correct in arguing Douglas's income was higher than what he reported; (2) Susan claims she is living below the MSOL; (3) Douglas "has remarried and would like to not have to pay the current spousal support"; (4) Douglas does not want to be penalized for his investments since the date of separation; (5) to be self-sufficient Susan "would have to leave the temporary employment and try to hook [onto] a major firm doing accounting work."
This last fact is unsupported by the record. Susan's income and expense declarations show she is employed full time (40 hours a week) as an accountant. --------
The last page of the written order discusses Susan's request for attorney fees. She owed her attorney over $31,000 defending herself against Douglas's efforts to terminate support. The court awarded $10,000. It wrote, "The [c]ourt found the issues were complex and based on [section] 2030 factor[s] the issue of spousal support was very important to both parties. [¶] The [c]ourt considered the declaration for attorney[] fees and costs, and found the time put forth in the preparation is accurate. [Susan] may not be the prevailing party, but there is a need for attorney[] fees. The Court would find under [section] 270 an ability to pay these fees based on the fact that [Douglas] has $10,000 in an account and he had just spent $100,000 that he put down on buying a family home. The [c]ourt considered both parties' [i]ncome and [e]xpense [d]eclarations and the testimony taken at the hearing."
DISCUSSION
On appeal, Susan contends the trial court erred in modifying support. "Modification of spousal support, even if the prior amount is established by agreement, requires a material change of circumstances since the last order. [Citations.] Change of circumstances means a reduction or increase in the supporting spouse's ability to pay and/or an increase or decrease in the supported spouse's needs. [Citations.] It includes all factors affecting need and the ability to pay. [Citation.] Appellate review of orders modifying spousal support is governed by an abuse of discretion standard, and such an abuse occurs when a court modifies a support order without substantial evidence of a material change of circumstances. [Citations.] (In re Marriage of McCann (1996) 41 Cal.App.4th 978, 982-983.) Moreover, a "discretionary order that is based on the application of improper criteria or incorrect legal assumptions is not an exercise of informed discretion, and is subject to reversal even though there may be substantial evidence to support that order. [Citations.]" (Mark T. v. Jamie Z. (2011) 194 Cal.App.4th 1115, 1124-1125.)
I. Rules Regarding Modification When There is a Stipulated Judgment
In 2012, Susan and Douglas entered into a marital settlement agreement covering spousal support. Thus, in this case the prior trial court, by incorporating the parties' spousal support stipulation in its own judgment, "presume[d] that the parties arrived at a fair support award, after arm's-length negotiations that took into consideration all of the circumstances as they then existed." (In re Marriage of Hentz (1976) 57 Cal.App.3d 899, 901.) "The court thereafter should not permit a party to change this contractual arrangement, absent changed circumstances, as it would allow a party to repudiate and change a legal contract for no reason at all. Because marital support provisions in property settlement agreements are modifiable by law [citation], it is necessary to give some legal protection to the original agreement, otherwise it is meaningless. The 'changed circumstance' rule provides this protection." (Id. at p. 902, fn. omitted.)
Consequently, a trial court given the task of determining what constitutes a change in circumstances, when there is a stipulated spousal support award, "is bound to give effect to the intent and reasonable expectations of the parties as expressed in the agreement." (In re Marriage of Aninger (1990) 220 Cal.App.3d 230, 238, italics added (Aninger), superseded by statute on another point as indicated in In re Marriage of O'Connor (1997) 59 Cal.App.4th 877, 882-883.) Stated another way, "[T]he trial court's discretion to modify the spousal support order is constrained by the terms of the marital settlement agreement. The court may not simply reevaluate the spousal support award." (Aninger, supra, 220 Cal.App.3d at p. 238.) "The support order sought to be modified is conclusive as to circumstances existing when entered." (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2017) ¶ 17:151, p. 17-64.)
II. Analysis
The record in this case shows the trial court reevaluated the spousal support award, and failed to appreciate it was constrained by the terms of the 2012 support order, which was based on a stipulated judgment. Although the support order was conclusive as to the circumstances existing at that time, it is clear the trial court endeavored to take a fresh look at the section 4320 factors based on circumstances existing in 2012. The court calculated a new MSOL figure for 2012 and determined spousal support should remain static. Consequently, the court's decision to reduce Susan's spousal support was not based on the terms of the stipulated judgment, a showing of material changed circumstances, or analysis of all the section 4320 factors. Because the court's discretionary order was based on an application of improper criteria and a misunderstanding of the law, it must be reversed and remanded.
For example, in its written ruling, the trial court asked the question, "How does the [c]ourt set the [MSOL] . . ." based on the unusual history of the case. It noted Susan initially received no support and then Douglas agreed to pay $2,477 plus attorney fees, but the trial court at that time did not make any findings regarding the MSOL or "go through the [section] 4320 factors . . . ." The court indicated that based on its de novo review of the evidence, including the income and expense reports, it calculated the MSOL in 2012 was $7,000 per month, after "adding the incomes" of Susan and Douglas. Although the court mentioned several facts existing in 2012, which related to the section 4320 factors, no factor, other than salaries, was part of the court's reevaluation of spousal support.
The trial court explained it must reduce Susan's spousal support so that her total monthly income would be close to $7,000. Because Susan had received a pay raise, the court used simple subtraction to determine how to reduce spousal support. The reduction achieved the result of maintaining the status quo existing in 2012. We found nothing in the court's order showing it arrived at the new spousal support figure of $850 based on the contents of the stipulated judgment or after weighing the current and relevant section 4320 factors in light of Douglas's purported showing of changed circumstances.
This error requires reversal of the court's order because the parties' marital agreement did not specify there must be a static amount of income for Susan ($7,000). Rather, the parties agreed to the sum of $2,477 based on several specific conditions and incorporated by reference a copy of a DissoMaster printout as stating the "parties' income." The DissoMaster printout noted the parties had a total combined income of $17,174 per month ($206,088 per year). The agreed upon amount of spousal support raised Susan's total income to $6,644 per month (approximately $79,000 per year), which meant she would have to downsize. Douglas, earning between $130,000 to $154,000 per year depending on which income figure was used, would also have to adjust to having less income. The agreement specified support would continue "until further order of the court," Susan's remarriage, or Douglas's death. There was nothing to suggest the parties contemplated spousal support payments would change if Douglas got remarried. And, Douglas's agreement to pay support did not include a step-down or termination date. It was undisputed that the parties in 2012 anticipated Susan would begin taking English classes to help bolster her earning potential. There was nothing to indicate spousal support would be reduced if she achieved some success, or that the parties intended to keep Susan below the upper middle class standard she enjoyed before the marriage ended. After all, the parties had a long-term marriage (24 years), they were both in their early 50s, well educated, and their only son was an adult. We found nothing in the marital agreement supporting the trial court's conclusion that spousal support should automatically step down every time Susan earned a raise. The matter must be retried to permit the trial court to give proper effect to the marital agreement with respect to future support. It was error for the trial court to ignore the terms of the stipulated judgment, retrospectively evaluate the MSOL, and reevaluate spousal support based on its new determination of the MSOL.
The court's singular reason for decreasing spousal support to $850 also mandates reversal. Other than stating the 2012 MSOL favored maintaining Susan's income at $7,000, nothing in the court's order suggests it also weighed the relevant statutory factors or exercised any discretion in calculating this figure. There was no discussion about Douglas's ability to continue paying or Susan's needs based on the standard of living established by the parties when they entered into the stipulation. A salary increase may not justify modification in this long-term marriage. After all, Susan agreed to forgo retroactive payments/arrearages, and in 2012, Douglas was not yet in a financial position to put Susan closer to an upper middle class lifestyle. "[A] showing of changed circumstances does not necessarily mandate a modification of spousal support." (In re Marriage of Poppe (1979) 97 Cal.App.3d 1, 10.) The trial court "must consider the required factors set out in section 4320. [Citation.] . . . Failure to weigh the factors is an abuse of discretion. [Citation.]" (In re Marriage of Shimkus (2016) 244 Cal.App.4th 1262, 1273, fn. omitted.) Here, the court's written ruling did not show it weighed any up-to-date evidence related to the section 4320 factors, or compared these circumstances to what the parties included in their stipulated judgment.
In conclusion, we reverse the court's order because there was no finding of changed circumstances based on appropriate considerations. A change must be measured against the terms stated in the parties' stipulated judgment. It was legal error, and therefore, an abuse of discretion for the trial court to reevaluate the MSOL and reduce spousal support without considering the parties' agreement and whether the current evidence relating to the section 4320 factors supported modification.
DISPOSITION
The order is reversed and the matter is remanded for a new hearing on the issue of whether spousal support should be modified. Appellant shall recover her costs on appeal.
O'LEARY, P. J. WE CONCUR: IKOLA, J. THOMPSON, J.