Cordray v. Lee
Filed 12/28/12
Cordray v. Lee CA6
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
MARIA CORDRAY
et al.,
Plaintiff and
Respondent,
v.
BRENT WEI-TEH
LEE,
Defendant and Appellant.
H036826
(Santa Clara County
Super. Ct. No. CP010972)
Appellant
Brent Wei-Teh Lee (Father) and respondent Maria Cordray (Mother) were
romantically involved starting sometime before 1993, though they never
married. They are the parents of two
children, a boy, Branden, born in 1993, and a girl, Bria, born in 1995. The parties separated in 2002, with the
children residing primarily with Mother but still spending significant time
with Father. A 2002 court order set
guideline child support at $4,632 for the two children payable monthly by
Father to Mother based on Father’s 33 percent custody timeshare and his monthly
self-employment income of $33,333,
with no income on Mother’s side. The
court also made a specific finding that Father’s 1999 net worth was
$10,000,000. In 2003, the parties
stipulated to reduce child support to $3,300 per month. In 2008, Father once again sought to reduce
his monthly child support payment, but the court denied his motion in early
2009, finding that it lacked sufficient information or evidence to warrant the
requested reduction.
Less
than a year later, in late 2009, Father once again sought to reduce child
support on the bases that he was then retired at age 63 and receiving Social
Security; had a substantial decline in income due to financial losses in 2008;
and was uninsured and had been diagnosed with cancer, incurring substantial
amounts of medical expenses for ongoing treatment. The matter was continued multiple times while
the parties engaged in discovery and the court concluded a contempt proceeding
filed by Mother against Father for payment of child support arrearages, which
was finally resolved by Father paying amounts owed.
The
2009 child-support-modification request, Father’s third such request, was
finally heard in August, October, and November 2010. After roughly a combined day and a half of
testimony, including that of experts, the court denied Father’s request to
reduce child support, as well as Mother’s request for an increase, and ordered
child support to continue at $3,300 per month.
The court reached the conclusion that this amount was appropriate per
the guidelines after imputing some monthly income to Father based on certain of
his substantial assets. The court also
concluded that this amount was appropriate based on an alternative finding that
special circumstances existed to warrant deviation from the guidelines under
Family Code section 4057, subdivision (b)(5), given Father’s wealth, recent
inheritance of income-producing property in Taiwan, recent cash purchases of
multiple properties that were not yet income-producing, and his recent
significant cash gifts to his older children and to charity.
Mother $45,000 in attorney fees and costs premised on Mother’s need and
Father’s ability to pay, concluding that Mother’s fees incurred comprised more
than one-half of her “entire net worth, but less than one-half of one percent
(0.5%) of father’s net worth†based on his own schedule of assets. The court additionally found the award of
attorney fees and costs appropriate as a sanction under section 271 in that
considerable litigation time was spent due to requests made by Father;
information provided by him was inaccurate and incomplete, necessitating
further consumption of time and expense; Father had rejected established
statutory and case law on certain points; he had maintained unmeritorious
positions; and he had made two unsuccessful requests to reduce child support in
a two-year period.
Father
appeals from the court's order on his third child-support-modification request
from 2009 that was heard in 2010. He
raises numerous issues, all without sufficient legal analysis or regard for the
actual record and the applicable standard of review—abuse of discretion. Mother did not file a brief, informing this
court by letter of her inability to afford legal counsel on appeal.
The
record amply supports the court’s findings and conclusions on all matters
considered and decided; therefore, we find no abuse of discretion by the trial
court and will affirm the order.
STATEMENT
OF THE CASE
I. Factual
and Procedural Background
The
parties became romantically involved before 1993 and had a son that year. Mother, significantly younger than Father,
did not then work but eventually pursued a nursing degree. The parties lived together in Father’s
home. They had a second child, a
daughter, in 1995. For some period of
time while they lived together, Mother received funds from Father about twice
per month. The parties separated in
2002, with Mother moving out of the house along with the children.
Mother
filed a petition in June 2002 to establish paternity and to set child support
and visitation. By order filed August
20, 2002, the court set monthly guideline child support at $4,632, allocated
equally between the two children. The
court found that Father’s income was from self-employment,
that his 1999 net worth was $10,000,000, and that his monthly income was
$33,333. The court set custody timeshare
at 67 percent with Mother and the balance with Father. Father was further ordered to provide an
accounting setting forth the ownership of particular properties, his interest
in each, and the value of each.
Father
sought to reduce child support by motion filed in March 2003. The parties stipulated to an order reducing
child support to $3,300 per month—$1,320 for Branden and $1,980 for Bria. The order found that under a prior agreement,
Father “was to provide documentation to support this reduction†but that he had
not done so and was to comply within a month “or the prior order of child
support shall be reinstated.†Father
filed a four page “Accounting of [his] Ownership Interest in Assets†in July
2003, which Mother has contended all along did not comply with the court’s
order but which she did not challenge by seeking to reinstate the increased
level of child support that had been previously set.
Father
filed a second motion to reduce child support in February 2008, based on an
asserted change in circumstances, including financial losses in the stock
market. After multiple continuances and
exchanges of financial documentation though discovery and discovery motions,
the matter was finally heard on the long-cause calendar on January 16, 2009. The court denied Father’s second motion to
modify child support, concluding that there was insufficient evidence to
support it; Father did not comply with reasonable discovery requests; he had
substantial wealth with income-producing assets; he had the ability to pay
support; Mother was gainfully employed and working substantially full time; and
the children needed the existing level of support. The court further ordered Father to pay
$16,969.75 towards Mother’s attorney fees.
Father
filed his third motion to reduce child support eight months later, in November
2009—the subject of this appeal. This
time, the request was based again on a decline in his income and losses in the
stock market and, additionally, Father’s perception that the order requiring
him to pay $3,300 in monthly child support was not “fair.†The motion was supported by Father’s
declaration, in which he stated that he was then retired but had his own
investment business; he had sustained about $250,000 in losses to his stock
portfolio; and falling interest rates had resulted in a loss of interest
income, such that his income had become negative. Father was also then 63 years old and
receiving $1,062 in monthly Social Security benefits. His accompanying Income and Expense
Declaration, which was signed under penalty of perjury, stated that he received
$10,000 per month in interest or dividends and made monthly charitable
contributions in this same amount, among other expenses, but did not
acknowledge income from Social Security.
He claimed that the children spent 46 percent of their time with him and
54 percent with Mother.
Father
filed another declaration a month later in further support of his motion. The declaration sought a complete waiver of
all child support and stated that he had been diagnosed with cancer the
preceding month, did not have health insurance, had already spent some $32,000
in medical expenses, and would continue to incur significant medical expenses
throughout the course of his treatment.
Attached to his declaration were copies of some medical reports and
bills. Father also filed schedules
showing loss of income from several properties and other financial summaries of
his assets and their values, along with two DissoMaster calculations reflecting
guideline support for 2008 and 2009, erroneously for one child only, at $375
and $232, respectively. These support
figures were generated by Michael S. Thompson, CPA, whom Father had engaged as
an expert for purposes of the motion.
Mr. Thompson later offered his opinion in testimony that guideline child
support, according to his calculations based on information provided by Father,
would be $264 payable monthly by Father to Mother.
Santa
Clara County Department of Child Support Services opposed the motion, as did
Mother. Mother’s responsive Income and
Expense Declaration, which was also signed under penalty of perjury, showed
that she had obtained her nursing degree, was working as a nurse 33 hours per
week plus available overtime, and making approximately $8,000 per month. Mother had liquid assets of $12,000 plus
other assets worth $11,700. She paid
$2,200 in monthly rent and she provided health insurance for the children
through her job. She claimed that
Branden spent 73 percent of the time with her and 26 percent with Father, while
Bria spent 84 percent of time with her and 16 percent with Father.
Mother
also pointed out that some of Father’s assets were owned in the name of third
party entities, which were 100 percent owned by Father, and that these entities
paid expenses relating to some of his assets, such as real property taxes for
the 6,000 square foot home on 12 acres in Saratoga where Father resided. Mother further disputed some of Father’s
claimed expenses, such as $2,000 per month he claimed in educational expenses for
the children, who attended public school, and $3,500 per month for “child
care.†And she contended that because of
Father’s wealth, recent acquisition of multiple investment properties with
cash, inheritance of income-generating property in Taiwan, and cash gifts to
other of his children and large charitable donations, income should be imputed
to him for purposes of guideline child support.
She alternatively contended that special circumstances existed to
upwardly deviate from guideline support under section 4057, subdivision
(b)(5). Mother also sought an award of
attorney fees, as Father ultimately did as well.
Father’s
motion was continued several times while the parties engaged in discovery
battles. In addition, the court was
required to address a contempt proceeding initiated against Father concerning
child support arrearages. That
proceeding was ultimately resolved by Father paying amounts owed and the court
considering the contempt citation “purged.â€
The
matter was finally heard on August 13, 2010; October 8, 2010; and November 18,
2010, for a total period of about a day and a half. Father and Mother both testified, Mother on
direct by offer of proof without objection, and both sides offered an expert
witness to support their respective positions concerning Father’s payment of
child support and the appropriate amount based on his financial position and
other circumstances. Mother requested a
statement of decision before the end of the proceedings, and the court took the
matter under submission.
The
court issued what it called a “Statement of Decision/Order re Child Support
Modification†on February 18, 2011, which concluded by reflecting the court’s
denial of Father’s motion to reduce child support and Mother’s responsive
request to increase it, and an award of attorney fees to Mother of $45,000
based on need under section 3652 and as a sanction under section 271.
Father
filed an objection to the Statement of Decision, pointing out what he contended
were omissions and ambiguities in it, including that it did not determine if
there had been a change in Father’s circumstances and did not determine
guideline support. Mother filed a
response to Father’s Objection, noting what she considered to be factual errors
in it, along with a proposed statement of decision.
II. The
Court’s Combined Statement of Decision and Final Order
On
June 27, 2011, the court filed its “Final Statement of Decision/Order re Child
Support Modification.†After discussing
the relevant background at length, the court determined that the evidence had
shown the following facts:
1)
Father was undergoing treatment
for cancer and was uninsured. He had
paid around $32,000 for initial treatment, and $61,000 for later
treatment. He claimed ongoing medical
expenses of $7,000 per month.
2)
Father receives $1,062 in
monthly Social Security retirement benefits, with each child receiving an
additional monthly auxiliary benefit of $592, which is deposited into bank
accounts in the children’s names but which Father essentially controls.
3)
Father lives in an
approximately 6,000 square foot home in Saratoga situated on 12 acres. There is no mortgage payment due on this
home, and property taxes and insurance are paid by a third party entity, 100
percent owned by Father. Father
estimated the home, which has five bedrooms, six and a half bathrooms, and a
three-car garage, to be worth $1.5 million.
Father owns two cars, one for which he paid $50,000 in cash.
4)
Father is the 100 percent owner
of another third party entity, which owns a 30-acre parcel located next to his
residence. There are 600 grape vines on
the property, and in 2009, he paid about $10,000 to produce three barrels of
wine. He intends to sell this property
after building a road on it.
5)
Father inherited real property
in Taiwan subject to a lease. By
agreement, his sisters had received monthly rent from the property of $10,000
for about 30 months, but Father now owns the property outright and is entitled
to receive all rents. There was an
ongoing dispute with tenants of the property, and Father testified that he
could not accept rents until the dispute was resolved. Father did not provide an estimate of value
for this property.
6)
Father purchased real property
in San Jose with horse stables for $1,500,000 in 1997. The property is unencumbered and it produces
a monthly income.
7)
In February 2009, Father
purchased six residential properties in Stockton for which he paid $1,059,000
in cash. He rents the houses mostly to
college students.
8)
In July 2009, Father purchased
37 vacant lots in the Stockton area, which he intends to develop. He paid approximately $394,000 in cash.
9)
Father owns an undeveloped
parcel in Morgan Hill.
10) Father owns an interest in commercial
property in Houston, Texas. He testified
that the value is less than what he paid for it and that the property was then
in default and subject to foreclosure.
He also has an interest in commercial property in Las Vegas, Nevada,
which generates income that he has assigned to an adult daughter.
11) Father recently invented a filtration system
to clean water and to convert seawater to drinking water. He built a prototype and is applying for a
patent. He had not yet had the time to
approach industry with his invention. He
was also working on another invention for the conversion of wastewater.
12) In January 2009, Father made a $125,000 cash
donation to his high school.
13) In April 2010, Father made a cash gift to the
University he attended in Taiwan of $989,457 toward the construction of a
building, the design of which he would be personally involved in. He converted two annuities to cash and closed
those accounts in order to make the donation.
He testified that he intended to donate another $4,000,000 toward the
project, had already made three trips there, and would spend more time after
the groundbreaking. He spent a fair
amount of his time on his inventions and projects.
14) Father gave his adult son $300,000 in cash
for a wedding gift and $100,000 to two grandchildren in early 2010. At the time, he did not know whether his
cancer could be successfully treated and he wanted to provide for his
family.
15) Father’s Income and Expense declaration filed
in August 2010 showed his Social Security income of $1,062 per month,
dividend/interest income of $650 per month, rental property income of $1,500 per
month, and “other†of $16,000 per month.
Father has a PhD, but there was no description of his vocation, other
than a description in tax returns as “venture capitalist.†Father claimed bank accounts worth only
$5,000, and claimed no stocks, bonds, or assets he could sell. He claimed all other real property valued at
“$4m.†His average monthly expenses were
declared to be $23,075, including an average monthly charitable contribution of
$10,000, and no debt. His accountant
estimated his assets at $6.8 million based on Father’s own handwritten
summary.
16) Mother works an average of 33 hours per week
as a registered nurse, standard for her particular job. She earns $53.16 per hour. She rents her home, has $20,000 in bank
accounts, and a 401b account of $39,000.
Her household expenses average $5,700 per month.
17) Custody timeshare was disputed. Father claimed his custody time to be around
40 percent. Mother offered her calendars
documenting Father’s timeshare at 34.8 percent for Branden and 13.9 percent for
Bria.
The
court then made extensive and detailed findings of fact and conclusions of law
in a 23-page order, which we summarize as follows:
1)
Father is an inventive
scientist and an astute businessperson.
He is optimistic about his recovery from cancer. The shock of his cancer prompted him to
remember his family with generous gifts and inspired him to give generously to
his alma maters.
2)
Father took advantage of the
downturn in the economy to invest in real property and businesses that may
yield a profit in the future. Even with
claimed significant financial losses in 2008, Father still invested over
$1,400,000 in cash in negative-cash-flow properties in 2009. Voluntarily taking on such properties does
not mean that Father has no income to pay child support. Where the supporting party has chosen to
invest in non-income producing assets, the trial court has discretion to impute
income to those assets based on a reasonable rate of return. (In re
Marriage of Williams (2007) 150 Cal.App.4th 1221, 1239 (
3)
In spite of Father’s looming
medical costs, he gave family members cash gifts totaling $400,000 while his
motion to reduce child support was pending.
These funds “would likely exceed the amount of child support, at the
current obligation level, for Branden and Bria through emancipation of each
child.†He also made the charitable
donation of nearly $1 million to a university he attended in Taiwan in April
2010.
4)
It is clear that Father loves
his children and will provide for them.
But it is also clear that the current level of child support “grates onâ€
Father because he thinks that Mother lives an extravagant lifestyle, a belief
that is unsupported by the evidence.
Father’s contribution to the support of the children while in Mother’s
household is “necessary and appropriate because he is wealthy and has the
ability to pay†while she needs the financial help to meet the children’s needs
when they are in her care. Child support
may appropriately improve the standard of living of the custodial household to
improve the lives of the children. (
Cal.App.4th 1353, 1360 (De Guigne);
In re Marriage of Schlafly (2007) 149
Cal.App.4th 747 (Schlafly).)
5)
Child support may be based on
the guideline, and in setting it, the court may include imputed investment
income. Alternatively, the court may
make a finding of special circumstances under section 4057, subdivision (b),
and award child support that departs from and exceeds the guideline.
6)
Child support was reduced by
stipulated order in June 2003, provided Father complied with the accounting
requirement set forth in the August 20, 2002 order. “Although Father filed a purported accounting
on July 7, 2003, it did not comply with the terms of the prior order.â€
7)
“Father still has an earning
capacity based on: (a) actual investment
income (taxable and non-taxable); (b) Social Security income; (c) imputed
investment income; and (d) income resulting from his inheritance of property in
Taiwan.â€
8)
“Any changes in Father’s
financial circumstances are largely due to his volitional acts; and Father is
still a man of wealth. Since the hearing
[resulting in denial of Father’s most recent prior effort to reduce child
support] on January 16, 2009, the evidence shows that: (a) Father purchased six rental properties in
Stockton for $1,059,000 in cash in February[] 2009, knowing there would be a
negative cash flow; (b) Father purchased thirty-seven building lots in Stockton
for $394,000 cash in July[] 2009, for possible development; (c) Father
made a cash gift to his adult son . . . in or about February[] 2010, (after
filing the instant motion) of $300,000; (d) Father made a cash gift to a
university in Taiwan of $989,457 on or about April 1, 2010. [¶] In
addition, Father testified at the January 16, 2009 [hearing] that he had
recently made a cash gift of $125,000 to his hometown in Taiwan.†He also testified that he intended to donate
another $4,000,000.
9)
Mother testified that Father’s
actual custody timeshare for the nine months before the hearing was 34.8
percent for Branden and 13.9 percent for Bria, and even less immediately before
that. Mother’s calendars documenting
this were admitted into evidence.
Although Father disputed Mother’s timeshare assertions, he only referred
to one alleged discrepancy in Mother’s calendars. Mother is more credible than Father on the
issue and “it is likely that an average timeshare percentage for the two
children may be around 24.35% although it will remain fluid because of the age
of the children.â€
10) Mother’s
expert testified that Father could reasonably expect to earn $28,593 per month
on a balanced investment portfolio, consisting of investible assets of
$4,936,873, a figure based on Father’s own statement of assets as provided to
his expert. Although Mother’s expert is
more credible than Father’s for a variety of reasons that include expertise and
experience, factual errors in Father’s expert’s reports, and the omission of
some of Father’s assets, the use of a rate of return of approximately 3 percent
is more reasonable than the use of 6.95 percent to which Mother’s expert
testified. Father’s asset omissions
included that he had at least $1,380,850 in bank accounts, not $696,023.64 as
he represented. In addition to
undervaluing Father’s cash assets by some $700,000, his expert also improperly
based real estate values on assessed values.
It is appropriate to include imputed investment income on the amount of
cash that Father recently invested in “negative-cash flow and non-income
producing real estate†and the $1,389,457 in cash he gave away within five
months from his last request to reduce child support.
11) Father and
his three sisters inherited real property in Taiwan that produced $10,000 in
income, which by agreement went exclusively to the sisters for 30 months,
after which the property and income would revert entirely to Father. Although Father testified that because of a
rental dispute with the tenants he was not currently accepting rent, it is
appropriate to impute $2,500 per month in rental income to Father, which is
one-fourth of the total monthly income.
12) Mother
works 33 hours per week as a nurse, which is considered to be standard and full
time, and she works additional time when called. Her gross monthly income is $7,325. She also receives $35 per month in interest
income but spends $54 per month for health insurance premiums for herself and
the children.
13) Father
sought the child-support reduction based in part on his cancer diagnosis and
medical bills. But he provided
inadequate documentation of these expenses.
He may be entitled to substantial tax deductions for these expenses but
he only claimed $1,450 per month in deductions in his Income and Expense Declaration. He also claimed $7,000 per month in ongoing
medical expenses and Mother’s expert factored this figure into his support
calculations.
14) Father
also sought the child-support reduction based on lost asset values, as he did
in his prior unsuccessful request.
Moreover, Father’s asset valuation omitted some of his liquid assets and
Mother’s expert did not factor in any investment income to Father with respect
to his residence, certain commercial building investments, or his inheritance
of property in Taiwan.
15) Father is
not “employable,†but he is an entrepreneur and his tax returns identify him as
a venture capitalist. He testified in
January 2009 that he is an “ ‘individual who engages in a pattern of
entrepreneurial ventures,’ that he has had success over time,†and that he
seeks out ways to have successful ventures that produce income in the long
run. He manages his own properties
without compensation and spends significant time on a patent invention and prototype
and will donate time and effort to the building design for the university he
attended in Taiwan. Mother is younger
and more employable, but is reasonably employed.
16) The
children receive $596 per month in Social Security benefits, which is deposited
into bank accounts Father set up in the children’s names. The bank statements arrive in the mail at
Father’s house and he reviews them personally with the children, who have
credit or debit card access to the accounts.
Despite Father’s assertion that Mother somehow took money from the children’s
bank accounts, Mother is unaware of how these accounts are used by the
children, she has never seen the account statements, and understands that the
children use these accounts to purchase items they consume while with Father. Mother is more credible on the issue.
17) For
purposes of determining guideline support, Father’s custody timeshare is 24.35
percent and his monthly taxable income consists of $1,500 from rental income as
his expert testified, $2,500 (one quarter of $10,000) imputed from the rental
income derived from the inherited property in Taiwan, and imputed investment
income of $11,317. While Mother’s expert
testified that a reasonable rate of return of 6.95 percent on investments of
$4,936,873 was reasonable ($28,593 per month), an imputed rate of return of
2.75 percent yields monthly income of $11,317.
support is $3,312 per month. Based on a
three percent rate of return, guideline child support would be $3,427.
18)
Alternatively, special circumstances exist to warrant deviation from guideline
support under section 4057, subdivision (b)(5), based on Marriage of Cheriton (2001) 92 Cal.App.4th 269 (
Cal.App.4th 1353; Schlafly, supra, 149
Cal.App.4th 747; and Williams, supra, 150
Cal.App.4th 1221.
19) Mother is
the parent most involved with the children’s school and school activities. She schedules and pays for their athletic and
extracurricular participation and she schedules their medical and dental
appointments. Father does not know the
names of the children’s pediatrician or dentist and was unaware that Branden
was being treated by a dermatologist.
Father does pay for academic tutoring.
20) Father’s
own handwritten list of assets indicates a net worth of at least $6,488,000
while Mother owns no home and has a net worth many times less than Father.
21) With
respect to attorney fees and costs, Mother has the need for an award of fees
and Father has the far superior ability to pay it. Mother’s request for an award of $45,000 in
attorney fees and costs is warranted for the reasons set forth in her counsel’s
filed declarations. In determining
whether to award fees and costs, the court must consider how to apportion the
overall cost of the litigation equitably between the parties under their
relative circumstances. (
921.) Mother’s fees and costs are more
than half her entire net worth, “but less than one-half of one percent (0.5%)
of Father’s net worth based on†his own handwritten schedule of assets.
22) Father
provided inaccurate and incomplete information even to his own expert, which
necessitated additional litigation time and expense. Father also took unmeritorious legal
positions, including that his family-gifting activity should have no effect on
his obligation to pay support, contrary to Marriage
of Destein (2001) 91 Cal.App.4th 1385, 1392 (Destein). Father’s refusal
to acknowledge statutory and case law resulted in a protracted hearing and
required Mother to incur additional fees and costs. Father also made factual assertions that were
unsupported. Mother does not have the
income or assets to afford the level of litigation required to contest Father’s
motion, the second filed by Father within two years. Mother is therefore entitled to fees under
sections 3652 and 271, and this will not impose an unreasonable burden on
Father.
Based
on all of the above findings of fact and conclusions of law, the court denied
Father’s request to reduce child support and Mother’s request to increase it;
ordered child support to remain at $3,300 per month payable by Father to
Mother; allocated $1,320 for Branden and $1,980 for Bria; ordered unreimbursed
health care expenses for the children to be split between the parties; and
ordered Father to pay $45,000 towards Mother’s attorney fees. The written order attached
"XSpouse" calculations supporting the court’s guideline child support
determinations, using a custody timeshare of 24.35 percent for Father and rates
of return on investment of 2.75 ($11,317) and 3.00 percent ($12,342)
Father
timely appealed from the court’s final order.
DISCUSSION
The Court’s Order Concerning Child Support
A.
Standard of Review
Father
challenges the court’s denial of his request to modify child support and the
related order maintaining monthly support at $3,300 per month for both minor
children. We review a child-support order for abuse of discretion. (Cheriton,
supra, 92 Cal.App.4th at p. 282.)
This standard of review applies to both the court’s imputation of income
(§ 4048, subd. (b)(3); Destein, supra,
91 Cal.App.4th at p. 1393) and its
alternative finding of special circumstances under section 4057,
subdivision (b)(5). (
p. 1361; In re Marriage of Cryer
(2011) 198 Cal.App.4th 1039, 1049 (Cryer)
[“special circumstances†exception of section 4057, subd. (b)(5) gives trial
court “ ‘considerable discretion to approach unique cases on an ad hoc basis’ â€
and court has broad discretion to determine when such special circumstances
exist].) In seeking to modify a child
support order, a party must demonstrate a change in circumstances justifying
the proposed modification. (
Cal.App.4th 1009, 1015; In re Marriage of
Bardzik (2008) 165 Cal.App.4th 1291, 1304 (Bardzik).) On appeal, we
review the court’s decision against the same standard of review—abuse of
discretion. (Bardzik, supra, at p. 1304; Cryer,
supra, 198 Cal.App.4th at p. 1054; Schlafly,
supra, 149 Cal.App.4th at p. 753.)
To
assess whether the trial court abused its discretion, “[w]e determine ‘whether
the court’s factual findings are supported by substantial evidence and whether
the court acted reasonably in exercising its discretion.’ [Citation.] We do not substitute our own judgment for that
of the trial court, but determine only if any judge reasonably could have made
such an order. [Citation.]†(Schlafly,
supra, 149 Cal.App.4th at p. 753.)
In determining whether the court’s finding are supported by substantial
evidence, we examine the evidence in the light most favorable to the prevailing
party and give that party, and the lower court’s order, the benefit of every
reasonable inference. (
Cal.App.3d 543, 548; Cryer, supra,
198 Cal.App.4th at p. 1054.) We accept
all evidence supporting the order as true and discard contrary evidence. (In re
Marriage of Drake (1997) 53 Cal.App.4th 1139, 1151.) The order will be affirmed unless the trial
court abused its discretion, and it will be reversed only if prejudicial error
is found. (Williams, supra, 150 Cal.App.4th at pp. 1233-1234.)
Still,
“ ‘the trial court has “a duty to exercise an informed and considered
discretion with respect to the [parent’s] support obligation . . . .†[Citation.]
Furthermore, “in reviewing child support orders we must also recognize
that determination of a child support obligation is a highly regulated area of
the law, and the only discretion a trial court possesses is the discretion
provided by the statute or rule.
[Citations.]†[Citation.] In short, the trial court’s discretion is not
so broad that it “may ignore or contravene the purposes of the law regarding .
. . child support. [Citations.]†[Citation.]’
([Cheriton, supra, 92
Cal.App.4th at pp.] 282-283.)†(In re
Marriage of Sorge (2012) 202
Cal.App.4th 626, 640 (Sorge).)
Child Support in California
“ ‘California has a strong public
policy in favor of adequate child support.
[Citations.] That policy is
expressed in statutes embodying the statewide uniform child support
guideline. (See . . . §§
4050-4076.) “The guideline seeks to
place the interests of children as the state’s top priority.†(§ 4053, subd. (e).) In setting guideline support, the courts are
required to adhere to certain principles, including these: “A parent’s first and principal obligation is
to support his or her minor children according to the parent’s circumstances
and station in life.†(§ 4053, subd.
(a).) “Each parent should pay for the
support of the children according to his or her ability.†(§ 4053, subd. (d).) “Children should share in the standard of
living of both parents. Child support
may therefore appropriately improve the standard of living of the custodial
household to improve the lives of the children.†(§ 4053, subd. (f).)’ (Cheriton,
supra, 92 Cal.App.4th at p. 283, fn. omitted.)†(Sorge,
supra, 202 Cal.App.4th at p. 640.)
“
‘To implement these policies, courts are required to calculate child support
under the statutory guidelines. (See §§ 4052-4055.) “[A]dherence to the guidelines is mandatory,
and the trial court may not depart from them except in the special
circumstances enumerated in the statutes. (§§ 4052, 4053, subd. (k);
[citation].†[Citation.] The guideline amount of child support, which
is calculated by applying a mathematical formula to the parents’ incomes, is
presumptively correct.
[Citations].’ ([
1237].)â€
(Sorge, supra, 202 Cal.App.4th at
pp. 640-641, italics omitted.)
In
addition to section 4053, subdivision (k), the presumption that the
mathematical formula yields the correct amount of child support appears in
section 4057, which provides in pertinent part:
“ ‘(a) The amount of child support established by the formula provided
in subdivision (a) of Section 4055 is presumed to be the correct amount of
child support to be ordered. [¶] (b) The
presumption of subdivision (a) is a rebuttable presumption affecting the burden
of proof and may be rebutted by admissible evidence showing that application of
the formula would be unjust or inappropriate in the particular case, consistent
with the principles set forth in Section 4053, because one or more of the
following factors is found to be applicable by a preponderance of the evidence,
and the court states in writing or on the record the information required in
subdivision (a) of Section 4056 . . . .’ â€
(Sorge, supra, 202 Cal.App.4th
at pp. 640-641, italics omitted.) The
listed factors are considered circumstances that warrant deviation from the
guideline and they include: the parties’ stipulation to a different amount; the
supporting parent having an extraordinarily high income such that the resulting
formula amount exceeds the needs of the children; and a party not contributing
to the needs of the children at a level commensurate with that party’s
custodial time. The list also includes a
catch-all factor: “Application of the
formula would be unjust or inappropriate due to special circumstances in the
particular case.†(§ 4057, subds.
(b)(1), (3), (4), & (5).)
Section
4058 provides the manner by which a trial court is to ascertain a parent’s
income for purposes of determining the guideline child-support amount. Subdivision (a) provides in pertinent part
that the “annual gross income of each parent means income from whatever source
derived.†The subdivision goes on to
list various sources of qualifying income for purposes of calculating guideline
child support, and provides exceptions thereto.
The list is expressly illustrative rather than exhaustive. Thus, “ ‘ “[I]ncome is broadly
defined for purposes of child support.
[Citations.] Subject to certain
statutory exceptions . . . [annual] gross income ‘means income from whatever
source derived . . . .’ [Citation.] Although [section 4058] specifically lists
more than a dozen possible income sources, by the statute’s express terms, that
list is not exhaustive.
[Citations.] Rather, the codified
income items ‘are by way of illustration only.
Income from other sources … should properly be factored into the “annual
gross income†computation.
[Citations.]’ †’
[Citation.] ‘ “The
judicially recognized sources of income cover a wide gamut.†[Citation.]’
[Citation.]†(
642.)
“In
determining a parent’s income for purposes of calculating guideline child
support, a trial court may choose to follow the guidance of subdivision (a) of
section 4058, by utilizing the factors identified in subdivision (a)(1) through
(3) to determine a parent’s actual income, or the court may, in its discretion,
impute to that parent an income different from his or her actual income—i.e.,
an income amount that corresponds with that parent’s earning capacity. Thus, a trial court may ultimately calculate
the guideline child support amount by using, as the income factor in its
support calculation, either (1) the parent’s actual income, as calculated
under section 4058, subdivision (a)[,] or (2) the parent’s imputed income,
as authorized by section 4058, subdivision (b), if the court determines that
imputing income to the parent would be more appropriate and would better serve
the child’s best interests.†(
642-643, fn. omitted.)
If
the court in its discretion determines to consider the earning capacity of a
parent in lieu of actual income, the court may take into account the ability to
earn from capital as well as labor. (
754; De Guigne, supra, 97 Cal.App.4th
at p. 1363; see also Mejia v. Reed
(2003) 31 Cal.4th 657, 671 [court may consider earnings from invested assets in
assessing earning capacity].) “Just as a
parent cannot shirk his parental obligations by reducing earning capacity
through unemployment or underemployment, he cannot shirk the obligation to
support his child by underutilizing
income-producing assets.†(
Cal.App.4th 150, 155.) In this regard,
the “trial court has broad discretionary authority to impute income and need
not defer to the parent’s choice of investment.
(Destein, supra, 91
Cal.App.4th at p. 1391.)†(
755.) A parent may not place a source of
possible income “ ‘ “ ‘off-limits’ †’ †through his or her choice of
investment. (Ibid; Cheriton, supra, 92
Cal.App.4th at p. 292.) But when
imputing investment income, the court must use a reasonable rate of return; the
figures “ ‘must have some tangible evidentiary foundation.’ [Citation.]†(Schlafly,
supra, 149 Cal.App.4th at p. 756.)
Accordingly,
“[w]hen the income of a parent does not adequately reflect that parent’s
earning capacity and station in life, a trial court has at least two possible
avenues for addressing this income-related ‘special circumstance.’ Under one scenario, the court may determine
that parent’s actual income derived pursuant to section 4058, subdivision (a),
which it would then use to calculate the guideline support amount. If the result of this calculation does not
accurately reflect that parent’s financial circumstances (and the resulting
guideline support amount would therefore be unjust or inappropriate given that
parent’s actual wealth), the court may deviate from the guideline support
amount pursuant to section 4057, which permits a court to deviate from the
guideline support amount if the court determines that the formula would be
unjust or inappropriate in the particular case.[
discretion under subdivision (d) of section 4058 to use a different income
amount, based on imputed income that is consistent with that parent’s earning
ability.†(Sorge, supra, 202 Cal.App.4th at p. 643, fn. 6.) Despite the presumption in favor of guideline
support, the policies expressed in section 4053 make clear that the court’s
paramount concern in adhering to or departing from the guideline amount must be
the interests of the children. (§ 4053,
subds. (a)-(l); De Guigne,
C.
of Discretion by the Trial Court
Father
generally contends that the court abused its discretion in not using what he
claimed was his actual income, which he contended was negative, in setting
guideline support and instead imputed income from some of his investments or
assets based on a 2.75 percent rate of return.
He claims the court further abused its discretion in determining his
custody timeshare as a component of the guideline formula. And he generally contends that the court
abused its discretion by finding the existence of special circumstances that
warranted deviation from the guideline.
Finally, he contends the court abused its discretion in declining to
find changed circumstances that warranted a reduction in child support.
Beginning
with the first of these contentions, Father in essence claims nothing more than
that the court had no authority to impute income from his substantial
investments and assets from which he was currently deriving little or no income,
or from substantial amounts of cash that he had gifted away in the past year or
two, and that the court was instead bound to calculate guideline support using
what he claimed to be his actual (negative) income. But as we have already explained in discussing
the general legal principles applicable to the determination of an award of
child support, it was well within the court’s discretion to determine Father’s
income based on his earning capacity, and to do so by imputing a reasonable
rate of return on some of his non-performing or underperforming capital
investments and assets as well as substantial amounts of gifted cash. These determinations were supported by
Mother’s expert’s opinion testimony concerning a reasonable rate of return on a
balanced portfolio the size of Father’s,
which testimony the court found more credible than that of Father’s
expert. In fact, in several areas
relevant to these determinations, Mother’s expert’s testimony was
undisputed.
As
we have explained, this judicial authority derives from section 4058,
subdivision (b) and is properly exercised where, as here, the court finds it
more appropriate than using actual income, consistent with the best interests
of the children. (Sorge, supra, 202
Cal.App.4th at pp. 642-643.) It is well
established that the court may derive income from earning capacity and may do
so using capital instead of labor by imputing a reasonable rate of return on
underutilized or underperforming investment assets, based on the evidence and
in the best interests of the children. (
754-756; De Guigne, supra, 97
Cal.App.4th at p. 1363; In re Marriage of
Dacumos, supra, 76 Cal.App.4th at
p. 155; Cheriton, supra, 92
Cal.App.4th at p. 292; Williams, supra,
150 Cal.App.4th at pp. 1236-1241; Sorge,
supra, 202 Cal.App.4th at pp. 643-648.)
The court did nothing more than that here, and did so reasonably. The court may also impute income based on a
parent’s voluntary choices to divest himself of assets—here in the form of substantial
charitable and family giving at the expense of his two minor children so as to
effectively preclude them from sharing in his level of wealth and standard of
living. (In re Marriage of Berger (2009) 170 Cal.App.4th 1070, 1074,
1081-1083 [court may impute income for parent’s voluntarily deferred salary as
this was effectively a choice to invest in his company at the expense of his
minor children while living off other assets].)
Accordingly,
the court had the authority to exercise its discretion to derive income based
on earning capacity for purposes of calculating guideline support, and its
legal conclusions are supported by factual findings that are, in turn,
supported by substantial evidence.
Father’s litany of undeveloped attacks on the court’s factual findings
in this regard display a lack of understanding of not just the operative legal
principles at issue in this matter but also the substantial evidence rule. They accordingly fail to demonstrate any error
or abuse of discretion. The same is true
of Father’s evidence-based contention that the court understated Mother’s
income, or earning capacity. The court’s
findings in this regard are also supported by substantial evidence. In fact, it was undisputed that although
Mother worked somewhat less than 40 hours per week as a nurse, that was
considered full time in her particular job, and she occasionally picked up
extra hours.
With
respect to the court’s calculation of Father’s custody timeshare, he contends
that the court erred by accepting Mother’s offer of proof on the topic. Her calendars for the last few years were
also offered in evidence. These
calendars noted the children’s time with each parent in the preceding years,
and disputed Father’s claim that he spent some 46 percent of time with the
children. Father makes this contention
about the offer of proof as if the court had no power to take evidence on this
basis, offering no applicable authority to this effect, and as if he made a
timely objection to this procedure. He
did not. He did specifically object to
the introduction of Mother’s calendars through the offer of proof in trial on
the asserted basis that the calendars had not been produced pre-trial, but the
objection was overruled and Father fails to articulate or show a prejudicial
abuse of discretion in that evidentiary ruling.
Moreover, Father’s counsel was also provided the opportunity to cross
examine Mother on the custody-time-share issue—and her calendars—six weeks
later at the continued hearing, eliminating any prejudicial effect of the
element of surprise of which Father complains.
In addition, the two earliest years of Mother’s calendars had been
previously produced and considered at an earlier hearing related to one of
Father’s prior requests to reduce child support, further mitigating any claimed
element of surprise or “trial by ambush†as counsel so colorfully and
hyperbolically put it.
name="_ftnref8" title="">[8]
In
sum, Father has failed to show an abuse of discretion by the trial court in its
determination to derive his income based on his earning capacity. The court alternatively concluded that
special circumstances existed to warrant deviation from the guideline. Because the court determined the same child
support amount when it considered the special circumstances in this case, it is
not necessary to address this latter claim of error. We nevertheless briefly address the merits of
Father's claim in this regard.
The
court’s order referenced, among other things, Father’s testimony concerning his
2009 substantial investments in non-income producing assets (approximately
$1,450,000) and his substantial charitable and family giving in 2009 and 2010
(approximately $1,625,000), as well as his spending of substantial time in
entrepreneurial activities for no compensation.
The court also cited that Father lives alone, except when the children
are with him, in a “5-bedroom, 6.5 bath, 6,000 square foot home (with a
swimming pool, vineyard and three-car garage) on 12 acres in Saratoga.†The court further cited that Father owns
another 30-acre parcel adjacent to his home, which he was improving with a road
in order to sell it at a profit. Father
also had two cars. His own valuation of
his assets, which the court found was low and had omitted assets, indicated a
net worth of $6,488,000 while Mother rented a home and had a net worth a
fraction of the size.
name="_ftnref9" title="">[9] In finding special circumstances based on
these facts, which are amply supported by the record, the court appropriately
cited De Guigne, Cheriton, Schlafly, and
Williams.
As
noted, section 4057, subdivision (b)(5) allows a finding of special
circumstances warranting deviation from guideline support where “[a]pplication
of the formula would be unjust or inappropriate†in the particular case. While the court reached the same
determination as to the amount of child support based on both the guideline and
special circumstances, we read the court’s determination of special
circumstances as an implied finding that guideline support based on Father’s
claim of actual income would have
been unjust or inappropriate. In
contending that the court abused its discretion by its finding of special
circumstances under section 4057, subdivision (b)(5), Father simply denies that
any such circumstances are present, in essence contending that his wealth and
holdings, particularly in relation to Mother’s savings, is irrelevant and that
it is Mother who lives an extravagant lifestyle and is an “extravagant spenderâ€
because of her trips to Lake Tahoe and Hawaii, “monthly spending for grooming,
gifts and vacations,†and spending on attorneys “to sue [Father].†Such claims, lacking appropriate legal
analysis, hardly mount a sustainable showing of abuse of discretion. Nor are they adequate to overcome substantial
evidence in the record that supports the court’s determination. We readily conclude that the court properly
engaged in the exercise of its discretion within the boundaries of the law that
defined that discretion, and that its legal determinations with respect to
special circumstances are well supported by substantial evidence in the record.
accurate 23-page order reflects its careful and thorough exercise of discretion
with respect to all issues before it, as well as deep familiarity and facility
with the applicable law as applied to the complex factual record presented
here.
Finally
with respect to child support, Father contends that the court abused its
discretion by not finding that his cancer diagnosis and resulting ongoing
medical expenses constituted a changed circumstance mandating a reduction. The court’s order ultimately denied Father’s
request but acknowledged his medical condition, noting that at the time of the
hearing, he had “courageously fought the cancer that was diagnosed in 2009†and
was “optimistic regarding his recovery.â€
The court also attributed Father’s generous charitable and family giving
in 2009 and 2010 to the shock of his cancer diagnosis, and further noted that
such giving, “in spite of the looming medical costs,†“would likely exceed the amount
of child support, at the current obligation level†for both children through
their respective emancipations. The
order further acknowledged that although Father had sought a child-support
reduction based on his cancer and medical bills constituting a changed
circumstance, “inadequate documentation was provided.†Relating to this determination was the
court’s observation that in spite of his ongoing medical bills, Father’s July
2010 Income and Expense Declaration did not reflect a change in investments or
expenses. But most critically, the court
recognized that Mother’s expert accounted for Father’s claimed ongoing medical
expenses of $7,000 per month in his opinions and analysis concerning Father’s
income and earning capacity, illustrating that even in spite of the changed
circumstances presented by Father’s diagnosis and resulting medical expenses,
these facts, in the context of Father’s entire financial picture, did not
warrant a child-support reduction. We
further observe that while the court found Mother’s expert to be credible in
his opinions, its order reduced the proffered rate of return on investment by
over half in its final analysis.
Father
has simply failed to show that the court abused its discretion in its denial of
his request to reduce child support based on his cancer diagnosis or ongoing
medical expenses, or that there was any prejudicial effect to him of the
court’s ruling in this regard.
The Court’s Order Concerning Attorney Fees
A. Standard of Review
The
court awarded $45,000 in attorney fees against Father. It expressly did so as a sanction under
section 271 and based on need and ability to pay under section 3652. Section 3652 provides, “Except as against a
governmental agency, an order modifying, terminating, or setting aside a
[child] support order may include an award of attorney’s fees and court costs
to the prevailing party.†To the extent
the award is based on section 3652, Father challenges this statutory basis as
authority for it because his motion to modify child support was denied (as
opposed to modified, terminated, or set aside) and he further contests that
Mother was a prevailing party. Because
we affirm the award under section 271, we need not dispose of Father’s alternative
challenge under section 3652.
As
to section 271, we review an award of fees and costs under this section for
abuse of discretion. “ ‘[W]e will
overturn such an order if, considering all the evidence viewed most favorably
in its support and indulging all reasonable inferences in its favor, no judge
could reasonably make the order.
[Citations.]’ [Citation.] We review any factual findings made in
connection with the award under the substantial evidence standard. [Citation.]â€
(In re Marriage of Fong (2011)
193 Cal.App.4th 278, 291.) In reviewing
the sanctions order, we indulge all reasonable inferences to uphold it. ‘We will not interfere with the order for
sanctions unless the trial court abused its broad discretion in making it.’ [Citation.]â€
(In re Marriage of Falcone &
Fyke (2008) 164 Cal.App.4th 814, 828.)
B. The
Court Did Not Abuse Its Discretion Under Section 271
Section
271, subdivision (a) provides:
“Notwithstanding any other provision of this code, the court may base an
award of attorney fees and costs on the extent to which the conduct of each
party or attorney furthers or frustrates the policy of the law to promote
settlement of litigation and, where possible, to reduce the cost of litigation
by encouraging cooperation between the parties and attorneys. An award of fees and costs pursuant to this
section is in the nature of a sanction.
In making an award pursuant to this section, the court shall take into
consideration all evidence concerning the parties’ incomes, assets, and liabilities. The court shall not impose a sanction
pursuant to this section that imposes an unreasonable financial burden on the
party against whom the sanction is imposed.
In order to obtain an award under this section, the party requesting an
award of attorney’s fees and costs is not required to demonstrate any financial
need for the award.†(§ 271, subd.
(a).) “ ‘[S]ection 271 sanctions have
been upheld for “obstreperous conduct which frustrated the policy of the law in
favor of settlement, and caused the costs of litigation to greatly increase . .
. .†[Citation.]’ †(In re
Marriage of Lucio (2008) 161 Cal.App.4th 1068, 1082.)
The
court’s order concerning attorney fees specifically found that considerable
time was spent with respect to a request by Father for a protective order, and
the court ultimately adopted the order proposed by Mother counsel; financial
information provided by Father to his counsel was inaccurate and incomplete,
necessitating additional time and expense; Father’s expert relied on Father's
erroneously supplied information, which resulted in opinions significantly
understating the value of Father’s investments and omitting some of his assets;
Father maintained his unmeritorious legal position that his substantial gifting
should have no effect on his obligation to pay child support (a position he
further maintains on appeal), ignoring statutes and existing case law; Father
maintained the unmeritorious positions that the child support he pays enriches
Mother and that he is entitled to know how that child support is spent; Father
required the unnecessary expenditure of time litigating the issue of Social
Security benefits payable to the children; Mother needs the fee award as she
cannot afford the level of litigation required to contest Father’s motion, his
second unsuccessful attempt to reduce child support in two years; and imposing
the award will not impose an unreasonable burden on Father.
Father
challenges the fee award on the basis that the order does not make findings
about settlement offers, and that the only offers made were by him. Even if we were to accept these statements as
true, they do nothing to demonstrate an abuse of discretion in the court’s
award. As documented by the record
Father’s—and seemingly his counsel’s—obstreperous conduct throughout the proceeding
frustrated actual resolution, increased costs, and more than justified the
award regardless of specific settlement offers.
Father further contends that the proceedings were delayed by Mother and
that she “alone complicated a simple case.â€
These contentions are pointedly belied by the record and again display a
misunderstanding of the applicable abuse of discretion standard of review and
the substantial evidence rule.
In
sum, Father has failed to show an abuse of discretion in the court’s fee award.
Other Issues
A. The
Adequacy of the Statement of Decision
Father
contends that the court’s final statement of decision and order failed to
address three primary issues raised by his objections to what we view as the
court’s preliminary and tentative decision, though not technically titled as
such. These issues are: 1) whether there was a change in
circumstances to warrant a reduction in child support; 2) “guideline supportâ€
and “guideline support based on
| Description | Appellant Brent Wei-Teh Lee (Father) and respondent Maria Cordray (Mother) were romantically involved starting sometime before 1993, though they never married. They are the parents of two children, a boy, Branden, born in 1993, and a girl, Bria, born in 1995. The parties separated in 2002, with the children residing primarily with Mother but still spending significant time with Father. A 2002 court order set guideline child support at $4,632 for the two children payable monthly by Father to Mother based on Father’s 33 percent custody timeshare and his monthly self-employment income of $33,333, with no income on Mother’s side. The court also made a specific finding that Father’s 1999 net worth was $10,000,000. In 2003, the parties stipulated to reduce child support to $3,300 per month. In 2008, Father once again sought to reduce his monthly child support payment, but the court denied his motion in early 2009, finding that it lacked sufficient information or evidence to warrant the requested reduction. |
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