Opinion
F066981
10-28-2014
In re the Marriage of HANNAH and ROBERT DUTCHER. HANNAH ROSE DUTCHER, Respondent, v. ROBERT JAMES DUTCHER, Appellant.
McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie; Robert James Dutcher, in pro per., for Appellant. Kathleen Bakergumprecht-Davies for Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 09CEFL00109) OPINION APPEAL from a judgment of the Superior Court of Fresno County. Kimberly J. Nystrom-Geist, Judge. McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie; Robert James Dutcher, in pro per., for Appellant. Kathleen Bakergumprecht-Davies for Respondent.
-ooOoo-
In the proceedings below to dissolve the marriage of Hannah and Robert Dutcher, the trial court entered a judgment resolving contested issues of spousal and child support, division of community property and needs-based attorney fees. The parties' marriage was very brief, only about two and one-half years, and early in the divorce proceedings there was an attempt to resolve issues by settlement agreement. That effort resulted in a stipulation that Hannah would receive total monthly support of $2,500 from Robert, and it was further agreed the trial court would reserve jurisdiction to decide how much of that monthly amount should be allocated toward child support and how much toward spousal support. Although the support arrangement was agreed to by the parties and became an order of the court in early 2009, Robert virtually ignored his obligation to pay support. Among the contested issues at trial were the following: (i) What portion of the $2,500 monthly support agreed to and ordered in 2009 should be deemed child support and what portion should be deemed spousal support?; (ii) Did the community have an interest in Robert's separate property business known as Remote Transmission Management (RTM) even though that business had decreased in value during the course of the marriage, such as under a theory that Robert should have been paid further compensation for management services he provided to RTM?; and (iii) Should Hannah be paid need-based attorney fees by Robert, and if so, how much?
For convenience, we refer to the parties using their first names. No disrespect is intended.
The trial court produced a lengthy statement of decision, which became the basis for the judgment. Among other things, the trial court held that the entirety of the $2,500 in monthly support was child support, which support obligation was continuing. The trial court then ordered an additional $250 per month in spousal support for Hannah, which was to be paid by Robert for one year. Concerning RTM, the trial court determined that Robert was undercompensated by $84,000 for his management services provided to RTM during the marriage and ordered half of that sum to be credited to Hannah. Finally, the trial court ordered Robert to pay Hannah the sum of $60,000 in need-based attorney fees, noting his litigation tactics. The trial court's statement of decision failed to include one matter that the parties had agreed upon - namely, that Robert was entitled to a credit for his contribution toward Hannah's student loans.
Robert now appeals from the judgment, challenging nearly all of the trial court's conclusions set forth in the statement of decision, and one that was not set forth (the student loans). Robert also argues that the trial court failed to adequately address his motion to modify support. Hannah, in her respondent's brief herein, asks that we apply the "disentitlement" doctrine and dismiss the portion of the appeal relating to Robert's support obligation because Robert flagrantly disregarded the support order. Hannah further responds that the trial court's decision and judgment on all the contested issues were well within the trial court's discretion. As explained below, we shall affirm the judgment in part and reverse in part, with directions on remand for limited further proceedings in the trial court consistent with this opinion.
FACTS AND PROCEDURAL HISTORY
Duration of the Marriage
Hannah and Robert were married on July 14, 2006. During their marriage, they had one minor child, R.J. Dutcher (R.J.). On January 6, 2009, the parties were separated when Hannah fled from the family residence with R.J. after an incident in which Robert was allegedly drunk and belligerent. Hannah filed a petition for dissolution of the marriage on January 8, 2009. The marriage had lasted two years and six months. At the time of trial, Hannah was 29 years old and Robert was 38 years old.
Hannah's Employment and Robert's Business Entity
Prior to the marriage, Hannah obtained a Bachelor of Arts degree and a teaching credential and was earning between $32,000 and $42,000 per year as a teacher. When she married Robert, Hannah left her teaching job and was employed as a bookkeeper for Robert's business, RTM. In 2007, she earned $30,000 in income from RTM and in 2008, she earned $15,000 in income. When the parties separated on January 6, 2009, Hannah's employment with RTM ended and she was unemployed.
In 2007, Hannah had also worked for Trebor, Inc. (doing business as "America's Mattress"), which was a mattress store Robert and Hannah started in July 2007. The mattress store went out of business a short time after the parties separated.
Prior to the marriage, RTM paid Robert a salary of $70,000. In 2006, Robert received a salary of $78,000 from RTM. In 2007 and 2008, RTM paid Robert a salary of $40,000 per year.
Robert started RTM in 2003 and was its sole shareholder. RTM is a high definition (HD) television service provider that uses specialized equipment to compress and encode the HD signal so that it can be transmitted from the site of a televised event to a broadcaster or television network. Typically, RTM's services were used for major sporting events such as college football games on ESPN and NFL football games and/or other special events such as the Democratic or Republican national conventions. RTM's clients included ESPN, ABC and other major broadcasters. In 2005, RTM was the sole provider in the industry of HD encoding equipment on a rental basis. Over time, however, most of the stadiums, sports venues and television stations began to acquire their own HD encoding equipment. By 2011, ESPN had taken 80 percent of its HD encoding in-house. Additionally, other companies emerged that began to compete with RTM. When Robert started RTM, he knew there would only be a limited window of opportunity in which RTM would be able to thrive in the business and maintain the same high level of profits.
The income earned by RTM was arguably reflective of the fact that changes in the market and industry were beginning to occur. From 2006 through 2009, the years covering the marriage, RTM had the following gross income and cash flow: (i) In 2006, there was a gross income of $1,004,000 and cash flow of $405,000; (ii) In 2007, there was a gross income of $727,000 and cash flow of $225,000; (iii) In 2008, there was a gross income of $907,000 and cash flow of $330,000; and (iv) In 2009, there was gross income of $564,000 and cash flow of $140,000. These figures were provided by the parties' joint expert, Michael Smith (hereafter Smith). Smith found that the value of RTM went down slightly during the period of the parties' marriage. According to Robert's testimony, in 2010, gross earnings for RTM was only $128,538.
The 2009 Stipulation and Order Regarding Support
After the dissolution petition was filed, both parties retained counsel and attempted to proceed with the dissolution on a collaborative basis. On January 28, 2009, Robert and Hannah by and through their attorneys presented a stipulation to the trial court allowing Hannah to relocate to the Bay area with R.J. and also setting forth agreed terms for a temporary support order. On February 24, 2009, the trial court entered a written order based on the parties' stipulation (the February 2009 order). On the issue of support, the February 2009 order stated as follows: "CHILD AND SPOUSAL SUPPORT: [Robert] shall pay to [Hannah] support in the amount of $2,500.00 payable one-half ($1,250.00) on the first day and one-half ($1,250.00) on the fifteenth day of each and every month commencing February 1, 2009 and continuing thereafter until further order of the court. The court reserves jurisdiction over characterization and allocation between child support and spousal support for tax purposes. [¶] Child support shall continue thereafter until said minor child of the parties marr[ies], dies, [is] emancipated, reaches age 18 and is not a full-time high school student, or reaches 19 and is a full-time high school student residing with a parent, or until further order of the Court, whichever first occurs." (Italics added.)
At that time, Robert's attorney was Judith Lund and Hannah's attorney was Erin Childs.
Robert made a total of two voluntary support payments, which were two separate checks for $2,500 each. An additional sum of $8,660 was taken involuntarily by a garnishment of his tax refund. He otherwise failed to pay any support to Hannah, even though he was able to keep his boat payments current and was able to afford to pay his attorneys.
Protracted Litigation and Trial
The initial collaborative approach to resolving issues did not meet with further success and the parties hired new legal counsel to proceed with the litigation. In August 2009, Hannah filed a motion concerning child visitation and requesting a business evaluation and cash flow analysis of RTM. She also requested evaluation of two other businesses at issue in the divorce, namely Dutcher's Carpetsplus, Inc., and Trebor, Inc. At the hearing, the parties concurred that the business evaluations were necessary and agreed to retain the services of CPA Smith as a joint expert for the purpose of evaluating the community and separate property interests of the businesses. The trial court so ordered. Also, a child custody evaluation was ordered in which each parent would be evaluated by a psychologist, Dr. Errol Leifer. The order after hearing was entered on January 8, 2010.
The child custody evaluation was prepared by Leifer and submitted to the trial court and the parties, and included a recommendation as to a proposed child custody order. Robert objected to the report and proposed order, contending the report made an error in failing to include Robert's full participation in the evaluation. A hearing was held on July 26, 2010, regarding Robert's objection. Robert was directed by the trial court to contact Leifer for the purpose of having Leifer either confirm that the report was accurate or confirm that an error was made. A new hearing was scheduled for August 16, 2010, to further consider Robert's objection, but he failed to appear at that hearing. At that time, the trial court struck Robert's objection to the proposed child custody order and granted the motion by Robert's attorney to be relieved as attorney of record. On November 15, 2010, Robert failed to appear at a mandatory settlement conference. At that conference, Hannah requested the matter be set for trial, and the trial court ordered the matter set for an expected short trial commencing on January 5, 2011.
On December 28, 2010, Hannah filed and served her trial brief. Among other things, her trial brief requested that the "uncharacterized sum of $2,500.00 per month to [Hannah] be properly proportioned and characterized," retroactive to February 1, 2009, so that "both parties may properly amend their tax returns." Applying the statutory "guideline" formula for child support, Hannah asserted that the trial court should set the ongoing child support at $1,371 per month, with the balance of the $2,500 being retroactively allocated to spousal support. In addition to the above amount of ongoing child support, Hannah requested that the trial court order Robert to pay, as further child support, one-half of Hannah's child care and unreimbursed medical expenses relating to R.J. Prospectively, she requested that the trial court award a monthly amount as permanent spousal support. Regarding RTM, Hannah contended among other things that the community was not "properly compensated for the efforts, skill and talent of [Robert] during the marriage ...." Finally, Hannah requested an award of need-based attorney fees in the amount of $30,000.
The statutory formula for uniform guideline child support, referred to herein as "guideline" support, is set forth in Family Code section 4055. The guideline amount for child support is always presumed to be correct (id., § 4057, subd. (a)) and courts may only depart from it under special circumstances set forth in the Family Code. (See Fam. Code, §§ 4050-4066.) Unless otherwise indicated, all further statutory references are to the Family Code.
Trial commenced on January 5, 2011. Hannah was represented at trial by Kathleen Bakergumprecht-Davies. Robert represented himself. Testimony took place on January 5, 2011, February 10, 2011, and April 19, 2011. On April 19, 2011, in the middle of the trial, Robert requested a continuance to seek legal counsel. On June 16, 2011, attorney Anil Pai substituted in as attorney of record for Robert.
The request for continuance was denied and the trial proceeded on that day.
On June 28, 2011, Robert filed his trial brief. Robert concurred with Hannah that the trial court must allocate the past support award, which allocation was needed for tax purposes. As to any future or prospective spousal support, Robert urged that none be awarded in light of Hannah's earning capacity and the short duration of the marriage. He also argued that Hannah had no interest in RTM and should receive no equalization payment, since RTM decreased in value during the marriage. Robert also asked that the trial court take into consideration that his income was subject to fluctuation, since the nature of his work (for RTM) "makes his income dependent on special events." Finally, he urged the trial court to deny Hannah's request for attorney fees since he was in "no better position" to pay them than Hannah.
On June 30, 2011, testimony resumed and it continued on September 20, 2011, and September 21, 2011. The testimony at trial included that of Smith, the parties' joint expert regarding the business entities. As noted, Smith testified as to the gross income and cash flow of RTM, and concluded that RTM declined in value during the course of the marriage. However, Smith also concluded that the community was not adequately compensated for the services Robert performed for RTM in 2007 and 2008. Based on that analysis, Smith determined the community was entitled to $84,000 worth of value.
When testimony concluded on September 21, 2011, the trial court requested that the parties submit a joint statement of the issues to be decided. Additionally, the trial court requested that each party submit "DissoMaster" calculations outlining their proposed child support and spousal support orders. The parties were also asked to prepare written closing arguments.
The parties stipulated that their marital status would be terminated nunc pro tunc as of December 31, 2011, regardless of when the judgment would be entered.
On November 14, 2011, the parties filed a joint request for a statement of decision, setting forth 33 issues the parties requested that the trial court address.
Robert's Motion to Modify Support
On November 14, 2011, Robert filed a motion to modify child and spousal support. The motion was set for December 20, 2011. On December 9, 2011, Hannah filed her opposition to the motion and requested the hearing be continued. On December 13, 2011, Robert filed his reply in support of the motion. He argued the motion should be granted because he "is unable to continue to pay the amount currently ordered ...." The motion was continued in order to be resolved in conjunction with the other issues before the trial court.
Closing Arguments
As directed by the trial court, the parties filed written closing arguments. In Hannah's written closing argument, she argued that in retroactively allocating the amount of child support under the February 2009 order, the "minimum" amount that should be deemed child support should be "$1371 per month" based on "the Dissomaster calculations and cash flow analysis performed by Mike Smith." Hannah argued an additional sum should be factored in to account for child care and unreimbursed medical expenses concerning R.J. The rest of the $2,500 should then be deemed spousal support. In addition to the allocation of past support, Hannah reiterated her request for a prospective, permanent award of spousal support and for attorney fees of $30,000.
Robert's written closing argument agreed with one aspect of Hannah's approach. That is, Robert agreed that the claimed child care and medical reimbursements "should [be] included as part of, as opposed to in addition to, the $2,500.00 in unallocated, previously ordered support." However, Robert insisted that "child support be calculated per guideline (Dissomaster) based on objective, evidence of income plus 1/2 of reasonable daycare expenses plus 1/2 of reasonable and customary medical expenses." Aside from the past allocation issue, Robert argued that the total amount of monthly support ($2,500) should be modified downward based on the evidence of the parties income and expenses and that such modification should be made retroactive to the first day of trial. Additionally, Robert's written closing argument reiterated his assertions that (i) Hannah could claim no community property interest in RTM, since that business decreased in value during the term of the marriage; (ii) Hannah failed to show she qualified for need-based attorney fees; and (iii) Hannah failed to show she was entitled to any more spousal support.
Hannah's written reply to Robert's closing argument contended, among other things, that if any modification is made to the prior (February 2009) support order, the modification could only be made retroactive to November 14, 2011, the date Robert filed his motion to modify.
On March 7, 2012, the trial court held a hearing to address issues raised in the written closing arguments. At that hearing, both parties expressed agreement as to the approach the trial court should take: That is, the total support under the February 2009 order must be capped at $2,500, and the child support portion of the $2,500 should be determined by calculating the guideline child support at the time of the 2009 order. The balance of the $2,500 would then be spousal support. On May 15, 2012, Hannah filed an updated income and expense declaration. On that same date, Robert filed an updated income and expense declaration.
Before the matter was deemed submitted, an issue arose whether Robert failed to return Hannah's wedding ring to her, which was valued at $17,000 to $18,000. Hannah asserted that Robert had substituted a fake ring for the original. Following a hearing, he was ordered to pay Hannah $17,000 for the ring, or to deliver the original ring back to Hannah.
Statement of Decision and Judgment
On November 8, 2012, the trial court stated the matter was submitted and read its tentative decision from the bench. On December 21, 2012, the trial court issued a 72-page proposed statement of decision. On January 23, 2013, Robert filed objections to the proposed statement of decision. On January 25, 2013, the trial court overruled all the objections and issued its judgment in the case, adopting the statement of decision.
In the statement of decision and judgment, the trial court held that the entirety of the $2,500 in monthly support was child support, which support obligation on Robert's part was a continuing one. In reaching that conclusion, the trial court decided that the parties' agreement (on which the February 2009 order was based) did not contemplate the allocation decision would be based on guideline child support (as the parties contended), but on the result that would be best for tax purposes for both parties. The trial court also required Robert to pay an additional $250 per month in spousal support, which would be payable over one year. The trial court denied Robert's motion to modify child support, since the court believed there was inadequate financial information provided. Concerning RTM, the trial court relied on the analysis of accounting expert, Smith, and determined that Robert was undercompensated by $84,000 for his management services. The trial court ordered half of that sum be credited to Hannah. Finally, the trial court ordered Robert to pay Hannah the sum of $60,000 in need-based attorney fees.
On March 25, 2013, Robert filed his notice of appeal.
DISCUSSION
I. Standard of Review
The interpretation of a written instrument is solely a judicial function unless the interpretation turns upon the credibility of extrinsic evidence. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) Extrinsic evidence is admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible. (Ibid.) An appellate court is not bound by a construction that is based solely upon the terms of the written instrument, where the construction was without the aid of evidence or there was no conflict in the evidence. (Id. at pp. 865-866.) "[E]ven in the absence of extrinsic evidence the trial court's interpretation of a written instrument must be accepted 'if such interpretation is reasonable, or if [it] is one of two or more reasonable constructions of the instrument' [citations]." (Id. at p. 866.)
Community property division orders are reviewed for abuse of discretion. (In re Marriage of Sivyer-Foley & Foley (2010) 189 Cal.App.4th 521, 526.) In addition, we review the trial court's factual findings regarding the character and value of the parties' property under the substantial evidence standard. (Ibid.)
The trial court's determination to grant or deny a modification of a support order will be upheld on appeal unless an abuse of discretion is demonstrated. (Edwards v. Edwards (2008) 162 Cal.App.4th 136, 141 [child support]; In re Marriage of Morrison (1978) 20 Cal.3d 437, 454 [spousal support].) Reversal will be ordered only if prejudicial error is found after examining the record of the proceedings below. (Edwards v. Edwards, supra, 162 Cal.App.4th at p. 141.)
II. Allocation of Support Pursuant to the February 2009 Support Order
The February 2009 order provided, based on the parties' stipulation, that Robert shall pay $2,500 per month in "support" to Hannah. The order did not characterize the nature of the support, but stated that "[t]he court reserves jurisdiction over characterization and allocation between child support and spousal support for tax purposes." In its statement of decision, the trial court interpreted the February 2009 order to mean that allocation between child and spousal support was to be based on "tax purposes," and on that basis it found the entire monthly support amount to be child support after doing an analysis of the tax consequences of all the possible outcomes. Robert's appeal challenges that ruling on several grounds.
In approaching this matter, we believe it is helpful to distinguish two periods of time: (i) February 1, 2009, to November 14, 2011 (covered in this part - i.e., part II), which is the period of time from when the February 2009 order took effect to the date Robert filed his motion to modify support; and (ii) November 14, 2011, forward (covered in part III of this opinion). Our reason for doing so will become clearer as our analysis unfolds.
A few preliminary comments are necessary. The February 2009 order was clearly a temporary support order. (See, e.g., § 3600; In re Marriage of Gruen (2011) 191 Cal.App.4th 627, 637 [describing temporary support orders].) As such, it was operative from the moment of its pronouncement and was directly appealable. (In re Marriage of Skelley (1976) 18 Cal.3d 365, 368.) Since no appeal was taken from the February 2009 order, it became final and is not subject to collateral attack in the present appeal. By its own terms, as well as by operation of law (see §§ 3601, 3603), the February 2009 order was to remain in effect until further order of the court.
Additionally, it must be kept in mind that "a support order may not be modified or terminated as to an amount that accrued before the date of the filing of the notice of motion ... to modify or terminate." (§ 3651, subd. (c)(1); § 3603.) "If a parent feels the amount ordered is too high—or too low—he or she must seek prospective modification. [Citations.] Accordingly, a trial court has no discretion to absolve an obligor of support arrearages, or interest thereon. [Citations.]" (In re Marriage of Tavares (2007) 151 Cal.App.4th 620, 626, italics added; accord, In re Marriage of Murray (2002) 101 Cal.App.4th 581, 595-596 [Family Code statutes "'prohibit retroactive modifications of temporary support'" prior to the motion to modify support].) The filing date of the motion to modify support "'establishes the outermost limit of retroactivity.'" (In re Marriage of Gruen, supra, 191 Cal.App.4th at p. 638.) Here, Robert's motion to modify the support order was not filed until November 14, 2011. Thus, Robert's obligation to pay $2,500 per month in support to Hannah remained in effect, and was not subject to modification, until November 14, 2011, at the earliest.
Robert filed an earlier motion on February 4, 2010, seeking a modification of child and spousal support, but that motion was abandoned.
What plainly emerges from this discussion is that Robert was obligated to pay support to Hannah in the amount of $2,500 per month from the effective date of the February 2009 order (i.e., Feb. 1, 2009) until at least November 14, 2011. This amount was and is owed (minus any sums actually paid) regardless of how the support obligation might be specifically characterized or even if it were left uncharacterized.
The parties were free to leave the support obligation undifferentiated between spousal and child support. Section 4066 allows for such "'family support'" as long as certain conditions are satisfied. The section includes a provision that "[t]he amount ... shall be adjusted to maximize the tax benefits for both parents." (§ 4066.) Section 92 defines "'family support'" as "an agreement between the parents, or an order or judgment, that combines child support and spousal support without designating the amount to be paid for child support and the amount to be paid for spousal support."
Additionally, Robert failed to demonstrate that the trial court erred in its interpretation of the language of the February 2009 order. Agreements entered between spouses that become part of the family law judgment are construed under the statutory rules governing the interpretation of written contracts. (In re Marriage of Simundza (2004) 121 Cal.App.4th 1513, 1518.) "The language of a contract is to govern its interpretation, if the language is clear and explicit ...." (Civ. Code § 1638; see id., § 1643 ["reasonable" interpretation prevails].) In construing the February 2009 order, the trial court noted that its terms included the required waiver language of section 4065, subdivision (a), for stipulations setting child support amounts outside the parameters of the usual statutory guidelines, and therefore it did not appear to the trial court that the parties "meant to stipulate to guideline child support." Instead of reflecting a stipulation for guideline support, the literal wording of the February 2009 order expressed that jurisdiction was reserved to allocate the support "for tax purposes." (Italics added.) No other explicit standard was set forth in the order. The trial court gave that wording meaningful effect by construing the February 2009 order to mean that its characterization or allocation decision was to be based on maximizing tax benefits to the parties. Moreover, although the parties made various arguments below about how the trial court should approach the allocation issue, no extrinsic evidence of what the parties actually intended by their 2009 stipulation was presented in the trial court. Since the language of the February 2009 order was reasonably susceptible of the interpretation given to it by the trial court, Robert has failed to demonstrate any error or abuse of discretion.
In any event, Robert failed to show prejudice. As noted above, regardless of characterization or allocation, Robert was obligated to pay the entire amount of support that accrued during the time period between February 1, 2009 (when the February 2009 order took effect) and November 14, 2011 (when Robert filed his motion to modify support). As to potential tax consequences, he admittedly did not pay taxes during this time period due to reported losses. Therefore, the particular allocation arrived at by the trial court (i.e., all of the $2,500 per month was child support) did not result in prejudice to Robert and, consequently, even if error, was not reversible. (Code Civ. Proc., § 475.)
Finally, as an alternative rationale for the outcome we have reached on this issue, we agree with Hannah that the "disentitlement" doctrine applies to Robert's challenge of support amounts that accrued between February 1, 2009, and November 14, 2011. "The disentitlement doctrine enables an appellate court to stay or to dismiss the appeal of a party who has refused to obey the superior court's legal orders. [Citation.] 'Dismissal is not "'a penalty imposed as a punishment for ... contempt. It is an exercise of a state court's inherent power to use its processes to induce compliance'" with a presumptively valid order.' [Citation.] Thus, the disentitlement doctrine prevents a party from seeking assistance from the court while that party is in 'an attitude of contempt to legal orders and processes of the courts of this state.' [Citation.]" (In re Marriage of Hofer (2012) 208 Cal.App.4th 454, 459.) The doctrine applies when "'"the balance of the equitable concerns make it a proper sanction"'" (ibid.), and no finding of contempt is necessary. (Id. at p. 460.)
In In re Marriage of Hofer, supra, 208 Cal.App.4th, the Court of Appeal applied the disentitlement doctrine where the party appealing from an award of need-based attorney fees under section 2030 failed to comply with discovery orders necessary to establish financial ability to pay. (In re Marriage of Hofer, supra, at p. 458.) "Where a party unlawfully withholds evidence of his income and assets, he will not be heard to complain that an order is not based on the evidence he refuses to disclose." (Ibid.) In Kottemann v. Kottemann (1957) 150 Cal.App.2d 483, the doctrine of disentitlement was applied based on the appellant's "contumacious failure to pay alimony ... ordered." (Id. at pp. 483-484.) In both of these cases, the appeal was dismissed altogether, but the potential for imposition of a lesser sanction was also indicated.
In the present case, the trial court specifically noted Robert's utter disregard of the support order, explaining as follows:
"While represented, [Robert] stipulated to a child support order.... Evidence established, however, that [Robert] did not comply with the order.... As of April 19, 2011, [Robert's] child support arrearage was $37,589.... Evidence further established that [Robert] had paid only $5,000 voluntarily toward his support obligation and that $8,660 had been intercepted from [Robert's] 2009 and 2010 tax refunds by the Alameda County Department of Child Support Services.... The voluntary payments were sufficient for only two months of his obligation. At the commencement of trial, the child support order had been in effect for two years - of 48 possible payments, [Robert] only made two voluntarily.
"[Robert's] near total disregard of the support order is particularly troubling to the court as [Robert] clearly demonstrated his ability to pay support. For example, [Robert's] Income and Expense declaration filed May 15, 2012, indicates that he paid his attorney who began representing him in April 2011 (mid-trial) $45,000. [Robert] testified that he had made all the payments on his boat, and that those payments were current.... In fact, [Robert] testified that in the month of December 2010, he paid $2,800 toward his boat payments, although the
monthly payment was only $495.... By this payment, [Robert] paid the boat current and paid two months in advance.
"These things [Robert] did for his own benefit while leaving his child without funds for food, shelter, or medical care. In fact, [Robert's] anger was intense and his disdain palpable when he was asked questions, posed in a very quiet and respectful tone by Ms. Bakergumprecht-Davies, about his child support obligation...." (Fn. omitted.)
Likewise, Robert did not send any monies to reimburse Hannah for his share of child care expenses or unreimbursed medical expenses for the minor child during this same time period (see § 4062 [stating requirement to pay share of such expenses as add-on child support].) Throughout the entire trial he offered no explanation for his almost total failure to provide support. We agree with Hannah and the trial court that Robert intentionally disregarded the court's order to pay support, despite his ability to do so. Accordingly, we conclude the disentitlement doctrine is applicable to this part of the appeal. Although we do not dismiss the appeal outright, we decline to address Robert's contentions on appeal with respect to (i) his obligation to pay $2,500 in support per month from February 1, 2009, to November 14, 2011, and (ii) the trial court's characterization of said monthly amounts as being entirely child support. To clarify, our application of the disentitlement doctrine constitutes an additional or alternative basis for the result we have reached in this part (part II) of our opinion.
In summary, insofar as the trial court interpreted the February 2009 order in the manner discussed above, and allocated or characterized the entire $2,500 monthly support therein as child support, that portion of the judgment is affirmed with respect to the support that accrued from February 1, 2009, to November 14, 2011.
III. Robert's Motion to Modify Support
The motion to modify support, filed November 14, 2011, was initially noticed for hearing on December 20, 2011, but the hearing of the motion was apparently continued to allow the trial court to consider it in connection with all the other issues and evidence presented during the trial. Robert's attorney subsequently agreed that the evidence supporting the motion was presented during the trial itself, in addition to any subsequently filed financial declarations.
The motion to modify support was addressed in the trial court's statement of decision. The trial court denied as moot the motion regarding spousal support because the trial court had ruled that the entirety of the $2,500 due each month was child support. The motion to modify child support was denied because the trial court believed there was not enough information presented for the trial court to "run" a guideline calculation. Robert's motion had requested a downward adjustment in child support to "guideline" levels. Robert contends the trial court failed to adequately consider his motion to modify support and erred in refusing to determine guideline child support. We agree with Robert, as shall be explained presently.
In light of the trial court's ruling that the entirety of the $2,500 monthly support obligation was child support, which outcome we have affirmed (see above), it follows that the trial court correctly ruled Robert's motion to modify spousal support was moot. That is, there was no spousal support at that time to modify. We now turn to Robert's motion to modify child support.
The trial court's statement of decision went on to award prospective spousal support of $250 per month, for one year. That aspect of the trial court's ruling is not challenged by Robert in his appeal.
Preliminarily, we note that the threshold showing necessary to modify a child support order is a change of circumstances since the prior order. (In re Marriage of Bodo (2011) 198 Cal.App.4th 373, 388; In re Marriage of Cheriton (2001) 92 Cal.App.4th 269, 298 [evidence of changed circumstances "a necessary predicate for modification"].) "[A] 'change of circumstances' must be demonstrated to obtain a downward modification of the child support order to the applicable guideline level ...." (In re Marriage of Laudeman (2001) 92 Cal.App.4th 1009, 1015, italics omitted.) "Each case stands or falls on its own facts, but the overriding issue is whether a change has affected either party's financial status." (Ibid.) In general, a change of circumstances may be "'"anything that affects the financial status of either party."'" (In re Marriage of Catalano (1988) 204 Cal.App.3d 543, 549, italics omitted.)
Robert met the required minimum showing of a change of circumstances since the time of the original support order. As the trial court observed in its statement of decision, at the time of the February 2009 order, Hannah's income was zero (as she was unemployed), and Robert's income was $3,333 in salary plus an additional $4,000 in self-employment income or draws from RTM. By the time of trial in 2011, Hannah was employed and was earning approximately $2,599 per month in income. Furthermore, during the trial Robert testified that his business, RTM, was steadily declining in the extent of its profitability, due to the changes in the industry. In connection with his motion to modify support, Robert filed an updated income and expense declaration reflecting his assertion that he was only earning a "draw" from RTM in the amount of $2,396.50 at that time. He reported being in substantial debt and that his total expenses per month were $4,486.50. Later, in May 2012, Robert indicated he was receiving a somewhat higher draw of $4,100 per month as his sole income. Ostensibly, at least, Robert's income had dropped since the time of the February 2009 order. Since changed circumstances were shown, the trial court should have proceeded to the next step in the analysis of determining guideline child support.
In its statement of decision, the trial court analyzed all the financial data in the record and indicated that Robert's income appeared to be greater than was reported by him. The trial court found that some of Robert's income and expense evidence was lacking in credibility and suggested that RTM may have been subsidizing a significant portion of Robert's living expenses. Due to the difficulties in making sense of all the evidence regarding Robert's income, the trial court declined to make any finding on that issue and deemed that the motion failed for lack of definite proof. As a result, the $2,500 in monthly child support remained intact and became the permanent, ongoing amount accruing thereafter each month. We do not fault the trial court's careful scrutiny of the evidence, as far as it went, nor are we second-guessing the trial court's credibility evaluations. There was no question that the evidence was varied, complicated and confusing. Despite these difficulties, however, we believe that in the final analysis it was incumbent upon the trial court to come to a reasonable conclusion as to Robert's income based on the record before it, and, upon doing so - after applying the relevant statutory formula - to determine guideline child support. (See § 4055 [formula for guideline child support].) Although the evidence may have been somewhat sketchy, there was enough evidence available for the trial court to make a reasoned finding as to Robert's income and to determine guideline support. Our holding on this issue stems from the importance and presumptive correctness of guideline child support under California law. "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 Fam. Code, §§ 4050-4076.)" (In re Marriage of Cheriton, supra, 92 Cal.App.4th at p. 283.) "To implement these policies, courts are required to calculate child support in accordance with the mathematical formula set forth in the statute. (See § 4055 ....)" (Id. at p. 284.) Section 4055 sets forth a statewide uniform guideline for determining the appropriate amount of child support, which amount is intended to be presumptively valid in all cases. (In re Marriage of Hubner (2001) 94 Cal.App.4th 175, 183; § 4057, subd. (a).) Adherence to the guidelines is mandatory, and the trial court may not depart from them except in special circumstances enumerated in the statutes. (§ 4052; In re Marriage of Cheriton, supra, 92 Cal.App.4th at p. 284.)
For example, the trial court might have adopted the reasoning and factual basis set forth in Hannah's written and oral argument to the court. We are not trying to suggest a particular outcome, but the trial court must make a reasonable finding, based on substantial evidence, within the parameters of the Family Code.
Moreover, under section 4056, subdivision (a), whenever a trial court intends to deviate from guideline support, whether the amount is above or below the guideline amount, that fact "triggers the court's sua sponte obligation to state, in writing or on the record, (1) the amount of support that would have been ordered under the guideline formula; (2) the reasons the ordered amount of support differs from the guideline formula amount; and (3) the reasons the ordered amount of support is consistent with the best interests of the children. (§ 4056, subd. (a) ....)" (In re Marriage of Laudeman (2001) 92 Cal.App.4th 1009, 1014; accord, In re Marriage of Williams (2007) 150 Cal.App.4th 1221, 1235.) "The statutory findings are mandatory. The failure to make them precludes effective appellate review and may constitute reversible error if the missing information is not otherwise discernible from the record." (In re Marriage of Hubner, supra, 94 Cal.App.4th at p. 183.) Here, the trial court failed to make the required findings and the rationale for deviation from guideline is not evident from the record.
For these reasons, we reverse the trial court's denial of the motion for modification of child support. The issue of the amount of monthly child support to be paid by Robert to Hannah from and after November 14, 2011 (i.e., prospectively from that date) is remanded for further proceedings to have the trial court follow the statutory provisions relating to guideline child support. In connection with those further proceedings, and to assist the trial court, the trial court may require the parties to provide any supplemental information, clarification or analysis as may be helpful to its decision making process. The order following such further proceedings shall be for guideline child support (unless a departure from the guideline amount is shown to be warranted and meets the statutory requirements for same), plus any additional support required by section 4062, subdivision (a).
Of course, such amounts would be in addition to amounts accrued between February 1, 2009, and November 14, 2011, which Robert did not pay.
Section 4062, subdivision (a), requires the court to order as "additional child support," the parent's share of child care costs and uninsured health care costs.
IV. Equalization Payment to Community for Underpaid Salary from RTM
On the question of Hannah's community property interest (if any) in Robert's separate property business (RTM), the trial court relied on the financial analysis and testimony of accounting expert, Smith, and determined the community was undercompensated by $84,000 in reasonable salary for Robert's management services provided to RTM during the marriage. The trial court explained that "[d]uring the marriage, the community had an interest in [Robert's] time, effort, and industry." Robert contends the trial court erred. He argues that no apportionment of RTM's income or profits was permissible because the value of RTM decreased slightly over the course of the marriage. We find Robert's argument to be misplaced in the context at hand, and accordingly we affirm this part of the trial court's ruling.
Generally speaking, income from one spouse's separate property is separate property, and the intrinsic increase of that separate property is also separate (§ 770). At the same time, the fruits of the community's expenditure of time, talent and labor are community property. (In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 850-851; see § 770; 32 Cal.Jur.3d (2013) Family Law, § 483, pp. 631-632.) As a result of the latter principle, where one spouse has devoted time, talent and labor to a separate property business during marriage, the community is entitled to receive a share of the profits and increase in value which derive from the spouse's personal efforts. (Beam v. Bank of America (1971) 6 Cal.3d 12, 17; Estate of Neilson (1962) 57 Cal.2d 733, 742; Huber v. Huber (1946) 27 Cal.2d 784, 792; 11 Witkin, Summary of Cal. Law (10th ed. 2005) Community Property, § 121, pp. 686-687.) As our Supreme Court has stated: "[L]ong ago our courts recognized that, since income arising from the husband's skill, efforts and industry is community property, the community should receive a fair share of the profits which derive from the husband's devotion of more than minimal time and effort to the handling of his separate property. [Citations.]" (Beam v. Bank of America, supra, 6 Cal.3d at p. 17.) The community is entitled to the portion of the profits fairly attributable to the time, talent, and personal effort of the spouse, as distinct from profits attributable to the separate capital of the business. (Id. at pp. 17-19; Huber v. Huber, supra, 27 Cal.2d at p. 792; Pereira v. Pereira (1909) 156 Cal. 1, 7; Logan v. Forster (1952) 114 Cal.App.2d 587, 600.)
As is evident from several of the cases we have quoted, the older cases spoke of the "husband's" separate property business. The principles of allocation expressed in the older cases remain valid under current law (see, e.g., In re Marriage of Dekker, supra, 17 Cal.App.4th at pp. 850-851), and, of course, would fully apply in the modern context regardless of which spouse owned the separate property business. Here, as it turns out, it is the husband's separate property business that is involved.
To elaborate further: "The capital which the husband brings to the marriage partnership is his own separate property, but it is a question for the court to determine what portion of the profits thereafter arises from the use of this capital and what part arises from the activity and personal ability of the husband. That portion of the income due to the 'personal character, energy, ability and capacity of the husband' is community property." (Witaschek v. Witaschek (1942) 56 Cal.App.2d 277, 281.) "'In regard to earnings, the rule is that where the husband is operating a business which is his separate property, income from such business is allocated to community or separate property in accordance with the extent to which it is allocable to the husband's efforts or his capital investment. [Citations.]'" (Harrold v. Harrold (1954) 43 Cal.2d 77, 80.) Accordingly, "courts must apportion profits derived from community effort to the community, and profits derived from separate capital are apportioned to separate property. [Citations.]" (In re Marriage of Dekker, supra, 17 Cal.App.4th at pp. 851-852, fn. omitted; see Estate of Ney (1963) 212 Cal.App.2d 891, 895.)
California courts generally apply one of two alternative methods to allocate the profits or increased value of a separate property business. As summarized in Beam v. Bank of America:
"Over the years our courts have evolved two quite distinct, alternative approaches to allocating earnings between separate and community income in such cases. One method of apportionment, first applied in Pereira v. Pereira[, supra,] 156 Cal. [at page] 7, and commonly referred to as the Pereira approach, 'is to allocate a fair return on the [husband's separate property] investment [as separate income] and to allocate any excess to the community property as arising from the husband's efforts.' [Citation.] The alternative apportionment approach, which traces its derivation to Van Camp v. Van Camp (1921) 53 Cal.App. 17, 27-28, is 'to determine the reasonable value of the husband's services ..., allocate that amount as community property, and treat the balance as separate property attributable to the normal earnings of the [separate estate].' [Citation.]
"'In making such apportionment between separate and community property our courts have developed no precise criterion or fixed standard, but have endeavored to adopt that yardstick which is most appropriate and equitable in a particular situation ... depending on whether the character of the capital investment in the separate property or the personal activity, ability, and capacity of the spouse is the chief contributing factor in the realization of income and profits [citations] ... [Par.] In applying this principle of apportionment the court is not bound either to adopt a predetermined percentage as a fair return on business capital which is separate property [the Pereira approach] nor need it limit the community interest only to [a] salary fixed as the reward for a spouse's service [the Van Camp method] but may select [whichever] formula will achieve substantial justice between the parties. [Citations.]' [Citations.]" (Beam v. Bank of America, supra, 6 Cal.3d at p. 18, fns. omitted.)
In the trial court's statement of decision below, the court expressed that it took into consideration the evidence at trial regarding the nature of how profits were realized for RTM. The trial court indicated that the factors relating to which apportionment formula was appropriate were mixed, since it was not only true that Robert's business success depended a great deal on his personal effort, involvement and skill, but it was also true that RTM was a "very capital-intensive" business that made its money from the usage of specialized equipment at broadcasting events. On balance, the trial court determined that the Van Camp method should be applied to apportionment. In light of the trial court's broad discretion to select the method that would, in the court's estimation, best achieve substantial justice between the parties, we discern no error in the trial court's selection of the Van Camp method under the facts of this case. Nor has any error been demonstrated by Robert regarding that selection.
Robert's primary contention on appeal is that the trial court could not, as a matter of law, apportion any profits of RTM to the community because the total value of that business enterprise at the time of the parties separation was slightly less than when the parties married. In other words, Robert argues that if a separate property business has declined in value during the course of the parties' marriage, there can never be any form of apportionment of profits to the community.
The parties joint financial expert, Smith, reported that the value of RTM at the date of marriage was $817,125 and at the date of separation was $796,292.
We disagree with Robert's line of argument as applied to this case. The rule asserted by Robert is derived from cases where the trial court applied the Pereira formula. In In re Marriage of Denney (1981) 115 Cal.App.3d 543 (Denney), which is the case primarily relied upon by Robert, the wife sought a portion of an alleged increase in the value of the husband's donut shop business. She was not requesting the reasonable value of time and effort devoted by one or both spouses in operating the donut shop. Although no formal salaries were paid as such, the parties (who had both devoted substantial time and labor to the donut shop business) regularly took from the business whatever funds were needed to support the community during their marriage. (Id. at p. 548.) As to the market value of the donut shop business, the evidence at trial was undisputed that the business was "worth no more at the time of separation than at the time of marriage." (Ibid.) Nevertheless, the wife sought to introduce evidence that at a certain point during the marriage, the business had declined to a zero value, but after that time it increased in value. (Ibid.) She claimed that this alleged increase in value was a community property asset. To support her theory, the "wife offered to testify that, at some point in time, the business became valueless, and that she thereafter built it up." (Ibid.) The trial court found that her proffered testimony was irrelevant and refused to admit it. The wife appealed and the Court of Appeal affirmed. (Id. at p. 550.)
In affirming the trial court's decision, Denney stated that "where a separate property business increases in value during the time of the marriage, the community may share in that portion of the enhanced value and the profits attributable to the spouse's individual skill and ability." (Denney, supra, 115 Cal.App.3d at p. 549.) However, Denney held that such increase in value must be measured by comparing the value of the separate property business at the time of marriage to the value at the time of separation; any fluctuations in value at other points in time during the marriage did not matter. Denney explained: "The Beam court placed upon trial courts the burden of determining the fair market value of a separate business at the time of marriage and again at the time of separation. It did not anticipate that the trier of fact would be required to track the oscillations in growth or decline of a business['s value] throughout the marriage." (Id. at p. 550.) Therefore, Denney concluded the trial court did not err in refusing to admit evidence concerning oscillations in the value of the husband's business before the date of separation.
As noted, the opinion in Denney addressed a claim for appreciation in market value only; it did not involve the question of whether the community was entitled to the reasonable value of services provided (by one or both spouses) to the separate business pursuant to the Van Camp formula, as is the case here. We think that fact makes Denney distinguishable from the present case, as we now explain. In cases where the trial court selects the Pereira formula as the appropriate method of apportionment, which formula first allocates a reasonable rate of return to the separate property and then allocates the balance to the community (see Beam v. Bank of America, supra, 6 Cal.3d at pp. 18-19; Pereira v. Pereira, supra, 156 Cal. at p. 7), there obviously must be profits or growth exceeding the "reasonable rate of return" over the duration of the marriage for the community to be entitled to any allocation. Thus, the rule stated in Denney makes sense in those cases. (See In re Marriage of Dekker, supra, 17 Cal.App.4th at pp. 852-853 [stating that the Pereira approach "allocate[s] a fair return to the separate property investment and allocate[s] the balance of the increased value to community property as arising from community efforts"].) On the other hand, under the Van Camp formula, the court first allocates to the community the reasonable value of the services and, only after that is done, allocates the balance to the separate property business. (Beam v. Bank of America, supra, 6 Cal.3d at p. 18; Van Camp v. Van Camp, supra, 53 Cal.App. at pp. 27-28.) Thus, application of the Van Camp formula does not necessitate a finding that the business appreciated in market value.
Denney alluded to "[t]he Beam court" in support of the proposition that any increase in market value is to be measured at the time of marriage and again at the time of separation. (Denney, supra, 115 Cal.App.3d at p. 550.) In Beam v. Bank of America, supra, 6 Cal.3d at page 19, the Supreme Court did employ that approach (or something close to it) within the context of applying the Pereira formula.
Similar language found in In re Marriage of Dekker, supra, 17 Cal.App.4th at pages 851-852, relating to the requirement of increase in value is likewise distinguishable, as the appellate court in that case was, as in Denney, discussing equitable apportionment pursuant to the Pereira formula.
Furthermore, the analysis used in Beam v. Bank of America reflects that apportionment under the Van Camp formula is not foreclosed merely because the community would have received nothing under the Pereira approach. In Beam, the trial court selected the Pereira formula. Since the amount of the growth was less than the realistic rate of return (i.e., 7 percent) for the separate property, the trial court found there was no community property interest in the separate business. (Beam v. Bank of America, supra, 6 Cal.3d at p. 19.) The Supreme Court affirmed the trial court's determination under the Pereira formula. In doing so, the Supreme Court did not rule out the possibility that the trial court might have applied the Van Camp formula under the same facts. Indeed, the appellant there argued the trial court should have applied the Van Camp formula instead of Pereira. Without resolving the latter issue, the Supreme Court proceeded to apply the Van Camp formula to demonstrate that no actual prejudice resulted from the trial court's failure to do so, since the income that would have been realized to the community under Van Camp would have been offset in that particular case due to certain family expenses incurred during the marriage. (Beam v. Bank of America, supra, at pp. 19-22.) For purposes of the present appeal, the principle we glean from the above-described analysis used in Beam is this: Even if no allocation to the community would be available under the Pereira formula due to lack of a sufficient rate of return by the separate property business, that fact does not prevent the trial court from applying the Van Camp formula in a proper case.
The issue of family expenses was not presented (at least not in any identifiable or adequate manner) in the instant appeal, and therefore we do not consider it. (See People v. Stanley (1995) 10 Cal.4th 764, 793; Keyes v. Bowen (2010) 189 Cal.App.4th 647, 655-656; Nelson v. Avondale Homeowners Assn. (2009) 172 Cal.App.4th 857, 862; Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700.) We note, in passing, one court refused to apply the deduction where to do so would be unfair to the community's interest. (See In re Marriage of Frick (1986) 181 Cal.App.3d 997, 1018-1019.)
The flexibility to apply the Van Camp approach also flows from the fact that the trial court is entitled in its broad discretion to select the method of apportionment that it believes will best achieve substantial justice between the parties. (Beam v. Bank of America, supra, 6 Cal.3d at p. 18; In re Marriage of Dekker, supra, 17 Cal.App.4th at p. 853.)
We hold that this was such a proper case. The evidence fairly reflected that RTM was a profitable company during the entire marriage, whether or not the overall demand for RTM's broadcast-related services was beginning to decline somewhat due to changing conditions in the industry. Clearly, Robert's personal efforts, energy, talents, and involvement, along with the use and availability of RTM's highly specialized capital equipment, accounted for that continuing profitability. Under the circumstances, the trial court was within its discretion to apply the Van Camp approach and to allocate to the community the reasonable amount of value which the community was undercompensated for Robert's services, despite the relatively minor decline in the market value of RTM over the course of this very brief marriage.
Further, the trial court's particular findings on the apportionment issue were supported by substantial evidence. As noted, the trial court primarily relied upon testimony of financial expert, Smith, who reviewed the financial records of RTM relating to the period of the parties' marriage. Smith testified that RTM's positive cash flow, after adjusting for depreciation, was $405,000 in 2006; $225,000 in 2007; $330,000 in 2008, and $140,000 in 2009. Smith determined that the value of RTM on the date of marriage was $817,125, and the value on the date of separation was $796,292. In conducting "a Van Camp apportionment analysis," Smith considered "the income history of the business, the distributions associated with the earnings, compensation ... during that period, as well as an allowance for perquisites." Smith also compared salary statistics for comparable management positions in the Fresno area. The evidence at trial further showed that some salary had been paid to Robert and Hannah from RTM. In 2006, RTM paid Robert a salary of $78,000. In 2007 and 2008, RTM paid Robert a salary of $40,000 per year. Hannah earned $30,000 in income from RTM in 2007 and $15,000 in 2008.
In the final analysis, Smith's opinion was that the community was undercompensated in the total amount of $84,000 for Robert's services performed for RTM in 2007 and 2008. The trial court agreed with that assessment. In reaching that decision, the trial court considered all the evidence we have noted above, as well as RTM's ability to continue to afford to purchase expensive high-tech equipment and a $40,000 truck during the relevant time period. On this record, we conclude there was substantial evidence to support the trial court's Van Camp-formula apportionment decision that the community was undercompensated by $84,000 for Robert's services to RTM. Therefore, we affirm the trial court's ruling on that issue.
After arriving at $84,000 as the amount to be allocated to the community, the trial court credited one-half of that sum to Hannah (i.e., $42,000), but only after it deducted other distributions (i.e., $53,400 in loan proceeds) that were paid by RTM for the benefit of the community. Upon division of all the marital property, an equalization payment of $23,918 from Robert to Hannah was ordered by the trial court.
The balance of Robert's arguments on the issue of the $84,000 allocation to the community express his particular objections to, and come under the heading (in his brief) concerning the trial court's alternative basis for its ruling - namely, that there was a breach of fiduciary duty on the part of Robert in his failure to have RTM pay him reasonable salary in 2007 and 2008 for his services to the community. Since we affirm the trial court's ruling under equitable apportionment principles (see above), we need not consider the breach of fiduciary duty theory or Robert's arguments against that theory.
V. The Award of Attorney Fees
Robert challenges the trial court's award of $60,000 in need-based attorney fees, arguing the trial court failed to consider the relevant statutory factors and therefore abused its discretion.
Overview of Law
The principles applicable to such awards are well established. During the pendency of a dissolution proceeding, the trial court may order that one party pay some or all of the other party's legal fees and costs. (§§ 2030, 2032.) The goal is to ensure parity between the spouses in their ability to have access to effective legal representation, based on a consideration of their relative circumstances. (In re Marriage of Falcone & Fyke (2012) 203 Cal.App.4th 964, 974-975; In re Marriage of Tharp (2010) 188 Cal.App.4th 1295, 1315 [statutory purpose is '""leveling the playing field'"" and permitting the lower-earning spouse to have a comparable ability to obtain and pay for counsel in litigating essential issues as the spouse with higher earnings]; In re Marriage of Keech (1999) 75 Cal.App.4th 860, 866.)
The grounds for awarding such attorney fees are set forth in sections 2030 and 2032. We briefly highlight the relevant language of these statutes. Section 2030, subdivision (a)(1), requires the court to "ensure that each party has access to legal representation" by ordering, "if necessary based on the income and needs assessments, one party ... to pay to the other party ... whatever amount is reasonably necessary for attorney's fees and for the cost of maintaining or defending the proceeding ...." (§ 2030, subd. (a)(1).) Section 2030, subdivision (a)(2), provides that the trial court shall make certain findings: "When a request for attorney's fees and costs is made, the court shall make findings on whether an award of attorney's fees and costs under this section is appropriate, whether there is a disparity in access to funds to retain counsel, and whether one party is able to pay for legal representation of both parties. If the findings demonstrate disparity in access and ability to pay, the court shall make an order awarding attorney's fees and costs."
Section 2032, subdivision (a), elaborates that an award of attorney fees under section 2030 may be made "where the making of the award, and the amount of the award, are just and reasonable under the relative circumstances of the respective parties." Section 2032, subdivision (b), provides that "[i]n determining what is just and reasonable under the relative circumstances," the trial court shall "take into consideration the need for the award to enable each party, to the extent practical, to have sufficient financial resources to present the party's case adequately, taking into consideration, to the extent relevant, the circumstances of the respective parties described in Section 4320." Section 2032, subdivision (b), adds the following clarification of the factors to be considered: "The fact that the party requesting an award of attorney's fees and costs has resources from which the party could pay the party's own attorney's fees and costs is not itself a bar to an order that the other party pay part or all of the fees and costs requested. Financial resources are only one factor for the court to consider in determining how to apportion the overall cost of the litigation equitably between the parties under their relative circumstances."
"Given this statutory framework, a trial court has wide discretion in fashioning an award of attorney fees in marital proceedings. [Citation.] In assessing one party's relative need and the other party's ability to pay, the family court may consider all evidence concerning the parties' current incomes, assets, and abilities, including investments and income-producing properties." (In re Marriage of Sorge (2012) 202 Cal.App.4th 626, 662.) In that assessment, "[e]xpenses are relevant to" such attorney fee orders, and disregarding them in determining whether attorney fees should be ordered is error. (Alan S. v. Superior Court (2009) 172 Cal.App.4th 238, 253, italics omitted.) Finally, in determining whether to award attorney fees to one party, the court may consider the other party's trial tactics. (In re Marriage of Sorge, supra, at p. 662; In re Marriage of Tharp, supra, 188 Cal.App.4th at p. 1314.) Thus, an attorney fees award under sections 2030 and 2032 "should be the product of a nuanced process in which the trial court should try to get the 'big picture' of the case, i.e., 'the relative circumstances of the respective parties' as the statute puts it." (Alan S. v. Superior Court, supra, at p. 254.)
"In summary, the proper legal standard for determining an attorney fee award requires the trial court to determine how to apportion the cost of the proceedings equitably between the parties under their relative circumstances. [Citation.] In making this determination, the trial court has broad discretion in ruling on a motion for fees and costs ...." (In re Marriage of Falcone & Fyke, supra, 203 Cal.App.4th at p. 975.) An award of attorney fees in a dissolution proceeding is a matter left to the trial court's sound discretion, and absent a clear showing of abuse, the trial court's determination will not be disturbed on appeal. (In re Marriage of Cryer (2011) 198 Cal.App.4th 1039, 1054.) "[W]e will not reverse absent a showing that no judge could reasonably have made the order, considering all of the evidence viewed most favorably in support of the order." (In re Marriage of Falcone & Fyke, supra, at p. 975.)
However, "although the trial court has considerable discretion in fashioning a need-based [attorney] fee award [citation], the record must reflect that the trial court actually exercised that discretion, and considered the statutory factors in exercising that discretion." (In re Marriage of Braud (1996) 45 Cal.App.4th 797, 827, fn. omitted; accord, In re Marriage of Tharp, supra, 188 Cal.App.4th at p. 1313.) "While no particular language is required in an order awarding attorney fees under sections 2030 and 2032, the record (including, but not limited to, the order itself), must reflect an actual exercise of discretion and a consideration of the statutory factors in the exercise of that discretion." (Alan S. v. Superior Court, supra, 172 Cal.App.4th at p. 254.) If it is apparent the trial court did not consider the statutory factors that are relevant to a determination of the parties' relative needs and ability to pay, the order will be reversed. (Id. at pp. 254, 258; In re Marriage of Lynn (2002) 101 Cal.App.4th 120, 133-134; In re Marriage of Keech, supra, 75 Cal.App.4th at pp. 866-871 [where, in light of support obligation and other expenses, husband clearly could not afford the high fee award ordered by court, it was held that the trial court failed to adequately consider statutory factors, and the fee award was reversed and remanded for determinations under §§ 2030 & 2032].)
Application to the Present Case
In the trial court's statement of decision, it rightly found "troubling" the fact that the parties had spent so much money on attorney fees in the dissolution of a very brief marriage (two and one-half years) where the amount in dispute was proportionally small. The trial court asked: "How can combined attorneys' fees and cost[s] be nearly $180,000 for a two-year marriage where the amount in dispute is perhaps $85,000 or so? Each side spent more on fees [than] either side could possibly gain from litigation." The trial court concluded that, by and large, the reason the fees were so extensive in this case was the manner in which Robert conducted the litigation. That is, Robert's approach was to aggressively litigate everything, and, at the same time, Robert's failure to appear at several hearings tended to drag matters out and required multiple hearings to decide issues. He also forced numerous issues to go all the way to trial by holding firm to weak pretrial positions on issues and then backing-off by acceding to Hannah's position once the evidence was presented at trial. Thus, the trial court, while indicating it was not sanctioning Robert or examining his motives, properly took into consideration Robert's trial tactics. (See In re Marriage of Sorge, supra, 202 Cal.App.4th at p. 662 [trial tactics may be considered]; In re Marriage of Tharp, supra, 188 Cal.App.4th at p. 1314 [same].)
By the time of the actual statement of decision, the trial court estimated the parties will have expended a combined sum of $200,000 in attorney fees.
Additionally, the trial court appropriately considered the fact that Robert continually failed to pay court-ordered support. This did great damage to his credibility in the trial court's eyes. Robert was able to "drive the litigation" and, in doing so, somehow found money to pay his own attorneys; yet, at the same time, Robert did not pay support and thereby placed Hannah and their minor child at a great disadvantage financially. Obviously, Robert's failure to pay child support affected Hannah's financial position and her ability to undertake the expense of an attorney. As the trial court observed, Hannah had to spend much of her financial resources to support the parties' child "because [Robert] does not."
The statement of decision did not include a discussion of Robert's income, expenses, debts, or assets relating to his ability to pay Hannah's attorney fees; it just stated the conclusion Robert was able to pay Hannah $60,000 in legal fees. The only fact noted by the trial court to show Robert was in a superior financial position and able to pay Hannah's fees was that "his cabin payment alone exceeds [Hannah's] entire net income." The trial court appeared to believe the cabin was, at that time, an extra vacation home. However, as Robert points out in his brief herein, his primary residence was lost to foreclosure during the divorce proceedings and, thus, the Bass Lake cabin was Robert's primary and only residence. Nor did the trial court discuss Hannah's income, expenses, assets or ability to pay.
Robert's appeal contends that "[w]ithout making a determination of an ability to pay by both Robert and Hannah based on their respective incomes, expenses and assets, there is no legal or factual basis to make a need-based fee award, particularly one in the amount of $60,000." We agree with Robert on this point. Accordingly, we reverse the trial court's award of attorney fees and remand for further proceedings to make the fee determination based upon adequate consideration of the statutory factors set forth in sections 2030 and 2032, to wit, Robert and Hannah's respective income, expenses, debts, assets and ability to pay.
We are not saying the amount is too high (or too low); only that it appears the trial court did not adequately weigh and consider the relevant statutory factors.
In connection with the remanded hearing, the trial court may require the parties to submit additional declarations or other papers to clarify or update any matters relevant to the hearing, including the information as to income, expenses, assets and/or any other financial or other information to properly evaluate a fee award under the criteria of sections 2030 and 2032. (See fn. 22, post.) A final caveat to the parties and their counsel: We encourage the trial court to make use of its ability to impose sanctions under sections 271 and 2107, subdivision (c), if warranted by any subsequent gamesmanship or recalcitrance. We expect the parties to be forthcoming, and that these remanded proceedings will be the end of the matter.
VI. Student Loan Payment Offset
The parties agreed that Robert was entitled to a credit for one-half of Hannah's student loan payments made during the marriage. For reasons that are not clear, the trial court did not include this matter in its statement of decision, even after Robert objected on that ground. That was error. We hold that in the remanded proceedings below, the trial court shall ascertain the precise amount of the credit to which Robert is entitled regarding the student loans and include such credit in a modified judgment.
We note that Hannah represents the amount of Robert's credit is $2,823.16.
DISPOSITION
We reverse the trial court's denial of Robert's motion to modify child support (filed Nov. 14, 2011) and remand for further proceedings to determine the amount of ongoing child support due each month by Robert from and after November 14, 2011, in accordance with the statutory provisions relating to guideline child support. We reverse the trial court's award of attorney fees and remand for further proceedings to determine the proper amount of need-based attorney fees after giving sufficient consideration to the statutory criteria of Family Code sections 2030 and 2032. We remand for further proceedings to have the trial court ascertain the precise amount of the credit due to Robert for one-half of Hannah's student loan payments made during the marriage, and to include that amount as part of the trial court's modified judgment. In all other respects, we affirm the judgment of the trial court. Each party is to bear their own costs on appeal.
If, upon rehearing of the attorney fee issue, the trial court believes that all or a portion of the total attorney fee award would be more appropriately based on sanctions (e.g., § 271, and/or § 2107, subd. (c)), our remand does not foreclose that possibility as long as the trial court gives the parties adequate notice and opportunity to be heard.
/s/_________
DETJEN, J.
WE CONCUR: /s/_________
LEVY, Acting P.J.
/s/_________
KANE, J.