Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BD366012 Michael P. Linfield and Mark A. Juhas, Judges.
John Christopher Heubeck, in pro. per.; Heubeck Law and Marc A. Lowe for Appellant.
Jeanine G. Strong and Bert H. Cohen for Respondent.
RUBIN, ACTING P. J.
This marital dissolution action between John Christopher Heubeck (husband) and Milagros Agatha Faraon Heubeck (wife) is before us for a second time. Previously, we affirmed a child support order but modified the date to which it was retroactive (Heubeck v. Heubeck (May 17, 2007, B186033) [nonpub. opn.]). In this case, husband appeals from an October 26, 2009 judgment of marital dissolution on reserved issues, a judgment which also incorporates a September 25, 2009 judgment on other reserved issues. Husband contends the trial court made various errors including those relating to calculation of spousal and child support. Wife moves for sanctions for a frivolous appeal. We affirm the judgment and deny the motion for sanctions.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Prior Appeal
The following facts are summarized from our prior opinion. Husband and wife were married on September 26, 1994. In 1995, they bought a home together and in February 1998, had their only child, a daughter. Husband was a 40 percent equity partner in Davis & Heubeck, a law firm specializing in plaintiffs’ asbestos litigation. Wife, also a lawyer, initially stayed at home to raise their daughter. In July 2000, husband moved out of the marital home, and in October 2000, wife obtained employment as a salaried attorney. Husband filed a petition for dissolution in March 2002. A Final Judgment of Dissolution (Status) was entered on July 15, 2004. In July 2005, the trial court granted wife’s motion to modify child support and ordered husband to pay wife guideline child support in the amount of $3,599 per month, retroactive to June 1, 2004, and to contribute to wife’s attorney fees. Husband appealed from that order. As noted, we affirmed the order, except to the extent it made the child support retroactive beyond the date the motion to modify was filed. On September 18, 2007, the trial court entered a new order modifying the child support order to be retroactive to the date the order to show cause for modification was filed.
B. The Current Appeal
Husband and wife purchased two homes together in Redondo Beach as community property: (1) a condominium purchased in 1995, which secured a $240,000 loan (the Carnegie Lane residence); and (2) a house purchased in 2000, which secured a $750,000 loan (the Paseo Miramar residence). Since separating, husband has lived in the Paseo Miramar residence and wife has lived in the Carnegie Lane residence. Both have remarried. Husband wants to continue living in the Paseo Miramar residence with his new family; wife wants to sell the Carnegie Lane residence and purchase a new home.
1. Bifurcated Trials
Although ordered to file a joint trial statement, husband and wife filed separate trial statements. The disputed issues were:
Date of separation;
Child custody;
Child support;
Whether husband’s law firm had any goodwill; if so, its value and whether it was a community asset;
Valuation of the Paseo Miramar and Carnegie Lane residences;
Reimbursements; and
Attorney fees.
Trial commenced on February 1, 2008, before Judge Michael P. Linfield, who determined the date of separation was December 20, 2000. Judge Linfield reserved the issues of child custody and support and attorney fees for himself, but assigned the matter to Judge Mark A. Juhas for determination of: (1) Epstein credits and Watts charges; (2) reimbursements; (3) husband’s cash flow and income; and (4) goodwill of husband’s law firm.
In re Marriage of Epstein (1979) 24 Cal.3d 76 (Epstein); In re Marriage of Watts (1985) 171 Cal.App.3d 366 (Watts).
Judge Juhas presided over the trial of the reserved issues on February 11, 28 and March 11 and 21, 2008. On March 21, Judge Juhas announced his findings, which were memorialized in a minute order: (1) the fair rental value of the Carnegie Lane residence from the date of separation to the date of trial was $293,000; (2) the fair rental value of the Paseo Miramar residence over that same time period was $320,000; (3) the community interest in the law firm’s work in progress was $200,000; (4) the law firm did not recover $107,463 in costs on the cases; (5) the community lost $52,000 from certain cases; (6) income deposited into a qualified settlement fund (QSF) is income when received, not when it is distributed by the QSF; (7) husband’s law firm had a goodwill value of $49,000; (8) husband was entitled to an Epstein reimbursement of $87,380 for the mortgage, taxes and insurance payments he made on the Carnegie Lane residence; and (9) wife was entitled to attorney fees of $750, to be calculated in the equalization payment. The minute order of that date states: “The court issues an oral statement of decision as fully reflected in the notes of the official court reporter.” Judge Juhas also then returned the matter to Judge Linfield for all purposes.
As applicable here, a QSF is a court approved fund established to satisfy a claim asserting liability arising out of a tort. (26 C.F.R. § 1.468B-1 (2010).)
On November 13, 2008, Judge Juhas filed a written statement of decision, which detailed the court’s March 21, 2008 findings, including specifying husband’s monthly cash flow available for support from 2003 through 2007. The statement of decision also directed the parties to “meet and confer and agree on an approximate equalization value of the assets in this ruling and [husband] is to pay the respondent’s portion of those assets before the Carnegie Lane property need be sold.” Husband sought certain modifications to the statement of decision. Following a hearing on December 4, 2008, Judge Juhas denied husband’s motion to modify the statement of decision.
Meanwhile, on July 18 and August 28, 2008, Judge Linfield presided over the trial of the remaining issues including child custody and child support. On July 18, he awarded joint legal and physical custody of the child to both parents on a 50-50 time share; he increased husband’s child support obligation to $4,196 per month (thus denying husband’s request for downward modification of child support); and ordered the parties to return to court each year in March to recalculate support retroactive to January of that year. Judge Linfield awarded wife her community property share of: an annuity, the value of husband’s work in progress and husband’s capital account. On August 28, Judge Linfield ordered husband to pay wife’s attorney fees in the amount of $50,000.
On August 14, 2008, wife served separate proposed judgments for Judge Juhas and Judge Linfield. Husband objected to both proposed judgments for various reasons, including that two separate judgments violated the “single judgment rule.”
C. Judge Juhas’s September 25, 2009 Judgment
On September 25, 2009, Judge Juhas filed a Judgment of Dissolution on Reserved Issues. Judge Juhas concluded that income was income when received, not when the QSF distributed payments to husband; the Paseo Miramar residence had a fair market value of $1,950,000; it and the loan by which it was encumbered were both community property; the Carnegie Lane residence was to be sold and the proceeds divided equally; the community value of work in progress at husband’s law firm was $200,000; the community value of the law firm’s capital account was $224,773; the community goodwill in the law firm was $49,000; the community value of the law firm’s fixed assets was $16,784; husband was entitled to reimbursements for payments made with respect to the Carnegie Lane residence from December 1, 1990, to the date of trial in the amount of $87,382; husband was not entitled to reimbursement for payments made by him with respect to the Paseo Miramar residence from December 1, 2000, through the date of trial.
D. Judge Linfield’s October 26, 2009 Judgment
On October 26, 2009, Judge Linfield filed Judgment of Dissolution on Reserved Issues, setting forth his child support and attorney fees orders.
DISCUSSION
A. The One Judgment Rule
As we understand husband’s contention, it is that the so-called “single judgment rule” precluded Judges Juhas and Linfield from rendering separate judgments on the discrete issues that were separately tried by each of them. He argues, “for purposes of remedying the violation of the single judgment rule, it may be necessary for all issues to be retried by a single judicial officer.” Husband is incorrect.
“[U]nder the ‘one final judgment’ rule, appeal lies only from final judgments in actions or proceedings, or from orders after judgment that affect the judgment or its enforcement; it does not lie from interlocutory judgments or orders unless specifically made appealable by statute.” (Lester v. Lennane (2000) 84 Cal.App.4th 536, 560.) An interlocutory judgment is a provisional determination of some or all issues. (7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 12, pp. 555-556.) A judgment is interlocutory “ ‘[w]here the ultimate judgment will be unconditional, but basic issues of law must be determined before evidence is heard and a final judgment rendered... [citation].’ [Citation.]” (7 Witkin, supra, Judgment, § 13, p. 556.) An interlocutory order or judgment has two characteristic features: it is not final for purposes of appeal, and is also not final in the trial court, when it may be modified after further evidence or law has been considered. (Ibid.)
One exception to the one final judgment rule is the so-called collateral order doctrine. (Lester v. Lennane, supra, 84 Cal.App.4th at p. 561.) “When a court renders an interlocutory order collateral to the main issue, dispositive of the rights of the parties in relation to the collateral matter, and directing payment of money or performance of an act, direct appeal may be taken. [Citations.] This constitutes a necessary exception to the one final judgment rule. Such a determination is substantially the same as a final judgment in an independent proceeding.” (In re Marriage of Skelley (1976) 18 Cal.3d 365, 368.) “Where the trial court’s ruling on a collateral issue ‘is substantially the same as a final judgment in an independent proceeding’ [citation], in that it leaves the court no further action to take on ‘a matter which... is severable from the general subject of the litigation’ [citation], an appeal will lie from that collateral order even though other matters in the case remain to be determined.” (Lester v. Lennane, supra, at p. 561; see also In re Marriage of Skelley, at p. 368.)
“It has long been established that controversies over spousal support, division of marital property and custody of minor children can be litigated in an action separate from the action which decrees a termination of the marriage. [Citations.] This concept, sometimes called ‘divisible divorce, ’ is not inconsistent with the basic principle that a single action should result in only one final appealable judgment. Although the parties may litigate their controversies in several actions, each action should, under conventional theory, result in a single judgment disposing of the issues raised in that action. [¶] California law also recognizes a form of divisible appeal, in that a party may appeal either from the whole of a judgment or from a particular part of one. [Citation.] The general rule is that where portions of a judgment are truly severable, an appeal from one portion will bring up for review only that portion, leaving all other parts of the judgment in full force and effect. [Citation.] This principle, although conducive to partial adjudication, has long coexisted with the one judgment rule.” (In re Marriage of Fink (1976) 54 Cal.App.3d 357, 362.)
Here, the issues decided by Judge Juhas directed the payment of money or performance of an act and left no further court action to take on the matters decided. As such, they were collateral to the main issue – dissolution of the marriage. Likewise, the issues decided by Judge Linfield were collateral in that they also directed the payment of money and left no further court action to take on those matters. As such, separate judgments by Judges Juhas and Linfield did not violate the one final judgment rule.
For all practical purposes Judge Linfield bifurcated the issues, some to be tried before him and others before Judge Juhas. Husband did not object to this procedure. Nor can he claim any error in the fact that the judgments consist of separate documents. Wife has not complained that he has only appealed from one judgment or that parts of his appeal are untimely. We address all of husband’s points on appeal.
B. Property Issues
1. Valuation of the Carnegie Lane Residence
Husband contends it was an abuse of discretion to order the Carnegie Lane residence to be sold without first valuing it. Husband argues that the court cannot order the sale of property to determine its value. Husband is incorrect.
In a marital dissolution action, the court must divide the community estate equally between the parties. (Fam. Code, § 2550.) For the purpose of division, the court must value the community’s assets and liability as near as practicable to the time of trial. (§ 2552.) The court may make any orders necessary to accomplish valuation of community assets. (§ 2553.) This includes ordering the parties to sell a community residence. (In re Marriage of Holmgren (1976) 60 Cal.App.3d 869, 873 (Holmgren).)
We will not disturb a trial court’s exercise of its broad discretion to value community property “ ‘in the absence of a clear showing of abuse, resulting in injury sufficiently grave as to amount to a manifest miscarriage of justice. [Citations.] “ ‘The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason....’ ” [Citations.]’ [Citation.]” (In re Marriage of Mosley (2008) 165 Cal.App.4th 1375, 1386.)
Ordering the Carnegie Lane residence sold was a reasonable method of valuing that community asset and therefore not an abuse of discretion, especially since neither party wanted to continue living there.
Husband’s reliance on In re Marriage of Cream (1993) 13 Cal.App.4th 81, 89 (Cream) is misplaced. In Cream, the trial court ordered a husband and wife to auction property between themselves to settle its value, over the wife’s objection. The appellate court reversed the order, reasoning that a forced interspousal auction does not establish a fair market value for the subject property, i.e., the highest price that would be agreed to by a willing buyer and seller. (Cream, supra, pp. 88-89.) But citing Holmgren, supra, 60 Cal.App.3d at page 873, the court in Cream expressly advised, “Nothing in our opinion should be construed as limiting the court’s authority under [former Civil Code] section 4800 [now Family Code section 2550] to order an asset sold, with the proceeds divided in the proportions necessary to accomplish an equal division of the community estate.” (Cream, at p. 89.)
2. Equalizing Payments
Husband contends it was error to order him to make an equalization payment without calculating the exact amount of that payment. He also argues the September 25, 2009 judgment “is defective because it states that [husband] is to make an unspecified equalization payment on or before July 21, 2008, to avoid listing and selling [the Paseo Miramar] home, but the judgment was not signed or effective until September 25, 2009.” We disagree.
First, the judgment was not defective because it was signed after the date husband was ordered to make the equalization payment. A trial court’s oral ruling becomes effective when it is entered in the minutes, unless the minute order reflects that a written order will be filed, in which case only the written order is the effective order. (In re Marriage of Drake (1997) 53 Cal.App.4th 1139, 1170.) Here, at the March 21, 2008 hearing, Judge Juhas stated that he was announcing his statement of decision orally. A minute order was filed that day. The minute order does not state that a written order was to be filed later. Under these circumstances, Judge Juhas’s oral ruling was effective on March 21, 2008, and it is immaterial for present purposes that a written statement of decision and judgment were filed later. Finally, husband has not demonstrated any prejudice by the timing and memorialization of the rulings.
Second, the judgment was not ineffective for failing to specify the amount of the equalization payment. As we have explained, the court had discretion to order both community property residences to be sold in order to determine their value. Respecting husband’s desire to keep the Paseo Miramar residence, on March 21, 2008, Judge Juhas ordered husband to make an equalization payment within 120 days; it found the fair market value of the Paseo Miramar residence was $1,950,000 and suggested that husband come to an agreement with wife as to the value of the Carnegie Lane residence to be offset against the equalization payment. Husband did not object that the amount of the equalization payment, not including a credit for the Carnegie Lane residence, was unknowable – all of the raw numbers needed to make the equalization payment had been determined – he argued only that the court should value the Carnegie Lane residence and reduce the equalization payment by husband’s interest therein so that husband could make the payment without having to sell the Paseo Miramar residence. The minute order from that date states that the court issued an oral statement of decision; it does not refer to the equalization payment. The written statement of decision filed on November 13, 2008, states: “The Carnegie Lane residence need not be sold until [husband] makes the required equalization payment with respect to the division of community property herein, which payment is due 120 days from March 21, 2008 or on or before July 21, 2008. [Husband and wife] are to meet and confer and agree on an approximate equalization value of the assets in this ruling and [husband] is to pay [wife’]s portion of those assets before the Carnegie Lane property need be sold. The parties are to cooperate in refinancing the Paseo Miramar property. If the equalization payment is not made as specified herein, the Paseo Miramar residence shall be listed for sale and sold and the proceeds shall be used to equalize the community property division herein, and the remaining proceeds shall be divided equally between the parties.” Husband did not object to the statement of decision on the grounds that it did not specify the amount of the equalization payment. He merely asked that the decision be modified “to indicate that compliance must be made within 120 days from the date the equalizing payment is known or some other date that makes future compliance possible.” In other words, husband was looking for maximum flexibility. To the extent husband did not object to the ruling on the grounds urged on appeal, he has waived appellate review of the issue. (Children’s Hospital and Medical Center v. Bonta (2002) 97 Cal.App.4th 740, 776-777.) Even assuming he has not waived the issue, we find it has no merit.
“[T]he family law court possesses broad discretion to determine the manner in which community property is awarded in order to accomplish an equal allocation. [Citation.] If the circumstances warrant, the court may award one or more items of the property to one party and require that party to make an equalizing payment to the other. [Citation.]” (In re Marriage of Andresen (1994) 28 Cal.App.4th 873, 880.) Although the court had discretion to order the sale of both residences, it gave husband the opportunity to come to an agreement with wife as to the amount of the equalization payment. If no such agreement could be reached, the Paseo Miramar residence, which husband wanted to keep, would have to be sold. This order was well within the court’s discretion, and husband cites no authority for the contrary. Finally, husband has not argued that wife failed to meet and confer about the payment or that the Paseo Miramar house is in danger of being sold. In other words, he has shown no prejudice from the court’s order.
Husband has cited no authority that the order was improper.
3. Sale of the Paseo Miramar Residence
Husband contends it was an abuse of discretion to order him to sell the Paseo Miramar residence if the equalization payment was not timely made. As we understand his argument, it is that if the court had valued the Carnegie Lane residence and included husband’s community property interest in it in calculating the equalization payment, husband could have made the reduced payment without having to sell the Paseo Miramar residence. We find no abuse of discretion.
In re Marriage of Munguia (1983) 146 Cal.App.3d 853 (Munguia), is instructive. In that case, the community property included three life insurance policies on the life of the husband. The wife wanted the policies canceled and the cash value divided while the husband wanted the policies kept in force and the couple’s children made irrevocable beneficiaries of the polices. The family court granted husband’s request. The appellate court reversed, holding it was error to deny the wife liquidated access to her portion of the community asset. (Id. at pp. 860-861.)
Here, under the reasoning of Munguia, wife was entitled to liquidated access to her community property interest in the Paseo Miramar residence. The family court gave husband 120 days to make the equalization payment and avoid selling the Paseo Miramar residence. This was ample time for husband to refinance or otherwise accumulate the funds without having to sell the residence. If husband was unable to make appropriate arrangements, it was not an abuse of discretion for the family court to order the Paseo Miramar residence sold so that wife could receive her community share.
4. Epstein Credits
Husband contends it was an abuse of discretion to deny him reimbursement for the costs of maintaining the Paseo Miramar residence after the date of separation, which husband paid from his separate property. He argues that, under Family Code section 2626 he should be reimbursed for that amount, less the fair rental value of the Paseo Miramar residence over the same period. Again, we find no abuse of discretion.
Generally, debts incurred after the date of marriage but before the date of separation must be divided equally. (Fam. Code, § 2622, subd. (a).) The family court also has discretion to order one spouse reimbursed from community assets for community debts that spouse paid from his separate property after separation but before trial. (Id., subd. (b).) These are known as “Epstein credits, ” from the seminal case Epstein, supra, 24 Cal.3d at page 84, in which our Supreme Court held that “ ‘a spouse who, after separation of the parties, uses earnings or other separate funds to pay preexisting community obligations should be reimbursed therefor out of the community property upon dissolution.’ ” (In re Marriage of Jeffries (1991) 228 Cal.App.3d 548, 552 (Jeffries).) One exception is where the spouse making the debt payment on an asset was using the asset and “the amount paid was not substantially in excess of the value of the use.” (Epstein, supra, at p. 85.) Whether to award Epstein credits and in what amount is left to the trial court’s discretion based on equitable considerations consistent with an equitable distribution of the community property. (In re Marriage of Hebbring (1989) 207 Cal.App.3d 1260, 1272 (Hebbring).)
On the flip side of Epstein credits, the court in Watts, supra, 171 Cal.App.3d at page 374, held that the community should be reimbursed for the value of a party’s exclusive use of the family residence between the date of separation and the date on which the community itself no longer held an interest in the residence. (Jeffries, supra, 228 Cal.App.3d at p. 552.) These are known as “Watts charges.” (Jeffries, at p. 554.) Like Epstein credits, whether and in what amount to impose Watts charges is in the trial court’s discretion. (Hebbring, supra, 207 Cal.App.3d at p. 1272.)
Here, husband sought Epstein credits in the amount of$513,689, which comprised “every dime” husband paid to maintain the Paseo Miramar residence, including property taxes, homeowner’s association fees, and mortgage principal and interest. Husband conceded that the amount should be reduced by the $320,000 fair rental value of the Paseo Miramar residence because he was living there (i.e., Watts charges). Acknowledging that he could have sold the property, husband argued that not doing so benefited the community because it increased in value by $900,000 over the relevant time period. According to husband’s calculations, wife’s community property interest in the Paseo Miramar residence’s fair market rental value of $320,000 (i.e., $160,000) should be reduced by one half of the approximate $514,000 husband paid from his separate property to maintain the Paseo Miramar residence (i.e., $257,000) and that the resulting negative $97,000, should be credited against wife’s community property interest in the Paseo Miramar residence. Wife’s position at trial was that husband could have sold the property at any time and “it’s presumptuous to be reimbursed dollar for dollar in, seven years [with]out giving notice that’s what you expect.” The court denied husband’s request for Epstein credits reasoning that the “payment was made on account of a debt for the acquisition or preservation of an asset the payer was using and the amount paid was not substantially in excess of the value of the use.” Moreover, the court observed, husband’s calculations did not account for the benefits he received including tax deductions for mortgage interest and property tax payments. We find no abuse of discretion in the trial court’s denial of Epstein credits based on the finding that husband was living in the Paseo Miramar residence and the payments husband had made (particularly when considered in light of tax benefits) did not substantially exceed the value of the use.
Husband’s assertion that Judge Juhas concluded that “no exceptions to the award of Epstein credits existed” is a misstatement of the record.
We also observe that, although it denied credits for the Paseo Miramar residence the court found that husband should be credited for the $87,382 he paid to maintain the Carnegie Lane residence in which wife lived. Wife does not contest that order.
5. Goodwill
Husband contends the valuation of his law firm’s goodwill in the amount of $49,000 is not supported by substantial evidence. He argues that the law firm, which was just one year old when the parties separated, had no repeat customers, published trial results, favorable reputation, advantageous location, or any other basis for anticipating future customers. We conclude that the valuation was supported by substantial evidence.
While the trial court has broad discretion to determine the value of community assets, the valuation of a particular asset is a factual question, the determination of which will not be disturbed on appeal if supported by substantial evidence. (In re Marriage of Iredale & Cates (2004) 121 Cal.App.4th 321, 329 [valuation of goodwill].) Under this standard of review, the judgment is presumed correct and all intendments and presumptions are indulged in favor of the judgment, conflicts in the evidence must be resolved in favor of the judgment and credibility is for the trier of fact to determine. (In re Marriage of Nichols (1994) 27 Cal.App.4th 661, 670.)
Although goodwill is defined in the Business and Professions Code as the “expectation of continued public patronage” (§ 14100), there is more to goodwill than expectation of continued patronage. (In re Marriage of McTiernan & Dubrow (2005) 133 Cal.App.4th 1090, 1096.) On the other hand, an individual’s skill, reputation and experience are not community property. (In re Marriage of Rives (1982) 130 Cal.App.3d 138, 153.) But a professional practice can generate goodwill (§ 14102) which can be community property. (McTiernan, supra, at p. 1096.) A law practice’s goodwill, if it exists, is an asset that must be valued and factored into the community property division. (In re Marriage of Rosen (2002) 105 Cal.App.4th 808, 818.)
For purposes of a marriage dissolution, capitalization of excess earnings is one recognized method for valuing goodwill associated with a professional practice. (In re Marriage of Ackerman (2006) 146 Cal.App.4th 191, 200.) In this method, “one first determines a practitioner’s average annual net earnings (before income taxes) by reference to any period that seems reasonably illustrative of the current rate of earnings. One then determines the annual salary of a typical salaried employee who has had experience commensurate with the spouse who is the... practitioner.... Next, one deducts from the average net pretax earnings of the business or practice a ‘fair return’ on the net tangible assets used by the business. Then, one determines the ‘excess earnings’ by subtracting the annual salary of the average salaried person from the average net pretax earnings of the business or practice remaining after deducting a fair return on tangible assets. Finally, one capitalizes the excess earnings over a period of years by multiplying it by a factor equal to a specific period of years, discounted to reflect present value of the excess earnings over that period. The period varies according to factors such as the type of business, its stability, and its earnings trend.” (In re Marriage of Garrity and Bishton (1986) 181 Cal.App.3d 675, 688, fn. 14.)
Here, the trial court used the excess earnings method to arrive at its $49,000 valuation of goodwill. This valuation was based on the testimony of wife’s expert witness – a forensic accountant – who described in detail how he used that method to calculate goodwill. In the expert’s opinion, the goodwill had a value of more than $100,000, an amount the trial court did not accept at face value. This constituted substantial evidence which the trial court was entitled to credit even though husband’s law firm had been in business for a short time.
C. Child Support
1. Due Process
As we understand husband’s contention, it is that he was denied due process because the issues of income and child support were tried separately, by different judges. He argues, at the trial on child support, Judge Linfield was confused about what had previously been decided by Judge Juhas on the issue of income. We find no due process violation.
Apart from whether husband’s failure to object to Judge Linfield’s bifurcation order constitutes a waiver of the issue on appeal (Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649), the record belies husband’s claim that at the child support trial on July 18, Judge Linfield was in any way confused about what Judge Juhas had previously decided about husband’s income.
At the time of the July 18 trial on child support before Judge Linfield, Judge Juhas had not yet filed a statement of decision. Judge Linfield ordered the parties to submit a joint trial brief. Not only did husband not file a joint trial brief with wife (who filed her own trial brief), husband did not file any brief at all. Thus, Judge Linfield only had wife’s trial brief which recounted Judge Juhas’s rulings, as well as a transcript of the proceedings before Judge Juhas. Judge Linfield stated, “If Judge Juhas found that the income was as [wife] stated in [wife’s trial] brief, that issue has been re[s]olved.” To the extent husband believed wife’s trial brief did not accurately reflect the reporter’s transcript of the proceedings before Judge Juhas, Judge Linfield gave husband every opportunity to point out the conflict. Under these circumstances, husband has failed to show that he was denied due process. If there was any confusion on July 18, it was on the part of husband who attempted to reargue issues that had already been decided by Judge Juhas.
Husband’s explanation for his disregard of the order to file a joint trial brief, or his failure to file any brief, was that he had been too busy.
We take judicial notice of the United States Code and Code of Federal Regulations requested by husband.
Father contends his income was miscalculated for purposes of awarding child support. He argues that Judge Juhas erred in finding that the contingency attorney fees father earned but received in installments through various QSFs should be treated as income when the fees were paid into the QSFs; rather, husband argues, those fees should be treated as income only when funds were distributed to him from the QSFs. We find no abuse of discretion.
“Typically, an appellate court’s review of child support orders is limited to whether the trial court abused its discretion. [Citation.] However, when an issue on appeal is strictly the interpretation of a statute, we traditionally exercise de novo review. [Citation.] In the context of child support orders, the rule is no different.” (Asfaw v. Woldberhan (2007) 147 Cal.App.4th 1407, 1414-1415.) “Where mixed questions of fact and law require ‘a critical consideration, in a factual context, of legal principles and their underlying values, the question is predominantly legal and its determination is reviewed independently. [Citation.]’ [Citations.]” (In re Marriage of Norviel (2002) 102 Cal.App.4th 1152, 1157 [determining date of separation].) Whether, for child support purposes, contingency attorney fees that are paid into a QSF in one lump sum and later distributed from the QSF in installments, should be treated as income when paid into the QSF or when the QSF distributes the money requires critical consideration of legal principles and their underlying values. As such, the question is predominantly legal and in the first instance we consider those principles independently.
It is the policy of this state that each parent should pay child support according to his or her ability. (Fam. Code, § 4053, subd. (d).) The amount of child support each parent should pay is calculated according to a formula, the components of which require calculation of each parent’s annual gross income. (§ 4055.) The annual gross income of each parent is defined as “income from whatever source derived....” (§ 4058, subd. (a).) Parents cannot avoid their support obligations by deferring income. (In re Marriage of Berger (2009) 170 Cal.App.4th 1070, 1073 (Berger).) Good or bad faith is not part of the equation. (In re Marriage of Padilla (1995) 38 Cal.App.4th 1212, 1216.)
Berger provides guidance for treatment of deferred income for child support purposes. There, Mr. Berger worked full time in a landscape business in which he owned an equity interest. When the company experienced financial difficulties, Mr. Berger, in good faith, elected to defer part of his contractual salary to help the company through the hard times. Based on this change in his income, Mr. Berger sought reduction of his child support obligations. The trial court granted the reduction, finding that although Mr. Berger had accrued $350,000 in deferred income, he derived no present income from the business other than a $2,000 monthly salary which was just enough to pay the family’s insurance needs. (Berger, supra, 170 Cal.App.4th at p. 1078.) The appellate court reversed. It held that a parent “cannot unilaterally, and voluntarily, arrange his business affairs in such a way as to effectively preclude his children from sharing in the benefits of his current standard of living.” (Id. at p. 1082; see also In re Marriage of Kirk (1990) 217 Cal.App.3d 597, 606-607 [loan repayment to employer automatically deducted from father’s paycheck should be considered when assessing father’s income because it was a voluntary diversion of income to pay debt which resulted in reduced funds for child support].)
In the present appeal, father testified that he was entitled to receive a total of $2.66 million in attorney fees from all of the QSFs. In each case, he negotiated with the QSF administrator the timing and amount of payments he would receive from the QSF. For example, in April 2005, father settled the Johnson case for approximately $2.5 million, of which he was entitled to 40 percent as his fee. Although he could have asked the administrator of the Johnson QSF for a one-time cash payment of his fees, father agreed to five payments beginning in 2016, when the child would be in college, to assure that father would have income during those years. Father testified that he agreed to structure his fees for tax purposes and to average out his income stream. Thus, father voluntarily elected to defer receiving income that would otherwise be due earlier, and instead chose to have those fees paid to him over time. Under the reasoning of Berger, father could not unilaterally and voluntarily arrange his business affairs in such a way as to effectively preclude his daughter from sharing in the benefits of his income when it was earned. (Berger, supra, 170 Cal.App.4th at p. 1082.) It is immaterial whether father did so in good faith for legitimate business purposes. Under these circumstances, the trial court correctly found that attorney fees father earns should be treated as income for child support purposes when they are paid – whether directly to father or into a QSF – and not when those fees were paid out of the QSFs on dates and in amounts negotiated by father. We do not suggest that the trial court has no discretion in setting child support to take into account a parent’s decision to defer income when, for example, that approach, might be in a child’s best interest. We hold that Berger is the starting point for the analysis, and the trial court did not abuse its discretion when it refused to ignore the deferred income.
Father’s reliance on In re Marriage of Olson (1993) 14 Cal.App.4th 1, is misplaced. Olson concerned spousal support, not child support. Because income is not statutorily defined for spousal support purposes, the trial court in Olson necessarily had discretion to decide whether contributions to and withdrawals from a retirement plan constituted income for spousal support purposes. By contrast, income for purposes of child support is defined by statute. (See In re Marriage of Schulze (1997) 60 Cal.App.4th 519, 528, 527 [guideline child support is highly regulated and “relatively fixed” whereas permanent spousal support orders must be “the product of a truly independent exercise of judicial discretion”].) In addition to being governed by different rules, child support and spousal support serve different purposes and implicate different policies. (In re Marriage of Blazer (2009) 176 Cal.App.4th 1438, 1446, fn. 3.) “ ‘[C]hild support awards must reflect a minor child’s right to be maintained in a lifestyle and condition consonant with his or her parents’ position in society after dissolution of the marriage, ’ while spousal support orders require ‘consideration of the parties’ standard of living during marriage only.’ ” (Blazer, supra, at p. 1446, fn. 3, quoting In re Marriage of Kerr (1999) 77 Cal.App.4th 87, 95-96.) For these reasons, Olson is inapposite.
Father briefly argues that treating attorney fees as income when those fees are paid into a QSF, is preempted by federal tax laws. Father does not develop his point with cogent argument supported by appropriate authorities and it is therefore waived. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.) We also observe that generally federal law is persuasive but not conclusive on the interpretation of income under Family Code section 4058. (In re Marriage of Loh (2001) 93 Cal.App.4th 325, 332.)
3. Double-counting
Father contends that Judge Juhas miscalculated father’s 2007 income. He argues that the trial exhibit and testimony upon which the trial court relied contained a mathematical mistake. We find no error.
We review a child support order for abuse of discretion and the trial court’s findings of fact in connection with a child support order under the substantial evidence standard of review. (In re Marriage of Zimmerman (2010) 183 Cal.App.4th 900, 906-907; Berger, supra, 170 Cal.App.4th at p. 1079.) When the evidence is susceptible of two or more inferences, the reviewing court will not substitute its deductions for those of the trial court. (In re Marriage of Rothrock (2008) 159 Cal.App.4th 223, 229-230.)
Here, the child support order was based on Judge Juhas’s findings with respect to husband’s income, comprised mostly of fees he earned from his law practice. Husband gave conflicting evidence of the attorney fees he received in 2007 from the Kirkorian case. On February 11, 2008, husband testified that he received $425,000 in a single payment from the Kirkorian QSF in 2007, and that additional structured payments were to be made in future years. This was consistent with Trial Exhibit 21, captioned “Summary of Structured Attorney Fee Payments, ” which reflects that husband received $425,000 from the Kirkorian case in 2007, and that he was to receive additional payments totaling more than $500,000 over the next five years. On March 21, 2008, husband stated that the Kirkorian QSF was funded with $500,000 in 2007. On July 18, 2008, husband stated that his attorney fees in the Kirkorian case were $918,890. A few days later, husband filed a declaration stating that he had miscalculated his 2007 income by including in that amount $425,000 that had been counted elsewhere. In a statement of decision filed November 13, 2008, Judge Juhas found that husband’s annual cash flow in 2007 was $918,890, the amount husband testified to on July 18. Husband filed objections to the statement of decision and an ex parte application to modify the statement of decision to correct a mathematical error, both of which asserted the same “miscalculation” husband argues on appeal. Following a hearing on the ex parte application, Judge Juhas declined to modify his statement of decision, finding that husband failed to prove “through the accounting, or other evidence, that the court’s statement of decision double counted the Kirkorian QSF money in 2007.”
Substantial evidence supported the trial court’s finding that husband’s income was $918,890 in 2007. This evidence included husband’s own testimony. That husband wishes the trial court to credit other, conflicting, evidence is beside the point.
4. Representative Time Period
Father contends the trial court did not use a representative time period to calculate child support in 2008. He argues that his prior calendar year’s income (2007) was an unreliable predictor of his future income inasmuch as he had no income whatsoever in the first half of 2008. We find no error.
Family Code section 4055 sets forth the formula for determining child support. It is “predicated on knowing what both parents’ income is in nominal static dollars at the time the order is made.” (In re Marriage of Hall (2000) 81 Cal.App.4th 313, 317-318.) Sections 4060 and 4064 deal with the problem of fluctuating income for support orders. Section 4060 gives the trial court discretion “to adjust the annual net adjustable income required for a support order when dividing net disposable income by 12 ‘does not accurately reflect the actual or prospective earnings of the parties.’ Section 4064 gives a trial court the authority to adjust a child support order ‘as appropriate to accommodate seasonal or fluctuating income of either parent.’ While both statutes are framed in discretionary terms, it is also well established that the discretion must be a reasonable one, ‘ “exercised along legal lines, taking into consideration the circumstances of the parties, their necessities and the financial ability of the [supporting spouse].” ’ [Citations.]” (In re Marriage of Riddle (2005) 125 Cal.App.4th 1075, 1081 (Riddle).) The goal is to arrive at a stable number which reasonably predicts what each spouse will earn in the immediate future. (Ibid.)
Past income is a good measure of future income from which the parent must pay support. (M.S. v. O.S. (2009) 176 Cal.App.4th 548, 554.) But “the time period on which income is calculated must be long enough to be representative, as distinct from extraordinary.” (Riddle, supra, 125 Cal.App.4th at p. 1081.) It is an abuse of discretion “to take so small a sliver of time to figure income that the determination essentially becomes arbitrary.” (Id. at p. 1083 [two months].) As a general rule, “the most recent 12 months” is appropriate in most cases. (Id. at p. 1083, italics added.)
Although the most recent 12 months is appropriate in most cases, it may not be in some. In Riddle, the court observed that“a two- or three-year average might indeed yield a more representative overall income figure for a party who only wrote books for a living. One can readily imagine that in the book industry long production lead times and the tendency of initial sales to fall off (hence royalties are likely to be highest with a book’s initial release) would mean that a period of more than a year might be necessary in order to obtain a representative picture of an author’s income.” (Riddle, 125 Cal.App.4th at p. 1084.) And in In re Marriage of Mosley, supra, 165 Cal.App.4th at pages 1386-1387, the court held that it was an abuse of discretion to base a child support order on the father’s one-year salary history with a new employer which included a signing bonus and a discretionary year-end bonus. Instead, it held, support should have been based on the prior year’s base salary plus some method to require the father to pay support based on any bonus he actually received, as opposed to speculative bonuses.
Here, on July 18, 2008, Judge Linfield asked the parties what time period should be used to calculate husband’s average monthly income. Husband suggested a 12-month period, and wife agreed. Judge Linfield explained: “What I am going to do is in effect what in other terms is called a look back.... [T]he figures that I am going to use for child support in the year 2008 are going to be based upon 2007 earnings. The child support that we calculate in 2009 will be based upon the 2008 earnings and so forth until [the child] becomes 18 and/or graduates from high school, et cetera.” Judge Linfield rejected husband’s subsequent argument that the court should not use the prior calendar year, but should instead use the 12 months immediately before the hearing (which included the first six months of the current year in which husband had not yet received any attorney fee income).
It was not an abuse of discretion for the court to base a child support order on husband’s income from the prior calendar year where, as here, the evidence showed that for the past several years husband had earned income in lump sums sporadically throughout the year. Under these circumstances, the trial court could reasonably conclude that the first half of 2008 was not predictive of husband’s likely future earnings.
5. Retroactive Modification of Child Support
Husband contends it was error to deny his motion for retroactive modification of child support to August 26, 2005. We disagree.
“An order modifying or terminating a support order may be made retroactive to the date of the filing of the notice of motion or order to show cause to modify or terminate, or to any subsequent date....” (Fam. Code, § 3653, subd. (a).) We review the ruling on a request for modification of a child support order for abuse of discretion. (In re Marriage of Leonard (2004) 119 Cal.App.4th 546, 555 (Leonard); In re Marriage of Drake, supra, 53 Cal.App.4th 1139, 1151.)
“An order of child support ‘may be modified or terminated at any time as the court deems to be necessary.’ ([Fam. Code, ] § 3651, subd. (a).) Statutory procedures for modification of child support ‘require a party to introduce admissible evidence of changed circumstances as a necessary predicate for modification.’ [Citations.] The burden of proof to establish that changed circumstances warrant a downward adjustment in child support rests with the supporting spouse. [Citation.] [¶] ‘Ordinarily, a factual change of circumstances is required [for an order modifying support] (e.g., increase or decrease in either party’s income available to pay child support).’ [Citation.] ‘There are no rigid guidelines for judging whether circumstances have sufficiently changed to warrant a child support modification. So long as the statewide statutory formula support requirements are met ([] § 4050 et seq.), the determination is made on a case-by-case basis and may properly rest on fluctuations in need or ability to pay.’ [Citations.] The ultimate determination of whether the individual facts of the case warrant modification of support is within the discretion of the trial court. [Citation.] The reviewing court will resolve any conflicts in the evidence in favor of the trial court’s determination.” (Leonard, supra, 119 Cal.App.4th at p. 556.)
At the hearing on July 18, 2008, wife objected to retroactive modification on the grounds that the exhibits husband claimed showed his income were produced for the first time at the hearing, and they lacked foundation. Judge Linfield agreed with wife and did not admit the exhibits into evidence. Judge Linfield explained: “Had you presented the brief according to this court’s pretrial orders, there would have been ample time. If there were objections to the evidence there would have been an objection made and you would have been able to respond, but you didn’t present any trial brief. And you came today with these documents. And I think correctly so, [wife’s counsel] is arguing that it becomes a blind side.” Judge Linfield added: “[H]ad I admitted [the exhibits], the court would deny the motion to modify on discretionary grounds. [¶] I am concerned that there are two things that happened during this case. One, this presentation of evidence today, Mr. Heubeck, isn’t the first time that you have done this. The court has gone through [its notes] on this case. And there are numerous times from looking at my notes where there were [sanctions ordered]. [¶] I have indicated, you know, that other times you’re attempting two bites at the apple.... There is another time... I indicated [that if husband] plays further discovery games, the court was going to come back very heavy on him.... This has really been a recurring pattern to this court.” Judge Linfield also explained he was exercising his discretion to deny the motion because, although father had recently caught up on his child support obligations, he had not paid child support for several years.
We find no abuse of discretion in denying the request for modification. There was no evidence of a change in husband’s circumstances, as opposed to husband’s assertion that his income had been overestimated. In other words, husband was not arguing a change in circumstance so much as a mistake in the original assessment of his circumstances. Given the nature of father’s argument and the history of child support payments, the trial court acted within its discretion in not making the order retroactive.
DISPOSITION
The judgment is affirmed. Wife to recover costs on appeal. The motion for sanctions is denied.
WE CONCUR: FLIER, J., GRIMES, J.