Court Opinion

ID: 4657460
Source: CourtListenerOpinion
Date Created: 2021-02-04 18:05:01.305911+00
Date Added: 2024-06-11T08:01:18.638239
License: Public Domain

Filed 2/4/21 Marriage of Heath CA1/5
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                  DIVISION FIVE

 In re the Marriage of JANE and
 TERRY HEATH.

 JANE E. HEATH,
             Appellant,                                                 A157626
 v.
                                                                        (San Mateo County
 TERRY J. HEATH,
                                                                        Super. Ct. No. FAM0119548)
             Appellant.

         This appeal and cross-appeal arise out of the trial court’s June 2019
order granting Terry Heath’s motion to modify child support. We reverse the
order modifying child support, concluding the court erred in considering the
spousal support received by Jane Heath from Terry as a special circumstance
warranting departure from the child support guideline. (Fam. Code,
§§ 4056–4076, 4057, subd. (b)(5).)1 On remand, the court must recalculate
the amount of child support payable from Terry to Jane from September 1,
2016 until each child reached the age of majority.

        Undesignated statutory references are to the Family Code. We refer
         1

to the parties by their first names for convenience and clarity, intending no
disrespect.

                                                               1
              FACTUAL AND PROCEDURAL BACKGROUND
      Jane and Terry married in 1992. They have two daughters, one born in
1999 and another born in 2001. The family lived in California, then moved to
New Jersey. In 2010, Jane and Terry divorced. A judgment of divorce
entered in New Jersey incorporated the parties’ settlement agreement.
Pursuant to that agreement, Terry agreed to pay Jane spousal support of
$130,000 per year. Subject to exceptions not relevant here, this amount was
not modifiable until the late 2020s. Terry also agreed to pay Jane annual
child support of $25,000 until each child reached the age of 23, if the child
was attending secondary school, vocational training, or college. The child
support award was subject to modification based on the laws of California,
where the parties agreed Jane could move.
      Jane moved to California and sought an upward modification of child
support. In 2013, the parties entered a stipulated order in San Mateo
Superior Court requiring Terry to pay monthly child support of $2,500 per
child until each child “reaches age 19, or reaches 18 and is not a full time
high school student, whichever occurs first.” At that time, Terry was earning
$375,000 annually.
                                       A.
                     Terry’s Motion to Modify Child Support
      In August 2016, Terry moved to modify child support. He argued a
downward modification of child support was warranted because he had lost
his job and his severance had expired. Terry also urged the court to order
Jane to seek full-time employment. Jane agreed to guideline child support
but opposed the seek work order. Among the reasons for her opposition, Jane
noted she had custody of the children 84 percent of the time and that her only
income was spousal support.

                                       2
      Shortly after filing the motion, Terry began a new job as chief executive
officer for Sciens Building Solutions (Sciens). His annual salary was
$200,000. Terry was eligible to receive an annual bonus of up to $150,000,
and his compensation package included shares of his company’s stock. Terry
had liquid assets of $392,000.
      At the September 2016 hearing on the motion, the parties discussed
Terry’s stock. Terry’s counsel acknowledged Terry received “preferred stock.”
When the court asked “how much,” Terry responded: “150,000 preferred
stock, which . . . can’t be sold until the company . . . sells itself.” Terry
explained, “it’s not money that I have access to, but I was required to
invest . . . in the preferred stock of the company.” Later, Terry’s attorney
stated the stock was worth “[n]othing right now.”
      Terry’s counsel urged the court to deviate from the child support
guideline under the “special circumstances” exception in section 4057,
subdivision (b)(5), arguing Terry would have little disposable income after
paying nonmodifiable spousal support. Counsel for Jane objected, noting
Terry had made a decision to take a lower-paying job and that Jane was
already using her spousal support to care for the children. According to Jane,
deviating from the child support guideline was not in the children’s best
interest.
      The court agreed with Terry. It concluded that setting the child
support at the guideline—$3,479—would leave Terry with net income of
$1,069 and Jane with net income of $11,693. This result, the court observed,
was not in the best interest of the children because it would not leave Terry
with sufficient funds to provide for his own housing. The court set the child
support payment at $0 but ordered Terry to pay Jane $2,000 per month in

                                          3
child support as an “advance” against his potential bonus or other income.2 If
Terry did not receive a bonus, or if he received a lower bonus, the monthly
advances would be credited “for whenever he is making more money to offset”
against future child support obligations.
      Next, the court “allocate[d] 10 percent of the stock [Terry] received
as income.” When the stock could be sold, Terry was ordered to “cash
those stocks” at Jane’s request “for the minor children.” The court further
ruled that income Terry received in addition to his base salary—such as a
bonus—would be allocated to child support pursuant to an Ostler-Smith3
schedule.
      Finally, the court declined to impose a seek work order because Terry
was not behind on child support payments. The court also observed that
while Jane could work while the children were in school, her employment
would have little effect on Terry’s child support obligation because Jane had
custody of the children 84 percent of the time. However, the court invited
Terry to seek a vocational evaluation of Jane, who had not worked in 17
years. Terry did not purse this offer.
      Terry did not object to any of these rulings. The court directed counsel
to submit a proposed order.

      2  The court announced its decision to order the $2,000 per month
“advance” immediately after asking Terry how much money he had in the
bank. Terry replied, “[$]380,000.” This suggests that, though the court felt
Terry’s income was insufficient to pay guideline support, Terry had savings
from which to pay the “advance” until such time as he received his
anticipated bonuses.
      3 In re Marriage of Ostler & Smith (1990) 223 Cal.App.3d 33, 37 holds a
trial court has discretion to order the supporting spouse to pay an additional
sum for spousal and child support based on a percentage of future bonuses
that spouse receives.

                                         4
                                       B.
                          March 2019 Written Order
      Over the next two and a half years, counsel exchanged proposed orders
but could not agree on the language regarding Terry’s stock. The parties
submitted their own proposed orders to the court in March 2019. Terry’s
proposed order stated that pursuant to his employment contract, he received
cash for the mandatory purchase of Sciens “Series A Preferred Stock.”
Terry’s order further stated that he would pay Jane additional child support
comprised of “10% of the value of the [s]tock upon an income producing
event,” such as when the stock “becomes sellable, or if the [s]tock is otherwise
liquidated or cashed-out.” Jane’s proposed order stated Terry “had received
$150,000 in cash for the purchase of 150,000 shares of Stock.” Jane’s order
stated Terry would pay, as additional child support, “10% of the shares of
Stock received by Father.”
      A few days later, the court issued a written order. The order states the
child support award is “$0 per month” based on the special circumstance
(§ 4057, subd. (b)(5)) that Terry paid $130,000 in nonmodifiable spousal
support and a guideline order would result in him having less than $1,000 in
net income and Jane having in excess of $11,500. According to the court, a
guideline order would leave Terry with insufficient funds to care for the
children during his custodial time.
      The court awarded non-guideline child support of $2,000 per month as
an “advance against the additional child support owed by [Terry] from
anticipated bonuses and additional income . . . at his new job. If there is no
bonus or additional income, then the amounts advanced as child support will
roll over to when [Terry] makes more money.”

                                       5
      Regarding Terry’s stock, the court determined “[a]s part of his
employment contract, [Terry] received 150,000 shares of Sciens Series A
Preferred Stock. The Court considers this stock award as income and as
such, allocates 10% of that stock to [Jane] as additional child support.” The
court ordered Terry to “hold that 10% of stock in trust for [Jane] until such
time as the shares are exercisable. [¶] [Terry] shall inform [Jane] promptly
when the stock becomes exercisable at which point [Jane] can tell [Terry] to
sell the block of shares he is holding on her behalf. [¶] If [Terry] sells the
rest of the shares, he can sell [Jane’s] too, if she agrees. [¶] Any further
awards of stock or cash to buy stock shall be treated similarly.”
      The court denied Terry’s request for a seek work order, concluding such
an order was appropriate only where Terry was “behind in his child support
payments and he is current.” The order was effective September 1, 2016
until “further order of the court or as set forth in the [divorce] judgment
filed . . . in New Jersey.”
                                        C.
            Reconsideration Motion and June 2019 Amended Order
      Terry moved for reconsideration on several grounds. As relevant here,
Terry argued the duration of child support set forth in the court’s order
contravened the parties’ April 2013 stipulated order. Terry also claimed the
number of stock shares in the order was incorrect because he received 250
shares of Sciens stock, not 150,000. Terry offered a supporting declaration
explaining how much stock he owned.
      In June 2019—before the hearing on the reconsideration motion—the
court amended the March 2019 order “sua sponte.” The amended order—now
consistent with the 2013 stipulated order—directed Terry to pay child
support until each child reached the age 19, or reached the age of 18 and was

                                        6
no longer a full-time high school student, whichever occurs first.4 The court
did not modify the March 2019 order in any other respect. Shortly thereafter,
Terry withdrew his reconsideration motion.
      Both parties timely appealed.
                                  DISCUSSION
      “A trial court’s determination to grant or deny on a request for
modification of a child support order will be affirmed unless the trial court
abuses its discretion, and it will be reversed only if prejudicial error is found
from examining the record below. [Citation.] [¶] Under this standard, we
consider only ‘whether the court’s factual determinations are supported by
substantial evidence and whether the court acted reasonably in exercising its
discretion.’ [Citation.] ‘We do not substitute our judgment for that of the
trial court, but confine ourselves to determining whether any judge could
have reasonably made the challenged order.’ ” (In re Marriage of
Macilwaine (2018) 26 Cal.App.5th 514, 527.)
      However, the trial court’s discretion is not boundless. The
“ ‘determination of a child support obligation is a highly regulated area of
the law, and the only discretion a trial court possesses is the discretion
provided by statute or rule. [Citations.]’ . . . [T]he trial court’s discretion
is not so broad that it ‘may ignore or contravene the purposes of the
law regarding . . . child support.’ ” (In re Marriage of Cheriton (2001)
92 Cal.App.4th 269, 283, superseded by statute on other grounds as stated
in In re Marriage of Morton (2018) 27 Cal.App.5th 1025, 1049.)

      4 As Terry acknowledges, child support terminated before the trial
court issued the amended order.

                                         7
                                        I.
                                 Jane’s Appeal
      Jane contends the court erred by departing from the child support
guideline and setting monthly support at $0. According to Jane, the child
support order “is contrary to established law” because spousal support
received from a party to the child support proceeding is not a special
circumstance justifying departure from the guideline. We agree.
      To place the issues in context, we begin with some brief background
on the statutory scheme governing child support orders. “Child support
awards in California are governed by the legislation that established a
statewide uniform child support guideline.” (In re Marriage of Hein (2020)
52 Cal.App.5th 519, 527 [citing §§ 4050–4076].) Courts must “ ‘calculate
child support under the statutory guidelines. [Citation.] . . . “[T]he trial court
may not depart from them except in the special circumstances enumerated
in the statutes. [Citations.]” [Citation.] The guideline amount of child
support, which is calculated by applying a mathematical formula to the
parents’ incomes, is presumptively correct.’ ” (In re Marriage of Sorge (2012)
202 Cal.App.4th 626, 640–641.)
      The mathematical formula turns, in relevant part, on each party’s
disposable income. Disposable income, as a general matter, is calculated by
subtracting certain statutorily approved deductions (§ 4059) from the party’s
statutorily defined gross income (§ 4058). (In re Marriage of Hein, supra,
52 Cal.App.5th at p. 528.)
      “A deviation from the guideline amount may be appropriate where
‘[a]pplication of the formula would be unjust or inappropriate due to special
circumstances in the particular case.’ ” (In re Marriage of Sorge, supra,
202 Cal.App.4th at p. 641 [quoting § 4057, subd. (b)(5)]; In re Marriage of

                                        8
Rodriguez (2018) 23 Cal.App.5th 625, 636.) The statute enumerates several
nonexclusive special circumstances. (§ 4057, subd. (b)(5)(A)–(D).) “ ‘The
“special circumstances” exception of section 4057, subdivision (b)(5) gives the
trial court “considerable discretion to approach unique cases on an ad hoc
basis.” ’ [Citations.] A trial court has ‘broad discretion’ to determine when
special circumstances apply.” (Rodriguez, at p. 636.) But the exercise of
discretion under section 4057, subdivision (b)(5) is not “open-ended. Courts
have no discretion to make a ‘special circumstances’ adjustment in guideline
support that is itself forbidden by the statute.” (Hogoboom & King, Cal.
Practice Guide: Family Law (The Rutter Group 2020) ¶ 6:151.1.)
      In re Marriage of Corman (1997) 59 Cal.App.4th 1492 (Corman) is
directly on point. There, the court conducted a lengthy statutory analysis
and concluded spousal support paid by one party to another may not be
included in the recipient’s gross income. (Id. at p. 1500.) Corman further
held that because the statutory scheme does not permit the consideration of
that spousal support in the determination of disposable income, a court
cannot consider such support as a special circumstance justifying departure
from support guidelines. (Id. at pp. 1495, 1501–1502.) The Corman court
also noted that including such support as income to the recipient would, in
that case, result in a de facto modification of the nonmodifiable spousal
support order for which the parties had bargained. (Id. at p. 1501.)
      As in Corman, the court determined guideline support was
unwarranted because Terry would have little disposable income after paying
spousal support and child support to Jane. In effect, the court concluded
Jane’s receipt of nonmodifiable spousal support from Terry was a special
circumstance warranting a departure from the statutory guideline. This was
improper. Under Corman, a court may not consider spousal support received

                                       9
from a party to the child support proceedings as a special circumstance
justifying departure from the guideline under section 4057. (Corman, supra,
59 Cal.App.4th at p. 1495.) Terry incorrectly argues that this holding in
Corman is dictum.
      However well-intentioned, the trial court’s decision to depart from the
statutory guideline based on Jane’s receipt of spousal support payments was
erroneous. (In re Marriage of Butler & Gill (1997) 53 Cal.App.4th 462, 465
[“the only discretion a trial court possesses” in fixing child support “is the
discretion provided by statute or rule”]; In re Marriage of Wood (1995)
37 Cal.App.4th 1059, 1069 [reversing child support order where court made
adjustment to guideline support “specifically forbidden” by the Legislature],
disapproved on other grounds in In re Marriage of Fellows (2006) 39 Cal.4th
179, 187.)
      We reverse the child support order and remand for the court to
reconsider the issue of child support payable by Terry to Jane without
consideration of the nonmodifiable spousal support. (Corman, supra,
59 Cal.App.4th at p. 1502.)
                                        II.
                                 Terry’s Appeal
      A.     Stock Award
      Terry challenges, on several grounds, the portion of the child support
order awarding a percentage of his stock to Jane. Terry begins by arguing
the court’s order is erroneous to the extent it indicates he possessed 150,000
shares of stock. Essentially, he contends the court misinterpreted his
comments at the hearing, and that he meant he had received $150,000 worth
of shares. To support this argument, Terry has moved under Code of Civil
Procedure section 909 for this court to consider additional evidence as to the

                                        10
amount of stock he received. We deny the motion as unnecessary. The
essential portion of the court’s order was the percentage of stock awarded to
Jane, not its overall quantity or value. Moreover, any error in the amount of
shares is easily correctible by the trial court on remand.
         Next, Terry contends the stock was not income because “it was not an
element of his compensation.” We disagree. There was no dispute in the trial
court that the stock was part of Terry’s compensation package.5 He was
required to purchase stock in the company with a portion ($150,000) of the
money he received as compensation. In the trial court and on appeal, Terry
contends the stock—though it was purchased with cash—had no present
value because it could not be sold until some future date.6 There is no
suggestion here that Terry intentionally received a portion of his
compensation with limited present value but potentially greater future value
in order to shelter that income from a child support award calculation.
Nonetheless, intentional or not, if the portion in question is an asset
representing available income to the parent, it is properly included in a child
support award. (See In re Marriage of de Guigne (2002) 97 Cal.App.4th 1353,
1363.)
      Here, the money converted into actual stock with no current value is
the functional equivalent of the stock options considered in In re Marriage of
Macilwaine, supra, 26 Cal.App.5th 514, or the deferred salary in In re
Marriage of Berger (2009) 170 Cal.App.4th 1070. “Once restrictions on
exercise and sale are removed, [husband’s] stock options are not materially

      5 Additionally, his briefing on the motion for additional evidence and its
attachments concede that the stock was, to a large extent, compensation, as
did his own declaration in support of the motion for reconsideration.
      6The exact nature of this future event was not clear, but the trial court
accepted this assertion and considered it as part of its order.

                                       11
distinguishable from the salary voluntarily deferred (and reinvested in the
employer) in Berger; a vested, mature stock option makes objectively
measurable compensation immediately available to [husband]. In deciding to
hold the options, rather than exercise and sell them, [husband] invests this
compensation in the employer, in hopes of increased future returns. While
[husband] is free to make whatever investment choices he desires, his choices
do not alter the fact that, once an option is vested and mature, his employer
has made actual compensation available to him.” (Macilwaine, at p. 532, fn.
omitted.)
      Those are essentially the circumstances before us. Terry was required
to reinvest a portion of his salary in the company. Restrictions on this
investment rendered it of no present value, but of some potential future
value, which the trial court appropriately recognized: “The Court considers
this stock award as income and as such, allocates 10% of that stock to [Jane]
as additional child support. [¶] [Terry] shall hold that 10% of stock in trust
for [Jane] until such time as the shares are exercisable.” Here, the court
considered the unique circumstances regarding Terry’s income and exercised
its broad discretion to make a child support order using a percentage of the
stock when it could be sold and a financial gain realized. This was not an
abuse of discretion. (See In re Marriage of Berger, supra, 170 Cal.App.4th at
p. 1084 [in assessing earning capacity, a trial court may take into account
earnings from invested assets]; In re Marriage of Ostler & Smith, supra,
223 Cal.App.3d at pp. 37, 51–52 [affirming use of a percentage of obligor
parent’s future bonuses when calculating child support].)
      Relying on In re Marriage of Kerr (1999) 77 Cal.App.4th 87 (Kerr),
Terry contends the court erred in the award of stock by not setting “a cap
such that the amount would not exceed the children’s reasonable needs.” In

                                      12
Kerr, the child support award was comprised of a percentage of the husband’s
postdissolution stock option income from his employer. (Id. at pp. 90, 92, 97.)
In a three-year period, and while the children were still minors, the stock
options increased in value twentyfold, and the husband objected that the
stock option percentage thus exceeded the children’s needs. (Id. at pp. 90, fn.
1, 92.)
      The appellate court agreed. It concluded the extraordinary increase in
value was a “unique circumstance[]” which rendered the use of a percentage
without regard to the needs of the minor children erroneous. (Kerr, supra,
77 Cal.App.4th at pp. 90, 97.) Kerr is distinguishable. When the court issued
the child support order, Terry’s stock had not drastically increased value like
the stock in Kerr. Moreover, in the trial court, Terry never objected to the use
of the 10 percent figure or suggested the child support award exceeded the
children’s needs. On appeal, Terry does not contend the percentage figure is
inappropriate. Instead, he concedes that “[a]n order awarding Jane 10% of
any monies [he] netted from the sale of his stock during the [children’s]
minority would have been appropriate.”
      Terry claims the court erred to the extent the stock awarded might not
be sold until after the children reach majority. However, whether the
custodial parent realizes the income during the children’s minority is of no
moment. The support order is meant to compensate the custodial parent
for the cost of the children’s care. (See In re Marriage of Lackey (1983)
143 Cal.App.3d 698, 706.) There is no reason Jane cannot recoup some of
these expenses after the children reach majority. Additionally, the children
are entitled to share in the supporting spouse’s greater, post-dissolution
standard of living, to the extent reasonably necessary to meet their needs.
(Kerr, supra, 77 Cal.App.4th at pp. 95–96.) To accept Terry’s argument

                                       13
would encourage parents to defer the realization of income until after the
children reach majority.
      The children have, of course, aged out. On remand, the court can easily
determine what stock was purchased as part of Terry’s compensation during
each child’s minority and fix that figure based upon the 10 percent award.7
We disagree with Terry’s speculation that the court’s award can be read to
include any stock he has ever purchased in the company. The award plainly
pertains to stock received as income, i.e., as part of compensation.
      B.    The Monthly “Advance”
      Terry also challenges the portion of the child support order awarding
Jane $2,000 per month as “an advance against the additional child support
owed by [Terry] from anticipated bonuses and additional income received at
his new job. If there is no bonus or additional income, then the amounts
advanced as child support will roll over to when [Terry] makes more money.”
      The children have reached the age of majority, and Terry’s obligation to
pay the advance has ended. If he did not pay the advance during the
intervening years, he has nothing to complain of now. If he did pay the
advance, he would be entitled to a credit against any support owing. On

      7  For the first time on appeal, Terry complains the stock award does not
step down to account for the older child reaching majority. This issue is
easily rectified on remand. Terry’s other challenges to the stock award are
not persuasive. His claim that, as separate property, the stock is not subject
to a child support order, is wrong. A trial court may award separate property
as child support. (In re Marriage of Braud (1996) 45 Cal.App.4th 797,
812.) Lastly, by allocating some of Terry’s stock to Jane, the court did not
make an unauthorized “add-on[]” to child support. Sections 4061 or 4062,
which come into play when the court awards child support “beyond the
guideline amount” (In re Marriage of Lusby (1998) 64 Cal.App.4th 459, 467,
italics added), do not apply here because the child support order did not
exceed the guideline.

                                       14
remand, the trial court can determine the amount of advances paid and give
Terry a credit for that amount.
      C.    Seek Work Order
      Terry’s final claim is that the court erred by denying his request to
order Jane to seek employment. We disagree. Terry asked the court to order
Jane to seek work. He did not follow the court’s lead and obtain a vocational
evaluation of Jane. To the extent Terry argued below that income should be
imputed to Jane, he failed to present evidence on that point.
                                  DISPOSITION
      The June 2019 order modifying child support is reversed. On remand,
the court must recalculate the amount of child support payable from Terry to
Jane from September 1, 2016 until each child reached the age of majority.
The court should also apply any credit earned by Terry from the payment of
an “advance” and may modify the portion of the order pertaining to the award
of stock as would be consistent with this opinion. In the interests of justice,
the parties are to bear their own costs on appeal. (Cal. Rules of Court, rule
8.278(a)(5).)

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                                         _________________________
                                         Reardon, J.*

WE CONCUR:

_________________________
Simons, Acting P. J.

_________________________
Burns, J.

A157626

     * Judge of the Superior Court of Alameda County, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.

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