(2009) ___ CA4 ___
3rd DCA, Justice Nicholson
Butte County, Commissioner Glusman
(1) Where Husband and his subsequent spouse owned substantial community assets that generated income, trial court violated Family Code Sec. 4057.5(a)(1)—which prohibits consideration of the income of a subsequent spouse when modifying child support—by considering the half of the community income attributable to the subsequent spouse when it modified father’s child support obligation.
(2) Husband was not entitled to claim a hardship because he did not prove that he would suffer extreme financial hardship if expenses relating to his new children were not considered.
(3) Where the original Order to Show Cause date had been allowed to go off-calendar, the trial court had jurisdiction to order a modification retroactive to the initial date that Wife’s Order to Show Cause modification was filed.
(4) Because Husband was not in the investment business, his capital gains could not be considered income in determining his child support obligation.
The 1995 judgment ordered Husband to pay child support of $506 per month. After the divorce Husband remarried and worked in a family business, taking a partnership draw instead of a salary. Eleven months after Wife filed or Order to Show Cause to increase the child support order Husband quit the family business to work in a startup business of his that was yet to turn a profit. Husband and his second wife were successful in real estate investing, earning more than $3.1 million in 2003 and 2004. That money was invested in a brokerage account in the name of the second wife, who was an attorney.
Wife filed her Order to Show Cause in January 2005, but experienced difficulty in obtaining discovery responses from Husband. The Order to Show Cause was continued nine times, and was ultimately taken off calendar on November 29, 2005. On February 14, 2006, Wife filed a motion in which she requested that her Order to Show Cause be set for trial. At an interim child support hearing on June 13, 2006, the presiding commissioner made an interim child support order and, in his minute order, stated that the matter had been resolved by the parties on November 29, 2005.
Husband was imputed with earned income of $4,166. In addition, Husband was charged with all of the $18,450 per month investment income that he and his second wife were earning. Child support was increased to $1,557 per month, retroactive to January 6, 2005. The trial court refused Husband’s request for hardship deductions for his two children from his second wife.
The trial court disagreed with the commissioner who made the interim order. It held that the Order to Show Cause had not been resolved when the matter went off-calendar, giving it jurisdiction to make the modification retroactive to the date the Order to Show Cause was filed on January 6, 2005.
The trial court refused to treat Husband’s capital gains as income in the calculation of his child support obligation. The court held that the gains were derived from the “liquidation of his capital assets,” not from the operation of a business. The trial court held that to include such gains as income would result in a “spike” in the child support, which would not be in the interest of justice.
Reversed as to Consideration of new wife’s income. Affirmed as to the hardship deduction and retroactivity of modification.
1. New Wife’s Income: Unless the child would suffer extreme and severe hardship, the income of a new spouse cannot be considered in determining child support. Family Code §4008 allows community property of a subsequent marriage to be used to satisfy a child support obligation, but the income of the new spouse cannot be factored in to the calculation of the child support obligation. There was no evidence that the children would suffer any hardship if the new wife’s income were not considered.
2. Hardship Deduction for New Children: A parent can claim the Family Code §4071 hardship deduction if he can show extreme financial hardship. Husband offered no evidence of such hardship. The fact that Wife did not contest the hardship claim was not an implied contract which required the trial court to grant it.
3. Retroactivity of Modification: The interim order recited that the court “. . . retained jurisdiction to ultimately increase or decrease this amount [the interim order] and to make any order retroactive to an earlier date.” The court had jurisdiction at trial to modify the interim order.
4. Consideration of Capital Gains: The trial court properly relied on Perlstein, which held that the proceeds from father’s sale of stock were not income. Only the return on those proceeds, when invested, were to be considered. Wife failed to offer any evidence that the child does not enjoy the same lifestyle when he was with her as when he was with his father. For that reason, the trial court’s order did not violate Family Code §4053, which requires parents to support their children according to their circumstances and station in life and ability to pay. The court referred to the trial court’s observation that Wife has remarried and resides in her husband’s home and when residing with her, [the minor child] lives in a separate unit at the house referred to as a “Casita.
Family Code §§ 4053(child support consistent with parent’s lifestyle and parent’s ability to pay), 4057.5 (new spouse’s income) Travelers Ins. Co. v. Superior Court (1977) 65 Cal.App.3d 751.(retroactivity) In re Marriage of Pearlstein (2006) 137 Cal.App.4th 1361. In re Marriage of Cheriton (2001) 92 Cal.App.4th 269 (capital gains)
Family Code §4057.5(a)(1) provides as follows: “The income of the obligor parent's subsequent spouse or nonmarital partner shall not be considered when determining or modifying child support, except in an extraordinary case where excluding that income would lead to extreme and severe hardship to any child subject to the child support award, in which case the court shall also consider whether including that income would lead to extreme and severe hardship to any child supported by the obligor or by the obligor's subsequent spouse or nonmarital partner.”