Marriage of McHugh CA4/3 ( 2014 )

Filed 10/30/14 Marriage of McHugh CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
In re Marriage of CHARLES D. and
CONNIE A. McHUGH.
CHARLES D. McHUGH,
G048551
Appellant,
(Super. Ct. No. 09D008768)
v.
OPINION
CONNIE A. McHUGH,
Respondent;
ORANGE COUNTY DEPARTMENT OF
CHILD SUPPORT SERVICES,
Respondent.
Appeal from a judgment of the Superior Court of Orange County, Duane T.
Neary, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.
Steven A. Madoni; John L. Dodd & Associates, John L. Dodd and
Benjamin Ekenes for Appellant.
Keith E. Dolnick for Respondent Connie A. McHugh.
Kamala D. Harris, Attorney General, Julie Weng-Gutierrez, Assistant
Attorney General, Linda M. Gonzalez and Ricardo Enriquez, Deputy Attorneys General,
for Respondent Orange County Department of Child Support Services.
* * *
Appellant Charles D. McHugh filed an order to show cause asking the trial
court to reduce his child support obligations because he lost his job as a commissioned
salesman and his new job paid considerably less.1 In opposing Charles’s request,
respondent Connie A. McHugh countered by asking the trial court to increase support
because Charles lost his job for diverting business from his employer to his father’s
competing company for the admitted purpose of minimizing his reported income and
reducing his support obligations. Connie argued the court should increase support based
on Charles’s income at his original job because Charles refused his employer’s offer to
retain him if he fully disclosed his misconduct and paid his employer restitution. The
trial court denied Charles’s request to reduce support and granted Connie’s request to
increase support by imputing income to Charles at the level he earned before engaging in
his misconduct.
Family Code section 4058, subdivision (b), grants trial courts discretion to
set child support based on a parent’s earning capacity rather than actual income if the
court finds the parent has the ability and opportunity to earn income at the level to be
imputed.2 As explained below, this discretion includes imputing income to the parent
1 For clarity, “we refer to the parties by their first names, as a convenience to
the reader. We do not intend this informality to reflect a lack of respect. [Citation.]”
(In re Marriage of Balcof (2006) 141 Cal. App. 4th 1509, 1513, fn. 2.)
2 All statutory references are to the Family Code unless otherwise stated.
2
based on earnings at a prior job, without evidence the parent has the current opportunity
to earn at that same level, if the parent left or otherwise lost the job in a manner reflecting
a voluntary and deliberate divestiture of financial resources required to pay child support
obligations, and imputing income at that level is in the child’s best interests.
We affirm the trial court’s order exercising its discretion to impute income
under section 4058, subdivision (b), because substantial evidence supports the findings
that (1) Charles had the ability and opportunity to keep his job; (2) his termination was a
voluntary divestiture of resources required for child support obligations because of his
misconduct in diverting business to his father’s company to avoid his support obligations
and deliberately failing to satisfy his employer’s conditions for keeping his higher paying
job; and (3) imputing income to Charles was in the child’s best interests.
I
FACTS AND PROCEDURAL HISTORY
Charles and Connie wed in 1992, and have one child who was born in
1996. The couple separated in September 2009, and Charles filed a petition to dissolve
the marriage that same month. Almost immediately, Connie filed an order to show cause
seeking temporary child and spousal support. In November 2009, the trial court granted
Connie’s request, ordering Charles to pay $2,227 in child support and $4,773 in spousal
support each month. The court based its award on Charles’s monthly income of $24,159
as a successful salesman for Amcor Packaging Distribution (Amcor), and Connie’s lack
of income as a stay-at-home mom.
In early 2010, Charles filed an order to show cause seeking to reduce the
amount of temporary child and spousal support based on his reduced income. In his
supporting declaration, Charles explained he suffered a drastic income reduction in
December 2009 when his largest client decided not to renew its contract with Amcor.
According to Charles, he was paid on a commission, and the loss of that client cut his
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income nearly in half. Charles also argued Connie was a licensed attorney and the court
should require her to find employment. In March 2011, the trial court granted Charles’s
request and reduced his monthly child support to $1,275 and his monthly spousal support
to $2,840.
In August 2011, Connie and Charles each filed applications seeking to
change the court’s March 2011 ruling. Connie filed a motion to set aside the March 2011
order, while Charles filed another order to show cause seeking to further reduce his
support obligations. In her motion, Connie argued the March 2011 order should be set
aside because Charles misrepresented his income to the court. In his order to show cause,
Charles argued he suffered another drastic reduction of income because Amcor fired him
in April 2011, and his new job paid considerably less. In response, Connie asked the
court to increase the temporary support by reinstating the original support order.
In November 2011, the trial court conducted an evidentiary hearing on
Connie’s motion to set aside, but it continued the hearing on the other requests. At the
hearing, the court received testimony from Thomas Sarnecki, Amcor’s Vice President of
Workplace Relations and Employment Counsel. Sarnecki explained Charles was one of
Amcor’s top salesmen earning between $137,000 and $597,000 per year during the
period 2003 to 2009. In 2009, Charles asked Amcor to help him reduce his income
because he was about to become embroiled in a bitter divorce and wanted to minimize his
earnings. According to Sarnecki, Amcor told Charles it could reassign him to a lower
paying position, but it would not cooperate with any of his other “more aggressive
approach[es],” such as diverting some of his compensation. Charles therefore remained
in the same position and his compensation arrangements did not change.
In the months following these discussions, Sarnecki testified Amcor noticed
a significant drop in the amount of sales Charles generated. Charles explained the
decrease was due to the downturn in the economy and the lack of competitiveness in
some of Amcor’s bids. Sarnecki explained Amcor initially believed Charles’s
4
explanation because of his past faithful service, but it began investigating him and his
accounts after one of Charles’s customers asked Amcor about the products it had
purchased and Amcor’s records showed the customer had not purchased anything in a
couple of years.
Sarnecki further testified Amcor’s investigators discovered Charles’s father
operated a competing business, Value Added Packaging & Printing, Inc. (Value Added),
and the investigators believed Charles had diverted some of Amcor’s business to his
father’s business. The investigators also believed Charles used one of Amcor’s other
salesmen to close sales with some of Charles’s customers, and then Charles and the other
salesman would share the commission.
In March 2011, Sarnecki and other Amcor executives met with Charles to
discuss the investigators’ findings. During this meeting, Charles admitted he had done a
lot of “‘stupid stuff’” in trying to reduce his income and settle his divorce, including
diverting business to Value Added and entering into improper commission sharing
agreements with another salesman on at least three accounts. Sarnecki further testified
that Charles admitted what he did “‘wasn’t right,’” showed remorse for his actions, and
wanted to “come clean” so he could keep his job.
Based on Charles’s admissions and his many years of successful service,
Amcor offered to retain Charles if he satisfied three conditions: (1) he fully disclosed all
of his misconduct; (2) he paid Amcor restitution for the business he diverted; and (3) he
agreed to a “last chance” employment agreement. Sarnecki thought Charles would
accept these conditions because he appeared remorseful, but Charles refused to pay
restitution or disclose the business he diverted. Instead, he told Sarnecki and the other
executives, “‘ . . . I can’t tell you . . . I know it was wrong . . . You’re going to get mad at
me. . . .’” When Charles refused to cooperate and agree to these conditions, Amcor
terminated Charles’s employment and filed a lawsuit against him, his father, and Value
Added to recover the diverted income.
5
Charles testified to his version of the meetings with Sarnecki and Amcor’s
investigators. Charles admitted he made many of the statements Sarnecki attributed to
him, but he testified those statements were not true. According to Charles, he made those
statements because Amcor’s investigators told him he would have to make those
admissions to keep his job.
In December 2011, the trial court denied Connie’s set aside motion. The
court explained the only permissible ground for granting the motion would be if Charles
defrauded the court by misrepresenting his income. The court found Charles attempted to
divert business from Amcor, but Connie failed to show he diverted any particular
business or the amount of Charles’s actual income when the court made its March 2011
support order. Without evidence showing a specific income that differed from the court’s
earlier findings, the court concluded it could not grant Connie’s motion.
In late 2012, the court conducted hearings on Charles’s request to further
reduce his support obligations and Connie’s counter request to increase his support
obligations. Charles and Connie stipulated the court would decide these requests based
on the testimony it received during the earlier hearings on Connie’s set aside motion. In
February 2013, the court denied Charles request and granted Connie’s: “The Court finds
that [Charles] had the opportunity to continue his employment at AMCOR and that
[Charles] was terminated as a result of his non-cooperation in the investigation into his
own misconduct. The Court finds that his misconduct was part and parcel of his attempt
to lower Child and Spousal Support. Therefore, the Court finds, termination from
AMCOR is deemed an unwillingness to work. (In re Marriage of Regenery (1989)
214 Cal. App. 3d 1367) The Court finds that this order is in the best interest of the child.
[¶] The Court’s other findings are as indicated in the Dissomaster computer printout . . .
attached to this order. This Child Support order commences August 1, 2012.”
The computer printout attached to the court’s order reveals the court did not
use the amount of Charles’s current income at his new job, but imputed monthly income
6
to Charles at the same level he earned at Amcor when the court made its original support
order in November 2009, i.e., $24,159. The court also imputed monthly income to
Connie in the amount of $8,333. Based on these findings, the court ordered Charles to
pay monthly child support of $2,047, nearly an $800 per month increase from the
March 2011 support order and just $180 less per month than the original November 2009
support order. The court’s order did not specify an amount of spousal support. Charles
timely appealed the court’s February 2013 order.
II
DISCUSSION
A. Governing Legal Principles on Child Support and Imputing Income
California has adopted a “statewide uniform guideline” for determining
child support according to a complex formula based on each parent’s income and
custodial time with the child. (§§ 4050, 4055; In re Marriage of Smith (2001)
90 Cal. App. 4th 74, 80-81 (Smith).) The child support amount the formula establishes is
rebuttably presumed to be the correct amount, and the court may order a different amount
only in limited circumstances and only after making certain findings. (§ 4057; Smith, at
p. 81.) Determining the amount of child support therefore is a highly regulated area of
the law, and the only discretion the trial court has is the discretion conferred by statute or
rule.3 (Smith, at p. 81.)
3 Although Charles’s order to show cause sought to reduce both his child and
spousal support obligations and Connie’s counter request sought to increase both
Charles’s child and spousal support, the parties’ briefs only address the child support
order. Accordingly, “[a]lthough the rules pertaining to the imputation of income for
purposes of spousal and child support may differ, . . . we consider any issue that may
pertain to this distinction waived for purposes of this appeal.” (In re Marriage of Eggers
(2005) 131 Cal. App. 4th 695, 699 (Eggers).)
7
The Family Code has granted the trial court discretion when imputing
income to a parent based on his or her “earning capacity.” (§ 4058, subd. (b).)
Specifically, section 4058, subdivision (b) states, “The court may, in its discretion,
consider the earning capacity of a parent in lieu of the parent’s income, consistent with
the best interests of the children.” (Ibid.)
Originally, “the exercise of this discretion was limited to situations where
the parent was found to be deliberately shirking family responsibilities by refusing to
seek or accept gainful employment. [Citations.] No such limitation exists under the
present scheme, however. [Citations.] ‘While deliberate avoidance of family
responsibilities is a significant factor in the decision to consider earning capacity
[citation], the statute explicitly authorizes consideration of earning capacity in all cases,’
consistent with the child’s best interests. [Citations.]” (Smith, supra, 90 Cal.App.4th at
p. 81.)
The Family Code does not define earning capacity, but its meaning has
been established through case law. (Eggers, supra, 131 Cal.App.4th at p. 699.)
“‘Earning capacity is composed of . . . the ability to work, including such factors as age,
occupation, skills, education, health, background, work experience and qualifications; . . .
and an opportunity to work . . . .’ [Citation.]”4 (Mendoza v. Ramos (2010)
182 Cal. App. 4th 680, 685 (Mendoza).) “The ‘opportunity to work’ exists when there is
substantial evidence of a reasonable ‘likelihood that a party could, with reasonable effort,
4 As originally established in In re Marriage of Regnery (1989)
214 Cal. App. 3d 1367 (Regnery), this earning capacity standard included a third prong,
“the willingness to work exemplified through good faith efforts, due diligence and
meaningful attempts to secure employment.” (Id. at pp. 1372-1373.) “Later courts,
recognizing . . . the . . . willingness to work [element] should be taken for granted, recast
Regnery’s three-prong test as a simple two-prong test: ability and opportunity.”
(In re Marriage of Bardzik (2008) 165 Cal. App. 4th 1291, 1302 (Bardzik); State of
Oregon v. Vargas (1999) 70 Cal. App. 4th 1123, 1126 (Vargas).)
8
apply his or her education, skills and training to produce income.’ [Citation.]” (Smith,
supra, 90 Cal.App.4th at p. 82.)
“‘When the ability to work or the opportunity to work is lacking, earning
capacity is absent and application of the standard is inappropriate. When the payor is
unwilling to pay and the other two factors are present, the court may apply the earnings
capacity standard to deter the shirking of one’s family responsibilities.’ [Citation.]”
(Mendoza, supra, 182 Cal.App.4th at p. 685, original italics.) Accordingly, “‘“[t]he only
limitations against imputing income to an unemployed or underemployed parent is where
the parent in fact has no ‘earning capacity’ . . . or relying on earning capacity would not
be consistent with the children’s best interest. . . .”’ [Citation.] In other words, ‘[a]s long
as ability and opportunity to earn exist, . . . the court has the discretion to consider
earning capacity when consistent with the child or children’s best interests. . . .’
[Citation.]” (Vargas, supra, 70 Cal.App.4th at p. 1126, original italics.)
On an application to modify support by imputing income to a parent based
on earning capacity, the burden of proof as to ability and opportunity to earn imputed
income changes depending on which parent—the payor or the payee—is seeking to
change the status quo. For example, “where the payor parent loses his or her job and
seeks a reduction in court-ordered support based on the changed circumstances of lack of
income, it will be the payor parent, as moving party, who bears the burden of showing a
lack of ability and opportunity to earn income.” (Bardzik, supra, 165 Cal.App.4th at
p. 1304, original italics; see also id. at pp. 1308-1309; Eggers, supra, 131 Cal.App.4th at
p. 701.) In contrast, when the payee parent seeks to increase the amount of court-ordered
support by imputing to the payor parent a greater income than the court previously had
ordered, the payee parent, as the moving party, bears the burden of proof to show the
payor parent has the ability and opportunity to earn that imputed income. (Bardzik, at
p. 1294.)
9
The parent seeking to impute income must show that the other parent has
the ability or qualifications to perform a job paying the income to be imputed and the
opportunity to obtain that job, i.e., an available position. The parent seeking to impute
income, however, does not bear the burden to show the other parent would have obtained
the job if he or she applied. (In re Marriage of LaBass & Munsee (1997) 56 Cal. App. 4th
1331, 1339 (LaBass & Munsee); see Bardzik, supra, 165 Cal.App.4th at pp. 1305-1306.)
For example, in LaBass & Munsee, the father sought to modify the existing
support order by imputing a full-time teacher’s salary to the mother even though the
mother was only working as a part-time teacher. The father met his burden to show the
mother’s ability and opportunity to earn a full-time teaching salary by presenting
evidence showing the mother had a teaching credential, the local school district had
multiple openings for full-time teachers with the mother’s background and experience,
and the pay scale for a full-time teacher with the mother’s level of education and
experience. (LaBass & Munsee, supra, 56 Cal.App.4th at pp. 1335-1336.) Based on this
showing, the trial court imputed the full-time teaching salary to the mother. The
appellate court rejected the mother’s argument the award was based on nothing but
“guesswork,” explaining, “[The father] bore no burden to convince the court that [the
mother] would have secured a full-time job had she applied. Rather, it was incumbent
upon [the mother] to show that, despite reasonable efforts, she could not secure
employment despite her qualifications.” (Id. at p. 1339, original italics.)
We review an order establishing or modifying child support based upon
earning capacity for an abuse of discretion. (In re Marriage of Berger (2009)
170 Cal. App. 4th 1070, 1079 (Berger); Vargas, supra, 70 Cal.App.4th at p. 1126.) “[W]e
consider only ‘whether the court’s factual determinations are supported by substantial
evidence and whether the court acted reasonably in exercising its discretion.’ [Citation.]
. . . ‘[W]e do not substitute our own judgment for that of the trial court, but determine
only if any judge reasonably could have made such an order.’” (Berger, at p. 1079.)
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B. We Infer All Necessary Findings Supported by the Record Because Charles Failed
to Request a Statement of Decision
When modifying a support order, the trial court must provide a statement of
decision explaining its ruling if requested by either parent. (§ 3654; In re Marriage of
Sellers (2003) 110 Cal. App. 4th 1007, 1010.) A statement of decision generally must
provide the factual and legal basis for the trial court’s decision as to each of the principal
controverted issues. (Code Civ. Proc., § 632; see Sellers, at p. 1010.)
“Under the doctrine of ‘implied findings,’ when parties waive a statement
of decision expressly or by not requesting one in a timely manner, appellate courts
reviewing the appealed judgment must presume the trial court made all factual findings
necessary to support the judgment for which there is substantial evidence.” (In re
Marriage of Condon (1998) 62 Cal. App. 4th 533, 549-550, fn. 11 (Condon); see In re
Marriage of Starr (2010) 189 Cal. App. 4th 277, 287; In re Marriage of Cohn (1998)
65 Cal. App. 4th 923, 928 (Cohn).) A party who does not request a statement of decision
may not argue the trial court failed to make any finding required to support its decision.
(Ibid.)
Here, Charles waived any objection the trial court did not make necessary
findings because he failed to ask the trial court for a statement of decision. We therefore
imply all findings necessary to support the trial court’s order denying Charles’s request to
reduce his support obligations and granting Connie’s request to increase his support
obligations. (Cohn, supra, 65 Cal.App.4th at p. 928; see Fair v. Bakhtiari (2011)
195 Cal. App. 4th 1135, 1148.)
Citing In re Marriage of Askmo (2000) 85 Cal. App. 4th 1032, 1040, Charles
contends “a statement of decision [was not] required here” because an order on a motion
does not require a statement of decision. He is mistaken. The trial court’s order was not
merely an order on a motion, but rather an order modifying a support order. Section 3654
11
therefore required a statement of decision and Charles’s failure to request a statement
requires us to invoke the implied findings doctrine.
Charles also contends the implied findings doctrine does not apply because
the trial court’s order adequately identified the legal basis for its ruling and the evidence
it considered. To support this contention, Charles cites In re Marriage of Fingert (1990)
221 Cal. App. 3d 1575, 1580, and In re Marriage of Seaman & Menjou (1991)
1 Cal. App. 4th 1489, 1494, fn. 3. In Fingert, the Court of Appeal declined to apply the
implied findings doctrine because the appeal was based on a settled statement of facts,
the trial court’s decision, and the reasons for the trial court’s decision. The Fingert court
concluded the settled statement provided it with the necessary information to decide the
appeal, but the court cited no authority establishing an exception to the implied findings
doctrine for an appeal based on a settled statement.5 (Fingert, at p. 1580.) Seaman &
Menjou followed Fingert without analysis. (Seaman & Menjou, at p. 1494, fn. 3; see also
Condon, supra, 62 Cal.App.4th at p. 549, fn. 11 [following Fingert without analysis].)
None of these cases apply here because Charles does not base his appeal on
a settled statement, but rather on the clerk’s and reporter’s transcripts he designated.
Moreover, although the foregoing cases seek to create an exception to the implied
findings doctrine, several respected treatises explain, “The apparent consensus is that
appellant’s express or implied waiver of a statement of decision on the appealed issues
unequivocally invokes the doctrine of ‘implied findings.’” (Hogoboom & King, Cal.
Practice Guide: Family Law (The Rutter Group 2014) ¶ 15:103, pp. 15-23 to 15-24,
original italics; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter
Group 2014) ¶ 8:24, pp. 8-13 to 8-14; Friedman et al., Cal. Practice Guide:
5 California Rules of Court, rule 8.137 allows an appellant to appeal based on
a settled statement of the trial court proceedings in lieu of a reporter’s and clerk’s
transcript.
12
Landlord-Tenant (The Rutter Group 2014) ¶ 9:267, pp. 9-69 to 9-70.) We therefore
follow the general rule and apply the implied findings doctrine.
C. Charles Failed to Show He Was Entitled to a Reduction in His Support
Obligations
Charles contends the trial court erred in denying his request to reduce his
support obligations because there is no substantial evidence to support a finding he had
the opportunity to keep his job at Amcor instead of taking his new, lower paying job.
Without evidence showing he could keep his Amcor job and continue earning at the same
income level the court used to calculate his support under the March 2011 order, Charles
contends the court erred in refusing to reduce his support obligations to an amount
commensurate with his lower income. We disagree because Charles misconstrues the
burden of proof on his request, and substantial evidence supports the trial court’s ruling.
As the moving party seeking to modify the existing support order, Charles
bore the burden to show not only that he lost his Amcor job, but also that he lacked the
ability and opportunity to keep that job and continue earning at the same level. (Bardzik,
supra, 165 Cal.App.4th at p. 1304; Eggers, supra, 131 Cal.App.4th at p. 701.) Here, it is
undisputed Amcor fired Charles, but it also is undisputed Amcor gave Charles the
opportunity to keep his job if he satisfied three conditions: (1) fully disclosing all
information about his improper conduct; (2) paying Amcor restitution for the business he
diverted; and (3) entering into a last chance employment agreement with Amcor.
Accordingly, to obtain an order reducing his support obligations it was Charles’s burden
to present evidence showing he could not satisfy these conditions, and therefore did not
have the opportunity to keep his job.
On the disclosure condition, Charles contends the “only testimony on this
point” was his testimony stating he was “unable to give [Amcor] what [it] wanted” and
he “didn’t have the information that they were looking for.” Charles acknowledges
Sarnecki testified Charles “avoided directly answering the question[s Amcor asked,] and
13
said things such as, ‘ . . . I can’t tell you . . . I know it was wrong . . . You’re going to get
mad at me . . . .’” According to Charles, this is not substantial evidence he “had the
needed information.” (Original italics.)
Charles, however, ignores Sarnecki’s other testimony that Charles admitted
he (1) diverted business to Value Added; (2) entered into improper commission sharing
agreements with another salesman on at least three accounts; (3) broke the trust Amcor
placed in him; and (4) “what he did ‘wasn’t right.’” Charles also ignores Sarnecki’s
testimony that Amcor learned a customer recently had purchased Amcor products
through Charles, but Amcor’s records showed the customer had not purchased any
products for at least two years. This testimony constitutes substantial evidence
supporting the reasonable inference Charles had the information Amcor sought and
Charles’s testimony to the contrary does not undermine the evidence’s substantiality.
(Leung v. Verdugo Hills Hospital (2012) 55 Cal. 4th 291, 308 (Leung) [“in evaluating a
claim of insufficiency of evidence, a reviewing court must resolve all conflicts in the
evidence in favor of the prevailing party and must draw all reasonable inferences in
support of the trial court’s judgment”].) Moreover, Charles bore the burden to show he
could not provide the information to Amcor, which required him to show he did not have
the information and he could not obtain it. The evidence Charles cites does not satisfy
this burden.
On the restitution condition, Charles faults Connie for failing to present
evidence showing how much restitution Amcor demanded and evidence Charles had the
financial ability to pay the amount demanded. In Charles’s view, the absence of evidence
on these points prevented the trial court from finding Charles could satisfy the restitution
condition, and therefore the court erred in finding Charles had the opportunity to keep his
job. But Charles bore the burden to show he could not satisfy this condition, not Connie.
(Bardzik, supra, 165 Cal.App.4th at p. 1304; Eggers, supra, 131 Cal.App.4th at p. 701.)
14
The lack of evidence on this point is therefore fatal to Charles’s challenge, not the trial
court’s ruling.6
D. Substantial Evidence Supports the Trial Court’s Ruling Imputing Income to
Charles
Charles contends the trial court erred in granting Connie’s request to
increase his support obligations for three reasons. We separately address each of them.
1. Connie Established Charles Had the Ability and Opportunity to Keep His
Job at Amcor
Charles first contends the trial court erred in imputing income to him based
on his Amcor earnings because Connie failed to satisfy her burden that Charles had the
ability and opportunity to keep his job. According to Charles, Connie had to show not
only that Amcor offered to allow Charles to keep his job, but also that he had the means
to satisfy Amcor’s conditions. Charles again misconstrues the applicable burden of
proof, and substantial evidence supports the trial court’s implied finding Connie met her
burden.
As the parent seeking to change the existing support order by imputing
income to Charles at the level he would have earned if he kept his job at Amcor, Connie
bore the burden to show Charles had the ability and opportunity to remain at Amcor.
(LaBass & Munsee, supra, 56 Cal.App.4th at p. 1339; see Bardzik, supra,
165 Cal.App.4th at pp. 1305-1306.) Connie satisfied that burden by submitting
substantial, undisputed evidence showing Charles excelled at that job for most of their
17-year marriage and Amcor offered to allow Charles to keep his job if he fully disclosed
his wrongdoings, paid Amcor restitution for the business he diverted, and entered into a
last chance employment agreement.
6 We do not address the third condition Amcor imposed on Charles keeping
his job—entering into a last chance employment agreement—because Charles’s failure to
show he could not satisfy the first two conditions renders this moot.
15
As explained above, the parent seeking to impute income to the other
parent need only show the other parent had the ability to perform the job earning the
income to be imputed and the job was available. The parent to whom the income would
be imputed bears the burden to show he or she could not secure the job despite reasonable
efforts. (LaBass & Munsee, supra, 56 Cal.App.4th at p. 1339; see Bardzik, supra,
165 Cal.App.4th at pp. 1305-1306.) We explained the rationale for putting this burden on
the parent to whom the income would be imputed in Bardzik: “This rule is grounded in
the commonsense proposition that you can lead someone to a want ad but you can’t make
them apply for the job. . . . Readers need only use a little imagination to think of all the
ways that a parent with both ability to do a job and the opportunity to get it could subtly
sabotage a job application or interview.” (Bardzik, at p. 1305.)
Here, it takes little imagination to think of the many ways Charles could
sabotage Amcor’s offer to allow him to keep his job if he satisfied Amcor’s conditions.
For example, as the trial court impliedly found, he could simply refuse to provide the
information Amcor sought and refuse to pay restitution. Whether Charles could satisfy
Amcor’s conditions lay uniquely within his knowledge and control. It therefore is
reasonable that Charles should bear the burden to show he could not satisfy the
conditions despite reasonable efforts. (See Bardzik, supra, 165 Cal.App.4th at
pp. 1305-1306; LaBass & Munsee, supra, 56 Cal.App.4th at p. 1339.)
As explained above, substantial evidence supports the trial court’s implied
finding Charles could have provided the information Amcor requested, but refused to
provide it. As for the restitution condition, Charles failed to provide any evidence
showing he lacked the financial resources to pay Amcor restitution. Accordingly,
Charles failed to show he could not satisfy Amcor’s conditions and substantial evidence
supports the trial court’s implied finding Charles had the ability and opportunity to keep
his job.
16
2. The Trial Court Had Discretion to Impute Income to Charles Based on His
Previous Earnings
Assuming he had the opportunity to remain with Amcor, Charles contends
the trial court nonetheless erred in imputing income to him at the level he earned in
November 2009 because Connie failed to show he had the current opportunity to earn the
same income. According to Charles, the trial court could not impute income to him
based on his November 2009 earnings without substantial evidence showing not only that
he had the opportunity to keep his job at Amcor, but also the present opportunity to earn
the same income. Neither the law nor the facts support Charles’s contentions.
Under section 4058, subdivision (b), a trial court has discretion to impute
income based on a job the parent previously held depending on the circumstances under
which the parent quit or otherwise left that job. (Eggers, supra, 131 Cal.App.4th at
p. 700; In re Marriage of Padilla (1995) 38 Cal. App. 4th 1212, 1219-1220 (Padilla);
In re Marriage of Ilas (1993) 12 Cal. App. 4th 1630, 1638-1639 (Ilas); Regnery, supra,
214 Cal.App.3d at pp. 1373-1376.)
In Padilla, the father quit a well-paying job to start his own business shortly
before a hearing to determine whether his support obligations should be increased based
on the newly-enacted statutory formula for determining child support. The court ordered
the support to remain the same for six months to allow the father time to start his new
business. At the end of that six-month period, the father had not paid any support, had
not earned any income from the business, and produced no evidence to show the situation
would improve. The trial court therefore increased the father’s support obligations by
imputing income to him based on his earnings at the job he left several months earlier.
(Padilla, supra, 38 Cal.App.4th at pp. 1214-1215.) We affirmed the trial court’s exercise
of its discretion because “‘“[a parent does] not have the right to divest himself [or herself]
of his [or her] earning ability at the expense of . . . minor children.”’ [Citations.]” (Id. at
p. 1218.) Instead, “a child support obligation ‘“must be taken into account whenever an
17
obligor wishes to pursue a different lifestyle or endeavor. . . . [It is] an overhead which
must be paid first before any other expenses. . . .”’ [Citations.]” (Ibid.)
Similarly, in Ilas, the trial court imputed income to a father based on his
earnings from the job he left a year earlier to start medical school. (Ilas, supra,
12 Cal.App.4th at pp. 1633-1634.) The Court of Appeal affirmed, explaining “‘[the
father] did not have the right to divest himself of his earning ability at the expense of [the
mother] and his two minor children. [The father] may wish to undertake and pursue and
continue to pursue his acquisition of a medical doctorate degree, but he must also
continue to pay his child and spousal support.’” (Id. at p. 1639; see Regnery, supra,
214 Cal.App.3d at pp. 1373-1376 [parent quitting job and failing to find replacement
employment for two years supported trial court’s decision imputing income based on
earnings at prior job].)
In Eggers, the parent’s employer fired him for sending sexually
inappropriate e-mails to a coworker. (Eggers, supra, 131 Cal.App.4th at p. 698.)
Although the parent did not quit his job to pursue other endeavors, the trial court
nonetheless relied on Padilla and Ilas to impute earnings because the court viewed the
termination as more “voluntary” than “involuntary” based on the reason for the
termination. (Id. at pp. 700-701.) We reversed because the parent’s misconduct was not
equivalent to voluntarily divesting himself of earning capacity required to pay child
support, as in Padilla and Ilas. In reaching that conclusion, we acknowledged trial courts
have the discretion to impute earnings from a prior job when a parent’s conduct in
quitting the job “reflect[s] a divestiture of resources required for child support
obligations.” We also recognized “[t]here may be situations where the supporting
parent’s conduct warrants considering a claimed involuntary termination of employment
as actually voluntary for purposes of determining the parent’s earning capacity.” (Ibid.)
We concluded, however, the parent’s conduct in Eggers did not rise to that level. (Id. at
p. 701.)
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Here, we conclude the evidence supports the trial court’s decision to treat
Charles’s termination as voluntary and impute income to him at his November 2009
earnings level. Charles did not simply exercise poor judgment on a collateral matter that
resulted in his termination; rather, he engaged in misconduct with the intent to avoid his
child support obligations and refused to accept Amcor’s reasonable conditions that would
have allowed him to keep his well-paying job despite his malfeasance. In deciding to
impute income to Charles, the trial court found he had the opportunity to keep his job,
Amcor fired him because he refused to cooperate with its investigation into his diversion
of business and improper commission sharing agreements, his misconduct “was part and
parcel of his attempt to lower Child and Spousal Support,” and imputing income to
Charles was in the child’s best interests. Substantial evidence supports each of these
findings.
Sarnecki testified Charles approached Amcor in early 2009 and asked for
help in reducing his income because he would soon become embroiled in a bitter divorce.
Amcor refused Charles’s request to conceal some of his compensation from Connie, and
in the months following that refusal Charles’s sales volume dropped significantly.
Charles eventually admitted to Sarnecki and other Amcor executives he had done a lot of
“‘stupid stuff’” to reduce his income and try to settle his divorce, including diverting
some of his Amcor customers to Value Added and entering into improper commission
sharing agreements with another salesman on at least three accounts. Finally, Sarnecki
testified Amcor terminated Charles when he failed to cooperate with the investigation
into his misconduct and provide information about the business he diverted. Charles
testified he made the foregoing statements to Sarnecki and other Amcor executives, but
claimed the statements were not true, explaining Amcor’s investigators told him he had to
make the statements if he wanted to keep his job. The trial court necessarily resolved this
conflict in the evidence in Connie’s favor, and we must defer to the trial court’s
resolution of that conflict. (Leung, supra, 55 Cal.4th at p. 308.)
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Charles cites several cases that hold a trial court’s decision to impute
income to a parent must be based on evidence of a current opportunity to earn the income
to be imputed, and evidence establishing merely that a parent continues to possess the
skills and qualifications that made it possible to earn a certain salary in the past is not
sufficient. (See, e.g., Mendoza, supra, 182 Cal.App.4th at pp. 685-686; Berger, supra,
170 Cal.App.4th at pp. 1079-1080; Bardzik, supra, 165 Cal.App.4th at pp. 1308-1309;
Smith, supra, 90 Cal.App.4th at pp. 82-83; Vargas, supra, 70 Cal.App.4th at p. 1127;
Cohn, supra, 65 Cal.App.4th at pp. 929-931.) None of these cases, however, involves a
parent who engaged in intentional misconduct to reduce his reported income and support
obligations, and then refused to cooperate with the employer when it nonetheless offered
him the opportunity to keep his job despite his malfeasance.
The two cases Charles cites that resemble our case are Berger and Bardzik
because they involved parents who voluntarily left a job. In Berger, we affirmed the trial
court’s decision refusing to impute income to a father based on a well-paying job he held
five years earlier because there was no evidence he had the present opportunity to earn
the same income. In seeking to impute that income to the father, the mother did not
argue the court had discretion to impute income from that previous job based on Padilla,
Ilas, and Eggers. Moreover, the father had quit his well-paying job to start a new
business a year before the couple separated, and there was no evidence suggesting he did
so in anticipation of a divorce or to divest himself of resources he would later need to
meet his child support obligations. (Berger, supra, 170 Cal.App.4th at pp. 1074-1075,
1079-1080.)
Similarly, in Bardzik, we affirmed the trial court’s decision refusing to
impute income to a mother based on a job from which she had retired a year earlier
because there was no evidence showing whether there were current opportunities for her
to earn the same income. The father sought to impute income to the mother solely based
on the salary she had earned before retirement because she had retired at the relatively
20
young age of 42. The father, however, did not rely on Padilla, Ilas, and Eggers, which
granted the trial court discretion to impute earnings from a prior job when the
circumstances showed the parent deliberately abandoned the employment necessary to
pay child support. In addition, there was no evidence the mother retired to divest herself
of resources required to pay child support. (Bardzik, supra, 165 Cal.App.4th at
pp. 1296-1298, 1308-1309.) Because Berger and Bardzik affirmed the trial court’s
exercise of its discretion and did not address the rule we apply here, neither case
establishes the trial court abused its discretion by imputing income to Charles at the level
he earned in November 2009.
Finally, Charles contends the reasons for his termination and his motivation
for acting as he did are irrelevant to the trial court’s decision whether to impute income to
Charles. To support this contention, Charles cites the following statement we made in
Padilla: “A parent’s motivation for reducing available income is irrelevant when the
ability and opportunity to adequately and reasonably provide for the child are present.”
(Padilla, supra, 38 Cal.App.4th at p. 1218.) Charles, however, takes this sentence out of
context, ignores our later clarification of this sentence in Bardzik, and ignores the proper
role motivation may play in the earning capacity analysis.
In Padilla, we declared a trial court’s authority to impute income based on
earning capacity did not require a finding the parent acted in bad faith in reducing or
eliminating his or her income. (See Padilla, supra, 38 Cal.App.4th at pp. 1217-1218.) In
Bardzik, we explained this statement from Padilla was “exuberant dicta” and “[did not
stand] for the blanket proposition that motivation is per se irrelevant” because “[a]n
inflexible rule of per se irrelevance . . . is inconsistent with Family Code section 4058,
subdivision (b)’s treatment of earning capacity as a discretionary matter considering the
best interests of the children.” (Bardzik, supra, 165 Cal.App.4th at p. 1311, original
italics.) Other cases have explained section 4058, subdivision (b), explicitly authorizes a
court to consider earning capacity in all cases consistent with the child’s best interests
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regardless of whether the parent acted in bad faith, but deliberate avoidance of family
responsibilities remains a “‘significant factor’” in deciding whether to consider earning
capacity in lieu of actual income. (See, e.g., Smith, supra, 90 Cal.App.4th at p. 81; Ilas,
supra, 12 Cal.App.4th at pp. 1638-1639.) Accordingly, the trial court properly
considered Charles’s declared intent to reduce his income when it decided to impute
income to Charles based on his November 2009 earnings level.
3. The Trial Court’s Denial of Connie’s Motion to Set Aside Did Not Bar Her
Counter Request to Increase Support
Charles contends the trial court erred in granting Connie’s counter request
to increase his support obligations because her earlier motion to set aside the March 2011
order modifying support raised the same issues and she failed to appeal the court’s denial
of that motion. According to Charles, the doctrine of res judicata prevented Connie from
relitigating the propriety of the March 2011 order. We disagree. Connie’s counter
request did not seek to relitigate the merits of the March 2011 order, but rather to increase
support based on changed circumstances.
“‘As generally understood, “[t]he doctrine of res judicata gives certain
conclusive effect to a former judgment in subsequent litigation involving the same
controversy.” [Citation.] The doctrine “has a double aspect.” [Citation.] “In its primary
aspect,” commonly known as claim preclusion, it “operates as a bar to the maintenance of
a second suit between the same parties on the same cause of action. [Citation.]”
[Citation.] “In its secondary aspect,” commonly known as collateral estoppel, “[t]he
prior judgment . . . ‘operates’” in “a second suit . . . based on a different cause of action
. . . ‘as an estoppel or conclusive adjudication as to such issues in the second action as
were actually litigated and determined in the first action.’ [Citation.]” [Citation.] “The
prerequisite elements for applying the doctrine to either an entire cause of action or one
or more issues are the same: (1) A claim or issue raised in the present action is identical
to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a
22
final judgment on the merits; and (3) the party against whom the doctrine is being
asserted was a party or in privity with a party to the prior proceeding. [Citations.]”’
[Citation.]” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal. 4th 788, 797, original
italics.)
Here, Connie’s motion to set aside the March 2011 support order was based
on her contention Charles lied when he claimed his income had been drastically reduced
because he had lost his largest customer. According to Connie, Charles’s income
remained the same because he had diverted some of his customers to Value Added and
another salesman at Amcor, and therefore the Amcor pay stubs on which the trial court
relied in making the March 2011 order did not accurately state Charles’s income. The
court denied Connie’s motion because she failed to show the amount of Charles’s income
not reflected in his pay stubs. The court explained it appeared Charles was attempting to
conceal income, but the court could not grant Connie’s motion because she failed to
present evidence showing Charles succeeded in his efforts to hide his actual income.
In contrast, Connie based her request to increase Charles’s support
obligations on circumstances occurring after the court issued its March 2011 order.
Connie learned Amcor had fired Charles and filed a lawsuit against him.7 According to
Connie, that lawsuit revealed Charles had been engaging in misconduct designed to
conceal his reported income and thereby reduce his support obligations. Connie argued
the trial court should impute income to Charles in the amount he earned when the court
made its original support order. The trial court granted this request because it found
Charles lost his job based on the scheme he concocted to conceal his true income and
imputing income to Charles at his previous earnings level was in the child’s best interest.
7 Section 213 authorized the declaration Connie filed in response to Charles’s
request to further reduce his support obligations to include a counter request seeking
affirmative relief on her behalf. (See In re Marriage of Seagondollar (2006)
139 Cal. App. 4th 1116, 1127.)
23
Accordingly, the issues the trial court decided on Connie’s two requests are
far from identical. The motion to set aside required Connie to prove Charles’s income on
the date the court issued the March 2011 order differed from Charles’s claimed income.
In other words, Connie had to prove Charles committed a fraud on the court. The counter
request to increase support required Connie to prove Charles had the ability and
opportunity to keep his job at Amcor and imputing the income Charles previously earned
at Amcor was in the child’s best interest. Although the two requests were based on the
same basic set of underlying facts, Charles provides no authority or explanation to show
the requests involved the identical issue. Accordingly, the doctrine of res judicata does
not apply.
III
DISPOSITION
The order is affirmed. Connie shall recover her costs on appeal.
ARONSON, J.
WE CONCUR:
MOORE, ACTING P. J.
THOMPSON, J.
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