Case of the Month Archive

Reductions left her needs unmet . . .

In reversal, First District holds that trial court erred by basing stepdown support order after long-term marriage on (1) wife’s failure to save or invest cash received as her share of sale of community business, and (2) Fam C §4320( l ) provision that spouse shall become self-supporting within period equal to half length of marriage

James Tilghman (Til) West and his wife, Sylvia, were divorced in November 1997 after 20 years of marriage. At the time, Sylvia was a stay-at-home mom caring for their two kids, who were 15 and 5. Til was in the process of selling his insurance marketing corporation, and he earned between $17,775 and $19,750 a month with another company. He and Sylvia subsequently signed an MSA, which provided, among other things, that the proceeds of the sale of the business would be divided between them, with a small amount designated for their older child. After the sale, Til and Sylvia each received $65,000 and a promissory note for $388,388, which would yield quarterly payments of just under $20,000 for six years, at which time the note, plus interest, would be paid in full. In addition, the MSA required Til to pay support of $8,000 a month from January 1, 1997, through March 30, 1997; $9,500 a month from April 1, 1997, through August 31, 1997; and $6,795 a month as of September 1, 1997. It also provided for a support review every six months, and for “appropriate” adjustments to reflect fluctuations in Til’s income. The agreement also contemplated that Sylvia would obtain a college degree in elementary education and teach grade school.

Sylvia graduated from Sonoma State in May 2002, got her substitute teaching credential the following December, and, after taking more classes, passed the CBEST in August 2003. Then, for various reasons, she abandoned her plans to become a teacher and decided to sell real estate instead. Meanwhile, Til’s support obligation had been adjusted three times since 1999, based on the following: Their older son moved in with Til, whose income had decreased; the son then went back to live with Sylvia; Til and Sylvia had issues over her academic progress; and Til allegedly failed to pay the support ordered. By August 2003, Til’s support obligation had been set, per the parties’ stipulation (incorporated into a May 2000 order), at $6,500 a month, with a review permitted on or after September 1, 2002. The payments on the promissory note ceased in spring 2003, but Sylvia did not seek a support mod.

Early in 2005, Til again moved to modify support, claiming that Sylvia’s standard of living was as good as his or better, and that she had been a licensed real estate agent for two years. He asked the court to impute monthly income of $4,000 to her and to reduce support accordingly. In opposition, Sylvia explained that she had realized that even with a teaching credential, her age and the competition she would encounter made her “effectively unemployable” as a teacher. She said she’d chosen real estate sales as a means to earn decent money relatively quickly, and that such a career would give her the time to care for their minor child. At the hearing on Til’s motion, Sylvia’s supervisor testified that she had the potential to succeed in real estate, but that it would take her time to develop clients; she also told the court that Sylvia “had done very well” in earning $15,000 in commissions during the last half of her first year. Til submitted the report of vocational expert Rachel Hawk, who opined that Sylvia would have difficulty finding a teaching job and that real estate was a realistic occupational goal for her. Hawk speculated that Sylvia should earn $31,825 during her second year in real estate, and $33,550 in her third. Hawk acknowledged that it took about two years to get a real estate career going, and said that Sylvia would need financial help during that time. In contrast, the evidence showed that Til earned $404,207 in 2004, and expected to receive draws of $12,800 twice monthly (with commission adjustments) during 2005; he also had an $800 car allowance.

In its decision and order, the trial court found that Til had the ability to pay support, that there was no reason to impute income to Sylvia, and that her choice of a real estate career was in line with her obligation to maximize her earning capacity; it also found that although Sylvia had a “comfortable lifestyle,” she lacked “many extras” that she’d enjoyed under the marital standard of living. The court said it was “puzzled” by Sylvia’s failure to save or invest any of her share of the proceeds from the sale of the corporation, and found that it would be unfair to Til to ignore that when it considered Sylvia’s current lifestyle and financial situation. Relying on Fam C §4320( l ) [support recipient must become self-supporting in reasonable time], the court found that Sylvia should become self-supporting within a period equal to half the length of the marriage, or approximately 10 years. Accordingly, the court ordered Til to pay permanent spousal support to Sylvia of $4,000 a month from January 1, 2005, to January 1, 2006, and $2,500 a month from January 1, 2006, to January 1, 2007, with a stepdown to nothing after that (zero order). The court based its stepdown order on Sylvia’s “favorable earnings outlook,” her receipt of “significant cash assets” from the corporate sale, and the duration of the marriage.

Sylvia appealed, and the First District reversed.

Sylvia changed her mind . . .
Sylvia argued that the trial court should not have ordered a spousal-support mod because there was insufficient evidence of changed circumstances. The panel noted that a showing of changed circumstances is a necessary prerequisite to modifying spousal support, but added that “[t]here is authority” that permits the parties to set forth triggering events that constitute a change of circumstances. The justices recognized that Sylvia and Til had stipulated that either could seek a support review on or after September 1, 2002, but they found that wording ambiguous; it could mean that either one was precluded from seeking a mod before that date despite changed circumstances, or that review was authorized on or after that date whether changed circumstances existed or not. The justices declined to delve any further into that issue, however, because they found that there was other evidence of changed circumstances. The parties’ MSA, they explained, anticipated that Sylvia would become a teacher; when she switched careers and began selling real estate, they concluded, that constituted sufficient changed circumstances to justify a support mod.

Wishing won’t make it so . . .
Turning to the stepdown order, the panel found that such orders “are not per se objectionable” as long as they are based on “reasonable inferences to be drawn from the evidence, not mere hopes or speculative expectations.” Here, the justices continued, the trial court had evidence that Sylvia had already earned real-estate commissions, and her supervisor had faith in Sylvia’s ability to succeed in the field; the court also had an expert’s estimate of her earning capacity in two or three more years. Thus, the lower court could reasonably assume that Sylvia’s income would increase in the future. Moreover, the order did not prevent Sylvia from seeking an upward modification if she could show that her anticipated earnings failed to materialize. Thus, the justices found that the trial court hadn’t erred in making a stepdown order. As for the fact that the order reduced support to zero on January 1, 2007, the justices declined to assume that the lower court was terminating jurisdiction over spousal support; since the order did not clearly state that jurisdiction would terminate on that date, they found that the order did not terminate jurisdiction over spousal support.

Too much, too soon . . .
The panel next reviewed the reasons that the lower court had given for its stepdown order, noting that it had properly considered the various factors required by Fam C §4320. The justices found, however, that two of the three reasons “provide no justification” for the reduction, and the third was just about as shaky. They had already OK'd the stepdown order, based on Sylvia’s rosy expectations for future income, but because Sylvia hadn’t earned anything in the first six months of 2005, they stopped short of approving the reduction in support that the court made retroactive to January 1, 2005. Moreover, the expectation that Sylvia could earn $31,825 at the end of her second year in real estate didn’t justify a support reduction of $48,000 for that year, nor did the projected $33,550 earnings for her third year justify a reduction of $78,000. Sylvia’s undisputed yearly expenses were $102,000, the panel pointed out, and Til clearly had the ability to pay support. Therefore, the justices concluded, the lower court had erred by ordering the stepdown amounts that it had.

For all the wrong reasons . . .
The justices also took issue with the trial court’s second reason for the stepdown: Sylvia’s receipt of “significant cash” from the corporate sale as part of the division of community property. They emphasized that the cash payments from the sale had ceased in the spring of 2003, and that Sylvia hadn’t sought a support increase because of that; thus, she “already was in effect imputing that income to herself.” The panel was at a loss to explain how that reduction in income could justify a decrease in support; moreover, those payments were her fair share of the community property, and they had been awarded to her in addition to spousal support. The justices recognized that in cases such as In re Marriage of McElwee (1988) 197 Cal.App.3d 902, 243 Cal.Rptr. 179, 1988 CFLR 3558, FIRST ALERT #F-88-307, courts have found that a spouse’s failure to properly manage his or her finances may be the basis for refusing to modify or continue support, where the spouse’s share of community property should have been enough to enable him or her to be self-supporting. However, the panel found, those cases were irrelevant because Sylvia hadn’t asked for a support increase after the payments ceased. In addition, the justices said, it wouldn’t be fair to base a support reduction on her failure to save or invest the payments because the trial court had not given her a Gavron warning about having a duty to invest ( In re Marriage of Gavron (1988) 203 Cal.App.3d 705, 250 Cal.Rptr. 148, 1988 CFLR 3793, FIRST ALERT #F-88-337). Therefore, the justices said, the trial court should not have based its stepdown order on the payments that Sylvia received. The lower court also erred, the panel continued, by basing the support reduction on Fam C §4320( l ) [half the length of the marriage rule], since that provision does not apply to marriages of long duration such as this one. Accordingly, the justices concluded that the trial court’s stated factors for ordering reduced support did not justify the stepdown order, and they reversed that order.