Some people will fight over anything. This is particularly true in Riverside County, where the California Court of Appeal recently had to decide whether to approve the decision of a divorce judge increasing child support for the parties’ 17-year-old child by $118 a month.
The amazing thing about this case, entitled Marriage of Nigro, is that both the mother and father are attorneys. Normally, it is not worth it to go to court to fight over such a small increase in child support and most attorneys would advise their clients of this fact. But then these folks themselves are attorneys, and maybe it was the principle of the whole matter. In the end, the appeals court voted 3-0 to reverse the decision of the family law judge, claiming that his decision to impute a higher amount of income to the ex-husband, who is in private practice for himself, was not supported by evidence in the record.
Specifically, the judge decided that a “more reasonable profit margin was 55% rather than 48%”. As the appeals court noted in its 25 page decision, “in setting this new profit/loss ratio, the trial court provided no explanation for essentially decreasing the monthly average expenses from the current rate of 52% to 45% (a 7% reduction in business costs) in order to achieve the 55% profit margin. The trial court cannot calculate imputed income based on figures taken “from thin air”.
The evidence from the husband had been that 52% of the gross receipts from his business went to expenses, including the secretary who cost $90,000 a year. The appeals court agreed with the judge that there was a need to impute income to the husband based on the evidence presented. However, it seems that the justices were bothered by the fact that the judge simply chose a number or a percentage without relying on specific evidence as to what that number or percentage should be.
At the end of the day, the court said “we believe the appropriate profit loss margin for an established 26-year-old law firm is a complex financial issue requiring a greater degree of training, skill, and business model expertise that is possessed by most laypersons. We can only speculate about whether it was reasonable for Thomas to continue paying over $2,000 a month to rent office space, over $1,000 in automobile expenses and over $8,000 a month in personnel expenses when Thomas’s take-home pay was sometimes less than the base pay of his legal assistant. On remand, the court may appoint a forensic accountant or other financial legal expert to evaluate Thomas’s desired business model to continue earning less than 50% of his gross income”.
The appeals court noted that it would be expensive to hire a forensic expert and that it might not be worth it to do so given that only $118 a month was at stake. However the court said it would be up to the parties to decide whether to simply settle or to go forward in the way the court had directed.
What makes this case even more interesting is that the child in question is 17 years old which means that child-support would end under California law in the not too distant future anyway.
When one talks about “imputing” income to a person, he or she means to enter into the computer formula that calculates child support a number that represents what the person could be earning rather than what the person is actually earning. The case discussed in this posting is complicated because the individual is self-employed. In many cases involving the issue of whether to impute income, the person who faces imputation has no income at all. In that type of case, the formula for imputation is fairly simple. It must be determined what type of skills or ability the person has; and whether there are jobs in the geographic area in that skill area. Also, the court must decide whether it is in the best interest of the children to impute income to the parent.
This is why those who think that child support is a simple process that involves a judge’s plugging in numbers are not correct; the issue of what numbers to plug in in the first instance is often complicated.
In the final analysis, nobody really won in this appeal because though the increase in child support of $118 was set aside at least for the time being, the mother who was the respondent on appeal was awarded costs in the appellate process, a common practice under California law. And now both parties have to go back to the drawing board.
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