Appellate Court has ruled that Trial Court was Wrong

In reversing a Trial Court in Bakersfield, Kern County, California, an Appellate Court has ruled that Trial Court was wrong by allowing depreciation deductions taken on equipment and other assets used in the self-employed Father’s businesses, as listed on his income tax returns, to reduce the amount of his income available for child support and by assuming that the income and expenses reported on Father’s tax returns were correct and thus, placing the burden on Mother to show that Father’s tax returns were incorrect. In the case of In re Marriage of Hein, Mother earned $9,086 per month as a physical therapist working three days a week during the marriage. Father was self-employed as a farm owner and manager and was the sole shareholder and president of two corporations. The assets of the corporations included four ranches totaling 110 acres and Father managed more than 6,000 acres of trees and vines. Father also owned other companies and real estate. He reported wages and salaries of $7,760 per month on his income tax returns.

Mother filed for divorce in May 2003, and their divorce judgment was filed in November 2004. Itincluded provisions for joint custody of their two daughters and did not order either parent to paychild support.

On February 28, 2014, Mother filed a request for modification of child custody and child support and for attorney’s fees and costs. After several days of trial, Trial Court issued a statement of decision that, among other things, determined that it was appropriate to reduce from Father’s gross income depreciation deductions taken by the two corporations on equipment and other assets used in the businesses, that Father’s federal tax returns were presumed correct, and that Mother had the burden of showing that the returns were incorrect. Trial Court also rejected Mother’s request for attorney’s fees, finding that an award would not be appropriate because there was no disparity in the parties’ incomes.

Claiming that Trial Court erred by allowing depreciation deductions to reduce Father’s income available for child support and placing the burden on her to rebut the presumption of correctness of Father’s tax returns, Mother appealed, and in a partially published opinion, California Court ofAppeals has now reversed Trial Court’s decision and has sent the case back to Trial Court for further proceedings consistent with its decision.

The Court of Appeals has ruled that (1) there is no reason to depart from treatment of depreciation deductions in Asfaw (2007) 147 Cal.App.4th 1407, [deduction for depreciation of rental property

is not appropriate] and Rodriguez (2018) 23 Cal.App.5th 625 [deduction for depreciation of motor vehicles is not expenditure required for operation of business and not deducted from income available for child support] in determining whether depreciation for equipment and other assets used in self-employed parent’s businesses should be deducted from income available to Father for child support purposes; (2) Trial Court erred in reducing Father’s available income for child support purposes by allowing depreciation deductions taken on his income tax returns; (3) Trial Court also erred by placing burden of proof on Mother to show that Father’s tax returns were incorrect (Father has greater knowledge of the facts regarding his businesses and expenses and has control over his business financial records); and (4) on these facts, the presumption that Father’s tax returns were correct does not apply. Therefore, the Court of Appeals has reversed and remanded the case back toTrial Court for further proceedings in line with this opinion.

In the unpublished parts of the opinion, the Court of Appeals has vacates Trial Court’s denial of attorney’s fees for Mother and declines to decide Mother’s other issues.

TRIAL JUDGE WAS WRONG IN NOT GRANTING A CONTINUANCE OF HEARING IN A DOMESTIC VIOLENCE CASE

A California Court of Appeals has ruled that a Trial Court was wrong, in a Domestic Violence Protection Act (“DVPA”) case, by refusing to grant a continuance to a Plaintiff who needed one to permit him to serve the opposing party and to give him time to recover from an unforeseen back surgery. In the case of J.M. v. W.T., Plaintiff, on January 8, 2019, filed a request for a DVPA protective order against Defendant. In a supporting declaration, Plaintiff asserted that between December 23, 2017, and March 17, 2018, Defendant committed several acts of domestic violence against Plaintiff (throwing a book at him, calling him offensive names over the phone, punching him with closed fist, biting him during sex, threatening to hurt his dog after the dog preferred Plaintiff to Defendant, and demanding entry to Plaintiff’s condo and then becoming physically out of control). Trial Court issued a Temporary Restraining Order pending the hearing and scheduled a hearing for January 29, 2019.

On January 24, 2019, Plaintiff submitted a written request for a continuance on California Judicial Council Form DV-115, explaining that he had been unable to serve Defendant with the necessary papers and that he was scheduled for spinal surgery on January 28, 2019, after which he would be unable to care for himself, stand or sit for a long period, or think clearly because of the medications. Neither party appeared at the January 29, 2019 hearing, and Trial Court denied the request for a continuance and dismissed the case, commenting that the incidents complained of happened almost a year ago.

Plaintiff appealed Trial Court’s decisions, and now a California Court of Appeals has reversed Trial Court’s decisions and remanded the case back to Trial Court with instructions. The Appellate Court has ruled that (1) under California Family Code Section 245(b), Trial Court must grant a continuance if a party shows good cause for one in writing or orally on the record; (2) the failure to serve the opposing party is grounds for a continuance; (3) here Plaintiff demonstrated good cause for a continuance on these facts; and (4) Trial Court abused its discretion by failing to grant a continuance. Therefore, the Appellate Court reversed Trial Court’s order denying a request for DVPA protective order and remanded the case back to Trial Court with directions to grant a continuance within 30 days of the case coming back to Trial Court.

HUSBAND LIVING IN FAMILY RESIDENCE AFTER SEPARATION OWES WIFE REASONABLE RENT BUT NOT INCREASE IN VALUE OF HOME

A California Court of Appeals has ruled that Watts charges [a party having sole use of both parties’ community property asset, i.e., home, after separation can be charged for that party’s sole use, i.e., reasonable rental value of the home] may be ordered against Husband where Husband lived in his separate property house after the parties’ date of separation and Moore/Marsden formula gave the community a beneficial interest in the house because payments during the marriage were made with community property funds. In the case of In re Marriage of Mohler, Husband bought a house for $168,000, taking title in his sole name in February of 1995, prior to the parties’ marriage. Husband and Wife were married in September of 1998. They lived in the House until they separated on July 2, 2011. The payments on the House were made with community property funds [the parties’ earnings during the marriage] until that date. The principle reduction on the mortgage loan on the House was reduced during the parties’ marriage to the tune of $56,557. After they separated, Husband lived in the House and paid the house payments with his separate property funds [his earnings after the parties’ date of separation].

At trial in 2017, Trial Court valued the House at $530,000. The parties agreed that the Moore/Marsden formula [when community pays for one party’s separate property House during the marriage, the community gets reimbursed based on principle reduction of the loan on the House and appreciation in value of the house during the marriage] should be used to calculate the community property interest in the House acquired by making the mortgage payments. Using that formula, Trial Court calculated that the community property interest amounted to 33.66%, or $172,684 (appreciation value plus mortgage principle reduction). However, Wife argued that the community property interest must be increased to 64.9% to include the six (6) years that Husband lived in the House after the parties’ separation. In essence, Wife was arguing that she had to wait for six (6) years to receive her community property share in the House while Husband was solely enjoying the House and thus, her community property interest should be increased.

Trial Court agreed and re-calculated the community property interest under the Moore/Marsden formula at $332,944, which included Husband’s separate property payments of $52,482 [payments he made on the mortgage after the date of separation]. Husband appealed and now the California Court of Appeals has vacated Trial Court’s order and has remanded the case back to Trail Court with directions as to how to resolve the case.

The Appellate Court has ruled that (1) by making payments on Husband’s separate property House with community property funds [parties’ earnings during the marriage], the community acquired a beneficial interest in House the amount of which is calculated by the application of the Moore/Marsden formula;(2) the community ceases to acquire a beneficial interest in a spouse’s separate property when community property payments stop or date of separation occurs; (3) Trial Court erred by applying the Moore/Marsden formula beyond the date of separation after which Husband made house payments with his separate property [his earnings after the date of separation]; and (4) if any compensation is due to the community by reason of Husband’s living in the House after the parties’ separation, it must be calculated as Watts charges. According to the Appellate Court, “where, as here, the community does not own the property outright but instead maintains a beneficial partial interest in the property due to a Moore/Marsden calculation,” Watts charges may be applied. Therefore, the Appellate Court has remanded the case back to Trial Court for further proceedings in line with this opinion.

WIFE CONVICTED OF DOMESTIC VIOLENCE NOT ENTITLED TO SPOUSAL SUPPORT

A California Court of Appeals has ruled that a Trial Court was not wrong when it denied Wife a spousal support award under California Family Code Section 4325’s rebuttable presumption against spousal support award to a spouse who is convicted of domestic violence. In the case of In re Marriage of Brewster and Clevenger, Husband, an orthopedic surgeon, and Wife, a gynecologist and obstetrician, separated in August of 2011, after 21 years of marriage. Wife filed for divorce.

In March of 2015, Husband filed a request for a temporary spousal support. In his supporting declaration, Husband stated that he had been depositing $10,000 per month into a joint account to cover Wife’s expenses and had been paying the mortgage and property taxes on the parties’ family home, where Wife was living rent free. Husband also asserted that he should not be ordered to pay any spousal support to Wife because she had been charged with “several criminal counts” for harassing him. Wife filed no response to Husband’s request.

After Trial Court set a trial date for October of 2016, Husband filed a trial brief in which he asked Trial Court to take judicial notice of the file in Wife’s criminal stalking case. Husband acknowledged that Trial Court had reserved jurisdiction on his temporary spousal support request, but reiterated his assertion that he should not have to pay spousal support to Wife under Family Code Section 4325 [rebuttable presumption against spousal support award to spouse convicted of domestic violence] and Section 4320 (i) and (n) [spousal support factors regarding domestic violence and any other equitable factors] since Wife had been convicted of domestic violence in January of 2016. He also claimed that Wife was underemployed and could be self-supporting.

Trial Court held four days of trial between October of 2016, and January 2017. At the outset, Trial Court took judicial notice of the minute orders and sentencing hearing in Wife’s criminal case. The parties stipulated on the record that the duck club membership would be assigned to Husband at a value of $65,000. Wife testified that she had been convicted of some criminal counts but did not specify them. However, in her written closing argument, she confessed to having put a non-poisonous python and several rats into the home where Husband was staying.

In rebuttal of the Family Code Section 4325 presumption, Wife testified to three incidents in which Husband had committed domestic violence against her. In the first, Wife claimed that Husband intentionally dislocated her finger when she refused to let go of his shirt during a confrontation; in the second, she alleged that Husband screamed at her, picked her up out of his chair, and threw her across the hallway after she confronted him at his office during business hours about an affair; and in the third, she stated that she had gone to Husband’s office on a Saturday, gained entry with a key she had previously purloined, and surprised him at his desk. In the ensuing conflict, Wife stated that Husband had injured her hip by throwing her down on the thinly-carpeted concrete floor, but had dissuaded her from calling police and begged for forgiveness. In his testimony, Husband claimed that Wife was the aggressor in each incident, that he had merely tried to subdue her, and that he had not noticed the bruises that she had claimed to have received.

Wife also testified to having several medical conditions relating to her shoulders, hands, and feet, as well as to suffering cardiac arrythmias requiring hospitalization after the last incident with Husband. Wife said that most of her conditions had since resolved, but she was unable to perform many of the procedures required in her practice and had begun to offer medical weight reduction treatment to supplement her practice.

After the parties submitted written closing arguments, Trial Court issued a tentative decision and subsequent divorce judgment in which it awarded the duck club membership to Husband at a value of $60,000, determined that the $10,000 payments Husband made were in lieu of spousal support and were taxable to Wife and deductible to Husband, ruled that Family Code Section 4325 applied (Wife had not rebutted the presumption), and set spousal support at zero.

Wife appealed, but after modifying the value of the duck club membership, the California Court of Appeals has affirmed Trial Court’s decisions. The appellate court has ruled that (1) it must deny Wife’s request for judicial notice of documents not presented at trial and not considered by Trial Court in making its judgment; (2) Trial Court was not wrong in applying Family Code Section 4325 presumption or in concluding that Wife failed to rebut the presumption on these facts (Wife filed to introduce documented evidence that she was the victim of domestic violence and statute does not require conviction be for a violent act); (3) Trial Court was also not wrong in declining to order spousal support; (4) Trial Court was also not wrong in finding that Husband’s payments into joint account were in lieu of spousal support (Trial Court did not lack jurisdiction to make temporary support order or retroactive order; Wife was estopped from arguing that payments were not in lieu of spousal support when she took the opposite position at trial); (5) Wife waived her argument regarding taxability of payments by failing to raise that issue at trial; and (6) Trial Court was wrong by valuing duck club membership at $60,000 after parties’ stipulated that its value was $65,000. Therefore, the Court of Appeals modifies the judgment to reflect correct value of the membership and affirms the remainder of the judgment.