David K. Wilkinson Family Law Blog on Lawyers.com

In the unpublished opinion of Marriage of Miller, the Court of Appeals reversed a trial court’s decision to set child support based on an apparently unreliable Income and Expense Declaration filed by the supporting party.

In 2007, Father was ordered to pay child support in the amount of $3,300. The order was based on a 50-50 timeshare, Father’s income of $35,000 per month and Mother’s income of $1,300 from wages and $600 from a Social Security benefit on behalf of the children. In June 2008 Father filed an Order to Show Cause to modify the support. Father filed an Income and Expense Declaration which stated that his income was $34,267 per month as a manager of an LLC.  In support of this income he attached four pay stubs reflecting four bi-weekly pay periods during the months of October through December 2007 and January 2008.  For each pay period Father took a draw of $34,266.67. Father testified in a June 2008 deposition that he did not earn a salary but received pass-through income from an LLC in which he had a 63% ownership. Father disclosed his 2007 K-1 which indicated that the income from the LLC was $1.6 million. However, he explained that his net was only $45,000 as the 1.555 million dollar difference was a “non-cash reinvestment in the growth of the company.”

At the OSC Wife’s counsel objected to Father’s Income and Expense Declaration. Mother’s attorney argued that Father did not comply with the court’s local rules regarding Income and Expense Declarations for employees who are shareholders of closely held corporations. Specifically, he did not disclose the proper W-2s, K-1s and profit and loss statements.

By the time of the OSC, both parties had lodged copious records that encompassed 20 volumes in the court’s file. The trial court was annoyed with counsel for talking over one another and for failing to adhere to the court’s requirements for financial disclosure.

After the court took the matter under submission it found that Father’s income was $35,000 per month and that Mother’s income was $1,400, producing a guideline order of $1,333 per month, or a reduction of $2,000 per month.  Additionally, if Father had overpaid support, Mother had to repay it all by December 2008.
    
The appeals court reversed because it was an abuse of discretion to rely on Father’s unverified Income and Expense Declaration. According to the court, Father misrepresented his gross monthly income when he stated that he took a draw of $34,267 and only provided evidence of one bi-weekly pay period per month. Moreover, Father’s deposition testimony that he earned $1.6 million, while netting only $45,000, was unsupported by records submitted to the court. By failing to calculate Father’s appropriate net disposable income, as required by Family Code §4059 and §4060, the trial court departed from the state’s uniform child support guidelines.

Judges are not accountants. They do not have the time or the resources to analyze every piece of paper presented to them. Accordingly, it is important to provide the court with clear, concise evidence of income and expenses. This reduces the chances of over-litigation and allows the court to make a more informed decision.

 Wilkinson & Finkbeiner are divorce lawyers in Orange County specializing in all family law issues.