B.S. v. S.S. (In re Marriage of B.S.)

1

In re the Marriage of B.S. and S.S.

B.S., Respondent, v. S.S., Appellant.

D077728

California Court of Appeals, Fourth District, First Division

January 3, 2022

NOT TO BE PUBLISHED

APPEAL from an order of the Superior Court of San Diego County No 18FL010584C, William J. Howatt, Jr., Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Motion to dismiss appeal denied; order affirmed.

Stephen Temko for Appellant.

Bickford Blado & Botros and Andrew J. Botros for Respondent.

O'ROURKE, J.

Appellant S.S. appeals from an April 2020 order on his request to modify and reduce child and spousal support to respondent B.S. The family court reduced combined support from $40, 000 per month to $15, 000 per month, including an upward deviation of child support from the guideline $7, 367 amount to $10, 000 based on the parties' children's various needs. The court declined to make its order retroactive to the date S.S. filed his modification request. S.S. contends the court reversibly erred by these rulings because he did not have the actual income to pay the ordered support, and the court failed to adequately consider his inability to pay given his litigation costs and living expenses.

B.S. moves to dismiss S.S.'s appeal under the equitable disentitlement doctrine, which gives an appellate court the ability to stay or dismiss the appeal of a party who has refused to obey court orders. (In re Marriage of Hofer (2012) 208 Cal.App.4th 454, 459; United Grand Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 166.) We elect to address S.S.'s appeal, and thus deny B.S.'s motion. On the merits, we affirm the order.

FACTUAL AND PROCEDURAL BACKGROUND^[1]

S.S and B.S. were married in 2001 and had three children during the marriage. In September 2018, while the children were minors, B.S. petitioned for dissolution of the marriage and sought a domestic violence restraining order. On the day B.S. served her petition, S.S. transferred to his mother $3 million out of a bank account he owned jointly with his father.^[2] The parties eventually entered into a stipulation to appoint Judge William Howatt as a privately compensated temporary judge in their matter. According to financial documentation and information S.S. provided to his expert accountants, he does not receive a salary; his primary source of income is distributions from his ownership interest in five hotel properties held in separate limited liability companies (LLCs).^[3] S.S. primarily invests in hotel properties with the plan to upgrade and refinance them, then make distributions to himself and his partners after the properties are fully leveraged and sold. His primary income is from the distributions from the hotels' operation through his investment in an LLC with another individual.^[4]

In early July 2019, Judge Howatt considered S.S.'s request for order regarding temporary child and spousal support, which was the subject of a prior order by another superior court judge. Finding the court had made several errors in its prior support order, Judge Howatt ordered that S.S. pay temporary child and spousal support of $25, 000 and $15, 000 per month respectively, retroactive to July 1, 2019. It ordered the erroneous prior order for $70, 000 in monthly combined child and spousal support corrected to $40, 000 per month retroactive to March 1, 2019, "with all arrears payable forthwith."^[5] In reaching his decision, Judge Howatt calculated guideline child support to be approximately $10, 000, but found an increase to $25, 000 was appropriate based on the marital standard of living, S.S.'s "past ability [to pay], if not present income available for support" and the children's best interests.

On August 1, 2019, S.S. filed another request for order relating to child and spousal support. He asked the court to modify child and spousal support downward "based on [his] actual earnings, B.S.'s ability to earn working full time, and [their] respective timeshare with the children." According to S.S., his yearly taxable income from 2013 to 2018 fluctuated greatly for various reasons. S.S. claimed his 2018 monthly income averaged $30, 252 and his 2019 average monthly income from LLC distributions was $42, 824. Asserting he was living with his parents because he could not afford his own housing, he outlined his estimated living expenses from September 2018 to July 2019. S.S. asked the court to impute income to B.S., a radiologist with the asserted potential to earn over $500, 000 per year based on her ability to work full time. In responsive and supplemental declarations, S.S. claimed he had been forced to borrow money from his father to pay court-ordered support. He stated he had $34, 000 in a bank account and $77, 177 in an investment account, with no ongoing income. S.S. pointed to his expert's conclusion that his "normalized" monthly earnings were $35, 095, noting that the figure was similar to that given by B.S.'s forensic CPA Brian Brinig, who opined based on information for 2015 to 2018 S.S.'s average monthly income available for support was $35, 788. In a November 2019 income and expense declaration, S.S. claimed average monthly expenses of $43, 972.^[6] He accused B.S. of misrepresenting the amount of funds available to her as well as her need for spousal and child support.

S.S. admitted he did not pay the court-ordered child and spousal support for January, February and March 2020. In February 2020, he submitted an updated income and expense declaration in which he again listed his expenses as $1, 615 in uninsured healthcare costs; $126 in groceries and household supplies; $565 for eating out; $240 in cell phone and telephone expenses; $33 in laundry and cleaning; $700 in clothing; $3, 100 in education expenses; $5, 000 in entertainment, gifts and vacation expenses; $1, 931 in automobile and transportation expenses; and $28, 062 in litigation costs. He claimed he paid $2, 600 per month to a housekeeper as an installment payment or debt. He reported paying his attorneys approximately $807, 073.25 as of February 2020, asserting he paid the fees and costs with loans from his parents.

In March 2020, the court conducted a hearing on S.S.'s August 2019 request. It took evidence from S.S.'s and B.S.'s expert CPAs Bergmark and Brinig, who had issued reports before the hearing. Both experts testified to S.S.'s available income to pay support.

Bergmark testified that his income analysis for S.S. looked at cash flows generated from hotel operations and distributions, as well as the level of debt; he testified that S.S. had told him, however, that he did not believe he could get any additional refinances, causing concern about his cash flow. S.S. told Bergmark there would be declining revenues unless they commenced a property improvement plan (PIP) on a hotel; Bergmark also testified about market disruptions including the Covid-19 pandemic. Bergmark's summary analysis of S.S.'s income "normalized" the monthly cash flow amounts, meaning he looked at all of the businesses' and operations' historical numbers, used time periods most representative, and came up with the best indication of ongoing yearly earnings for each entity, then divided them by 12. These normalized earnings constituted Bergmark's opinion as to S.S.'s income available for support.

Bergmark also traced incoming and outgoing funds from various bank accounts. This tracing included sales proceeds from a joint restaurant business, from which S.S. received $700, 000 in January 2019. S.S. deposited half of the proceeds back into an account for one hotel LLC jointly owned by him and his father (New Albany Hospitality, LLC, or New Albany), and $350, 000 into another account, from which S.S. paid $350, 000 in federal income tax payments. (The court later found this was an overpayment, resulting in a refund of $307, 478 to S.S., which S.S. deposited into his personal bank account.) Bergmark explained in part that he understood from S.S. that some of the payments to S.S.'s father were loans, which Bergmark concluded amounted to $1, 030, 087. Bergmark admitted he saw no promissory notes or any other documentation to substantiate the loans; he relied only on what S.S. told him. S.S. gave Bergmark a paper purporting to be a summary of the loan activity; Bergmark did not prepare it and S.S. told him what the interest rate was. S.S. also provided Bergmark select pages purporting to be his father's bank account records. One account in particular, No. 5388, was opened in May 2017 with $2 million from an account held jointly by S.S. and B.S., but Bergmark allocated $1.7 million to S.S. and $300, 000 to S.S.'s father due to their respective property ownership interests. As of the date of separation in September 2018, the account held $5 million, but $2 million was transferred to New Albany, and the other $3 million was paid to S.S.'s father, assertedly to repay loans.

S.S and B.S. testified. S.S. explained his hotel ownership interests and his work, describing himself as "money manager" who made decisions "to input dollars or not put dollars in a particular investment and . . . try to manage and mitigate all the risks from ownership." He testified his father was an investor, and another individual managed the hotel property improvement plans (PIPs), day to day operations, bank accounts, and bills. S.S. admitted purposely submitting factually inaccurate asset and liability information to banks for the purpose of getting loans; he testified it was "common" to overstate assets and understate liabilities. In January 2020, he sold his interest in New Albany to his father, and testified he received between $500, 000 and $1 million in cash, which he deposited back into the bank account of another hotel property to go toward a PIP....