McHugh v. McHugh (In re Mchugh)

231 Cal.App.4th 1238

180 Cal.Rptr.3d 448

IN RE MARRIAGE OF Charles D. and Connie A. MCHUGH.

Charles D. McHugh, Appellant

v.Connie A. McHugh, Respondent;

Orange County Department of Child Support Services, Respondent.

G048551

Court of Appeal, Fourth District, Division 3, California.

Filed October 30, 2014

As Modified November 26, 2014

Steven A. Madoni ; John L. Dodd & Associates, John L. Dodd, Tustin, and Benjamin Ekenes for Appellant.

Keith E. Dolnick, Irvine, for Respondent Connie A. McHugh.

Kamala D. Harris, Attorney General, Julie Weng-Gutierrez, Assistant Attorney General, Linda M. Gonzalez and Ricardo Enriquez, Deputy Attorneys General, for Respondent Orange County Department of Child Support Services.

OPINION

ARONSON, J.

Appellant Charles D. McHugh filed an order to show cause asking the trial court to reduce his child support obligations because he lost his job as a commissioned salesman and his new job paid considerably less.¹ In opposing Charles's request, respondent Connie A. McHugh countered by asking the trial court to increase support because Charles lost his job for diverting business from his employer to his father's competing company to minimize his reported income and reduce his support obligations. Connie asked the court to increase her support based on Charles's income at the job he lost because Charles refused his employer's offer to retain him if he fully disclosed his misconduct and paid his employer restitution. The trial court denied Charles's motion to reduce the amount of child support and granted Connie's request to increase support by imputing income to Charles at the level he earned before engaging in his misconduct.

Family Code section 4058, subdivision (b), grants trial courts discretion to set child support based on a parent's earning capacity rather than actual income if the court finds the parent has the ability and opportunity to earn income at the level to be imputed.² As explained below, this discretion includes imputing income to the parent based on earnings at a prior job, without evidence the parent has the current opportunity to earn at that same level, if the parent left or otherwise lost the job in a manner reflecting a voluntary and deliberate divestiture of financial resources required to pay child support obligations, and imputing income at that level is in the child's best interests.

We affirm the trial court's order exercising its discretion to impute income under section 4058, subdivision (b), because substantial evidence supports the findings that (1) Charles had the ability and opportunity to keep his job; (2) his termination was a voluntary divestiture of resources required for child support obligations because of his misconduct in diverting business to his father's company to avoid his support obligations and deliberately failing to satisfy his employer's conditions for keeping his higher paying job; and (3) imputing income to Charles was in the child's best interests.

IFacts and Procedural History

Charles and Connie wed in 1992 and have one child, who was born in 1996. The couple separated in September 2009, and Charles filed a petition to dissolve the marriage that same month. Almost immediately, Connie filed an order to show cause seeking temporary child and spousal support. In November 2009, the trial court granted Connie's request, ordering Charles to pay $2,227 in child support and $4,773 in spousal support each month. The court based its award on Charles's monthly income of $24,159 as a successful salesman for Amcor Packaging Distribution (Amcor), and Connie's lack of income as a stay-at-home mom.

In early 2010, Charles filed an order to show cause seeking to reduce the amount of temporary child and spousal support based on his reduced income. In his supporting declaration, Charles explained he suffered a drastic income reduction in December 2009 when his largest client decided not to renew its contract with Amcor. According to Charles, he was paid on commission, and the loss of that client cut his income nearly in half. Charles also argued Connie was a licensed attorney and the court should require her to find employment. In March 2011, the trial court granted Charles's request and reduced his monthly child support to $1,275 and his monthly spousal support to $2,840.

In August 2011, Connie and Charles each filed an application seeking to change the court's March 2011 ruling. Connie filed a motion to set aside the March 2011 order, while Charles filed another order to show cause seeking to further reduce his support obligations. In her motion, Connie argued the March 2011 order should be set aside because Charles misrepresented his income to the court. In his order to show cause, Charles argued he suffered another drastic reduction of income because Amcor fired him in April 2011, and his new job paid considerably less. In response, Connie asked the court to increase the temporary support by reinstating the original support order.

In November 2011, the trial court conducted an evidentiary hearing on Connie's set-aside motion, but it continued the hearing on the other requests. Thomas Sarnecki, Amcor's vice president of workplace relations and employment counsel, testified that Charles was one of Amcor's top salesmen, earning between $137,000 and $597,000 per year during the period 2003 to 2009. In 2009, Charles asked Amcor to help him reduce his income because he faced a bitter divorce and wanted to minimize his earnings. According to Sarnecki, Amcor told Charles it would reassign him to a lower paying position, but it rejected his other “more aggressive approach[es],” such as diverting some of his compensation. Charles therefore remained in the same position and his compensation arrangements did not change.

In the months following these discussions, Sarnecki testified Amcor noticed a significant drop in the sales Charles generated. Charles explained the decrease was due to the downturn in the economy and the lack of competitiveness in some of Amcor's bids. Sarnecki explained Amcor initially accepted Charles's explanation because of his past faithful service, but began an investigation after one of Charles's customers asked Amcor about products it recently had purchased and Amcor had no record of the transaction.

Amcor's investigators discovered Charles's father operated a competing business, Value Added Packaging & Printing, Inc. (Value Added), and the investigators suspected Charles had diverted some of Amcor's business to his father's business. The investigators also believed Charles used one of Amcor's other salesmen to close some of Charles's transactions, and then Charles and the other salesman would share the commission.

In March 2011, Sarnecki and other Amcor executives met with Charles to discuss the investigators' findings. During this meeting, Charles admitted he had done a lot of “ ‘stupid stuff’ ” in trying to reduce his income and settle his divorce, including diverting business to Value Added and entering into improper commission sharing agreements on at least three accounts. Sarnecki further testified that Charles admitted what he did “ ‘wasn't right,’ ” showed remorse for his actions, and wanted to “come clean” so he could keep his job.

Based on Charles's admissions and his many years of successful service, Amcor offered to retain Charles if he satisfied three conditions: (1) fully disclose his misconduct; (2) pay Amcor restitution for the business he diverted; and (3) agree to a “last chance” employment agreement. Sarnecki thought Charles would accept these conditions because he appeared remorseful, but Charles refused to pay restitution or disclose the business he diverted. Instead, he told Sarnecki and the other executives, “ ‘I can't tell you ... I know it was wrong ... You're going to get mad at me....’ ” When Charles refused to cooperate and agree to these conditions, Amcor terminated Charles's employment and filed a lawsuit against him, his father, and Value Added to recover the income it lost.

Charles testified to his version of the meetings with Sarnecki and Amcor's investigators. Charles admitted he made many of the statements Sarnecki attributed to him, but he testified those statements were not true. According to Charles, he made those admissions because Amcor's investigators told him he would have to come clean to keep his job.

In December 2011, the trial court denied Connie's set-aside motion. The court explained the only permissible ground for granting the motion would be if Charles defrauded the court by misrepresenting his income. The court found Charles attempted to divert business from Amcor, but Connie failed to show he diverted any particular business or the amount of Charles's actual income when the court made its March 2011 support order. Without evidence showing a specific income that differed from the court's earlier findings, the court concluded it could not grant Connie's motion.

In late 2012, the court conducted hearings on Charles's request to further reduce his support obligations and Connie's counterrequest to increase the amount of support. Charles and Connie stipulated the court would decide these requests based on the testimony it received in Connie's set-aside motion. In February 2013, the court denied Charles's request and granted Connie's: “The Court finds that [Charles] had the opportunity to continue his employment at AMCOR and that [Charles] was terminated as a result of his non-cooperation in the investigation into his own misconduct. The Court finds that his misconduct was part and parcel of his attempt to lower Child and Spousal Support. Therefore, the Court finds, termination from AMCOR is deemed an unwillingness to work. (In re Marriage of Regnery (1989) 214 Cal.App.3d 1367, 263 Cal.Rptr. 243 ) The Court finds that this order is in the best interest of the child. [¶] The Court's other findings are as indicated in the Dissomaster computer printout ... attached to this order. This Child Support order commences ...