California Court Reviews “Imputation of Income” Underlying Support Orders

chart-851180-m.jpgIn divorce actions, courts have the authority to bifurcate the proceedings into separate parts in order to enter a “status-only” judgment of dissolution of marriage. This enables the court to officially dissolve the marriage, while moving forward to resolve any and all reserved issues, such as child or spousal support, the division of property, and custody. Once a court enters a judgment on the reserved issues, either or both parties may seek to appeal the court’s decision. There are many legal grounds upon which one may challenge the court’s determination. If you are facing a divorce, your rights to property, custody, and support are significant matters that must be addressed early in the proceedings. The best course of action is to consult an experienced San Diego family law attorney who can help to protect your rights.

In a recent California case, both ex-spouses separately appealed from a divorce judgment, asserting different claims. Here, the parties were married in 1998 and had two children in 2000 and 2003. The wife filed for legal separation in July 2007, and the husband responded by requesting dissolution of marriage. At the time of the marriage, the husband was a real estate developer. The couple together formed a new real estate development company shortly before they got married. According to the facts of the case, the couple lived an affluent lifestyle. At the end of a nine-day trial, the court ordered the husband to pay a monthly amount of $2,778 in child support and $1,750 in spousal support.

On appeal, the husband claimed, among other things, that the trial court’s order of child and spousal support should be reversed due to insufficient evidence regarding the court’s imputation of income to him. Under California law, when a court is determining the amount of spousal support and child support, respectively, it is required to look at the extent of a parent’s earning capacity. During the trial, the court concluded that the husband had the ability to earn $150,000 per year from self-employment and therefore ordered child and spousal support based on that amount.

The court of appeals agreed with the husband’s argument and reversed the awards. The court pointed out that under the applicable statutes and related case law, “earning capacity” is composed of the ability to work, the willingness to work, and an opportunity to work. The party hoping to have income imputed has the burden of demonstrating ability and opportunity to earn the specified income. It is not enough to merely show that a spouse possesses the skills and qualifications that made it possible to earn a certain salary in the past.

Here, the court concluded that the imputation of income to the husband was erroneous because it was based on an unwarranted assumption that he would earn the same income in the immediate future that he was able to average over the preceding four years. The court noted that the husband was able to earn a substantial income by rebuilding homes that were destroyed in the catastrophic fires in San Diego County in 2007. There is no evidence that he would have future opportunities to earn such a substantial amount of money going forward.

As this case shows, understanding the state family code and how it applies to the facts of your divorce case is extremely important and can affect the ultimate settlement terms.

Roy M. Doppelt has been representing parties in family law matters for more than 20 years. Doppelt & Forney serves clients throughout Southern California, including San Diego, Encinitas, La Jolla, and Chula Vista. For a free consultation, contact Doppelt & Forney through our website, or give us a call toll-free at (800) ROY IS IT (769-4748).

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