S.J.W. v. G.H.W. ( 2015 )

J-S53002-15
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P 65.37
S.J.W., : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellee :
:
v. :
:
G.H.W., :
:
Appellant : No. 407 MDA 2015
Appeal from the Order entered January 30, 2015,
Court of Common Pleas, Lancaster County,
Domestic Relations at No. 2014-02264 – PACSES No. 961114835
BEFORE: DONOHUE, OTT and MUSMANNO, JJ.
MEMORANDUM BY DONOHUE, J.: FILED AUGUST 21, 2015
Appellant, G.H.W. (“Father”), appeals from the order entered on
January 30, 2015 by the Court of Common Pleas of Lancaster County,
increasing Father’s child support obligation to Appellee, S.J.W. (“Mother”),
for the parties minor child, C.J.W. (“Child”). For the reasons that follow, we
affirm in part and vacate in part the trial court’s support order.
Mother and Father have one daughter, Child, age ten. Mother works
full-time for a temporary staffing service, with her current placement being
at a company called Compleat Restoration. Mother’s position with Compleat
Restoration could become permanent. Mother earns fifteen dollars per hour
and pays a babysitter $110.00 per week. Father is the owner and sole
shareholder of several businesses. Specifically relevant to this case are Mine
Drilling Services, LLC (“MDS”) and J. Roy’s, Inc. (“J. Roy’s”), which provides
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Father with his primary source of income. On April 8, 2013, following the
dissolution of their marriage, Mother and Father entered into a postnuptial
agreement prior to this support matter. According to their postnuptial
agreement, Mother received $2,500.00 per month in alimony and $1,500.00
per month in child support from Father.
Mother initiated the instant matter on August 19, 2014 by filing a
complaint against Father for support of Child. On October 9, 2014, Mother,
with her attorney, and Father, pro se, appeared for a support conference.
On October 14, 2014, the trial court entered an order requiring Father to pay
Mother $1,354.27 per month in child support and $130.00 in arrears.
Pursuant to this order, Father was to provide medical insurance coverage for
Child, with Father to pay sixty-eight percent and Mother thirty-two percent
of unreimbursed medical expenses.
On October 30, 2014, Mother filed exceptions to the trial court’s
October 14, 2014 order. On November 6, 2014, Mother petitioned the trial
court requesting that the court list this matter as complex. The trial court
granted Mother’s request and scheduled a hearing for January 28, 2015. On
January 22, 2015, Mother filed a motion for compliance because Father
failed to answer interrogatories and produce documents requested by Mother
on December 16, 2015. The same day, the trial court ordered Father to file
answers to the interrogatories and produce the documents requested.
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On January 28, 2015, both parties appeared at the scheduled hearing,
Mother with counsel and Father once again pro se. The trial court heard
testimony from both Mother and Father in addition to the testimony of
Mother’s witness, David M. Weiss, CPA (Weiss) of Simon Lever, an expert in
business valuation, who provided a report in the form of a financial analysis
of Father’s personal and business income (“the Weiss Report”). Weiss based
his testimony and report on Father’s 2013 tax return, the tax returns for
several of his businesses, including MDS and J. Roy’s, and Father’s October
9, 2014 pay stub. Weiss concluded that Father had support income
available to him in the net amount of $344,890 per year, or $28,740.83 per
month.
On January 30, 2015, the trial court issued a support order, pursuant
to Rule 1910.16-3.1 of the Pennsylvania Rules of Civil Procedure, which sets
forth support guidelines for high-income cases. The trial court accepted
Weiss’ testimony as accurate and found Father’s monthly net income
available for support was $28,740.83, or $344,890 annually. According to
the January 30, 2015 order, Father was to pay Mother $2,968.27 per month
in child support effective September 19, 2014 and $3,006.06 effective on
December 1, 2014.1 Father still was to provide medical insurance coverage
for Child, with Father paying eighty-seven percent and Mother thirteen
1
The two tiers were necessary because of an increase in childcare expenses
that Mother incurred.
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percent of any unreimbursed medical expenses for Child over $250.00 per
year.
On February 26, 2015, Father filed a motion for reconsideration, which
the trial court denied the same day. On February 27, 2015, Father filed a
timely notice of appeal. On March 3, 2015, the trial court ordered Father to
file a concise statement of the errors complained of on appeal pursuant to
Rule 1925(b) of the Pennsylvania Rules of Appellate Procedure. On March
24, 2015, Father filed his timely Rule 1925(b) statement.
On appeal, Father raises the following issues for our review and
determination:
1. The trial court’s reliance on the Weiss Report in
its entirety is an abuse of discretion because it
improperly includes an increased line of credit for
[MDS] as cash available to [Father], while failing to
review the business’ operational expenses.
2. The trial court abused its discretion by
including the full purchase price of a 2013 Porsche,
when Appellant’s W-2 provides for the use, resulting
in a double-dip.
3. The trial court’s reliance on the Weiss Report in
its entirety is an abuse of discretion because it
includes depreciation for [J. Roy’s] as income to
[Father] without determining whether the amount he
receives increases as a result.
4. The trial court abused its discretion by entering
the order of January 28, 2015, without requiring the
parties to submit income and expense statements
required by Pa.R.C.P. 1910.11(c)(2) and Pa.R.C.P.
1910.16-3.1.
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Father’s Brief at 5.2
Our standard of review when considering an appeal from a child
support order is as follows:
When evaluating a support order, this Court may
only reverse the trial court’s determination where the
order cannot be sustained on any valid ground. We
will not interfere with the broad discretion afforded
the trial court absent an abuse of the discretion or
insufficient evidence to sustain the support order. An
abuse of discretion is not merely an error of
judgment; if, in reaching a conclusion, the court
overrides or misapplies the law, or the judgment
exercised is shown by the record to be either
manifestly unreasonable or the product of partiality,
prejudice, bias or ill will, discretion has been abused.
In addition, we note that the duty to support one’s
child is absolute, and the purpose of child support is
to promote the child’s best interests.
McClain v. McClain, 872 A.2d 856, 860 (Pa. Super. 2005) (internal
citations omitted). “A support order will not be disturbed on appeal unless
the trial court failed to consider properly the requirements of the Rules of
Civil Procedure Governing Actions for Support, Pa.R.C.P. 1910.1 et seq., or
abused its discretion in applying these Rules.” Berry v. Berry, 898 A.2d
1100, 1103 (Pa. Super. 2006).
For his first three issues on appeal, Father contends that the trial court
abused its discretion and misapplied the law because it determined, relying
on the Weiss Report, that his income available for child support was
$344,890 annually, or $28,740.83 per month. See Father’s Brief at 11-21.
2
We have reorganized and renumbered Father’s issues for ease of review.
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First, Father argues that the Weiss Report improperly included a line of
credit worth $111,000 for MDS as cash available to Father. See id. at 12-
18. Father contends that in doing so, the trial court acted contrary to
established Pennsylvania case law, as it would require him to pay his child
support obligation on credit, with funds that have to be repaid with interest.
See id. at 12-16. Father avers that this was improper because there was no
evidence introduced during the January 28, 2015 hearing that he used MDS
to shelter income and avoid his child support obligation. Id. at 12-15.
Furthermore, Father asserts that the Weiss Report did not take into
consideration the expenditures, in addition to the debts, of MDS for which
Father might to use the line of credit to pay. Id. at 16-17. Thus, Father
asks us to remand this case to the trial court for a determination of his
income available for support without the inclusion of the $111,000 MDS line
of credit. Id. at 18.
“Generally, the amount of support to be awarded is based upon the
parties’ monthly net income.” Pa.R.C.P. 1910.16-2. Our Court has stated,
“[i]n considering this matter, all reasoning must begin with an evaluation of
a parties’ income that is available for support. The assessment of the full
measure of a parent’s income for the purposes of child support requires
courts … to determine ability to pay from all financial resources.” D.H. v.
R.H., 900 A.2d 922, 930 (Pa. Super. 2006) (citation and internal quotations
omitted). Therefore, “[w]hen determining income available for child
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support, the court must consider all forms of income.” Berry, 898 A.2d at
1104 (citation and internal quotations omitted); see Pa.R.C.P. 1910.16-2(a).
The Domestic Relations Code defines the term “income” as follows:
“Income.” Includes compensation for services,
including, but not limited to, wages, salaries,
bonuses, fees, compensation in kind, commissions
and similar items; income derived from business;
gains derived from dealings in property; interest;
rents; royalties; dividends; annuities; income from
life insurance and endowment contracts; all forms of
retirement; pensions; income from discharge of
indebtedness; distributive share of partnership gross
income; income in respect of a decedent; income
from an interest in an estate or trust; military
retirement benefits; railroad employment retirement
benefits; social security benefits; temporary and
permanent disability benefits; workers’
compensation; unemployment compensation; other
entitlements to money or lump sum awards, without
regard to source, including lottery winnings; income
tax refunds; insurance compensation or settlements;
awards or verdicts; and any form of payment due to
and collectible by an individual regardless of source.
23 Pa.C.S.A. § 4302.
Importantly, in regards to business income, this Court has held:
Support orders “must be fair, non-confiscatory and
attendant to the circumstances of the parties.”
Fennell v. Fennell, 753 A.2d 866, 868 (Pa. Super.
2000). “When a payor spouse owns his own
business, the calculation of income for child support
purposes must reflect the actual available financial
resources of the payor spouse.” Fitzgerald v.
Kempf, 805 A.2d 529, 532 (Pa. Super. 2002)
(internal quotation marks omitted). Further, “all
benefits flowing from corporate ownership
must be considered in determining income
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available to calculate a support obligation.”
Fennell, supra at 868 (emphasis added).
Spahr v. Spahr, 869 A.2d 548, 552 (Pa. Super. 2005) (emphasis in
original). Additionally,
[o]ur jurisprudence is clear, therefore, that the
owner of a closely-held corporation cannot avoid a
support obligation by sheltering income that should
be available for support by manipulating salary,
perquisites, corporate expenditures, and/or
corporate distribution amounts. By the same token,
however, we cannot attribute as income funds not
actually available to or received by the party.
Fennell, 753 A.2d at 868.
Father argues that this Court’s decision in Fitzgerald is controlling.
See Father’s Brief at 13-15. In Fitzgerald, the appellant, the sole
shareholder of a Subchapter S corporation,3 argued that the trial court erred
by accepting the testimony of the appellee’s expert, who testified that the
appellant’s net monthly income available for support was $35,500.
Fitzgerald, 805 A.2d at 531. The appellee’s expert testified that the
appellant had such a high income available for support because the appellant
could have completely drawn down his business’ line of credit to pay
distributions to himself. Id.3
A Subchapter S corporation is “[a] corporation whose income is taxed
through its shareholders rather than through the corporation itself. Only
corporations with a limited number of shareholders can elect S-corporation
tax status under Subchapter S of the Internal Revenue Code.” BLACK’S LAW
DICTIONARY 368 (8th ed. 2004).
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This Court held that the trial court erred in including the business’ line
of credit in the calculation of the appellant’s income available for support.
Id. at 532. Our Court reasoned:
Appellant may have been able to increase the
balance on his credit line in order to shift cash to
accounts receivable and then distribute these
“earnings” to himself as income. But[,] what can be
done by a business on paper and what should be
done by that same business in reality could be very
different.
* * *
There is absolutely no evidence in the record that
appellant was retaining the earnings of his
corporation in order to avoid paying child support.
The trial court, therefore, erred by attributing to
appellant funds which were not available to him as
income. The business practice discussed by wife’s
expert does not free up cash within the company
which could then be distributed to appellant. Rather,
on a basic level, it appears to this Court that the
support order will force appellant to pay his child
support obligations on credit. “It would be untenable
to argue that proceeds of a loan made to a
corporation for the exclusive purpose of making
capital expenditures should instead be disbursed as
income to the [principal shareholder] of the
corporation.” Labar v. Labar, [] 731 A.2d 1252,
1256 ([Pa.] 1999). The trial court abused its
discretion by requiring appellant to further leverage
his company and completely ignoring the fact that
appellant will have to repay the bank for these
distribution of “cash.” On remand, the trial court is
directed to refrain from relying on hypothetical paper
calculations and determine appellant’s actual
monthly income based on the reality of appellant’s
financial situation.
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We agree with Father that Fitzgerald is controlling. Here, like
Fitzgerald, Father is the sole shareholder of MDS, a Subchapter S
corporation. See Weiss Report, 12/15/14, at 4; see also N.T., 1/28/15, at
43. Also like Fitzgerald, there is no evidence that Father was sheltering or
manipulating income to avoid his support obligation. By including the line of
credit for MDS in Father’s income, Weiss’ analysis attributes to Father funds
that were not available for income and forces Father to pay his child support
obligations on credit. See Weiss Report, 12/15/14, at 5, 7. Thus, the trial
court assigned to him as income money that he will have to repay, with
interest, now or in the future. Therefore, fundamentally, it was improper for
the trial court to include the line of credit as income to Father. See
Fitzgerald, 805 A.2d at 532. Accordingly, we conclude that the trial court
abused its discretion by including the line of credit of $111,000 for MDS as
cash available to Father.
Mother argues that Fitzgerald is inapplicable to this case because
Weiss converted MDS’ 2013 corporate tax return from an accrual basis to a
cash basis4 and as a result, Father benefitted from the repayment of debt
4
Weiss explained the differences between cash basis accounting and
accrual basis accounting as follows:
The primary difference between cash method of
accounting and accrual method of accounting would
be, let’s say by way of example, for expenses, if we
had a utility bill for service that was provided in 2012
-- I’m using these periods to coincide with the 2013
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that he otherwise would not have received had Weiss used the accrual basis
return. See Mother’s Brief at 11-14. This repayment of debt, Mother
argues, lowered Father’s income available for support. See id. Mother
asserts that the debt, which exceeded the $111,000 line of credit, effectively
nullified the impact of the line of credit, as MDS could have applied the line
of credit in its entirety towards the repayment of debt. See id. at 13-14.
Thus, Mother contends the line of credit had no impact on the income Father
derived from MDS. Id. at 14.
We find Mother’s argument unavailing. There was no requirement that
Weiss convert MDS’ 2013 corporate tax return from an accrual basis to a
cash basis, therefore giving Father the benefit of debt repayment he
otherwise would not have received. Additionally, even if Father had applied
the entirety of the $111,000 line of credit towards repaying MDS’ debt, this
does not account for the fact that at some point, MDS would have to repay
the bank, and therefore, it could not have been income available to Father.
Accordingly, we remand this case to the trial court for the calculation of
returns -- the service was provided in December of
2012, but it was paid in January of 2013. On a cash
basis, expenses can only be deducted in the year
paid regardless of when that service took place.
On the accrual basis, the utility bill would have been
recorded as an expense in 2012 because the service
was provided in 2012.
N.T., 1/28/15, at 14.
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Father’s support obligation without the inclusion of the $111,000 line of
credit as income available for support.
Second, Father argues that the trial court abused its discretion in
relying on the Weiss Report in determining his income available for support
because the Weiss Report included the full purchase price of a 2013 Porsche
Cayenne in his income available for support. Father’s Brief at 19-20. Father
contends that his W-2 accounted for the use of the 2013 Porsche Cayenne,
resulting in the vehicle counting twice towards his income available for
support. Id.
This Court has held that “even if not received by the support obligor as
cash, personal perquisites, such as entertainment and personal automobile
expenses, paid by a party’s business must be included in income for purpose
of calculating support.” Fennell, 753 A.2d at 868 (quotations and citations
omitted). The certified record reflects that J. Roy’s purchased the 2013
Porsche Cayenne for $72,023. N.T., 1/28/15, at 20-21; see also Plaintiff’s
Exhibit 12. The certified record further reflects that Father is the sole
proprietor of J. Roy’s and in complete control of how J. Roy’s disburses its
funds. See N.T., 1/28/15, at 42-43; see also Plaintiff’s Exhibit 12. There is
also no dispute that Father is the sole driver of the 2013 Porsche Cayenne.
See N.T., 1/28/15, at 46. Father has provided no evidence that his W-2
from J. Roy’s accounted for the full purchase price of the vehicle or evidence
to refute any of the aforementioned testimony. Accordingly, we conclude
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that the trial court did not err including the full purchase price of the 2013
Porsche Cayenne in Father’s income available for support. See Fennell,
753 A.2d at 868.
Third, Father argues that the trial court erred in relying on the Weiss
Report in determining his income available for support because the Weiss
Report improperly included $78,251 worth of depreciation for J. Roy’s as
income to Father. See Father’s Brief at 18-20. We conclude that Father has
not preserved his third issue for review. It is well settled that “[i]ssues not
raised before the trial court are not preserved for appeal and may not be
presented for the first time on appeal.” Rabatin v. Allied Glove Corp.,
24 A.3d 388, 391 (Pa. Super. 2011); Pa.R.A.P. 302(a). Here, Father did not
raise the issue of the Weiss report improperly including $78,251 worth of
depreciation for J. Roy’s at any point before the trial court. Accordingly,
Father has waived this issue on appeal.5
For these same reasons, Father has also not preserved his fourth issue
for review, that the trial court abused its discretion by entering the January
28, 2015 order without requiring either party to submit for review the
5
Even if Father had preserved his third issue for appeal, it would not entitle
him to any relief. The certified record on appeal reflects that the Weiss
Report did not include the $78,251 worth of depreciation for J. Roy’s in the
calculation of income available for support. See Weiss Report, 12/15/14, at
6-7. Likewise, Weiss testified that he did not include any cash from J. Roy’s
as income available to Father for support because there was none and that
he included a financial breakdown of J. Roy’s tax return merely for
informational purposes. See N.T., 1/28/15, at 20-21. Accordingly, this
argument is meritless.
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income and expense statements required under Rule 1910.11(c)(2) of the
Pennsylvania Rules of Civil Procedure. See Father’s Brief at 21-23. Father
made no mention of the parties’ non-compliance with Rule 1910.11(c)(2)
until his concise statement of the errors complained of on appeal pursuant to
Rule 1925(b) of the Pennsylvania Rules of Appellate Procedure. Accordingly,
Father has waived his fourth and final issue on appeal. 6 See Rabatin, 24
A.3d at 391; Pa.R.A.P. 302(a).
Order affirmed in part and vacated in part. Case remanded for
proceedings consistent with this memorandum. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/21/2015
6
We note again that even if Father had preserved his fourth issue for
appeal, it would not entitle him to any relief. While Rule 1910.11(c)(2) did
require the parties in this case to submit income and expense statements,
Father does not cite any rule, case, or statute, that obligates the trial court
to consider the income and expense statements in its support determination.
The record here, including the Weiss Report, the parties’ tax returns, the
parties’ pay stubs, and the tax returns for Father’s businesses provided all
the information the trial court needed to make a support determination
under Rule 1910.16-3.1. See Plaintiff’s Exhibits 1-12; see also Rule
1910.16-3.1. Therefore, Father was not prejudiced by the parties’ failure to
file income and expense statements.
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