Opinion
NOT TO BE PUBLISHED
Appeal from postjudgment orders of the Superior Court of Orange County, Nancy A. Pollard, Judge.
Law Offices of Andrea L. Mersel and Andrea L. Mersel for Appellant.
Gilligan Law Corporation and John J. Gilligan for Respondent.
OPINION
O’LEARY, ACTING P. J.
Stephen R. and Brenda L. Horowitz were married for over 20 years. When the marriage was dissolved in 1992, Stephen agreed to pay $1,700 per month in spousal support. Seventeen years later, Stephen filed an order to show cause (OSC) to modify or terminate spousal support because he planned to retire. The trial court denied the OSC. However, it also ordered 66-year-old Brenda to make efforts to become self-supporting and ordered spousal support would be reduced to $1,200 per month after a period of one year. It also ordered Stephen to pay $13,000 towards Brenda’s attorney fees. On appeal, Stephen maintains the court’s order was an abuse of discretion and support should have been terminated. We agree the spousal support order should be reversed, but for a different reason. Without first reaching any conclusion about whether or not there was a material change of circumstances, the court denied Stephen’s OSC and at the same time granted it in part, by scheduling a step down of $500 at a future date. We reverse the orders and remand for a new hearing on support. The attorney fees award is affirmed. Consequently, we reverse in part and affirm in part.
We refer to the parties by their first names for ease of reading and to avoid confusion, and not out of disrespect. (In re Marriage of James & Christine C. (2008) 158 Cal.App.4th 1261, 1264, fn. 1.)
I
Stephen’s OSC declared he planned to retire because of his age (65), his poor health, the tough job market, and his company’s plans to reduce its workforce. He requested a downward modification to zero or termination of spousal support. Stephen stated his income was going to be significantly reduced after retirement as it would be limited to social security ($2,300/month), his pension ($520/month), and withdrawals from an individual retirement account (IRA account) ($1,250/month) for a total of $4,070 per month. Before retirement he was making $16,000 to $23,000 per month, depending on the timing of bonuses.
Stephen maintained Brenda had a yearly income of $50,000 per year and cash assets of $480,000. She owned outright a condominium in Huntington Beach. Stephen stated he had gone to extraordinary measures to continue paying Brenda spousal support over the years despite his lay-offs and medical issues. He advised the court that he had undertaken the “tremendous burden” of relocating to Georgia “for employment purposes in order to be able to continue my financial responsibility of spousal support.”
In her response, Brenda stated her monthly income was $2,326 (not including the spousal support) and her monthly expenses exceeded $4,000. She stated Stephen was employed as an aerospace engineer and they lived a “very comfortable lifestyle” when they were married. Due to Stephen’s large salary, they agreed she would stop working and become a homemaker. After their divorce, Brenda stated she was unable to join the work force for several reasons. First, she had several medical issues. She had hearing problems and must wear hearing aids, and she suffers from a learning disability (attention deficit disorder), cadriomyopathy (a heart condition), and stress. Due to these issues, it took her 11 years to complete college degrees.
Brenda also questioned the validity of Stephen’s claims to have suffered multiple strokes due to the lack of supporting medical documentation. She also asserted Stephen’s move to Georgia was solely prompted by a promotion offered by his employer.
In addition, Brenda noted Stephen had misstated his income. She questioned why he failed to disclose interest and dividend income, as well as income from various pension plans. She estimated he held over $800,000 in assets. She opined Stephen would continue to earn income as a consultant after retiring as he was a “workaholic.” And in conclusion, Brenda requested the court order Stephen to pay her attorney fees incurred to respond to his OSC.
After considering argument and briefing from the parties, the court took the matter under submission. It issued a lengthy written statement of its factual conclusions and legal determinations. The court ruled as follows:
“The court finds that this is a marriage of long duration, being 20 1/2 years” and there were no minor children. Stephen paid Brenda spousal support ($1,700 per month) for 17 years. After the divorce, Brenda earned a B.S. and M.S. degree in social work, but she had no employment history. She lived in a small one-bedroom condominium (675 sq. ft.) that was paid for. Her monthly expenses totaled $4,021, “which is below the marital standard of living.” The court concluded that with Stephen’s spousal support, Brenda “just barely meets her monthly needs.” Brenda had $497,000 in assets and only approximately $25,000 of it was available in cash. The remainder was tied up in property and stocks. Brenda also had to incur the cost of hearing aids not covered by Medicare.
The court noted Brenda was not warned at the time of the judgment to return to the work force or make any efforts to become self-sufficient (there was no Gavron admonition). Consequently, the court concluded Brenda cannot “be expected to have obtained employment.”
In re Marriage of Gavron (1988) 203 Cal.App.3d 705 [supported spouse’s failure to make good faith efforts to become self-sufficient can constitute a change in circumstances warranting a modification in spousal support if the supported spouse is made aware of the obligation to become self-supporting].
As for Stephen, the court noted he lived comfortably in Georgia with his second wife. He had earned a M.S. in mathematics and was earning $11,666 per month at the time of his retirement. His 2007 tax return showed earnings of $218,000. His gross salary in 2008, which included a bonus, was $176,279. His wife’s salary was $2,800 per month. The court noted Stephen failed to disclose any details of his severance package when he retired in March 2009. He also failed to disclose information as to what his pension would be from his most recent employer. The court concluded Stephen was “hiding some of his income by his refusal to disclose, all in violation of Feldman.”
In re Marriage of Feldman (2007) 153 Cal.App.4th 1470, 1478 (Feldman) [discussing a court’s discretion and factors for imposing monetary sanctions for a parties failure to comply with various disclosure requirements].
The court compared the living situations of both parties, finding Stephen “lives in a large home at least equal to the marital home and severely unlike the small condominium in which [Brenda] now lives and he enjoys a standard equal to or greater than the marital standard of living.” The court concluded the marital standard of living was $5,000 per month per person at the time of dissolution. It noted Stephen was an engineer earning $60,000 per year and the parties enjoyed a “middle to upper middle class life style.” It concluded Brenda was now living below the marital standard of living and Stephen was living above it.
The court ruled, “Therefore at this time, the [c]ourt denies... [the] request to modify the spousal support order of $1,700 per month, which amount does not meet her needs. However, the [c]ourt admonishes and warns [Brenda] that she is expected to make concerted efforts to become more self sufficient within a reasonable period of time which the [c]ourt deems to be [one] year, at which time the court will reduce spousal support to $1,200 per month commencing [December 1, 2010, ] and continuing until the death of either party, [Brenda’s remarriage] or further order of the [c]ourt.” The court ordered Stephen to contribute to Brenda’s attorney fees in the amount of $13,000. It did not specify a statutory basis for the attorney fee award.
II
A. General Legal Principles Governing Modifications of Spousal Support
“‘Modification of spousal support, even if the prior amount is established by agreement, requires a material change of circumstances since the last order. [Citations.] Change of circumstances means a reduction or increase in the supporting spouse’s ability to pay and/or an increase or decrease in the supported spouse’s needs. [Citations.] It includes all factors affecting need and the ability to pay.’ [Citation.] ‘A trial court considering whether to modify a spousal support order considers the same criteria set forth in Family Code section 4320 as it considered in making the initial order.’ [Citation.]” (In re Marriage of Dietz (2009) 176 Cal.App.4th 387, 396 (Dietz).)
All further statutory references are to the Family Code.
Section 4320 provides: “In ordering spousal support under this part, the court shall consider all of the following circumstances:
“(a) The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage, taking into account all of the following:
“(1) The marketable skills of the supported party; the job market for those skills; the time and expenses required for the supported party to acquire the appropriate education or training to develop those skills; and the possible need for retraining or education to acquire other, more marketable skills or employment.
“(2) The extent to which the supported party’s present or future earning capacity is impaired by periods of unemployment that were incurred during the marriage to permit the supported party to devote time to domestic duties.
“(b) The extent to which the supported party contributed to the attainment of an education, training, a career position, or a license by the supporting party.
“(c) The ability of the supporting party to pay spousal support, taking into account the supporting party’s earning capacity, earned and unearned income, assets, and standard of living.
“(d) The needs of each party based on the standard of living established during the marriage.
“(e) The obligations and assets, including the separate property, of each party.
“(f) The duration of the marriage.
“(g) The ability of the supported party to engage in gainful employment without unduly interfering with the interests of dependent children in the custody of the party.
“(h) The age and health of the parties.
“(i) Documented evidence of any history of domestic violence....
“(j) The immediate and specific tax consequences to each party.
“(k) The balance of the hardships to each party.
“(l) The goal that the supported party shall be self-supporting within a reasonable period of time....
“(m) The criminal conviction of an abusive spouse shall be considered in making a reduction or elimination of a spousal support award in accordance with [s]ection 4325.
“(n) Any other factors the court determines are just and equitable.”
Finally, it is well settled a spouse’s retirement does not automatically require the termination of spousal support. (In re Marriage of Crobarger (1986) 178 Cal.App.3d 56, 59-60.) While Stephen’s retirement could have justified a finding of changed circumstances (which the court did not find), the retirement would not also dictate that spousal support should be terminated. Rather, the court must analyze Stephen’s entire financial situation to determine his ability to continue to pay spousal support. (Ibid.)
B. Standard of Review
“‘Appellate review of orders modifying spousal support is governed by an abuse of discretion standard, and such an abuse occurs when a court modifies a support order without substantial evidence of a material change of circumstances.’ [Citations.] ... ‘“So long as the court exercised its discretion along legal lines, its decision will not be reversed on appeal if there is substantial evidence to support it.”’ [Citation.]” (Dietz, supra, 176 Cal.App.4th at p. 398; In re Marriage of Smith (1990) 225 Cal.App.3d 469, 480 [“Absent a change of circumstances, a motion for modification is nothing more than an impermissible collateral attack on a prior final order”].) Stated another way, the failure to recognize and apply each applicable statutory factor is an abuse of discretion. (In re Marriage of Cheriton (2001) 92 Cal.App.4th 269, 304.)
C. Need for a Material Change of Circumstances
The moving party (Stephen) had the burden of establishing a material change in circumstances warranting modification of the spousal support order. (In re Marriage of Stephenson (1995) 39 Cal.App.4th 71, 78-79 (Stephenson).) In this case, Stephen claimed his retirement and the corresponding reduction in his income necessarily caused a material change in his financial circumstances. In short, he could no longer afford to pay Brenda $1,700 per month.
There is a large body of case law regarding what happens to spousal support obligations when the supporting spouse retires. While a spouse cannot be forced to continue working after the usual retirement age to pay the same level of spousal support as when he or she was employed (In re Marriage of Reynolds (1998) 63 Cal.App.4th 1373, 1378), retirement does not automatically warrant a downward modification of support. “[T]he bona fide retirement of a supporting spouse warrants an examination by the trial court to determine if there has been a material change of circumstances to justify a modification in support.” (In re Marriage of Sinks (1988) 204 Cal.App.3d 586, 594-595.) As noted above, in making this determination the trial court is required to reconsider the same standards and criteria set forth in section 4320, which expressly requires the trial court to consider the supporting spouse’s ability to pay taking into account his or her income and earning capacity. (§ 4320, subd. (a); see Stephenson, supra, 39 Cal.App.4th at pp. 77-78.)
We have carefully reviewed the reporter’s transcript and the court’s written statement of decision. The trial court failed to make any express findings with respect to whether it found a material change in circumstances in Stephen’s income or earning capacity. Although the court discussed Stephen’s income while he was still working at his most recent employer, DataPath, the evidence established Stephen had officially retired and he was no longer drawing that salary. The court also recognized Stephen declared different sources of retirement income, and it determined Stephen was likely hiding “some” other sources of income. However, it never reached any conclusion with respect to what Stephen’s current income as a retiree may be or could be. We can infer the court did not find Stephen to be a credible witness, but its ruling does not specifically attribute any income to him from the undisclosed sources of income. And although Stephen testified he did not intend to continue working as a consultant after retirement and earn more money as Brenda had speculated, the court never indicated if it believed him.
As discussed later in this opinion, we find no merit in Stephen’s contention there was insufficient evidence to support the court’s finding he was hiding income.
Thus, it appears the trial court’s ruling erroneously glossed over the issue of whether Stephen established a material change of circumstances with respect to his income and/or earning capacity. It would seem the court instead focused on and considered what spousal support should be in the future based on other section 4320 criteria i.e., the disparities in Stephen’s and Brenda’s current standards of living. A trial court abuses its discretion when it modifies a support order without first finding a material change of circumstances. (See Dietz, supra, 176 Cal.App.4th at p. 398.)
The matter must be remanded because there remains an unresolved factual dispute about Stephen’s current income as a retiree. Certainly a supporting spouse’s loss of a significant source of income could, depending on the circumstances of the case, constitute a material change. But given the court’s factual determination Stephen was hiding assets, the issue of whether other sources of income could be attributed to Stephen (and how much) must be decided by the trial court in the first instance. If there was no material change in Stephen’s ability to pay the current support obligation, there would be no reason for the trial court to order a step down in the amount of support absent a different kind of change in circumstance.
Indeed, due to the lack of any specific findings of changed circumstances, the order on its face presents a puzzling inconsistency. The trial court expressly stated the OSC was denied and Stephen must continue with the current $1,700 support obligation. However, this ruling cannot be reconciled with an implied finding Stephen failed to prove a material change of circumstances, or that Stephen had the ability to pay support, because the court also ordered the current support obligation to be reduced at a future date by $500. A reduction would necessarily imply the court had evidence supporting a material change of circumstance at that future date. We are left guessing as to what that might be or how the court arrived at the $500 figure.
First, it cannot be said the order could be based on any changed circumstances with respect to Brenda’s needs. Indeed, the record does not reasonably support the conclusion Brenda will have decreased needs in the future. To the contrary, the trial court made the express factual finding her current income plus $1,700 spousal support “just barely meets her monthly needs.”
It appears the court’s ruling has more to do with its belief Brenda should try to become more independent. The trial court appropriately noted Brenda was never admonished with a Gavron warning to become self-sufficient when the marriage terminated. And the court’s original spousal support order plainly specified the $1,700 payments would only terminate upon Brenda’s death or remarriage. The trial court correctly realized Brenda cannot be expected to have obtained employment over the past 17 years. (In re Marriage of Heistermann (1991) 234 Cal.App.3d 1195, 1204 [“[A]bsent provisions in the original support order designed to direct the spouse toward becoming self-supporting, an unemployed spouse should not be penalized years later for a failure to become employed”].) However, apparently the trial court determined it was now time for Brenda to take steps towards self-sufficiency and gave her the Gavron warning.
Generally, once a supported spouse is warned by the court but fails to take some action to decrease the need for spousal support, the court may modify the award on the ground of changed circumstances. (In re Marriage of Shaughnessy (2006) 139 Cal.App.4th 1225, 1238 [“a material change of circumstances warranting a modification of spousal support may stem from unrealized expectations embodied in the previous order”].) However, we found no authority to support this trial court’s decision to issue the Gavron warning and at the same time order support reduced. The trial court failed to appreciate that before phasing in a modification reducing support there must first be a finding of material changed circumstances. There was no such finding in this case.
The court’s expectation that circumstances may change in the future once Brenda embarks on her yearlong “concerted effort” to find employment is mere speculation and cannot serve to support the order. Brenda is 66 years old, has no employment history (her last job was in 1970), and it took her a very long time to earn a B.S. and M.S. degree in social work. There was no evidence she had avoided work she was capable of doing. There also was no evidence suggesting she will be able to find employment within the year, especially given the current job market.
We conclude the trial court’s downward modification of support was not based on the determination Brenda no longer needed support, or that circumstances had changed, but was the mistaken perception the passage of one year would automatically warrant a reduction (regardless of whether Brenda succeeded in becoming self-sufficient or not). In addition, we find the decision to reduce support by the seemingly arbitrary figure of $500 without evidence of $500 worth of changed financial circumstances appears to be punitive. Finding no legal authority or factual basis to support the court’s decision, we conclude it was an abuse of discretion.
D. Stephen’s Retirement Income
Stephen argues the court wrongfully found he was hiding his income by refusing to disclose information about accounts, including his severance and retirement from DataPath. Stephen asserts he stated on the record he did not receive a pension from DataPath and, therefore, did not need to produce any records to support the pension’s nonexistence. He asserts the record is unclear as to what other information he failed to provide. He concludes Brenda made more egregious omissions regarding her income and questions if the trial court abused its discretion because it found no fault with Brenda.
We will begin with the trial court’s ruling Stephen was hiding some of his income in violation of Feldman. He supplies this court with the evidence and facts in his favor. However, this court’s review is limited and Stephen is not permitted to relitigate the facts. We find there was substantial evidence to support the court’s ruling. Stephen failed to produce financial documents such as: (1) his UBS account statements that could have reflected dividend/interest income; (2) his Bank of America statements showing interest income; (3) his Kinecta Federal Credit Union account statements after the date of retirement; and (4) statements reflecting the amount of the DataPath severance package.
Although some of this information was revealed at trial, Stephen blatantly ignored Brenda’s timely served notice to appear and subpoena to produce documents. When Stephen was asked on cross-examination why he refused to disclose the bank records that he admitted would have shown his severance package from DataPath, he said “Well, I just chose not to.” At trial, it was discovered Stephen had $1.2 million dollars in a Schwab account. Stephen had no documents to support his claim that nearly half of it did not belong to him. Stephen replied “I might have messed up” when he was cross-examined about his failure to produce any documents proving he had in fact retired. In light of the above, it was not unreasonable for the court to have disbelieved Stephen’s testimony and conclude he hid some income.
Stephen asserts the court unfairly singled him out as being dishonest because there was also evidence Brenda was withholding information about her income. Brenda was questioned about her failure to: (1) include a $1,000 per month interest payment on her 1991 income and expense declaration; (2) itemize her jewelry on her current income and expense declaration; and (3) produce all her Bank of America statements. The court reasonably accepted Brenda’s explanation the interest payments did not start until after she filed the income and expense declaration and the money related to an inheritance. The jewelry was awarded to Brenda 17 years ago in the dissolution judgment and she correctly concluded it did not need to be declared or sold to support herself. As for the purported missing bank statements, the court reasonably believed Brenda’s testimony what she produced showed all the transactions occurring within the past two years. We found nothing else in the record to suggest Brenda was hiding income or was otherwise being dishonest. It cannot be said the trial court abused its discretion in finding Brenda was a credible witness but Stephen was not.
We note the court stated Stephen’s failure to disclose all his income violated Feldman, but it did not impose any monetary sanctions permitted under that authority. (Feldman, supra, 153 Cal.App.4th at p. 1478 [discussing a court’s discretion and factors for imposing monetary sanctions for a parties failure to comply with various disclosure requirements].) We therefore need not address Stephen’s argument Feldman is inapt once the marriage has been terminated.
E. Attorney Fees Award
The court did not specify the reasons or statutory grounds for awarding attorney fees. Since Stephen partially prevailed on his OSC (spousal support was modified downward, albeit in one year time) we assume attorney fees were not awarded under section 271 [bad faith or frivolous motion]. It is more likely the court would have based fees on a “needs and ability” analysis under section 2030. Brenda showed she had incurred $18,232 in attorney fees defending the OSC. The court awarded $13,000. We review an order granting attorney fees in a dissolution proceeding for abuse of discretion. (In re Marriage of Sullivan (1984) 37 Cal.3d 762, 768-769 (Sullivan).) Such an abuse will be established, “‘only if, considering all the evidence viewed most favorably in support of its order, no judge could reasonably make the order made.’ [Citations.]” (Ibid.)
Under section 2030, a need-based award of attorney fees and costs is authorized to “ensure that each party has access to legal representation” during the dissolution proceeding. (§ 2030, subd. (a)(1); see In re Marriage of Hobdy (2004) 123 Cal.App.4th 360, 371.) Such an award is permitted where “just and reasonable under the relative circumstances of the respective parties.” (§ 2032, subd. (a).) The purposes of a need-based award are “to ensure that the parties have adequate resources to litigate the family law controversy and to effectuate the public policy favoring ‘parity between spouses in their ability to obtain legal representation.’” (In re Marriage of Braud (1996) 45 Cal.App.4th 797, 827; see Sullivan, supra, 37 Cal.3d at p. 768.)
The key considerations in making such an award is the recipient’s need for the award and the obligor’s ability to pay. (§ 2030, subd. (a)(2).) On the question of need, the statute “permits an award to a spouse even if that spouse has sufficient resources to pay attorney’s fees and costs from his or her own pocket.” (In re Marriage of O’Connor (1997) 59 Cal.App.4th 877, 883; see § 2032, subd. (b).) On the question of ability to pay, relevant factors include assets and earning capacity. (In re Marriage of Drake (1997) 53 Cal.App.4th 1139, 1167; see §§ 2032, subd. (b), 4320, subds. (a) & (e).)
In this case, we recognize the trial court did not resolve the factual dispute about whether there was a material change in Stephen’s income or what additional portion of his income was hidden. Nevertheless, the attorney fees award can be upheld because the court’s ruling reflects the court considered Stephen’s and Brenda’s respective incomes (to the extent reported), the needs of the parties, and their ability to pay. These findings were all supported by substantial evidence. Because “[w]e may overturn the trial court’s award only if ‘“no judge could reasonably”’ have made it” (O’Connor, supra, 59 Cal.App.4th at p. 884), and we have no basis upon which to say on this record the trial court’s determination was unreasonable, we affirm the court’s order awarding attorney fees.
III
We affirm the attorney fees award order. We reverse the order modifying spousal support and remand the matter for a new hearing in light of our discussion above. In the interests of justice, both parties shall bear their own costs on appeal.
WE CONCUR: MOORE, J., FYBEL, J.