(Santa Cruz County Super. Ct. No. FL014100). Trial Judge: Hon. Irwin Joseph, Commissioner.
The opinion of the court was delivered by: Premo, J.
CERTIFIED FOR PUBLICATION
This is an appeal and cross-appeal from the trial court's postjudgment order reducing child and spousal support. In her appeal, respondent Cindie Greenbaum Alter argues that the trial court erred by refusing to enforce the parties' marital settlement agreement (MSA), which stated that child support was to be "absolutely non-modifiable downward." In his cross-appeal, petitioner Jack Mitchell Alter argues that the trial court abused its discretion by cone the $6,000 his mother gave him every month. We reject both arguments. The trial court always has the power to modify an existing child support order, either upward or downward, notwithstanding the parties' agreement to the contrary. And, where a party receives recurring gifts of money, the trial court has discretion to consider that money as income for purposes of the statewide uniform child support guidelines. (Fam. Code, § 4050 et seq.)*fn1
We do agree with Jack*fn2 that the trial court misread the MSA in setting the amount of spousal support. Accordingly, we shall reverse the judgment and remand the matter for the trial court to reconsider that portion of its order.
I. FACTUAL AND PROCEDURAL BACKGROUND
Jack and Cindie were married in 1989. They had two minor children, Samantha and Alexandra. When Jack and Cindie separated in 2001 they entered into an MSA, which was ultimately incorporated into the judgment of dissolution. The MSA gave Cindie sole physical and legal custody of the children and required Jack to pay child support of $4,000 per month plus significant additional child support in the form of tuition payments and the like, which are commonly known as "add-ons." (§ 4062; In re Marriage of Fini (1994) 26 Cal.App.4th 1033, 1039.) Paragraph No. 4.9 of the MSA stated: "These obligations shall be absolutely non-modifiable downward throughout the term that child support shall remain in effect."
The MSA also required Jack to pay spousal support of $3,000 per month, to give Cindie a portion of anything he inherited from his mother or from his father's estate, and to maintain an estate plan that left 25 percent of his own estate to Cindie. Spousal support would not terminate upon Cindie's remarriage, but it could be reduced to $1,000 in specified circumstances.
Immediately after finalizing the MSA in July 2001, Cindie moved with the children to Georgia where they continue to reside.
B. The Current Litigation
On December 7, 2004, Jack commenced proceedings to modify his support obligations based upon changed circumstances. Jack sought a reduction in child support to the amount required under the statutory guidelines, reduction of his responsibility for the add-ons, and elimination of spousal support. Cindie opposed the modifications, arguing that under the terms of the MSA the child support provisions could not be reduced and, in any event, there had been no change in circumstances. The issues were litigated for over two years, finally going to trial in June 2007.
Jack testified that he had worked in his family's retail drapery business most of his life. He had inherited the business on the death of his father in 1996 and continued to operate it, with varying degrees of success, through the time of trial, when his income from the business was about $7,000 per month. When Jack and Cindie separated in 2001, Jack had anticipated receiving additional income of around $12,500 per month from a commercial building his mother owned. That income never materialized, however, because Jack's mother sold the building. Thus, according to Jack, his income was not what he had expected it to be when he and Cindie entered into the MSA and was now insufficient to meet all his obligations under the judgment.
Jack admitted that his mother covered many of his expenses. She had been regularly giving him $3,000 per month for many years. For a time after the divorce, Jack lived with her, rent-free. In 2005, she purchased a house in Sunnyvale and Jack moved into it. She then increased Jack's monthly stipend to $6,000, $3,000 of which Jack used to pay the rent his mother charged. Jack's mother also paid for Jack's daughters' schools, tutoring, and summer camp. Jack used his mother's credit card to buy clothes and other things for the girls. His mother paid for transportation and lodging for Jack to visit his daughters in Georgia several times a year. She gave him money from time to time when he needed it. She paid his attorneys in California and in Georgia. And, although Jack had declined the offer, his mother had also volunteered to pay the difference between the court-ordered support and that which Jack was able to pay himself.
Jack claimed that all the money his mother had given him over the last several years had been loaned. He produced a number of promissory notes dating back to 2005, documenting the debt. The notes were not itemized and did not call for interest. The total of the notes showed that Jack owed $400,000 to his mother's trust and $25,000 to his brother. Although the notes had different dates, the notes Jack produced at trial were all signed on the same day. Jack explained that his mother's attorney sent him the notes via email, he printed them, signed them, and sent them back to the attorney. The notes he produced were those he still had on his computer, which he printed and signed all at once. Jack testified that the loans would not be repaid out of his inheritance because his mother's money was to remain in a trust.
Jack explained that his mother began asking for repayment when she learned of the terms of the MSA. Jack had not wanted to tell his mother about some of the terms of that agreement, particularly the inheritance clause. But as it got harder and harder for him to make the payments required by the judgment, he felt compelled to disclose the entire agreement to his mother who, thereafter, demanded he sign promissory notes for the money that went to support Cindie. According to Jack, the loans would not continue. Cindie countered that, when Jack's father died, Jack's mother began giving Cindie and Jack $4,000 per month on a regular basis and it was with that source of money that Jack had planned to pay some of the support required by the judgment. Cindie always understood this money to have been a gift, not a loan. Jack's mother did not testify.
Cindie was a lawyer, although she had not been employed outside the home during the marriage. After she returned to Georgia in 2001, she reactivated her license to practice law and obtained a job as a clerk for a superior court judge. Her annual salary had risen from $19,500 in 2005 to nearly $61,000 in 2007. She had some dividend income, as well. Her 2005 tax return showed dividends of $10,319 for the year, most of which, Cindie explained, came from accounts she owned in joint tenancy with her father. Cindie received annual notice of dividends from these accounts but she never actually received the dividends and did not have access to the accounts. She did not submit tax returns for 2006. By the time of trial Cindie had liquidated most of her own savings to pay for this litigation and a lawsuit she had commenced against the builder of her house in Georgia. Her income and expense declaration for 2007 showed monthly dividends of $50 and noted that any other dividends she reported on her tax return were "paper income" only.
3. The Trial Court's Orders
The trial court made three orders: the July 2, 2007 order, the July 9, 2007 amended order (first amended order), and the final order of October 29, 2007 (second amended order).
The trial court's first order rejected Cindie's claim that child support could not be reduced, concluding that "the court always has jurisdiction to modify [child support]." The court found that since Jack was not receiving the $12,500 per month he had anticipated in 2001, there had been a material change in Jack's financial situation. The court found that Jack's monthly income from his business was $7,500 and that he "historically and continually receives $6,000 per month from his mother and another $1,000 in cash and benefits . . . , totaling $7,000 in non-taxable income per month." The court found Cindie's salary to be as stated on her wage and tax statements and that her dividends were $10,319 for all of 2005, $480 per month for 2006, and $100 per month for 2007. Applying its findings to the statutory formula, the court determined that Jack's monthly child support payments should be reduced. The court did not modify the addons.
In the first amended order, the court confirmed the findings contained in the original order, made the additional finding that, "Both sides signed a Marital Settlement Agreement which set a floor for support," and reduced the spousal support payment to $1,000. Jack filed written objections to the calculation of Cindie's income, the characterization of the $6,000 per month he received from his mother as income, and the finding that the MSA set a floor of $1,000 per month for spousal support.
The second amended order confirmed most of the findings in the prior orders and corrected an error in the calculation of one of the child support payments. The final orders reduced child support to $2,850, $2,839, and $3,045 per month for the years 2005, 2006, and 2007, respectively. Spousal support was reduced to $1,000 per ...