In Re Marriage of Schulze
60 Cal. App. 2d 519, 70 Cal. Rptr. 2d 488, 60 Cal.App.4th 519 (1997)
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Rule of Law:
A permanent spousal support order must be based on an independent, ground-up evaluation of the statutory factors enumerated in Family Code § 4320, not on a computer-generated figure intended for calculating temporary support. When non-cash employee benefits are included as income for support calculations, the court must also account for the corresponding tax liability on that imputed income to accurately determine net disposable income.
Facts:
- Michael Schulze and Andrea Schulze, who had three children, separated in April 1992 after nine years of marriage.
- Michael worked for his parents' manufacturing company, historically earning over $100,000 annually.
- In 1992, the year of separation, Michael's parents altered their company's ownership structure; Michael did not receive any stock, and his direct salary was subsequently reduced to approximately $80,000, despite the company's sales increasing.
- After the separation, Michael's mother purchased a condominium for him to live in and charged him rent of $800 per month, which was $600 below its fair rental value.
- Michael also had the use of a company-provided Mercedes, which had a fair rental value of $500 per month.
Procedural Posture:
- The dissolution of marriage between Michael and Andrea Schulze proceeded to trial in the family court (trial court/court of first instance) in January 1994.
- The trial judge, using the DissoMaster computer program, calculated a family support order based on Michael's actual earnings plus imputed, 'nontaxable' income from a rental subsidy and a company car.
- The trial court used the computer program's figure for temporary spousal support as the basis for the permanent spousal support component of the final order.
- The trial court issued a judgment ordering Michael to pay $4,780 per month in family support, $5,000 in sanctions for frustrating settlement, and $7,500 in attorney's fees.
- Michael Schulze (appellant) appealed the judgment to the California Court of Appeal (intermediate appellate court).
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Issue:
Does a family court abuse its discretion when it determines a permanent family support order by using a computer program's calculation for temporary support and by treating imputed income from employee benefits as 'nontaxable' for the purposes of calculating the support obligation?
Opinions:
Majority - Sills
Yes. A family court abuses its discretion by basing a permanent spousal support order on a computer-generated temporary support figure and by failing to account for the tax consequences of imputed income. The court reasoned that temporary and permanent spousal support serve different purposes; temporary support is meant to maintain the status quo, while permanent support must be based on a thorough consideration of all statutory factors listed in Family Code § 4320. Using a temporary support figure from a computer program as a baseline or starting point for a permanent order subverts the required independent exercise of judicial discretion. Additionally, while it was proper to include the rental subsidy and company car as 'employee benefits' constituting income under Family Code § 4058, it was error to characterize them as 'nontaxable.' If these benefits are treated as compensation for support calculation purposes, their corresponding tax liability must also be factored in to determine the payor's actual net disposable income, as required by § 4059.
Analysis:
This decision establishes a crucial procedural safeguard in family law, clearly delineating the analytical process for setting permanent spousal support. By forbidding reliance on temporary support formulas, the court reinforces that permanent awards demand a de novo, fact-intensive inquiry into the statutory § 4320 factors. The ruling also introduces a rule of logical consistency for imputed income: if a non-cash benefit is to be treated as income, its tax consequences must also be recognized. This prevents the artificial inflation of a supporting spouse's net income and ensures that support orders are grounded in financial reality, significantly impacting how courts must handle cases involving complex, non-salary compensation.
