Macilwaine v. Macilwaine (In re Macilwaine)
237 Cal. Rptr. 3d 156
| Cal. Ct. App. 5th | 2018Background
- John (supporting parent) worked as CTO of LendingClub; substantial compensation was in employer stock options that began vesting in 2013 and became tradable after the company's 2014 IPO.
- Dissolution judgment (2012) set base child support plus percentage "bonus" support tied to earnings over base salary; children born 1997–2008.
- John sought an order capping income for support purposes under Fam. Code §4057(b)(3) (extraordinary earner exception) after his reported income rose sharply due largely to option proceeds.
- Trial court applied an "exercise-and-sale" rule (count only actual sales proceeds as income), concluded John was an extraordinarily high earner, and capped income at $2 million/year (reducing guideline support).
- Patricia appealed, arguing (1) vested/mature options should be treated as income when available (not deferred until exercise/sale), (2) the trial court used the wrong legal standard to determine the children’s "needs," and (3) the court failed to provide the required §4056 findings explaining the deviation from guideline support.
Issues
| Issue | Plaintiff's Argument (Patricia) | Defendant's Argument (John) | Held |
|---|---|---|---|
| When do employer-granted stock options constitute "income" for guideline support? | Options become income once vested/mature and sale restrictions are removed; market value minus strike should be counted. | No income until options are actually exercised and shares sold (exercise-and-sale rule). | Vested, mature options that are available to the employee constitute income under §4058(a)(1); inclusion is measured when compensation is conferred and available (vesting/maturity), not delayed until sale. |
| Whether trial court permissibly excluded vested option value when calculating guideline income | Court must include available option value in gross income; parent cannot defer acceptance to reduce support. | Court should consider practical sale restrictions and investment strategy; exercise rule justified here. | Trial court erred by deferring to obligor’s investment preferences and excluding available compensation; it must recalculate guideline income to include vested/mature options unless meaningful legal restrictions remained. |
| Proper standard for determining "needs of the children" under §4057(b)(3) (extraordinary earner exception) | Needs are based on parents' financial circumstances and "station in life," not solely on historical custodial spending. | Cap is appropriate because historical household expenditures show children's needs can be met at lower support level. | Court applied wrong standard (relied on historical spending); must assess needs in light of parents’ station in life and the resources available. |
| Adequacy of trial court findings under Fam. Code §4056 when deviating from guideline support | Court must state guideline amount, explain why ordered amount differs, and why deviation is consistent with children's best interests with concrete reasoning. | Trial court's general conclusions and offsets justified cap; detailed quantification unnecessary. | Statement of decision was conclusory and opaque; §4056 requires articulated reasons showing guideline exceeds needs and why lower amount is in children’s best interests. Remand for recalculation and proper findings. |
Key Cases Cited
- Cheriton v. Kipple, 92 Cal.App.4th 269 (Cal. Ct. App.) (stock options are part of employment compensation and must be included in income; guideline framework and limits on trial court discretion)
- Berger v. Berger, 170 Cal.App.4th 1070 (Cal. Ct. App.) (a parent cannot voluntarily forgo or defer compensation to reduce support; deferred salary must be treated as income)
- Riddle v. Riddle, 125 Cal.App.4th 1075 (Cal. Ct. App.) (employer loan forgiveness and other noncash compensation can be included in income for support purposes)
- Cooper v. Cooper, 269 Cal.App.2d 6 (Cal. Ct. App.) (in spousal support context, vested but unexercised stock options are not a mere expectancy and may be treated as property/value once exercisable)
- Hubner v. Hubner, 94 Cal.App.4th 175 (Cal. Ct. App.) (trial court must calculate presumptive guideline support before exercising statutory discretion to deviate)