Morton v. Morton (In re Morton)
238 Cal. Rptr. 3d 407
| Cal. Ct. App. 5th | 2018Background
- David and Launa Morton married in 1991, separated in 2012; two children (one reached majority in 2016). Divorce proceedings litigated business characterization, child support, spousal support, and attorney fees.
- David worked in and eventually owned a 50% interest in Huddleston Crane Services, Inc. and H.C.S. Mechanical, Inc.; trial court found his ownership interest was a gift from his father and therefore separate property (affirmed on appeal).
- David reported large S‑corporation income on tax returns but much was retained by the companies; he received substantial estimated‑tax payments and large federal and state refunds in 2014–2015 (totaling $94,258 in 2015).
- Trial court continued a 2013 child support order in the June 2016 judgment and set permanent spousal support; the court excluded David’s tax refunds and voluntary 401(k) and HSA contributions from income calculations without explaining the exclusions.
- Launa sought additional attorney fees (~$115,000) after trial; the trial court denied additional fees. Appellate issues challenged child support/spousal support calculations and the denial of further attorney fees; business characterization was also appealed.
Issues
| Issue | Morton (Plaintiff/Appellant) Argument | David (Respondent) Argument | Held |
|---|---|---|---|
| Whether state/federal income tax refunds must be included in a parent’s annual net disposable income for child support under Fam. Code §4059 | Refunds are income available for support and must be added back when withholdings/estimates were previously subtracted | Refunds belonged to the S‑corporations or otherwise not available to him | Court: Refunds must be included when withholdings/estimates were deducted; David’s refund exclusion was error and his ownership theory lacked evidentiary support; remand to include refunds |
| Whether voluntary 401(k) (and HSA) contributions may be excluded from income available for child support/spousal support | Voluntary retirement and HSA contributions are funds available for support and should be included unless court gives findings justifying exclusion | Contributions are legitimate deductions from pay and should reduce income available | Court: Voluntary 401(k)/HSA contributions generally count as disposable income; exclusion was error absent express findings justifying exclusion; remand for recalculation or findings |
| Whether trial court erred by denying additional attorney fees under Fam. Code §2030 | Trial court failed to make required explicit findings and ignored disparity in access/ability to pay; award of further fees was mandatory given the record | Both parties had assets from property division; no demonstrated need for additional fees | Court: §2030(a)(2) requires explicit findings on disparity and ability to pay; record compels findings of disparity and ability to pay by David → award of additional attorney fees was mandatory; remand to determine amount (including appellate fees) |
| Whether David’s ownership interest in Huddleston Crane was community property or separate property (gift) | Launa argued community claim or remuneration; business should be valued in community accounting | Trial court found interest was a gift from Father and not remuneratory, thus separate property | Court: Trial court’s explicit finding that the interest was a gift and implicit finding it was not remuneratory are supported by substantial evidence; characterization affirmed |
Key Cases Cited
- In re Marriage of Cheriton, 92 Cal.App.4th 269 (appellate standard for child support) (discusses review for abuse of discretion in support awards)
- Ready v. Ready, 76 P.3d 836 (Wyo. 2003) (tax refunds treated as income affecting child support/cash flow)
- In re Marriage of Pylawka, 277 Ill.App.3d 728 (tax refunds represent overwithholding and should be added back in child support calculations)
- In re B.G., 11 Cal.3d 679 (statutory requirement to make an express finding construed as requiring an explicit on‑the‑record finding)
- Soule v. General Motors Corp., 8 Cal.4th 548 (prejudice standard for reversible error in civil cases)