Opinion
Aрpellant Howard E. Cohn (Howard), former husband of respondent Patricia O. Cohn (Patricia), appeals from a judgment after trial which awarded Patricia temporary and permanent child and spousal support. Howard contends the court abused its discretion in imputing income to him based on earning capacity when the evidence showed he had no opportunity to work.
We shall conclude the trial court acted within its discretion in imputing income to Howard, but that the court’s earning capacity figures are not supported by substantial evidence. We will therefore reverse and remand for further proceedings on the issue.
Background
Howard and Patricia married on September 4, 1983, and separated in August of 1994. They had three children: Matthew bom in 1986, Brian bom in 1988, and Regina bom in 1992. During the marriage, Howard worked in various capacities. In 1987, he obtained a job as house counsel for a
In August of 1993, Howard’s employer filed for bankruptcy. Howard’s income dried up and the Cohns’ financial world began to crumble. Howard received some retainer income between February and August of 1994, but by January of 1995 he was effectively unemployed. In early 1994, Howard began having severe stress-related emotional problems, culminating in mеntal breakdowns and temporary hospitalization in January of 1995.
While Howard was hospitalized, Patricia took the three children and moved to Seattle. The marriage was formally dissolved on January 18, 1996.
After a custody hearing in July of 1996, Patricia was awarded primary physical custody of the three children, with liberal visitation to Hоward. The parties were ordered to share equally the transportation and lodging expense for the children’s visits with Howard.
Trial on other issues, including child and spousal support, was held on March 12-14, 1997. Howard filed for chapter 7 bankruptcy just prior to trial.
At the trial, Howard testified in exhaustive detail about his efforts to find employment since his mental breakdown in January 1995. After completing 40 hours of Mandatory Continuing Legal Education, he looked for jobs in the Daily Recorder, submitted resumes and cover letters to most of the firms in the Sacramento area, and applied to numerous public agencies such as the Sacramento, Placer, and Shastа County Public Defender’s and District Attorney’s offices. He did not receive a single job offer.
Frustrated by his inability to find work, Howard moved to Los Angeles in mid-1995 for about three months where he worked for a private lender, but was unable to make any money. He then returned to Sacramento and pursued an opportunity to sell living trusts, obtaining the required insurance license, but was eventually informed by the company he worked for that it had adopted a new policy not to hire attorneys. Howard then sought out other types of employment such as in-house counsel, paralegal, law clerk, contract attorney, and car salesman, all to no avail.
In Mаrch 1996, Howard set up his own law office in Hayward, where he used to practice, and accepted court appointments from Alameda County.
Patricia testified that she did not know of any job offers that Howard turned down, or of any employment opportunities he could have, but failed to pursue.
The Trial Court’s Ruling
The court issued a statement of decision in which it found that Howard earned virtually nothing during 1995, and that his gross income in 1996 was approximately $8,000. The court also found that Howard’s mental and physical problems prevented him from earning any significant income between January and August of 1995,- and it therefore declined to order him to pay child or spousal support for that period.
However, for the period between August 1995 and August 1996, the court set Howard’s annual earning capacity at $40,000, “given his previous experience, education and professional background.” From August 1996 to the time of trial in March 1997, the court imputed income to Howard at the stepped-up rate of $80,000 per year “based upon the additional time that passed thereby allowing [him] to obtain income or employment more consistent with his previous experience and training.” The court also imputed income to Patricia based on her earning capacity. Using the “DissoMaster” computer program and the imputеd income figures, the trial court calculated Howard’s temporary and permanent child and spousal support.
Appeal
In computing child support obligations under the statewide uniform guidelines, the trial court has discretion to impute income to either parent based on that parent’s “earning capacity.” (Former Fam. Code,
“ ‘ “Earning capacity is composed of (1) the ability to work, including such factors as age, occupation, skills, education, health, background, work
Taking his cue from the above line of authority, Howard contends that (1) because the trial court did not find in its statement of decision that he had the opportunity to work, it erred in imputing income to him based on earning capacity, and (2) use of earning capacity rather than actual income figures was an abuse of discretion because there is no substantial evidence in the record that Howard had the opportunity to work. We discuss each claim individually.
Statement of Decision
Judgments and orders of the lower courts are presumed to be correct on appeal. (In re Marriage of Arceneaux (1990)
Here, Howard requested a statement of decision but failed to bring the court’s attention to the fact that it did not make findings with respect to his opportunity to work. Thus, insofar as Howard’s challenge to the judgment is based on this deficiency, it is waived. We imply all findings necessary to support the judgment, and our review is limited to whether there is substantial evidence in the record to support these implied findings. (In re Marriage of Aninger (1990)
The record shows that after reaching the pinnacle of success as counsel to a close-knit group of comрanies, Howard’s personal and professional life was shattered when his employer filed bankruptcy and he was laid off in 1993. He suffered a complete mental breakdown and had to be hospitalized in January 1995.
In August 1995, Howard began again to seek out employment. The evidence was uncontradicted that, despite аn exhaustive job search, Howard was unable to find an employer willing to hire him in an attorney position. After attempts to earn money in other fields proved fruitless, Howard opened a solo practice in Hayward which he operated for a year, with little to show for it. At the time of trial he planned to move his practice to Sacramento where, hopefully, he would have better luck.
Substantial evidence supports the first two elements necessary for imputation of income—Howard had both the ability and the willingness to work. The question on appeal is whether the trial court could have reasonably concluded Howard had the opportunity to work on the state of this record.
Case law on the subject is scant. The only formulation of the opportunity element, first enunciated in In re Marriage of Regnery (1989)
We begin with the observation that in the case of professionals or tradespeople who are self-employable, the “employer willing to hire” definition is obviously too narrow, as it encompasses only salaried employees. As this case illustrates, a licensed attorney with marketable skills who cannot find outside employment may still “hang up the shingle” and try to sustain a living through court appointments, referrals, contract work, etc. This is what happened here. Frustrated by his fruitless search for a salaried position, Howard set up a law practice in Hayward, a market with which he was familiar, and did manage to make some money, albeit meager and sporadic.
Thus, a more аppropriate definition of “opportunity to work” is the substantial likelihood that a party could, with reasonable effort, apply his or her education, skills and training to produce income. Under this definition, we find substantial evidence of opportunity.
However, we can find no substantial evidence to support the figurеs arrived at by the trial court. To rely on earning capacity in lieu of actual income “[t]he dispositive question is whether the evidence will sustain the inference that the party charged with support could, with reasonable effort, obtain employment generating the postulated (higher) income.” (County of Yolo v. Garcia (1993)
Instead of basing his earning capacity on a salaried position which the evidence showed Howard was unable to secure, the court’s focus should
The record supports the court’s finding that Howard grossed about $8,000 while operating a solo practice in Hayward. This is only a starting point, however. By no means was the court restricted to that figure in determining annual earning capacity. To use Howard’s terminology, he could be “flipping burgеrs at McDonald’s” and do better than that. The inquiry should be directed at what an attorney with Howard’s background, age, qualifications, and experience could be expected to earn in his first year as full time solo practitioner.
An even more apparent error in the court’s analysis is its projection that Howard’s income would double to $80,000 after only one year. This finding is impossible to fathom. If the court based Howard’s first year’s income on a $40,000 entry level position, as its statement of decision clearly indicates, it is inconceivable that such an entry level salary would rise by 100 percent after only one year of service. Very few private jobs and certainly no public sector positions operate in such a manner. The basis for the court’s stepped-up imputation is elusive at best, but in any event lacks evidentiary support in the record.
We are sympathetic to the trial court’s view that Howard’s support obligations be based on his earning capacity, and reaffirm its discretion to do so. Nevertheless, figures for earning capacity cannot be drawn from thin air; they must have some tangible evidentiary foundation. Because these figures do not, we reverse and remand for further proceedings. On remand, the court will have a much better track record from which to view the issue. Presumably, Howard would have had more than a year in which to establish his law practice. If it turns out that he continued to generate extremely low income figures as a self-employed attorney in Sacramento (as he did in Hayward) the inquiry may need to refocus on such issues as to whether Howard exercised reasonable diligence in developing his law practice or alternatively what employment opportunities were available in the nonlegal field to someone with Howard’s skills and experience.
A new evidentiary hearing, at which both sides may introduce evidence of Howard’s earning capacity, is the best medium through which the court can make this determination.
Disposition
That portion of the judgment ordering Howard to pay temporary and permanent child and spousal support is reversed. The cause is remanded to
Blease, Acting P. J., and Nicholson, J., concurred.
Notes
Howard testified that in 1996 his Hayward practice grossed some $7,000-plus, while incurring overhead expenses of $14,000-$15,000.
All further unspecified statutory references are to the Family Code.
As LaBass illustrates (
Unlike Patricia, who the court found “has essentially not been employed outside the home” and had made “minimal effort to obtain employment,” the court found that Howard “made attempts to regain employment and income in both the legal and business fields, without much success.”