COURT OF APPEALS OF VIRGINIA
Present: Judges Willis, Elder and Senior Judge Cole
Argued at Richmond, Virginia
MARY E. HOWARD
MEMORANDUM OPINION * BY
v. Record No. 1400-93-4 JUDGE LARRY G. ELDER
JULY 18, 2000
JAMES T. HOWARD
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Quinlan H. Hancock, Judge
Mary E. Howard, pro se.
No brief or argument for appellee.
Mary E. Howard (wife) appeals from a 1993 order of the
Circuit Court of Fairfax County (1) determining the amount of
child and spousal support to be paid to her by her former
spouse, James T. Howard (husband) 1 ; (2) refusing her request to
make the figures retroactive to the date of her request for
support; and (3) failing to impose sanctions on husband's
attorney. We hold that the bulk of the trial court's challenged
rulings did not constitute an abuse of discretion but that the
court committed reversible error in determining husband's gross
income for purposes of calculating child and spousal support by
* Pursuant to Code § 17.1-413, recodifying Code
§ 17-116.010, this opinion is not designated for publication.
1
Wife's appeal was stayed during the pendency of husband's
bankruptcy petition.
failing to include husband's net rental income from the dental
corporation, interest, dividends, capital gains, and certain
clothing and tax preparation costs; improperly including in his
income wife's spousal support; and in apportioning child support
expenses between the parties. Therefore, we reverse the
decision of the trial court as to child and spousal support and
remand for further proceedings consistent with this opinion.
I.
ANALYSIS
A.
SPOUSAL AND CHILD SUPPORT
1. GROSS INCOME CALCULATION
"Decisions concerning both [spousal and child] support rest
within the sound discretion of the trial court . . . ." Calvert
v. Calvert, 18 Va. App. 781, 784, 447 S.E.2d 875, 876 (1994).
"The trial court's decision, when based upon credibility
determinations made during an ore tenus hearing, is owed great
weight and will not be disturbed unless plainly wrong or without
evidence to support it." Douglas v. Hammett, 28 Va. App. 517,
525, 507 S.E.2d 98, 102 (1998). In computing a party's gross
income for child support, Code § 20-108.2(C) requires the
inclusion of "all income from all sources." Such income "shall
include, but not be limited to, income from salaries, wages,
commissions, bonuses, . . . pensions, interest, . . . spousal
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support, [and] rental income." Code § 20-108.2(C). This income
"include[s] nonmonetary as well as cash income." Carmon v.
Dep't of Soc. Servs., 21 Va. App. 749, 755, 467 S.E.2d 815, 818
(1996). Gross income "shall be subject to deduction of
reasonable business expenses for persons with income from
self-employment, a partnership, or a closely held business."
Code § 20-108.2(C).
A court determining spousal support also shall consider all
income of the parties. See Code § 20-107.1.
a. Imputation of Income
A spouse's voluntary underemployment may serve as a basis
for the trial court to impute income to the underemployed spouse
when calculating child and spousal support. See Code
§§ 20-107.1, 20-108.1(B), 20-108.2(A); see also Stubblebine v.
Stubblebine, 22 Va. App. 703, 708, 473 S.E.2d 72, 74 (1996) (en
banc); Bennett v. Dep't of Soc. Servs. ex. rel. Bennett, 22 Va.
App. 684, 691-92, 472 S.E.2d 668, 672 (1996).
Husband testified that his employment with Seylor's Dental
Laboratory did not detract from his dental practice earnings
because "[he] did not have the patients to replace it" and had
been unable to find other suitable employment. Wife presented
no evidence to refute husband's testimony, other than her
general implication during cross-examination of husband that he
could earn more money working as a dental hygienist than he did
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working at Seylor's. The trial court did not abuse its
discretion by accepting husband's testimony and failing to
impute income to husband for purposes of calculating child and
spousal support.
b. Rental Income and Other Benefits
We hold the trial court did not err in excluding income
husband received from renting a jointly owned condominium but
did err in failing to include income he received from renting
space in his home to his dental corporation. Including
husband's expenses for the condominium mortgage, homeowner's
fees, maintenance, repairs and the like, husband claimed a net
loss for rental of the condominium. Although Code § 20-108.2(C)
requires the inclusion of rental income in the gross income
calculation, it also permits the deduction of reasonable
business expenses. Therefore, we hold the trial court did not
abuse its discretion in concluding implicitly that husband had
no net rental income attributable to the condominium for
purposes of child support. Similarly, we hold the trial court
also acted within its discretion in concluding implicitly that
husband had no net rental income from the condominium for
purposes of spousal support. See Code § 20-107.1.
In contrast to the expenses for the condominium, husband
claimed no reasonable business expenses to be deducted from the
$400 monthly income he received for rental of office space in
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his home to his dental practice. Although husband used the $400
monthly rental income to make his $390 monthly mortgage payment,
this payment covered the mortgage for the entire house, and no
evidence established what portion of the payment may have been
attributable to the office portion of the house rather than the
residential portion. Under these facts, the trial court abused
its discretion in failing to include the $400 rent husband
received from the corporation each month in determining
husband's gross income for purposes of calculating child
support. The court's failure to include this rental income in
its child support calculations also calls into question whether
it considered the rental income in the context of its spousal
support calculations. Therefore, we reverse and remand to the
trial court for a recalculation of both child and spousal
support. 2
2
Although wife has not assigned error to the trial court's
failure to include husband's 1992 interest and capital gains in
his gross income, we note that both categories of receipts are
income under Code § 20-108.2(C) if held to have been received
contemporaneously. See Goldhamer v. Cohen, 31 Va. App. 728, 737
n.2, 525 S.E.2d 599, 603 n.2 (2000); id. at 730, 525 S.E.2d at
604 (Elder, J., concurring). We also note that same code
section contains specific requirements regarding the
consideration of spousal support payments in apportioning child
support payments between parents. It provides that "spousal
support included in gross income shall be limited to spousal
support paid pursuant to a pre-existing order . . . and . . .
shall be deducted from the gross income of the payor when paid
pursuant to a pre-existing order or written agreement between
the parties to the present proceeding." That code section also
states that "'gross income' shall mean all income from all
sources, and shall include . . . spousal support." Although
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Wife contends the trial court erroneously excluded from
husband's gross income sums paid by his corporation for various
benefits he received. We hold the court did not err in
excluding sums paid for the lease and operation of an
automobile; utilities; lawn care; pest control; appliances;
furnishings; entertainment; meals; disability, life and health
insurance, and unreimbursed medical expenses. The evidence,
viewed in the light most favorable to husband, supported a
finding that these costs were legitimate business expenses.
Wife contends the trial court erroneously permitted husband
to deduct from his gross income expenses paid by the corporation
for attorney's fees incurred in the parties' divorce
proceedings. We hold the record contains insufficient evidence
to establish the allegation that any such payments were made
contemporaneously with the support proceeding. On brief, wife
indicated that entries in the corporate checkbook showing loan
repayments to Hallmark Bank & Trust totaling $5,451.73 in 1992
were for a loan used to satisfy legal fees paid by the
corporation, but wife cites nothing to support this assertion,
and we are unable to find any evidence in the record to support
it. See Buchanan v. Buchanan, 14 Va. App. 53, 56, 413 S.E.2d
237, 239 (1992). Therefore, we presume these payments were for
such errors, standing alone, negate each other in the
calculation of combined gross income, they produce an incorrect
allocation of child support between the parties.
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a reasonable business expense listed on the corporation's
expense sheet for calendar year or fiscal year 1992 and deemed
deductible by the trial court. Given the absence of evidence to
rebut this inference, we hold the trial court did not abuse its
discretion in permitting the deduction.
Wife also contends that the trial court erred in allowing
the corporation's payment of certain expenses for clothing, fees
for personal income tax preparation, and dividends and pension
plan contributions without including these items as income to
husband. 3 On the issue of clothing, husband was not entitled to
a reduction in gross income for the purchase of clothing not
specifically required for his work as a dentist. In addition to
deductions for special shoes, pants, lab coats and the like used
in his dental practice, husband also claimed deductions for a
tie, sports jacket and suit all purchased from an ordinary
department store, and for alterations for the suit. These
ordinary clothing items did not constitute reasonable business
expenses, and the corporation's payment for these items and the
3
Although the court's failure to include most of these
figures in husband's income appears to be error, they amount to
only a small sum of money as compared to the calculation of
husband's overall income and, standing alone, would not
necessarily support the conclusion that the trial court
committed reversible error in fashioning the child and spousal
support awards. Cf. Gamble v. Gamble, 14 Va. App. 558, 575, 421
S.E.2d 635, 645 (1992). However, because we reverse and remand
for the trial court's failure to include husband's more
substantial rental income, we also review these issues.
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costs for dry cleaning these and other articles of ordinary
clothing, which totaled $459.55, should have been included as
income to husband.
The evidence also established that husband paid his
accountant with funds from the corporation and that $300 of her
fees were for the preparation of his personal rather than
corporate tax returns. Therefore, $300 paid by the corporation
for preparation of husband's personal income tax returns should
have been included in his gross income.
Finally, wife contends husband's receipt of a $100 dividend
from the corporation and the corporation's contributions to the
pension plan should be included in gross income. Because Code
§ 20-108.2(C) specifically includes dividends in gross income,
we hold that failure to include this sum in husband's gross
income was error. As to the pension plan contributions, we
previously have held that voluntary contributions to one's
pension plan are includable in gross income. See Frazer v.
Frazer, 23 Va. App. 358, 377-79, 477 S.E.2d 290, 299-300 (1996)
(voluntary contributions of $30,000 per year). In husband's
case, however, the contributions were made directly by the
corporation, were listed as mandatory by the corporate
accountant, and totaled no more than $911 for calendar year
1992. Under these circumstances, we hold the court did not
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abuse its discretion in failing to include these sums in
husband's gross income.
Wife claims husband "laundered money" through their eldest
son. However, husband testified that the corporation's original
payment to the son was for cleaning of the office carpets and
that the son's check to husband individually for the same amount
was for payment of back rent on the condominium the son rented
from father. The trial court was entitled to accept this
explanation and to conclude that the cleaning of the office
carpets was a reasonable business expense.
In keeping with the above, we hold the trial court abused
its discretion in excluding from husband's gross income his
rental income from the dental corporation and certain other
benefits he received from the corporation, and we remand for a
recalculation of child and spousal support.
c. Excess Capital in Corporation
Husband testified that his accountant recommended retaining
operating capital of about $23,000 in the corporate account.
The accountant testified that the overhead was about forty
percent. Using gross corporate receipts of approximately
$184,000 for calendar year 1992, the corporation's net receipts
after forty percent overhead, excluding husband's salary, would
be $110,400. Subtracting husband's "elective" salary of $91,105
left corporate operating capital of approximately $19,000, an
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amount lower than recommended by husband's accountant. Finally,
the accountant's testimony established that the legitimate
expenses paid by the corporation during calendar year 1992,
adjusted for the $759.55 of expenses disallowed above, totaled
$85,592.15, making the actual overhead figure more than
forty-six percent and leaving corporate operating capital of
only approximately $7,000.
This evidence, viewed in the light most favorable to
husband, established the trial court did not abuse its
discretion in failing to adjust husband's gross income upward
based on earnings retained by the corporation.
d. Math Error
The trial court did not abuse its discretion in failing to
adjust husband's income based on the purported mathematical
error. First, the accountant testified that she did not use the
erroneous figures reported by husband and relied instead on the
actual deposits in the corporate bank account. Therefore,
viewing the evidence in the light most favorable to husband, the
error had no impact on the accountant's calculations.
Second, assuming the error did impact the accountant's
figures such that the patient income for calendar year 1992
should have been $159,580, as represented by wife, this
difference has no impact on the funds available to husband.
Under either analysis in Section I.A.1(c) concerning excess
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capital in the corporation, this increase in receipts would
still have left corporate operating capital at a level lower
than the $23,000 amount recommended by husband's accountant.
Under either formulation, the error, if any, was harmless
because the increase in corporate income was not large enough to
require husband to increase his elective wages under the facts
of this case.
2. WIFE'S NEED VERSUS HUSBAND'S ABILITY TO PAY
Because we remand the issue of spousal support for
redetermination based on the trial court's failure to consider
various items of additional income to husband, we do not
consider wife's proportionality argument in this appeal.
B.
DATE FOR MODIFICATION OF SPOUSAL AND CHILD SUPPORT
Code §§ 20-108 and 20-112 provide that awards of child and
spousal support "may be modified with respect to any period
during which there is a pending petition for modification." The
legislature's use of the word "may" indicates that the decision
whether to make a modification effective as of the date of
notice of the petition to the opposing party rests within the
discretion of the trial court. Compare Code § 20-108.1(B) (as
amended in 1996) (providing that "[i]n any proceeding on the
issue of determining child support . . . , [l]iability for
support shall be determined retroactively for the period
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measured from the date that the proceeding was commenced by the
filing of an action with the court" provided certain conditions
are met (emphasis added)). The court's failure to make the
modification effective as of the date of wife's petition did not
constitute an abuse of discretion.
C.
FAILURE TO SANCTION HUSBAND'S ATTORNEY
Any duty the trial court may have had to report attorney
violations of the Code of Professional Responsibility is not
within our jurisdiction. The appropriate professional authority
to which the trial court had a duty to report, if any, was the
Virginia State Bar. See Virginia Code of Prof. Resp., Disc.
Rule 1-103.
The only authority the trial court had to sanction
husband's attorney was to hold him in contempt of court. Code
§ 18.2-456 provides that trial courts "may" punish officers of
the court for "[m]isbehavior in the presence of the court, or so
near thereto as to obstruct or interrupt the administration of
justice." Code § 18.2-456 (emphasis added). A court merely has
the discretion to punish for contempt but is not required to do
so. See id.; Brown v. Commonwealth, 26 Va. App. 758, 762, 497
S.E.2d 147, 149 (1998). The court was not required, simply by
recognizing counsel's misrepresentations in his motion for
recusal, to find counsel in contempt. Whether to sanction
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counsel for the alleged misrepresentations rested within the
sound discretion of the court.
II.
CONCLUSION
We hold the trial court did not abuse its discretion in
failing to make wife's requests for modification of support
retroactive to the date of the filing of her petition or in not
imposing sanctions on husband's attorney. On the issue of
husband's gross income, the court did not abuse its discretion
in concluding husband was not voluntarily underemployed or
underpaid by his corporation or in concluding that the possible
mathematical error acknowledged by husband's accountant had no
impact on its calculation of gross income. However, we hold the
trial court abused its discretion in failing to include in
husband's gross income his net rental income from the dental
corporation, interest, dividends, capital gains, and certain
clothing and tax preparation costs; improperly including in his
income wife's spousal support; and in apportioning child support
expenses between the parties. Therefore, we reverse and remand
to the trial court without reaching wife's assignment of error
alleging that the court improperly balanced her need for spousal
support against husband's ability to pay.
Affirmed in part,
reversed in part
and remanded.
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