Marriage of Heidemann CA4/1

Filed 5/31/13 Marriage of Heidemann CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

In re the Marriage of PAUL and
JENNIFER HEIDEMANN.
D060843
PAUL HEIDEMANN,

Respondent, (Super. Ct. No. DN154547)

v.

JENNIFER DETRANI,

Appellant.

APPEAL from a judgment of the Superior Court of San Diego County, Thomas

Ashworth III, Judge. Affirmed in part, reversed in part and remanded with directions.

Jennifer DeTrani, in pro. per.; and Dennis Seymour for Appellant.

Stephen Temko for Respondent.

In this marital dissolution action between Paul Heidemann and Jennifer DeTrani,

Jennifer appeals from the final judgment determining the division of property and other

matters, including child custody and support.1 Jennifer contends (1) the trial court erred

in apportioning and dividing Paul's ownership interest in a privately held insurance

1 As is customary in family law cases, we will refer to the parties by their first
names for convenience and clarity, intending no disrespect.
brokerage firm (the firm), between community property and Paul's separate property;2

(2) the court's valuation of Paul's share of the firm was erroneous; (3) the court

incorrectly determined Paul's income for purposes of calculating child support; (4) the

court erred in denying Jennifer's request to retroactively modify temporary child

support; (5) the court erred in ordering the parties to use a privately compensated

mediator to develop an annual child sharing calendar; and (6) the court erred in denying

Jennifer's request to include her surname as a second middle name for both of the parties'

children. We reverse the portions of the judgment denying Jennifer's request to

retroactively modify temporary child support and her request to include her surname as

her children's second middle name, and remand for further proceedings on those requests.

We otherwise affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Paul and Jennifer were married in August 2002 and separated in February 2009.

They had two children during the marriage—a son born in 2005 and a daughter born in

2006.

2 Paul filed a motion in this court to seal portions of the reporter's transcript and a
subsequent motion to seal portions of appellant's appendix, the parties' briefs, and certain
exhibits containing information about the firm that Paul seeks to protect from disclosure.
We granted both motions. As a result, both redacted and unredacted versions of the
appellate briefs and appellant's appendix were filed with the unredacted versions filed
under seal. Respondent's appendix and unredacted copies of the pages of the reporter's
transcript containing redactions were also filed under seal. Although this court cannot
file a confidential or sealed opinion, we have endeavored to discuss the relevant facts in
sufficiently general terms to maintain their confidentiality. However, it is impossible to
meaningfully discuss the issues in this appeal involving Paul's membership in the firm
without some reference to information falling within the scope of Paul's sealing motions.
2
 Jennifer graduated from college and law school and practiced law for several years

until shortly after she married Paul. She quit working to focus on remodeling the family

home and to be a stay-at-home mother. She resumed practicing law after she and Paul

separated, and was working part time for a family law attorney at the time of trial. 3

Paul graduated from college with a bachelor's degree in political science in 1991.

In 1994 he began employment with John Burnham & Company (Burnham), an insurance

brokerage business. Union Bank acquired Burnham after Paul and Jennifer married. In

September 2007, Paul left Union Bank and accepted an offer to join the firm.

Approximately 60 percent of Paul's Union Bank clients followed Paul to the firm, and

between 70 and 80 percent of those clients had been his clients before he married

Jennifer.

The firm extended a "premium offer" to Paul to purchase twice the ownership

interest usually offered to new members because of his stature in the community, his

book of business, and his expertise in the construction practice area. Under the firm's

offer, Paul was paid a salary plus a percentage of an annual "principal's bonus" and

monthly draws against profits based on his ownership percentage. Paul was also offered

the position of principal construction practice group leader because of his expertise in the

construction field.

To acquire his ownership interest in the firm, Paul was required to sign the firm's

Fourth Amended Operating Agreement (the Operating Agreement), which sets forth the

buy-in process applicable to every owner joining the firm. Under the Operating

3 Jennifer was laid off from that position during trial.
3
Agreement, the firm is entirely owned by members who work for the firm. New owners

buy into the firm by purchasing the interests of departing owners or portions of the

interests of existing owners. A new owner's purchase of a departing owner's interest is

generally financed through a promissory note payable to the departing owner in monthly

installments over a 12-year period. Thus, two benefits of purchasing an ownership

interest in the firm are that (1) the owner builds equity in the firm over time by paying

down the note financing the purchase; and (2) upon retirement, the owner receives a 12-

year stream of income by taking a promissory note for the sale of his or her interest to a

new owner.

The purchase price of Paul's initial interest in the firm was based on an annual

appraisal of the firm by Reagan Consulting, Inc. (Reagan), an independent firm with

expertise in valuing businesses.4 Paul signed a promissory note reflecting a bank loan

for the down payment on his ownership interest, and he and Jennifer signed a promissory

note payable to a departing owner for the balance of the purchase price. Under the

Operating Agreement, the firm made the note payments after automatically deducting the

amount of the payments from Paul's monthly profit draw. The deduction of the note

payments from Paul's monthly draw was mandatory and the only way Paul could finance

the purchase of an interest in the firm.

4 The Operating Agreement provides that the price to be paid for a membership
interest is the fair market value of the member's percentage interest, "which fair market
value shall be determined annually by an appraiser familiar with the insurance
industry . . . ."

4
 In May 2008, Paul's ownership interest in the firm was adjusted to a lower

percentage as the result of the firm's merger with another firm. In 2009 Paul purchased

an additional interest in the firm that was 100 percent financed through a promissory note

and a loan from the firm for the down payment. The payments on these loans were also

made from mandatory deductions from Paul's monthly profit draw. After that purchase,

Paul's ownership percentage was again adjusted as a result of the firm's consolidation

with a related firm and a new owner being brought into the firm. Eleven months after he

and Jennifer separated, Paul purchased an additional interest in the firm.

Paul filed a petition for dissolution in February 2009. In March 2009 Jennifer

filed an order to show cause (OSC) seeking orders regarding child support and custody,

spousal support, use of the residence, and attorney fees and costs. On the parties'

stipulation, the court ordered Paul to pay Jennifer spousal support of $3,000 per month

and child support of $3,000 per month. The court reserved jurisdiction over support

retroactive to March 13, 2009, the date Jennifer filed her OSC. The court also reserved

jurisdiction over the promissory note payments made from Paul's monthly profit draw

and over Paul's other future profit distributions and bonuses. On May 20, 2010, Jennifer

filed an OSC seeking modification of child and spousal support and attorney fees and

costs. In June 2010 Paul filed an OSC requesting the court to adopt the recommendations

of a child custody and visitation mediator and to use the date of separation as the

valuation date of his equity interest in the firm.

In September 2010, the parties stipulated to an order appointing retired Judge

Thomas Ashworth, III to preside over the case as a privately compensated temporary

5
judge. The stipulation and order stated: "The parties are vacating the existing OSCs and

resetting the OSCs and trial and everything else in front of Judge Ashworth."

A trial before the court (Judge Ashworth) was held over seven days beginning on

November 30, 2010 and ending on February 16, 2011. On May 11, 2011, the court

issued a final statement of decision addressing the contested issues, and entered judgment

based on the statement of decision on September 2, 2011. We will include additional

relevant facts in our discussion of the legal issues.

DISCUSSION

I. Division of Ownership Interest in the Firm

Jennifer contends the court erred by not allowing her to retain a 50 percent equity

interest in the interest in the firm that Paul acquired during marriage. In its statement of

decision the court concluded: "When considered as a whole, [Paul's] interest in the firm

has only a small community component. [Paul] had an established clientele with John

Burnham prior to marriage. The firm ownership interests were acquired shortly before

separation and encumbered up to 100% of their appraised value. Any significant future

value, which is at best speculative, will be earned by [Paul's] post-separation efforts."

To calculate the value of the community interest in the firm, the court relied on a

Reagan appraisal that determined the total fair market value of the firm as of

December 31, 2009. The court calculated the ownership percentage of the firm's total

value that Paul held at the time of separation and subtracted from that figure the "date of

separation related debt" owed for the purchase of Paul's interest in the firm. The court

found the resulting figure was the net value of the community interest in the firm at the

6
time of separation. The court awarded Paul that interest in the firm and equalized the

distribution of community property by awarding Jennifer the family residence, which the

court found to have a net value that was almost $20,000 more than the net value of Paul's

interest in the firm. The court ruled that the interest in the firm that Paul purchased after

separation was Paul's separate property.

Jennifer contends the court should have divided the community interest in the firm

in kind by awarding her a 50 percent equity interest in Paul's ownership interest. She

argues that a proper division of the community interest in the firm would entitle her to

receive half of Paul's profit draws as long as Paul holds that interest, and half of the

income stream produced by Paul's sale of that interest upon retirement from the firm.5

She contends that the ownership interest in the firm is a vested property right equivalent

to a vested stock option or pension that becomes an asset of the community when

acquired during marriage.

Family Code section 25506 requires the trial court in marital dissolution

proceedings to value and equally divide the parties' community property estate, unless the

parties have agreed otherwise.7 A spouse's time, skill, and labor are community assets

5 Jennifer does not expressly contest the court's finding that the interest in the firm
that Paul purchased after separation is Paul's separate property. However, she does not
exclude that interest in claiming entitlement to half of Paul's profit draws and income
from the sale of his interest in the firm upon retirement.

6 All subsequent statutory references are to the Family Code unless otherwise
specified.

7 Section 2550 provides: "Except upon the written agreement of the parties, or on
oral stipulation of the parties in open court, or as otherwise provided in this division, in a
7
and his or her earnings during marriage are community property, but after separation,

earnings and accumulations of a spouse are separate property. (§§ 760, 771, subd. (a).)

"The trial court must characterize the property for purposes of this division as separate,

community, or quasi-community . . . . In characterizing a benefit, courts consider all

relevant circumstances." (In re Marriage of Sivyer-Foley & Foley (2010) 189

Cal.App.4th 521, 525-526 (Sivyer-Foley); § 771). "The word 'earnings' is broader in

scope than 'wages' and 'salary.' " (In re Marriage of Imperato (1975) 45 Cal.App.3d 432,

437.)

"The trial court has broad discretion to determine the manner in which community

property is divided, although, absent an agreement, it must be divided equally.

[Citations.] Accordingly, we review the trial court's judgment dividing marital property

for an abuse of discretion." (Sivyer-Foley, supra, 189 Cal.App.4th at p. 526.) Generally,

"the appropriate test of abuse of discretion is whether or not the trial court exceeded the

bounds of reason, all of the circumstances before it being considered." (In re Marriage of

Connolly (1979) 23 Cal.3d 590, 598.) "In addition, we review the trial court's factual

findings regarding the character and value of the parties' property under the substantial

evidence standard. [Citations.] Ultimately we review characterization issues

independently because they are a mixed question of fact and law involving application of

the law to facts." (Sivyer-Foley, supra, at p. 526.)

proceeding for dissolution of marriage or for legal separation of the parties, the court
shall, either in its judgment of dissolution of the marriage, in its judgment of legal
separation of the parties, or at a later time if it expressly reserves jurisdiction to make
such a property division, divide the community estate of the parties equally."
8
 The court may use any of several methods of effecting an equal division of

community property, including division in kind or "asset distribution or cash out." (In re

Marriage of Cream (1993) 13 Cal.App.4th 81, 88 (Cream).) "The asset distribution or

cash out method involves distributing one or more community assets to one spouse and

other community assets of equal value . . . to the other. When . . . this method is used,

section [2552] confers upon the court the responsibility to fix the value of assets and

liabilities in order to accomplish an equal division." (Ibid.)

Whatever method the trial court uses in apportioning a particular asset or property

between community property and separate property for the purpose of dividing the

property in a marital dissolution action, the "superior court must arrive at a result that is

'reasonable and fairly representative of the relative contributions of the community and

separate estates.' " (In re Marriage of Lehman (1998) 18 Cal.4th 169, 187.) "[W]hen the

court concludes that property contains both separate and community interests, the court

has very broad discretion to fashion an apportionment of interests that is equitable under

the circumstances of the case. [Citations.] The court is not bound by a particular method

of allocation. Rather, the court should divide the property ' "by whatever method or

formula will 'achieve substantial justice between the parties.' " ' " (In re Marriage of

Gray (2007) 155 Cal.App.4th 504, 514.)

The essential issue raised by Jennifer's challenge to the court's division of

community property is whether the court erred in deciding that any increases in the equity

value of Paul's interest in the firm or profit draws he receives after separation are his

separate property, and therefore, Jennifer's community property share of Paul's interest in

9
the firm is limited to half of its equity value in 2009. We find no error in the court's

division of community property.

Jennifer's claim to a 50 percent share of Paul's interest in the firm might have merit

if the community's purchase of that interest were strictly an investment in a business that

neither spouse was actively involved in operating. However, Paul's opportunity to buy an

ownership interest in the firm and his entitlement to the benefits of the profit draw and

future income stream from the sale of his interest were entirely the result of his book of

business and his ability to produce profits for the firm as a working member of the firm.

The Operating Agreement requires each member to devote his or her "full attention and

effort to the business of [the firm], unless, with the approval of the Board of Directors, a

[m]ember elects to reduce his or her commitment to less than a full time effort, in which

event [the member's ownership interest] would be reduced . . . ." The firm's chief

financial and operating officer (CFO/COO) testified that if a member of the firm

underperforms, his or her ownership percentage can be reduced, and he was aware of

three instances of ownership percentages being reduced for underperformance. He

further testified that Paul had not been threatened with a reduction of his ownership

interest, and that the percentage of the firm a member owns is set over time based on the

member's contribution to the growth of the firm. The fact that after separation Paul was

offered and purchased an additional ownership interest in the firm evidences that he was

contributing to the growth of the firm and, accordingly, to the profits resulting in his

monthly profit draws. Thus, Paul's post-separation profit draws are sufficiently tied to his

10
work performance and to the revenue he personally generates for the firm to be properly

deemed the fruit of his own time, skill, and effort and, as such, his separate property.

This case is analogous to In re Marriage of Behrens (1982) 137 Cal.App.3d 562

(Behrens), in which the Court of Appeal held that a husband's account in the profit-

sharing plan of a corporation of which he was a key employee and shareholder was

community property immediately before the parties separated, but the employer's post-

separation contributions to the account that increased its value were the husband's

separate property. (Id. at p. 577.) In rejecting the wife's argument that the post-

separation contributions were community property because they were based on profits to

which the community as a shareholder had prior claim, the Behrens court distinguished

between undistributed corporate earnings that cause appreciation in the value of

corporate shares, and the earnings of a shareholder-employee in the form of " ' "salary,

bonuses, and other forms of benefits." ' " (Ibid.) Because the contributions to the

husband's profit-sharing account were intended and received as a form of compensation

paid to shareholder-employees, the Behrens court held that the post-separation

contributions were the husband's separate property. (Ibid.) The profit draws that Paul

receives from the firm are analogous to the profit-sharing distributions to the husband in

Behrens, as both are essentially a form of employment compensation based on the

recipient's status as part owner who works for the employer. Like the post-separation

profit-sharing payments in Behrens, Paul's post-separation profit draws from the firm are

separate property.

11
 Moreover, the firm made Paul a premium offer—i.e., an offer to purchase twice

the ownership interest in the firm than that typically offered to new members—in large

part because of his book of business, 70 to 80 percent of which was the result of his time,

skill, and efforts before marriage. Although the court did not expressly treat the book of

business itself as an item of property to be apportioned and divided between the

community estate and Paul's separate property estate, the court reasonably viewed its

separate property character and the major role it played in Paul's acquisition of his

ownership interest in the firm as relevant circumstances supporting its award of the entire

community interest in the firm to Paul with an equalizing distribution of the residence to

Jennifer.8

Jennifer argues that Paul's future income stream from the sale of his interest in the

firm upon retirement should be viewed, and divided in kind, as a pension that is part

community property. However, "in disposing of the community interest in a pension plan

in marital dissolution actions, the trial court possesses broad discretion to choose to

divide it in kind between the spouses, or to award it to the employee spouse at its present

8 Courts in other jurisdictions have held that a book of business similar to Paul's is a
marital asset subject to division and distribution in dissolution proceedings. An Arizona
appellate court noted that although the husband insurance agent was an employee of an
insurance company and did not own the business, he had a right to commissions on the
renewals of the policies he had procured, and that the renewal value of existing policies is
termed a "Book of Business" in the insurance industry. (Pangburn v. Pangburn (Ariz.
1986) 731 P.2d 122, 123 (Pangburn).) The Pangburn court held that the trial court had
discretion to include the husband's book of business in the community estate. (Id. at
p. 125; see also Moll v. Moll (2001) 722 N.Y.S.2d 732, 737 [husband's book of business
as a stockbroker and financial advisor is a marital asset subject to equitable distribution].)
12
value and accomplish an equal division of community property by an offsetting award of

other assets." (In re Marriage of Bergman (1985) 168 Cal.App.3d 742, 746.)

Even if we were to view Paul's future income stream from his eventual sale of his

interest in the firm as a pension that should have been divided in kind, Jennifer would not

be entitled to 50 percent of that benefit. When the total number of years served by an

employee-spouse is a substantial factor in computing the amount of retirement benefits he

or she will receive, the trial court appropriately applies the "time rule" in dividing those

benefits between community and separate property. (In re Marriage of Gowan (1997) 54

Cal.App.4th 80, 88; In re Marriage of Judd (1977) 68 Cal.App.3d 515, 522.) "Generally,

under the time rule, the community is allocated a fraction of the benefits, the numerator

representing length of service during marriage but before separation, and the denominator

representing the total length of service by the employee spouse. That ratio is then

multiplied by the total benefit received to determine the community interest." (In re

Marriage of Steinberger (2001) 91 Cal.App.4th 1449, 1460.) The length of Paul's

"service" with the firm during marriage but before separation was approximately 17

months, ending in February 2009. His total length of service with the firm remains to be

seen, but will likely be in the range of 15 to 20 years. Thus, it is not clear that Jennifer

would realize a greater benefit from an in-kind division of the community interest in

Paul's post-retirement income stream under the time rule than she realized by the court's

awarding her the marital residence as an equalizing distribution of community property.

13
 In any event, given the evidence that Paul built 70 to 80 percent of the book of

business he brought to the firm before marriage and that his post-separation profit draws

and corresponding equity increases in his ownership share of the firm are directly tied to

the time, skill and effort he devotes to working for the firm, the court reasonably found

there was "only a small community component" to Paul's interest in the firm and that any

significant value in Paul's interest would be earned by his post-separation efforts. The

court did not abuse its discretion in awarding Paul the entire community interest in the

firm and equalizing the distribution of community property by awarding Jennifer the

family residence.

II. Valuation of Community Interest in The Firm

Jennifer contends the court erred in rejecting the analysis of the value of the

community interest in the firm that she presented at trial. Using primarily a capitalization

of excess earnings valuation method, but also considering a capitalized cash flow method,

her business appraisal expert, John Cooper, valued the community interest in the firm as

of February 2009 at a figure that was about seven times higher than the value that the

court ultimately found.

"The trial court possesses broad discretion to determine the value of community

assets as long as its determination is within the range of the evidence presented.

[Citation.] The valuation of a particular asset is a factual question for the trial court, and

its determination will be upheld on appeal if supported by substantial evidence in the

record. [Citation.] All issues of credibility are for the trier of fact, and all conflicts in the

evidence must be resolved in support of the judgment. [Citation.] The trial court's

14
judgment is presumed to be correct on appeal, and all intendments and presumptions are

indulged in favor of its correctness." (In re Marriage of Nichols (1994) 27 Cal.App.4th

661, 670 (Nichols).)

"In the exercise of its broad discretion, the trial court 'makes an independent

determination of value based upon the evidence presented on the factors to be considered

and the weight given to each. The trial court is not required to accept the opinion of any

expert as to the value of an asset.' [Citations.] Differences between the experts' opinions

go to the weight of the evidence. [Citations.] Rather, the court must determine which of

the recognized valuation approaches will most effectively achieve substantial justice

between the parties." (In re Marriage of Duncan (2001) 90 Cal.App.4th 617, 632

(Duncan).)

The court based its valuation of the community interest in the firm on the 2009

Reagan appraisal of the firm and the trial testimony of Kevin Stipe, an officer and

principal of Reagan. Jennifer argues that the Reagan appraisal is defective because it did

not factor in business goodwill, which itself is property subject to valuation and division

in a dissolution action.

Business and Professions Code section 14100 defines the goodwill of a business as

the expectation of continued public patronage. Because a community interest can only be

acquired during marriage, "the value of the goodwill must exist at the time of the

dissolution and that value must be established without dependence on the potential or

continuing net income of the professional spouse." (In re Marriage of King (1983) 150

Cal.App.3d 304, 309.) Although the court may not value business goodwill by a method

15
that factors in the post-separation efforts of either spouse, " 'a proper means of arriving at

the value of such goodwill contemplates any legitimate method of evaluation that

measures its present value by taking into account some past result.' [Citation.] In this

regard, the value of goodwill existing at the time of marital dissolution is separate and

apart from the expectation of the spouses' future earnings." (Duncan, supra, 90

Cal.App.4th at pp. 633-634.)9

Stipe testified that goodwill is considered to be one of the intangible assets of the

firm that is part of the value of earnings that is "pooled" in the Reagan appraisal with the

other intangible assets, although it is not separately identified. The 2009 Reagan

appraisal explained, under the heading "Description of Valuation Tests," that Reagan

focused on income and market approaches for evaluating the firm rather than an asset

based approach because the firm is "an insurance broker that derives most of its value

from intangible assets (i.e., customer lists, restrictive covenants and goodwill)[.]" The

firm's CFO/COO testified that what the Reagan appraisal essentially values is the firm's

goodwill because most of the firm's value is goodwill. When he testified that goodwill is

based on the present value of future earnings and not past earnings, the court interjected,

"Of course future earnings are a projection based on past earnings." In accordance with

the court's observation, the Reagan appraisal stated: "In preparing our forecast of future

earnings, we have used the pro forma twelve month period ended December 31, 2009 as

a base year for revenue and expense projections. . . .We have looked closely at the unique

9 However, Duncan also noted that "[v]aluing goodwill necessarily takes into
consideration future income because the [statutory] definition of 'goodwill' is 'expectation
of continued public patronage.' " (Duncan, supra, 90 Cal.App.4th at p. 634, fn. 12.)
16
characteristics of [the firm's] past operating results and received input from management

as well as our own judgment to develop projections for revenue growth." (Italics added.)

Thus, the Reagan appraisal properly factored in goodwill as an intangible asset of the

firm in valuing the firm (and, accordingly, the community interest in the firm), and

properly measured its present value by taking into account past results.

Jennifer argues that the value of the community interest in the firm cannot be

determined by use of a "buy-sell formula" because that approach does not address or

account for the ownership distributions (i.e., profit draws) received before retirement, or

the post-retirement stream of income from the sale of the interest upon retirement. We

construe Jennifer's reference to a "buy-sell formula" to mean the firm's use of the Reagan

appraisal to determine the price an incoming member will pay for his or her ownership

percentage of the firm, in accordance with the buy-sell provisions of the firm's Operating

Agreement.

We disagree that the Reagan appraisal failed to account for profit distributions to

owners or the income owners will receive from future sales of their ownership interests.

The price an owner pays for an ownership percentage of the firm is that percentage of the

firm's total appraised value, which consists mostly of the value of the firm's goodwill –

i.e., expectation of continued patronage. Thus, the purchase price reflects the purchaser's

expectation of the firm's future earnings (based on past performance), which will be the

source of any future profit draws the owner will receive, as well as his or her income

stream from the sale of the ownership interest upon retirement. Accordingly, the court's

valuation of the community interest in the firm based on the Reagan appraisal sufficiently

17
accounted for the expectations of annual ownership distributions until retirement and a

post-retirement stream of income from the sale of the interest upon retirement.

As for the buy-sell aspect of the Reagan appraisal, there is no hard and fast rule

against using an appraisal performed for the purpose of establishing value under a buy-

sell agreement to determine the value of a community property interest in a business. As

noted in In re Marriage of Iredale & Cates (2004) 121 Cal.App.4th 321, regarding the

valuation of a professional practice, "the particular circumstances of each case, and each

professional practice, will vary and call for different methods of valuation." (Id. at

p. 328.) Generally, in valuing a professional practice for purposes of dividing community

property, a trial court should determine the value of (1) fixed assets such as cash,

furniture, equipment, and supplies; (2) other assets including accounts receivable and

collectible costs advanced; (3) goodwill of the practitioner spouse in the professional

business as a going concern; and (4) liabilities of the practitioner related to the business.

(Id. at p. 327.) Although the Reagan appraisal is done annually for the purpose of

determining the price at which interests in the firm will be bought and sold, it

substantially complies with the above general requirements for valuing an interest in a

professional business, because it takes into account the firm's tangible (i.e., fixed) and

intangible assets, goodwill, and long-term liabilities.10

10 Jennifer contends there is no "professional goodwill" in this case because Paul is
not a professional. However, regardless of whether it is called "professional goodwill" or
simply "goodwill," Paul's book of business is equivalent to the goodwill of an attorney
spouse in his or her professional business as a going concern because both represent the
expectation of future patronage from clients as the result of the development of business
relationships. In Moll v. Moll, supra, 722 N.Y.S.2d 732, the appellate court observed that
18
 In Nichols, the Court of Appeal stated that in deciding whether to use a formula set

forth in a buy-sell agreement to value a spouse's interest in a professional business, "the

trial court should consider (1) the proximity of the date of the agreement to the date of

separation to ensure that the agreement was not entered into in contemplation of marital

dissolution; (2) the existence of an independent motive for entering into the buy-sell

agreement, such as a desire to protect all partners against the effect of a partnership

dissolution; and (3) whether the value resulting from the agreement's purchase price

formula is similar to the value produced by other approaches." (Nichols, supra, 27

Cal.App.4th at p. 672.)

The first factor has no relevance in this case because there is no evidence that Paul

joined the firm and entered into its Operating Agreement (signed by all members of the

firm) in contemplation of marital dissolution. The second factor weighs in favor of the

court's use of the Operating Agreement's valuation formula because the firm

unquestionably has independent motives for requiring all of its members to enter into its

Operating Agreement that have nothing to do with the possibility members may go

through marital dissolution proceedings. Regarding the third factor—whether the value

resulting from the buy-sell agreement's purchase price formula is similar to the value

the stockbroker husband's " 'book of business' is not the customer accounts maintained by
the brokerage house. It is the personal or professional goodwill acquired by the
[husband] . . . ." (Id. at p. 773, italics added.) The same reasoning applies to Paul's book
of business—i.e., it reflects his personal and professional goodwill in the business of the
firm as a going concern. (See Duncan, supra, 90 Cal.App.4th at p. 626 [husband's
investment advisory business was properly valued as of the date of separation as a
professional practice]; In re Marriage of Rives (1982) 130 Cal.App.3d 138, 149 [queen
bee business that depended on husband's skill, experience, and reputation in the industry
resembled a professional practice with goodwill value component].)

19
produced by other approaches—Jennifer points to the difference between the value of the

community interest based on the Reagan appraisal and the value her expert Cooper

calculated using capitalization of excess earnings and capitalized cash flow approaches.

The capitalization of excess earnings method of determining the goodwill value of

a spouse's business focuses on the earning power of a business to determine the rate of

return predicted earnings will yield in light of the risks involved to attain the earnings.

(In re Marriage of Ackerman (2006) 146 Cal.App.4th 191, 200.) Generally, the excess

earnings method compares the earnings of the spouse in question with the earnings of a

peer whose performance is average. (Ibid.) "To make this comparison, courts

may . . . 'determine the annual salary of a typical salaried employee who has had

experience commensurate with the spouse . . . .' [Citation.] Alternatively, courts may

apply the 'similarly situated professional' standard, under which reasonable compensation

is based on ' " ' " 'the cost of hiring a nonowner outsider to perform the same average

amount that other people are normally compensated for performing similar

services . . . .' " ' " ' " (Ibid.)

The next step in this approach is to deduct from the spouse's average net pretax

earnings a fair return on the net tangible assets of the spouse's business. (In re Marriage

of McTiernan & Dubrow (2005) 133 Cal.App.4th 1090, 1095, fn. 1.) " 'Then, one

determines the "excess earnings" by subtracting the annual salary of the average salaried

person from the average net pretax earning[s] of the [spouse's] business or practice

remaining after deducting a fair return on tangible assets. Finally, one capitalizes the

excess earnings over a period of years by multiplying it by a factor equal to a specific

20
period of years, discounted to reflect present value of the excess earnings over that

period. The period varies according to factors such as the type of business, its stability,

and its earnings trend.' " (Ibid.)

In his application of the capitalization of excess earnings method, Cooper

determined that the "reasonable compensation" for a nonowner of the firm doing Paul's

job was $150,000 per year. Using a capitalization rate of 45 percent, Cooper calculated

the "marital value" of the community interest in the firm on the date of separation.

Cooper also used a capitalized cash flow method of appraising the community interest in

the firm. Under that method, he determined the marital value of the community interest

in the firm on the date of separation and on November 1, 2010. Taking both valuation

methods into consideration, he concluded that a figure about seven times greater than the

court's valuation was a reasonable number for the marital value of the community interest

in the firm on the date of separation. Cooper also calculated the value of the community

interest in 2032, reduced to its present value, based on the assumption that the firm would

grow in value at a rate of 10 percent per year.

Regarding Cooper's capitalization of excess earnings approach, Stipe testified that

he did not agree with Cooper's use of $150,000 per year as reasonable compensation for a

nonowner doing Paul's job. Stipe believed Paul's earnings should be compared to an

employee performing at Paul's level and "not somebody in a little agency in Bakersfield."

He testified that under the firm's compensation formula, a nonowner operating at Paul's

level of performance would earn $390,000 per year, and that reasonable compensation for

21
Paul was in the neighborhood of $400,000 per year because Paul was the firm's eighth

largest sales producer for 2009 with a substantial book of business.11

Stipe also disagreed with Cooper's projected annual growth rate of 10 percent for

the firm. He testified that even if the firm were to grow at that rate, the ownership base

would expand and there would be a substantial reduction in each owner's percentage.

Consequently, in 10 years at that growth rate, Paul's ownership interest would be a

fraction of its present percentage. Stipe observed that if the value of Paul's interest grew

to the figure Cooper projected, the value of the entire firm at that time would be a figure

in the hundreds of millions that, in Stipe's words, "just seems really off."

In response to questioning by the court, Stipe confirmed that if his figure for

reasonable annual compensation ($400,000) for a peer doing Paul's job were used in

Cooper's capitalization of excess earnings formula instead of Cooper's figure of

$150,000, the value of the community interest in the firm would be less than the amount

owed on the purchase notes. Cooper conceded that even if $240,000 were used as the

reasonable compensation figure, the value of the community interest would be would be

less than the amount owing on the notes. Regarding his alternative capitalized cash flow

formula, Cooper testified that if $240,000 were used as the reasonable compensation

figure in that formula, the value of the community interest in the firm would be "just

about be above water" in terms of its positive value, and that if the reasonable

11 The firm's CFO/COO testified that if Paul worked for the firm as a nonowner and
had a similar book of business, he would earn $240,000 per year.

22
compensation figure were $300,000, the value of the community interest would be "just

below water"—i.e., less than the debt owed for the purchase of the interest.

In its statement of decision, the court found that Cooper's use of $150,000 as the

reasonable annual compensation figure in his capitalization of excess earnings formula

was not appropriate. The court stated that if Cooper "ha[d] used a more reasonable figure

in the $230,000 to $300,000 range, there would have been no positive value [of the

community interest the firm]." The court was entitled to accept Stipe's reasonable

compensation analysis over Cooper's. (Duncan, supra, 90 Cal.App.4th at p. 632

["Differences between the experts' opinions go to the weight of the evidence."].)

Given the court's reasonable compensation findings, we conclude that the third

factor to be considered in determining whether to use a formula in a buy-sell agreement

to value a spouse's interest in a business (whether the value resulting from the

agreement's purchase price formula is similar to the value produced by other approaches)

also supports the court's use of the Operating Agreement's valuation formula. This factor

supports the court's use of the annual Reagan appraisal performed under the Operating

Agreement, because the Reagan appraisal actually results in a greater value than the value

resulting from either the capitalization of excess earnings formula or the capitalized cash

flow formula, when the court's reasonable compensation findings are used in those

formulas. The Reagan appraisal and Stipe's testimony constitute substantial evidence

supporting the court's determination of the value of the community interest in the firm.

Because the court's value determination was within the range of the evidence, the court

23
acted within its broad discretion in valuing that asset. (Nichols, supra, 27 Cal.App.4th at

p. 670.)

III. Valuation Date

Jennifer contends the court erred in using the December 31, 2009 Reagan

appraisal to determine the value of the community interest in the firm instead of using the

December 2010 appraisal. After the close of evidence at trial, the parties submitted

written closing argument to the court. In her closing rebuttal, Jennifer stated, "This Court

should order Paul to produce a copy of the Reagan Report for 2010 or obtain the

valuation number. As an owner at [the firm] and based on the timing of the release of the

report as detailed by Kevin Stipe and Hal Dunning at trial, Paul should have a copy of the

Reagan Report for the year ended December 2010 by now. The Court should then

subtract the related 'debt' on the date of Judgment."12

Noting that Jennifer waited until her closing rebuttal statement to request an order

for him to produce the 2010 Reagan appraisal of the firm, Paul argues it was Jennifer's

obligation to seek the 2010 Reagan appraisal in discovery and enter it into evidence; it

was not the court's duty to order him to produce it. We agree.

12 In her argument heading in her opening brief Jennifer asserts that the court should
have used the date of judgment as date of valuation. Likewise, in her written closing
argument to the trial court, she argued that the date of valuation, if the community
interest in the firm is not divided in kind, should be the date of judgment, noting that
"Paul provided no evidence on date-of-judgment valuations." However, she actually
argues in her opening brief that the community interest in the firm should have been
valued as of the time of trial, which, as noted occurred between November 30, 2010 and
February 16, 2011. Judgment was entered on September 2, 2011.
24
 Section 2552, subdivision (a) provides, in relevant part, that "[f]or the purpose of

division of the community estate upon dissolution of marriage or legal separation of the

parties, . . . the court shall value the assets and liabilities as near as practicable to the time

of trial." It was not practicable for the court to value the firm as of the time of trial based

on the December 2010 Reagan appraisal because neither party sought to admit that

appraisal in evidence or requested the court to order its production during trial, even

though the close of evidence did not occur until mid-February 2011. The trial court

generally has no sua sponte duty to order the production of evidence during trial. (See

Bennett v. Municipality of Anchorage (Alaska 2009) 205 P.3d 1113, 1118 [court had no

independent duty to order prosecution in domestic violence case to produce all available

evidence regarding a prior incident; court's only duty was to evaluate the relevance and

potential prejudice of the evidence based on the record before it].) A party has the

burden of proof as to each fact that is essential to a claim that he or she is asserting (Evid.

Code § 500), and " '[b]urden of proof' means the obligation of a party to establish by

evidence a requisite degree of belief concerning a fact in the mind of the trier of fact or

the court." (Evid. Code § 115, italics added.) Although Jennifer sought a division of the

community interest in the firm in kind at trial, Paul made it clear before trial that he

sought a distribution or cash out division of that asset based on its value as established by

the 2009 Reagan appraisal.13 In claiming that a later valuation date was appropriate,

13 Paul asserted that position in his "Supporting Declaration Re Alternate Valuation
Date . . . " filed in June 2010.
25
Jennifer bore the burden of proof as to value on such later date. The trial court did not err

in failing to order Paul to produce evidence of the value of the firm at the time of trial.

IV. Income For Purposes of Determining Child Support

A. Profit draws

Jennifer contends the court erred in refusing to include Paul's monthly profit draw

as income for purposes of calculating his child support obligation. As noted, the firm

automatically deducts from Paul's monthly profit draw the amount necessary to make the

note payments for his purchases of interests in the firm, and the deduction of those

payments is mandatory under the Operating Agreement.

We review a child support order for abuse of discretion and, in doing so,

determine whether substantial evidence supports the factual findings made in connection

with the order. (In re Marriage of Alter (2009) 171 Cal.App.4th 718, 730.) In applying

the abuse of discretion standard, we do not substitute our judgment for that of the trial

court; we consider only whether any judge reasonably could have made the order. (Id. at

pp. 730-731.) However, the court must follow established legal principles in exercising

its discretion, and we apply the independent or de novo standard of review in determining

whether it did so. (Ibid.) We also apply de novo review to issues of statutory

construction and questions of law presented on undisputed facts. (Id. at p. 732; In re

Marriage of Zimmerman (2010) 183 Cal.App.4th 900, 906-907; In re Marriage of Blazer

(2009) 176 Cal.App.4th 1438, 1443 (Blazer).)

26
 In arguing that Paul's monthly draws must be included in his income for purposes

of calculating child support, Jennifer mainly relies on In re Marriage of Kirk (1990) 217

Cal.App.3d 597 (Kirk) for the proposition that a parent's voluntary diversion of income

for purpose of repaying debt should not be deducted from his or her income for purposes

of child support. The husband and father of four children in Kirk was the principal owner

and controlling shareholder of a corporation that operated a car dealership. (Id. at

p. 600.) After he and his wife separated, he took a loan from the corporation and used it

for vacations and other personal pleasures. (Ibid.) The husband later entered into an

employment agreement with new owners of the corporation that provided for repayment

of his debt to the corporation in the amount of $572,000. (Ibid.) The mechanism for the

repayment was that the corporation paid the husband an annual bonus in monthly

installments of $4,450, which were automatically used to reduce his debt. In addition to

the bonus installments, the husband was paid a regular salary of $5,000 per month. (Id. at

pp. 600-601.) The trial court excluded the bonus installment payments from the

husband's income for the purpose of calculating child support because they were not

available for his living expenses or for child support. (Id. at p. 601.)

The Kirk court decided the trial court erred "in failing to consider that the only

rational inference derivable from the paperwork before the court was that [the shift of the

bonus payments from the husband's control by automatic payments to the creditor

corporation] was a voluntary diversion of income to pay debt, resulting in deprivation of

funds for child support. The law does not permit this." (Kirk, supra, 217 Cal.App.3d at

p. 607, italics added; see also In re Marriage of Berger (2009) 170 Cal.App.4th 1070

27
[salary that father having substantial wealth voluntarily deferred to preserve his

company's capital must be included in his income for purposes of child support].)

However, although the Kirk court reversed the child support order, it remanded the matter

for further consideration of whether the diversion of the husband's income for repayment

of his debt was truly voluntary, stating: "It is conceivable that [the husband] had no

choice in the matter, that if he had declined to enter into the special bonus provision he

would not have been employed, and hence that the shift of income was in fact not

'voluntary' with [the husband] as we have presumed above. [The husband's] counsel

argued as much to the trial court. There was, however, no substantial evidence before the

court to support this conclusion, and as a matter of fact the trial court did not enunciate

that conclusion. On rehearing, the trial court will be entitled to consider additional

evidence bearing upon the true nature of [the husband's] employment agreement." (Kirk,

supra, at p. 607.)

Thus, Kirk tends to support Paul's position that his monthly profit draws are

properly excluded from his income for purposes of child support because the use of the

draws to pay down the debt he incurred to purchase his ownership shares of the firm is

mandatory rather than voluntary. The Kirk court's direction to the trial court on remand

plainly suggested that if the husband could establish by substantial evidence that the

diversion of his bonus payments to pay his debt was involuntary—i.e., that he had no

choice in the matter—the trial court would have discretion to exclude the bonus payments

from income for purposes of calculating child support. Here, the evidence establishes

that Paul joined the firm as an owner during the marriage and had no choice but to

28
purchase his interests in the firm through the procedure set forth in the Operating

Agreement, which requires that his profit draws automatically be used to make monthly

payments on his purchase notes until they are paid off. Because the deduction of the note

payments is not voluntary, Kirk does not support the inclusion of the profit draws in

Paul's income for purposes of child support.

In its statement of decision, the trial court explained its decision to not include the

profit draws as income for purposes of support as follows: "Over the past 3 years, the

note payments, which are direct deductions from the draws, substantially exceeded the

draws after payment of related taxes. It is unreasonable to expect support to be paid from

a source that doesn't exist. Such an order would be inherently unstable and leave [Paul]

with insufficient funds to meet even his basic living expenses. The Court was initially

concerned with the holding of [Kirk]. The Court finds that [Kirk] is distinguishable

because it involved a father who already had a support obligation and voluntarily entered

into a debt arrangement that he knew would reduce his support obligation. The present

case involves debts incurred before separation, with the consent of both parties, and the

income never provided a source to meet the family expenses since there was no net cash

flow. In the event that at some point in the future [Paul's] profit draws after related

taxes exceed the deducted note payments, this difference should be considered additional

income for the purpose of calculating support." (Italics added.) The court repeated the

italicized language in the judgment.

29
 Jennifer argues the mandatory note payments are voluntary because Paul could

choose to sell his interest in the firm and continue to work for the firm strictly as a

salaried, nonowner producer. However, as the trial court noted, Paul incurred the debt for

his purchase of ownership in the firm during the marriage with Jennifer's consent and

support; he did not become a part owner of the firm after separation. Because Paul

agreed to the terms of his part ownership during marriage, including the mandatory

diversion of his profit draws to pay down his purchase notes, and became an established

owner-producer during marriage, he should not be forced post-separation to choose

between divesting himself of his ownership interest in the firm or having his profit draws

included in his income for purposes of child support despite the fact they are not

presently available as income for that purpose. The trial court reasonably ruled that

Paul's profit draws are to be excluded from his income for purposes of calculating child

support until he realizes net income from them, at which point they should be included as

income for purposes of child support.

Although the court did not cite any statutory authority supporting its decision to

exclude Paul's profit draws from his income for purposes of support, such authority

exists. Section 4058, subdivision (a)(2), provides that annual gross income for the

purpose of calculating child support includes "[i]ncome from the proprietorship of a

business, such as gross receipts from the business reduced by expenditures required for

the operation of the business." Paul is a part owner of the firm, and the note payments

that are mandatorily deducted from his profit draws are expenditures required for the

30
operation of his business. Accordingly, section 4058, subdivision (a)(2), authorized the

court to exclude the draws from his income for the purpose of child support until such

time that they exceed his note payments.

In Blazer, the Court of Appeal similarly construed section 4058, subdivision

(a)(2). The Blazer court decided that for purposes of determining spousal support, the

trial court had acted within its discretion in excluding from the husband's income funds

that the husband used to capitalize and diversify his business. The trial court found it was

necessary to diversify the business and that the funds spent for that purpose were

reasonable expenses properly charged to the business rather than the husband. (Blazer,

supra, 176 Cal.App.4th at p. 1447.) Although the Blazer court acknowledged that

"[c]hild support and spousal support serve different purposes, implicate different policies,

and are governed by different rules[,]" (id. at p. 1446, fn. 3), it observed that "[t]o the

extent that [section 4058] may offer guidance, it likewise sustains the trial court's

decision here. That statute excludes from income 'expenditures required for the operation

of the business.' " (Blazer, supra, at p. 1448.)

Jennifer cites Asfaw v. Woldberhan (2007) 147 Cal.App.4th 1407, 1417 (Asfaw) as

support for her position that Paul's note payments are not " 'expenditures required for the

operation of the business' " within the meaning of section 4058, subdivision (a)(2).

However, the issue in Asfaw was whether asset depreciation is a business expense that

may be deducted from income for purposes of calculating child support. The Asfaw court

decided it is not, stating: "[A]though 'income' is broadly defined in the statutory child

support scheme [citation], deduction provisions are specific and narrowly construed

31
[citation]. We find the Legislature's choice of the words 'expenditure,' 'required,' and

'operation of the business' in section 4058 are words of limitation. 'Expenditure' suggests

an actual outlay of cash or other consideration. Depreciating an asset does not involve a

reduction of cash available for child support. Nor is depreciation 'required' for the

operation of a business. A proprietor cannot operate a business without inventory,

without employees, without paying taxes, and so forth. A business can be conducted

without a deduction for depreciation. We conclude that 'operation of the business' means

ordinary and necessary business expenditures directly related to or associated with the

active, day-to-day conduct of a business. [Citations.][14] Depreciation of a business

asset, by its very nature, is not essential to the day-to-day running of the business, but is

intended to promote the continuity of the business over a longer term." (Asfaw, supra, at

p. 1425, fn. omitted.)

"An appellate decision is not authority for everything said in the court's opinion

but only 'for the points actually involved and actually decided.' " (Santisas v. Goodin

14 Asfaw cited examples from case law of the meaning of the term "operating
expenses" in other contexts, including Mandel v. Myers (1981) 29 Cal.3d 531, 543 [1978-
1979 Budget Act defined "operating expenses and equipment" as including " 'all
expenditures for purchase of materials, supplies, equipment, services . . . and all other
proper expenses.' "]; Keller v. Chowchilla Water Dist. (2000) 80 Cal.App.4th 1006, 1013
[Prop. 218 (Cal. Const., art. XIII D, § 5) defines "maintenance and operation expenses"
as " 'the cost of rent, repair, replacement, rehabilitation, fuel, power, electrical current,
care and supervision necessary to properly operate and maintain a permanent public
improvement.' "]; and Kirkpatrick v. City of Oceanside (1991) 232 Cal.App.3d 267, 281
[discussing the finding in a prior unpublished opinion that the city's Manufactured Home
Fair Practices Commission properly excluded land lease costs from rent because those
costs were "debt service expenses" that were specifically excluded from of normal
operating expenses under rent control ordinance].)

32
(1998) 17 Cal.4th 599, 620.) The point involved and decided in Asfaw was whether asset

depreciation is a business expense properly deducted from a parent's income for purposes

of calculating child support; the Asfaw court did not consider the type of expenditure at

issue in this case. Asfaw's holding does not necessarily conflict with the conclusion that

Paul's note payments are expenditures required for operation of his business as a part

owner of the firm. Under the Operating Agreement, which governs ownership, Paul's

note payments are a required expenditure in the operation of his business. Although the

note payments are not ordinary business expenditures in the sense of payment of wages,

rent, utilities, and taxes, or the purchase of inventory, materials, and supplies, they are

nevertheless an actual outlay of cash that, unlike depreciation of an asset, involves a

reduction of cash available for child support. Accordingly, they constitute "expenditures

required for the operation of the business" under section 4058, subdivision (a)(2).

B. Interest deduction

Jennifer contends that "according to both experts," the interest deduction Paul has

taken on tax returns for the investment interest he pays on his loans to purchase his

interests in the firm should be charged to him as tax-free income in calculating his child

support obligation.15 Jennifer's only legal argument on this point is her assertion that

15 Jennifer cites her expert Cooper's testimony that the entire note payment should be
included in Paul's income because, in his words, "those note payments represent the
acquisition of an asset. They are not payments that [I] would categorize as expenses in
the course of the operations of this business of the insurance business." Jennifer's counsel
asked Paul's accounting expert Ginita Wall whether Paul's interest payments should be
treated as tax free income for purposes of calculating child support. Wall testified that if
the interest payments were not deducted from Paul's income for support purposes, they
33
"this expense is not allowed under the California child support statutes . . . ." We

presume she means that although this interest deduction was properly taken on her and

Paul's 2009 joint tax return, the California child support statutes do not allow it as a

deduction from gross income for purposes of child support.16

We could disregard Jennifer's contention regarding the effect of the tax treatment

of Paul's interest payments on the determination of his income for purposes of child

support because she does not explain, with citation to any specific statute or other

authority, why Paul's interest payments should be included in his income for purposes of

child support. We are not required to consider a contention on appeal that amounts to a

complaint of error unsupported by pertinent argument or citation of authority.

(Huntington Landmark Adult Community Assn. v. Ross (1989) 213 Cal.App.3d 1012,

1021; Strutt v. Ontario Sav. & Loan Assn. (1972) 28 Cal.App.3d 866, 873-874.)

However, we presume her argument is that deduction of the interest payments from

income for purposes of child support is not authorized under section 4059, which

provides that the annual net disposable income of each parent shall be computed by

would become "nontaxable building income." She was not asked to explain what that
term means.
16 Having already argued that Paul's entire note payments, which include both
principal and interest payments, should be included in Paul's income for purposes of
calculating support, it is unclear why Jennifer contends under a separate argument
heading that the interest payments on the notes should be included in Paul's income for
purposes of child support. If Jennifer's position is that regardless of whether the principal
payments should be included in Paul's income for support purposes, interest payments
should be included because they are tax deductible, it is unclear why she contends the
entire amount of the interest payments should be included, instead of just the amount of
the tax savings that Paul realizes from deducting the interest payments from his taxable
income. Her contention appears to confuse a tax deductible payment with tax free
income.
34
deducting from his or her gross income the actual amounts attributable to certain items,

including the state and federal income tax liability resulting from the parties' taxable

income. (§ 4059, subd. (a).)17

To the extent Jennifer is simply arguing that Paul's investment interest payments

are not an allowable deduction from annual gross income for purposes of child support

even though they are an allowable deduction from taxable income on a tax return, her

argument fails in light of our conclusion that Paul's mandatory note payments, which

include the interest payments in question, are excluded from Paul's annual gross income

under section 4058, subdivision (a)(2). Section 4059 governs deductions from annual

gross income to arrive at annual net disposable income; thus, any expenditure that is

excluded from annual gross income under section 4058, subdivision (a)(2), is not part of

the net disposable income equation under section 4059 because it has already been

excluded from income. The court did not err in excluding Paul's entire note payments

from his income for purposes of calculating child support.

C. Unreimbursed business expenses

On Paul and Jennifer's joint 2009 tax return, Paul claimed unreimbursed business

expenses as a deduction from his gross income from the firm. Jennifer contends the court

should have included these unreimbursed business expenses in Paul's income for

purposes of child support because Paul did not produce written proof of them at trial.

17 Paul has argued in this appeal, and to the trial court, that his note payments are
deductible from his gross income under section 4059, subdivision (f), which allows the
deduction of "[j]ob-related expenses, if allowed by the court after consideration of
whether the expenses are necessary, the benefit to the employee, and any other relevant
facts."
35
 We presume that Paul's gross income and other information stated under penalty

of perjury on his 2009 tax return is correct for purposes of child support. (See, M.S. v.

O.S. (2009) 176 Cal.App.4th 548, 557; In re Marriage of Loh (2001) 93 Cal.App.4th 325,

332. ["Returns are, after all, ultimately enforced by federal and state criminal penalties."])

In calculating Paul's income for purposes of child support, Jennifer's expert Cooper did

not deduct the unreimbursed business expenses claimed on Paul's tax return because he

assumed the firm reimbursed all of Paul's business expenses. He explained, "My

experience in this area is that taxpayers stretch the truth a bit sometimes, and I have no

way of knowing if [Paul] did or not, although I never received any receipts for these

expense that were pretty large in amount. So I felt it was fair to allow the amount that

was reimbursed each year and not to allow reduction amounts over and above that."

(Italics added.) Cooper's testimony is insufficient to rebut the presumption that Paul's

gross income and other information stated on his 2009 tax return is correct for purposes

of child support, and no other evidence in the record rebuts that presumption.

The court did not err in determining Paul's income for purposes of calculating

child support.

V. Retroactive Modification of Temporary Child Support

Jennifer contends that the court erred in denying her request for retroactive

modification of temporary child support. She states in her opening brief that she is

challenging only the denial of retroactive modification of child support; she is not

seeking retroactive modification of spousal support. We conclude the court erred in

36
ruling that it lost jurisdiction to retroactively modify support when Jennifer's OSC

requesting retroactive modification was taken off calendar.

As noted in our statement of facts, on March 13, 2009 Jennifer filed an OSC

seeking child support, among other things. The court ordered Paul to pay Jennifer child

support of $3,000 per month and reserved jurisdiction over support retroactive to

March 13, 2009, the date Jennifer filed her OSC. On May 20, 2009, Jennifer filed an

OSC/motion seeking modification of child and spousal support and attorney fees and

costs. On June 21, 2010, Paul filed an OSC requesting the court to adopt the

recommendations of a child custody and visitation mediator and to use the date of

separation as the valuation date of his equity interest in the firm.

On August 3, 2010, the parties informed the court (Judge Alksne) of their

agreement to have Judge Ashworth of Judicial Arbitration and Mediation Services

(JAMS) take over the case. Paul's counsel initially stated to the court, "Two weeks ago I

contacted counsel, and I thought we had agreed that Judge Ashworth would be the judge

to take the two pending OSCs we have in the trial of this case." (Italics added.) Later

that day, after Jennifer's counsel confirmed Jennifer's agreement to have Judge Ashworth

take over the case, Paul's counsel informed the court, "We've agreed to take this matter to

JAMS to try all issues and all OSCs and give jurisdiction to Judge Ashworth to handle all

of these things." (Italics added.) When the court asked if the parties intended to file a

stipulation, Paul's counsel replied, "Yes, we will. . . .We'll vacate the existing OSCs and

reset the trials on OSC and everything else in front of Judge Ashworth." (Italics added.)

At the conclusion of the hearing the court stated: "And all matters that are currently

37
pending in front of Judge Von Kalinowski will be taken off calendar and reset at Judge

Ashworth's pleasure." (Italics added.) On September 2010, the stipulation and order

appointing Judge Ashworth to preside over the case was filed. The stipulation and order

stated: "The parties are vacating the existing OSCs and resetting the OSCs and trial and

everything else in front of Judge Ashworth." (Italics added.)

The court (Judge Ashworth) denied Jennifer's motion for retroactive support

modification on two grounds. First, the court ruled that it lost jurisdiction over

retroactivity when Jennifer's OSC went off calendar, citing this court's opinion in In re

Marriage of Gruen (2011) 191 Cal.App.4th 627 (Gruen). Second, the court ruled that

"the original stipulated support order was based on income findings that were

approximately correct." We conclude the court was incorrect as to the first ground and

must conduct further proceedings to determine the correctness of the original stipulated

order.

In Gruen the husband filed a petition for dissolution of the marriage and an OSC

regarding child and spousal support and other matters. (Gruen, supra, 191 Cal.App.4th at

p. 632.) The court held a hearing on the OSC and ordered the husband to pay the wife

$40,000 per month in temporary support, stating the order was made " 'on an interim,

without prejudice basis, pending the next hearing.' " (Id. at p. 633.) The court also

appointed an expert to assist it in determining the husband's income available for support.

The court continued the hearing on the husband's OSC, and on the continued hearing

date, the husband asked the court to take the matter off calendar insofar as it pertained to

support and to continue the initial support order pending preparation of the expert's

38
report. About six months later, the husband filed a motion for " 'retroactive

reimbursement' " seeking a reduction in his support obligation retroactive to the date of

the court's initial temporary support order. (Id. at pp. 633-635.) Based on the appointed

expert's final report on the husband's income, the court ordered the husband to pay

monthly support in varying amounts that were less than the initial $40,000 award for

three different time periods, the earliest of which began on the date of the initial support

order. (Id. at p. 634.) At a later hearing the court further reduced the awards going back

to the date of the initial award. (Id. at p. 636.)

This court reversed the Gruen trial court's orders retroactively modifying its initial

temporary support order, concluding that a trial court lacks jurisdiction to retroactively

modify a temporary support order to any date earlier than the date of the filing of a notice

of motion or OSC to modify the order. (Gruen, supra, 191 Cal.App.4th at pp. 631, 638.)

That conclusion is based primarily on section 3603, which provides that a temporary or

pendente lite support order " 'may be modified or terminated at any time except as to an

amount that accrued before the date of the filing of the notice of motion or order to show

cause to modify or terminate.' " (Id. at p. 638; italics added; see also § 3651, subd. (c)

[permanent support orders].) Section 3653, subdivision (a), correspondingly provides,

with exceptions that do not apply here, that "[a]n order modifying or terminating a

support order may be made retroactive to the date of the filing of the notice of motion or

order to show cause to modify or terminate, or to any subsequent date . . . ."

39
 Paul contends that under Gruen, the court correctly ruled that it lost jurisdiction to

rule on Jennifer's OSC to modify support when the OSC was taken off calendar as part of

the stipulation to have Judge Ashworth preside over and try the case. We disagree.

Jennifer's right to a hearing and ruling on her OSC cannot be justly defeated on a

technicality. The above-quoted statements of Paul's counsel and Judge Alksne on the

record, as well as the language of the written stipulation itself, make it abundantly clear

that the parties and the court understood and intended that Judge Ashworth would hear

and rule on Jennifer's pending OSC after the case was transferred to him. In stating that

the parties were "vacating the existing OSCs and resetting the OSCs and trial and

everything else in front of Judge Ashworth[,]" (italics added), the written stipulation and

order to transfer the case to Judge Ashworth effectively continued the hearing on

Jennifer's OSC to an unspecified date and only technically took the matter off calendar.

Unlike the husband in Gruen when he asked the court to take his OSC off calendar to the

extent it pertained to support, Jennifer clearly did not intend to take her OSC off calendar

in the sense of removing the matter from the court's consideration and determination. It

would be putting form over substance to conclude that the court lost jurisdiction to rule

on Jennifer's OSC simply because it was taken off calendar with the express

understanding of both parties and the court that it would be reset and decided by Judge

Ashworth. Judge Ashworth had jurisdiction to hear and rule on Jennifer's OSC to

retroactively modify temporary support.

40
 Paul additionally argues that Jennifer was not prejudiced by the court's refusal to

hear her OSC because the court awarded her spousal support for 30 months from

January 1, 2011 and the marriage lasted only 6 and a half years. Paul notes that the court

stated, in connection with its denial of retroactive modification of temporary support, that

"the lack of retroactivity has been considered as an equitable factor in determining the

length of spousal support." The extent to which the court's spousal support award is

properly factored into a determination of the correct amount of temporary child support

from the time Jennifer filed her OSC to the time judgment was entered, and whether, in

the court's words, "the original stipulated support order was based on income findings

that were approximately correct," are matters properly decided by the trial court.

Accordingly, we will remand the matter to the trial court for further proceedings on

Jennifer's OSC to the extent it seeks retroactive modification of the court's award of

temporary child support.

VI. Order to Use A Privately Compensated Mediator

The judgment requires the parties to use a privately compensated mediator to

resolve future disputes in developing summer child-sharing calendars. Jennifer contends

the court lacked authority to impose the private mediation requirement and requests that

it either be stricken from the judgment or that Paul be required to pay the cost of such

private mediation. Although there is no statute that expressly authorizes a court to order

the parties to participate in mediation with a privately compensated mediator and to pay

the cost of the mediation, the court's mediation order in this case is consistent with prior

stipulated orders.

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 On March 20, 2009, the parties stipulated, and the court ordered, that the parties

would submit to non-confidential mediation "to mediate any disputed child sharing issues

and to determine the most appropriate child custody and child sharing plan for the minor

children . . . ." The stipulated order provided that the mediation was intended to be in

place of Family Court Services and that Penny Angel-Levy would perform the mediation.

The stipulated order further provided that that each party would pay half of the mediator's

costs; however, the court reserved "full jurisdiction to allocate the costs of the mediation

between the parties and/or the community." The court also reserved "jurisdiction to make

additional appropriate orders if the need arises to assure the timely completion of the

mediation."

On July 2, 2009, the parties stipulated and the court ordered that "[i]f during the

pendency of the action, the parties are unable to agree on any child sharing issues they

shall continue their participation in non-confidential mediation with Penny Angel-Levy

in accordance with the Stipulation Re Appointment of Child Custody and Visitation

Mediator filed March 20, 2009. Said stipulation remains unmodified and in full force

and effect." (Italics added.)

In its statement of decision, the court noted Jennifer's belief "that Ms. Angel-Levy

is biased against her and that she should be replaced as the recommending mediator."

Finding "it would be unfair to Ms. Angel-Levy to remain as the recommending

mediator/custody evaluator[,]" the court set forth a procedure for the parties to select a

new mediator within 10 days of entry of judgment, with the court retaining jurisdiction to

resolve any dispute regarding the selection. The court also noted "the parties have been

42
unable to agree on an appropriate child sharing plan for raising their two young children."

The judgment reiterated the procedure for the parties to select a mediator within 10 days

of entry of judgment, and ordered the parties to meet with the mediator to develop a

calendar setting forth their child sharing schedule through the summer of 2012. The

judgment provides that "[t]hereafter, in approximately the middle of the summer each

year, the parents shall develop the new schedule for the following year. The parents shall

continue to use the mediator's services until they are able to accomplish this task without

assistance." (Italics added.)

The effect of the March 2009 and July 2009 stipulated orders is that Jennifer

agreed to submit to private mediation any custody disputes during the pendency of the

action. A marriage dissolution action remains pending with respect to child support and

custody issues while the child is a dependent minor in order to allow the court to monitor

the child's welfare. (In re Marriage of Kreiss (2004) 122 Cal.App.4th 1082, 1084.)

Accordingly, in child support and custody matters, the family court has continuing

jurisdiction even after the court enters judgment. (Id. at p. 1085; In re Marriage of

Armato (2001) 88 Cal.App.4th 1030, 1043 [child support].)

The judgment's mediation directive accords with the court's prior stipulated orders,

except for the selection of a new mediator to replace Angel-Levy because of Jennifer's

unwillingness to participate in further mediation with her. The July 2009 stipulated order

requires private mediation only if the parties are unable to agree on any child sharing

issues during the pendency of the action; the judgment requires private mediation only

until the parties are able to develop child sharing schedules without the assistance of a

43
mediator. Thus, the judgment does no more than reaffirm the July stipulated order—both

require private mediation only if the parties are unable to agree on child sharing issues.

Because the mediation directive in the judgment is consistent with the prior stipulated

orders, the court did not err in including the mediation directive in the judgment.

Regarding Jennifer's alternative request that Paul be required to pay the cost of

such private mediation, we note that under the March 2009 stipulated order, the trial court

retained jurisdiction to allocate the costs of the mediation between the parties, which we

construe as jurisdiction to order an allocation other than the 50-50 cost sharing specified

in the stipulation. If the court were to find that mediation was necessitated by an

unreasonable refusal to cooperate on the part of one party only, the court could exercise

its discretion to place all or a greater share of the mediation costs on the uncooperative

party.

Regarding Jennifer's wish to be free of the stipulation to mediate, we note that "[i]t

is within the discretion of the court to set aside a stipulation [where] . . . .there has been a

change in underlying conditions that could not have been anticipated, or where special

circumstances exist rendering it unjust to enforce the stipulation." (In re Marriage of

Jacobs (1982) 128 Cal.App.3d 273, 283.) Setting aside a stipulation on such grounds

would require factual findings by the trial court. Thus, if present or future circumstances

warrant setting aside the stipulation for private mediation, the trial court is the proper

forum in which to seek that relief.

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 VII. Denial of Request to Include Jennifer's Surname As the Children's Second Middle
Name

Jennifer contends the court erred in denying her request to include her surname as

a second middle name for both of the parties' children. The standards for deciding a

request to change a child's surname are well-settled. " '[T]he sole consideration when

parents contest a surname should be the child's best interest.' " (In re Marriage of

McManamy & Templeton (1993) 14 Cal.App.4th 607, 609.) Factors to be considered in

determining the child's best interest include the length of time the child has used his or

her present name; the effect of a name change on preservation of the parent-child

relationships; the strength of the parent-child relationships; and identification of the child

as part of a family unit. (Id. at pp. 609-610.) Whether a requested name change is in the

child's best interests is a question of fact, and the trial court's determination of that

question will be upheld if it is supported by substantial evidence. (Id. at pp. 610-611.)

Although the present case involves a request to add a second middle name rather than a

request to change a surname, we believe the same standard for deciding the request

applies, namely, whether the requested change is in the child's best interest.

Jennifer first requested the name change for the children on the last day of trial

near the end of her testimony on direct examination in conjunction with her request to

change her own surname back to her maiden name. The court expressed the view that

changing the children's name would require a separate motion and that Jennifer's request

was not "encompassed within the trial issues." The court stated it "did not know that this

particular issue was an issue nor do I think it's encompassed . . . within the pleadings

45
here." Paul's counsel objected and stated, "This issue was never raised. It's not relevant

today, and obviously it's a surprise to everyone on this side of the table . . . . It was not

raised as an issue for this trial."

The court reiterated that the changing the children's names "is not an issue that I

see is properly before me now and would require . . . the best interest evaluation. And

normally we would get input from a mental health professional on this because the issue

is not whether you want it or he wants it or doesn't want it. It's whether it's in the best

interests of the children is the test, and I have no idea whether it's in the best interests of

the children or not to do that." Jennifer responded, "That's fine, Your Honor. It's not

something that we wanted to spring on anybody. It's just something that I thought of as I

was driving down here." The court concluded the discussion on the issue by stating,

"Well, if you decide that you want to pursue it, this isn't the time for it because it's not

properly framed. . . . And there's some case law on it as to what needs to be shown to do

that, but I don't think it's properly before me now."

Although Jennifer essentially conceded that the name change issue was not

properly raised at trial and should be pursued in a separate proceeding, in her written

rebuttal to Paul's written closing argument she requested, for the first time in writing, that

the children's names be changed to include her maiden name, and she presented argument

as to why the name change would be in the children's best interests.18 Alternatively, she

requested "that her name remain intact as 'Jennifer Heidemann DeTrani' so that she may

pursue both name changes at the appropriate juncture." Despite its observation at trial

18 Paul did not address the name change issue in his written closing argument.
46
that the name change issue was not properly before it, the court decided the issue in its

statement of decision and judgment as follows: "[Jennifer's] request to have the children

change their names to include a second middle name is denied. This has the potential to

be confusing and is not in the children's best interests."

Because Jennifer's name change request was not properly litigated, there is

insufficient evidence in the record to support the court's finding that the requested name

change is not in the children's best interests. Jennifer first raised the name change issue

on the last day of trial near the close of evidence, more or less as an afterthought, and the

court made it clear that the issue was not properly before it. Since neither party presented

any evidence on whether the requested name change was in the children's best interests,

the court could not reasonably make any best interests finding. The sole basis the court

articulated for its conclusory finding that the requested name change is not in the

children's best interests is that the name change "has the potential to be confusing . . . ."

(Italics added.) The court's view that the name change may be confusing at some future

point in the children's lives is speculative and not based on any specific evidence, and is

thus insufficient to support a finding that the requested name change is not in the

children's best interests. Accordingly, we will remand the matter for the court to conduct

a proper evidentiary hearing on Jennifer's request to add her maiden name to the

children's names as a second middle name.

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 DISPOSITION

The portions of the judgment denying Jennifer's request for retroactive

modification of temporary child support and denying her request to include her surname

as the children's second middle name are reversed. The matter is remanded and the trial

court is directed to hear and determine Jennifer's OSC filed on May 20, 2009 to the extent

it seeks modification of child support, and to decide Jennifer's request to change the

children's names after conducting an evidentiary hearing on whether the requested change

is in the children's best interests. In all other respects the judgment is affirmed. The

parties shall bear their own costs on appeal.

McCONNELL, P. J.

WE CONCUR:

NARES, J.

O'ROURKE, J.

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