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An Award of Attorney’s Fees as Sanctions May be Payable from Spousal Support “Income”

Divorcing after thirty years of marriage, Husband and Wife entered into a Marital Settlement Agreement (“MSA”) in which the couple agreed to the division of their marital assets and that Husband would provide ongoing spousal support to Wife. Over the following six years, despite this agreement, Wife’s divorce lawyer continued to extensively litigate issues regarding the marital property division and modification of the agreed-upon spousal support to Wife – $7,500 per month and an Ostler-Smith 35% of Husband’s annual bonus.

Wife’s divorce lawyer was ultimately unsuccessful in her litigation efforts. Husband’s divorce attorney argued that Wife’s litigation was vexatious and unnecessary, and his divorce attorney requested the divorce court to order Wife to pay attorney’s fees incurred by Husband in connection with this litigation as a sanction pursuant to Family Code section 271. The divorce court noted that over the course of Wife’s litigation, she had “repetitively filed motions and then tried to dismiss them after much of the preparation was done only refile the same motion later again” and found that Wife “had available to her all of the information necessary to resolve her issue but instead chose to accuse Husband of fraud and engage in frivolous litigation.” On this basis, the divorce court sanctioned Wife in the amount of $50,000 pursuant to Section 271. To avoid imposing an unreasonable financial burden on Wife, the divorce court permitted Husband to withhold $25,000 per year from the amount he paid to Wife as a share of his annual bonus under the MSA, to begin only after she paid off additional amounts owed to him in a similar manner.

Wife’s divorce attorney appealed the divorce court’s order and argued that her share of Husband’s annual bonus is spousal support that is not “income” from which Husband can withhold payments for Section 271 sanctions against Wife. Section 271 subdivision (c) states, “[a]n award of attorney’s fees and costs as a sanction pursuant to this section is payable only from the property or income of the party against whom the sanction is imposed.” Reviewing the issue de novo, the Court interpreted the term “income”, as used in Section 271, not to exclude spousal support as a source from which Section 271 sanctions may be paid, reasoning that spousal support is includable in gross income for tax purposes, gross income is used in the Family Code for the purpose of allocating child support obligations, and that spousal support from former marriages is included as reportable income in the standard request to modify spousal support.

Wife’s divorce lawyer further argued that the withholding of the sanctions from her share of Husband’s annual bonus payment imposed an unreasonable financial burden. The Court noted that Section 271 subdivision (a) already precludes the imposition of a sanction pursuant to that section which imposes an unreasonable financial burden and acknowledges circumstances “where support is sufficient to allow the party to spend [spousal support] funds in addition to covering their basic needs.” The divorce court had already made reasonable accommodation for Wife’s financial condition, based on her prior statements under oath, by ordering the sanctions to be split into two payments over two years and to be paid only after satisfaction of her other debts to Husband. The divorce court also specifically found that Wife had “mismanaged her money and routinely overspent” and that much of her “substantial legal debt was incurred by aggressively pursuing largely unnecessary litigation in a manner that resulted in the very sanctions she now disputes.” Acknowledging that the “purpose of spousal support is not to cover any and all expenses”, the Court determined that it was reasonable for Wife to anticipate fluctuation of the spousal support funds because a sizable portion of her support came from Husband’s annual bonus, which is necessarily a variable sum depending on Husband’s job performance. Any monthly shortfall to Wife as a result of the reduction of her spousal support by sanctions, therefore, was not an unreasonable financial burden under Family Code section 271 such that payment of the sanctions from her spousal support funds should be precluded.

In Re the Marriage of Pearson (2018) 21 Cal.App.5th 218