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Parties May Not Contract Away the Change-of-Circumstances Requirement for Child Support Modifications

Husband and Wife separated in 2006 after a 16 year marriage. Five years later, in March, 2011, they entered into a stipulated judgment which provided for child support of about $17,366 per month, consisting of base support, contributions to special needs trusts for the children (all four had serious disabilities and one was paralyzed), 100% of healthcare expenses, and 100% of high school tuition. The judgment stated that Husband’s income was about $840,000 per year ($70,000 per month) as of March, 2011. However, he had been earning approximately $1,900,000 per year ($158,000 per month) prior to their 2006 separation.

The stipulated judgment provided that any future requests by either party to modify support should be reviewed “de novo by the Court”.1

In January, 2014, Husband filed an RFO to reduce child support to guideline because his income had fallen to about $20,000 per month. He asked the family law court to calculate child based on a de novo review.

(He also requested a termination of spousal support, which is addressed separately, here, and further timeshare with one of the children, but that issue was not addressed by the Appellate Court.)

By the time Husband’s RFO was finally heard in February, 2015, he and Wife had already entered into a stipulation which took care of the period prior to January 1, 2014. Therefore, the family law court was only determining child support for the period commencing January 1, 2014.

The divorce court agreed that Husband’s income had dropped since May, 2011 but pointed out that in May, 2014, after filing his RFO, Husband joined a new company which paid him approximately $52,000 per month plus a $500,000 signing bonus, which he could keep if he met certain targets over the next two years. Therefore, the divorce court prorated the $500,000 bonus for the period May, 2014 through May, 2016, which meant that Husband’s total monthly income during that period was approximately $74,000 per month. Because that was more than it had been at the time of the March, 2011 judgment, the divorce court found no adverse circumstances warranting a modification for the period after May, 2014. The divorce court did grant a reduction for the period January, 2014 through April, 2014, before Husband began his new job, based on his income of approximately $27,000 per month. (The opinion does not state whether the reduction for that period was to guideline or something else.)

Husband appealed. He argued:

  1. The divorce court should have averaged his income for the calendar years 2014 and 2015 separately, rather than using the periods January, 2014 through April, 2014, and May, 2014 through February, 2015.
  2. Even if the trial court did find that his income at the time of the February, 2015 hearing was about $4,000 greater per month than at the time of the March, 2011 Judgment, it should have completed a “de novo” analysis to reduce his child support obligation to guideline.

The Appellate Court rejected both his divorce lawyer’s arguments and affirmed the divorce court orders.

First, it held that divorce courts are not required to calculate income based on calendar years, and may adjust child support as appropriate to accommodate any seasonal or fluctuating income of either parent. The adjustment only needs to be fair and representative. Here, the court accommodated Husband’s $500,000 signing bonus by treating the two year period for which it was paid as one period of time for calculating support, and the period prior to his receipt of that bonus as a separate period of time. The Appellate Court found that treatment was “reasonable” and “made sense”.

It held that the provision in the parties’ stipulated judgment that future requests to modify would be reviewed “de novo” was not enforceable. Parties may contract about what constitutes a change of circumstances. Or, if parties agree to a modification, then no change of circumstances is required. But, where there is no agreement to modify, parties may not contract around the change-of-circumstances rule because of the doctrine of res judicata. The Court stated: “[Husband’s] position would reduce family law orders and judgments to mere temporary placeholders in contravention of res judicata.”

1Ordinarily, a party who wishes to reduce his above-guideline child support obligation to a guideline obligation must demonstrate a material change of circumstances. Marriage of Laudeman (2001) 92 Cal. App. 4th 1009. (There is much case law on what circumstances qualify as a “change”.)  Here, Husband and Wife stipulated that either party’s request to modify child support “shall be reviewed de novo by the court.” In other words, if Husband wanted to reduce child support to the guideline amount, the Court would determine guideline from scratch, without using the findings or award in the Judgment as a starting point.