Hoegen v. Hoegen

• Decision Date: 22 January 2016
• Docket Number: No. 14–P–1491.,14–P–1491.
• Citation: 43 N.E.3d 718,89 Mass.App.Ct. 6
• Parties: Patrick J. HOEGEN v. Christine M. HOEGEN.
• Court: Appeals Court of Massachusetts

89 Mass.App.Ct. 6

43 N.E.3d 718

Patrick J. HOEGEN

v.Christine M. HOEGEN.

No. 14–P–1491.

Appeals Court of Massachusetts, Worcester.

Argued Oct. 21, 2015.

Decided Jan. 22, 2016.

Warren M. Yanoff, Worcester, for Christine M. Hoegen.

Penelope A. Kathiwala (Barbara A. Cunningham, Worcester, with her) for Patrick J. Hoegen.

Present: GREEN, HANLON, & MASSING, JJ.

Opinion

HANLON, J.

The defendant, Christine M. Hoegen (mother), appeals from a modification judgment of the Probate and Family Court which held that her former husband, Patrick J. Hoegen (father), was not obligated to include income realized from vested restricted stock units (RSU) in the calculation of child support for

the parties' minor children.¹ We reverse.

Background. The parties were divorced by a judgment of divorce nisi, incorporating by reference a separation agreement, which survived as an independent contract, except as to matters relating to the children.² Under the agreement, the father's child support obligation was $1,020 biweekly,³ which the parties agreed was higher than the presumptive amount of support under the Massachusetts Child Support Guidelines at that time. The agreement also required that the parties “confer on April 1st of each year to evaluate whether the child support should be adjusted.”⁴ Exhibit D to the agreement (captioned “Pension/Retirement Funds, Etc.”) explicitly stated that the mother “acknowledges that she is aware that the [father] does participate in a stock plan through his employment; the [mother] waives all rights, title and interests in these accounts.”

On February 5, 2013, the father filed a complaint for modification, seeking to define more fully the shared parenting schedule, that is, to provide more specificity about weekday, holiday, and vacation schedules along with related transportation, and also to incorporate language regarding relocation of the children outside of Massachusetts; he also sought to extend the review of his child support obligation from every year to every three years. The father amended his complaint on May 23, 2013, requesting not only the original relief, but also that he be granted the tax exemption for both children.

On June 27, 2013, the mother filed an answer to the amended complaint and a counterclaim, seeking, in addition to adjustments to the parenting schedule and responsibilities, to recalculate child support to include “all” of the father's income. On January 13, 2014, the parties resolved by stipulation the issues relating to the parenting schedule, and proceeded to trial only on the issues of child support and the tax exemptions.

On March 25, 2014, the judge ordered the entry of judgment on the father's modification complaint, incorporating the parties' stipulation, and increasing the father's child support obligation to

$608 per week, based on base pay and bonuses, but excluding the RSU income. The judge found that “the mother did not prove that the father's income from [RSU] should be included in calculating child support as there was no evidence that said [RSU] income was not derived from the stock plan listed as an asset on the father's financial statement at the time of the divorce and in which any interest of the mother in said stock plan was waived by the mother in the parties' separation agreement.”⁵ The mother timely appealed.

Discussion. RSU income. First, the mother challenges the judge's order that the RSU income should not be included in calculating the father's child support obligation, arguing that income for child support purposes, as defined in the guidelines, is “expansive and effectively constitutes income from any and all sources.” The father counters that, as part of the marital asset division at the time of divorce, he retained sole ownership of his “stock plan” and, under the provisions of that agreement, which independently survived the divorce judgment, the mother waived “all rights, title and interests” in it. He claims that, because the mother waived her right to this asset, using the RSU income derived from it for the purpose of calculating child support essentially would be “double dipping.”

“ ‘[C]hild support is controlled by G.L. c. 208, § 28, and the Massachusetts Child Support Guidelines.’ ... Except as otherwise stated therein, the guidelines have presumptive application to actions to modify existing orders.” Wasson v. Wasson, 81 Mass.App.Ct. 574, 576, 965 N.E.2d 882 (2012), quoting from Croak v. Bergeron, 67 Mass.App.Ct. 750, 754, 856 N.E.2d 900 (2006). “In furtherance of the public policy that dependent children shall be maintained as completely as possible from the resources of their parents and upon a complaint filed after a judgment of divorce, orders of maintenance and for support of minor children shall be modified if there is an inconsistency between the amount of the existing order and the amount that would result from the application of the child support guidelines. ' ” Morales v. Morales, 464 Mass. 507, 511, 984 N.E.2d 748 (2013), quoting from G.L. c. 208, § 28, as amended, effective July 1, 2012. See Massachusetts Child Support Guidelines § III–A(1) (2013). In

addition, as the principles to the guidelines state, if one parent comes to enjoy a higher standard of living, a child is entitled to enjoy that higher standard. It is clear, therefore, that the guidelines must be applied in determining the amount of a parent's child support obligation, particularly in a case such as this one, where there is no contrary agreement between the parties and where the combined income of the parties is below the guidelines maximum of $250,000.⁶ See id. at § II–C. See also Wasson, supra at 577, 965 N.E.2d 882.

Section I–A of the guidelines explicitly instructs on the definition of “income,” and how that income should be calculated when determining a child support order. “[I]ncome is defined as gross income from whatever source regardless of whether that income is recognized by the Internal Revenue Code or reported to the Internal Revenue Service or state Department of Revenue or other taxing authority”; some twenty-seven sources of income are then listed. While income derived from stock or RSUs is not specifically included, the last item on the sample list is a catch-all phrase stating that “any other form of income or compensation not specifically itemized” may be included. Massachusetts Child Support Guidelines I–A(28).

“[A] judge's discretionary decision constitutes an abuse of discretion where we conclude the judge made ‘a clear error of judgment in weighing’ the factors relevant to the decision, such that the decision falls outside the range of reasonable alternatives.” L.L. v. Commonwealth, 470 Mass. 169, 185 n. 27, 20 N.E.3d 930 (2014), quoting from Picciotto v. Continental Cas. Co., 512 F.3d 9, 15 (1st Cir.2008). We acknowledge that the judge has a measure of discretion in how to value and how to characterize stock, bonuses, and contingencies because “a ‘one size fits all’ rule is both impractical and potentially unfair.” Brower v. Brower, 61 Mass.App.Ct. 216, 221, 808 N.E.2d 836 (2004). However, as this court has held, income derived from stock options is considered “gross annual employment income” for the purpose of calculating child support orders. Wooters v. Wooters, 74 Mass.App.Ct. 839, 843, 911 N.E.2d 234 (2009). “[C]ommon sense dictates that the income realized from the exercise of stock options should be treated as gross employment income: It is commonly defined as part of one's compensation package, and it

is listed on W–2 forms and is taxable along with the other income.” Ibid. If not characterized as such, “a person could potentially avoid his or her obligations merely by choosing to be compensated in stock options instead of by a salary.” Ibid. See Champion v. Champion, 54 Mass.App.Ct. 215, 221, 764 N.E.2d 898 (2002) (rejecting the proposition that “an improper double benefit exists whenever income produced by an asset included in a party's equitable share of the marital estate is considered in determining the need for or the ability to pay support orders”).

In this case, the father received as part of the compensation package in his offer of employment a certain number of RSUs. In addition, as indicated by the father's employee pay stubs, he regularly earned income from his employer-issued RSUs. As a result, contrary to the father's argument, these monies should have been included as gross income, along with his base salary and bonus compensation, in calculating his child support obligation. See ibid. In light of this, the judge's finding that the mother failed to “prove that the father's income from [RSUs] should be included in calculating child support” was error. The error was compounded by the fact that the judge failed to make written findings as to why he excluded the RSU income from the child support calculation, apart from noting that any claim to that income was waived. See Wasson, 81 Mass.App.Ct. at 579, 965 N.E.2d 882 (judge abused discretion in failing to make specific written findings in excluding capital gains income).

In addition, it does not appear from the modification judgment that the judge considered the disparity in the standards of living between the parties' households, which is inconsistent with the principles underlying the guidelines. See Katzman v. Healy, 77 Mass.App.Ct. 589, 599, 933 N.E.2d 156 (2010), quoting from Brooks v. Piela, 61 Mass.App.Ct. 731, 734, 814 N.E.2d 365 (2004) (“Implicit in the judge's consideration of this disparity [in income] is consideration of the children's needs, defined in the light of [the father's] higher standard of living”). We are satisfied that failure to consider the income derived from the RSUs in determining an appropriate child support order in this case would result in an inequity. See Croak, 67 Mass.App.Ct. at 759, 856 N.E.2d 900.

As noted, the father counters that the mother waived all interest in his RSU income at the time of the agreement. That waiver, in his...